Exhibit F
Minutes Exhibit F
Port Commission Regular Meeting of
September 27, 2016
From: Frank Lemos (MBAC President)
To: Commission-Public-Records; Creighton, John; Bowman, Stephanie; Albro, Thomas; Gregoire, Courtney; Felleman,
Fred
Cc: Schirato, LeeAnne
Subject: Port Commission Public Testimony - Violations of Title VI
Date: Monday, September 26, 2016 3:03:48 PM
Attachments: MBAC to Port of Seattle Commission Testimony_20160926.pdf
Hello Port of Seattle Commissioners,
On behalf of the National Minority Business Advisory Council (MBAC), please find the attached
letter for public testimony for the Tuesday, September 27, 2016 Port Commission meeting.
Thank you for your time and considerations.
Regards,
Frank Lemos, President
National Minority Business Advisory Council (MBAC)
From: Frank Lemos (MBAC President)
To: Commission-Public-Records; Creighton, John; Bowman, Stephanie; Albro, Thomas; Gregoire, Courtney; Felleman,
Fred
Cc: Fick, Ted; Schirato, LeeAnne
Subject: Fw: Port Commission Public Testimony - Violations of Title VI
Date: Tuesday, September 27, 2016 12:47:07 PM
Attachments: MBAC Letter - Port of Seattle_20160927.pdf
EXHIBIT A - I-200 RCW 49-60-400.pdf
EXHIBIT B - BBC Research Conditions for WMBES in US.pdf
Hello Port of Seattle Commissioners,
On behalf of the National Minority Business Advisory Council (MBAC), please find the attached
letter and enclosuresfor public testimony for today's Port Commission meeting.
Thank you for your time and considerations.
Regards,
Frank Lemos, President
National Minority Business Advisory Council (MBAC)
From: Frank Lemos (MBAC President)
Sent: Monday, September 26, 2016 3:03 PM
To: Commission-public-records@portseattle.org; Creighton.J@portseattle.org;
Bowman.S@portseattle.org; albro.t@portseattle.org; gregoire.c@portseattle.org;
felleman.f@portseattle.org
Cc: Schirato.L@portseattle.org
Subject: Port Commission Public Testimony - Violations of Title VI
Hello Port of Seattle Commissioners,
On behalf of the National Minority Business Advisory Council (MBAC), please find the attached
letter for public testimony for the Tuesday, September 27, 2016 Port Commission meeting.
Thank you for your time and considerations.
Regards,
Frank Lemos, President
National Minority Business Advisory Council (MBAC)
From: Frank Lemos (MBAC President)
To: Commission-Public-Records; Creighton, John; Bowman, Stephanie; Albro, Thomas; Gregoire, Courtney; Felleman,
Fred
Cc: Fick, Ted; Schirato, LeeAnne
Subject: Fw: Port Commission Public Testimony - Violations of Title VI (2 of 2)
Date: Tuesday, September 27, 2016 12:54:43 PM
Attachments: EXHIBIT C - 2014 Port of Seattle Disparity Study.pdf
EXHIBIT D - USDOJ Title VI Legal Manual.pdf
EXHIBIT E - MBAC Letter - Sound Transit CEO and Board_20160914.pdf
EXHIBIT F - Ralph Graves - Port Commission_20160120.pdf
Hello Port of Seattle Commissioners,
Please find letter enclosures Exhibits C - F attached.
Regards,
Frank Lemos, President
National Minority Business Advisory Council (MBAC)
From: Frank Lemos (MBAC President)
Sent: Tuesday, September 27, 2016 12:46 PM
To: Commission-public-records@portseattle.org; Creighton.J@portseattle.org;
Bowman.S@portseattle.org; albro.t@portseattle.org; gregoire.c@portseattle.org;
felleman.f@portseattle.org
Cc: Fick.T@portseattle.org; Schirato.L@portseattle.org
Subject: Fw: Port Commission Public Testimony - Violations of Title VI
Hello Port of Seattle Commissioners,
On behalf of the National Minority Business Advisory Council (MBAC), please find the attached
letter and enclosuresfor public testimony for today's Port Commission meeting.
Thank you for your time and considerations.
Regards,
Frank Lemos, President
National Minority Business Advisory Council (MBAC)
From: Frank Lemos (MBAC President)
Sent: Monday, September 26, 2016 3:03 PM
To: Commission-public-records@portseattle.org; Creighton.J@portseattle.org;
Bowman.S@portseattle.org; albro.t@portseattle.org; gregoire.c@portseattle.org;
felleman.f@portseattle.org
Cc: Schirato.L@portseattle.org
Subject: Port Commission Public Testimony - Violations of Title VI
Hello Port of Seattle Commissioners,
On behalf of the National Minority Business Advisory Council (MBAC), please find the attached
letter for public testimony for the Tuesday, September 27, 2016 Port Commission meeting.
Thank you for your time and considerations.
Regards,
Frank Lemos, President
National Minority Business Advisory Council (MBAC)
September 26, 2016
Port of Seattle Commissioners
Port of Seattle
P.O. Box 1209
Seattle, WA 98111
RE: PORT COMMISSION PUBLIC TESTIMONY - PROJECT LABOR AGREEMENTS CREATING
DISPARATE IMPACTS - VIOLATIONS OF THE CIVIL RIGHTS ACTS OF 1964
Hello Commissioners,
We are the National Minority Business Advisory Council (MBAC), a 501(c)(4) headquartered
in Washington State, King County, positioned as a unifying voice in Washington State for
minority business enterprises (MBEs) on policy and public procurement reform. The mission of
MBAC is to engage, inform, and empower MBEs to achieve public contract equity by increasing
awareness of public procurement inequities, advancing action that invokes accountability of
Title VI of the Civil Rights Acts of 1964 for those municipalities that receive Federal funds,
and finally, assisting minority business advocacy efforts that promote fair and equal
opportunity for our historically disadvantaged communities of color, both regionally and
nationally.
We write to you to officially requesting that you hold off on any new votes to expand the Port
of Seattle's Project Labor Agreement (PLA) under the guides that MBAC strongly believes that
the Port's action of the current PLA is a neutral process and/or program that creates a
barrier, which as a Federal fund recipient the Port of Seattle is violating its Federal and Legal
obligation of Title VI of the Civil Rights Acts of 1964.
A more detailed letter will be submitted to you tomorrow outlining in more specific terms
what MBAC's concerns are and MBAC's recommended actions to insure equity and fairness.
My sincere apologies as I will not be able to attend tomorrow's Port Commission Meeting as
planned. Please submit this fax, email and/or letter into the Commission's public testimony
for tomorrow's meeting for public record.
Sincerely,
Frank Lemos, President
National Minority Business Advisory Council (MBAC)
cc: WASHINGTON STATE CIVIL RIGHTS COALTION
Hayward Evans, Co-Chair - Washington State African American Political Action Committee
Eddie Rye, Co-Convener - Community Coalition for Contracts and Jobs (CCCJ)
NATIONAL ASSOCIATION OF MINORITY CONTRACTORS LEADERSHIP
R. C. Armstead, Washington State Chapter
September 27, 2016
VIA U.S. MAIL AND EMAIL
Commission President John Creighton
Port of Seattle Commissioners
Port of Seattle
P.O. Box 1209
Seattle, WA 98111
RE: PORT OF SEATTLE'S CONTINUED DISCRIMINATION OF MINORITIES - PUBLIC PROCUREMENT
PRACTICES CREATING DISPARATE IMPACTS - VIOLATIONS OF THE CIVIL RIGHTS ACTS OF 1964
Dear President John Creighton and Port Commissioners,
We are the National Minority Business Advisory Council (MBAC), a 501(c)(4) headquartered in
Washington State, King County, positioned as a unifying voice in Washington State for minority
business enterprises (MBEs) on policy and public procurement reform. The mission of MBAC is to
engage, inform, and empower MBEs to achieve public contract equity by increasing awareness of
public procurement inequities, advancing action that invokes accountability of Title VI of the Civil
Rights Acts of 1964 for those municipalities that receive Federal funds, and finally, assisting minority
business advocacy efforts that promote fair and equal opportunity for our historically disadvantaged
communities of color, both regionally and nationally.
We write to you today to formally express our disappointment in the Port of Seattle's General
Counsel Craig Watson's past and present legal recommendations with regard to the Port of Seattle's
inclusion of disadvantaged women and minority-owned businesses in the Port's public procurement
programs, both Federal and non-Federal programs. Although MBAC does not have direct access to
Mr. Watson's legal opinions or recommendations to the Port Commission with regard to Washington
State's Initiative 200 (I-200), RCW 49.60.400 (Exhibit A), in reference to the Port's obligation to Title
VI of the Civil Rights Acts of 1964, and/or legal recommendation(s) to the stated concerns of the
minority business community of inequity and discrimination via the Port's race and gender neutral
public procurement practices, it is MBAC's opinion that the Port's very limited actions taken to
address these known, verified, and documented inequities is evidence that Mr. Watson must have
provided low risk legal counsel that places the misunderstanding and misuse of I-200 above the Port's
Federal and legal obligations to Title VI of the Civil Rights Acts of 1964. MBAC is left to make the
assumption that Mr. Watson has very little concerns of injustice and discriminatory procurement
practices being continued by the Port, or Mr. Watson and his office have very little exposure and
experience with regard to the Federal Civil Rights Acts of 1964 and the Port of Seattle's legal
obligations to Title VI.
Nationally, it has been MBAC's experience that unless a governmental municipality's General Counsel
has direct Title VI Civil Rights Acts expertise, their recommendations to the issues of public
procurement inequity and claim of disparity from the minority community, tend to lean in the
direction of non-affirmative action, and race and gender neutral recommendations to supposedly fix
the public procurement inequity for women and minority businesses. It is amazing that the answer
MBAC Letter to Port of Seattle Commission
Discrimination in Public Procurement - Violations of Title VI
September 27, 2016
Page 2 of 5
to a problem of discriminatory public procurement practices, created by race and gender neutral
programing, is more race and gender neutral public procurement programing. National data shows
that without mandatory race and gender specific procurement goals, the racism, bias, and
discriminatory Disparate Impacts/Effects will continue. For reference to this national issue please
see the 2016 BBC Research and Consulting report, Conditions for Minorities, Women, and Minorityand
Woman-Owned Businesses in the United States (Exhibit B).
Commissioners, the continued cycle of systemic bias is costing the minority business community
billions nationally in public opportunity annually, and it is MBAC's position that these discriminatory
injustices that are creating Disparate Impacts/Effects for our minority community needs to be put to
an end immediately. You have the power and authority to stop the Port from being a part of what is
now being coined, on a national level, as economic apartheid.
Numbers do not lie. For all those fair minded individuals seeking proof of the claim that the Port's
continued use of race and gender neutral procurement programs create Disparate Impact/Effect
outcomes for minority-owned businesses, please see the 2014 Port of Seattle's Disparity Study
(Exhibit C), the largest inequity being of those of African American, Native American, and Hispanic
Americans decent.
At this time MBAC request that the Port Commission ask themselves these following questions that
can be answered via a simple read of the 2001 United States Department of Justice Title VI Legal
Manual (Exhibit D).
First, is the Port of Seattle what is described by Title VI of the Civil Rights Acts of 1964 a Federal
"recipient"?
A "recipient" receives Federal financial assistance and/or operates a "program or activity,"
and therefore its conduct is subject to Title VI.1 The term recipient means any State,
political subdivision of any State, or instrumentality of any State or political subdivision, any
public or private agency, institution, or organization, or other entity, or any individual, in
any State, to whom Federal financial assistance is extended, directly or through another
recipient, for any program, including any successor, assign, or transferee thereof, but such
term does not include any ultimate beneficiary under any such program.2
Second, is the Port of Seattle responsible for fair and equitable procurement practices that create
fair and equitable outcomes for women and minority businesses, beyond those projects that the Port
of Seattle has been granted Federal dollars via Federal grants, Federal contracts, or Federal loans?
Funds provided to ensure the continued operation of a corporation are assistance to the
entity "as a whole," and thus all operations of the entire corporation are subject to Title VI.3
Third, is the Port of Seattle obligated to remedy discrimination, once it has proof that it has neutral
processes and programs that create Disparate Impacts/Effects?
Thus, Title VI claims may be proven under two primary theories: intentional discrimination
/disparate treatment and disparate impacts/effects.4 Under the second theory, a recipient,
1 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 20
2 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 20
3 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 38
MBAC Letter to Port of Seattle Commission
Discrimination in Public Procurement - Violations of Title VI
September 27, 2016
Page 3 of 5
in violation of agency regulations, uses a neutral procedure or practice that has disparate
impact on individuals of a particular race, color, or national origin, and such practice lacks a
"substantial legitimate justification." 5
Title VI states that no program or activity receiving "Federal financial assistance" shall
discriminate against individuals based on their race, color, or national origin. 6
When enacted in 1964, Title VI did not include a definition of "program or activity."
Congress, however, made its intentions clearly known: Title VI's prohibitions were meant to
be applied institution-wide, and as broadly as necessary to eradicate discriminatory practices
supported by Federal funds. 7
It is our opinion that the Federal rules of Title VI are clear and precise with regard to the Port of
Seattle's obligation to run a fair and equitable procurement program that results in equity for all,
even if those results dictate mandated race and gender conscious public procurement processes.
Another growing concern for MBAC and the minority business community as a whole is mandated
project labor agreements (PLA). These agreements are known to create barriers for minority -owned
businesses, and the Port of Seattle, as a Federal recipient, has the obligation to ensure that these
small disadvantaged minority businesses are excluded from any project contract agreement that
would create Disparate Impacts/Effects, such as the Port of Seattle's PLA currently in place. To
understand MBAC's concerns of PLAs more specifically, please see the September 14, 2016 MBAC
letter to Sound Transit and its Board of Directors (Exhibit E). As for evidence that the Port is
knowingly engaging in contract agreements with labor that create barriers, please see the January
26, 2016 memorandum from the Port's Senior Director of Capital Development, Ralph Graves, to this
Commission (Exhibit F). A quote from Mr. Graves is as follows:
"While PLAs provide the benefits described above, the Port is aware that PLAs may adversely
affect small businesses that are less likely to employ union labor." 8
MBAC would like to have a more in-depth discussion about the Port of Seattle's obligation to Title VI
of the Civil Rights Acts of 1964 and the community's ability as a last resort to file hundreds of Title VI
complaints against the Port of Seattle to several of the Federal Agencies within the United States
Department of Transportation. More immediately, MBAC would like to formally request that this
elected body commission a third party legal review of the allegations provided above from an
attorney(s) who specializes in the Federal Civil Rights Acts of 1964, specifically Title VI and Title VII.
MBAC would also like to request that the Port Commission conduct an impact analysis study to
determine the effects on small disadvantaged minority and women-owned businesses caused by PLAs.
In closing, it is MBAC's position that the Port of Seattle has done very little to effect positive,
meaningful change for state-certified women and minority-owned businesses in Washington State
since the discriminatory outcome of Disparate Impacts/Effects were found in the 2014 Port of Seattle
Disparity Study. Ralph Graves had been told time and time again by those in the Port of Seattle's
Small Business Group of these concerns, and he has said publically and for the record that the Port of
4 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 42
5 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 43
6 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 10
7 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 29
8 Please see the January 26, 2016 report by Ralf Graves, Senior Director of Capital Development Port of Seattle, to Ted Fick, CEO - Port of Seattle
MBAC Letter to Port of Seattle Commission
Discrimination in Public Procurement - Violations of Title VI
September 27, 2016
Page 4 of 5
Seattle is not responsible to Title VI for anything other than the projects with specific Federal
funding, and that Initiative 200 is the state law that he will ensure the Port of Seattle will follow,
and it is I-200 that will not allow the Port of Seattle to conduct mandatory goals based on gender
and/or race. Mr. Graves and Mr. Watson in our opinion are absolutely dead wrong, and their
leadership and recommendations these last two decades since the passage of I-200 has cost the
Puget Sound minority community hundreds of millions in contract opportunity with the Port of
Seattle. Their views and actions are not reflective of the leadership of this Port Commission and its
stated beliefs and values it holds in equity, inclusion, diversity, and fair and just economic
opportunity for all those in the region that the Port of Seattle serves.
MBAC looks forward to meeting with each and every one of the Seattle Port Commissioners, and we
look forward to correspondence to the issues and concerns listed in this letter. The Port of Seattle
Commission deserves better leadership within the Port of Seattle, the existing institutional guardians
who have willfully and knowingly bent over backwards to NOT address the injustice outcomes that
the Port of Seattle has knowingly produced year after year.
Time for change is now. We thank you for your time, attention and consideration. We look forward
to discussing in detail how we can work to address these concerns of the minority business
community.
Sincerely,
Frank Lemos, President
National Minority Business Advisory Council (MBAC)
Enclosures:
Exhibit A RCW 49.60.400 (Initiative 200) - Discrimination, preferential treatment prohibited
Exhibit B Conditions for Minorities, Women, and Minority- and Woman-Owned Businesses in the United
States, BBC Research and Consulting
Exhibit C - 2014 Port of Seattle Disparity Study, BBC Research and Consulting
Exhibit D Title VI Legal Manual, United State Department of Justice Civil Rights Division
Exhibit E MBAC letter to Sound Transit and its Board of Directors, September 14, 2016
Exhibit F Port of Seattle Memorandum Ralph Graves, Senior Director of Capital Development to Ted
Fick, Chief Executive Officer, January 20, 2016
MBAC Letter to Port of Seattle Commission
Discrimination in Public Procurement - Violations of Title VI
September 27, 2016
Page 5 of 5
cc: PORT OF SEATTLE
Ted Fick, Chief Executive Officer Port of Seattle
Tom Albro, Vice President Port of Seattle Commission
Stephanie Bowman, Secretary Port of Seattle Commission
Courtney Gregoire, Assistant Secretary Port of Seattle Commission
Fred Felleman, Commissioner Port of Seattle Commission
FEDERAL AGENCY AND CONGRESSIONAL LEADERSHIP
Loretta Lynch, Attorney General U.S. Department of Justice (USDOJ)
Sally Yates, Deputy Attorney General USDOJ
Vanita Gupta, Principal Deputy Assistant Attorney General - USDOJ, Civil Rights Division
Deena Jang, Chief USDOJ, Civil Rights Division
Alejandra Castillo, National Director - Minority Business Development Agency (MBDA)
Albert Shen, National Deputy Director - MBDA
Justin Tanner, Associate Director Office of Legislative, Education & Intergovernmental Affairs - MBDA
Josephine Arnold, Chief Counsel - MBDA
Leonardo San Roman, Senior Advisor to the National Director - MBDA
ASSOCIATED GENERAL CONTRACTORS
Nancy Munro, President
Jake Jacobson, First Vice President
David D'Hondt, Executive Vice President
Jerry Vanderwood, Chief Lobbyist
RCW 49.60.400: Discrimination, preferential treatment prohibited. Page 1 of 1
RCW 49.60.400
Discrimination, preferential treatment prohibited.
(1) The state shall not discriminate against, or grant preferential treatment to, any individual or group on
the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public
education, or public contracting.
(2) This section applies only to action taken after December 3, 1998.
(3) This section does not affect any law or governmental action that does not discriminate against, or
grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or
national origin.
(4) This section does not affect any otherwise lawful classification that:
(a) Is based on sex and is necessary for sexual privacy or medical or psychological treatment; or
(b) Is necessary for undercover law enforcement or for film, video, audio, or theatrical casting; or
(c) Provides for separate athletic teams for each sex.
(5) This section does not invalidate any court order or consent decree that is in force as of
December 3, 1998.
(6) This section does not prohibit action that must be taken to establish or maintain eligibility for any
federal program, if ineligibility would result in a loss of federal funds to the state.
(7) Nothing in this section prohibits schools established under chapter 28A.715 RCW from:
(a) Implementing a policy of Indian preference in employment; or
(b) Prioritizing the admission of tribal members where capacity of the school's programs or facilities
is not as large as demand.
(8) For the purposes of this section, "state" includes, but is not necessarily limited to, the state itself,
any city, county, public college or university, community college, school district, special district, or other
political subdivision or governmental instrumentality of or within the state.
(9) The remedies available for violations of this section shall be the same, regardless of the injured
party's race, sex, color, ethnicity, or national origin, as are otherwise available for violations of
Washington antidiscrimination law.
(10) This section shall be self-executing. If any part or parts of this section are found to be in conflict
with federal law, the United States Constitution, or the Washington state Constitution, the section shall
be implemented to the maximum extent that federal law, the United States Constitution, and the
Washington state Constitution permit. Any provision held invalid shall be severable from the remaining
portions of this section.
[2013 c 242 7; 1999 c 3 1 (Initiative Measure No. 200, approved November 3, 1998).]
http://apps.leg.wa.gov/rcw/default.aspx?cite=49.60.400 4/14/2015
Connditioons foor Minorities,
Woomenn, andd Minoority and
WoomannOwnned BBusineesses in
thee Unitted Sttates
REPORT
Repoort
April 20, 2016
Coonditions for Minoriities, WWomenn,
annd Minoority aand WoomanOwnedd
Buusinessses in thhe United Staates
Prepared by
BBC RResearch & Coonsulting
19999 Broadway, Suuite 2200
Denvver, Colorado 8802029750
303.3321.2547 fax 303.399.04488
wwww.bbcresearch.com
bbc@@bbcresearch.com
CONDITIONS FOR MINORITIES, WOMEN, AND
MINORITY AND WOMANOWNED BUSINESSES
IN THE UNITED STATES
Historically, there have been myriad legal, economic, and social obstacles that have impeded
minorities and women from acquiring the human and financial capital necessary to start and
operate successful businesses. Barriers such as slavery, racial oppression, segregation, race
based displacement, and labor market discrimination limited opportunities for minorities in
terms of both education and workplace experience, the effects of which are still apparent
today.1, 2, 3, 4 Similarly, many women faced educational and labor market discrimination, often
restricting them to either being homemakers or taking genderspecific jobs with low pay and
little chance for advancement.5
In the middle of the 20th century, many legal and workplace reforms opened up new
opportunities for minorities and women. Brown v. Board of Education, The Equal Pay Act, The
Civil Rights Act, and The Women's Educational Equity Act outlawed many forms of race and
genderbased discrimination. Workplaces adopted formalized personnel policies and
implemented programs to diversify their staffs.6 Those reforms increased diversity in
workplaces and reduced educational and employment disparities for minorities and
women7, 8, 9, 10 However, despite those improvements, minorities and women continue to face
barrierssuch as incarceration, residential segregation, and family responsibilitiesthat have
made it more difficult to acquire the human and financial capital necessary to start and operate
businesses successfully.11, 12, 13
Federal Courts and the United States Congress have considered barriers that minorities, women,
and minority and womanowned businesses face throughout the country as evidence for the
existence of race and genderbased discrimination in government contracting and
procurement.14, 15, 16 The United States Supreme Court and other federal courts have held that
assessing conditions for minorities, women, and minority and womanowned businesses is
instructive in determining whether government agencies' implementations of minority and
womanowned business programs are appropriate and justified within their own marketplaces.
Those assessments help agencies determine whether they are passively participating in any race
or genderbased discrimination that makes it more difficult for minority and womanowned
businesses to successfully compete for their contracts. Passive participation means that agencies
unintentionally perpetuate race or genderbased discrimination simply by operating within
discriminatory marketplaces. Many courts have held that passive participation in any race or
genderbased discrimination establishes a compelling governmental interest for agencies to take
remedial action to address such discrimination.17, 18, 19
BBC RESEARCH & CONSULTING PAGE 1
This report summarizes information about barriers that minorities, women, and minority and
womanowned businesses face in the national construction; professional services; and goods
and services contracting industries.20 Any such barriers may reduce the availability of minority
and womanowned businesses for government contracting and may also reduce their ability to
successfully compete for that work. BBC Research & Consulting (BBC) conducted various
analyses to assess whether minorities, women, and minority and womanowned businesses
continue to face any barriers in four key areas:
Human capital, to assess whether minorities and women face any barriers related to
education, employment, and gaining managerial experience in relevant industries;
Financial capital, to assess whether minorities and women face any barriers related to
wages, homeownership, personal wealth, and access to financing;
Business ownership to assess whether minorities and women own businesses at rates
that are comparable to that of nonHispanic white men; and
Success of businesses to assess whether minority and womanowned businesses have
outcomes that are similar to those of businesses owned by nonHispanic white men.
Information in this report comes from existing research and from primary research that BBC
conducted.
Human Capital
Human capital is the collection of personal knowledge, behavior, experience, and characteristics
that make up an individual's ability to perform and succeed in particular labor markets. Human
capital factors such as education, business experience, and managerial experience have been
shown to be related to business success.21, 22, 23, 24 Any race or genderbased barriers in those
areas may make it more difficult for minorities and women to work in relevant industries and
may prevent some of them from starting and operating businesses successfully.
Education. Barriers associated with educational attainment may preclude entry or
advancement in certain industries, because many occupations require at least a high school
diploma, and some occupationssuch as occupations in professional servicesrequire at least a
fouryear college degree. In addition, educational attainment is a strong predictor of both income
and personal wealth, which are both shown to be related to business formation and success.25, 26
Nationally, minorities lag behind nonHispanic whites in terms of both educational attainment
and the quality of education that they receive.27, 28 Minorities are far more likely than non
Hispanic whites to attend schools that do not provide access to core classes in science and
math.29 In addition, Black American students are more than three times more likely than non
Hispanic whites to be expelled or suspended from high school.30 BBC's analysis of the United
States labor force indicate that certain minority groups are far less likely than nonHispanic
whites to earn a college degree. As shown in Figure 1, Black American, Hispanic American, and
Native American workers in the United States are substantially less likely than nonHispanic
white workers to have a fouryear college degree.
BBC RESEARCH & CONSULTING PAGE 2
Figuure 1.
Perccentage of all workers 25
andd older with att least a
fourryear degreee, 20082012
Note::
** Deenotes that the differrence in
propoortions between the minority group
and nnonHispanic whites ((or between
womeen and men) is statistically significant
at thee 95% confidence levvel.
Sourcce:
BBC RResearch & Consultinng from 2008
2012 ACS 5% Public Use MMicrodata sample.
The raaw data extract was obtained through
the IPPUMS program of thee MN Population
Centeer: http://usa.ipums.org/usa/.
Emmployment aand manageement expeerience. An immportant preecursor to business
ownnership and ssuccess is acqquiring direct work and maanagement exxperience in rrelevant
induustries. Any bbarriers that llimit minoritiies and womeen from acquuiring that expperience could
prevent them froom starting and operating related businnesses in the future.
Empployment. Prrior industry experience haas been showwn to be an immportant indicator for
bussiness ownersship and succcess on a natioonal level. Hoowever, minorities and woomen are ofteen
unaable to acquirre relevant woork experiencce. Minoritiess and women are sometimmes discriminaated
against in hiring decisions, which impedess their entry iinto the laborr market.31, 32,, 33 When
empployed, minorrities and women are often relegated too peripheral ppositions in tthe labor marrket
andd to industriess that exhibit already highh concentratioons of minoritties or womeen.34, 35, 36, 37 The
studdy team's anaalyses of the UUnited States labor force iss largely conssistent with those findingss. As
shown in Figures 2, the indusstries with thee highest reprresentation oof minority wworkers are otther
servvices; childcaare, hair, and nnails; healthccare; and trannsportation, wwarehousing, utilities, andd
commmunicationss. The industrries with the llowest repressentation of mminority workkers are
whoolesale trade;; professionall services; and education.
BBCC RESEARCH & CONSULTING PAAGE 3
Figuure 2.
Perccent represenntation of minnorities in variious industriees, 20082012
Note:: ** Denotes thatt the difference in prooportions between mminority workers in tthe specified industryy and all industries iss statistically
significant at thee 95% confidence levvel.
The representattion of minorities among all US workers iss 12% for Black Amerricans, 15% for Hispaanic Americans, 6% ffor other race
minorities, and 333% for all minoritiess considered togetheer.
Workers in the ffinance, insurance, reeal estate, legal serviices, accounting, advvertising, architecturre, management, scieentific research, and
veterinary servicces industries were ccombined to one cateegory of professionaal services; Workers iin the rental and leassing, travel,
investigation, waste remediation, arts, entertainment, reecreation, accommoddations, food servicees, and select other sservices were
combined into oone category of other services; Workers in child day care servvices, barber shops, bbeauty salons, nail saalons, and other
personal were combined into one caategory of childcare, hair, and nails.
Sourcce: BBC Research & Consulting from 200082012 ACS 5% Public Use Microdata sample. The raw data eextract was obtainedd through the IPUMSS
program of the MMN Population Center: http://usa.ipums.org/usa/.
Figuure 3 indicatees that the reppresentation of women in various induustries is simiilar in some
resppects to that oof minorities.. For examplee, there is a reelatively highh representatiion of womenn in
chilldcare, hair, aand nails and healthcare. HHowever, in coontrast to minorities, therre is also a higgh
representation oof women in eeducation andd a relatively low represenntation of women in
mannufacturing; eextraction and agriculturee; and construuction.
BBCC RESEARCH & CONSULTING PAAGE 4
Figuure 3.
Perccent represenntation of wommen in variouus industries, 220082012
Note:: ** Denotes thatt the difference in prooportions between wwomen workers in thhe specified industry and all industries is statistically significant
at the 95% confiidence level.
The representattion of women among all US workers is 477%.
Workers in the ffinance, insurance, reeal estate, legal serviices, accounting, advvertising, architecturre, management, scieentific research, and
veterinary servicces industries were ccombined to one cateegory of professionaal services; Workers iin the rental and leassing, travel,
investigation, waste remediation, arts, entertainment, reecreation, accommoddations, food servicees, and select other sservices were
combined into oone category of other services; Workers in child day care servvices, barber shops, bbeauty salons, nail saalons, and other
personal were combined into one caategory of childcare, hair, and nails.
Sourcce: BBC Research & Consulting from 200082012 ACS 5% Public Use Microdata sample. The raw data eextract was obtainedd through the IPUMSS
program of the MMN Population Center: http://usa.ipums.org/usa/.
Management exxperience. Maanagerial expperience is an essential preedictor of bussiness successs.
Howwever, race aand genderbased discrimination remaains a persisteent obstacle tto greater
diveersity in management positions.38, 39, 40 Nationally, mminorities andd women aree far less likelyy
thann nonHispannic white menn to work in mmanagement ppositions.41, 442 BBC examinned the
conncentration off minorities and women inn managemennt positions inn the United SStates
connstruction; professional serrvices; and gooods and servvices industriies.
Connstruction. Coompared to nnonHispanic whites, smalller percentagges of Black AAmericans, Assian
Paccific Americanns, Hispanic AAmericans, Naative Americaans, and otherr race minoriities work as
mannagers in the constructionn industry. In addition, a smmaller percenntage of wommen than men
worrk as managers in the consstruction induustry.
Proofessional serrvices. Compared to nonHHispanic whittes, smaller ppercentages of Black
Americans, Asiann Pacific Ameericans, and HHispanic Americans work aas managers in the
professional servvices industryy. In additionn, a smaller peercentage of wwomen than mmen work as
mannagers in the professional services induustry.
BBCC RESEARCH & CONSULTING PAAGE 5
Goods and support services. Compared to nonHispanic whites, smaller percentages of Black
Americans, Hispanic Americans, Native Americans, and other race minorities work as managers
in the goods and services industry. In addition, a smaller percentage of women than men work as
managers in the goods and services industry.
Figure 4.
Professional
Percentage of workers who
United States Construction Services Goods & Services
worked as a manager in
key industries, 20082012
Race/ethnicity
Black American 4.7 % ** 2.6 % ** 2.3 % **
Note:
Asian Pacific American 9.4 ** 2.6 ** 5.8
** Denotes that the difference in
proportions between the minority group Subcontinent Asian 14.7 ** 5.4 9.3 **
and nonHispanic whites (or between Hispanic American 3.1 ** 2.1 ** 1.9 **
women and men) is statistically significant
at the 95% confidence level. Native American 5.8 ** 3.7 3.4 **
Other race minority 6.5 ** 2.4 3.3 **
Source: NonHispanic white 10.4 4.1 5.9
BBC Research & Consulting from 20082012
ACS 5% Public Use Microdata sample. The Gender
raw data extract was obtained through the
Women 6.8 % ** 1.8 % ** 4.6 % **
IPUMS program of the MN Population
Center: http://usa.ipums.org/usa/. Men 8.4 4.5 5.0
All individuals 8.2 % 3.8 % 4.9 %
Intergenerational business experience. Having a family member who owns a business and
is working in that business is an important predictor of business ownership and business
success.43 Such experiences help entrepreneurs gain access to important opportunity networks;
obtain knowledge of best practices and business etiquette; and receive handson experience in
helping to run businesses. However, nationally, minorities have substantially fewer family
members who own businesses and both minorities and women have fewer opportunities to be
involved with those businesses. That lack of experience makes it more difficult for minorities
and women to subsequently start their own businesses and operate them successfully.
Financial Capital
In addition to human capital, financial capital has been shown to be an important indicator of
business formation and success.44 Individuals can acquire financial capital through a variety of
sources including employment wages, personal wealth, homeownership, and financing. If race
or genderbased discrimination exists in those capital markets, minorities and women may have
difficulty acquiring the capital necessary to start, operate, or expand businesses.
Wages and income. Wage and income gaps between minorities and nonHispanic whites and
between women and men are welldocumented throughout the country, even when researchers
have statistically controlled for various factors unrelated to race and gender.45, 46, 47 BBC
observed wage gaps nationwide that are consistent with that research. Figure 5 presents mean
annual wages for workers nationwide by race/ethnicity and gender. As shown in Figure 5, Black
Americans, Native Americans, and Hispanic American workers earn substantially less in wages
than nonHispanic whites. In addition women workers earn substantially less in wages than
men. Such disparities make it difficult for minorities and women to use employment wages as a
source of business capital.
BBC RESEARCH & CONSULTING PAGE 6
Figuure 5.
Meaan annual wages among
worrkers, 200820012
Note::
The saample universe is all non
instituutionalized, employeed individuals aged
25644 that are not in schoool, the military, or
selfemployed.
** Deenotes statistically siggnificant
differrences from nonHisppanic whites (for
minorrity groups) or from men (for women)
at thee 95% confidence levvel.
Sourcce:
BBC RResearch & Consultinng from 20082012
ACS 55% Public Use Microddata sample. The
raw ddata extract was obtaained through the
IPUMS program of the MNN Population
Centeer: http://usa.ipums.org/usa/.
Perrsonal wealth. Another iimportant potential sourcee of business capital is perrsonal wealthh. As
withh wages and income, theree are substanntial disparitiees between mminorities andd nonHispannic
whiites and betwween women aand men in teerms of persoonal wealth.488, 49 For exampple, in 2010,
Blacck Americanss and Hispaniic Americans across the coountry exhibitted average hhousehold nett
worrth that was 55 percent andd 1 percent, reespectively, thhat of nonHiispanic whitees. In additionn,
morre than oneqquarter of Blaack Americanss and Hispaniic Americans were living iin poverty in
20110, substantiaally higher thaan the nationnal average. WWealth inequaalities also exiist for womenn
relaative to men. For example, the median wwealth of nonnmarried woomen nationaally is
appproximately oonethird thatt of nonmarried men.50
Homeownershhip. Homeowwnership and home equity have been shhown to be keey sources of
bussiness capital..51, 52 Howeveer, minorities appear to facce substantiall barriers in oowning homees.
BBCC examined homeownershhip rates natioonwide for reelevant racial/ethnic groupps. As shown in
Figuure 6, minoritty groups in tthe United Staates exhibit hhomeownershhip rates signnificantly loweer
thann that of nonHispanic whites. Discrimiination is at leeast partly too blame for thhose disparities.
Ressearch indicattes that minorities continuue to be givenn less informaation on prosppective homees
andd have their purchase offerrs rejected beecause of their race.53, 54 MMinorities whoo own homes
tendd to own hommes that are wworth substanntially less thaan those of nonHispanic wwhites and allso
tendd to accrue suubstantially leess equity.55, 56 Differencess in home vallues and equiity between
minnorities and nnonHispanic whites can bee attributedat least, in ppartto the ddepressed
property values that tend to eexist in raciallysegregatedd neighborhooods.57, 58
BBCC RESEARCH & CONSULTING PAAGE 7
Figuure 6.
Homme Ownershipp Rates,
200082012
Note::
The saample universe is all households.
** Deenotes statistically siggnificant differences
from nonHispanic whitess at the 95%
confiddence level.
Sourcce:
BBC RResearch & Consultinng from 20082012
ACS 55% Public Use Microddata sample. The raww
data eextract was obtainedd through the IPUMSS
progrram of the MN Population Center:
http:///usa.ipums.org/usa//.
Figuure 7 presentts median homme values ammong homeowwners of differrent racial/etthnic groups in
the United Statess. Homeowneers of certain minority grooupsBlack AAmericans, Hispanic
Americans, and NNative Ameriicansown hhomes that, onn average, aree worth substantially less
thann those of nonnHispanic wwhites.
Figuure 7.
Meddian home vaalues,
200082012
Note::
The saample universe is all owneroccupied
housing units.
Sourcce:
BBC RResearch & Consultinng from 20082012
ACS 55% Public Use Microddata sample. The
raw ddata extract was obtaained through the
IPUMS program of the MNN Population
Centeer: http://usa.ipums.org/usa/.
Acccess to finanncing. Minorrities and wommen face manny barriers inn trying to acccess credit annd
finaancing, both ffor home purcchases and foor business caapital. Researchers have offten attributeed
those barriers too various formms of race annd genderbassed discriminnation that exxist in credit
marrkets.59, 60, 61, 662, 63, 64 BBC suummarizes reesults relatedd to difficultiees that minoriities, women,
andd minority annd womanowwned businesses face in thhe home crediit and businesss credit
marrkets.
Homme credit. Minorities and wwomen continue to face barriers whenn trying to acccess credit to
purrchase homess. Examples off such barrierrs include disscriminatory ttreatment of minorities annd
wommen during thhe preappliccation phase aand disproportionate targeting of minoority and wommen
borrrowers for suubprime homme loans.65, 66, 667, 68, 69 Race and genderbbased barrierrs in home creedit
marrkets, as well as the recentt foreclosure crisis, have leed to decreasses in homeowwnership amoong
minnorities and wwomen and erroded their leevels of persoonal wealth.700, 71, 72, 73 To exxamine how
minnorities fare inn the home crredit market relative to noonHispanic wwhites, BBC aanalyzed homme
loann denial ratess for highincoome househoolds by race/eethnicity nationwide. As shhown in
Figuure 8, Black AAmericans, Assian Americanns, Hispanic AAmericans, Native Americaans, and Native
Hawwaiian or Pacific Islanders exhibit higheer home loan denial rates than nonHisspanic whitess.
BBCC RESEARCH & CONSULTING PAAGE 8
Figuure 8.
Dennial rates of coonventional
purchase loans foor highincomme
houuseholds, 20133
Note::
Highincome borrowers are those households with
120%% or more of the HUDD area median family
incomme (MFI).
Sourcce:
FFIEC HMDA data 2007 annd 2013. The raw datta
extracct was obtained fromm the Consumer Financial
Protection Bureau HMDA data tool:
http:///www.consumerfinaance.gov/hmda/expllore.
Bussiness credit. Minority and womanowwned businessses face substtantial difficuulties accessinng
bussiness credit. For example, researchers have shown tthat Black Ammericanowneed and Hispanic
Americanownedd businesses are more likeely to be deniied business ccredit, even aafter accounting
for various race and genderneutral factors.74, 75 In adddition, womenn are less likeely to apply foor
creddit and receivve smaller loaans.76, 77 Without equal acccess to busineess capital, minority and
wommanowned bbusinesses muust rely moree on personall finances for their businessses, which
leavves them at a disadvantagee when tryingg to start andd operate succcessful busineesses.78, 79, 80, 881
Business Owwnership
Theere has been ssubstantial grrowth in the nnumber of miinority and wwomanowneed businessess
oveer the past 40 years. For exxample, from 1975 to 19900, the number of womanoowned
bussinesses increeased by 145 percent, and the number oof Hispanic AAmericanownned businessees
incrreased by neaarly 200 percent.82 Despitee the progresss that minoriities and wommen have madde
withh regard to business owneership, imporrtant barriers in starting businesses remmain. Black
Americans, Hispanic Americaans, and women are still leess likely to sttart businessees than non
Hisppanic white mmen.83, 84, 85 Inn addition, altthough rates oof business owwnership havve increased
amoong minoritiees and womenn, they have bbeen unable tto penetrate aall industries evenly.
Minnorities and wwomen disprooportionatelyy own businessses in industtries that requuire less humman
andd financial cappital to be succcessful and tthat include laarge concentrrations of inddividuals fromm
disaadvantaged ggroups.86, 87 BBBC examined rates of businness ownershhip in the Uniited States
connstruction; professional serrvices; and gooods and servvices industriies by race/etthnicity and
gennder.
Connstruction. AAll relevant mminority grouups exhibit lowwer businesss ownership rrates than nonn
Hisppanic whites in the construction industtry. In additioon, women exxhibit lower bbusiness
ownnership rates than men.
Proofessional seervices. Blacck Americanss, Asian Pacifiic Americans,, Subcontinennt Asian
Americans, Hispanic Americaans, and otherr race minoritties exhibit loower business ownership
ratees than nonHHispanic whittes in the proffessional servvices industryy. In addition, women exhiibit
lowwer business oownership rattes than men.
BBCC RESEARCH & CONSULTING PAAGE 9
Goods and support services. Black Americans, Asian Pacific Americans, Subcontinent Asian
Americans, and Hispanic Americans exhibit lower business ownership rates than nonHispanic
whites in the goods and services industry. In addition, women show lower business ownership
rates than men.
Figure 9.
Professional Goods &
Selfemployment rates in
Construction Services Services
key industries, 20082012
Race/ethnicity
Note:
Black American 18.8 % ** 5.4 % ** 10.9 % **
** Denotes that the difference in proportions
between the minority group and non Asian Pacific American 24.6 ** 8.0 ** 11.7 **
Hispanic whites (or between women and Subcontinent Asian American 22.6 ** 8.2 ** 8.0 **
men) is statistically significant at the 95%
Hispanic American 17.0 ** 9.3 ** 13.9 **
confidence level.
Native American 19.8 ** 12.4 15.5
AsianPacific American, Subcontinent Asian
American, and other race minority were Other race minority 23.0 ** 7.3 ** 16.1
combined into the single category of "Other
minority group" due to small sample sizes. NonHispanic white 27.3 13.1 16.0
Gender
Source:
Women 16.8 % ** 7.6 % ** 13.3 % **
BBC Research & Consulting from 20082012
ACS 5% Public Use Microdata samples. The Men 24.9 13.6 15.2
raw data extract was obtained through the
IPUMS program of the MN Population All individuals 24.2 % 12.1 % 14.7 %
Center: http://usa.ipums.org/usa/.
BBC also conducted regression analyses to determine whether differences in business
ownership rates between minorities and nonHispanic whites and between women and men
exist even after statistically controlling for various race and genderneutral factors such as
income, education, and familial status. BBC conducted those analyses separately for each
relevant industry. Figure 10 presents the race/ethnicity and gender factors that were
significantly related to business ownership for each relevant industry.
Construction. Being Black American, Asian Pacific American, Subcontinent American, Hispanic
American, and Native American was associated with lower business ownership rates in the
construction industry. In addition, being a woman was associated with lower business
ownership rates.
Professional services. Being Black American, Asian Pacific American, and Subcontinent Asian
American was associated with lower business ownership rates in the professional services
industry. In addition, being a woman was associated with lower business ownership rates.
Goods and support services. Being Black American, Asian Pacific American, Subcontinent
Asian American, and Hispanic American was associated with lower business ownership rates in
the goods and services industry. In addition, being a woman was associated with lower business
ownership rates.
Thus, disparities in business ownership rates between minorities and nonHispanic whites and
between women and men are not completely explained by differences in race and gender
neutral factors such as income, education, and familial status. Disparities in business ownership
rates exist for several groups in all key industries even after accounting for such factors.
BBC RESEARCH & CONSULTING PAGE 10
Figure 10.
Industry and Group Coefficient
Statistically significant relationships between
race/ethnicity and gender and business
Construction
ownership in key industries, 20082012
Black American 0.2363
Source: Asian Pacific American 0.1024
BBC Research & Consulting from 20082012 ACS 5% Public Use Microdata Subcontinent Asian American 0.2017
samples. The raw data extract was obtained through the IPUMS program Hispanic American 0.1674
of the MN Population Center: http://usa.ipums.org/usa/.
Native American 0.1804
Women 0.4312
Professional Services
Black American 0.3503
Asian Pacific American 0.2759
Subcontinent Asian American 0.3451
Women 0.2634
Goods & Services
Black American 0.1763
Asian Pacific American 0.1005
Subcontinent Asian American 0.1464
Hispanic American 0.0233
Women 0.0802
Business Success
There is a great deal of research indicating that, nationally, minority and womanowned
businesses fare worse than businesses owned by nonHispanic white men. For example, Black
Americans, Native Americans, Hispanic Americans, and women exhibit higher rates of moving
from business ownership to unemployment than nonHispanic whites and men. In addition,
minority and womanowned businesses have been shown to be less successful than businesses
owned by nonHispanic whites and men using a number of different indicators such as profits,
closure rates, and business size (but also see Robb and Watson 2012).88, 89, 90 BBC examined data
on business closure, business receipts, and business owner earnings to further explore the
success of minority and womanowned businesses in the United States.
Business closure. BBC examined the rates of closure among businesses nationwide by the
race/ethnicity and gender of the owners. Figure 11 presents those results. As shown in
Figure 11, Black American, Asian American, and Hispanic Americanowned businesses close at
higher rates than nonHispanic whiteowned businesses. In addition, womanowned businesses
close at higher rates than business owned by men. Increased rates of business closure among
minority and womanowned businesses may have important effects on their availability for
government contracts nationwide.
BBC RESEARCH & CONSULTING PAGE 11
Figuure 11.
Ratees of businesss closure,
200022006
Note::
Data include only to nonppublicly held businessses.
Equal Gender Ownership refers to those
businesses for which ownership is split evenlyy
betweeen women and menn.
Statistical significance of tthese results cannot be
determined, because sammple sizes were not
reporrted.
Sourcce:
Lowreey, Ying. 2010. "Racee/Ethnicity and
Establishment Dynamics, 20022006." U.S. Smmall
Business Administration OOffice of Advocacy.
Washhington D.C.
Lowreey, Ying. 2014. "Gendder and Establishmennt
Dynammics, 20022006." U..S. Small Business
Administration Office of AAdvocacy. Washingtoon D.C.
Bussiness receipts. BBC alsoo examined ddata on busineess receipts tto assess wheether minorityy
andd womanownned businessees nationwidee earn as mucch as businesses owned byy nonHispannic
whiites or busineess owned by men, respecttively. Figure 12 shows meean annual reeceipts for
bussinesses by thhe race/ethniccity and gendder of ownerss. The data in Figure 12 inddicates that inn
20112 Black American, Asian American, HHispanic American, Nativee American, aand Native
Hawwaiian and Paacific Islanderrowned busiinesses nationnwide showeed lower meann annual
bussiness receiptts than busineesses owned bby nonHispaanic whites. Inn addition, womanownedd
bussinesses showwed lower meean annual buusiness receippts than businnesses ownedd by men.
Figuure 12.
Meaan annual bussiness
receeipts (in thoussands), 2012
Note::
Includdes employer and noonemployer firms.
Does not include publiclytraded companies or
otherr firms not classifiablee by race/ethnicity
and gender.
Sourcce:
2012 Survey of Business OOwners, part of the
U.S. CCensus Bureau's 20077 Economic Census.
Bussiness owneer earnings.. BBC analyzeed business owwner earninggs to assess wwhether
minnorities and wwomen earn aas much from their businessses as nonHHispanic whittes and men ddo.
As sshown in Figuure 13, Black Americans, AAsian Pacific AAmericans, HHispanic Amerricans, Nativee
Americans, and oother race miinorities earnn less, on averrage, from theeir businesses than non
Hisppanic whites.. In addition, wwomen earneed less from ttheir businesses than menn.
BBCC RESEARCH & CONSULTING PAGGE 12
Figuure 13.
Meaan annual bussiness
ownner earnings, 20082012
Note::
The saample universe is buusiness owners age
16 and over who reportedd positive
earninngs. All amounts in 22012 dollars.
** Deenotes statistically siggnificant
differrences from nonHisppanic whites (for
minorrity groups) or from men (for women)
at thee 95% confidence levvel.
Sourcce:
BBC RResearch & Consultinng from 20082012
ACS 55% Public Use Microddata sample. The
raw ddata extract was obtaained through the
IPUMS program of the MNN Population
Centeer: http://usa.ipums.org/usa/.
Summmary
BBCC's analyses oof nationwidee business connditions indiccate that minoorities, womeen, and minorrity
andd womanownned businessees face substaantial barriers nationwidee. Existing research, as welll as
anaalyses that BBBC conducted,, indicate thatt race and geenderbased ddisparities exxist in terms oof
acquiring humann capital, accrruing financiaal capital, ownning businessses, and operating successsful
bussinesses. In mmany cases, there is evidencce that those disparities exxist even afteer accountingg for
variious race andd genderneuutral factors ssuch as age, inncome, educaation, and fammilial status.
Theere is also evidence that mmany disparities are dueaat least, in paartto race aand gender
based discriminaation.
Thoose barriers liikely have immportant effeccts on the abillity of minoritties and wommen to start
bussinesses in key industriesconstruction; professionnal services; aand goods andd servicesaand
opeerating those businesses suuccessfully. AAny difficultiees that minoriities and wommen face in
starrting and operating busineesses may redduce their avaailability for ggovernment wwork and mayy
alsoo reduce the ddegree to whiich they are aable to successsfully compeete for governnment contraccts.
In aaddition, the eexistence of such barriers indicates thaat many goverrnment agenccies may be
passively particiipating in racee and genderrbased discrrimination thaat makes it mmore difficult ffor
minnority and womanownedd businesses tto successfullly compete foor their contraacts. Many
couurts have heldd that passive participationn in any race or genderbaased discrimiination
estaablishes a commpelling goveernmental intterest for ageencies to take remedial acttion to addresss
such discriminattion.
BBCC RESEARCH & CONSULTING PAGGE 13
1HaneyLpez, Ian. 2006. White by Law: The Legal Construction of Race. New York: NYU Press.
2 Woodward, Comer Vann. 1955. The Strange Career of Jim Crow. Oxford: Oxford University Press.
3 Prucha, Francis Paul. 1986. The Great Father: The United States Government and the American Indians. Lincoln: University of
Nebraska Press.
4 Lee, Erika. 2003. At America's Gates: Chinese Immigration During the Exclusion Era, 18821943. Chapel Hill, NC: University of
North Carolina Press.
5Goldin, Claudia. 2006. "The Quiet Revolution That Transformed Women's Employment, Education, and Family." The American
Economic Review 96(2):121.
6 Dobbin, Frank. 2009. Inventing Equal Opportunity. Princeton: Princeton University Press.
7 Holzer, Harry and David Neumark. 2000. "Assessing Affirmative Action." Journal of Economic Literature 38(3):483568
8 Kalev, Alexandra, Frank Dobbin, and Erin Kelly. 2006. "Best Practices or Best Guesses? Assessing the Efficacy of Corporate
Affirmative Action and Diversity Policies." American Sociological Review 71(4):589617.
9 Kao, Grace and Jennifer S. Thompson. 2003. "Racial and Ethnic Stratification in Educational Achievement and Attainment."
Annual Review of Sociology 29(1):41742.
10 DiPrete, Thomas A. and Claudia Buchmann. 2013. The Rise of Women: The Growing Gender Gap in Education and What It
Means for American Schools. New York: Russell Sage Foundation.
11 Travis, Jeremy, Bruce Western, and Steve Redburn. 2014. The Growth of Incarceration in the United States: Exploring Causes
and Consequences. National Research Council. Washington D.C.: Division of Behavioral and Social Sciences and Education.
Retrieved January 6, 2015 (http://www.nap.edu/booksearch.php?booksearch=1&record_id=18613&term=Black&chapter=33
69).
12 Charles, Camille Zubrinsky. 2003. "The Dynamics of Racial Residential Segregation." Annual Review of Sociology 29:167207.
13Bianchi, Suzanne M., Liana C. Sayer, Melissa A. Milkie, and John P. Robinson. 2012. "Housework: Who Did, Does or Will Do It,
and How Much Does It Matter?" Social Forces 91(1):5563.
14 Adarand VII, 228 F.3d at 1167 76; see also Western States Paving, 407 F.3d at 992 (Congress "explicitly relied upon" the
Department of Justice study that "documented the discriminatory hurdles that minorities must overcome to secure federally
funded contracts"); Midwest Fence Corp. v. U.S. DOT, Illinois DOT, et al., 2015 WL 1396376, appeal pending.
15 Adarand VII, 228 F.3d. at 116870; Western States Paving, 407 F.3d at 992; see DynaLantic, 885 F.Supp.2d 237; Midwest Fence
Corp. v. U.S. DOT, Illinois DOT, et al., 2015 WL 1396376, appeal pending; Geyer Signal, 2014 WL 130909297 at *14.
16 Adarand VII at 117072; see DynaLantic, 885 F.Supp.2d 237; Geyer Signal, 2014 WL 1309092 at *14.
17 City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989).
18 Concrete Works of Colo., Inc. v. City and County of Denver, 36 F.3d 1513, 1524 (10th Cir. 1994).
19 Rothe Development Corp v. U.S. Dept of Defense, 545 F.3d 1023, 1041.
20Study industries were defined using the Census Bureau's industry classification. All construction industry analyses were
based on the census's construction industry code. All professional services industry analyses were based on the Census's
architecture and engineering industry code. All goods and services industry analyses were based on the Census Bureau's
machinery and equipment wholesaler; Petroleum product wholesaler; professional and commercial equipment wholesale;
electrical goods wholesaler; drug, chemical, and sundries wholesaler; radio, TV, and computer stores; fuel dealers; truck
transportation; warehousing and storage; services to buildings and dwellings, except construction cleaning; waste
management and remediation services; computer system design and related services; and commercial and industrial
equipment repair and maintenance industry codes.
21 Fairlie, Robert W. and Alicia M. Robb. 2007. "Why Are BlackOwned Businesses Less Successful than WhiteOwned
Businesses? The Role of Families, Inheritances, and Business Human Capital." Journal of Labor Economics 25(2):289323.
22 Fairlie, Robert W. and Alicia M. Robb. 2008. Race and Entrepreneurial Success: Black, Asian, and WhiteOwned Businesses in
the United States. Cambridge, Mass.: MIT Press.
23 Fairlie, Robert W. and Alicia M. Robb. 2009. "Gender Differences in Business Performance: Evidence From the Characteristics
of Business Owners Survey." Small Business Economics 33(4):37595.
24 Hout, Michael and Harvey Rosen. 2000. "SelfEmployment, Family Background, and Race." Journal of Human Resources
35(4):67092.
BBC RESEARCH & CONSULTING PAGE 14
25 Emmons, William R. and Bryan J. Noeth. 2015. Why Didn't Higher Education Protect Hispanic and Black Wealth? St. Louis, MO:
Center for Household Financial Stability. Retrieved August 20, 2015
(https://www.stlouisfed.org/~/media/Publications/In%20the%20Balance/Images/Issue_12/ITB_August_2015.pdf).
26 Shapiro, Thomas, Tatjana Meschede, and Sam Osoro. 2013. The Roots of the Widening Racial Wealth Gap: Explaining the
BlackWhite Economic Divide. Waltham, MA: Institute on Assets and Social Policy. Retrieved January 2, 2015
(http://iasp.brandeis.edu/pdfs/Author/shapirothomasm/racialwealthgapbrief.pdf).
27 National Center for Education Statistics. 2010. Status and Trends in the Education of Racial and Ethnic Minorities. National
Center for Education Statistics. Retrieved January 20, 2015 (http://nces.ed.gov/pubs2010/2010015/tables.asp).
28 Kao, Grace and Jennifer S. Thompson. 2003. "Racial and Ethnic Stratification in Educational Achievement and Attainment."
Annual Review of Sociology 29(1):41742.
29 U.S. Department of Education Office for Civil Rights. 2014a. College and Career Readiness. Washington D.C.: U.S. Department
of Education. Retrieved January 3, 2015 (http://www2.ed.gov/about/offices/list/ocr/docs/crdccollegeandcareerreadiness
snapshot.pdf).
30 U.S. Department of Education Office for Civil Rights. 2014b. School Discipline, Restraint, and Seclusion Highlights. Washington
D.C.: U.S. Department of Education. Retrieved January 3, 2015 (http://ocrdata.ed.gov/Downloads/CRDCSchoolDiscipline
Snapshot.pdf).
31 Correll, Shelley J., Stephen Benard, and In Paik. 2007. "Getting a Job: Is There a Motherhood Penalty?" American Journal of
Sociology 112(5):12971339.
32 Pager, Devah, Bruce Western, and Bart Bonikowski. 2009. "Discrimination in a LowWage Labor Market A Field
Experiment." American Sociological Review 74(5):77799.
33 Bertrand, Marianne and Sendhil Mullainathan. 2004. "Are Emily and Greg More Employable Than Lakisha and Jamal? A Field
Experiment on Labor Market Discrimination." American Economic Review 94(4):9911013.
34 Beck, E. M., Patrick M. Horan, and Charles M. Tolbert II. 1980. "Industrial Segmentation and Labor Market Discrimination."
Social Problems 28(2):11330.
35 Catanzarite, Lisa. 2003. "RaceGender Composition and Occupational Pay Degradation." Social Problems 50(1):1437.
36 Cohen, Philip N. and Matt L. Huffman. 2003. "Occupational Segregation and the Devaluation of Women's Work across U.S.
Labor Markets." Social Forces 81(3):881908.
37 Huffman, Matt L. and Philip N. Cohen. 2004. "Racial Wage Inequality: Job Segregation and Devaluation across U.S. Labor
Markets." American Journal of Sociology 109(4):90236.
38 Wilson, George and Debra Branch McBrier. 2005. "Race and Loss of Privilege: African American/White Differences in the
Determinants of Job Layoffs From UpperTier Occupations." Sociological Forum 20(2):30121.
39 Roscigno, Vincent J., Lisette M. Garcia, and Donna BobbittZeher. "Social Closure and Processes of Race/Sex Employment
Discrimination." The Annals of the American Academy of Political and Social Science 609 (1): 1648.
40 Roscigno, Vincent J. , Lisa M. Williams, and Reginald A. Byron. 2012. "Workplace Racial Discrimination and Middle Class
Vulnerability." American Behavioral Scientist 56(5):696710.
41 Smith, Ryan A. 2002. "Race, Gender, and Authority in the Workplace: Theory and Research." Annual Review of Sociology
28:50942.
42 Wilson, George. 1997. "Pathways to Power: Racial Differences in the Determinants of Job Authority." Social Problems
44(1):3854.
43 Hout, Michael and Harvey Rosen. 2000. "SelfEmployment, Family Background, and Race." Journal of Human Resources
35(4):67092.
44 Robb, Alicia and Robert Fairlie. 2007. "Access to Financial Capital among U.S. Businesses: The Case of African American
Firms." The Annals of the American Academy of Political and Social Science 613(1):4772.
45 Cha, Youngjoo and Kim A. Weeden. 2014. "Overwork and the Slow Convergence in the Gender Gap in Wages." American
Sociological Review 79(3):45784.
46 McCall, Leslie. 2001. "Sources of Racial Wage Inequality in Metropolitan Labor Markets: Racial, Ethnic, and Gender
Differences." American Sociological Review 66(4):52041.
47 TomaskovicDevey, Donald. 1993b. "The Gender and Race Composition of Jobs and the Male/Female, White/Black Pay Gaps."
Social Forces 72(1):4576.
BBC RESEARCH & CONSULTING PAGE 15
48Shapiro, Thomas, Tatjana Meschede, and Sam Osoro. 2013. The Roots of the Widening Racial Wealth Gap: Explaining the
BlackWhite Economic Divide. Waltham, MA: Institute on Assets and Social Policy. Retrieved January 2, 2015
(http://iasp.brandeis.edu/pdfs/Author/shapirothomasm/racialwealthgapbrief.pdf).
49 Sullivan, Laura, Tatjana Meschede, Lars Dietrich, Thomas Shapiro, Amy Traub, Catherine Ruetschlin, and Tamara Draut.
2015. The Racial Wealth Gap: Why Policy Matters. New York: Demos. Retrieved August 28, 2015
(http://www.demos.org/sites/default/files/publications/RacialWealthGap_1.pdf)
50 Chang, Mariko Lin. 2010. Shortchanged: Why Women Have Less Wealth and What Can Be Done About It. Oxford: Oxford
University Press.
51 Berger, Allen N. and Gregory F. Udell. 1998. "The Economics of Small Business Finance: The Roles of Private Equity and Debt
Markets in the Financial Growth Cycle." Journal of Banking & Finance 22(68):61373.
52 Fairlie, Robert W. and Harry A. Krashinsky. 2012. "Liquidity Constraints, Household Wealth, and Entrepreneurship
Revisited." Review of Income & Wealth 58(2):279306.
53 Turner, Margery Austen, Rob Santos, and Diane K. Levy, Doug Wissoker, Claudia Aranda, and Rob Pitingolo. 2013. Housing
Discrimination Against Racial and Ethnic Minorities 2012. Washington, D.C.: U.S. Department of Housing and Urban
Development. Retrieved January 2, 2015
(http://www.huduser.org/portal/publications/fairhsg/hsg_discrimination_2012.html).
54 Roscigno, Vincent J., Diana L. Karafin, and Griff Tester. 2009. "The Complexities and Processes of Racial Housing
Discrimination." Social Problems 56(1): 4969.
55 Kochhar, Rakesh and Richard Fry. 2014. "Wealth Inequality Has Widened along Racial, Ethnic Lines since End of Great
Recession." Pew Research Center. Retrieved December 29, 2014 (http://www.pewresearch.org/facttank/2014/12/12/racial
wealthgapsgreatrecession/).
56 BurdSharps, Sarah and Rebecca Rasch. 2015. Impact of the US Housing Crisis on the Racial Wealth Gap Across Generations.
Brooklyn, NY: Social Science Research Council. Retrieved June 23, 2015. (http://www.ssrc.org/publications/view/129CDF74
1F11E511940A005056AB4B80/).
57 Charles, Camille Zubrinsky. 2003. "The Dynamics of Racial Residential Segregation." Annual Review of Sociology 29:167207.
58 Shapiro, Thomas, Tatjana Meschede, and Sam Osoro. 2013. The Roots of the Widening Racial Wealth Gap: Explaining the
BlackWhite Economic Divide. Waltham, MA: Institute on Assets and Social Policy. Retrieved January 2, 2015
(http://iasp.brandeis.edu/pdfs/Author/shapirothomasm/racialwealthgapbrief.pdf).
59 Blanchard, Lloyd, Bo Zhao, and John Yinger. 2008. "Do Lenders Discriminate Against Minority and Woman Entrepreneurs?"
Journal of Urban Economics 63(2):46797.
60 Cavalluzzo, Ken S., Linda C. Cavalluzzo, and John D. Wolken. 2002. "Competition, Small Business Financing, and
Discrimination: Evidence from a New Survey." The Journal of Business 75(4):64179.
61 Cavalluzzo, Ken and John Wolken. 2005. "Small Business Loan Turndowns, Personal Wealth, and Discrimination." The Journal
of Business 78(6):215378.
62 Gruenstein Bocian, Debbie, Wei Li, Carolina Reid, and Robert G. Quercia. 2011. Lost Ground, 2011: Disparities in Mortgage
Lending and Foreclosures. Washington D.C.: Center for Responsible Lending. Retrieved January 21, 2015
63 Mijid, Naranchimeg and Alexandra Bernasek. 2013. "Gender and the Credit Rationing of Small Businesses." The Social Science
Journal 50(1):5565.
64 Ross, Stephen L. and John Yinger. 2002. The Color of Credit: Mortgage Discrimination, Research Methodology, and FairLending
Enforcement. Cambridge, MA: MIT Press.
65 Ross, Stephen L., Margery Austin Turner, Erin Godfrey, and Robin R. Smith. 2008. "Mortgage Lending in Chicago and Los
Angeles: A Paired Testing Study of the PreApplication Process." Journal of Urban Economics 63(3):90219.
66 Dymski, Gary, Jesus Hernandez, and Lisa Mohanty. 2013. "Race, Gender, Power, and the US Subprime Mortgage and
Foreclosure Crisis: A Meso Analysis." Feminist Economics 19(3):12451.
67 Fishbein, Allen J. and Patrick Woodall. 2006. Women are Prime Targets Subprime: Women Are Disproportionately Represented
in HighCost Mortgage Market. Washington D.C.: Consumer Federation of America. Retrieved January 5, 2015
(http://policylinkcontent.s3.amazonaws.com/WomenPrimeTargetsSubprimeLending_CFA_0.pdf).
68 Williams, Richard, Reynold Nesiba, and Eileen Diaz McConnell. 2005. "The Changing Face of Inequality in Home Mortgage
Lending." Social Problems 52(2):181208.
69 Wyly, Elvin and C. S. Ponder. 2011. "Gender, Age, and Race in Subprime America." Housing Policy Debate 21(4):52964.
BBC RESEARCH & CONSULTING PAGE 16
70 Baker, Amy Castro. 2011. Tearing Down the Wealth of Women. New York: Women's Media Center. Retrieved January 5, 2015
(http://www.womensmediacenter.com/feature/entry/tearingdownthewealthofwomen).
71 Baker, Amy Castro. 2014. "Eroding the Wealth of Women: Gender and the Subprime Foreclosure Crisis." Social Service Review
88(1):5991.
72 Rugh, Jacob S. and Douglas S. Massey. 2010. "Racial Segregation and the American Foreclosure Crisis." American Sociological
Review 75(5):62951.
73 BurdSharps, Sarah and Rebecca Rasch. 2015. Impact of the US Housing Crisis on the Racial Wealth Gap Across Generations.
Brooklyn, NY: Social Science Research Council. Retrieved June 23, 2015. (http://www.ssrc.org/publications/view/129CDF74
1F11E511940A005056AB4B80/).
74 Blanchard, Lloyd, Bo Zhao, and John Yinger. 2008. "Do Lenders Discriminate Against Minority and Woman Entrepreneurs?"
Journal of Urban Economics 63(2):46797.
75 Blanchflower, David G., Phillip B. Levine, and David J. Zimmerman. 2003. "Discrimination in the Small Business Credit
Market." The Review of Economics and Statistics 85(4):93043.
76 Mijid, Naranchimeg and Alexandra Bernasek. 2013. "Gender and the Credit Rationing of Small Businesses." The Social
Science Journal 50(1):5565.
77 Treichel, Monica Zimmerman and Jonathan A. Scott. 2006. "WomenOwned Businesses and Access to Bank Credit: Evidence
from Three Surveys Since 1987." Venture Capital 8(1):5167.
78 Coleman, Susan and Alicia Robb. 2009. "A Comparison of New Firm Financing by Gender: Evidence from the Kauffman Firm
Survey Data." Small Business Economics 33(4):397411.
79 Robb, Alicia and Robert Fairlie. 2007. "Access to Financial Capital among U.S. Businesses: The Case of African American
Firms." The Annals of the American Academy of Political and Social Science 613(1):4772.
80 Robb, Alicia M., Robert W. Fairlie, and David T. Robinson. 2009. Patterns of Financing: A Comparison between White and
AfricanAmerican Young Firms. Kansas City, MO: Ewing Marion Kauffman Foundation. Retrieved January 21, 2015
(http://www.kauffman.org/whatwedo/research/kauffmanfirmsurveyseries/patternsoffinancingacomparison
betweenwhiteandafricanamericanyoungfirms).
81 Fairlie, Robert W. and Harry A. Krashinsky. 2012. "Liquidity Constraints, Household Wealth, and Entrepreneurship
Revisited." Review of Income & Wealth 58(2):279306.
82 Blanchflower, David G. 2008. Minority SelfEmployment in the United States and the Impact of Affirmative Action Programs.
Cambridge, MA: National Bureau of Economic Research, Retrieved January 15, 2015 (http://www.nber.org/papers/w13972).
83 Fairlie, Robert W. and Alicia M. Robb. 2009b. "Gender Differences in Business Performance: Evidence from the
Characteristics of Business Owners Survey." Small Business Economics 33(4):37595.
84 Fairlie, Robert W. 2006. "Entrepreneurship among Disadvantaged Groups: Women, Minorities, and the Less Educated." Pp.
43775 in The Life Cycle of Entrepreneurial Ventures, edited by Simon Parker. Springer Science & Business Media.
85 Fairlie, Robert W. and Alicia M. Robb. 2008. Race and Entrepreneurial Success: Black, Asian, and WhiteOwned Businesses in
the United States. Cambridge, Mass.: MIT Press.
86 Budig, Michelle J. 2006b. "Intersections on the Road to SelfEmployment: Gender, Family and Occupational Class." Social
Forces 84(4):222339.
87 Lofstrom, Magnus and Timothy Bates. 2013. "African Americans' Pursuit of SelfEmployment." Small Business Economics
40(1):7386.
88 Fairlie, Robert W. and Alicia M. Robb. 2008. Race and Entrepreneurial Success: Black, Asian, and WhiteOwned Businesses in
the United States. Cambridge, Mass.: MIT Press.
89 Coleman, Susan and Alicia Robb. 2009. "A Comparison of New Firm Financing by Gender: Evidence from the Kauffman Firm
Survey Data." Small Business Economics 33(4):397411.
90 Robb, Alicia M. and John Watson. 2012. "Gender Differences in Firm Performance: Evidence from New Ventures in the United
States." Journal of Business Venturing 27(5):54458.
BBC RESEARCH & CONSULTING PAGE 17
Porrt of SSeattle Dissparitty Stuudy
FINAL REEPORT
Finall Report
September 12, 20014
Poort of Seattle Disparrity Stuudy
Prepared for
Port of Seattle
27111 Alaskan Wayy
Seatttle, Washingtoon 98121
Prepared by
BBC RResearch & Coonsulting
19999 Broadway, Suuite 2200
Denvver, Colorado 8802029750
303.3321.2547 fax 303.399.04488
wwww.bbcresearch.com
bbc@@bbcresearch.com
Table of Contents
Chapter ES. Executive Summary
Analyses in the 2014 Disparity Study ...................................................................................... ES1
Utilization and Disparity Analysis Results for Individual Groups ............................................. ES2
Implementing the Federal DBE Program and the SCS and SBE Programs ............................... ES6
Next Steps ................................................................................................................................ ES7
Chapter 1. Introduction
A. Background ......................................................................................................................... 12
B Study Scope ........................................................................................................................ 14
C. Study Team ......................................................................................................................... 17
Chapter 2. Legal Framework
A. Measures that are Part of the Federal DBE Program ......................................................... 21
B. Measures that are Part of State and Local Programs ......................................................... 23
C. Legal Standards that Raceand GenderConscious Programs Must Satisfy ........................ 23
Chapter 3. Collection and Analysis of Port Data
A. Overview of Port Contracts ................................................................................................ 31
B. Collection and Analysis of Contract Data ........................................................................... 32
C. Collection of Vendor Data .................................................................................................. 34
D. Location of Vendors Performing Port Work ....................................................................... 35
E. Types of Work Involved in Port Contracts ......................................................................... 35
Chapter 4. Marketplace Conditions
A. Entry and Advancement ..................................................................................................... 41
B. Business Ownership ............................................................................................................ 45
C. Access to Capital ................................................................................................................. 48
D. Success of Business ........................................................................................................... 415
Chapter 5. Availability Analysis
A. Purpose of the Availability Analysis .................................................................................... 51
B. Definitions of Minority and WomenOwned Businesses .................................................. 51
C. Information Collected about Potentially Available Businesses .......................................... 53
D. Businesses Included in the Availability Database ............................................................... 55
E. MBE/WBE Availability Calculations .................................................................................... 56
F. Availability Results .............................................................................................................. 59
BBC RESEARCH & CONSULTING i
Table of Contents
Chapter 6. Utilization Analysis
A. Overview of the Utilization Analysis ................................................................................... 61
B. Overall Utilization Results ................................................................................................... 62
C. Utilization Results for Construction and ConstructionRelated Professional
Services Contracts .............................................................................................................. 64
Chapter 7. Disparity Analysis
A. Overview of Disparity Analysis ........................................................................................... 71
B. Overall Disparity Analysis Results ....................................................................................... 75
C. Disparity Analysis Results for Construction and ConstructionRelated
Professional Services Contracts .......................................................................................... 77
D. Statistical Significance of Disparity Analysis Results ........................................................... 78
Chapter 8. Further Exploration of Disparities
A. Are there Disparities for Prime Contracts and Subcontracts? ............................................ 81
B. Are there Disparities for Large and Small Prime Contracts? .............................................. 82
C. Are there Disparities in Different Time Periods during the Study Period? ......................... 83
D. Do Bid/Proposal Processes Explain Any Disparities for Prime Contracts? ......................... 84
Chapter 9. Race and GenderNeutral Measures
A. Is there evidence of discrimination within the local construction and
constructionrelated professional services contracting marketplace for
any racial/ethnic or gender groups? .................................................................................. 93
B. What has been the agency's past experience in meeting its overall DBE goal? ................ 93
C. What has DBE participation been when the agency did not use race or gender
conscious measures? .......................................................................................................... 93
D. What is the extent and effectiveness of raceand gender neutral measures
that the agency could have in place for the next fiscal year? ............................................ 94
Chapter 10. Implementation of the Federal DBE Program, the SCS Program, and
the SBE Program
Reporting to DOT 49 CFR Part 26.11 (b) ............................................................................... 101
Bidders List 49 CFR Part 26.11 (c) ......................................................................................... 101
Prompt Payment Mechanisms 49 CFR Part 26.29 ................................................................ 102
DBE Directory 49 CFR Part 26.31 .......................................................................................... 102
Overconcentration 49 CFR Part 26.33 .................................................................................. 103
BBC RESEARCH & CONSULTING ii
Table of Contents
Business Development Programs 49 CFR Part 26.35 and MentorProtg
Programs 49 CFR Appendix D to Part 26 ....................................................................... 103
Responsibilities for Monitoring the Performance of Other Program
Participants 49 CFR Part 26.37 ...................................................................................... 104
Fostering Small Business Participation 49 CFR Part 26.39 ................................................... 104
Prohibition of DBE Quotas and Setasides for DBEs Unless in Limited and
Extreme Circumstances 49 CFR Part 26.43 .................................................................... 105
Setting Overall DBE Goals 49 CFR Part 26.45 ....................................................................... 105
Analysis of Reasons for not Meeting Overall DBE Goal 49 CFR Part 26.47(c) ...................... 105
Maximum Feasible Portion of Goal Met through Raceand GenderNeutral Measures
49 CFR Part 26.51(a) ......................................................................................................... 106
Use of DBE Contract Goals 49 CFR Part 26.51 (d) ................................................................. 107
Flexible Use of any Raceand GenderConscious Measures 49 CFR Part 26.51 (f) ............... 108
Good Faith Effort Procedures 49 CFR Part 26.53 ................................................................. 108
Counting DBE and MBE/WBE Participation 49 CFR Part 26.55 ............................................ 109
DBE Certification 49 CFR Part 26 Subpart D ....................................................................... 1010
Monitoring Changes to the Federal DBE Program ................................................................ 1010
LocallyFunded Contracts ...................................................................................................... 1011
Appendices
A. Definitions of Terms .......................................................................................................... A1
B. Report on Legal Analysis .................................................................................................... B1
C. Utilization Analysis Methodology .......................................................................................C1
D. General Approach to Availability Analysis ......................................................................... D1
E. Entry and Advancement in the Seattle Metropolitan Area Construction and
Engineering Industries ........................................................................................................ E1
F. Business Ownership in the Seattle Metropolitan Area Construction and
Engineering Industries ........................................................................................................ F1
G. Access to Capital for Business Formation and Success ..................................................... G1
H. Success of Businesses in the Seattle Metropolitan Area Construction and
Engineering Industries ....................................................................................................... H1
I. Description of Data Sources for Marketplace Analyses ...................................................... I1
J. Qualitative Information from Personal Interviews, Public Hearings, and
Other Meetings ................................................................................................................... J1
K. Detailed Disparity Results ................................................................................................... K1
BBC RESEARCH & CONSULTING iii
CHAPTER ES.
Executive Summary
The Port of Seattle (the Port) retained BBC Research & Consulting (BBC) to conduct a disparity
study that would provide information to help the agency implement the Federal Disadvantaged
Business Enterprise (DBE) Program and its small business programsthe Small Contractor and
Suppliers (SCS) Program and the Small Business Enterprise (SBE) Program. The disparity study
examined whether there were any disparities between:
The percentage of construction and constructionrelated professional services contracting
dollars (including subcontract dollars) that the Port awarded to minority and women
owned business enterprises (MBE/WBEs) between January 1, 2010 and September 30,
2013 (i.e., utilization);1 and
The percentage of construction and constructionrelated professional services contracting
dollars that MBE/WBEs might be expected to receive based on their availability to perform
specific types and sizes of the Port's prime contracts and subcontracts (i.e., availability).
The Port could use information from the study to help refine its implementation of the Federal
DBE Program, the SCS Program, and the SBE Program. Information from the study could inform
the Port setting its overall DBE goal; determining the portion of the goal that can be met through
race and genderneutral measures and, if necessary, race and gender conscious measures; and,
if appropriate, determining which groups would be eligible for race and genderconscious
measures.2 The study also provides information about program measures that the Port could
consider using to encourage the participation of small businessesincluding many
MBE/WBEsin its contracting.
Analyses in the 2014 Disparity Study
Along with measuring potential disparities between MBE/WBE utilization and availability on
Port construction contracts and constructionrelated professional services contracts, the
disparity study also examined other quantitative and qualitative information related to the legal
framework surrounding the Port's implementation of the Federal DBE Program, the SCS
Program, and the SBE Program; local marketplace conditions for MBE/WBEs and for other small
businesses; and contracting practices and business assistance programs that the Port currently
has in place.
1 The study team considered businesses as MBE/WBEs if they were owned and operated by minorities or women, regardless of
whether they were certified as DBEs or as MBE/WBEs through the Washington State Office of Minority and Women's Business
Enterprises (OMWBE). In the study, "certified DBEs" refers to those businesses that are specifically certified as such through
OMWBE.
2 Race and genderneutral measures are measures that are designed to remove potential barriers for all businesses
attempting to do work with the agency or measures specifically designed to increase the participation of small or emerging
businesses. Race and genderconscious measures are measures that are specifically designed to increase the participation of
DBEs and MBE/WBEs.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER ES, PAGE 1
The study team conducted an analysis of federal regulations, case law, and other
information to guide the methodology for the disparity study. The analysis included a
review of federal, state, and local requirements related to the Federal DBE Program, the SCS
Program, and the SBE Program.
BBC conducted quantitative analyses of the success of minorities, women, and MBE/WBEs
throughout the Port's relevant geographic market area. In addition, the study team
collected qualitative information through indepth anecdotal interviews and public
meetings about potential barriers that small businesses and MBE/WBEs face in the local
construction and constructionrelated professional services contracting industries.
BBC analyzed the percentage of MBE/WBEs that are "ready, willing, and able" to perform
on Port construction and constructionrelated professional services prime contracts and
subcontracts. That analysis was based on telephone surveys that the study team completed
with more than 3,000 Washington businesses that work in industries related to the types of
construction and constructionrelated professional services contracts that the Port awards.
(The study team attempted telephone surveys with every business establishment that it
identified as doing work that is relevant to Port construction and constructionrelated
professional services contracting.)
BBC analyzed the dollars that the Port awarded to MBE/WBEs on more than 1,000
construction and constructionrelated professional services prime contracts and
subcontracts executed between January 1, 2010 and September 30, 2013 (i.e., the study
period). BBC analyzed contracts that were funded by the Federal Aviation Administration
(FAA) and contracts that were solely locallyfunded.
BBC examined whether there were any disparities between the utilization and availability
of MBE/WBEs on construction and constructionrelated professional services contracts that
the Port awarded during the study period. The study team also assessed whether any
observed disparities were statistically significant.
BBC reviewed the Port's current contracting practices and SBE/MBE/WBE/DBE program
measures and provided guidance related to additional program options and refinements to
those practices and measures.
Utilization and Disparity Analysis Results for Individual Groups
According to federal regulations and relevant case law, agencies that use race or genderbased
measures to encourage the participation of DBE/MBE/WBEs in their contracting must limit the
use of those measures "to those specific groups that have actually suffered discrimination or its
effects."3 If the Port determines that the use of race and genderconscious measures on FAA
funded contracts is appropriate, then it should evaluate which groups should be considered
eligible to participate in those programs.
Utilization and disparity analysis results for Port construction and constructionrelated
professional services contractsalong with other pertinent informationare relevant to the
3 United States Department of Transportation Official Western States Paving Company Case Q&A,
https://www.civilrights.dot.gov/sites/default/files/DBE/Guidance/Western%20States%20Paving%20Company%20Case%20
Q%26A%2020140725%20508.pdf.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER ES, PAGE 2
agency's determmination of whhich groups coould be eligibble for any racce or genderrconscious
meaasures. Courtts have considdered the exisstence of subsstantial dispaarities betweeen the utilization
andd availability ffor particularr groups as innferences of ddiscriminationn in the local marketplace..
Thaat informationn is also usefuul for the Portt to examine the performaance of its currrent programms.
BBCC examined wwhether theree were any dissparities betwween the Portt's utilizationn of individual
MBE/WBE groupps on its consstruction and constructionnrelated proffessional servvices contractts
andd the availabillity of those bbusinesses to perform thatt work.
Utilization results. The stuudy team meaasured MBE/WWBE participation in termms of utilizatioon
the percentage oof prime contrract and subccontract dollaars that the Poort awarded tto MBE/WBEEs
durring the studyy period. Figure ES1 preseents overall MMBE/WBE utiilization on Port constructtion
andd constructionnrelated proffessional servvices contractts during the study periodd. The darker
porrtion of the baar presents thhe Port's utilizzation of MBEE/WBEs that were DBEceertified during
the study periodd. As shown inn Figure ES1,, MBE/WBEs received 10.2 percent of tthe Port's prime
conntract and subbcontract dolllars during thhe study periood. MBE/WBEEs that were DBEcertifiedd
receeived 3.4 perccent of the Poort's prime coontract and suubcontract doollars.
Figuure ES1.
Oveerall MBE/WBBE utilization oon Port
construction andd constructionnrelated
proffessional servvices prime coontracts
andd subcontractss
Note::
Includdes FAA and locallyfunded Port contractts.
Darkeer portion of bar pressents certified DBE utilization.
The sttudy team analyzed 1,048 prime
contracts/subcontracts.
For mmore detail and resultts by group, see Figure K2 in
Appendix K.
Sourcce:
BBC RResearch & Consultinng from the Port's contracting data.
Dissparity analyysis results.. Although infformation about MBE/WBBE utilization is instructivee on
its oown, it is evenn more instruuctive when itt is comparedd with the utiilization that might be
exppected based oon the availabbility of MBE//WBEs for aggency work. AAs part of the disparity stuudy,
BBCC compared thhe utilizationn of MBE/WBEs on Port coonstruction annd constructiionrelated
professional servvices prime ccontracts and subcontractss with the perrcentage of coontract dollarrs
thatt MBE/WBEs might be exppected to receeive based onn their availabbility for that work.
BBCC expressed bboth utilizatioon and availabbility as perceentages of thee total dollarss that a
particular groupp received for a particular sset of contraccts (e.g., 2% uutilization commpared with
10%% availabilityy). BBC then calculated a "ddisparity indeex" by dividinng utilization by availabilitty
BBCC RESEARCH & CONSULTING FFINAL REPORTT CCHAPTER ES, PAAGE 3
andd multiplying by 100.4 A disparity indexx of 100 indicaates an exact t match betweeen utilizationn
andd availability ffor a particulaar group for aa specific set of contracts ((often referreed to as "paritty").
A diisparity indexx of less than 100 may indicate a disparrity between utilization annd availabilityy,
andd disparities oof less than 800 are describeed in this repport as "substaantial." Dispaarity analysis
resuults for key coontract sets aare described below.
All cconstruction and construcctionrelated professionall services conntracts. Figurre ES2 presennts
dispparity analysiis results for all Port consttruction and cconstructionrelated profeessional serviices
conntracts executted during thee study period. Note that tthe Port did nnot use any raace or genderr
connscious prograam measuress to encouragee the particippation of DBEE/MBE/WBEss in its
conntracting during the study period. The liine down thee center of thee graph showws a disparity
indeex level of 1000, which indiicates parity bbetween utilization and avvailability. Disparity indicees
of leess than 100 indicate disparities betweeen utilizationn and availability (i.e., undderutilization)).
Forr reference, a line is also drrawn at a dispparity index llevel of 80, beecause some ccourts use 800 as
a thhreshold for wwhat indicatess a substantiaal disparity.5
Figuure ES2.
Dispparity indices for
Portt constructionn and
constructionrelaated
proffessional servvices
primme contracts aand
subcontracts
Note::
Numbber of prime
contracts/subcontracts annalyzed was
1,0488.
For mmore detail, see Figure K2 in
Appendix K.
Sourcce:
BBC RResearch & Consultinng
availaability and utilization analyses.
As sshown in Figuure ES2, overrall, utilizatioon of MBE/WBBEs considerred together oon Port
connstruction andd constructionnrelated proofessional serrvices contraccts during thee study periodd
wass substantially below whatt might be exppected basedd on their availability for thhose contractts.
Thee disparity inddex of 56 indiicates that alll MBE/WBEs considered ttogether receiived
appproximately $$0.56 for everry dollar that they might bee expected too receive baseed on their
4 Forr example, if actuaal utilization of WWBEs on a set of contracts was 2 peercent and the avvailability of WBEEs for those contraacts
was 10 percent, then the disparity indeex would be 2 perrcent divided by 10 percent, whichh would then be mmultiplied by 1000 to
equaal 20.
5 Sevveral courts deemm a disparity index below 80 as beiing "substantial" and have accepteed it as evidence oof adverse condittions
for MMBE/WBEs. For example, see Rothe Development Coorp v. U.S. Dept off Defense, 545 F.3dd 1023, 1041; Engg'g Contractors Asss'n
of Soouth Florida, Inc. vv. Metropolitan Daade County, 122 FF.3d at 914, 923 (111th Circuit 19977); Concrete Workks of Colo., Inc. v. CCity
and CCounty of Denver, 36 F.3d 1513, 15524 (10th Cir. 19994). See Appendixx B for additionall discussion of thoose and other casses.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CCHAPTER ES, PAAGE 4
availability for construction and constructionrelated professional services prime contracts and
subcontracts that the Port awarded during the study period.
All MBE groups exhibited disparity indices below parityBlack Americanowned
businesses (disparity index of 96), AsianPacific Americanowned businesses (disparity
index of 29), Subcontinent Asian Americanowned businesses (disparity index of 8),
Hispanic Americanowned businesses (disparity index of 21), and Native Americanowned
businesses (disparity index of 42). Of the groups exhibiting disparities, only Black
Americanowned businesses did not exhibit a substantial disparity.
WBEs (disparity index of 113) were the only MBE/WBE group that did not exhibit a
disparity.
Although Black Americanowned businesses did not show substantial disparities on Port
construction and constructionrelated professional services contracts, most of the dollars that
went to Black Americanowned businesses during the study period (approximately $4.5 million
of $5.6 million) went to a single Black Americanowned electrical contracting firm that was not
DBEcertified. In some cases, other individual MBE/WBEs also accounted for relatively large
proportions of their respective groups' utilization but not nearly to the same extent. For details,
see Chapters 6 and 7.
Construction and constructionrelated professional services. Figure ES3 presents disparity
analysis results separately for construction and constructionrelated professional services
contracts to assess whether MBE/WBEs exhibited different outcomes based on industry. Note
that the dollars associated with construction contracts accounted for the majority of contracting
dollars that the Port awarded during the study period (78% of the contracting dollars that BBC
analyzed as part of the study). As shown in Figure ES3, MBE/WBEs considered together
exhibited substantial disparities between utilization and availability on both construction
(disparity index of 63) and constructionrelated professional services contracts (disparity index
of 28).
AsianPacific Americanowned businesses (disparity index of 25), Subcontinent Asian
Americanowned businesses (disparity index of 11), Hispanic Americanowned businesses
(disparity index of 22), and Native Americanowned businesses (disparity index of 38)
exhibited substantial disparities on construction contracts.
Black Americanowned businesses (disparity index of 6), AsianPacific Americanowned
businesses (disparity index of 39), Subcontinent Asian Americanowned businesses
(disparity index of 6), and Hispanic Americanowned businesses (disparity index of 11)
exhibited substantial disparities on constructionrelated professional services contracts.6
WBEs did not exhibit a disparity on construction contracts (disparity index of 134) but
exhibited a substantial disparity on constructionrelated professional services contracts
(disparity index of 47).
6 Most of the dollars that went to Black Americanowned businesses on construction contracts during the study period
(approximately $4.5 million of $5.5 million) went to a single Black Americanowned electrical contracting firm that was not
DBE certified.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER ES, PAGE 5
Figuure ES3.
Dispparity indices for
Portt constructionn and
constructionrelaated
proffessional servvices
contracts
Note::
The sttudy team analyzed 681
construction prime
contracts/subcontracts annd 367
constructionrelated profeessional
servicces prime
contracts/subcontracts.
For mmore detail, see Figures K3
and KK4 in Appendix K.
Sourcce:
BBC RResearch & Consultinng
availaability and utilization analyses.
Othher informaation. The stuudy team alsoo examined innformation cooncerning thee local
marrketplace, inccluding resultts by MBE/WBE group, as part of the diisparity studyy. The Port
should review thhe full dispariity study repoort, as well ass other informmation it mayy have, in
deteermining wheether it needss to use any rrace or gendeerconscious measures, annd if so, in
deteermining whaat actions it mmight take based on the finndings of thiss study.
Implementinng the Fedeeral DBE PProgram annd the SCSS and SBE PPrograms
Chaapter 10 revieews informatiion relevant tto the Port's iimplementatiion of the Fedderal DBE
Program, the SCSS Program, annd the SBE Prrogram. Key aareas of potenntial refinemeent are
disccussed beloww.
The Port shhould continuue to keep tracck of the partticipation of SSBE/DBE/MBBE/WBEs in itts
contractingg. Doing so cann help the ageency assess thhe effectiveness of certainn measures thhat
are designeed to encourage the particiipation of thoose businessees. In additionn, to ensure
accurate traacking, the Poort should conntinue to makke efforts to ccollect that innformation for
subcontractts, particularlly on construuctionrelatedd professionall services conntracts.
The Port shhould make effforts to ensure that its proompt paymennt policies aree well enforceed.
Indepth annecdotal interrviews with bbusiness owneers and manaagers revealed the
importancee of prompt paayment to smmall businessees as well as ssome dissatissfaction with
how prompptly businessees are paid onn public agenccy projects.
The Port shhould make effforts to ensure that its meechanisms forr monitoring the
performancce of DBEs aree enforced. Inndepth anecddotal intervieews with busiiness owners
and manageers revealed tthe importannce of such meechanisms annd indicated ddiscrepanciess
between the work that pprime contracctors commit to DBE subcoontractors at contract awaard
and the worrk actually peerformed by DDBEs.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CCHAPTER ES, PAAGE 6
The Port should explore partnerships to develop and implement Business Development
Programs such as mentorprotg and joint venture programs. Such programs could help
further encourage the participation of small businesses in Port contracting.
Next Steps
The disparity study represents an independent analysis of information related to the
participation of MBE/WBEs in the Port's construction and constructionrelated professional
services contracting. The Port should review study results and other relevant information in
connection with making decisions concerning its implementation of the Federal DBE Program,
the SCS Program, and the SBE Program. USDOT periodically revises elements of (and regulations
related to) the Federal DBE Program and issues guidance concerning implementation of the
program. In addition, new court decisions provide insights related to the proper implementation
of SBE/DBE/MBE/WBE programs. The Port should closely follow such developments.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER ES, PAGE 7
CHAPTER 1.
Introduction
The Port of Seattle (the Port) owns and operates the SeattleTacoma International Airport. The
Port also operates four public marinas and partners with other local agencies to build road and
rail infrastructure throughout the Seattle Metropolitan Area.1 The Port retained BBC Research &
Consulting (BBC) to conduct a disparity study that would provide information to help the agency
implement the Federal Disadvantaged Business Enterprise (DBE) Program and its small
business programsthe Small Contractor and Suppliers (SCS) Program and the Small Business
Enterprise (SBE) Program. A disparity study examines whether there are any disparities
between:
The percentage of contract dollars (including subcontract dollars) that an agency awarded to
minority and womenowned business enterprises (MBE/WBEs) during a particular time
period (i.e., utilization);2 and
The percentage of contract dollars that MBE/WBEs might be expected to receive based on
their availability to perform specific types and sizes of the agency's prime contracts and
subcontracts (i.e., availability).
Disparity studies also examine other qualitative and quantitative information related to:
The legal framework surrounding an agency's implementation of the Federal DBE Program;
Local marketplace conditions for MBE/WBEs and for other small businesses; and
Contracting practices and business assistance programs that the agency currently has in
place.
An agency can use information from a disparity study as it considers specific program measures
as part of its implementation of the Federal DBE Program and other disadvantaged or small
business programs. There are several reasons why an agency would consider conducting a
disparity study:
The types of research that are conducted as part of a disparity study provide information
that is useful to an agency that is implementing the Federal DBE Program and other business
programs (e.g., setting an overall DBE goal).
A disparity study often provides insights into how to improve contracting opportunities for
local small businesses.
1 For the purposes of this study, the Seattle Metropolitan Area is defined as King, Pierce, and Snohomish counties.
2 The courts have accepted examining the percentage of contract dollars that an agency awarded to MBE/WBEs as an
appropriate measure of utilization.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 1, PAGE 1
An independent, objective review of MBE/WBE participation in an agency's contracting is
valuable to both agency leadership and to external groups that may be monitoring the
agency's contracting practices.
State and local agencies that have successfully defended their implementations of the
Federal DBE Program and other business programs in court have typically relied on the
types of information collected as part of disparity studies.
BBC introduces the 2014 Port of Seattle disparity study in three parts:
A. Background;
B. Study scope; and
C. BBC study team.
A. Background
The Port of Seattle implements the Federal DBE Program as well as two small business
programsthe SCS Program and the SBE Program.
Federal DBE Program. The Federal DBE Program is a program designed to increase the
participation of MBE/WBEs in United States Department of Transportation (USDOT)assisted
contracts. As a recipient of USDOT fundsin this case, Federal Aviation Administration (FAA)
fundsthe Port must comply with federal regulations and implement the Federal DBE Program.
After enactment of the Transportation Equity Act for the 21st Century (TEA21) in 1998, USDOT
established a new Federal DBE Program for fund recipients to implement. TEA21 has since been
amended and reauthorized ("MAP21," "SAFETEA" and "SAFETEALU").3, 4
Setting an overall goal for DBE participation. As part of the Federal DBE Program, every three
years, an agency is required to set an overall goal for DBE participation on its USDOTfunded
contracts.5 Although an agency is required to set the goal every three years, the overall DBE goal
is an annual goal in that the agency must monitor DBE participation in its USDOTfunded
contracts every year. If DBE participation for a particular year is less than the overall DBE goal
for that year, then the agency must analyze the reasons for the difference and establish specific
measures to address the difference and enable the agency to meet the goal in the next year.
The Federal DBE Program describes the steps an agency must follow in establishing its overall
DBE goal. To begin the goalsetting process, an agency must develop a base figure based on
demonstrable evidence of the availability of DBEs to participate on the agency's USDOTfunded
contracts. Then, after considering various, related factors, the agency can make an upward,
3 Moving Ahead for Progress in the 21st Century Act ("MAP21"), Pub L. 112141, H.R. 4348, 1101(b), July 6, 2012, 126 Stat
405.; preceded by Pub L. 10959, Title I, 1101(b), August 10, 2005, 119 Stat. 1156; preceded by Pub L. 105178, Title I,
1101(b), June 9, 1998, 112 Stat. 107.
4 USDOT most recently revised the Federal DBE Program in early 2011.
5 http://www.gpo.gov/fdsys/pkg/FR20110128/html/20111531.htm
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 1, PAGE 2
downward, or no adjustment to its base figure as it determines its overall DBE goal (referred to
as a "step2" adjustment).
Projecting the portion of the overall DBE goal to be met through race and genderneutral
means. According to 49 Code of Federal Regulations (CFR) Part 26, an agency must meet the
maximum feasible portion of its overall goal for DBE participation through race and gender
neutral means.6 Race and genderneutral measures are measures that are designed to remove
potential barriers for all businesses attempting to do work with the agency or measures
specifically designed to increase the participation of small or emerging businesses (for examples
of race and genderneutral program measures, see 49 CFR Section 26.51(b)). If an agency can
meet its goal solely through race and genderneutral means, it cannot implement race or
genderconscious measures as part of its program (i.e., measures specifically designed to
increase the participation of DBEs and MBE/WBEs, such as DBE contract goals or MBE/WBE
participation goals).
Every three years, the Federal DBE Program requires an agency to project the portion of its
overall DBE goal that it will meet through race and gender neutral measures and the portion
that it will meet through any raceor genderconscious measures. USDOT has outlined a number
of factors for an agency to consider when making such determinations.7
Determining whether all groups will be eligible for race or genderconscious measures. If an
agency determines that race or genderconscious measuressuch as DBE contract goalsare
appropriate for its implementation of the Federal DBE Program, then it must also determine
which racial/ethnic or gender groups are eligible for participation in those measures.8 USDOT
provides a waiver provision if an agency determines that its implementation of the Federal DBE
Program does not need to include certain racial/ethnic or gender groups in the race or gender
conscious measures that it implements. For example, some agencies apply DBE contract goals to
their USDOTfunded contracts for which only "underutilized DBEs" are eligible, and
underutilized DBEs may not include all DBE groups.
SCS Program and the SBE Program. The Port operates two race and genderneutral
business programsthe SCS Program and the SBE Programto encourage the participation of
small businesses in its locallyfunded contracts. The SCS Program is a joint partnership with King
County that uses participation requirements and evaluation incentives to encourage prime
contractors to use SCScertified subcontractors on locallyfunded Port contracts. The SBE
Program is a collection of tools that the Port uses to track the participation of businesses that
identify themselves as SBEs on locallyfunded Port contracts.
One of the reasons why the Port does not use race and genderconscious measures as part of the
SCS and SBE Programs is because of Initiative 200, which became effective in December 1998.
6 49 CFR Section 26.51.
7 http://www.dotcr.ost.dot.gov/Documents/Dbe/49CFRPART26.doc
8 Quotas are prohibited, but under extreme circumstances, an agency can request USDOT approval to use preference programs
related to DBE prime contracting. Small business preference programs, including reserving contracts on which only small
businesses can bid as prime contractors, are allowable under the Federal DBE Program.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 1, PAGE 3
Initiative 200 amended state law to prohibit the use of race and genderbased preferences in
public contracting, public employment, and public education, unless such measures are required
"to establish or maintain eligibility for any federal program, if ineligibility would result in a loss
of federal funds to the state."9 Thus, Initiative 200 prohibited government agencies in
Washington from using race and genderconscious measures on locallyfunded contracts.
However, Initiative 200 permits continued implementation of federallyrequired programs, such
as the Federal DBE Program.
B. Study Scope
The disparity study provides information that can help the Port continue its implementation of
the Federal DBE Program, the SCS Program, and the SBE Program in a legallydefensible manner.
That information will also be useful to the Port as it continues to seek fairness in its contracting
and procurement processes for USDOT and locallyfunded contracts.
Racial/ethnic and gender groups examined in the study. A DBE is defined in 49 CFR Part
26 as a forprofit small business that is owned and operated by one or more individuals who are
socially and economically disadvantaged.10 There is a gross receipts limit (not more than an
average of $22,410,000 over three years and lower limits for certain lines of business) and a
personal net worth limit ($1.32 million not including equity in the business and in primary
personal residence) that businesses and business owners must fall below to be able to be
certified as a DBE.11 The Federal DBE Program specifies that the following racial/ethnic and
gender groups are presumed to be disadvantaged:
AsianPacific Americans;
Black Americans;
Hispanic Americans;
Native Americans;
Subcontinent Asian Americans;
Women of any race or ethnicity; and
Any additional groups whose members are designated as socially and economically
disadvantaged by the Small Business Administration.
In addition, agencies can consider individuals to be socially and economically disadvantaged on a
casebycase basis.12 As long as those businesses and business owners do not exceed revenue
and personal net worth limits, they are eligible for DBE certification.
9 RCW 49.60.400(1).
10 49 CFR Section 26.5.
11 USDOT periodically adjusts the gross receipt limits and the personal net worth limit that businesses and business owners
must fall below to be eligible for DBE certification.
12 White maleowned businesses can also meet the federal certification requirements and be certified as DBEs. However,
relatively few DBEs are white maleowned businesses.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 1, PAGE 4
MBE/WBEs, DBEs, and Potential DBEs. BBC includes MBEs and WBEsregardless of DBE
or other certificationsin the utilization, availability, disparity, and marketplace analyses. As a
result, those analyses pertain to any potential barriers related specifically to the race/ethnicity
and gender of business owners.
The study team uses the terms "MBEs" and "WBEs" to refer to businesses that are owned
and controlled by minorities or women (according to the race/ethnicity and gender
definitions listed above), regardless of whether they are:
Certified as DBEs or meet the revenue and net worth requirements for DBE certification;
Certified as SCSs through the Port or through King County; or
Certified as MBEs or WBEs through the Washington State Office of Minority and
Women's Business Enterprises (OMWBE).13
The study team uses the term "DBE" to refer specifically to businesses certified as such
through OMWBE, according to the definitions in 49 CFR Part 26.
The study team uses the term "potential DBE" to refer to MBE/WBEs that are
DBEcertified or appear that they could be DBEcertified based on the revenue requirements
specified as part of the Federal DBE Program, regardless of actual DBE certification.
Analyses in the disparity study. The disparity study examines whether there are any
disparities between the utilization and availability of MBE/WBEs on Port contracts.The study
focuses on FAA and locallyfunded construction and constructionrelated professional services
contracts that the Port awarded between January 1, 2010 and September 30, 2013 (i.e., the study
period). During the study period, The Port did not apply DBE contract goals or other race or
gender conscious measures to any of those contracts. The disparity study also includes:
A review of legal issues surrounding the implementation of the Federal DBE Program and
the SCS and SBE Programs;
An analysis of local marketplace conditions for MBE/WBEs and for other small businesses;
An assessment of the Port's contracting practices and business assistance programs; and
Other information for the Port to consider as it implements the Federal DBE Program and
the SCS and SBE Programs.
That information is organized in the disparity study report in the following manner:
Legal framework and analysis. The study team conducted a detailed analysis of relevant federal
regulations, case law, state law, and other information to guide the methodology for the disparity
study. The analysis included a review of federal requirements related to the Federal DBE
Program and an assessment of any state requirements concerning the implementation of the
Federal DBE program and the SCS and SBE Programs. The legal framework and analysis for the
study is summarized in Chapter 2 and presented in detail in Appendix B.
13 For this study, a WBE is a business with at least 51 percent ownership and control by nonHispanic white women.
Businesses owned and controlled by minority women are counted as minorityowned businesses.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 1, PAGE 5
Data collection and analysis. BBC examined data from multiple sources to complete the
utilization and availability analyses. In addition, the study team conducted telephone surveys
with thousands of businesses throughout the Seattle Metropolitan Area. The scope of the study
team's data collection and analysis as it pertains to the utilization and availability analyses is
presented in Chapter 3.
Marketplace conditions. BBC conducted quantitative analyses of the success of minorities and
women and MBE/WBEs in the local contracting industries. BBC compared business outcomes for
minorities, women, and MBE/WBEs to outcomes for nonHispanic white males and nonHispanic
white maleowned businesses. In addition, the study team collected qualitative information
about potential barriers that small businesses and MBE/WBEs face in the Seattle Metropolitan
Area through indepth anecdotal interviews. Information about marketplace conditions is
presented in Chapter 4 and Appendices E, F, G, H, I, and J.
Availability analysis. BBC analyzed the percentage of MBE/WBEs that are "ready, willing, and
able" to perform on the Port's prime contracts and subcontracts. That analysis was based on
telephone surveys with hundreds of Seattle Metropolitan Area businesses that work in
industries related to the types of contracting dollars that the Port awards. BBC analyzed
availability for specific MBE/WBE groups and types of contracts. Results from the availability
analysis are presented in Chapter 5 and Appendix C.
Utilization analysis. BBC analyzed contract dollars that the Port awarded to MBE/WBEs between
January 1, 2010 and September 30, 2013. Those data included information about associated
subcontracts.14 BBC analyzed contracts that were USDOTfunded and contracts that were solely
funded through local sources. Note that the Port did not apply DBE contract goals or other race
or gender conscious measures to any of those contracts. Results from the utilization analysis are
presented in Chapter 6 and Appendix D.
Disparity analysis. BBC examined whether there were any disparities between the utilization of
MBE/WBEs on contracts that the Port awarded during the study period and the availability of
those businesses for that work. BBC analyzed disparity analysis results for specific MBE/WBE
groups, types of contracts, contract roles, and contract sizes. The study team also assessed
whether any observed disparities were statistically significant. Results from the disparity
analysis are presented in Chapter 7 and Appendix K.
Further exploration of disparities. BBC examined potential causes of any disparities between
utilization and availability of MBE/WBEs on contracts that the Port awarded during the study
period. Those analyses included comparisons of results for subsets of Port contracts and
examinations of bids and proposals for a representative sample of contracts. BBC presents the
results of those analyses in Chapter 8.
Race and genderneutral measures. BBC reviewed information regarding evidence of
discrimination in the Seattle Metropolitan Area contracting marketplace; analyzed the Port's
experience with meeting its overall DBE goal in the past; and provided information about the
14 Note that prime contractorsnot the Portactually award subcontracts to subcontractors. However, throughout the
report, BBC refers to the Port as awarding subcontracts to simplify those discussions.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 1, PAGE 6
Port's past performance in encouraging the participation of MBE/WBEs using race and gender
neutral measures. Information from those analyses is presented in Chapter 9.
Implementation of the Federal DBE Program and the SCS and SBE Programs. BBC reviewed the
Port's contracting practices and DBE, SCS, and SBE program measures. BBC provided guidance
related to additional program options and changes to current contracting practices. The study
team's review and guidance is presented in Chapter 10.
C. Study Team
The BBC study team was made up of four firms that, collectively, possess decades of experience
related to conducting disparity studies in connection with the Federal DBE Program and state
and local MBE/WBE programs.
BBC (prime consultant). BBC is a Denverbased economic and policy research firm. BBC had
overall responsibility for the study and performed all of the quantitative analyses.
Holland & Knight. Holland & Knight is a national law firm with offices throughout the country.
Holland & Knight conducted the legal analysis that provided the basis for this study.
Keen Independent Research. Keen Independent Research is a Denverbased research firm.
Keen Independent Research advised on the study and reviewed portions of the final report.
Pacific Communications Consultants (PCC). PCC is a minority womanowned
communications firm based in Bellevue, Washington. PCC helped conduct indepth anecdotal
interviews as part of qualitative analyses of marketplace conditions.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 1, PAGE 7
CHAPTER 2.
Legal Framework
Federal regulationsspecifically, 49 Code of Federal Regulations (CFR) Part 26set forth the
requirements for how state and local agencies that receive United States Department of
Transportation (USDOT) funds must implement the Federal Disadvantaged Business Enterprise
(DBE) Program. The legal framework for the Port of Seattle (the Port) disparity study is based on
those regulations as well as on United States Supreme Court decisions and other federal court
rulings.
Several nonminority contractors and other groups have filed lawsuits challenging the
constitutionality of the Federal DBE Program or the constitutionality of specific agencies'
implementations of the Federal DBE Program. For example, contractors have filed lawsuits
against agencies implementing the Federal DBE Program in California, Illinois, Minnesota,
Montana, Nebraska, and Washington. Implementations of the program were successfully
defended in California, Illinois, Minnesota, and Nebraska but not in Washington. (The case in
Montana is still pending.) Appendix B provides further analysis of relevant legal decisions and
federal regulations.1
To understand the legal context for the disparity study, it is useful to review:
A. Measures that are part of the Federal DBE Program;
B. Measures that are part of state and local programs; and
C. Legal standards that race and genderconscious measures must satisfy.
A. Measures that are Part of the Federal DBE Program
Regulations that govern an agency's implementation of the Federal DBE Program require that
the agency meet the maximum feasible portion of its overall DBE goal through race and gender
neutral means.2 Race and genderneutral program measures are measures that are designed to
remove potential barriers for all businesses attempting to do work with the agency or measures
specifically designed to increase the participation of small or emerging businesses. If an agency
can meet its goal solely through race and genderneutral means, it cannot use race or gender
conscious measures. Race and genderconscious measures are measures that are specifically
designed to increase the participation of DBEs and minority and womenowned business
enterprises (MBE/WBEs), such as DBE contract goals or MBE/WBE participation goals.
If an agency cannot meet its overall DBE goal solely through race and genderneutral means,
then it is permitted to use race and genderconscious program measures as part of its
1 Neither Chapter 2 nor Appendix B constitutes a legal evaluation of the Port's current contracting practices or of its
implementation of the Federal DBE Program.
2 49 CFR Section 26.51.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 2, PAGE 1
implementation of the Federal DBE Program. However, because such program measures are
based specifically on the race or gender of business ownership, their use must satisfy certain
legal and regulatory standards in order to be valid. Given that context, there are several general
approaches that public agencies that receive USDOT funds could use to implement the Federal
DBE Program.
1. Applying a combination of race and genderneutral and race and gender
conscious measures with all certified DBEs considered eligible for race and gender
conscious measures. As part of implementing the Federal DBE Program, many agencies use a
combination of race and genderneutral and race and genderconscious measures where all
certified DBEs are considered eligible for race and genderconscious measures. The Port
currently implements the Federal DBE Program in this manner. The Port uses myriad race and
genderneutral measures that are designed to encourage the participation of small and emerging
businesses in its contracting. In addition, the agency specifies percentage goals for DBE
participation on individual Federal Aviation Administration (FAA)funded contracts (i.e., DBE
contract goals). Prime contractors that bid on those contracts must make subcontracting
commitments to DBEs to meet DBE contract goals, or they must show good faith efforts of having
tried to do so. The participation of all certified DBEsregardless of race/ethnicity or gender
count toward meeting individual contracting goals.
2. Applying a combination of race and genderneutral and race and gender
conscious measures with only certain groups of certified DBEs considered eligible
for conscious measures. Other agencies use a combination of race and genderneutral and
race and genderconscious measures when implementing the Federal DBE Program but limit
DBE participation in race and genderconscious measures to certain racial/ethnic or gender
groups based on evidence of those groups facing discrimination within the agencies' respective
relevant geographic market areas (underutilized DBEs, or UDBEs). Prime contractors that bid on
those contracts must make subcontracting commitments to UDBEs to meet those percentage
goals, or they must show good faith efforts of having tried to do so. In recent years, the California
Department of Transportation and the Oregon Department of Transportation, among other
agencies, have operated such programs.
3. Applying a combination of race and genderneutral and more aggressive race
and genderconscious measures in extreme circumstances. The Federal DBE Program
states that a recipient may not use more aggressive race and genderconscious program
measuressuch as setting aside contracts for DBE biddingexcept in limited and extreme
circumstances. An agency may only use set asides when no other method could be reasonably
expected to redress egregious instances of discrimination.3 Specific quotas for DBE participation
are strictly prohibited under the Federal DBE Program.
4. Operating an entirely race and genderneutral program. Some agencies have
implemented the Federal DBE Program without the use of DBE contract goals or other race and
genderconscious measures. Instead, those agencies only use race and genderneutral measures
as part of their implementation of the Federal DBE Program. For example, the Florida
3 49 CFR Section 26.43.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 2, PAGE 2
Department of Transportation implements the Federal DBE Program using only race and
genderneutral program measures.
B. Measures that are Part of State and Local Programs
In addition to USDOTfunded contracts, the Port and other agencies award construction and
constructionrelated professional services contracts that are solely funded through local sources.
The Federal DBE Program does not apply to those contracts. Many agencies apply MBE/WBE
goals to locallyfunded contracts in a manner that is very similar to how they set DBE goals on
federallyfunded contracts. For example, the Texas Department of Transportation operates a
Historically Underutilized Business Program that includes contract goals on certain statefunded
projects. The North Carolina Department of Transportation and the Indiana Department of
Transportation both have MBE/WBE programs in place for to their locallyfunded contracts that
mirror the Federal DBE Program.
The Port does not apply MBE/WBE goals to its locallyfunded contracts because of Initiative 200,
which Washington voters passed in November 1998. Initiative 200 amended state law to
prohibit discrimination and the use of race and genderbased preferences in public contracting,
public employment, and public education. However, Initiative 200 did not prohibit the use of
race and genderbased preferences if they are required "to establish or maintain eligibility for
any federal program, if ineligibility would result in a loss of federal funds to the state." Thus,
Initiative 200 prohibited public agencies in Washington from applying race and gender
conscious measures to locallyfunded contracts but not necessarily to federallyfunded
contracts.
C. Legal Standards that Race and GenderConscious Measures Must
Satisfy
The U.S. Supreme Court has established that government programs that include raceconscious
measures must meet the "strict scrutiny" standard of constitutional review.4 The two key U.S.
Supreme Court cases that established the strict scrutiny standard for raceconscious measures
are:
The 1989 decision in City of Richmond v. J.A. Croson Company, which established the strict
scrutiny standard of review for raceconscious programs adopted by state and local
governments;5 and
The 2005 decision in Adarand Constructors, Inc. v. Pea, which established the strict scrutiny
standard of review for federal raceconscious programs.6
As described in detail in Appendix B, the strict scrutiny standard is extremely difficult for a
government entity to meet. It presents the highest threshold for evaluating the legality of race
4 Certain Federal Courts of Appeal, including the Ninth Circuit Court of Appeals, apply the "intermediate scrutiny" standard to
genderconscious programs. Appendix B describes the intermediate scrutiny standard in detail.
5 City of Richmond v. J.A. Croson Company, 488 U.S. 469 (1989).
6 Adarand Constructors, Inc. v. Pea, 515 U.S. 200 (1995).
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 2, PAGE 3
conscious programs short of prohibiting them altogether. Under the strict scrutiny standard, a
governmental entity must:
Have a compelling governmental interest in remedying specific past identified discrimination
or its present effects; and
Establish that any program adopted is narrowly tailored to achieve the goal of remedying the
identified discrimination. There are a number of factors a court considers when determining
whether a program is narrowly tailored (see Appendix B).
A government agency must meet both components of the strict scrutiny standard. A program
that fails to meet either one is unconstitutional.
Examples of raceconscious programs that have not satisfied the strict scrutiny
standard. Many programs that use race and genderconscious measures have been challenged
in court and have been found to be unconstitutional. The Western States Paving Co. v. Washington
State DOT case provides an example of a local government program that was found to not have
met the strict scrutiny standard by failing to be narrowly tailored.7 Appendix B discusses the
Western States Paving Co. v. Washington State DOT ruling and other related rulings in detail.
Constitutionality of the Federal DBE Program on its face. The Federal DBE Program has
been held to be constitutional "on its face"or, as it is written rather than as it is appliedin
several legal challenges to date (for example, see discussion in Appendix B of Northern
Contracting, Inc. v. Illinois DOT, Sherbrooke Turf, Inc. v. Minn DOT, Gross Seed v. Nebraska
Department of Roads, Western States Paving Co. v. Washington State DOT, and Adarand
Constructors, Inc. v. Slater).8, 9 Some of those court decisions are discussed below.
Northern Contracting, Inc. v. Illinois DOT. In the Northern Contracting, Inc. v. Illinois DOT
decision, the Seventh Circuit Court of Appeals cited its earlier precedent in Milwaukee County
Pavers v. Fielder to hold that "a state is insulated from [a narrow tailoring] constitutional attack,
absent a showing that the state exceeded its federal authority. IDOT [Illinois DOT] here is acting
as an instrument of federal policy and Northern Contracting cannot collaterally attack the
federal regulations through a challenge to IDOT's program."10
The Seventh Circuit Court of Appeals distinguished both the Ninth Circuit Court of Appeals
decision in Western States Paving Co. v. Washington State DOT and the Eighth Circuit Court of
Appeals decision in Sherbrooke Turf, Inc. v. Minnesota DOT relating to an "as applied" narrow
tailoring analysis:11
7 Western States Paving Co. v. Washington State DOT, 407 F.3d 983 (9th Cir. 2005), cert. denied, 546 U.S. 1170 (2006).
8 473 F.3d 715 (7th Cir. 2007).
9 Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000) cert. granted then dismissed as improvidently granted sub
nom. Adarand Constructors, Inc. v. Mineta, 532 U.S. 941, 534 U.S. 103 (2001).
10 473 F.3d at 722.
11 Sherbrooke Turf, Inc. v. Minnesota DOT, and Gross Seed Company v. Nebraska Department of Road, 345 F.3d 964 (8th Cir.
2003), cert. denied, 541 U.S. 1041 (2004).
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 2, PAGE 4
The Seventh Circuit held that IDOT's application of a federallymandated program is limited
to the question of whether the state exceeded its grant of federal authority under the Federal
DBE Program.12
The Seventh Circuit analyzed IDOT's compliance with the federal regulations regarding
calculation of the availability of DBEs, adjustment of its goal based on local market
conditions, and its use of raceneutral methods set forth in the federal regulations.13 The
court held that Northern Contracting failed to demonstrate that IDOT did not satisfy
compliance with the federal regulations.14
The Seventh Circuit Court of Appeals affirmed the district court's decision upholding the validity
of IDOT's DBE program.
Western States Paving Co. v. Washington State DOT. The constitutionality of the Federal DBE
Program was also upheld by the Ninth Circuit Court of Appeals in Western States Paving Co. v.
Washington State DOT. However, the Ninth Circuit found that the Washington State Department
of Transportation failed to show that its implementation of the Federal DBE Program was
narrowly tailored. After that ruling, state departments of transportation in the Ninth Circuit
operated entirely race and genderneutral programs until they could complete disparity studies
to provide information that would allow them to implement the Federal DBE Program in a
narrowly tailored manner.15 The Ninth Circuit Court of Appeals recently examined another
agency's implementation of the Federal DBE Program for the first time since Western States
Paving. In Associated General Contractors of America, San Diego Chapter, Inc. v. California
Department of Transportation, et al., the Court found the California Department of
Transportation's implementation of the Federal DBE Program to be constitutional on its face and
as applied.16
Guidance from decisions that have upheld state and local programs. In addition to the Federal
DBE Program, some state and local government minority business programs have been found to
meet the strict scrutiny standard. Appendix B discusses the successful defense of state and local
raceconscious programs, including Concrete Works of Colorado v. City and County of Denver
(upheld in part) and H.B. Rowe Company, Inc. v. W. Lyndo Tippett, North Carolina Department of
Transportation, et al.17, 18 Appendix B as well as USDOT guidance provide further instruction
regarding legal issues in a government agency's implementation of the Federal DBE Program.19
12 Id. at 722.
13 Id. at 72324.
14 Id.
15 Disparity studies have been completed or are underway for state DOTs in each Ninth Circuit state as well as for many local
transit agencies and airports in those states.
16 AGC, San Diego Chapter v. California DOT, 2013 WL 1607239 (9th Cir. April 16, 2013).
17 Concrete Works of Colorado v. City and County of Denver, 321 F.3d 950 (10th Cir. 2003), cert. denied, 540 U.S. 1027 (2003).
18 H.B. Rowe Company., Inc. v. W. Lyndo Tippett, North Carolina Department of Transportation, et al; 589 F. Supp. 2d 587
(E.D.N.C. 2008), appeal pending in the Fourth Circuit Court of Appeals.
19 http://www.osdbu.dot.gov/DBEProgram/dbeqna.cfm.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 2, PAGE 5
CHAPTER 3.
Collection and Analysis of Port Data
Chapter 3 provides an overview of Port of Seattle (Port) contracts that the study team analyzed
as part of the disparity study and describes the process that the study team used to collect prime
contract and subcontract data. Chapter 3 is organized into five parts:
A. Overview of Port contracts;
B. Collection and analysis of contract data;
C. Collection of vendor data;
D. Locations of vendors performing Port work; and
E. Types of work involved in Port contracts.
Appendix C provides additional details about the method that BBC used to collect and analyze
the Port's contract and vendor data.
A. Overview of Port Contracts
The Port uses United States Department of Transportation (USDOT) and local funding to execute
construction and constructionrelated professional services projects throughout the Seattle
Metropolitan Area.1 Examples of such projects include airport terminal upgrades; airfield
improvements; and seaport infrastructure improvements. The Port's Central Procurement Office
is responsible for awarding contracts related to construction and professional services projects.
The Port uses the Procurement and Roster Management System (PRMS) to maintain data on
vendors that bid or propose on construction and constructionrelated professional services
contracts. In addition, businesses can use PRMS to register themselves to be included on the
Port's small works (i.e., construction contracts worth less than $300,000) or professional
services vendor lists, or rosters. The Port uses those rosters to notify qualified businesses about
bid opportunities. The Port does not maintain analogous rosters for major works (i.e.,
construction contracts worth more than $300,000).
Construction. Construction contracts typically involve a prime contractor and several
subcontractors. The Port's Central Procurement Office awards construction contracts through a
competitive bidding process (as required by Washington State statute). The Central
Procurement Office is required to award such contracts to the lowest responsive and responsible
bidder.
1 For the purposes of this study, the Seattle Metropolitan Area is defined as King, Pierce, and Snohomish counties.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 3, PAGE 1
Professional services. For professional services contracts that are worth less than $50,000,
the Central Procurement Office uses a direct procurement procedure. If three or more interested
and qualified businesses express interest in a contract, the Port is required to contract with a
business that is a verified Small Contractor and Supplier (SCS).2 If it is not possible for the Port to
award the contract to an SCScertified firm, then the Port must at least demonstrate due
diligence in complying with the requirement.
For professional services contracts that are worth more than $50,000 but less than $200,000, the
Central Procurement Office uses the professional services roster in PRMS to solicit bids from
qualified vendors. If there are two or more SCScertified or selfdeclared small businesses that
express interest in the work, at least one of them must be included in the interview process. The
Port evaluates the interviews and takes interview scores into consideration when awarding
those contracts.
For professional services contracts that are worth more than $200,000, the Central Procurement
Office is required to publically advertise the bidding opportunity through a formal Request for
Proposal (RFP) process. The RFP process includes advertisement of the procurement
opportunity, a preproposal conference, issuance of addenda, and final selection by an appointed
selection committee. The selection committee awards the contract based on predetermined
selection criteria.
B. Collection and Analysis of Contract Data
The study team worked with the Port to collect data on the USDOT and locallyfunded
construction and constructionrelated professional services prime contracts and subcontracts
that the agency awarded during the study period.
Study period. BBC examined construction and constructionrelated professional services
contracts that the Port awarded between January 1, 2010 and September 30, 2013. The Port did
not apply Disadvantaged Business Enterprise (DBE) contract goals or other race or gender
conscious measures to any of those contracts.
Data sources. BBC relied on several sources of information to compile data on the Port's prime
contracts and subcontracts.
The Port provided the study team with electronic data on construction and construction
related professional services prime contracts that the agency awarded during the study
period. The Port maintains those data in its PeopleSoft (PS) data system and Contractor
Data System (CDS).3
The Port also provided the study team with electronic data on construction subcontracts
that the agency awarded during the study period. Those data are maintained in CDS.
2 The SCS Program is a joint partnership with King County that uses participation requirements and evaluation incentives to
encourage prime contractors to use SCScertified subcontractors on locallyfunded contracts.
3 The Port provided information about whether each construction and constructionrelated professional services contract was
USDOTfunded.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 3, PAGE 2
The Port began maintaining subcontractor data on professional services contracts in 2013.
In order to gather comprehensive subcontractor data for the entire study period, the study
team collected data on constructionrelated professional services subcontracts from two
main sourcessurveys of prime contractors and the Port's 2013 subcontract invoice
records.
Appendix C describes the study team's data collection methodology in detail.
Total number of Port contracts. The study team identified 344 prime contracts and 704
associated subcontracts that the Port awarded during the study period in the areas of
construction and constructionrelated professional services. The contracts that the study team
identified accounted for approximately $242 million of Port spending during the study period.4
Contracts included in the study team's analyses. The study team included construction and
constructionrelated professional services contracts that the Port awarded during the study
period in its analyses. For each prime contract and subcontract, the study team determined the
prime contractor's subindustry that characterized the firm's primary line of business (e.g., heavy
construction). BBC identified subindustries based on the Port's contract data and the primary
lines of work of prime contractors and subcontractors.
Figure 31 presents information about the 1,048 prime contracts and subcontracts that the study
team included in its analyses. Approximately 14 percent of the associated contract dollars
corresponded to contracts that involved Federal Aviation Administration (FAA) funds, including
contracts that were only partially funded through the FAA.
Figure 31.
Number of Port contracts included in the study
Dollars
Contract types Number (millions)
Construction 681 $190
Constructionrelated Professional Services 367 52
Total 1,048 $242
Note: Numbers rounded to nearest dollar and thus may not sum exactly to totals.
The figure includes Port contracts executed on or before September 30, 2013.
Source: BBC Research & Consulting from Port contract data.
Contracts not included in the study team's analyses. BBC did not include contracts in its
analyses that:
The Port awarded to nonprofit organizations or to other government agencies;
Were classified in industries that were not directly related to construction or construction
related professional services (e.g., financial services);
4 BBC weighted contract values that were sourced from 2013 invoice data to equal the total paidtodate amount for the entire
study period.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 3, PAGE 3
Were classified in subindustries for which the Port awarded the majority of contracting
dollars outside of the Seattle Metropolitan Area;5 or
Were classified in national market industries (i.e., industries in which a small number of
large, national businesses compete).
Prime contract and subcontract amounts. For each contract, BBC examined dollars that
the Port paid to each prime contractor during the study period and the dollars that the prime
contractor paid to any subcontractors.
If a contract did not include any subcontracts, the study team attributed the entire amount
paid during the study period to the prime contract.
If a contract included subcontracts, the study team calculated subcontract amounts as the
total amount paid to each subcontractor. BBC then calculated the prime contract amount as
the total amount paid less the sum of dollars paid to all subcontractors.
C. Collection of Vendor Data
The study team collected information on businesses that participated on Port construction and
constructionrelated professional services contracts during the study period. BBC relied on a
variety of sources for that information, including:
The Port's contract and vendor data;
The Office of Minority and Women's Business Enterprises (OMWBE) directory of DBE
certified firms;
Dun & Bradstreet (D&B) business listings and other business information sources;
Business websites;
Telephone surveys that the study team conducted with business owners and managers; and
Reviews that the Port completed of study information.
The study team compiled the following information about each business that participated on
Port contracts:
Business location;
Ownership status (i.e., whether each business was minority or womenowned);
DBE certification status;
Primary line of work;
Year of establishment; and
Business size (in terms of number of employees and revenue).
5 BBC included the utilization of businesses that were located outside of the Seattle Metropolitan Area in its analyses. However,
the study team did so only for those subindustries for which the Port awarded the majority of contract dollars to businesses
located within the Seattle Metropolitan Area.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 3, PAGE 4
Appendix C presents additional information about the data that the study team collected on
businesses that participated on Port contracts during the study period.
D. Location of Vendors Performing Port Work
The Federal DBE program requires agencies to implement the DBE program based on
information from the relevant geographic market areathe area in which the agency spends the
substantial majority of its contracting dollars. The study team used the Port's contracting and
vendor data to help determine the relevant geographic market area for the study.
The study team summed the dollars that went to each prime contractor and
subcontractor involved in the construction and constructionrelated professional
services contracts that the Port awarded during the study period.
For each prime contractor and subcontractor, BBC determined the county in which
the business was located.6
BBC then added the construction and constructionrelated professional services
contract dollars that the Port awarded to businesses in each county and defined the
relevant geographic market area based on those counties that account for the
majority of where the Port spends its contracting dollars.
The study team's analysis showed that 88 percent of the Port's construction and construction
related professional services contracting dollars during the study period went to businesses with
locations in King, Pierce, or Snohomish counties, indicating that those three counties together
should be considered the relevant geographic market area for the study. As a result, BBC's
analyses, including the availability analysis and quantitative analyses of marketplace conditions,
focused on King, Pierce, and Snohomish counties.
E. Types of Work Involved in Port Contracts
The study team determined the subindustries that were involved in relevant prime contracts
and subcontracts that the Port awarded during the study period. The study team based those
determinations on the Port's contract data and information about each prime contractor and
subcontractor's primary lines of work. BBC developed subindustries based in part on 8digit
D&B industry classification codes. Figure 32 presents the dollars that the study team examined
in various construction and constructionrelated professional services subindustries as part of
its analyses.
The study team combined related subindustries that accounted for relatively small percentages
of total contracting dollars into two subindustries and labeled them "other construction
services" and "other construction equipment and supplies." For example, the contracting dollars
that the Port awarded to contractors for "sheetmetal work" represented less than 1 percent of
total Port contract dollars that BBC examined in the study. As a result, BBC combined
6 If a business had locations in multiple counties, BBC selected the county closest to Seattle for the purpose of determining the
Port's relevant geographic market area.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 3, PAGE 5
"sheetmetal work" with other types of work that also accounted for relatively small percentages
of total contracting dollars and that were relatively dissimilar to other subindustries.
Figure 32.
Industry Total (in thousands)
Port contract dollars by
subindustry, 2010 2013
Construction
Note: Heavy construction $61,849
Numbers rounded to nearest dollar and Electrical work 26,042
thus may not sum exactly to totals. Water, sewer, and utility lines 20,002
Vertical construction trades 18,932
Source: Plumbing and HVAC 6,694
BBC Research & Consulting from Port
Vertical construction 5,898
contract data.
Marine construction 5,571
Excavation and drilling 3,233
Steel building materials 2,197
Landscape services 1,482
Wrecking and demolition 1,251
Signs, installation and manufacture 777
Trucking 623
Asphalt and concete supply 593
Other construction services 14,600
Other construction equipment and supplies 4,081
Total Construction $173,826
Constructionrelated Professional Services
Engineering $53,847
Environmental research, consulting, and testing 10,871
Construction management 1,983
Transportation consulting 1,551
Surveying and mapmaking 237
Total Engineering $68,489
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 3, PAGE 6
CHAPTER 4.
Marketplace Conditions
Federal courts have found that Congress "spent decades compiling evidence of race
discrimination in government highway contracting, barriers to the formation of minorityowned
construction businesses, and barriers to entry."1 Congress found that discrimination has
impeded the formation and expansion of qualified minority and womenowned business
enterprises (MBE/WBEs). BBC conducted quantitative and qualitative analyses to examine
whether barriers for MBE/WBEs that Congress found on a national level also appear in the
Seattle Metropolitan Area.2 BBC analyzed whether barriers exist in the local construction and
constructionrelated professional services industries for minorities, women, and for MBE/WBEs,
and whether such barriers affect the utilization and availability of MBE/WBEs for the Port of
Seattle's (the Port's) contracting.
BBC examined conditions in the local marketplace in four primary areas:
A. Entry and advancement;
B. Business ownership;
C. Access to capital; and
D. Success of businesses.
Appendices E through I present quantitative information concerning conditions in the local
marketplace. Appendix J presents qualitative information that the study team collected through:
Indepth anecdotal interviews with business owners and others throughout the region;
Verbal testimony submitted by local business representatives who attended the 2014
Regional Contracting Forum that took place on March 26, 2014;
Written testimony submitted by key stakeholders; and
Public forums that BBC conducted in the Seattle Metropolitan Area on January 28 and 29,
2014.
A. Entry and Advancement
Several business owners and managers that the study team interviewed as part of the disparity
study commented that individuals who form construction and constructionrelated professional
services businesses tend to work in those industries before starting their own businesses (for
details, see Appendix J). Any barriers related to entry or advancement in the construction and
constructionrelated professional services industries may prevent some minorities and women
1 Sherbrooke Turf, Inc. v. Minnesota DOT, 345 F.3d, 970 (8th Cir. 2003) (citing Adarand Constructors, Inc., 228 F.3d at 1167 76);
Western States Paving Co. v. Washington State DOT, 407 F.3d 983, 992 (9th Cir. 2005).
2 For the purposes of this study, the Seattle Metropolitan Area is defined as King, Pierce, and Snohomish counties.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 1
from starting such businesses in the Seattle Metropolitan Area. Several studies throughout the
United States have indicated that race and genderbased discrimination has affected the
employment and advancement of certain groups in the construction and constructionrelated
professional services industries. The study team examined the representation of minorities and
women among all workers in the local construction and constructionrelated professional
services industries. In addition, for the construction industry, the study team examined the
advancement of minorities and women into supervisory and managerial roles. Appendix E
presents those results in more detail.
Quantitative information about entry and advancement in construction. Quantitative
analyses of the Seattle Metropolitan Areabased primarily on data from the 2000 U.S. Census
and the 20092011 American Community Survey (ACS)showed that, in general, certain
minority groups and women appear to be underrepresented among all workers in the local
construction industry relative to all industries considered together. In addition, minorities and
women appear to face barriers regarding advancement to supervisory or managerial positions.
Overall representation. Black Americans, AsianPacific Americans, Subcontinent Asian
Americans, and women accounted for a smaller percentage of workers in the local construction
industry than in all Seattle Metropolitan Area industries in 2009 through 2011.
Black Americans made up 3 percent of workers in the local construction industry compared
with 6 percent of workers in all Seattle Metropolitan Area industries.
AsianPacific Americans (4%) and Subcontinent Asian Americans (less than 1%) were also
underrepresented in the local construction industry relative to their representation in all
Seattle Metropolitan Area industries (12% and 2%, respectively).
Women made up about 12 percent of the workforce in the local construction industry
compared with 46 percent of the workforce in all Seattle Metropolitan Area industries. In
most construction trades in the Seattle Metropolitan Area, women made up less than 5
percent of workers.
Representation of Native Americans in the local construction industry was similar to the
representation of Native Americans in the workforce for all Seattle Metropolitan Area industries
(2%). Representation of Hispanic Americans in the local construction industry (13%) was
substantially higher than the representation of Hispanic Americans in the workforce for all
Seattle Metropolitan Area industries (8%).
Advancement. Minority and female workers in the local construction industry were less likely
than nonHispanic whites and males to advance to the level of firstline supervisor based on data
for 2009 through 2011.
Only 15 percent of firstline supervisors were minorities, less than the percentage of all
Seattle Metropolitan Area construction workers that were minorities (23%).
Similar to that result, women made up only 7 percent of firstline supervisors in the local
construction industry compared to 12 percent of all workers in the local construction
industry.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 2
In addition, minorities and women were generally less likely than nonHispanic whites and
males to advance to the level of construction manager in the local construction industry.
Formal education beyond high school is not a prerequisite for most construction jobs. Because
the average educational attainment of minorities and women was generally consistent with
educational requirements for construction jobs, factors other than formal education may explain
the relatively low representation of minorities and women among workers in the local
construction industry and the relatively low representation of minorities and women working in
supervisory and managerial roles.
Quantitative information about entry into the constructionrelated professional
services industry. BBC also used 2000 U.S. Census data and 20092011 ACS data to examine
employment and advancement for minorities and women in the local constructionrelated
professional services industry. As with construction, in general, minorities appear to be
underrepresented in the local constructionrelated professional services industry. The patterns
in the Seattle Metropolitan Area were similar to Washington as a whole and the United States as
a whole.
Overall representation. In general, minorities and women accounted for a smaller percentage of
workers in the local constructionrelated professional services industry than in all Seattle
Metropolitan Area industries in 2009 through 2011, even when limiting the analyses to only
those individuals with college degrees.
Black Americans made up 1 percent of workers in the local constructionrelated
professional services industry compared with 3 percent of workers with college degrees in
all Seattle Metropolitan Area industries.
Similar to that result, 1 percent of workers in the local constructionrelated professional
services industry were Subcontinent Asian Americans compared with 3 percent of workers
with college degrees in all Seattle Metropolitan Area industries.
Asian Pacific Americans made up 10 percent of workers in the local constructionrelated
professional services industry compared with 13 percent of workers with college degrees in
all Seattle Metropolitan Area industries.
Thirtythree percent of workers in the local constructionrelated professional services
industry were women compared with 46 percent of workers with college degrees in all
Seattle Metropolitan Area industries. Women represented an even smaller percentage of
workers in the local civil engineering industry (18%).
Representation of Native Americans in the local constructionrelated professional services
industry was similar to the representation of Native American workers with college degrees for
all Seattle Metropolitan Area industries (1%). Representation of Hispanic Americans in the local
professional services industry (5%) was higher than the representation of Hispanic American
workers with college degrees for all Seattle Metropolitan Area industries (3%).
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 3
Qualitative information about entry and advancement. BBC collected qualitative
information about entry and advancement in the local construction and constructionrelated
professional services industries through indepth interviews; verbal and written testimony; and
public meetings and forums.
Paths to starting a business. Interviewees reported that construction and constructionrelated
professional services companies are typically started (or sometimes purchased) by individuals
with connections to the construction or constructionrelated professional services industries.
Most business owners reported that they worked in the construction or construction
related professional services industry before starting their businesses.
Some interviewees indicated that relationships among family members were instrumental
in establishing their construction businesses.
Therefore, any barriers to becoming employed in the construction or constructionrelated
professional services industry could also affect business ownership.
Discriminatory work environments. Some interviewees reported a discriminatory work
environment and stereotypical attitudes about women on worksites:
Some interviewees reported that women in construction have difficulty commanding
respect. One female business owner said that, early in the life of her business, people would
not talk to her because she was a woman.
Some interviewees said that they had personally experienced sexist comments.
Some interviewees reported a discriminatory work environment and stereotypical attitudes
about minorities.
Several minority business owners said that they had personally experienced racial/ethnic
slurs or other discriminatory comments. Some interviewees indicated that such comments
were also directed at workers.
Some interviewees indicated that it was difficult for a minority to be acknowledged as a
business owner.
Effects of entry and advancement. The barriers that minorities and women appear to face
entering and advancing within the local construction and constructionrelated professional
services industries may have substantial effects on business outcomes for MBE/WBEs.
Typically, employment and advancement are preconditions to business ownership in the
construction and constructionrelated professional services industries. Because certain
minority groups and women appear to be underrepresented in the local construction and
constructionrelated professional services industriesboth in general and as supervisors
and managers it follows that such underrepresentation may prevent some minorities and
women from ever starting businesses, reducing overall MBE/WBE availability in the local
construction and constructionrelated professional services contracting industries.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 4
Underrepresentation of certain groups in the local construction and constructionrelated
professional services industries may perpetuate beliefs and stereotypical attitudes that
MBE/WBEs may not be as qualified as majorityowned businesses (i.e., nonHispanic white
maleowned businesses). Those beliefs may make it more difficult for MBE/WBEs to win
work in the Seattle Metropolitan Area, including work with the Port.
B. Business Ownership
National research and studies in other states Figure 41.
have found that race/ethnicity and gender also Use of regression analyses of business
affect opportunities for business ownership, ownership in defense of the Federal DBE
even after accounting for race and gender Program
neutral factors. Figure 41 summarizes how State and federal courts have considered
courts have used information from such differences in business ownership rates
studies particularly from regression between minorities and women and non
analyseswhen considering the validity of an Hispanic whites and males when reviewing the
agency's implementation of the Federal implementation of the Federal DBE Program,
Disadvantaged Business Enterprise (DBE) particularly when considering DBE goals. For
example, disparity studies in California,
Program.
Minnesota, and Illinois used regression
analyses to examine the impact of
BBC used regression analyses and data sources race/ethnicity and gender on business
that were similar to those used in other studies ownership in the construction and
to analyze business ownership in the local professional services industries. Results from
construction and constructionrelated those analyses helped determine whether
professional services industries. BBC used differences in business ownership exist
between minorities and women and non
20092011 ACS data to examine whether there
Hispanic white males after statistically
are differences in business ownership rates
controlling for race and genderneutral
between minorities and women and non characteristics. Those analyses were included
Hispanic whites and males in the local in materials submitted to the courts in
construction and constructionrelated subsequent litigation concerning the
professional services industries. implementation of the Federal DBE Program.
The regression models that the study team developed showed that certain minority groups and
women are less likely than nonHispanic whites and males to own businesses, even after
accounting for various personal characteristics including education, age, and the ability to speak
English. For those groups that were significantly less likely to own businesses, BBC compared
their actual business ownership rates with simulated rates if those groups owned businesses at
the same rate as nonHispanic whites or nonHispanic white males (in the case of nonHispanic
white women) who share similar race and genderneutral personal characteristics.
Appendix F provides details about BBC's quantitative analyses of business ownership rates.
Quantitative information about business ownership in construction. Regression
analyses of the local construction industry revealed that certain groups were significantly less
likely than nonHispanic whites and males to own construction businesses, even after accounting
for various race and genderneutral personal characteristics such as education, age, personal
net worth, and ability to speak English. Those groups were:
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 5
Hispanic Americans; and
NonHispanic white females.
For each of those groups, Figure 42 presents actual business ownership rates and simulated
business ownership rates (i.e., "benchmarks") if those groups owned businesses in the local
construction industry at the same rate as nonHispanic whites or nonHispanic white males who
share similar personal characteristics. The study team calculated a business ownership disparity
index for each group by dividing the observed business ownership rate by the benchmark
business ownership rate and then multiplying the result by 100. Values less than 100 indicate
that the group is less likely to own businesses than what would be expected for nonHispanic
whites or nonHispanic white males who share similar race and genderneutral personal
characteristics.
Figure 42.
Comparison of actual business ownership rates to simulated rates for
Seattle Metropolitan Area construction workers, 20092011
Business ownership rate Disparity index
Group Actual Benchmark (100 = parity)
Hispanic American 12.2% 23.5% 52
NonHispanic white female 15.6% 23.0% 68
Note: Because benchmarks can only be estimated for records with an observed (rather than imputed)
dependent variable, comparisons are made using only that subset of the sample. For that reason, actual
selfemployment rates may differ slightly from those shown in Figure 42.
Source: BBC Research & Consulting from statistical models of 20092011 ACS data. The raw data extract was
obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
As shown in Figure 42, Hispanic Americans and nonHispanic white women in the Seattle
Metropolitan Area both own construction businesses at rates that are substantially lower than
those of nonHispanic whites and nonHispanic white males who share similar personal
characteristics. Hispanic Americans own construction businesses at 52 percent of the rate that
would be expected for nonHispanic whites who share similar personal characteristics. Non
Hispanic white women own construction businesses at 68 percent of the rate that would be
expected based on the simulated business ownership rates of nonHispanic white males who
share similar personal characteristics.
Quantitative information about business ownership in constructionrelated
professional services. As with construction, BBC examined differences in business ownership
rates between minorities and nonHispanic white females and nonHispanic whites and males in
the local constructionrelated professional services industry. After accounting for various race
and genderneutral personal characteristics, BBC found that nonHispanic white females were
less likely to own constructionrelated professional services businesses than nonHispanic white
males. Figure 43 presents actual business ownership rates and simulated business ownership
rates (i.e., "benchmarks") if nonHispanic white females owned businesses in the local
constructionrelated professional services industry at the same rate as nonHispanic white males
who share similar personal characteristics. The study team calculated a business ownership
disparity index by dividing the observed business ownership rate by the benchmark business
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 6
ownership rate and then multiplying the result by 100. Values less than 100 indicate that the
group is less likely to own businesses than what would be expected for nonHispanic white
males who share similar race and genderneutral personal characteristics.
Figure 43.
Comparison of actual business ownership rates to simulated rates for Seattle Metropolitan
Area workers in the constructionrelated professional services industry, 20092011
Business ownership rate Disparity index
Group Actual Benchmark (100 = parity)
NonHispanic white female 11.8% 18.9% 62
Note: Because benchmarks can only be estimated for records with an observed (rather than imputed)
dependent variable, comparisons are made using only that subset of the sample. For that reason, actual
selfemployment rates may differ slightly from those shown in Figure 43.
Source: BBC Research & Consulting from statistical models of 20092011 ACS data. The raw data extract was
obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
Approximately 12 percent of nonHispanic white women in the Seattle Metropolitan Area
constructionrelated professional services industry were business owners in 2009 through 2011
compared with a benchmark business ownership rate of about 19 percent (a disparity index of
62). Those results indicate that women working in the Seattle Metropolitan Area construction
related professional services industry own businesses at 62 percent of the rate that would be
expected for nonHispanic white males who share similar personal characteristics.
No minority groups were significantly less likely to own constructionrelated professional
services businesses than nonHispanic whites. However, that result does not necessarily indicate
that minorities have the same opportunities as nonHispanic whites to own and operate
successful businesses in the local constructionrelated professional services industry
(for example, see the qualitative information below and in Appendix J).
Qualitative information about business ownership. BBC collected qualitative
information about business ownership in the local construction and constructionrelated
professional services industries through indepth interviews; verbal and written testimony; and
public meetings and forums.
According to most interviewees, the construction and constructionrelated professional services
industries in the Seattle Metropolitan Area have been dynamic and highly competitive, especially
in recent years. It is difficult to start and successfully operate a business within the local market.
Business owners who were minority, female, or white male reported facing many of the same
challenges. Owners of small construction and constructionrelated professional services
businesses identified many challenges to staying in business. Similarly, representatives of large
majorityowned businesses reported difficulties with remaining profitable.
Some interviewees indicated additional disadvantages for minorities and women starting or
operating businesses in the local construction and constructionrelated professional services
industries. They cited difficulties associated with the preconditions of starting and maintaining a
business, such as issues with obtaining financing, bonding, equipment and supplies, and being
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 7
excluded from industry networks. Any disadvantages in operating a business can also reduce the
number of MBE/WBEs.
Effects of business ownership. The barriers that certain minority groups and women appear
to face regarding business ownership may have substantial effects on the current composition of
the local construction and constructionrelated professional services contracting industries.
Evidence indicates that certain minority groups and women are less likely than nonHispanic
whites and males to own construction and constructionrelated professional services businesses
in the Seattle Metropolitan Area. There is also evidence that some MBE/WBEs may have never
formed as a result of different barriers related to race/ethnicity and gender in the Seattle
Metropolitan Area.
C. Access to Capital
Access to capital represents one of the key factors that researchers have examined when
studying business formation and success. If race or genderbased discrimination exists in
capital markets, minorities and women may have difficulty acquiring the capital necessary to
start or expand a business. BBC examined whether MBE/WBEs have access to capitalboth for
their homes and for their businessesthat is comparable to that of majorityowned businesses.
In addition, the study team examined information about whether minorities and women face any
barriers in obtaining bonding and insurance. Appendix G provides details about BBC's
quantitative analyses of access to capital, bonding, and insurance.
Quantitative information about homeownership and mortgage lending. Wealth
created through homeownership can be an important source of funds to start or expand a
business. Barriers to homeownership or home equity can affect business opportunities by
limiting the availability of funds for new or expanding businesses. BBC analyzed the potential
effects of race/ethnicity on homeownership and on mortgage lending in the Seattle Metropolitan
Area based on 20092011 ACS data and 2012 Home Mortgage Disclosure Act (HMDA) data,
respectively.
Homeownership rates. Many studies have documented past discrimination in the national
housing market. BBC used 20092011 ACS data to examine homeownership rates in the Seattle
Metropolitan Area. Every minority group that the study team examinedBlack Americans
(33%), AsianPacific Americans (61%), Subcontinent Asian Americans (51%), Hispanic
Americans (39%), Native Americans (46%), and "other" minorities (53%)owned homes in the
Seattle Metropolitan Area at a lower rate than nonHispanic whites (65% own homes). Although
those differences were all statistically significant (with the exception of "other" minorities), the
differences between nonHispanic whites and Black Americans and between nonHispanic
whites and Hispanic Americans were the most pronounced.
BBC also examined median home values among local homeowners and found that Black
American, Hispanic American, Native American, and "other" minority homeowners tend to own
homes of lower values than nonHispanic white homeowners.
Mortgage lending. If minorities are discriminated against when applying for home mortgages,
then they may be denied opportunities to own homes, purchase more expensive homes, or
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 8
access equity in their homes. The study team explored market conditions for mortgage lending
in the Seattle Metropolitan Area using 2012 HMDA data. The data indicated that Black Americans
(16%) and Native Americans (14%) are denied mortgages at substantially higher rates than non
Hispanic whites (7%). There is also evidence suggesting that minoritiesparticularly Native
Americans and Black Americansare generally more likely than nonHispanic whites to have
subprime loans.
Quantitative information about business credit. Business credit is also an important
source of funds for small businesses. Any race or genderbased barriers in the application or
approval processes of business loans could affect the formation and success of MBE/WBEs. To
examine the effect of race/ethnicity and gender in business capital markets, the study team
analyzed data from the Federal Reserve Board's 1998 and 2003 Survey of Small Business
Finances (SSBF).3 Because SSBF records the geographic location of businesses by Census
Division, BBC examined data for the Pacific Census Division, which includes Washington, Alaska,
California, Hawaii, and Oregon. The Pacific Census Division is the level of geographic detail of
SSBF data most specific to the Seattle Metropolitan Area. BBC also examined SBF data for the
United States overall.
Business loan approval rates. BBC developed regression models of business loan approvals
based on 2003 SSBF data to examine outcomes for MBEs and femaleowned businesses after
statistically controlling for race and genderneutral business factors.
The results from the model indicated that Black Americanowned businesses in the United
States were significantly less likely than nonHispanic whiteowned businesses to be
approved for business loans.
Femaleowned businesses in the United Sates were no less likely than maleowned
businesses to be approved for business loans.
For Black Americanowned businesses, Figure 44 presents actual business loan approval rates
and simulated loan approval rates (i.e., "benchmark") if Black Americanowned businesses in the
Pacific Census Division were approved for business loans at the same rate as nonHispanics
white maleowned businesses that share the same race and genderneutral business
characteristics. The study team calculated a loan approval disparity index for Black American
owned businesses by dividing the observed loan approval rate by the benchmark loan approval
rate and then multiplying the result by 100. Values of less than 100 indicate that, in reality, Black
Americanowned businesses are less likely to be approved for a business loan than what would
be expected for nonHispanic white maleowned businesses that share similar business
characteristics.
As shown in Figure 44, Black Americanowned businesses in the Pacific Census Division are
approved for business loans at rates that are substantially lower than those of nonHispanic
white maleowned businesses. Black Americanowned businesses are approved for loans at 71
3 Data from the 2003 SSBF were the most current SSBF data available at the time of this study.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 9
percent of the rate that would be expected for nonHispanic whiteowned businesses that share
similar characteristics.
Figure 44.
Comparison of actual business loan approval rates to simulated rates
("benchmark"), Pacific Census Division, 2003
Loan approval rates Disparity index
Group Actual Benchmark (100 = parity)
Black American 49.1% 69.0% 71
Source: BBC Research & Consulting analysis of 2003 NSSBF data.
Loan values and interest rates. BBC also examined the average business loan values for
businesses that received loans. Data from the 2003 SSBF indicated that minority and female
owned businesses in the Pacific Census Division received business loans that, on average, were
worth less than twothirds of the loans that majorityowned businesses received ($289,000
versus $456,000). In addition, minority and femaleowned businesses in the Pacific Census
Division received business loans that had, on average, higher interest rates than loans that
majorityowned businesses received (8.5% versus 6.9%).
Experiences of MBEs, WBEs, and majorityowned businesses with obtaining lines of credit and
business loans. As part of availability surveys that the study team conducted, BBC asked several
questions related to potential barriers or difficulties that businesses have faced in the local
marketplace. The surveyor introduced those questions with the following description: "Finally,
we're interested in whether your company has experienced barriers or difficulties associated with
starting or expanding a business in your industry or with obtaining work. Think about your
experiences in the Seattle Metropolitan Area within the past five years as we ask you these
questions." For each potential barrier, the study team examined whether the percentage of
businesses that indicated that they had experienced that barrier or difficulty differed among
MBEs, WBEs, and majorityowned businesses. The study team also examined those data
separately for young businesses (i.e., businesses that were 10 years old or younger).
The first question was, "Has your company experienced any difficulties in obtaining lines of credit
or loans?" As shown in Figure 45, of all businesses, 31 percent of MBEs and 27 percent of WBEs
reported difficulties obtaining lines of credit or loans. A smaller percentage of majorityowned
businesses (14%) reported that they had experienced difficulties with obtaining lines of credit or
loans. Overall, a larger percentage of young businesses reported that they had experienced
difficulties with obtaining lines of credit or loans compared to all businesses. Similar to all
businesses, young MBEs (44%) and WBEs (33%) were more likely to report such difficulties
than young majorityowned businesses (18%).
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 10
Figuure 45.
Hass your companny
experienced any
difficulties in obttaining
linees of credit or loans?
Sourcce:
BBC RResearch & Consultinng from
20122014 Availability Interviews.
Quantitative innformation about bonding and insurance. Ass part of availaability surveyys,
BBCC also examinned potential barriers that businesses faface in obtainiing bonding aand insurancee.
Bonnding. To examine whetheer bonding reppresents a baarrier for locaal businesses,, BBC asked
bussiness ownerss and manageers the followwing two quesstions:
Has your commpany obtained or tried to obtain a bondd for a projecct?
[And if so] Haas your company had any ddifficulties obtaining bondss needed for aa project?
Figuure 46 preseents results foor those questtions. Amongg businesses tthat reportedd that they hadd
obtained or triedd to obtain a bbond, 41 perccent of MBEs reported diffficulties with obtaining boonds
neeeded for a prooject. A smalleer percentagee of WBEs (255%) and majoorityowned bbusinesses
(15%) reported difficulties wwith obtainingg bonds for a pproject. Givenn the small nuumber of youung
bussinesses that rresponded too the questionns regarding bbonding, BBCC did not incluude separate
anaalyses for young businesses' experiencees with obtainning bonding..
Figuure 46.
Hass your companny
hadd any difficultiies
obtaining bonds
neeeded for a project?
Sourcce:
BBC RResearch & Consultinng from
20122014 Availability Interviews.
Insuurance. BBC aalso examinedd whether MBBE/WBEs weere more likelly than majorrityowned
bussinesses to repport that insuurance requirrements preseented a barrier to biddingg by asking the
queestion, "Have aany insurancee requirementts on projectss presented a bbarrier to biddding?" Figuree
47 presents thoose results. Abbout 29 perceent of MBEs reported suchh difficulties. CCompared to
MBEs, a smaller percentage oof WBEs (15%%) and majoriityowned buusinesses (13%%) indicated
thatt insurance reequirements present a barrrier to biddinng on projectts.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CCHAPTER 4, PAGGE 11
Youung MBEs (399%) were much more likely than all othher types of businesses to indicate that
insuurance requirrements on a project preseent a barrier tto bidding. Coompared to yyoung MBEs, aa
smaaller percentaage of young WWBEs (16%) and young mmajorityowneed businessess (15%)
indiicated that innsurance requuirements preesent a barrieer to their bussiness.
Figuure 47.
Havve any insurannce
requirements on
projjects presenteed a
barrrier to biddingg?
Sourcce:
BBC RResearch & Consultinng from
20122014 Availability Interviews.
Qualitative infformation aabout access to capital.. BBC collecteed qualitativee informationn
aboout access to ccapital for businesses in thhe local contrracting industtry through inndepth
inteerviews; availlability intervviews; verbal and written ttestimony; annd public meeetings and
foruums.
Manny business oowners in the local markettplace reporteed that obtainning financingg was importtant
in eestablishing and growing their businessses (includingg financing foor working capital and for
equuipment), andd surviving pooor market coonditions. Maany interviewwees indicatedd that access tto
finaancing was a bbarrier for smmall businessees in general,, especially wwhen starting and first
growwing. Some bbusiness owners and manaagers observeed that barrieers to financinng had worseened
durring the recennt economic ddownturn. Somme business oowners explaained the connection betwween
personal assets aand the abilitty to obtain finnancing. For example:
The Asian PPacific Americcan owner of a noncertifieed engineerinng business said, "We neveer
went for finnancing. And tthe reason is very simple. The banks wwill lend you mmoney if you
have moneyy. If you don'tt have moneyy, they won't llend it to youu."
The Asian PPacific Americcan owner of a DBEcertifiied engineeriing company reported thatt he
has not hadd any problemms getting a line of credit, bbut acknowleedged that if hhe "had to
borrow a haalf million doollars, [he] proobably couldnn't, because [he] doesn't hhave enough
collateral foor that."
Inteerviewees hadd different oppinions on whhether race orr gender affected access too financing.
Manny business oowners indicaated that it is difficult for small businesses in generaal to obtain
finaancing, and thhat the abilityy to access business loans wwas affected by personal wwealth. (Notee
thatt business sizze and personnal equity mayy be affected by race or geender discrimmination.) Somme
minnority businesss owners inddicated that rrace and gendderbased disscrimination affected
BBCC RESEARCH & CONSULTING FFINAL REPORTT CCHAPTER 4, PAGGE 12
financing. They reported that it was more difficult for minority business owners to obtain
financing. Other minority and female business owners reported no instances of discrimination in
obtaining financing.
Qualitative information about access to bonding. BBC collected qualitative information
about access to bonding in the local contracting industry through indepth interviews;
availability interviews; verbal and written testimony; and public meetings and forums. Some
business owners and managers in the local marketplace indicated that bonding requirements
had adversely affected their growth and opportunities to bid on public contracts. For example:
The Black American owner of a noncertified consulting business said, "[Bonding
requirements] are problematic on public contracts. I had to give up pursuing some public
projects where the required bond values were high [and my business could not obtain the
bond]."
When asked about bonding requirements being a barrier, the owner of a certified Black
Americanowned construction company said that bonding requirements can be a problem
for his business. He said that he did not bid on a few contracts in which he was interested,
because the bonding requirements were too high.
Many interviewees explained the link between financing and bonding:
A participant at a trade association meeting shared feedback from the local construction
contracting community. He said that often, small businesses are asked to meet excessive
bonding requirements. He explained, "[The small business'] scope of work may be [valued
at] $500,000, but [it] is asked to provide a $1 million bond. It just goes back to financial
issues that exist."
The female owner of a DBEcertified construction company said that her business has been
unable to obtain bonding. She said, "It's a chicken and egg thing. If you don't have a line of
credit, it's really hard to get bonding."
The Black American owner of a DBEcertified trucking and specialty contracting company
said, "It's been a major problem, because it's based on a company's finances." He went on to
explain that small businesses, including DBEs, often have less stable finances because work
is inconsistent.
Minority and female business owners, in general, said that they did not perceive overt racial or
gender discrimination in obtaining bonding. However, the size and capitalization of businesses
appears to have an effect on the ability to obtain bonding. They indicated that, to the extent
that MBE/WBEs are disproportionately small, undercapitalized, have limited access to financing,
or have limited experience, bonding is a barrier. For example:
The Black American owner of a DBEcertified trucking and specialty contracting company
said, "If the company doesn't have work and can't keep money in the bank, [it] loses [its]
credit rating."
The Asian American owner of a DBEcertified contracting business said, "If you do not have
a relationship with your bonding company, then it can be hard [to obtain bonding]. A lot of
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 13
DBEs, because of historical reasons, do not have those relationships, so it is hard for them to
get bonding."
Qualitative information about access to insurance. The study team asked business
owners and managers whether insurance requirements and obtaining insurance presented
barriers to doing business. Many interviewees indicated that that they could obtain necessary
insurance, but that the cost was high. Some said that "it's a normal business expense." Owners of
small businesses in particular commented on the high cost of insurance for their businesses. A
few interviewees criticized the Port's insurance requirements. Examples of such comments
include the following:
When asked about insurance requirements being a barrier, the Caucasian manager of a
WBEcertified construction business said that the Port's insurance certificate requirements
are frustrating for him. He said that he has filed the required insurance certificate with the
Port every year. He said that, even though he has already submitted the certificate, he is
asked for a new one whenever he is awarded a job at the Port. He explained that the
situation is frustrating because it costs him money to provide the form, and it takes more of
his time than is necessary.
A business owner who submitted written testimony said, "The Port continues to push down
on minority small business consultant hourly rates and expects these small businesses to
pay for extraneous Port insurance requirements for Professional Liability and Auto
Liability. They think all consultants can absorb these extra insurance costs without allowing
for reimbursements or hourly rates adjustments to pay for it. As a small firm, we do not
have the huge revenue or resources to maintain high insurance coverage. They need to
allow MBE firms to only have $1 million liability coverage for both PL and Auto/General
Liability. If they want a firm to have higher insurance coverage, then the Port is expected to
pay for it. No exceptions."
Some interviewees indicated that the cost of obtaining insurance was so high as to affect the
contracts they pursued. For example, the female Asian American principal of an Asian American
owned, MBE/DBEcertified engineering company said, "When [public agencies] ask for high
[insurance] requirements, sometimes I can't even go after a project." Insurance requirements
appear to affect both prime contractors and subcontractors due to passthrough of insurance
requirements on public sector contracts. Examples of such comments include the following:
The president of an engineering industry trade association indicated that there are a lot of
"pass through issues" that affect small businesses when dealing with insurance
requirements. He said that the problem lies in the fact that, in most circumstances,
subcontractors cannot piggyback on prime consultants' insurance policies, which in turn
makes it difficult for subcontractors to afford required insurance. In addition, he said that
"Some agencies are asking for insurance on things that are uninsurable." He explained that
this makes it even more difficult for small businesses to manage insurance requirements.
Although they did not report problems with insurance requirements for their company,
representatives of a large publiclyowned concrete company said, "There are a lot of
subcontractors that can't meet certain insurance requirements even by the agencies that we
work for."
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 14
Effects of access to capital, bonding, and insurance. Potential barriers associated with
access to capital, bonding, and insurance may affect various business outcomes for MBE/WBEs.
There is quantitative and qualitative evidence indicating that it is more difficult for
minorities, women, and MBE/WBEs than it is for nonHispanic whites, males, and majority
owned businesses to obtain capital, bonding, and insurance, or that barriers to accessing
capital, bonding, and insurance disproportionately affect MBEs and WBEs. Such difficulties
may reduce the number of MBE/WBEs that form, survive, and grow, which could reduce
overall MBE/WBE availability in the local construction and constructionrelated
professional services industries.
In addition, access to capital, bonding, and insurance are often required for businesses to
pursue certain types of public sector contracts, limiting access to construction and
constructionrelated professional services contracts with the Port.
D. Success of Businesses
BBC completed quantitative and qualitative analyses that assessed whether the success of
MBE/WBEs differs from that of majorityowned businesses in the local construction and
constructionrelated professional services industries. The study team examined business success
in terms of:
Participation in the public and private sector;
Relative capacity;
Business closure, expansion, and contraction; and
Business receipts and earnings.
Appendix H provides details about BBC's quantitative analyses of success of businesses. BBC also
collected and analyzed information from interviews with business owners and managers and
others knowledgeable about the local contracting industry.
Quantitative analysis of participation in the public and private sectors. BBC drew on
information from availability surveys to examine any patterns of MBE/WBE and majorityowned
business participation in the industry. There was some indication from those data that MBEs
working in constructionrelated professional services were slightly more likely to have pursued
work in the public sector than the private sector within the past five years. MBE construction
businesses were slightly more likely to bid as prime contractors on public sector work than
private sector work.
Compared to majorityowned businesses (87%), a slightly smaller percentage of WBEs (85%)
and MBEs (83%) reported bidding on private sector construction work in the past five years. A
smaller percentage of MBEs (82%) than WBEs (89%) and majorityowned businesses (89%)
reported bidding on private sector constructionrelated professional services work in the past
five years. Those results suggest that barriers to competing for private sector work may have a
greater impact on MBEs than majorityowned businesses in both industries. Larger percentages
of MBEs reported bidding on public sector contracts in both industries.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 15
Quantitative analysis of relative capacity. A business' "relative capacity" refers to the
largest contract or subcontract that the business bid on or performed within the five years
preceding the time when the study team interviewed it. BBC collected capacity information from
businesses as part of availability surveys with owners and managers. Availability interview data
indicated that, in general, neither MBEs nor WBEs differ from majorityowned businesses in
terms of relative capacity once business age is taken into account. In other words, MBE/WBEs
exhibit relative capacities that are comparable to those of majorityowned businesses working in
the same industries and that have been in business for approximately the same amount of time.
Quantitative analysis of business closures, expansions, and contractions. A 2010 SBA
report investigated business dynamics and whether minorityowned businesses were more
likely to close than other businesses. The report included analysis of business closures,
contractions, and expansions in Washington between 2002 and 2006.4 Data were available for
Black Americanowned businesses, Hispanic Americanowned businesses, Asian American
owned businesses, and nonHispanic whiteowned businesses. Those data indicated that Black
Americanowned businesses (38%) and Hispanic Americanowned businesses (36%) in
Washington closed at substantially higher rates than nonHispanic whiteowned businesses
(30%) between 2002 and 2006.
Initiative 200. The SBA data track business closures for the time period following the passing of
Initiative 200 in Washington. Initiative 200, which became effective in December 1998, amended
state law to prohibit the use of race and genderbased preferences in public contracting, public
employment, and public education, unless such requirements are required "to establish or
maintain eligibility for any federal program, if ineligibility would result in a loss of federal funds
to the state."5 Thus, Initiative 200 prohibited government agencies in Washington from applying
race and genderconscious programs (e.g., DBE contract goals) to locallyfunded contracts.
However, Initiative 200 permits the continued implementation of federallyrequired programs,
such as the Federal DBE Program.
Many business owners and others knowledgeable about the local construction and construction
related professional services industries argue that many MBEs and WBEs closed as a result of
Initiative 200 and the prohibition of race and genderconscious programs on nonfederally
funded contracts (see Appendix J and the discussion about business ownership above). Although
SBA data on business closures in the local marketplace may seem to support such arguments, it
would be more instructive to compare them with analogous data on business closures prior to
the passing of Initiative 200. Along those lines, some academic research that has examined
business ownership before and after the passing of Initiative 200 has suggested adverse
4 Lowrey, Ying. 2010. "Race/Ethnicity and Establishment Dynamics, 20022006." U.S. Small Business Administration Office of
Advocacy. Washington D.C. Those data were the most recent business closure, contractions, and expansion data available for
Washington at the time of the disparity study. No recent studies have examined business closure, contractions, and expansion
data available for the Seattle Metropolitan Area.
5 RCW 49.60.400(1).
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 16
outcomes for minorities, women, and minority and womenowned businesses as a result of the
measure.6
Quantitative analysis of business receipts and earnings. BBC examined several sources
of information to analyze business receipts and earnings for Seattle Metropolitan Area
businesses.
Business receipts. Analysis of the 2007 Survey of Business Owners (SBO), which was part of the
U.S. Census Bureau's 2007 Economic Census, indicate that average receipts for most MBE/WBEs
in the Seattle Metropolitan Area are lower than average receipts for businesses owned by non
Hispanic whites and businesses owned by males. Hispanic Americanowned businesses had
higher average receipts than majority; Black American; and Native Hawaiian and other Pacific
Islanderowned businesses. In the construction industry and the professional, scientific, and
technical services industry, Native Hawaiian and other Pacific Islander; Black American;
Hispanic American; and womanowned businesses had lower average receipts than non
Hispanic and nonHispanic maleowned businesses.
BBC also analyzed revenue data for businesses in the local construction and constructionrelated
professional services industries that the study team collected as part of availability interviews.
Key results included the following in the construction and constructionrelated professional
services sectors:
A larger percentage of MBE and WBE businesses than majorityowned businesses have
annual revenue of only $1 million or less; and
A smaller percentage of MBEs and WBEs than majorityowned businesses earn relatively
high levels of revenue.
Data from availability surveys, along with data from the 2007 SBO, suggest that MBE/WBEs are
more likely to be small businesses than majorityowned businesses.
Business owner earnings. The 2000 U.S. Census of Population and 20092011 ACS provide data
on the earnings of incorporated and unincorporated business owners age 16 and older who
reported positive business earnings. BBC analyzed those data for the construction industry in
the Seattle Metropolitan Area for 1999 (the time period reported in the 2000 Census) and
between 2008 and 2011 (the time period reported in the ACS data). In the local construction
industry between 2008 and 2011, Hispanic business owners earned significantly less than non
Hispanic white business owners. In addition, female owners of construction businesses tended
to earn less than male owners, and nonHispanic minority owners of construction businesses
tended to earn less than nonminority owners. However, those differences were not statistically
significant.
BBC also analyzed those data for the local constructionrelated professional services industry in
the Seattle Metropolitan Area for 1999 and between 2008 and 2011. In the local construction
6 Fairlie, R. & Marion, J. 2007. "Affirmative Action Programs and Business Ownership among Minorities and Women." Ford
Foundation and National Economic Development and Law Center.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 17
related professional services industry between 2008 and 2011, Black American, Subcontinent
Asian American, and female business owners earned significantly less than nonHispanic white
and nonHispanic white male business owners. In addition, nonHispanic minority owners of
professional services businesses tended to earn less than nonminority owners. However, that
difference was not statistically significant.
BBC performed regression analyses using 20092011 ACS data to examine whether there were
differences in business earnings between 2008 and 2011 between minorities and nonHispanic
whites and between women and men after statistically controlling for certain race and gender
neutral personal characteristics. There were no statistically significant effects of race and gender
on business earnings in the local construction industry after statistically controlling for certain
race and genderneutral personal characteristics. In the constructionrelated professional
services industry, female business owners tended to earn less than similarly situated men in the
professional services industry.
Qualitative information about success of businesses. BBC also collected qualitative
information about success of businesses in the local construction and constructionrelated
professional services industries. BBC collected that information through indepth interviews;
availability interviews; verbal and written testimony; and public forums.
Disadvantages for small businesses. Many interviewees indicated that small businesses are at a
disadvantage when competing in the local construction and constructionrelated professional
services contracting industries.
Some interviewees reported that small businesses have difficulty hiring and retaining
employees.
Some interviewees indicated that business size can affect access to financing.
Some interviewees reported that small businesses may be at a disadvantage because the
acquisition of equipment and supplies are affected by the financial health of the company
and its ability to obtain financing.
In addition, owners and managers of small businesses reported that public agency contracting
processes and requirements often put small businesses at a disadvantage when competing for
public sector work.
Some small business owners said that it was more difficult for smaller businesses to market
and identify contract opportunities.
Some interviewees reported that public sector bonding requirements can present a barrier
to bidding for small construction businesses seeking work as prime contractors and as
subcontractors.
Some interviewees indicated that, beyond the barriers associated with bonding, the sizes of
public sector contracts present a barrier to bidding for many smaller companies.
Interviewees also identified public sector insurance requirements as a barrier to
construction and constructionrelated professional services businesses seeking public
sector prime contracts and subcontracts.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 18
Some interviewees reported that overly complicated bidding processes can present a
barrier to businesses seeking public sector work.
Some business owners said that public agencies, including the Port, favor bidders and
proposers that they already know, affecting opportunities for other businesses.
Business owners indicated that slow payment by public agencies or by prime contractors
can be especially damaging to small businesses and represent a barrier to performing that
work. Business owners and managers also mentioned excessive retainage and delayed final
payments on contracts as concerns. Interviewees indicated that slow payment is more of a
problem with public sector than with private sector contracts. That barrier can adversely
affect small businesses, especially those with limited access to financing.
Impact of the recent economic downturn. Many owners and managers of large and small
businesses reported that the most recent economic downturn has had an adverse effect on all
businesses, but especially small businesses.
Most interviewees indicated that market conditions since 2008 have made it difficult to stay
in business.
Many business owners and managers said that they saw much more competition during the
economic downturn.
Some business owners said that they have scaled back their operations in response to
economic conditions in order to stay in business.
According to interviewees, some businesses survived because they were wellcapitalized
going into the economic downturn.
A number of interviewees noted that the slowdown in private sector work resulted in more
companies pursuing public sector contracts.
Some business owners and managers said that economic conditions were improving, but
some reported that they had not seen improvement.
Interviewees reported that large businesses are competing for smaller contracts, which
adversely affects small businesses that rely on work of that size.
Impact of disadvantages for small businesses on MBE/WBEs. Because MBE/WBEs are more
likely than majorityowned businesses to be small businesses, any barriers for small businesses
may have a disproportionate effect on MBE/WBEs. A number of minority and female business
owners indicated that the major barriers that they face are due to the size of their businesses.
Stereotypes, "good ol' boy" network, and other factors potentially affecting MBE/WBEs. Some
interviewees indicated difficulties for minorities and women beyond those associated with being
a small business. Some of the most frequently mentioned types of barriers were related to
stereotypes and the presence of a "good ol' boy" network in the local industry.
Some interviewees indicated that prime contractors or customers had discriminated
against businesses based on race/ethnicity or gender. There was some evidence that some
prime contractors hold negative stereotypes concerning MBEs and WBEs.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 19
Some owners and managers of MBE/WBEs reported that there were double standards for
performance of work that adversely affected their companies. Some individuals attributed
the double standards to discrimination.
Some business owners reported that they have been treated unfairly by prime contractors,
but noted that it would be hard to know if it was due to discrimination.
Some interviewees said that working conditions in the industry are sometimes hostile for
minorities and women.
Some business owners reported widespread abuse of the Federal DBE Program through
false reporting of DBE participation or through falsifying good faith efforts.
The presence of a "good ol' boy" network affecting the construction and constructionrelated
professional services industries in the local marketplace was often reported by minority, female,
and white male interviewees.
Some of the interviewees discussing the "good ol' boy" network said that it made it more
difficult for minorities and women to break into the industry.
Certain minority and female business owners said that there was a "good ol' boy" network,
but that, over time, they had been able to enter the network or form their own networks.
Some interviewees reported that they were not affected by any "good ol' boy" networks.
Views as to whether discrimination affected MBE/WBEs did not completely align according to
the race/ethnicity and gender of the interviewee. Not every minority and female interviewee
indicated that discrimination affected the local marketplace today, and some Caucasian men said
that race and genderbased discrimination affected MBEs and WBEs. Appendix J presents views
from a broad range of business owners and managers and others who are knowledgeable about
the local construction and constructionrelated professional services industries.
Effects of success of businesses. The differences that the study team observed between
MBE/WBEs and majorityowned businesses regarding business success may affect business
outcomes for MBE/WBEs in the local construction and constructionrelated professional
services contracting industries.
Quantitative and qualitative analyses suggest that, in general, MBE/WBEs may be less
successful than majorityowned businesses and they may close at greater rates.
Disparities in business receipts and earnings for certain MBE/WBE groups may make it
difficult for existing MBE/WBEs to obtain the resources to effectively compete for contracts,
particularly ones that are relatively large in size. Such limitations may affect the number
and types of public sector contracts and subcontracts on which MBE/WBEs are able to bid.
Because of the nature of the data pertaining to business success, it is difficult to
quantify the effect that associated barriers may have on MBE/WBE availability for
Port contracts. However, barriers to business successalong with barriers to entry
and advancement; business ownership; and access to capital, bonding and
insurancemay reduce the existing availability of MBE/WBEs for Port
construction and constructionrelated professional services contracts.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 4, PAGE 20
CHAPTER 5.
Availability Analysis
BBC analyzed the availability of minority- and women-owned business enterprises
(MBE/WBEs) that are ready, willing, and able to perform on Port of Seattle (Port) construction
and construction-related professional services prime contracts and subcontracts. The Port can
use that and other information to help refine its implementations of the Federal Disadvantaged
Business Enterprise (DBE) Program, the Small Business Enterprise (SBE) Program, and the
Small Contractors and Suppliers (SCS) Program. Chapter 5 describes BBC's availability analysis
in six parts:
A. Purpose of the availability analysis;
B. Definitions of Minority- and Women-owned businesses;
C. Information collected about potentially available businesses;
D. Businesses included in the availability database;
E. MBE/WBE availability calculations; and
F. Availability results.
Appendix D provides supporting information related to the availability analysis.
A. Purpose of the Availability Analysis
BBC examined the availability of MBE/WBEs for Port prime contracts and subcontracts to use as
inputs in the disparity analysis. In the disparity analysis, BBC compared the percentage of Port
contract dollars that went to MBE/WBEs during the study period (i.e., utilization) to the
percentage of dollars that might be expected to go to those businesses based on their availability
for specific types and sizes of Port contracts (i.e., availability). Comparisons between utilization
and availability allowed the study team to determine whether any MBE/WBE groups were
underutilized during the study period relative to their availability for Port work.
B. Definitions of Minority- and Women-Owned Businesses
To interpret the availability analysis, as well as other analyses presented in the disparity study,
it is useful to understand the differences between all MBE/WBEs and MBE/WBEs that are DBE-
certified or could be DBE-certified. In addition, it is important to understand how BBC treated
businesses owned by minority women.
MBE/WBEs. The definitions that the study team used for MBE/WBE groups in the disparity
study were consistent with the definitions specified in 49 Code of Federal Regulations (CFR)
Part 26. The study team examined utilization, availability, and disparities separately for Black
American-, Asian-Pacific American-, Subcontinent Asian American-, Hispanic American-, Native
American-, and non-Hispanic white women-owned businesses.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 5, PAGE 1
The study team analyzed the possibility that race- or gender-based discrimination affected the
participation of MBE/WBEs in Port work based on the race/ethnicity and gender of business
ownership and not on DBE/MBE/WBE certification status. Therefore, the study team counted
businesses as minority- or women-owned regardless of whether they were, or could be, certified
as DBEs and regardless of whether they were certified as MBEs or WBEs through the
Washington State Office of Minority and Women's Business Enterprises (OMWBE). Analyzing
the availability and utilization of MBE/WBEs regardless of DBE/MBE/WBE certification allows
one to assess whether there are disparities affecting all MBE/WBEs and not just certified
businesses. Businesses may be discriminated against because of the race or gender of their
owners regardless of whether they are certified.
Moreover, the study team's analyses of whether MBE/WBEs face disadvantages include the
most successful, highest-revenue MBE/WBEs. A disparity study that focused only on MBE/WBEs
that are, or could be, DBE-certified would improperly compare outcomes for "economically
disadvantaged" businesses with all other businesses, including both non-Hispanic white male-
owned businesses and relatively successful MBE/WBEs. Limiting the analyses to low-revenue
companies would have inappropriately made it more likely for the study team to observe
disparities for MBE/WBE groups. Courts that have reviewed disparity studies have accepted
analyses based on race/ethnicity and gender of ownership rather than on certification status.
Certified DBEs. Certified DBEs are businesses that are certified as such through OMWBE,
which means that they are businesses that:
Are owned and controlled by one or more individuals who are presumed to be both socially
and economically disadvantaged according to 49 CFR Part 26;1 and
Meet the gross revenue and personal net worth requirements described in 49 CFR Part 26.
Because implementation of the Federal DBE Program requires the Port to track DBE utilization,
BBC reports utilization results for all MBE/WBEs and separately for those MBE/WBEs that are
DBE-certified. However, BBC does not report availability or disparity analysis results separately
for certified DBEs.
Businesses owned by minority women. BBC considered four options for coding
businesses owned by minority women:
Coding those businesses as both minority-owned and women-owned;
Creating unique groups of minority women-owned businesses;
Grouping minority women-owned businesses with all other women-owned businesses; and
Grouping minority women-owned businesses with their corresponding minority groups.
1 The Federal DBE Program specifies that Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans,
Subcontinent Asian Americans, women of any race or ethnicity, and any additional groups whose members are designated as
socially and economically disadvantaged by the Small Business Administration are presumed to be disadvantaged.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 5, PAGE 2
BBC chose not to code businesses as both women-owned and minority-owned to avoid doublecounting
certain businesses when reporting total MBE/WBE utilization and availability. Creating
groups of minority women-owned businesses that were distinct from minority male-owned
businesses (e.g., Black American women-owned businesses versus Black American male-owned
businesses) was also unworkable because some minority groups had utilization and availability
so low that further disaggregation by gender made it even more difficult to interpret the results.
After rejecting the first two options, BBC then considered whether to group minority womenowned
businesses with all other women-owned businesses or with their corresponding
minority groups. BBC chose the latter (e.g., grouping Black American women-owned businesses
with all other Black American-owned businesses). Thus, "WBEs" in this report refers to non-
Hispanic white women-owned businesses. The study team's definition of WBE gives the Port
information to answer questions that sometimes arise pertaining to the utilization of non-
Hispanic white women-owned businesses, such as whether the work that goes to MBE/WBEs
disproportionately goes to those businesses.
Majority-owned businesses. Majority-owned businesses are businesses that are not owned
by minorities or women (i.e., businesses owned by non-Hispanic white males). In the utilization
and availability analyses, the study team coded each business as minority-, women-, or majorityowned.
C. Information Collected about
Figure 5-1.
Potentially Available Businesses Summary of the strengths of
BBC's "custom census" approach
BBC's availability analysis focused on specific areas of
work (i.e., subindustries) related to the types of Federal courts have reviewed and upheld
construction and construction-related professional "custom census" approaches to examining
services contracts that the Port awarded during the availability. Compared with some other
study period. BBC identified specific subindustries for previous court-reviewed custom census
inclusion in the availability analysis and identified the approaches, BBC added several layers of
screening to determine which businesses
geographic areas in which the Port awarded most of the
are potentially available for work in the
corresponding contract dollars (i.e., the relevant construction and construction-related
geographic market area). BBC considered the Seattle professional services contracting industry in
Metropolitan Area as the relevant geographic market the Seattle Metropolitan Area.
area for the study. The Seattle Metropolitan Area
For example, the BBC analysis included
includes King, Pierce, and Snohomish Counties.2 The
discussions with businesses about their
study team then developed a database of potentially interest in local government work,
available businesses through surveys with business contractor roles, and geographic locations
establishments located in the Seattle Metropolitan Area of their workitems not included in some
that do work within relevant subindustries. That of the previous court-reviewed custom
census approaches. BBC also analyzed the
method of examining availability is sometimes referred
sizes of contracts and subcontracts on
to as a "custom census" and has been accepted in federal
which businesses have bid on or performed
court. Figure 5-1 summarizes the strengths of BBC's in the past.
custom census approach to examining availability.
2 The U.S. Census Bureau officially defines the relevant metropolitan area as the Seattle-Tacoma-Bellevue, WA area.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 5, PAGE 3
Overview of availability surveys. The study team conducted telephone surveys with
business owners and managers to identify local businesses that are potentially available for Port
construction and construction-related professional services prime contracts and subcontracts.3
BBC began the survey process by collecting information about business establishments from
Dun & Bradstreet (D&B) Marketplace listings.4 BBC collected information about all business
establishments listed under 8-digit work specialization codes (as developed by D&B) that were
most related to the construction and construction-related professional services contracts that
the Port awarded during the study period. D&B provided 9,626 business listings related to those
work specialization codes.5
Information collected in availability surveys. BBC worked with Customer Research
International (CRI) to conduct telephone surveys with the owners or managers of identified
business establishments. Survey questions covered many topics about each organization:
Status as a private business (as opposed to a public agency or not-for-profit organization);
Status as a subsidiary or branch of another company;
Primary lines of work;
Qualifications and interest in performing construction or construction-related professional
services work for the Port or other local government agencies;
Qualifications and interest in performing construction or construction-related professional
services work as a prime contractor or as a subcontractor;
Largest prime contract or subcontract bid on or performed in the previous five years;
Year of establishment; and
Race/ethnicity and gender of ownership.
Appendix D provides details about specific survey questions and an example of the availability
survey instrument.
Considering businesses as potentially available. CRI asked successfully contacted
business owners and managers several questions concerning:
The types of work that their companies performed;
Their past bidding histories;
Their qualifications and interest in working on contracts for the Port or other local
government agencies; and
Other relevant topics.
3 The study team offered business representatives the option of completing surveys via fax or e-mail if they preferred not to
complete surveys via telephone.
4 D&B Marketplace is accepted as the most comprehensive and complete source of business listings in the nation.
5 Seven hundred sixty-seven of those business listings did not include a phone number. Thus, BBC attempted availability
surveys with 8,859 business establishments.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 5, PAGE 4
BBC considered businesses to be potentially available for Port construction or constructionrelated
professional services prime contracts or subcontracts if they reported having a location
in the Seattle Metropolitan Area and reported possessing all of the following characteristics:
Being a private business (as opposed to a nonprofit organization);
Having performed work relevant to Port construction or construction-related professional
services contracting;
Having bid on or performed construction or construction-related professional services
prime contracts or subcontracts in either the public or private sector in Washington in the
past five years; and
Being qualified for and interested in work for Port or other state or local governments.6
BBC also considered the following information to determine if businesses were potentially
available for specific contracts that the Port awarded during the study period:
The largest contract bid on or performed in the past; and
The year the business was established.
D. Businesses Included in the Availability Database
After conducting availability surveys with thousands of local businesses, the study team
developed a database of information about businesses that are potentially available for Port
construction and construction-related professional services contracting work. Data from the
availability surveys allowed BBC to develop a representative depiction of businesses that are
qualified and interested in Port or other local agency work, but it should not be considered an
exhaustive list of every business that could potentially participate in Port construction or
construction-related professional services work. Appendix D provides a detailed discussion
about why the database should not be considered an exhaustive list of potentially available
businesses.
Figure 5-2 presents the percentage of businesses in the study team's availability database that
corresponded to each racial/ethnic and gender group. The information in Figure 5-2 solely
reflects a simple count of businesses with no analysis of availability for specific Port contracts.
Thus, it represents only a first step toward analyzing the availability of MBE/WBEs for Port
work. The study team's analysis included 620 businesses that were potentially available for
specific construction or construction-related professional services contracts that the Port
awarded during the study period. As shown in Figure 5-2, of those businesses, 24 percent were
MBEs or WBEs.
6 That information was gathered separately for prime contract and subcontract work.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 5, PAGE 5
Figure 5-2.
Percent
Percentage of firms in the availability
Race/ethnicity and gender of firms
database that corresponded to each
racial/ethnic and gender group
Black American-owned 2.6 %
Asian-Pacific American-owned 3.7
Note:
Subcontinent Asian American-owned 1.3
Numbers rounded to nearest tenth of 1 percent and thus may not
sum exactly to totals. Hispanic American-owned 3.9
Native American-owned 2.3
Source: Total MBE 13.7 %
BBC Research & Consulting 2012-2014 availability analysis.
WBE (white women-owned) 10.2
Total MBE/WBE 23.9 %
Total majority-owned firms 76.1
Total firms 100.0 %
E. MBE/WBE Availability Calculations
BBC analyzed information from the availability database to develop dollar-weighted availability
estimates for use in the disparity analysis. Dollar-weighted availability estimates represent the
percentage of Port construction and construction-related professional services contracting
dollars that MBE/WBEs would be expected to receive based on their availability for specific
types and sizes of Port construction and construction-related professional services prime
contracts and subcontracts. BBC's used a bottom up, contract-by-contract "matching" approach
to calculate availability.
Steps to calculating availability. Only a portion of the businesses in the availability database
was considered potentially available for any given Port construction or construction-related
professional services prime contract or subcontract (referred to collectively as "contract
elements"). BBC first examined the characteristics of each specific contract element, including
type of work, contract size, and contract date. BBC then identified businesses in the availability
database that perform work of that type, in that location, of that size, in that role (i.e., prime
contractor or subcontractor), and that were in business in the year that the contract element
was awarded.
BBC identified the specific characteristics of each of the 1,048 Port prime contracts and
subcontracts that the study team examined as part of the disparity study and then took the
following steps to calculate availability for each contract element:
1. For each contract element, the study team identified businesses in the availability database
that reported that they:
Are qualified and interested in performing construction or construction-related
professional services work in that particular role for that specific type of work for the
Port and other local agencies;
Have bid on or performed work of that size; and
Were in business in the year that the Port awarded the contract.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 5, PAGE 6
2. The study team then counted the number of MBEs (by race/ethnicity), WBEs, and majorityowned
businesses among all businesses in the availability database that met the criteria
specified in Step 1.
3. The study team translated the numeric availability of businesses for the contract element
into percentage availability.
BBC repeated those steps for each contract element that the study team examined as part of the
disparity study. BBC multiplied the percentage availability for each contract element by the
dollars associated with the contract element, added results across all contract elements, and
divided by the total dollars for all contract elements. The result was a dollar-weighted estimate
of overall availability of MBE/WBEs and estimates of availability for each MBE/WBE group.
Figure 5-3 provides an example of how BBC calculated availability for a specific subcontract
associated with a construction prime contract that the Port awarded during the study period.
Improvements on a simple "head
count" of businesses. BBC used a Figure 5-3.
Example of an availability calculation for a Port
custom census approach to calculating subcontract
MBE/WBE availability for Port work
rather than using a simple "head count" On a contract that the Port awarded in 2010, the prime
of MBE/WBEs (i.e., simply calculating contractor awarded a subcontract worth $58,246 for heavy
the percentage of all local construction construction work. To determine the overall availability of
MBE/WBEs for that subcontract, the study team identified
and construction-related professional
businesses in the availability database that:
services businesses that are minority-
a. Were in business in 2010;
or women-owned). There are several
b. Indicated that they performed heavy construction
important ways in which BBC's custom
work;
census approach to measuring
c. Reported bidding on work of similar or greater
availability is more precise than
size in the past; and
completing a simple head count.
d. Reported qualifications and interest in working as
a subcontractor on Port or other local agency
BBC's approach accounts for type of
construction or construction-related professional
work. USDOT suggests calculating services projects.
availability based on businesses'
The study team found 177 businesses in the availability
abilities to perform specific types of
database that met those criteria. Of those businesses, 41
work. USDOT gives the following were MBEs or WBEs. Thus, MBE/WBE availability for the
example in "Tips for Goal-Setting in the subcontract was 23 percent (i.e., 41/177 X 100 = 23).
Disadvantaged Business Enterprise
(DBE) Program:"
If 90 percent of an agency's contracting dollars is spent on heavy construction and 10
percent on trucking, the agency would calculate the percentage of heavy construction
businesses that are MBEs or WBEs and the percentage of trucking businesses that are
MBEs or WBEs, and weight the first figure by 90 percent and the second figure by 10
percent when calculating overall MBE/WBE availability.7
7 Tips for Goals Setting in the Disadvantaged Business Enterprise (DBE) Program,
http://www.osdbu.dot.gov/dbeprogram/tips.cfm.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 5, PAGE 1
The BBC study team took type of work into account by examining 22 different subindustries
related to construction and construction-related professional services as part of estimating
availability for Port work.
BBC's approach accounts for qualifications and interest in construction and construction-
related professional services prime contract and subcontract work. The study team collected
information on whether businesses are qualified and interested in working as prime
contractors, subcontractors, or both on Port or other local agency construction or constructionrelated
professional services work, in addition to the consideration of several other factors
related to Port prime contracts and subcontracts (e.g., contract types, sizes, and locations):
Only businesses that reported being qualified for and interested in working as prime
contractors were counted as available for prime contracts;
Only businesses that reported being qualified for and interested in working as
subcontractors were counted as available for subcontracts; and
Businesses that reported being qualified for and interested in working as both prime
contractors and subcontractors were counted as available for both prime contracts and
subcontracts.
BBC's approach accounts for the size of prime contracts and subcontracts and relative
capacity. BBC considered the sizein terms of dollar valueof the prime contracts and
subcontracts that a business bid on or received in the previous five years (i.e., relative capacity)
when determining whether to count that business as available for a particular contract element.
When counting available businesses for a particular prime contract or subcontract, BBC
considered whether businesses had previously bid on or received at least one contract of an
equivalent or greater dollar value. BBC's approach is consistent with many recent, key court
decisions that have found relative capacity measures to be important to measuring availability
(e.g., Associated General Contractors of America, San Diego Chapter vs. California Department of
Transportation, et al.,8 Western States Paving Company v. Washington State DOT, Rothe
Development Corp. v. U.S. Department of Defense,9 and Engineering Contractors Association of S.
Fla. Inc. vs. Metro Dade County10).
BBC's approach generates dollar-weighted results. BBC examined availability on a contract-by-
contract basis and then dollar-weighted the results for different sets of contract elements. Thus,
the results of relatively large contract elements contributed more to overall availability
estimates than those of relatively small contract elements. BBC's approach is consistent with
USDOT's "Tips for Goal-Setting in the Disadvantaged Business Enterprise (DBE) Program,"
which suggests a dollar-weighted approach to calculating availability.
8 AGC, San Diego Chapter v. California DOT, 2013 WL 1607239 (9th Cir. April 16, 2013).
9 Rothe Development Corp. v. U.S. Department of Defense, 545 F.3d 1023 (Fed. Cir. 2008).
10 Engineering Contractors Association of S. Fla. Inc. vs. Metro Dade County, 943 F. Supp. 1546 (S.D. Fla. 1996).
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 5, PAGE 1
F. Availability Results
BBC used a custom census approach to estimate the availability of MBE/WBEs and majorityowned
businesses for the 1,048 construction and construction-related professional services
prime contracts and subcontracts that the Port awarded during the study period. Figure 5-4
presents overall dollar-weighted availability estimates by MBE/WBE group for those contracts.
Figure 5-4.
Availability
Overall dollar-weighted
Race/ethnicity and gender Estimate
availability estimates by
MBE/WBE group
Black American-owned 2.4 %
Asian-Pacific American-owned 2.2
Note:
Numbers rounded to nearest tenth of 1 percent and Subcontinent Asian American-owned 1.8
thus may not sum exactly to totals. Hispanic American-owned 4.8
For more detail and results by group, see Figure K-2
in Appendix K. Native American-owned 2.4
Total MBE 13.7 %
Source:
WBE (white women-owned) 4.5
BBC Research & Consulting 2012-2014 availability
Total MBE/WBE 18.2 %
analysis.
Overall, MBE/WBE availability for Port construction and construction-related professional
services contracts is 18.2 percent. WBEs (4.5%) and Hispanic American-owned businesses
(4.8%) exhibited the highest availability percentages among all MBE/WBE groups. Note that
availability estimates varied when the study team examined different subsets of those contracts.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 5, PAGE 2
CHAPTER 6.
Utilization Analysis
Chapter 6 presents information about the participation of minority and womenowned business
enterprises (MBE/WBEs) in construction and constructionrelated professional services prime
contracts and subcontracts that the Port of Seattle (the Port) executed between January 1, 2010
and September 30, 2013 (i.e., the study period). Chapter 3 and Appendix C provide additional
information about utilization data collection and methodology.
Chapter 6 is organized in three parts:
A. Overview of the utilization analysis;
B. Overall utilization results; and
C. Utilization results for construction and constructionrelated professional services contracts.
Additional information about MBE/WBE utilization on key sets of Port contracts is presented in
Appendix K.
A. Overview of the Utilization Analysis
BBC analyzed MBE/WBE utilization on Federal
Aviation Administration (FAA) and locally Figure 61.
funded construction and constructionrelated Defining and measuring "utilization"
professional services contracts that the Port
"Utilization" of MBE/WBEs refers to the share of
executed during the study period. Information prime contract and subcontract dollars that an
about MBE/WBE utilization is useful on its own, agency awarded to MBE/WBEs during a
but it is even more useful when it is compared particular time period. BBC measures the
with the utilization that might be expected utilization of all MBE/WBEs, regardless of
based on the availability of MBE/WBEs for Port certification, and separately of MBE/WBEs that
are DBEcertified. BBC examines utilization
work. BBC presents such comparisons as part of
separately for different racial/ethnic and gender
the disparity analysis in Chapter 7. groups.
Definition of utilization. The study team BBC measures MBE/WBE utilization as a
percentage of total prime contract and
measured MBE/WBE participation in terms of
subcontract dollars that an agency awarded. For
"utilization"the percentage of prime contract example, if 5 percent of prime contract and
and subcontract dollars that went to subcontract dollars went to WBEs on a particular
MBE/WBEs during the study period. Figure 61 set of contracts, WBE utilization for that set of
presents information about BBC's definition of contracts would be 5 percent.
utilization and how it was measured.
Differences between BBC's analysis and the Port's Uniform Reports of DBE
Awards/Commitments and Payments. The FAA requires the Port to submit reports about
DBE utilization on its FAAfunded contracts twice each year (typically in June and December).
BBC's analysis of MBE/WBE utilization goes beyond what the Port currently reports to the FAA.
Two key differences are that:
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 6, PAGE 1
BBC counts all MBE/WBEs, not only certified DBEs; and
BBC examines locallyfunded contracts, not only FAAfunded contracts.
All MBE/WBEs, not only certified DBEs. Per United States Department of Transportation
(USDOT) regulations, the Port prepares DBE utilization reports based on information about
certified DBEs.1 The Port does not track the utilization of MBE/WBEs that are not DBEcertified.
In contrast, BBC's utilization analyses include utilization of all MBE/WBEs not just the
utilization of certified DBEs. The study team counted businesses as MBE/WBEs that may have
once been DBEcertified and graduated (or let their certifications lapse) as well as MBE/WBEs
that have never been certified. BBC provides utilization results for all MBE/WBEs and separately
for MBE/WBEs that were DBEcertified during the study period.2
Locallyfunded contracts, not only FAAfunded contracts. The FAA requires the Port to prepare
DBE utilization reports only for its FAAfunded contracts. Thus, the Port reports certified DBE
utilization only for those contracts. BBC analyzed MBE/WBE utilization on both FAA and locally
funded Port construction and constructionrelated professional services contracts. Utilization
information for locallyfunded contracts is instructive, because the Port does not apply any DBE
contract goals to those contracts. USDOT suggests that an agency should examine MBE/WBE
utilization on contracts to which DBE contract goals do not apply when designing its
implementation of the Federal DBE Program.3
B. Overall Utilization Results
Figure 62 presents overall MBE/WBE utilization (as a percentage of total dollars) on
construction and constructionrelated professional services contracts that the Port executed
during the study period, including both prime contracts and subcontracts. The darker portion of
the bar presents the Port's utilization of MBE/WBEs that were DBEcertified. As shown in Figure
62, overall, MBE/WBEs received 10.2 percent of the Port's prime contract and subcontract
dollars during the study period. MBE/WBEs that were DBEcertified received 3.4 percent of the
Port's prime contract and subcontract dollars.
1 The FAA is a modal agency of the USDOT.
2 Although businesses that are owned and operated by socially and economicallydisadvantaged white men can become
certified as DBEs, BBC did not identify any DBEcertified white maleowned businesses that the Port utilized during the study
period. In other words, all DBEs that the Port utilized during the study period were MBE/WBEs. Thus, utilization results for
certified DBEs are a subset of the utilization results for all MBE/WBEs.
3 https://www.civilrights.dot.gov/disadvantagedbusinessenterprise/doyouqualify/library.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 6, PAGE 2
Figuure 62.
Oveerall MBE/WBBE utilization oon the Port's
construction andd constructionnrelated
proffessional servvices prime coontracts and
subcontracts
Note::
Includdes FAA and locallyfunded Port contractts.
Darkeer portion of bar pressents certified DBE utilization.
The sttudy team analyzed 1,048 prime contractts/subcontracts.
For mmore detail, see Figure K2 in Appendix K.
Sourcce:
BBC RResearch & Consultinng from the Port's contracting data.
In aaddition, BBC separately exxamined the utilization of f each MBE/WWBE group that is identifieed in
49 CCode of Federral Regulationns Part 26 as being presummed to be disadvantaged. AAs shown in
Figuure 63, overaall, the Port's utilization off WBEs (5.0%%) was higherr than any othher MBE/WBE
group. Among MMBE groups, uutilization of BBlack Americaanowned buusinesses (2.3%) was higheer
thann that of otheer groups.
Figuure 63.
Total
Oveerall MBE/WBBE utilization oon
$ in thoousands Percen n t
the Port's construction and
constructionrelaated
MBE/WWBEs
proffessional servvices prime
contracts and subbcontracts byy Blacck Americanownedd $55,606 2.3 %
MBE/WBE groupp AsianPacific Americannowned 1,5561 0.6
Subccontinent Asian Ammericanowned 371 0.2
Note:: Hisppanic Americanowned 22,417 1.0
Includdes FAA and locallyfunded Port contractts. Native Americanowneed 22,499 1.0
Numbbers rounded to nearrest tenth of 1 percent WBEE (white womenowwned) 122,182 5.0
and thhus may not sum exaactly to totals.
Tootal MBE/WBE $244,631 10.2 %
The sttudy team analyzed 1,048 prime
contracts/subcontracts. Majoorityowned 2177,684 89.8
For mmore detail, see Figure K2 in Appendix K. Tootal $2422,315 100.0 %
DBEs
Sourcce:
Blacck Americanownedd $782 0.3 %
BBC RResearch & Consultinng from the Port's
contracting data. AsianPacific Americannowned 910 0.4
Subccontinent Asian Ammericanowned 301 0.1
Hisppanic Americanowned 1,7911 0.7
Native Americanowneed 2,0812 0.9
WBEE (white womenowwned) 22,453 1.0
Tootal DBE $88,319 3.4 %
NonDBE 2333,996 96.6
Tootal $2422,315 100.0 %
BBCC RESEARCH & CONSULTING FFINAL REPORTT CHAPTER 6, PAGE 3
A small number of businesses accounted for a relatively large percentage of MBE/WBE
utilization on the Port's construction and constructionrelated professional services contracts
during the study period:
One Black Americanowned businessan electrical contractor received 80 percent of the
total dollars that went to Black Americanowned businesses (approximately $4.5 million of
$5.6 million);
Three AsianPacific Americanowned businessesone heavy construction business, one
engineering business, and one electrical contractorreceived 84 percent combined of the
total dollars that went to AsianPacific Americanowned businesses (approximately $1.3
million of $1.6 million);
Three Subcontinent Asian Americanowned businessesone steel building materials
business, one trucking business, and one engineering businessreceived 78 percent
combined of the total dollars that went to Subcontinent Asian Americanowned businesses
(approximately $290,000 of $370,000);
One Hispanic Americanowned businessesa heavy construction businessreceived 75
percent of the total dollars that went to Hispanic Americanowned businesses
(approximately $1.8 million of $2.4 million); and
Two Native Americanowned businessesone engineering business and one landscape
services businessreceived 73 percent combined of the total dollars that went to Native
Americanowned businesses (approximately $1.8 million of $2.5 million).
C. Utilization Results for Construction and ConstructionRelated
Professional Services Contracts
BBC examined MBE/WBE utilization separately for construction and constructionrelated
professional services contracts across the entire study period. As shown in Figure 64,
MBE/WBE utilization on the Port's construction contracts (11.6%) was higher than on the Port's
constructionrelated professional services contracts (4.8%). Certified DBE utilization was also
higher on the Port's construction contracts (3.7%) than on constructionrelated professional
services contracts (2.5%).
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 6, PAGE 4
Figuure 64.
MBE/WBE utilizaation on the Port's
construction andd constructionn
relaated professioonal services
contracts
Note::
Includdes FAA and locallyfunded Port contractts.
Darkeer portion of bar pressents certified DBE
utilizaation.
The sttudy team analyzed 1,048 prime
contracts/subcontracts.
For mmore detail, see Figures K3 and K4 in Apppendix K.
Sourcce:
BBC RResearch & Consultinng from the Port's contracting
data.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CHAPTER 6, PAGE 5
CHAPTER 7.
Disparity Analysis
The disparity analysis compared the utilization of minority and womenowned businesses
(MBE/WBEs) on construction and constructionrelated professional services contracts that the
Port of Seattle (the Port) awarded between January 1, 2010 and September 30, 2013 (i.e., the
study period) to what those businesses might be expected to receive based on their availability
for that work. Chapter 7 presents the disparity analysis in four parts:
A. Overview of disparity analysis;
B. Overall disparity analysis results;
C. Disparity analysis results for construction and constructionrelated professional services
contracts; and
D. Statistical significance of disparity analysis results.
A. Overview of Disparity Analysis
As part of the disparity analysis, BBC compared
the actual utilization of MBE/WBEs on Port Figure 71.
construction and constructionrelated Calculation of disparity indices
professional services prime contracts and The disparity index provides a way of assessing
subcontracts with the percentage of contract how closely the actual utilization of an
dollars that MBE/WBEs might be expected to MBE/WBE group matches the percentage of
receive based on their availability for that contract dollars that the group might be
work. (Availability is also referred to as the expected to receive based on its availability for
a specific set of contracts. One can directly
"utilization benchmark.") BBC made those
compare a disparity index for one group to
comparisons for each individual MBE/WBE that of another group and compare disparity
group. BBC reports disparity analysis results indices across different sets of contracts. BBC
for all Port construction and construction calculates disparity indices using the following
related professional services contracts formula:
considered together and separately for % actual utilization
x 100
different sets of contracts (e.g., prime contracts % availability
and subcontracts).
For example, if actual utilization of WBEs on a
BBC expressed both actual utilization and set of contracts was 2 percent and the
availability of WBEs for those contracts was 10
availability as percentages of the total dollars
percent, then the disparity index would be 2
associated with a particular set of contracts, percent divided by 10 percent, which would
making them directly comparable (e.g., 5% then be multiplied by 100 to equal 20. In this
utilization compared with 4% availability). BBC example, WBEs would have actually received
then calculated a "disparity index" to help 20 cents of every dollar that they might be
compare utilization and availability results expected to receive based on their availability.
among MBE/WBE groups and across different
sets of contracts. Figure 71 describes how BBC
calculates disparity indices.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 7, PAGE 1
A disparity index of 100 indicates a match between actual utilization and availability for a
particular MBE/WBE group for a specific set of contracts (often referred to as "parity"). A
disparity index of less than 100 indicates a disparity between utilization and availability, and
disparities of less than 80 are described in this report as "substantial."1
The disparity analysis results that BBC presents in Chapter 7 summarize detailed results tables
provided in Appendix K. Each table in Appendix K presents disparity analysis results for a
different set of Port contracts. For example, Figure K2 in Appendix K reports disparity analysis
results for all Port construction and constructionrelated professional services contracts that the
study team examined as part of the study that is, FAA and locallyfunded construction and
constructionrelated professional services prime contracts and subcontracts that the Port
awarded during the study period. Appendix K includes analogous tables for different subsets of
contracts, including those that present results separately for:
Construction and constructionrelated professional services contracts;
Prime contracts and subcontracts;
Contracts executed in 20102011 and 20122013; and
Large and small prime contracts.
The heading of each table in Appendix K provides a description of the subset of contracts that the
study team analyzed for that particular disparity analysis table.
A review of Figure 72 helps to introduce the calculations and format of all of the disparity
analysis tables in Appendix K.2 As illustrated in Figure 72, the disparity analysis tables present
information about each MBE/WBE group (as well as about all businesses) in separate rows:
"All firms" in row (1) pertains to information about all nonHispanic white maleowned
businesses (i.e., majorityowned businesses) and MBE/WBEs considered together.
Row (2) provides results for all MBE/WBEs, regardless of whether they were certified as
MBE/WBEs or as Disadvantaged Business Enterprises (DBEs) through the Washington
State Office of Minority and Women's Business Enterprises (OMWBE).
Row (3) provides results for all WBEs, regardless of whether they were certified as
WBE/DBEs through OMWBE.
Row (4) provides results for all MBEs, regardless of whether they were certified as
MBE/DBEs through OMWBE.
Rows (5) through (10) provide results for businesses of each individual minority group,
regardless of whether they were certified as MBE/DBEs through OMWBE.
1 Many courts have deemed a disparity index below 80 as being "substantial" and have accepted it as evidence of adverse
conditions for MBE/WBEs (e.g., see Rothe Development Corp v. U.S. Dept of Defense, 545 F.3d 1023, 1041; Eng'g Contractors
Ass'n of South Florida, Inc. v. Metropolitan Dade County, 122 F.3d at 914, 923 (11th Circuit 1997); and Concrete Works of Colo.,
Inc. v. City and County of Denver, 36 F.3d 1513, 1524 (10th Cir. 1994). See Appendix B for additional discussion of those and
other cases.
2 Figure 72 is identical to Figure K2 in Appendix K.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 7, PAGE 2
Figure 72.
Example of a disparity analysis table from Appendix K (same as Figure K2 in Appendix K)
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 1,048 $228,225 $242,315
(2) MBE/WBE 198 $24,155 $24,631 10.2 18.2 8.0 56.0
(3) WBE 104 $11,801 $12,182 5.0 4.5 0.6 112.7
(4) MBE 94 $12,354 $12,449 5.1 13.7 8.6 37.5
(5) Black Americanowned 31 $5,605 $5,606 2.3 2.4 0.1 95.6
(6) AsianPacific Americanowned 21 $1,482 $1,556 0.6 2.2 1.6 28.8
(7) Subcontinent Asian Americanowned 13 $350 $371 0.2 1.8 1.7 8.4
(8) Hispanic Americanowned 20 $2,417 $2,417 1.0 4.8 3.8 20.8
(9) Native Americanowned 9 $2,499 $2,499 1.0 2.4 1.4 42.3
(10) Unknown MBE 0 $0
(11) DBEcertified 97 $8,035 $8,319 3.4
(12) Womanowned DBE 36 $2,233 $2,453 1.0
(13) Minorityowned DBE 61 $5,802 $5,866 2.4
(14) Black Americanowned DBE 16 $781 $782 0.3
(15) AsianPacific Americanowned DBE 14 $848 $910 0.4
(16) Subcontinent Asian Americanowned DBE 10 $301 $301 0.1
(17) Hispanic Americanowned DBE 15 $1,791 $1,791 0.7
(18) Native Americanowned DBE 6 $2,081 $2,081 0.9
(19) Unknown DBEMBE 0 $0
(20) White maleowned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Notes: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white womenowned businesses.
* Unknown MBE, Unknown DBEMBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total dollars of Black Americanowned
businesses (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added to column b, row 5 and the sum would be shown in column c,
row 5.
Source: BBC Research & Consulting Disparity Analysis.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 7, PAGE 3
The bottom half of Figure 72 presents utilization results for businesses that were certified as
DBEs through OMWBE. BBC does not report availability or disparity analysis results separately
for certified DBEs. BBC included a row for white maleowned DBEs, although the analysis did not
identify any white maleowned DBEs that the Port utilized on construction and construction
related professional services prime contracts or subcontracts during the study period.
Utilization. Each disparity analysis table includes the same columns and rows:
Column (a) presents the number of prime contracts and subcontracts (i.e., contract
elements) that the study team analyzed for that particular set of contracts. As shown in row
(1) of column (a) of Figure 72, the study team analyzed 1,048 contract elements. The value
presented in column (a) for each individual MBE/WBE group represents the number of
contract elements on which the Port utilized businesses of that particular group
(e.g., as shown in row (5) of column (a), the Port utilized Black Americanowned businesses
on 31 prime contracts and subcontracts).
Column (b) presents the dollars (in thousands) that were associated with the set of contract
elements before adjusting total dollars for professional services contracts where 2013
invoice data was the only source of contract information. A portion of the professional
services contract data only includes invoice information from 2013. That portion of the data
is weighted up to account for the total dollar amount in the entire study period. A more
detailed discussion of BBC's weighting procedure can be found in Appendix C. As shown in
row (1) of column (b) of Figure 72, the study team examined approximately $228 million
for the entire set of contract elements. The dollar totals include both prime contract and
subcontract dollars.
Column (c) presents the contract dollars (in thousands) for which the Port utilized each
MBE/WBE group on the set of contracts after adjusting total dollars for professional
services contracts where 2013 invoice data was the only source of contract information. As
shown in row (1) of column (c) of Figure 72, after adjusting for professional services
contracts for which 2013 invoice data was the only source of contract information, the
study team examined approximately $242 million for the set of contract elements.
Column (d) presents the utilization of each MBE/WBE group as a percentage of total dollars
associated with the set of contract elements. The study team calculated each percentage in
column (d) by dividing the dollars going to a particular group in column (c) by the total
dollars associated with the set of contract elements shown in row (1) of column (c), and
then expressing the result as a percentage (e.g., for Black Americanowned businesses, the
study team divided $5.6 million by $242 million and multiplied by 100 for a result of 2.3%,
as shown in row (5) of column (d)).
Availability (utilization benchmark). Column (e) of Figure 72 presents the availability of
each MBE/WBE group for all construction and constructionrelated professional services prime
contracts and subcontracts that the Port awarded during the study period. Availability estimates,
which are represented as a percentage of the total contracting dollars associated with the set of
contracts, serve as a benchmark against which to compare utilization for a specific group for a
particular set of contracts (e.g., as shown in row (5) of column (e), availability of Black American
owned businesses is 2.4%). BBC did not calculate availability figures separately for businesses
that were DBEcertified.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 7, PAGE 4
Differences between utilization and availability. The next step in analyzing whether
there was a disparity between the utilization and availability of a particular MBE/WBE group is
to subtract the utilization result from the availability result. Column (f) of Figure 72 presents
the percentage point difference between utilization and availability for each MBE/WBE group.
For example, as presented in row (5) of column (f) of Figure 72, utilization of Black American
owned businesses was 0.1 percentage points less than the availability of Black Americanowned
businesses.
Disparity indices. It is sometimes difficult to interpret absolute percentage differences between
utilization and availability. Therefore, BBC also calculated a disparity index for each MBE/WBE
group, which measured utilization relative to availability and served as a metric to compare any
disparities across different MBE/WBE groups and across different sets of contracts. BBC
calculated disparity indices by dividing percent utilization for each group by percent availability
and multiplying by 100. Smaller disparity index values indicate greater disparities (i.e., a greater
degree of underutilization).
Column (g) of Figure 72 presents the disparity index for each MBE/WBE group. For example, as
reported in row (5) of column (g), the disparity index for Black Americanowned businesses was
approximately 96, indicating that Black Americanowned businesses actually received
approximately $0.96 for every dollar that they might be expected to receive based on their
availability for the construction and constructionrelated professional services prime contracts
and subcontracts that the Port awarded during the study period. BBC did not calculate disparity
indices separately for DBEcertified businesses.
Results when disparity indices were very large or when availability was zero. BBC applied
the following rules when disparity indices were exceedingly large or could not be calculated
because the study team did not identify any businesses of a particular group as available for a
particular set of contract elements:
When BBC's calculations showed a disparity index exceeding 200, BBC reported an index of
"200+." A disparity index of 200+ means that utilization was more than twice as much as
availability for a particular group for a particular set of contracts.
When there was no utilization and 0 percent availability for a particular group for a
particular set of contracts, BBC reported a disparity index of "100," indicating parity.
When utilization for a particular group for a particular set of contracts was greater than
0 percent but availability was 0 percent, BBC reported a disparity index of "200+."3
B. Overall Disparity Analysis Results
BBC used the disparity analysis results from Figure 72 (which is identical to Figure K2 in
Appendix K) to assess any disparities between MBE/WBE utilization and availability on all
construction and constructionrelated prime contracts and subcontracts that the Port awarded
during the study period. Figure 73 presents disparity indices for all MBE/WBE groups
3 A particular MBE/WBE group could show a utilization percentage greater than 0 percent but an availability percentage of 0
percent for many reasons, including the fact that one or more utilized businesses were out of business at the time that BBC
conducted availability surveys.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 7, PAGE 5
connsidered togetther and sepaarately for eacch group. Thee line down thhe center of tthe graph shoows
a diisparity indexx level of 100,, which indicaates parity beetween utilizaation and avaailability.
Dispparity indicess less than 1000 indicate dissparities betwween utilizatiion and availaability
(i.e.., underutilizaation). For refference, a linee is also drawwn at an indexx level of 80, bbecause some
couurts use 80 as a threshold ffor what indiccates a substaantial disparity.
Figuure 73.
Oveerall disparity indices
for Port construcction
andd constructionn
relaated professioonal
servvices contractts
Note::
The sttudy team analyzed 1,048
primee contracts/subcontrracts.
For mmore detail, see Figure K2 in
Appendix K.
Sourcce:
BBC RResearch & Consultinng
availaability and utilization analyses.
As sshown in Figuure 73, overaall, the utilizaation of MBE//WBEs considdered togetheer on Port
connstruction andd constructionnrelated proofessional serrvices contraccts during thee study periodd
wass substantially below whatt might be exppected basedd on their availability for thhose contractts.
Thee disparity inddex of 56 indiicates that alll MBE/WBEs considered ttogether receiived
appproximately $$0.56 for everry dollar that they might bee expected too receive baseed on their
availability for construction aand constructtionrelated pprofessional sservices primme contracts and
subbcontracts thaat the Port awwarded duringg the study peeriod.
Five MBE/WWBE groups eexhibited dispparity indicess below parityyBlack Americanownedd
businesses (disparity inddex of 96), AssianPacific AAmericanownned businessees (disparity
index of 29)), Subcontineent Asian Ameericanownedd businesses (disparity inddex of 8),
Hispanic Ammericanowned businesses (disparity inndex of 21), aand Native Ammericanownned
businesses (disparity inddex of 42). Off the groups eexhibiting dissparities, onlyy Black
Americanoowned busineesses did not exhibit substtantial disparities. The vasst majority of
dollars thatt went to Blacck Americanoowned busineesses (approxximately $4.55 million of $55.6
million) weent to a singlee Black Americanowned bbusiness that was not DBEcertified.
WBEs (dispparity index oof 113) were tthe only MBEE/WBE group that did not exhibit
disparities.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CHAPTER 7, PAAGE 6
C. Disparity AAnalysis Reesults for CConstructiion and CoonstructionnRelated
Proofessional Services CContracts
BBCC also examinned disparity analysis resuults separatelyy for construcction and connstruction
relaated professioonal services contracts to aassess whethher MBE/WBEEs exhibited ddifferent
outcomes based on industry. Note that thee dollars assoociated with cconstruction ccontracts
accoounted for thhe vast majoriity of contractting dollars thhat the Port aawarded duriing the study
period (78% of tthe contractinng dollars thaat BBC analyzzed as part of the study). Figure 74
presents disparity indices forr all MBE/WBBE groups sepparately for coonstruction aand constructtion
relaated professioonal services contracts. Ass shown in Figgure 74, MBEE/WBEs conssidered togethher
exhhibited substaantial disparitties between utilization annd availabilityy on both connstruction
(dissparity index of 63) and coonstructionreelated professsional services contracts ((disparity inddex
of 228). However,, it is importaant to note thaat several inddividual MBE//WBE groupss did not exhiibit
dispparities on eitther construcction or consttructionrelatted professionnal services ccontracts.
AsianPaciffic Americanoowned businesses (disparrity index of 225), Subcontinnent Asian
Americanoowned busineesses (dispariity index of 11), Hispanic AAmericanowwned businessses
(disparity inndex of 22), aand Native Ammericanowned businessees (disparity index of 38)
exhibited suubstantial dissparities on construction ccontracts.
Black Amerricanowned bbusinesses (ddisparity indeex of 6), AsiannPacific Ameericanownedd
businesses (disparity inddex of 39), Suubcontinent AAsian Americaanowned buusinesses
(disparity inndex of 6) annd Hispanic Ammericanownned businessees (disparity iindex of 11)
exhibited suubstantial dissparities on constructionrrelated professional servicces contracts.
WBEs did nnot exhibit dissparities on construction ccontracts (dissparity index of 134) but
exhibited suubstantial dissparities on constructionrrelated professional servicces contracts
(disparity inndex of 47).
Figuure 74.
Dispparity indices for
Portt constructionn and
constructionrelaated
proffessional servvices
contracts
Note::
The sttudy team analyzed 681
construction prime
contracts/subcontracts annd 367
constructionrelated profeessional
servicces prime
contracts/subcontracts.
For mmore detail, see Figures K3
and KK4 in Appendix K.
Sourcce:
BBC RResearch & Consultinng
availaability and utilization analyses.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CHAPTER 7, PAAGE 7
D. Statistical Significance of Disparity Analysis Results
Statistical significance tests allow researchers to
test the degree to which they can reject "random Figure 75.
Statistical confidence in availability and
chance" as an explanation for any observed
utilization results
quantitative differences. Random chance in data
sampling is the factor that researchers consider As part of the availability analysis, BBC
most in determining the statistical significance of conducted telephone surveys with more than
1,900 business establishmentsa number of
results. However, BBC attempted to contact every
completed surveys that is generally
business in the relevant geographic market area considered large enough to be treated as a
that Dun & Bradstreet (D&B) identified as doing "population," not a sample. The confidence
business within relevant subindustries (as interval around BBC's estimate of MBE/WBE
described in Chapter 5), mitigating many of the representation among all businesses
concerns associated with random chance in data available for Port construction and
constructionrelated professional services
sampling as they may relate to BBC's availability
work23.9 percentis accurate within
analysis. Much of the utilization analysis also about +/ 1.6 percentage points at the 95
approaches a "population" of contracts. Therefore, percent confidence level (BBC applied the
one might consider any disparity identified when finite population correction factor when
comparing overall utilization with availability to determining confidence intervals). By
be "statistically significant." Figure 75 explains comparison, many survey results for
proportions reported in the popular press
the relatively high level of statistical confidence
are accurate within about +/ 5.0 percentage
inherent in the utilization and availability results. points.
Monte Carlo analysis. BBC used a computational algorithm that relies on repeated, random
sampling to further examine statistical significance of disparity analysis results. That approach is
termed a Monte Carlo method. The analyses that the study team completed as part of the
disparity study were wellsuited for using Monte Carlo analysis to test the statistical significance
of disparity analysis results. Monte Carlo analysis was appropriate for that purpose, because,
among the contracts the Port awarded during the study period, there were many individual
chances for businesses to win prime contracts and subcontracts, each with a different payoff
(i.e., each with a different dollar value).
Figure 76 provides additional information about how the study team used Monte Carlo a Monte
Carlo method to test the statistical significance of disparity analysis results. It is important to
note that Monte Carlo simulations may not be necessary to establish the statistical significance of
results (see discussion in Figure 75), and it may not be appropriate for very small populations
of businesses.
Results. BBC identified substantial disparities for MBEs overall on:
All construction and constructionrelated professional services contracts considered
together (see Table K2 in Appendix K);
Construction contracts (see Table K3 in Appendix K); and
Constructionrelated professional services contracts (see Table K4 in Appendix K).
In addition, WBEs showed substantial disparities on constructionrelated professional services
contracts (see Table K4 in Appendix K).
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 7, PAGE 8
Figure 76.
Monte Carlo Analysis
The study team began the Monte Carlo analysis by examining individual contract elements. For each
contract element, BBC's availability database provided information on individual businesses that
were available for that contract element based on type of work, contractor role, contract size, and
location of the work. The study team assumed that each available business had an equal chance of
winning that contract element. For example, the odds of a WBE receiving that contract element
were equal to the number of WBEs available for the contract element divided by the total number
of businesses available for the work. The Monte Carlo simulation then randomly chose a business
from the pool of available businesses to win the contract element.
The Monte Carlo simulation repeated the above process for all other elements in a particular set of
contracts. The output of a single Monte Carlo simulation for all contract elements in the set
represented simulated utilization of MBE/WBEs, by group, for that set of contract elements. The
entire Monte Carlo simulation was then repeated one million times for each set of contracts. The
combined output from all one million simulations represented a probability distribution of the
overall utilization of MBE/WBEs if contracts were awarded randomly based on the availability of
businesses working in the local construction and constructionrelated professional services
contracting industry.
The output of the Monte Carlo simulations represents the number of runs out of one million that
produced a simulated utilization result that was equal or below the observed utilization in the actual
data for each MBE/WBE group and for each set of contracts. If that number was less than or equal
to 25,000 (i.e., 2.5% of the total number of runs), then the study team considered that disparity
index to be statistically significant at the 95 percent confidence level. If that number was less than
or equal to 50,000 (i.e., 5.0% of the total number of runs), then the study team considered that
disparity index to be statistically significant at the 90 percent confidence level.
BBC applied Monte Carlo analysis to those disparity analysis results. Figure 77 presents the
results from the Monte Carlo simulations as they relate to the statistical significance of
disparities that the study team observed for MBE/WBEs. As shown in Figure 77, Monte Carlo
simulations indicated that the disparities that MBEs exhibited on all contracts, construction
contracts, and constructionrelated professional services contracts were statistically significant
at the 95 percent confidence level. The disparity that the study team observed for WBEs on
constructionrelated professional services contracts was not statistically significant at either the
95 percent confidence level or the 90 percent confidence level.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 7, PAGE 9
Figure 77.
Monte Carlo simulation results for disparity analysis results
Number of simulation Probability of
runs out of one million observed disparity
Disparity that replicated occurring due to
MBE/WBE Group index observed utilization "chance"
All contracts
WBE 112 N/A N/A
MBE 37 364 <0.1 %
Construction contracts
WBE 134 N/A N/A
MBE 41 10,944 1.1 %
Professional services contracts
WBE 47 51,827 5.2 %
MBE 21 76 <0.1
Note: Numbers rounded to nearest tenth of 1 percent. Numbers may not add to totals due to rounding.
Source: BBC Research & Consulting availability and utilization analyses.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 7, PAGE 10
CHAPTER 8.
Further Exploration of Disparities
As presented in Chapter 7, the study team observed substantial disparities for various groups of
minority and womenowned business enterprises (MBE/WBEs) when examining disparity
analysis results for all Port of Seattle (Port) construction and constructionrelated professional
services contracts considered together and for construction and constructionrelated
professional services contracts considered separately. Four areas of questions provide a
framework for further exploration of the disparities that the study team observed between the
utilization and availability of MBE/WBEs on Port contracts:
A. Are there disparities for prime contracts and subcontracts?
B. Are there disparities for large and small prime contracts?
C. Are there disparities in different time periods during the study period?
D. Do bid/proposal processes explain any disparities for prime contracts?
Answers to those questions may be relevant as the Port considers how to refine its
implementation of the Federal Disadvantaged Business Enterprise (DBE) Program, the Small
Business Enterprise (SBE) program, and he Small Contractors and Suppliers (SCS) program.
Answers to those questions may also help the Port identify the specific racial/ethnic and gender
groups, if any, that might be included in any future race or genderconscious programs.
A. Are there Disparities for Prime Contracts and Subcontracts?
BBC examined disparity analysis results separately for prime contracts and subcontracts to
assess whether MBE/WBEs exhibited different outcomes based on their roles as either prime
contractors or subcontractors during the study period. Figure 81 presents disparity indices for
all MBE/WBE groups separately for prime contracts and subcontracts. Overall, MBE/WBEs
exhibited substantial disparities for both prime contracts (disparity index of 56) and
subcontracts (disparity index of 56).
AsianPacific Americanowned businesses (disparity index of 11), Subcontinent Asian
Americanowned businesses (disparity index of 1), Hispanic Americanowned businesses
(disparity index of 1), and Native Americanowned businesses (disparity index of 83)
exhibited disparities on construction and constructionrelated professional services prime
contracts. Of those groups, only Native Americanowned businesses did not exhibit a
substantial disparity.
Black Americanowned businesses (disparity index of 42), AsianPacific Americanowned
businesses (disparity index of 61), Subcontinent Asian Americanowned businesses
(disparity index of 30), Hispanic Americanowned businesses (disparity index of 39), and
Native Americanowned businesses (disparity index of 4) all exhibited substantial
disparities on construction and constructionrelated professional services subcontracts.
WBEs did not exhibit disparities on prime contracts (disparity index of 117) or subcontracts
(disparity index of 110).
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 8, PAGE 1
Figuure 81.
Dispparity indices
for construction
andd constructionn
relaated prime
contracts and
subcontracts
Note::
The sttudy team analyzed 344
primee contracts and 704
subcoontracts.
For mmore detail, see Figures
K9 annd K12 in Appendix K.
Sourcce:
BBC RResearch & Consultinng
availaability and utilization
analyses.
B. AAre there Disparitiess for Largee and Smalll Prime Coontracts?
BBCC compared ddisparity analysis results foor "large" prime contractss and "small" prime contraacts
thatt the Port awaarded duringg the study peeriod to assess whether contract size afffected disparrity
anaalysis results ffor prime conntracts. "Large" prime conttracts were ddefined as connstruction
conntracts worth more than $22 million and constructionnrelated proffessional servvices contractts
worrth more thann $500,000. "SSmall" prime contracts weere defined ass constructionn contracts
worrth $2 millionn or less and cconstructionrelated profeessional serviices contractss worth $500,000
or less. Figure 82 presents disparity indicces for all MBE/WBE groupps separatelyy for large andd
smaall prime conttracts.
Oveerall, MBE/WWBEs exhibitedd substantial disparities foor large primee contracts
(dissparity index of 35) and smmall prime coontracts (dispparity index of 77).
AsianPaciffic Americanoowned businesses (disparrity index of 00), Subcontineent Asian
Americanoowned busineesses (dispariity index of 0)), Hispanic Ammericanownned businessees
(disparity inndex of 0), Naative Americaanowned businesses (dispparity index oof 0), and WBBEs
(disparity inndex of 84) exhibited dispparities on larrge prime conntracts. Of thoose groups, onnly
WBEs did nnot exhibit a ssubstantial disparity.
Black Amerricanowned bbusinesses (ddisparity indeex of 97), AsiaanPacific Ammericanowneed
businesses (disparity inddex of 24), Suubcontinent AAsian Americaanowned buusinesses
(disparity inndex of 2), annd Hispanic AAmericanownned businessees (disparity index of 2), aall
exhibited disparities on small prime ccontracts. Of those groupss, only Black AAmericanowwned
businesses did not exhibbit a substantial disparity.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CHAPTER 8, PAAGE 2
Figuure 82.
Dispparity indices for
largge prime
contracts and smmall
primme contracts
Note::
The sttudy team analyzed 305
small prime contracts andd 39
large prime contracts.
Small prime contracts werre
construction contracts woorth
$2 miillion or less and
constructionrelated
professional services conttracts
worthh $500,000 or less. Laarge
primee contracts were
construction contracts woorth
more than $2 million and
constructionrelated
professional services conttracts
worthh more than $500,0000.
For mmore detail, see Figures
K15 aand K16 in Appendixx K.
Sourcce:
BBC RResearch & Consultinng
availaability and utilization
analyses.
C. AAre there Disparitiess in Differeent Time PPeriods during the Sttudy Periood?
BBCC examined ddisparity analyysis results seeparately for two separatee time periodds (201020111
andd 20122013) during the sttudy period. FFigure 83 prresents disparrity indices foor all MBE/WWBEs
groups separately for the 201102011 and 20122013 pperiods. Overrall, MBE/WBBEs exhibited a
subbstantial dispaarity in 20102011 (disparrity index of 336) but not inn 20122013
(dissparity index of 96).
Black Amerricanowned bbusinesses (ddisparity indeex of 30), AsiaanPacific Ammericanowneed
businesses (disparity inddex of 21), Suubcontinent AAsian Americaanowned buusinesses
(disparity inndex of 8), Hiispanic Amerricanowned bbusinesses (ddisparity indeex of 23), Natiive
Americanoowned busineesses (dispariity index of 577), and WBEss (disparity inndex of 59)
exhibited suubstantial dissparities in thhe 201020111 time period.
AsianPaciffic Americanoowned businesses (disparrity index of 443), Subcontinnent Asian
Americanoowned busineesses (dispariity index of 9)), Hispanic Ammericanownned businessees
(disparity inndex of 17), aand Native Ammericanowned businessees (disparity index of 0)
exhibited suubstantial dissparities in thhe 201220133 time period.
Both WBEs and Black Ammericanowned businessees did not shoow disparitiess in the 2012
2013 time pperiod. Both ggroups exhibiited disparityy indices of 2000+.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CHAPTER 8, PAAGE 3
Figuure 83.
Dispparity indices in
201102011 and
201122013
Note::
The sttudy team analyzed 629
primee contracts/subcontrracts
for 200102011 and 419 prime
contracts/subcontracts foor
20122013.
For mmore detail, see Figures
K5 annd K6 in Appendix KK.
Sourcce:
BBC RResearch & Consultinng
availaability and utilization
analyses.
D. Do Bid/Proposal Proocesses Explain Any Disparities for Primee Contractts?
BBCC completed aa case study aanalysis to assess whetherr characteristtics of the Porrt's bid or
proposal evaluattion processees help to explain any of thhe disparities that the studdy team obserrved
for prime contraacts. BBC anallyzed bid andd proposal infformation from samples off constructionn
andd constructionnrelated proffessional servvices contractts that the Poort awarded dduring the stuudy
period.
Connstruction. BBC examineed bid information for a saample of 141 cconstruction contracts thaat
the Port executed during the study period. The study teeam did not aanalyze two oof those contracts,
because it was uunable to deteermine ownerrship informaation for two of the busineesses that
subbmitted bids. TThe study teaam conductedd an analysis of the bids suubmitted for tthe remainingg
1399 contracts.1 In total, the Poort received 5576 bids for tthose contraccts.
Nummber of bids from MBE/WWBEs. MBE/WWBEs submittted 111 of thee 576 bids (199%) that the
studdy team exammined:
Fortyfive bbids (8% of alll bids) came from MBEs (221 different bbusinesses); aand
Sixtysix bidds (11% of alll bids) came from WBEs (17 different bbusinesses).
1 Thee study team alsoo conducted its annalysis by leaving the two contractts in the analysis aand removing thee bidders whose
inforrmation the studyy team could not ddetermine. Resultts of the analysess showed no subsstantial differencee for the success oof bids
submmitted by MBE/WWBEs and majorityyowned businessses.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CHAPTER 8, PAAGE 4
As ppart of availabbility surveyss, the study teeam asked construction buusiness owneers and managgers
to inndicate whether their commpanies comppete as primee contractors on public conntracts. Of thee
bussiness ownerss and manageers that indicaated that theiir companies compete as pprime
conntractors, 13 ppercent repreesented MBEss and 10 perccent represennted WBEs. Thhose percentaages
werre higher thann the percenttage of MBEs that submitteed bids on Poort construction contracts
durring the studyy period but loower than thee percentage of WBEs thatt submitted bbids. Appendix H
(speecifically, Figuure H2) provvides more innformation abbout those avvailability survvey results.
Succcess of bids. BBC also examined the peercentage of bbids that MBEE/WBEs submmitted that
resuulted in contrract awards. AAs shown in FFigure 84, 277 percent of thhe bids that MMBEs submittted
resuulted in contrract awards, wwhich was slightly higher tthan the perccent of bids thhat nonHispaanic
whiite maleowned businesses submitted tthat resulted in contract awwards. Of thee bids submittted
by WWBEs, 23 perrcent resultedd in contract aawards, slighttly lower than the percentt of bids that non
Hisppanic white mmaleowned bbusinesses suubmitted that t resulted in ccontract awarrds.
Figuure 84.
Perccentage of bidds on
Portt constructionn
contracts that resulted in
contract awards
Note::
Basedd on analysis of 576 bbids on 139
contracts.
Sourcce:
BBC RResearch & Consultinng from Port of
Seattle contract records.
Connstructionrrelated proffessional seervices. BBC examined prroposal informmation for a
sammple of 48 connstructionrellated professional servicess contracts thhat the Port eexecuted during
the study periodd. The study teeam did not aanalyze five oof those contrracts, becausee it was unablle to
deteermine owneership information for twoo of the busineesses submittting bids. Thee study team
connducted an annalysis of the rremaining 433 contracts.2 In total, the Poort received 1175 proposalls for
those 43 contraccts.
Nummber of bids from MBE/WWBEs. MBE/WWBEs submittted 20 of the 1175 proposalls that the stuudy
teamm examined ((11%):
13 proposaals (7% of all pproposals) caame from MBEs (10 differeent businessees); and
7 proposalss (4% of all prroposals) camme from WBEEs (6 differentt businesses).
Of tthe constructiionrelated professional seervices businness owners aand managerss that indicateed in
availability surveeys that theirr companies aare interestedd in competinng as prime coontractors onn
pubblic contracts,, 15 percent rrepresented MMBEs and 10 percent reprresented WBEEs. Those
percentages werre higher thann the percentage of MBEs aand WBEs that actually suubmitted
2 Thee study team alsoo conducted its annalysis by leaving the five contractts in the analysis aand removing thee bidders whose
inforrmation the studyy team could not ddetermine. Resultts of the analysess showed no subsstantial differencee for the success oof bids
submmitted by MBE/WWBEs and majorityyowned businessses.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CHAPTER 8, PAAGE 5
proposals on thee Port's constructionrelated professionnal services ccontracts duriing the study
period. Appendixx H (specificaally, Figure H3) provides mmore informaation about thhose availability
survvey results.
Succcess of propoosals. BBC alsso examined tthe success raates of the prroposals that MBE/WBEs
subbmitted on thee Port's consttructionrelatted professionnal services ccontracts. As shown in Figuure
85, none of the proposals subbmitted by MMBEs resultedd in contract aawards. Fortyythree percennt of
the proposals suubmitted by WWBEs resultedd in contract aawards, whicch was substaantially higheer
thann the percenttage of proposals that nonHispanic whhite maleownned businessees submitted that
resuulted in contrract awards.
Figuure 85.
Perccentage of bidds on
Portt constructionnrelated
proffessional servvices
contracts that resulted in
contract awards
Note::
Basedd on analysis of 175 pproposals on
43 contracts.
Sourcce:
BBC RResearch & Consultinng from Port
of Seaattle contract records.
BBCC RESEARCH & CONSULTING FFINAL REPORTT CHAPTER 8, PAAGE 6
CHAPTER 9.
Race and GenderNeutral Measures
The Federal Disadvantaged Business Enterprise (DBE) Program requires state and local
transportation agencies to meet the maximum feasible portion of their overall DBE goals using
race and genderneutral measures.1 Race and genderneutral measures are initiatives that
agencies use to encourage the participation of all businessesor, all small businessesin their
contracts. They are not specifically limited to minority and womenowned business enterprises
(MBE/WBEs) or to DBEs. Agencies must determine whether they can meet their overall DBE
goals solely through neutral means or whether race and genderconscious measuressuch as
DBE contract goalsare also needed. As part of making that determination, agencies must
project the portion of their overall DBE goals that they expect to meet through the use of race
and genderneutral measures and the portion that they expect to meet through the use of race
and genderconscious measures.
If an agency determines that it can meet its overall DBE goal solely through race and
genderneutral means, then the agency would propose using only neutral measures as part
of its implementation of the Federal DBE Program. The agency would project that 100
percent of its overall DBE goal would be met through neutral means and that 0 percent
would be met through race and genderconscious means.
If an agency determines that a combination of race and genderneutral and race and
genderconscious measures are needed to meet its overall DBE goal, then the agency would
propose using a combination of neutral and conscious measures as part of its
implementation of the Federal DBE Program. The agency would project that some
percentage of its overall DBE goal would be met through neutral means, and that the
remainder would be met through race and genderconscious means.
The United States Department of Transportation (USDOT) offers guidance concerning how
transportation agencies should project the portions of their overall DBE goals that they will meet
through race and genderneutral and race and genderconscious measures, including the
following:
"USDOT Questions and Answers about 49 CFR Part 26" addresses factors for federal aid
recipients to consider when projecting the portion of their overall DBE goals that they will
meet through race and genderneutral means.2
USDOT's "Tips for GoalSetting" also suggests factors for federal aid recipients to consider
when making such projections.3
1 49 CFR Section 26.51.
2 See http://www.dotcr.ost.dot.gov/Documents/Dbe/49CFRPART26.doc.
3 http://www.osdbu.dot.gov/DBEProgram/tips.cfm.
BBC RESEARCH & CONSULTINGFINAL REPORT CHAPTER 9, PAGE 1
A Federal Highway Administration (FHWA) Figure 91.
template for how the agency considers Excerpt from Explanation of Approval
approving DBE goal and methodology of [State] DBE Goal Setting Process for
submissions includes a section on projecting FY [Year]
the percentage of overall DBE goals to be met
You must also explain the basis for the
through neutral and conscious means. An State's raceneutral/raceconscious
excerpt from that template is provided in division and why it is the State's best
Figure 91. estimate of the maximum amount of
participation that can be achieved
Based on 49 CFR Part 26 and the guidance described through raceneutral means. There are a
above, general areas of questions that transportation variety of types of information that can
be relied upon when determining a
agencies might ask related to making any
recipient's raceneutral/raceconscious
projections include: division. Appropriate information should
give a sound analysis of the recipient's
A. Is there evidence of discrimination within the market, the raceneutral measures it
local construction and constructionrelated employs and information on contracting
professional services contracting marketplace in the recipient's contracting area.
for any racial/ethnic or gender groups? Information that could be relied on
includes: the extent of participation of
B. What has been the agency's past experience in DBEs in the recipient's contracts that do
meeting its overall DBE goal? not have contract goals; past prime
contractors' achievements; excess DBE
C. What has DBE participation been when the achievements over past goals; how many
agency did not use race or genderconscious DBE primes have participated in the
measures?4 state's programs in the past; or
information about state, local or private
D. What is the extent and effectiveness of race contracting in similar areas that do not
and genderneutral measures that the agency use contracting goals and how many
could have in place for the next fiscal year? minority and women's businesses
participate in programs without goals.
Chapter 9 is organized around each of those general
Source: FHWA, Explanation for Approval of [State]
areas of questions. DBE Program Goal Setting Process for FY [Year].
http://www.fhwa.dot.gov/civilrights/
dbe_memo_a4.htm.
4 To assess that question, USDOT guidance suggests evaluating (a) DBE participation as prime contractors if DBE contract goals
did not affect utilization, (b) DBE participation as prime contractors and subcontractors for agency contracts without DBE
goals, and (c) overall utilization for other public or private sector contracting where contract goals were not used.
BBC RESEARCH & CONSULTINGFINAL REPORT CHAPTER 9, PAGE 2
A. Is there evidence of discrimination within the local construction and
constructionrelated professional services contracting marketplace for any
racial/ethnic or gender groups?
As discussed in previous chapters, BBC examined marketplace conditions in the Seattle
Metropolitan Area, including:
Entry and advancement;
Business ownership;
Access to capital, bonding, and insurance; and
Success of businesses.
There was quantitative evidence of disparities for MBE/WBEs overall and for specific groups
concerning the above issues. Qualitative information also indicated some evidence of
discrimination affecting the local marketplace. However, some minority and female business
owners that the study team interviewed as part of the disparity study did not think that their
businesses had been affected by any race or genderbased discrimination. The Port should
review the information about marketplace conditions presented in this report as well as other
information it may have when considering the extent to which it can meet its overall DBE goal
through race and genderneutral measures.
B. What has been the agency's past experience in meeting its overall DBE
goal?
Figure 92 presents the participation of certified DBEs on Federal Aviation Administration
(FAA)funded construction and constructionrelated professional services contracts that the
Port awarded in recent years, as presented in Port reports to USDOT. Based on information
about awards and commitments to DBEcertified businesses, the Port has exceeded its DBE goal
in recent years. In federal fiscal years (FFYs) 2009 through 2011, DBE awards and commitments
on FAAfunded contracts exceeded the Port's overall DBE goal by an average of 8.6 percentage
points.
Figure 92.
Past certified DBE participation in the Port's DBE Annual
FAAfunded contracts, FFYs 2009, 2010, and 2011. FFY attainment DBE goal Difference
Note: The Port of Seattle did not award any USDOTfunded contracts in FFY 2012, 2009 17.5 % 3.0 % 14.5 %
so the agency did not set an overall DBE goal for that year.
2010 11.9 4.0 7.9
Source: Port of Seattle DBE Program, 2012. 2011 3.3 0.0 3.3
C. What has DBE participation been when the agency did not use race or
genderconscious measures?
The Port did not apply DBE contract goals or any other race or genderconscious measures to
any contracts that the agency awarded during the study period. BBC's analysis shows that
overall, certified DBEs received 3.4 percent of the dollars associated with those contracts. The
BBC RESEARCH & CONSULTINGFINAL REPORT CHAPTER 9, PAGE 3
Port should consider that information when determining the percentage of its overall DBE goal
that it can achieve through race and genderneutral measures.
D. What is the extent and effectiveness of race and genderneutral
measures that the agency could have in place for the next fiscal year?
When determining the extent to which the Port could meet its overall DBE goal through the use
of race and genderneutral measures, the agency should review the neutral measures that it and
other local organizations already have in place. The Port should also review measures that it has
planned or could consider for future implementation.
Current race and genderneutral measures. The Port currently has a broad range of race
and genderneutral measures in place to encourage the participation of all small businesses
including DBEsin its construction and constructionrelated professional services contracts.
The agency plans on continuing the use of those measures in the future. The Port's race and
genderneutral efforts can be classified into three categories:
Business outreach and communication;
Technical assistance; and
Improved contracting processes.
Business outreach and communication. The Port engages in various outreach and
communication efforts across its relevant geographic market area to encourage the utilization
and growth of small businesses, including many MBE/WBEs. Those efforts include:
Meetings and relationship building;
Website and communications; and
Advertisements of contract opportunities.
Meetings and relationship building. In an effort to engage its stakeholders, the Port participates
in information and communications programs related to contracting procedures and contracting
opportunities. The Port maintains a mailing list of vendors that it uses to communicate with
potential prime contractors to inform them about small businesses that could be available for
subcontracting opportunities.
Website and communications. The Port revises and updates its website regularly. The website
currently provides access to various business resources including links to the following
information:
Overall DBE goals for FFYs 20092012 and the methodology that the Port used to establish
them;
Guidance on how to do business with the Port; and
Information about contracting opportunities.
BBC RESEARCH & CONSULTINGFINAL REPORT CHAPTER 9, PAGE 4
The Port also provides information on its website about available small businesses and DBEs
that are certified with the Washington State Office of Minority & Women's Business Enterprises
(OMWBE) by referring interested businesses to OMWBE's website.
Advertisements of contract opportunities. The Port advertises construction and other
contracting opportunities on its website. The Port also makes efforts to arrange bid solicitations,
times for bid presentations, and delivery schedules in ways that facilitate participation by DBEs
and other small businesses and that make contracts more accessible to small businesses.
Technical assistance. The Port provides technical assistance through partnerships with various
businesses and organizations, including USDOT and the Washington State Department of
Transportation.
Business and financial management. The Port partners with USDOT to help small businesses
with the costs of bonds. The Port simplifies the bonding process, reduces bonding requirements,
and offers assistance to small businesses struggling to obtain bonding. The Port also refers small
businesses to services that other agencies offer in order to develop and improve immediate and
longterm management and encourage greater selfsufficiency among such firms.
Technological training. The Port helps small businesses improve their ability to use technology
and electronic media by referring them to programs that other agencies operate. Those efforts
enable businesses to navigate the Port's online vendor database systems and other electronic
systems more effectively.
Improved contracting practices. The Port engages in efforts to improve its contracting practices,
making contracts more accessible to all businesses, including DBEs. The Port makes efforts to
unbundle large contracts to make them more accessible to businesses of all sizes. The Port also
encourages and, in some cases, requires prime contractors to consider subcontracting portions
of contracts to qualified DBEs and other small businesses. Those efforts may include identifying
economicallyfeasible subcontracts in instances where prime contractors are able to complete
the work themselves. The Port finds that approach to be especially effective on projects that
include tasks across different work areas (e.g., a project that involved carpentry, electricity, and
cleaning).
Potential raceand genderneutral measures. The Port is awaiting results of the 2014
disparity study to develop additional race and genderneutral measures. However, there are
several organizations throughout Washington that are implementing efforts to encourage the
participation of small businessesincluding DBEs and many MBE/WBEsin local contracting.
The Port might consider adopting some of those measures to encourage small business and DBE
participation in its construction and constructionrelated professional services contracts. Figure
93 provides examples of race and genderneutral programs that other organizations in
Washington have in place. There may be several reasons why certain measures are not
practicable for the Port, and there may also be measures in addition to those presented in Figure
93 that the Port might consider using.
BBC RESEARCH & CONSULTINGFINAL REPORT CHAPTER 9, PAGE 5
Figure 93.
Examples of race and genderneutral programs that Washington organizations have in place
Neutral measure Description
Technical assistance Technical assistance programs are available throughout Washington. Those programs primarily provide
general information and assistance for business startups and growing businesses. Industryspecific
resources often take the form of checklists of issues of which businesses should be aware and easily
accessible business forms. Examples of general support providers include SCORE, Washington State
Network Small Business Development Centers, and the Washington State Small Business Administration.
Some large organizations that offer tradespecific classes and seminars are the Associated General
Contractors and the American Council of Engineering Companies.
Other programs focus on market development assistance and the use of electronic media and
technology. Those programs are available through organizations such as The Foundation for the
Advancement of Marketing Excellence in Entrepreneurs. More locally focused programs include the
Business Development Center at UW Bothell, INROADS in Seattle and Northern Idaho, the Seattle
Community Capital Development, and the Washington State Department of Transportation.
Small business finance Washington State offers a program called the Linked Deposit Program which links the deposit of state
funds to loans made by participating financial institutions to qualified MBE/WBEs. The deposit of the
state funds is made at below market rates, and the savings are passed on by the bank to the Linked
Deposit borrowers in the form of an interest rate not to exceed 2 percent. Sound Transit currently
participates in the Linked Deposit Program.
Other organizations providing financing or help finding financing in Washington include Community
Capital Development, which provides both loans and training and technical assistance; the Rural
Washington Loan Fund, which provides loans to businesses that would create jobs or help retain existing
jobs in specific areas, especially for low income persons; the Coastal Revolving Loan Fund/Technical
Assistance Loan Fund, which provides loans to businesses that would create jobs in regions affected by
declines in fishing and timber industries; Evergreen Community Development; and organizations such as
ACCION USA. Other local organizations, including minority and regional chambers, provide training and
support on how to obtain financing and prepare funding documents.
Bonding programs Bonding programs offering bonding and finance assistance and training have become more popular.
Programs such as the SBA Bond Guarantee Program provide bid, performance, and payment bond
guarantees for individual contracts. The USDOT Bonding Assistance Program also provides bonding
assistance in the form of bonding fee cost reimbursements for DBEs performing transportation work and
is a major bonding source for Washington DBE firms.
The Washington Economic Development Finance Authority offers resources, bonds, and information for
obtaining bond financing in Washington, particularly for smaller manufacturing and processing facilities
and environmental preservation, energy, technology, and applied biological sciences as they overlap with
waste disposal.
Mentorprotg programs The City of Tacoma's Historically Underutilized Business Program (HUB) offers a mentorprotg program
that connects HUBcertified businesses with a successful business owner mentor.
Community Capital Development and the City of Shoreline, through their contracts with Shoreline
Community College Small Business Accelerator, both provide free business mentoring.
The Small Business Administration 8(a) Business Development MentorProtg Program is an example of
a mentorprotg program that pairs subcontractors with prime contractors to assist in management,
financial, and technical assistance and exploration of joint ventures and subcontractor opportunities for
federal contracts.
Source: BBC Research & Consulting.
BBC RESEARCH & CONSULTINGFINAL REPORT CHAPTER 9, PAGE 6
CHAPTER 10.
Implementation of the Federal DBE Program,
the SCS Program, and the SBE Program
The Port of Seattle (the Port) implements three programs to encourage the participation of
minority and womenowned business enterprises (MBE/WBEs)the Federal Disadvantaged
Business Enterprise (DBE) Program for United States Department of Transportation (USDOT)
funded contracts and the Small Contractor and Suppliers (SCS) and Small Business Enterprise
(SBE) Programs for locallyfunded contracts. The SCS Program is a joint partnership with King
County that uses participation requirements and evaluation incentives to encourage prime
contractors to use SCScertified subcontractors on locallyfunded Port contracts. The SBE
Program is a collection of tools that the Port uses to track the participation of businesses that
identify themselves as SBEs on locallyfunded Port contracts.
Chapter 10 reviews information relevant to the Port's implementation of those programs.
Chapter 10 is organized according to the regulations for the Federal DBE Program that are
presented in 49 Code of Federal Regulations (CFR) Part 26 and associated documents.1 That
information is most directly relevant to the Port's implementation of the Federal DBE Program,
but where appropriate, BBC also discusses how it is relevant to the SCS and SBE programs.
Reporting to DOT 49 CFR Part 26.11 (b)
The Port must periodically report DBE participation on its federallyfunded construction and
constructionrelated professional services contracts to the Federal Aviation Administration
(FAA). The Port tracks DBE and nonDBE participation through progress payments to prime
contractors. Prime contractors must sign a certification for each progress payment indicating
they have paid all subcontractors, and the Port tracks the total amount of those payments to
calculate DBE participation. Based on that information, the Port prepares Uniform Reports of DBE
Awards or Commitments and Payments, which it then submits to FAA. The Port should continue
to do so.
As part of the SBE Program, the Port also tracks the participation of businesses that identify
themselves as small businesses on locallyfunded Port contracts. The Port should continue to do
so. That practice can help the agency assess the effect of certain measures on the participation of
small businesses in locallyfunded Port contracts.
Bidders List 49 CFR Part 26.11 (c)
As part of its implementation of the Federal DBE Program, the Port must develop a bidders list of
businesses that are available for its FAAfunded contracts. The bidders list must include the
following information about each available business:
1 Because Chapter 10 discusses only certain portions of the Federal DBE Program, the Port should refer to the complete federal
regulations when considering its implementation of the program.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 1
Firm name;
Address;
DBE status;
Age of firm; and
Annual gross receipts.
The Port currently maintains a bidders list that includes all of the above information for
businesses that bid or propose on FAAfunded contracts.
As part of the SCS Program, the Port also maintains an online directory of all businesses that are
SCScertified with the agency. The directory allows prime contractors to search for SCScertified
businesses by industry, description, or business name when they are seeking to partner with
those businesses.
Improving vendor data. In order to more effectively track the utilization of MBE/WBEs on its
contracts, the Port should consider continuing to improve the information that it collects on the
ownership status of utilized businesses, including both prime contractors and subcontractors.
The Port should consider collecting information about the race/ethnicity and gender of business
owners, regardless of certification status. The Port could use business information that BBC
collected as part of the disparity study to update and improve its vendor data.
Information from availability telephone surveys. Availability telephone surveys that the
study team conducted as part of the disparity study collected information about local businesses
that are potentially available for different types of Port construction and constructionrelated
professional services contracts. The Port should consider using that information to augment its
current bidders lists.
Prompt Payment Mechanisms 49 CFR Part 26.29
The Federal DBE Program requires fund recipients to establish policies that help ensure that
prime contractors pay their subcontractors in a timely manner. The Port's prompt payment
requirements for its FAAfunded contracts appear to comply with Washington State law and
with federal regulations in 49 CFR Part 26.29. The Port must pay a prime contractor no more
than 30 days after its receipt of a properly completed invoice from that prime contractor. The
agency requires that prime contractors pay subcontractors no later than 10 calendar days after
receiving payment from the Port. Any delays or postponements in payment can only occur for
"good cause following written approval of the Port of Seattle."
Indepth anecdotal interviews with business owners and managers revealed some
dissatisfaction with how promptly businesses are paid on public agency projects. One business
owner specifically commented on the difficulty of getting paid on Port contracts.
DBE Directory 49 CFR Part 26.31
The Port is required to maintain a directory that lists all DBEs that are eligible to participate in
its contracts, including information about each business' address, phone number, and relevant
types of work. The Washington State Office of Minority and Women's Business Enterprises
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 2
(OMWBE)the unified DBE certifying agency for the state of Washingtonmaintains a DBE
Directory that lists all businesses in the state that are certified as DBEs and includes all of the
information that the Federal DBE Program requires. The Port directs prime contractors and
other interested businesses to the DBE Directory to obtain information about eligible DBEs that
are eligible to participate in its contracts.
Overconcentration 49 CFR Part 26.33
Agencies implementing the Federal DBE Program are required to report and take corrective
measures if they find that DBEs are so overconcentrated in certain work areas as to unduly
burden nonDBEs working in those areas. Such measures may include, but are not limited to:
Developing ways to assist DBEs to move into nontraditional areas of work;
Varying the use of DBE contract goals; and
Working with contractors to find and use DBEs in other industry areas.
BBC investigated potential overconcentration on Port contracts and identified two subindustries
in which certified DBEs accounted for 50 percent or more of total subcontract dollars between
January 1, 2010 and September 30, 2013:
Landscaping services (83%); and
Trucking (62%).
Because the above figures are based only on subcontract dollars, they do not include work that
prime contractors selfperformed in those areas. If the study team had included selfperformed
work in those analyses, the percentages for which DBEs accounted would likely have decreased.
In addition, the above figures are based on both FAA and locallyfunded contracts and would
likely differ if limited to FAAfunded contracts. The Port should consider reviewing similar
information and continuing to monitor landscaping services, trucking, and other work
specializations for potential overconcentration in the future.
Business Development Programs 49 CFR Part 26.35 and MentorProtg
Programs 49 CFR Appendix D to Part 26
In addition to their implementations of the Federal DBE Program, agencies are required to
establish Business Development Programs (BDPs) to assist businesses gain the ability to
compete successfully in the local marketplace. As part of a BDP, or separately, agencies may
establish a mentorprotg program, in which a nonDBE or another DBE serves as a mentor and
principal source of business development assistance to a protg DBE.
The Port has not established a formal BDP. However, the Port engages in several activities that
help support DBEs that are seeking opportunities to participate in Port contracting. For example,
the Port:
Engages in outreach with DBEs related to contracting opportunities;
Provides referrals to capacitybuilding and training opportunities in the local marketplace;
Hosts information sessions and offers prebid technical assistance, as appropriate; and
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 3
Participates in regional committees related to small business issues.
Some of the business owners that the study team interviewed as part of the disparity study
cautioned that highquality training programs specific to their fields were needed and that
generalized or lowquality training could cause more harm than good. Many business owners
and managers thought that mentorprotg programs would be very useful. Some interviewees
were critical of how such programs were structured, indicating shortages of mentors and lack of
mentor commitment as potential issues.
The Port might explore additional partnerships to implement other BDPs, including
implementing a mentorprotg program. Such programs could provide specialized assistance
that would be tailored to the needs of developing businesses.
Responsibilities for Monitoring the Performance of Other Program
Participants 49 CFR Part 26.37
The Final Rule effective February 28, 2011 revised requirements for monitoring and enforcing
that the work that prime contractors commit to DBE subcontractors at contract award
(or through contract modifications) is actually performed by those DBEs. The Final Rule states
that prime contractors can only terminate DBEs for "good cause" and with written consent from
the awarding agency.
To monitor the performance of DBEs, the Port has established extensive monitoring
mechanisms. For example, the Port:
Notifies USDOT of any false, fraudulent, or dishonest conduct in connection with the Port's
implementation of the Federal DBE program;
Includes clauses in its contractssuch as breach of contract actions, audits, and reviews
to enforce requirements of the Federal DBE Program;
Maintains a running tally of payments actually made to DBEs and compares those
attainments to commitments, based on information from prime contractors; and
Reports information about both commitments and attainments in its Uniform Report of DBE
Awards or Commitments and Payments to USDOT.
The Port should review the requirements set forth in 49 CFR Part 26.37 and in The Final Rule to
ensure that it has appropriately implemented its monitoring and enforcement mechanisms and
that they are consistent with federal regulations and best practices.
Fostering Small Business Participation 49 CFR Part 26.39
The Federal DBE Program requires agencies to implement measures that encourage small
business participation in their contracting, "taking all reasonable steps to eliminate obstacles to
their participation, including unnecessary and unjustified bundling of contract requirements
that may preclude small business participation in procurements as prime contractors or
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 4
subcontractors."2 The Final Rule effective February 28, 2011 added a requirement for
transportation agencies to submit a plan to USDOT for fostering small business participation.
The Port has several measures in place to encourage small business participation in its
contracting. For example, the Port:
Requires prime contractors to provide subcontracting opportunities of a size that small
businessesincluding DBEscan reasonably perform on contracts that do not include DBE
contract goals;
Assesses the work involved on individual contracts andwhen appropriateunbundles
contract elements to encourage small business participation;
Works with small businesses and helps them better understand contracting and
procurement opportunities with the agency;
Encourages prime contractors and individual departments to use small businesses on
contracts;
Encourages small businesses, including many minority and womenowned businesses, to
pursue relevant certifications; and
Hosts and participates in workshops, business development meetings, and other events
that are intended to enhance contracting opportunities for small businesses.
In addition, the Port operates two race and genderneutral business programsthe SCS
Program and the SBE Programto encourage the participation of small businesses in its locally
funded contracts.
Prohibition of DBE Quotas and Setasides for DBEs Unless in Limited and
Extreme Circumstances 49 CFR Part 26.43
The use of DBE quotas and setasides are prohibited under the Federal DBE Program except in
limited and extreme circumstances. Consistent with federal regulations, the Port does not use
quotas or setasides.
Setting Overall DBE Goals 49 CFR Part 26.45
In The Final Rule effective February 28, 2011, USDOT changed how often agencies that
implement the Federal DBE Program are required to submit overall DBE goals. As discussed in
Chapter 1, agencies now need to develop and submit overall DBE goals every three years. That
change was effective as of March 5, 2010.
Analysis of Reasons for not Meeting Overall DBE Goal 49 CFR Part
26.47(c)
The Final Rule effective February 28, 2011 requires agencies to take the following actions if their
DBE participation for a particular fiscal year is less than their overall DBE goal:
Analyze in detail the reasons for the difference; and
2 49 CFR Part 26.39(a).
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 5
Establish specific steps and milestones to address the difference and enable the agency to
meet the goal in the next fiscal year.
Based on information about awards and commitments to DBEcertified businesses, the Port has
met its DBE goal in recent years. In federal fiscal years 2009, 2010, and 2011, DBE awards and
commitments on FAAfunded contracts exceeded the Port's overall DBE goal by an average of 8.6
percentage points.3
Need for separate accounting for participation of potential DBEs. In accordance with
guidance in the Federal DBE Program, BBC's analysis of the overall DBE goal in this study is
based on DBEs that are currently certified and on MBE/WBEs that could potentially be DBE
certified (i.e., potential DBEs). Potential DBEs that are available for Port work are counted in the
overall DBE goal. However, potential DBEs that participate in Port contracts are not counted in
Uniform Reports of DBE Awards or Commitments and Payments.
Based on verbal communication with USDOT in Washington, D.C. in 2011, agencies can explore
whether one reason why they have not met their overall DBE goal is because they are not
counting the participation of potential DBEs in their contracting. USDOT might then expect an
agency to explore ways to further encourage potential DBEs to become DBEcertified as one way
of closing the gap between reported DBE participation and its overall DBE goal. In order to have
the information to explore that possibility, the Port should consider:
Developing a system to collect information on the race/ethnicity and gender of the owners
of all businessesnot just certified DBEsparticipating as prime contractors or
subcontractors in FAAfunded contracts;
Developing internal reports of MBE/WBE participation in Port contracts, regardless of DBE
certification and separately by race/ethnicity and gender; and
Continuing to track participation of certified DBEs on FAAfunded contracts, per USDOT
reporting requirements.
Other steps to evaluate how the Port might better meet its overall goal. Analyzing
the utilization of uncertified MBE/WBEs that could be certified is one step among many that the
Port might consider taking when examining any differences between DBE utilization and its
overall DBE goal in the future. Based on its comprehensive review, the Port must establish
specific steps and milestones to correct the problems it identifies in its analysis and to enable it
to better meet its overall DBE goal in the future, per 49 CFR Part 26.47(c)(2).
Maximum Feasible Portion of Goal Met through Race and GenderNeutral
Measures 49 CFR Part 26.51(a)
The Port must meet the maximum feasible portion of its overall DBE goal through the use of
race and genderneutral measures. The Port must project the portion of its overall DBE goal that
could be achieved through such means.
3 The Port of Seattle did not award any USDOTfunded contracts in federal fiscal year 2012, so the agency did not set an overall
DBE goal for that year
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 6
Use of DBE Contract Goals 49 CFR Part 26.51(d)
The Federal DBE Program requires agencies to use race and genderconscious measuressuch
as DBE contract goalsto meet any portion of their overall DBE goals that they do not project
being able to meet using race and genderneutral measures, as noted in 49 CFR Part 26.51(d).
Based on information from the disparity study and other available information, the Port should
assess whether the use of DBE contract goals is necessary in the future to meet any portion of its
overall DBE goal.
USDOT guidelines on the use of DBE contract goals, which are presented in 49 CFR Part 26.51(e),
include the following guidance:
DBE contract goals may only be used on contracts that have subcontracting possibilities;
Agencies are not required to set DBE contract goals on every FAAfunded contract;
During the period covered by the overall DBE goal, an agency must set DBE contract goals
so that they will cumulatively result in meeting the portion of the overall goal that the
agency projects being unable to meet through race and genderneutral means;
An agency's DBE contract goals must provide for participation by all DBE groups eligible for
race and genderconscious measures and must not be subdivided into groupspecific goals;
and
An agency must maintain and report data on DBE participation separately for contracts that
include and that do not include DBE contract goals.
If the Port determines that it needs to begin using DBE contract goals, then it should also
evaluate which DBE groups should be considered eligible for those goals. If the Port decides to
include specific DBE groups (e.g., groups classified as underutilized DBEs) but not other groups
in its DBE contract goals, it must submit a waiver request to FAA.
Some individuals participating in indepth interviews and public meetings made comments
related to the use of DBE contract goals.
Several MBE/WBEs commented that DBE contract goals help their firms get their "foot in
the door" with prime contractors. A few MBE/WBEs indicated that one of the primary
reasons that their firms get work at all is because of the Federal DBE Program and DBE
contract goals.
Some interviewees suggested that DBE contract goals should only apply to those groups
that experience discrimination. Many interviewees also indicated that they are aware of
several fraudulent DBE firms that are taking advantage of DBE contract goals.
The Port should consider those comments if it determines that it is appropriate to use DBE
contract goals in the future.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 7
Flexible Use of any Race and GenderConscious Measures
49 CFR Part 26.51(f)
Agencies must exercise flexibility in any use of race and genderconscious measures such as
DBE contract goals. The Port must comply with that section if it implements race and gender
conscious measures in the future.
Good Faith Effort Procedures 49 CFR Part 26.53
USDOT has provided guidance for agencies to review good faith efforts, including materials in
Appendix A of 49 CFR Part 26. The Port's current implementation of the Federal DBE Program
outlines its good faith efforts process. The Final Rule effective February 28, 2011 updated
requirements for good faith efforts when agencies use DBE contract goals. If the Port implements
DBE contract goals in the future, then it should review 49 CFR Part 26.53 and The Final Rule to
ensure that its good faith efforts procedures are consistent with federal regulations.
The Port requires contractors to submit good faith efforts documentation in the event that their
efforts to solicit sufficient DBE participation to meet a DBE contract goal are unsuccessful. The
Port would consider the following efforts in determining whether a bidder's good faith efforts
were acceptable:
Bidder attended any Portscheduled presolicitation or prebid meetings;
Bidder advertised subcontracting opportunities in general circulation, trade association, or
minorityfocused media;
Bidder sent written solicitations to a reasonable number of DBEs in sufficient time to allow
the DBEs to participate effectively;
Bidder followed up initial solicitations by contacting DBEs to determine whether the DBEs
were interested;
Bidder identified portions of work to be performed by DBEs in order to increase the
possibility of meeting the DBE contract goal;
Bidder provided interested DBEs with adequate information about the plans, specifications,
and requirements of the contract;
Bidder negotiated in good faith with interested DBEs and did not reject DBEs as unqualified
without sound reasons based on a thorough investigation of their capabilities;
Bidder made efforts to assist interested DBEs in obtaining bonding, lines of credit, or
insurance; and
Bidder effectively used the services of available minority and women community
organizations; minority and women contractors' groups; local and federal minority
business assistance offices; and other organizations which provide assistance in the
recruitment and placement of socially and economicallydisadvantaged individuals.
During the study period, the Port did not award any contracts to bidders who submitted good
faith efforts in lieu of meeting DBE contract goals.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 8
Several individuals participating in indepth interviews and public meetings made comments
related to good faith efforts. Many MBE/WBEs indicated that, in many cases, prime contractors
do not make genuine efforts to use MBE/WBEs.
Several participants indicated that DBE contract goals used by other agencies produce an
incentive for prime contractors to use perfunctory good faith efforts processes to comply
with the goals rather than to seek meaningful DBE participation on projects.
Several MBE/WBEs indicated that prime contractors have listed their businesses on project
bidssometimes without their knowledgewith no intention of actually using them on
those projects.
The Port should review such concerns further when evaluating ways to improve its current
implementation of the Federal DBE Program. It should also review legal issues, including state
contracting laws and whether certain program options would meet USDOT regulations.
Counting DBE and MBE/WBE Participation 49 CFR Part 26.55
Section 26.55 of 49 CFR Part 26 describes how agencies should count DBE participation and
evaluate whether bidders have met DBE contract goals. Federal regulations also give specific
guidance for counting the participation of different types of DBE suppliers and trucking
companies. Section 26.11 discusses the Uniform Report of DBE Awards or Commitments and
Payments.
As discussed above, the Port should consider developing procedures and databases to
consistently track participation of MBE/WBEs and potential DBEs in FAA and locallyfunded
contracts. Such efforts will help the agency track the effectiveness of the race and gender
neutral measures that it uses to encourage DBE participation. If applicable, the Port should also
consider collecting information regarding any shortfalls in annual DBE participation, including
preparing utilization reports for all MBE/WBEs (not just those that are DBEcertified). The Port
should consider collecting and using the following information:
Databases that BBC developed as part of the study to track MBE/WBE utilization;
Contractor/consultant registration documents from businesses working with the Port as
prime contractors and subcontractors, which should include information about the
race/ethnicity and gender of their owners;
Prime contractor and subcontractor utilization on both FAA and locallyfunded contracts;
Reports on the participation of certified DBEs in FAAfunded contracts, as required under
the Federal DBE Program;
Subcontractor utilization data (for all tiers and suppliers) for all businesses regardless of
race/ethnicity, gender, or DBEcertification status;
Invoices for prime contractors and subcontractors;
Descriptions of the areas of contracts on which subcontractors worked; and
Subcontractors' contact information and committed dollar amounts from prime contractors
at the time of contract awards.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 9
The Port should consider maintaining the information described above for some minimum
amount of time (e.g., five years). The Port should also consider establishing a training process for
all staff that is responsible for managing and entering contract and vendor data. Training should
convey data entry rules and standards and ensure consistency in the data entry process.
DBE Certification 49 CFR Part 26 Subpart D
OMWBE is responsible for all DBE and MBE/WBE certification in the state of Washington.
OMWBE also maintains all of the certification records for the state of Washington. Businesses
interested in working with the Port that are seeking DBE certification must obtain it through
OMWBE. As the Port continues to work with DBEcertified businesses, the agency should
consider ensuring that OMWBE continues to certify all groups that the Federal DBE Program
presumes to be socially and economically disadvantaged in a manner that is consistent with
federal regulations.
Many businesses participating in indepth interviews and public meetings commented on the
DBE certification process. Although some business owners gave favorable comments about the
OMWBE certification process, several business owners were highly critical about the difficulties
and time requirements associated with certification. Some interviewees also said that OMWBE is
unfair in its treatment of WBEs seeking DBE certification.
It appears that many businesses and local agencies are confused about the multiple Small
Business Enterprise, MBE, WBE, and DBE programs that Washington agencies operate.
Representatives of some MBE/WBEs reported that their businesses were not DBEcertified
because they perceived the process to be difficult or that there would be little benefit from
certification.
Some business owners reported that they inquired about certification and were dissuaded
from pursuing it after learning about the time and effort required, or after learning about
the difficulties for WBEs to be certified when family members were also involved in the
business.
The Port might consider more effectively communicating information about the Federal DBE
Program, particularly information about the benefits of DBE certification. It may be effective for
the Port to coordinate with other agencies that operate similar programs and to verify that the
information that OMWBE provides is accurate and current. The Port should consider
encouraging OMWBE to examine its staffing, training, and information systems to improve its
implementation of the DBE certification process as well as other aspects of the Federal DBE
Program.
Although the Port appears to follow federal regulations concerning DBE certification, which
requires collecting and reviewing considerable information from program applicants, the agency
might research other ways to make the certification process easier for potential DBEs.
Monitoring Changes to the Federal DBE Program
Federal regulations related to the Federal DBE Program change periodically, and USDOT also
issues new guidance concerning implementation of the program. The Port should continue to
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 10
monitor such developments. Other transportation agencies' implementations of the Federal DBE
Program are under review in federal district courts (for details, see Appendix B). The Port
should continue to monitor court decisions in those and other relevant cases.
LocallyFunded Contracts
Certain improvements to the Port's implementation of the Federal DBE Program, especially
tracking MBE/WBE participation, might also be implemented on a race and genderneutral
basis for Port contracts that are entirely locally funded. The Port should review opportunities on
its locallyfunded contracts to further encourage participation of small businesses, including
many MBE/WBEs, as allowable under state law. The Port should also consider that information
as it considers refinements to the SCS and SBE Programs.
BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 10, PAGE 11
APPENDIX A.
Definitions of Terms
Appendix A provides explanations and definitions useful to understanding the Port of Seattle
disparity study report. The following definitions are only relevant in the context of this report.
Anecdotal information. Anecdotal information includes personal qualitative accounts and
perceptions of incidentsincluding any incidents of discriminationtold from individual
interviewees' or participants' perspectives.
Availability analysis. The availability analysis examines the number of minority and women
owned business enterprises that are ready, willing, and able to perform construction and
constructionrelated professional services work for the Port of Seattle.
Business. A business is a forprofit company including all of its establishments (synonymous
with "firm").
Business listing. A business listing is a record in the Dun & Bradstreet database (or other
database) of business information. A Dun & Bradstreet record is considered a "listing" until the
study team determines the listing actually represents a business establishment with a working
phone number.
Business establishment. A business establishment is a place of business with an address and
working phone number. One business can have many business establishments.
Certified minorityowned business enterprise (certified MBE). A certified MBE is a
business that is certified by the Washington State Office of Minority and Women's Business
Enterprises as being a business with at least 51 percent ownership and control by minorities.
Minority groups are defined according to federal regulations as outlined in 49 Code of Federal
Regulations (CFR) Part 26, Section 26.5.
Certified womenowned business enterprise (certified WBE). A certified WBE is a
business that is certified by the Washington State Office of Minority and Women's Business
Enterprises as being a business with at least 51 percent ownership and control by women.
Contract. A contract is a legally binding relationship between the seller of goods or services
and a buyer.
Contract element. A contract element is either a prime contract or subcontract that the study
team included in its analyses.
Contractor. A contractor is a business performing on one or more construction contracts.
Control. Control means exercising management and executive authority for a company, per
federal regulations, including 49 CFR Part 26, Section 26.71.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX A, PAGE 1
Disadvantaged Business Enterprise (DBE). A DBE is a small business that is owned and
controlled by one or more individuals who are both socially and economically disadvantaged
according to the guidelines in the Federal DBE Program (49 CFR Part 26) and that is certified as
such through the Washington State Office of Minority and Women's Business Enterprises. The
following groups are presumed to be socially and economically disadvantaged according to the
Federal DBE Program:
AsianPacific Americans;
Black Americans;
Hispanic Americans;
Native Americans;
Subcontinent Asian Americans;
Women of any race or ethnicity; and
Any additional groups whose members are designated as socially and economically
disadvantaged by the Small Business Administration.
Examination of economic disadvantage also includes investigating the business' gross revenue
and the business owner's personal net worth (maximum of $1.32 million excluding equity in a
home and in the business). Some minority and womenowned businesses do not qualify as
DBEs because of gross revenue or net worth requirements. A business owned by a nonminority
male can be certified as a DBE if the business meets the requirements in 49 CFR Part 26.
Disparity. A disparity is a difference or gap between an actual outcome and a reference point.
For example, a difference between an outcome for one racial/ethnic group and an outcome for
nonHispanic whites may constitute a disparity.
Disparity analysis. A disparity analysis compares actual outcomes with what might be
expected based on other data. Analysis of whether there is a "disparity" between the utilization
and availability of minority and womenowned business enterprisess is one tool in examining
whether there is evidence consistent with discrimination against such businesses.
Disparity index. A disparity index is computed by dividing an actual outcome by what might
be expected based on other data and then multiplying the result by 100. A disparity index of 100
indicates "parity." Smaller disparity indices indicate larger disparities.
Dun & Bradstreet (D&B). D&B is the leading global provider of lists of business
establishments and other business information for specific industries and specific geographical
areas (for details, see www.dnb.com).
Employer firms. Employer firms are firms with paid employees other than the business owner
and family members.
Enterprise. An enterprise is an economic unit that could be a forprofit business or business
establishment; notforprofit organization; or public sector organization.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX A, PAGE 2
Establishment. See "business establishment."
Federal Aviation Administration (FAA). The FAA is an agency of the United States
Department of Transportation that serves as the national aviation authority of the United States.
The FAA has authority to regulate and oversee all aspects of civil aviation in the United States.
Federal DBE Program. The Federal DBE Program was established by the United States
Department of Transportation after enactment of the Transportation Equity Act for the 21st
Century (TEA21) as amended in 1998. Regulations for the Federal DBE Program are set forth in
49 CFR Part 26.
Firm. See "business."
Federallyfunded contract. A federallyfunded contract is any contract or project funded in
whole or in part with United States Department of Transportation financial assistance, including
loans. As used in this study, it is synonymous with "USDOTfunded contract" or "FAAfunded
contract."
Industry. An industry is a broad classification for businesses providing related goods or
services.
Locallyfunded contract. A locallyfunded contract is any contract or project that is wholly
funded with local, nonfederal funds. Those contracts do not include United States Department
of Transportation funds.
Majorityowned business. A majorityowned business is a forprofit business that is not
owned and controlled by minorities or women (see definition of "minorities" below).
MBE. See "minorityowned business enterprise."
Minorities. Minorities are individuals who belong to one of the racial/ethnic groups identified
in the federal regulations in 49 CFR Part 26 as presumed to be socially and economically
disadvantaged:
Black Americans, which include persons having origins in any of the black racial groups of
Africa;
Hispanic Americans, which include persons of Mexican, Puerto Rican, Cuban, Dominican,
Central or South American, or other Spanish or Portuguese culture or origin, regardless of
race;
Native Americans, which include persons who are American Indians, Eskimos, Aleuts, or
Native Hawaiians;
AsianPacific Americans, which include persons whose origins are from Japan, China,
Taiwan, Korea, Burma (Myanmar), Vietnam, Laos, Cambodia (Kampuchea), Thailand,
Malaysia, Indonesia, the Philippines, Brunei, Samoa, Guam, Hong Kong, and other countries
and territories in the Pacific; and
Subcontinent Asian Americans, which include persons having origins in India, Pakistan,
Bangladesh, Bhutan, the Maldives Islands, Nepal, or Sri Lanka.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX A, PAGE 3
Minorityowned business enterprise (MBE). An MBE is a business with at least 51 percent
ownership and control by minorities. Minority groups are defined according to federal
regulations, as outlined in 49 CFR Part 26, Section 26.5. For purposes of this study, a business
need not be certified by the Washington State Office of Minority and Women's Business
Enterprises to be counted as an MBE. Businesses owned by minority women are also counted as
MBEs in this study.
North American Industry Classification System (NAICS) codes. NAICS codes identify the
primary lines of business of a business enterprise. For details, see http://www.census.gov/
epcd/www/naics.html.
NonDBEs. NonDBEs are businesses that are not certified as DBEs, regardless of the
race/ethnicity or gender of the owner.
Nonresponse bias. Nonresponse bias occurs when the observed responses to a survey
question differ in systematic ways from what would have been obtained if all individuals in a
population, including nonrespondents, had answered the question.
Owned. Owned indicates at least 51 percent ownership of a company. For example, a
"minorityowned" business is at least 51 percent owned by one or more minorities.
Port of Seattle (the Port). The Port owns and operates the SeattleTacoma International
Airport. The Port also operates four public marinas and partners with other local agencies to
build road and rail infrastructure throughout the Seattle Metropolitan Area.
Potential DBE. A potential DBE is a minority or womenowned business enterprise that is
DBEcertified or appears that it could be DBEcertified (regardless of actual DBE certification)
based on revenue requirements specified as part of the Federal DBE Program.
Prime consultant. A prime consultant is a professional services firm that performed a prime
contract for an end user, such as the Port.
Prime contract. A prime contract is a contract between a prime contractor or a prime
consultant and an end user, such as the Port.
Prime contractor. A prime contractor is a construction firm that performed a prime contract
for an end user, such as the Port.
Project. A project refers to a construction or professional services endeavor that the Port bid
out during the study period. A project could include one or multiple prime contracts and
corresponding subcontracts.
Raceand genderconscious measures. Raceand genderconscious measures are
contracting measures that are specifically designed to increase the participation of DBEs and
MBE/WBEs. They apply to businesses owned by certain racial/ethnic groups but not others or
to businesses owned by women but not men. A DBE contract goal is one example of a race and
genderconscious measure. Note that the term is more accurately "race, ethnicity, and gender
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX A, PAGE 4
conscious measures." However, for ease of communication, the study team uses the term "race
and genderconscious measures."
Race and genderneutral measures. Race and genderneutral measures are measures
that are designed to remove potential barriers for all businesses attempting to do work with the
agency or measures specifically designed to increase the participation of small or emerging
businesses, regardless of the race/ethnicity or gender of ownership. Race and genderneutral
measures may include assistance in overcoming bonding and financing obstacles; simplifying
bidding procedures; providing technical assistance; establishing programs to assist startup
firms; and other methods open to all businesses regardless of race or gender of ownership. Note
that the term is more accurately "race, ethnicity, and genderneutral measures." However, for
ease of communication, the study team uses the term to "race and genderneutral measures."
Relevant geographic market area. The relevant geographic market area is the geographic
area in which the businesses to which the Port awards most of its contracting dollars are
located. The relevant geographic market area is also referred to as the "local marketplace." Case
law related to MBE/WBE programs requires disparity analyses to focus on the "relevant
geographic market area." The relevant geographic market area for the Port includes King, Pierce,
and Snohomish counties.
Small business enterprise (SBE). A SBE is a business of small size (based on number of
employees) or with small revenue relative to other businesses in the industry. SBE does not
necessarily mean that the business is certified as a small business enterprise.
Small Business Administration (SBA). The SBA refers to the United States Small Business
Administration, which is an independent agency of the United States government.
Statistically significant difference. A statistically significant difference refers to a
quantitative difference for which there is a 0.95 probability that chance can be correctly rejected
as a reasonable explanation for the difference (meaning that there is a 0.05 probability that
chance in the sampling process could correctly account for the difference).
Subconsultant. A subconsultant is a professional services firm that performed services for a
prime consultant as part of a larger contract.
Subcontract. A subcontract is a contract between a prime contractor or prime consultant and
another business selling goods or services to the prime contractor or prime consultant as part of
a larger contract.
Subcontractor. A subcontractor is a construction firm that performed services for a prime
contractor as part of a larger contract.
United States Departments of Transportation (USDOT). USDOT refers to the United
States Department of Transportation, which includes the FAA.
Utilization. Utilization refers to the percentage of total contracting dollars of a particular work
type that went to a specific group of businesses (e.g., DBEs).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX A, PAGE 5
Washington State Office of Minority and Women's Business Enterprises (OMWBE).
OMWBE is the State of Washington's Unified Certified Authority for DBE certification. OMWBE is
responsible for certifying eligible businesses and maintains a statewide electronic directory of
certified DBEs in Washington. OMWBE also has statewide responsibility for certifying
businesses as MBEs and WBEs. For details, see http://www.omwbe.wa.gov.
WBE. See "womenowned business."
Womenowned business enterprise (WBE). A WBE is a business with at least 51 percent
ownership and control by nonminority women. For this study, a business need not be certified
by OMWBE to be considered a WBE. Businesses owned and controlled by minority women are
counted as MBEs in this study.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX A, PAGE 6
HOLLAND & KNIGHT LLP
APPENDIX B
PRIVILEGED AND CONFIDENTIAL
ATTORNEYCLIENT PRIVILEGE
ATTORNEY WORK PRODUCT
NOT FOR PUBLIC DISSEMINATION
CONFIDENTIAL
FINAL REPORT
PORT OF SEATTLE, WASHINGTON
REPORT ON LEGAL FRAMEWORK
AND ANALYSIS
Keith M. Wiener
Partner
Holland & Knight LLP
One Atlantic Center
1201 West Peachtree Street, N.E.
Suite 2000
Atlanta, Georgia 303093473
(404) 8178515
Table of Contents
TABLE OF CONTENTS ........................................................................................................................................................................................ I
APPENDIX B REPORT ON LEGAL ANALYSIS ........................................................................................................................................... 1
A. Introduction ...................................................................................................................................................................s
v
s City of Richmond v. J.A. Croson Co., vzz vx{ s{z{ v
t Adarand Constructors, Inc. v. Pena ("Adarand I"), wsw trr s{{w w
x
s x
t st
u tt
v v{xrvrr tu
w tu
tz
s Associated General Contractors of America, San Diego Chapter, Inc. v. California
Department of Transportation ysu u sszy { sx trsu tz
t Associated General Contractors of America, San Diego Chapter, Inc. v. California
Department of Transportation, et al. r{sxtt
tr trss appeal dismissed based on standing, on other
grounds Ninth Circuit held Caltrans' DBE Program constitutional, Associated
General Contractors of America, San Diego Chapter, Inc. v. California Department of
Transportation, et al., 713 F.3d 1187 (9th Cir. April 16, 2013) 35
3. Western States Paving Co. v. Washington State DOT, 407 F.3d 983 (9th Cir. 2005),
cert. denied, 546 U.S. 1170 (2006) .................................................................................................................. 37
4. Western States Paving Co. v. Washington DOT, US DOT & FHWA, 2006 WL 1734163
(W.D. Wash. June 23, 2006) (unpublished opinion) ............................................................................... 42
5. M.K. Weeden Construction v. State of Montana, Montana Department of
Transportation, et al., 2013 WL 4774517 (D. Mont.) (September 4, 2013) .................................. 43
6. Monterey Mechanical v. Wilson, 125 F.3d 702 (9th Cir. 1997) .................................................. vx
y Associated Gen. Contractors of California, Inc. v. Coalition for Econ. Equity ("AGCC")
{wr t svrs { s{{s ........................................................................ 47
8. Coral Construction Co. v. King County, 941 F.2d 910 (9th Cir. 1991) ................................................. 50
E. Recent Decisions Involving the Federal DBE Program and its Implementation in Other
Jurisdictions .................................................................................................................................................................. wv
s Northern Contracting, Inc. v. Illinois vyu u ysw y trry 54
2. Northern Contracting, Inc. v. Illinois, 2005 WL 2230195 (N.D. Ill. Sept. 8, 2005),
aff'd 473 F.3d 715 (7th Cir. 2007) .................................................. wx
u Northern Contracting, Inc. v. State of Illinois, Illinois DOT, and USDOT trrv
vttyrv u trrv xs
I
4. Sherbrooke Turf, Inc. v. Minnesota DOT, and Gross Seed Company v. Nebraska
Department of Road, 345 F.3d 964 (8th Cir. 2003), cert. denied, 541 U.S. 1041
(2004) .................................................. xv
w Sherbrooke Turf, Inc. v. Minnesota DOT trrs swrtzvs rr srtx
trrs aff'd uvw u {xv z trru xy
x Gross Seed Co. v. Nebraska Department of Roads vrr uryu
x trrt aff'd uvw u {xv z trru .................. 68
7. Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000) cert. granted
then dismissed as improvidently granted sub nom. Adarand Constructors, Inc. v.
Mineta, 532 U.S. 941, 534 U.S. 103 (2001) .................................................................................................. 69
8. Geod Corporation v. New Jersey Transit Corporation, et. al., 746 F. Supp.2d 642,
2010 WL 4193051 (D. N. J. October 19, 2010) .......................................................................................... 70
9. Geod Corporation v. New Jersey Transit Corporation, et. seq. 678 F.Supp.2d 276,
2009 WL 2595607 (D.N.J. August 20, 2009) .............................................................................................. 76
10. South Florida Chapter of the Associated General Contractors v. Broward County,
Florida, 544 F. Supp.2d 1336 (S.D. Fla. 2008) ........................................................................................... 79
11. Klaver Construction, Inc. v. Kansas DOT, 211 F. Supp.2d 1296 (D. Kan. 2002) ............................. 82
F. Recent Decisions Involving State or Local Government MBE/WBE Programs in Other
Jurisdictions .................................................................................................................................................................. zu
Recent Decisions in Federal Circuit Courts of Appeal ............................. 83
1. H. B. Rowe Co., Inc. v. W. Lyndo Tippett, NCDOT, et al., 615 F.3d 233 (4th Cir. 2010) ................ 83
2. JanaRock Construction, Inc. v. New York State Dept. of Economic Development, 438
F.3d 195 (2d Cir. 2006) ....................................................................................................................................... 94
3. Rapid Test Prods., Inc. v. Durham Sch. Servs., Inc., 460 F.3d 859 (7th Cir. 2006) .......................... 95
4. Virdi v. DeKalb County School District, 135 Fed. Appx. 262, 2005 WL 138942 (11th
Cir. 2005) (unpublished opinion) ................................................................................................................... 96
5. Concrete Works of Colorado, Inc. v. City and County of Denver, 321 F.3d 950 (10th
Cir. 2003), cert. denied, 540 U.S. 1027, 124 S. Ct. 556 (2003) (Scalia, Justice with
whom the Chief Justice Rehnquist, joined, dissenting from the denial of certiorari) ............... 98
6. Kornhass Construction, Inc. v. State of Oklahoma, Department of Central Services,
140 F.Supp.2d 1232 (W.D. OK. 2001) ......................................................................................................... 110
7. In re City of Memphis, 293 F.3d 345 (6th Cir. 2002) .............................................................................. 115
8. Builders Ass'n of Greater Chicago v. County of Cook, Chicago, 256 F.3d 642 (7th Cir.
2001) .................................................. ssw
{ Associated Gen. Contractors v. Drabik tsv u yur x trrr affirming
t{z{vu {{z zsttvs s{{z ssy
sr W.H. Scott Constr. Co. v. City of Jackson, s{{ u trx w s{{{ ssz
ss Eng'g Contractors Ass'n of S. Florida v. Metro. Dade County stt u z{w ss
s{{y ............................................................................................................... 118
Recent District Court Decisions ................................................................................................................................ 130
12. H.B. Rowe Corp., Inc. v. W. Lyndo Tippett, North Carolina DOT, et al., 589 F. Supp.2d
587 (E.D.N.C. 2008), affirmed in part, reversed in part, and remanded, 615 F.3d 233
(4th Cir. 2010) ...................................................................................................................................................... 130
13. Thomas v. City of Saint Paul, 526 F. Supp.2d 959 (D. Minn 2007), affirmed, 321 Fed.
Appx. 541, 2009 WL 777932 (8th Cir. March 26, 2009) (unpublished opinion),
cert. denied, 130 S.Ct. 408 (2009). ................................................................................................................ 135
II
14. Thompson Building Wrecking Co. v. Augusta, Georgia, No. 1:07CV019, 2007 WL
926153 (S.D. Ga. Mar. 14, 2007)(Slip. Op.) ............................................................................................... 137
15. Hershell Gill Consulting Engineers, Inc. v. MiamiDade County, 333 F. Supp.2d 1305
(S.D. Fla. 2004) ..................................................................................................................................................... 139
16. Florida A.G.C. Council, Inc. v. State of Florida, 303 F. Supp.2d 1307 (N.D. Fla. 2004) ............... 143
17. The Builders Ass'n of Greater Chicago v. The City of Chicago, 298 F. Supp.2d 725
(N.D. Ill. 2003) ....................................................................................................................................................... 145
18. Associated Utility Contractors of Maryland, Inc. v. Mayor and City Council of
Baltimore, 218 F. Supp.2d 749 (D. Md. 2002)...............................................................................svx
s{ Associated Utility Contractors of Maryland, Inc. v. The Mayor and City Council of
Baltimore zu t xsu trrr svy
tr Webster v. Fulton County ws t suwv s{{{ a'ffd per curiam tsz
u stxy ss trrr svy
ts Associated Gen. Contractors v. Drabik wr t yvs s{{{ swr
tt Phillips & Jordan, Inc. v. Watts su t surz s{{z sws
swt
s Rothe Development Corp. v. U.S. Department of Defense wvw u srtu
trrz ............................................................................................................ 152
2. DynaLantic Corp. v. United States Dept. of Defense, et al., 885 F.Supp.2d 237, 2012
WL 3356813 (D.D.C. Aug. 15, 2012), appeal pending, United States Court of
Appeals for the District of Columbia, Docket Number 125330 ..................................................... sxs
u DynaLantic Corp. v. United States Dept. of Defense wru t txt
trry ............................................................................................................... 169
4. "Federal Procurement After Adarand" (USCCR Report September, 2005) ................................ 171
III
APPENDIX B.
Report on Legal Analysis
A. Introduction
In this section Holland & Knight LLP analyzes recent cases regarding the Transportation Equity
Act for the 21st Century (TEA21) as amended and reauthorized ("MAP21," "SAFETEA" and
"SAFETEALU"),1 and the United States Department of Transportation ("USDOT" or "DOT")
regulations promulgated to implement TEA21 known as the Federal Disadvantaged Business
Enterprise ("DBE") Program,2 and local minority and womenowned business enterprise
("MBE/WBE") programs to provide a summary of the legal framework for the disparity study as
applicable to Port of Seattle, Washington.
This section begins with a review of the landmark United States Supreme Court decision in City
of Richmond v. J.A. Croson.3 Croson sets forth the strict scrutiny constitutional analysis applicable
in the legal framework for conducting a disparity study. This section also notes the United States
Supreme Court decision in Adarand Constructors, Inc. v. Pena,4 ("Adarand I"), which applied the
strict scrutiny analysis set forth in Croson to federal programs that provide federal assistance to
a recipient of federal funds. The Supreme Court's decisions in Adarand I and Croson, and
subsequent cases and authorities provide the basis for the legal analysis in connection with Port
of Seattle, Washington's participation in the Federal DBE Program.
The legal framework then analyzes and reviews significant recent court decisions that have
followed, interpreted, and applied Croson and Adarand I to the present and that are applicable to
Port of Seattle, Washington's disparity study and the strict scrutiny analysis. In particular, this
analysis reviews the Ninth Circuit decisions in Associated General Contractors of America, San
Diego Chapter, Inc. v. California Department of Transportation ("Caltrans"), et al.5 and Western
States Paving Co. v. Washington State DOT6.
In Associated General Contractors of America, San Diego Chapter, Inc. v. California Department of
Transportation ("Caltrans"), et al., ("AGC, SDC v. Caltrans"), which is the most recent significant
decision, the Ninth Circuit upheld the validity of the state DOT's implementation of the Federal
DBE Program. In Western States Paving, the Ninth Circuit upheld the validity of the Federal DBE
Program, but held that mere compliance with the Federal DBE Program by state recipients of
1 Moving Ahead for Progress in the 21st Century Act ("MAP21"), Pub L. 112141, H.R. 4348, 1101(b), July 6, 2012, 126 Stat
405.; preceded by Pub L. 10959, Title I, 1101(b), August 10, 2005, 119 Stat. 1156; preceded by Pub L. 105178, Title I,
1101(b), June 9, 1998, 112 Stat. 107.
2 49 CFR Part 26 (Participation by Disadvantaged Business Enterprises in Department of Transportation Financial Assistance
Programs ("Federal DBE Program").
3 City of Richmond v. J.A. Croson, 488 U.S. 469 (1989).
4 Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995).
5 Associated General Contractors of America, San Diego Chapter, Inc. v. California Department of Transportation, et al., 713 F. 3d
1187 (9th Cir. April 16, 2013) (AGC, SDC v. Caltrans).
6 Western States Paving Co. v. Washington State DOT, 407 F.3d 983 (9th Cir. 2005), cert. denied, 546 U.S. 1170 (2006).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 1
federal funds, absent independent and sufficient statespecific evidence of discrimination in the
state's transportation contracting industry marketplace, did not satisfy the strict scrutiny
analysis.
In addition, the analysis reviews other recent federal cases that have considered the validity of
the Federal DBE Program and a state government agency's or recipient's implementation of the
DBE program, including Northern Contracting, Inc. v. Illinois DOT,7 Sherbrooke Turf, Inc. v. Minn
DOT and Gross Seed v. Nebraska Department of Roads,8 Adarand Construction, Inc. v. Slater9
("Adarand VII"), Geod Corporation v. New Jersey Transit Corporation10, and South Florida Chapter
of the A.G.C. v. Broward County, Florida.11
The analyses of AGC, SDC v. Caltrans, Western States Paving, and these other recent cases are
instructive to a recipient of federal funds and the disparity study because they are the most
recent and significant decisions by federal courts setting forth the legal framework applied to
the Federal DBE Program and its implementation by recipients of federal financial assistance
governed by 49 CFR Part 26.12 They also are applicable in terms of the preparation of their DBE
Program by recipients of federal funds submitted in compliance with the Federal DBE
regulations.
Following Western States Paving, it is noteworthy that the USDOT, in particular for agencies in
states in the Ninth Circuit Court of Appeals, recommended the use of disparity studies by
recipients of Federal financial assistance to examine whether or not there is evidence of
discrimination and its effects, and how remedies might be narrowly tailored in developing their
DBE Program to comply with the Federal DBE Program.13 The USDOT suggests consideration of
both statistical and anecdotal evidence. The USDOT instructs that recipients should ascertain
evidence for discrimination and its effects separately for each group presumed to be
disadvantaged in 49 CFR Part 26.14 The USDOT's Guidance provides that recipients should
consider evidence of discrimination and its effects.15 The USDOT's Guidance is recognized by the
federal regulations as "valid and binding, and constitutes the official position of the Department
of Transportation"16 for states in the Ninth Circuit.
7 473 F.3d 715 (7th Cir. 2007).
8 345 F.3d 964 (8th Cir. 2003), cert. denied, 541 U.S. 1041 (2004).
9 228 F.3d 1147 (10th Cir. 2000) ("Adarand VII").
10 766 F. Supp.2d 642, (D. N.J. 2010).
11 544 F. Supp.2d 1336 (S.D. Fla. 2008).
12 See AGC, SDC v. Caltrans, 713 F.3d 1187 (9th Cir. 2013); Northern Contracting, Inc. v. Illinois DOT, 473 F.3d 715 (7th Cir.
th
2007); Western States Paving, 407 F.3d 983 (9 Cir. 2005); Sherbrooke Turf, Inc. v. Minn. DOT, 345 F.3d 964 (8th Cir. 2003),
cert. denied, 541 U.S. 1041 (2004); Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000) ("Adarand VII").
13 Questions and Answers Concerning Response to Western States Paving Company v. Washington State Department of
Transportation (January 2006) [hereinafter USDOT Guidance], available at 71 Fed. Reg. 14,775 and
http://www.fhwa.dot.gov/civilrights/dbe_memo_a5.htm; see 49 CFR 26.9; see also 49 C.F.R. Section 26.45.
14 DOT Guidance, available at http://www.fhwa.dot.gov/civilrights/dbe_memo_a5.htm (January 2006)
15 Id.
16 Id., 49 C.F.R. 26.9.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 2
In Western States Paving, the United States intervened to defend the Federal DBE Program's
facial constitutionality, and, according to the Court, stated "that [the Federal DBE Program's]
race conscious measures can be constitutionally applied only in those states where the effects of
discrimination are present."17 Accordingly, the USDOT has advised federal aid recipients that
any use of raceconscious measures must be predicated on evidence that the recipient has
concerning discrimination or its effects within the local transportation contracting
marketplace.18
Most recently in the Ninth Circuit, the Ninth Circuit Court of Appeals in AGC, SDC v. Caltrans
(April 2013), and the United States District Court for the Eastern District of California in AGC,
SDC v. Caltrans (2011), which are fully discussed below, held that Caltrans' current
implementation of the Federal DBE Program is constitutional.19 The Ninth Circuit held that
Caltrans' DBE Program implementing the Federal DBE Program was constitutional and survived
strict scrutiny by: (1) having a strong basis in evidence of discrimination within the California
transportation contracting industry based in substantial part on the evidence from the Disparity
Study conducted for Caltrans; and (2) being "narrowly tailored" to benefit only those groups
that have actually suffered discrimination.
The District Court had held that the "Caltrans DBE Program is based on substantial statistical
and anecdotal evidence of discrimination in the California contracting industry," satisfied the
strict scrutiny standard, and is "clearly constitutional" and "narrowly tailored" under Western
States Paving and the Supreme Court cases.20
17 Western States Paving, 407 F.3d at 996; see also Br. for the United States, at 28 (April 19, 2004).
18 DOT Guidance, available at 71 Fed. Reg. 14,775 and http://www.fhwa.dot.gov/civilrights/dbe_memo_a5.htm (January
2006).
19 Associated General Contractors of America, San Diego Chapter, Inc. v. California DOT (Caltrans), 713 F. 3d 1187 (9th Cir. April
16, 2013); Associated General Contractor of America, San Diego Chapter, Inc. v. California DOT (Caltrans), U.S.D.C. E.D. Cal.,
Civil Action No.S:09cv01622, Slip Opinion (E.D. Cal. April 20, 2011), appeal dismissed based on standing, on other grounds
Ninth Circuit held Caltrans' DBE Program constitutional, Associated General Contractors of America, San Diego Chapter, Inc. v.
California DOT (Caltrans), et al., 713 F. 3d 1187 (9th Cir. April 16, 2013).
20 Id., Associated General Contractors of America, San Diego Chapter, Inc. v. California DOT (Caltrans), Slip Opinion (E.D. Cal.
April 20, 2011), Transcript of U.S. District Court, Eastern Division of California, at 4256.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 3
B. U.S. Supreme Court Cases
1. City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989)
In Croson, the U.S. Supreme Court struck down the City of Richmond's "setaside" program as
unconstitutional because it did not satisfy the strict scrutiny analysis applied to "racebased"
governmental programs. J.A. Croson Co. ("Croson") challenged the City of Richmond's minority
contracting preference plan, which required prime contractors to subcontract at least 30
percent of the dollar amount of contracts to one or more Minority Business Enterprises ("MBE").
In enacting the plan, the City cited past discrimination and anintent to increase minority
business participation in construction projects as motivating factors.
The Supreme Court held the City of Richmond's "setaside" action plan violated the Equal
Protection Clause of the Fourteenth Amendment. The Court applied the "strict scrutiny"
standard, generally applicable to any racebased classification, which requires a governmental
entity to have a "compelling governmental interest" in remedying past identified discrimination
and that any program adopted by a local or state government must be "narrowly tailored" to
achieve the goal of remedying the identified discrimination.
The Court determined that the plan neither served a "compelling governmental interest" nor
offered a "narrowly tailored" remedy to past discrimination. The Court found no "compelling
governmental interest" because the City had not provided "a strong basis in evidence for its
conclusion that [racebased] remedial action was necessary." The Court held the City presented
no direct evidence of any race discrimination on its part in awarding construction contracts or
any evidence that the City's prime contractors had discriminated against minorityowned
subcontractors. The Court also found there were only generalized allegations of societal and
industry discrimination coupled with positive legislative motives. The Court concluded that this
was insufficient evidence to demonstrate a compelling interest in awarding public contracts on
the basis of race.
Similarly, the Court held the City failed to demonstrate that the plan was "narrowly tailored" for
several reasons, including because there did not appear to have been any consideration of race
neutral means to increase minority business participation in city contracting, and because of the
over inclusiveness of certain minorities in the "preference" program (for example, Aleuts)
without any evidence they suffered discrimination in Richmond.
The Court further found "if the City could show that it had essentially become a 'passive
participant' in a system of racial exclusion practiced by elements of the local construction
industry, [i]t could take affirmative steps to dismantle such a system." The Court held that
"[w]here there is a significant statistical disparity between the number of qualified minority
contractors willing and able to perform a particular service and the number of such contractors
actually engaged by the locality or the locality's prime contractors, an inference of
discriminatory exclusion could arise." The Supreme Court noted that it did not intend its
decision to preclude a state or local government from "taking action to rectify the effects of
identified discrimination within its jurisdiction."
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 4
2. Adarand Constructors, Inc. v. Pena ("Adarand I"), 515 U.S. 200 (1995)
In Adarand I, the U.S. Supreme Court extended the holding in Croson and ruled that all federal
government programs that use racial or ethnic criteria as factors in procurement decisions must
pass a test of strict scrutiny in order to survive constitutional muster. The cases interpreting
Adarand I are the most recent and significant decisions by federal courts setting forth the legal
framework for disparity studies as well as the predicate to satisfy the constitutional strict
scrutiny standard of review, which applies to the implementation of the Federal DBE Program
by recipients of federal funds.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 5
C. The Legal Framework Applied to the Federal DBE Program and State
and Local Government MBE/WBE Programs
The following provides an analysis for the legal framework focusing on recent key cases
regarding the Federal DBE Program and state and local MBE/WBE programs, and their
implications for a disparity study. The recent decisions involving the Federal DBE Program are
instructive to Port of Seattle, Washington and the disparity study because they concern the strict
scrutiny analysis and legal framework in this area, and implementation of the DBE Program by
recipients of federal financial assistance (like Port of Seattle, Washington) based on 49 C.F.R.
Part 26.
1. The Federal DBE Program
After the Adarand decision, the U.S. Department of Justice in 1996 conducted a study of evidence
on the issue of discrimination in government construction procurement contracts, which
Congress relied upon as documenting a compelling governmental interest to have a federal
program to remedy the effects of current and past discrimination in the transportation
contracting industry for federallyfunded contracts.21 Subsequently, in 1998, Congress passed
the Transportation Equity Act for the 21st Century ("TEA21"), which authorized the United
States Department of Transportation to expend funds for federal highway programs for 1998
2003. Pub.L. 105178, Title I, 1101(b), 112 Stat. 107, 113 (1998). The USDOT promulgated
new regulations in 1999 contained at 49 C.F.R. Part 26 to establish the current Federal DBE
Program. The TEA21 was subsequently extended in 2003, 2005 and 2012. The reauthorization
of TEA21 in 2005 was for a five year period from 2005 to 2009. Pub.L. 10959, Title I,
1101(b), August 10, 2005, 119 Stat. 115357 ("SAFETEA"). In July 2012, Congress passed the
Moving Ahead for Progress in the 21st Century Act ("MAP21").22
The Federal DBE Program as amended changed certain requirements for federal aid recipients
and accordingly changed how recipients of federal funds implemented the Federal DBE Program
for federallyassisted contracts. The federal government determined that there is a compelling
governmental interest for race and genderbased programs at the national level, and that the
program is narrowly tailored because of the federal regulations, including the flexibility in
implementation provided to individual federal aid recipients by the regulations. State and local
governments are not required to implement race and genderbased measures where they are
not necessary to achieve DBE goals and those goals may be achieved by race and gender
neutral measures.23
The Federal DBE Program established responsibility for implementing the DBE Program to state
and local government recipients of federal funds. A recipient of federal financial assistance must
set an annual DBE goal specific to conditions in the relevant marketplace. Even though an
overall annual 10 percent aspirational goal applies at the federal level, it does not affect the
goals established by individual state or local governmental recipients. The Federal DBE Program
21 AppendixThe Compelling Interest for Affirmative Action in Federal Procurement, 61 Fed. Reg. 26,050, 26,05163 & nn. 1136
(May 23, 1996) (hereinafter "The Compelling Interest"); see Adarand VII, 228 F.3d at 11671176, citing The Compelling
Interest.
22 Pub L. 112141, H.R. 4348, 1101(b), July 6, 2012, 126 Stat 405.
23 49 C.F.R. 26.51.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 6
outlines certain steps a state or local government recipient can follow in establishing a goal, and
USDOT considers and must approve the goal and the recipient's DBE program. The
implementation of the Federal DBE Program is substantially in the hands of the state or local
government recipient and is set forth in detail in the federal regulations, including 49 C.F.R.
26.45.
Provided in 49 C.F.R. 26.45 are instructions as to how recipients of federal funds should set the
overall goals for their DBE programs. In summary, the recipient establishes a base figure for
relative availability of DBEs.24 This is accomplished by determining the relative number of
ready, willing, and able DBEs in the recipient's market.25 Second, the recipient must determine
an appropriate adjustment, if any, to the base figure to arrive at the overall goal.26 There are
many types of evidence considered when determining if an adjustment is appropriate, according
to 49 C.F.R. 26.45(d). These include, among other types, the current capacity of DBEs to
perform work on the recipient's contracts as measured by the volume of work DBEs have
performed in recent years. If available, recipients consider evidence from related fields that
affect the opportunities for DBEs to form, grow, and compete, such as statistical disparities
between the ability of DBEs to obtain financing, bonding, and insurance, as well as data on
employment, education, and training.27 This process, based on the federal regulations, aims to
establish a goal that reflects a determination of the level of DBE participation one would expect
absent the effects of discrimination.28
Further, the Federal DBE Program requires state and local government recipients of federal
funds to assess how much of the DBE goal can be met through race and genderneutral efforts
and what percentage, if any, should be met through race and genderbased efforts. 29
A state or local government recipient is responsible for seriously considering and determining
race and genderneutral measures that can be implemented.30 A recipient of federal funds must
establish a contract clause requiring prime contractors to promptly pay subcontractors in the
Federal DBE Program (42 C.F.R. 26.29). The Federal DBE Program also established certain
recordkeeping requirements, including maintaining a bidders list containing data on
contractors and subcontractors seeking federallyassisted contracts from the agency (42 C.F.R.
26.11). There are multiple administrative requirements that recipients must comply with in
accordance with the regulations.31
Federal aid recipients are to certify DBEs according to their race/gender, size, net worth and
other factors related to defining an economically and socially disadvantaged business as
outlined in 49 C.F.R. 26.6126.73.
24 49 C.F.R. 26.45(a), (b), (c).
25 Id.
26 Id. at 26.45(d).
27 Id.
28 49 C.F.R. 26.45(b)(d).
29 49 C.F.R. 26.51.
30 49 C.F.R. 26.51(b).
31 49 C.F.R. 26.2126.37.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 7
MAP21 (July 2012).
In the 2012 Moving Ahead for Progress in the 21st Century Act (MAP21), Congress provides
"Findings" that "discrimination and related barriers" "merit the continuation of the" Federal
DBE Program.32 In MAP21, Congress specifically finds as follows:
"(A) while significant progress has occurred due to the establishment of the
disadvantaged business enterprise program, discrimination and related barriers
continue to pose significant obstacles for minority and womenowned businesses
seeking to do business in federallyassisted surface transportation markets across
the United States;
(B) the continuing barriers described in subparagraph (A) merit the continuation
of the disadvantaged business enterprise program;
(C) Congress has received and reviewed testimony and documentation of race
and gender discrimination from numerous sources, including congressional
hearings and roundtables, scientific reports, reports issued by public and private
agencies, news stories, reports of discrimination by organizations and individuals,
and discrimination lawsuits, which show that race and genderneutral efforts
alone are insufficient to address the problem;
(D) the testimony and documentation described in subparagraph (C) demonstrate
that discrimination across the United States poses a barrier to full and fair
participation in surface transportationrelated businesses of women business
owners and minority business owners and has impacted firm development and
many aspects of surface transportationrelated business in the public and private
markets; and
(E) the testimony and documentation described in subparagraph (C) provide a
strong basis that there is a compelling need for the continuation of the
disadvantaged business enterprise program to address race and gender
discrimination in surface transportationrelated business."33
Thus, Congress in MAP21 determined based on testimony and documentation of race
and gender discrimination that there is "a compelling need for the continuation of the"
Federal DBE Program.34
U.S. DOT Final Rule, 76 Fed. Reg. 5083 (January 28, 2011).
The United States Department of Transportation promulgated a new Final Rule on January 28,
2011, effective February 28, 2011, 76 Fed. Reg. 5083 (January 28, 2011) ("Final Rule")
amending the Federal DBE Program at 49 C.F.R. Part 26. According to the United States DOT, the
Rule increases accountability for recipients with respect to meeting overall goals, modifies and
32 Pub L. 112141, H.R. 4348, 1101(b), July 6, 2012, 126 Stat 405.
33 Pub L. 112141, H.R. 4348, 1101(b), July 6, 2012, 126 Stat 405.
34 Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 8
updates certification requirements, adjusts the personal net worth threshold for inflation to
$1.32 million dollars, provides for expedited interstate certification, adds provisions to foster
small business participation, provides for additional postaward oversight and monitoring, and
addresses other matters.35
In particular, the Final Rule provides that a recipient's DBE Program must include a monitoring
and enforcement mechanism to ensure that work committed to DBEs at contract award or
subsequently is actually performed by the DBEs to which the work was committed and that this
mechanism must include a written certification that the recipient has reviewed contracting
records and monitored work sites for this purpose.36
In addition, the Final Rule adds a Section 26.39 to Subpart B to provide for fostering small
business participation.37 The recipient's DBE program must include an element to structure
contracting requirements to facilitate competition by small business concerns, which must be
submitted to the appropriate DOT operating administration for approval by February 28,
2012.38 The new Final Rule provides a list of "strategies" that may be included as part of the
small business program, including establishing a raceneutral small business setaside for prime
contracts under a stated amount; requiring bidders on prime contracts to specify elements or
specific subcontracts that are of a size that small businesses, including DBEs, can reasonably
perform; requiring the prime contractor to provide subcontracting opportunities of a size that
small businesses, including DBEs, can reasonably perform; and to meet the portion of the
recipient's overall goal it projects to meet through raceneutral measures, ensuring that a
reasonable number of prime contracts are of a size that small businesses, including DBEs, can
reasonably perform and other strategies.39 The new Final Rule provides that actively
implementing program elements to foster small business participation is a requirement of good
faith implementation of the recipient's DBE program.40
The Final Rule also provides that recipients must take certain specific actions if the awards and
commitments shown on its Uniform Report of Awards or Commitments and Payments, at the
end of any fiscal year, are less than the overall goal applicable to that fiscal year, in order to be
regarded by the DOT as implementing its DBE program in good faith.41 The Final Rule sets out
what action the recipient must take in order to be regarded as implementing its DBE program in
good faith, including analyzing the reasons for the difference between the overall goal and its
awards and commitments, establishing specific steps and milestones to correct the problems
identified, and submitting at the end of the fiscal year a timely analysis and corrective actions to
the appropriate operating administration for approval, and additional actions.42 The Final Rule
provides a list of acts or omissions that DOT will regard the recipient as being in noncompliance
35 76 F.R. 50835101.
36 See 49 C.F.R. 26.37, 76 F.R. at 5097.
37 76 F.R. at 5097, January 28, 2011.
38 Id.
39 Id. at 5097, amending 49 C.F.R. 26.39(b)(1)(5).
40 Id. at 5097, amending 49 C.F.R. 26.39(c).
41 76 F.R. at 5098, amending 49 C.F.R. 26.47(c).
42 Id., amending 49 C.F.R. 26.47(c)(1)(5).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 9
for failing to implement its DBE program in good faith, including not submitting its analysis and
corrective actions, disapproval of its analysis or corrective actions, or if it does not fully
implement the corrective actions.43
The Department states in the Final Rule with regard to disparity studies and in calculating goals,
that it agrees "it is reasonable, in calculating goals and in doing disparity studies, to consider
potential DBEs (e.g., firms apparently owned and controlled by minorities or women that have
not been certified under the DBE program) as well as certified DBEs. This is consistent with
good practice in the field as well as with DOT guidance."44
The United States DOT in the Final Rule states that there is a continuing compelling need for the
DBE program.45 The DOT concludes that, as court decisions have noted, the DOT's DBE
regulations and the statutes authorizing them, "are supported by a compelling need to address
discrimination and its effects."46 The DOT says that the "basis for the program has been
established by Congress and applies on a nationwide basis", notes that both the House and
Senate Federal Aviation Administration ("FAA") Reauthorization Bills contained findings
reaffirming the compelling need for the program, and references additional information
presented to the House of Representatives in a March 26, 2009 hearing before the
Transportation and Infrastructure Committee, and a Department of Justice document entitled
"The Compelling Interest for Race and GenderConscious Federal Contracting Programs: A
Decade Later An Update to the May 23, 1996 Review of Barriers for Minority and Women
Owned Businesses."47 This information, the DOT states, "confirms the continuing compelling
need for race and genderconscious programs such as the DOT DBE program."48
Notice of Proposed Rulemaking (NPRM) for the Disadvantaged Business Enterprise:
Program Implementation Modifications for 49 CFR Part 26 (September 6, 2012)
On September 6, 2012, the Department of Transportation published a Notice of Proposed
Rulemaking (NPRM) entitled, "Disadvantaged Business Enterprise: Program Implementation
Modifications" in the Federal Register at 77 Fed. Reg. 54952.49 On October 25, 2012, the USDOT
issued an extension of time for the Comment Period to comment on the NPRM, by extending the
Comment Period until December 26, 2012.50 On September 18, 2013, the USDOT issued a Notice
of Reopening Comment Period and a Public Listening Session, which provides another extension
of time for the Comment Period by extending the Comment Period until October 30, 2013.51
43 Id., amending 49 C.F.R. 26.47(c)(5).
44 76 F.R. at 5092.
45 76 F.R. at 5095.
46 76 F.R. at 5095.
47 Id.
48 Id.
49 77 F.R. 5495255024 (September 6, 2012).
50 77 F.R. 65164 (October 25, 2012).
51 78 F.R. 57336 (September 18, 2013). At the time of this report, the public listening session was cancelled on October 9,
2013, subject to rescheduling, and the comment period may be extended based on when the U.S. DOT reschedules the
listening session.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 10
This Notice of Proposed Rulemaking proposes three categories of changes that the Department
indicates will improve implementation of the DOT's Federal DBE Program. First, the NPRM
proposes revisions to personal net worth, application, and reporting forms. Second, the NPRM
proposes modifications to certificationrelated provisions of the rule. Third, the NPRM would
modify several other provisions of the rule, including concerning such subjects as good faith
efforts, transit vehicle manufacturers and counting of trucking companies. 52
The USDOT notes the DBE Program was recently reauthorized in the Moving Ahead for Progress
in the 21st Century Act ("MAP21"), Public Law 112141 (enacted July 6, 2012), and that the
Department believes this reauthorization is intended to maintain the status quo of the DBE
Program and does not include any significant substantive changes to the Program.53
The Notice of Proposed Rulemaking proposes changes to the Personal Net Worth Form and
related requirements of 49 CFR 26.67; certification provisions at Section 26.65; what rules
govern determinations of ownership at Section 26.69; what rules govern determinations
concerning control at Section 26.71; what are other rules affecting certification at Section 26.73;
what procedures do recipients follow in making certification decisions at Section 26.83; what
rules govern recipients' denials of initial requests for certification at Section 26.86; what
procedures does a recipient use to remove a DBE's eligibility at Section 26.87; summary
suspension of certification at Section 26.88; and what is the process for certification appeals to
the USDOT at Section 26.89.54
In addition, other provisions that are proposed to be amended include: what are the objectives
of this Part at Section 26.1; specific definitions at Section 26.5 adding eight new definitions for
the following words or phrases: "assets;" "business, business concern, or business enterprise;"
"contingent liability;" "days;" "immediate family member;" "liabilities;" "nondisadvantaged
individual;" "principal place of business;" and "transit vehicle manufacturer (TVM)."55
Also, additional provisions proposed to be amended include: what records do recipients keep
and report at Section 26.11; who must have a DBE Program at Section 26.21; how are overall
goals established for transit vehicle manufacturers at Section 26.49; what means do recipients
use to meet overall goals at Section 26.51; what are the rules governing information,
confidentiality, cooperation, and intimidation or retaliation at Section 26.109.56
The NPRM proposes adding language to Appendix A Good Faith Efforts, including
recommending that recipients scrutinize the documented good faith efforts by contractors, and
at a minimum, review the performance of other bidders in meeting the contract goal; propose
mirroring language added in Section 26.53 revisions that recipients require contractors to
submit all subcontractor quotes in order to review whether DBE prices were substantially
higher; require recipients to contact the DBEs listed on a contractor's solicitation to inquire as to
52 77 F.R. 54952.
53 Id. at 54952.
54 Id. at 5495254960.
55 Id. at 54960.
56 Id. at 5496054965.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 11
whether they were, in fact, contacted by the prime; and language stating that pro forma mailings
to DBEs requesting bids are not alone sufficient to satisfy good faith efforts under the rule.57
The NPRM proposed various modifications of the DBE Program, including four proposed
modifications to existing and/or new information collections, including modifications to the
Uniform Report of DBE Commitment/Awards and Payments Form found in Appendix B of 49
CFR Part 26.58
As part of the Rulemaking the Department intends to reinstate the information collection
entitled, "Uniform Report of DBE Commitment/Rewards and Payments," consistent with the
changes proposed in the NPRM.59 This information collection requires that DOT Form 4630 be
submitted by each recipient and is used to enable DOT to conduct program oversight and
recipients' DBE Programs.60 In this NPRM, the Department proposes to modify certain aspects of
this information collection in response to issues raised by stakeholders, including: (1) Creating
separate forms for routine DBE reporting and for transit vehicle manufacturers and mega
projects; (2) amending and clarifying the report's instructions to better explain how to fill out
the form; and (3) changing the forms to better capture the desired DBE data on a more
continuous basis.61
It should be noted that because this is a Notice of Proposed Rulemaking, which the Comment
Period has been extended to October 30, 2013, at the time of this report it is not known whether
any or all of these proposed rules actually will be promulgated as a Final Rule, which most likely
would occur in 2014. It also is possible, based on the comments received by the USDOT, that
there will be changes to the proposed amended language to these rules when they are published
in the Final Rule.
2. Strict Scrutiny Analysis
A race and ethnicitybased program implemented by a state or local government is subject to
the strict scrutiny constitutional analysis.62 Implementation of the Federal DBE Program by a
recipient of federal funds also is subject to the strict scrutiny analysis if it utilizes race and
ethnicitybased efforts. The strict scrutiny analysis is comprised of two prongs:
The program must serve an established compelling governmental interest; and
The program must be narrowly tailored to achieve that compelling government interest.63
57 Id. at 5496554966.
58 Id. at 5497654978.
59 Id. at 5496654967; 77 F.R. 65165 (October 25, 2012).
60 Id.
61 77 F.R. 65165 (October 25, 2012).
62 Croson, 448 U.S. at 492493; Adarand Constructors, Inc. v. Pena (Adarand I), 515 U.S. 200, 227 (1995); See, Fisher v. University
of Texas, ___U.S.___, 133 S.Ct. 2411 (June 24, 2013).
63 Adarand I, 515 U.S. 200, 227 (1995); AGC, SDC v. Caltrans, 713 F.3d 1187, 11951200 (9th Cir. 2013); Northern Contracting,
473 F.3d at 721; Western States Paving, 407 F.3d at 991; Sherbrooke Turf, 345 F.3d at 969; Adarand VII, 228 F.3d at 1176.;
Associated Gen. Contractors of Ohio, Inc. v. Drabik ("Drabik II"), 214 F.3d 730 (6th Cir. 2000); Eng'g Contractors Ass'n of South
Florida, Inc. v. Metro. Dade County, 122 F.3d 895 (11th Cir. 1997); Contractors Ass'n of E. Pa. v. City of Philadelphia ("CAEP I"),
6 F.3d 990 (3d Cir. 1993).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 12
a. The Compelling Governmental Interest Requirement
The first prong of the strict scrutiny analysis requires a governmental entity to have a
"compelling governmental interest" in remedying past identified discrimination in order to
implement a race and ethnicitybased program. State and local governments cannot rely on
national statistics of discrimination in an industry to draw conclusions about the prevailing
market conditions in their own regions.64 Rather, state and local governments must measure
discrimination in their state or local market. However, that is not necessarily confined by the
jurisdiction's boundaries.65
The federal courts have held that, with respect to the Federal DBE Program, recipients of federal
funds do not need to independently satisfy this prong because Congress has satisfied the
compelling interest test of the strict scrutiny analysis.66 The federal courts have held that
Congress had ample evidence of discrimination in the transportation contracting industry to
justify the Federal DBE Program (TEA21), and the federal regulations implementing the
program (49 C.F.R. Part 26).67 Specifically, the federal courts found Congress "spent decades
compiling evidence of race discrimination in government highway contracting, of barriers to the
formation of minorityowned construction businesses, and of barriers to entry."68 The evidence
found to satisfy the compelling interest standard included numerous congressional
investigations and hearings, and outside studies of statistical and anecdotal evidence (e.g.,
disparity studies).69 The evidentiary basis on which Congress relied to support its finding of
discrimination includes:
Barriers to minority business formation. Congress found that discrimination by prime
contractors, unions, and lenders has woefully impeded the formation of qualified minority
64 See e.g., Concrete Works, Inc. v. City and County of Denver ("Concrete Works I"), 36 F.3d 1513, 1520 (10th Cir. 1994).
65 Id.
66 N. Contracting, 473 F.3d at 721; Western States Paving, 407 F.3d at 991; Sherbrooke Turf, 345 F.3d at 969; Adarand VII, 228
F.3d at 1176.
67 Id. In the case of Rothe Dev. Corp. v. U.S. Dept. of Defense, 545 F.3d 1023 (Fed. Cir. 2008), the Federal Circuit Court of Appeals
pointed out it had questioned in its earlier decision whether the evidence of discrimination before Congress was in fact so
"outdated" so as to provide an insufficient basis in evidence for the Department of Defense program (i.e., whether a
compelling interest was satisfied). 413 F.3d 1327 (Fed. Cir. 2005). The Federal Circuit Court of Appeals after its 2005
decision remanded the case to the district court to rule on this issue. Rothe considered the validity of race and gender
conscious Department of Defense ("DOD") regulations (2006 Reauthorization of the 1207 Program). The decisions in N.
Contracting, Sherbrooke Turf, Adarand VII, and Western States Paving held the evidence of discrimination nationwide in
transportation contracting was sufficient to find the Federal DBE Program on its face was constitutional. On remand, the
district court in Rothe on August 10, 2007 issued its order denying plaintiff Rothe's Motion for Summary Judgment and
granting Defendant United States Department of Defense's CrossMotion for Summary Judgment, holding the 2006
Reauthorization of the 1207 DOD Program constitutional. Rothe Devel. Corp. v. U.S. Dept. of Defense, 499 F.Supp.2d 775 (W.D.
Tex. Aug 10, 2007). The district court found the data contained in the Appendix (The Compelling Interest, 61 Fed. Reg.
26050 (1996)), the Urban Institute Report, and the Benchmark Study relied upon in part by the courts in Sherbrooke Turf,
Adarand VII, and Western States Paving in upholding the constitutionality of the Federal DBE Program was "stale" as
applied to and for purposes of the 2006 Reauthorization of the 1207 DOD Program. This district court finding was not
appealed or considered by the Federal Circuit Court of Appeals. 545 F.3d 1023, 1037. The Federal Circuit Court of Appeals
reversed the district court decision in part and held invalid the DOD Section 1207 program as enacted in 2006. 545 F.3d
1023, 1050. See the discussion of the 2008 Federal Circuit Court of Appeals decision in Rothe below in Section G. See also the
discussion below in Section G of the 2012 district court decision in DynaLantic Corp. v. U.S. Department of Defense, et al, 885
F.Supp.2d 237, 2012 WL 3356813 (D.D.C. Aug. 15, 2012).
68 Sherbrooke Turf, 345 F.3d at 970, (citing Adarand VII, 228 F.3d at 1167 76); Western States Paving, 407 F.3d at 99293.
69 See, e.g., Adarand VII, 228 F.3d at 1167 76; see also Western States Paving, 407 F.3d at 992 (Congress "explicitly relied
upon" the Department of Justice study that "documented the discriminatory hurdles that minorities must overcome to
secure federally funded contracts").
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 13
business enterprises in the subcontracting market nationwide, noting the existence of
"good ol' boy" networks, from which minority firms have traditionally been excluded, and
the racebased denial of access to capital, which affects the formation of minority
subcontracting enterprise.70
Barriers to competition for existing minority enterprises. Congress found evidence showing
systematic exclusion and discrimination by prime contractors, private sector customers,
business networks, suppliers, and bonding companies precluding minority enterprises
from opportunities to bid. When minority firms are permitted to bid on subcontracts,
prime contractors often resist working with them. Congress found evidence of the same
prime contractor using a minority business enterprise on a government contract not using
that minority business enterprise on a private contract, despite being satisfied with that
subcontractor's work. Congress found that informal, racially exclusionary business
networks dominate the subcontracting construction industry.71
Local disparity studies. Congress found that local studies throughout the country tend to
show a disparity between utilization and availability of minorityowned firms, raising an
inference of discrimination.72
Results of removing affirmative action programs. Congress found evidence that when race
conscious public contracting programs are struck down or discontinued, minority business
participation in the relevant market drops sharply or even disappears, which courts have
found strongly supports the government's claim that there are significant barriers to
minority competition, raising the specter of discrimination.73
MAP21. Recently, in July 2012, Congress passed MAP21 (see above), which made
"Findings" that "discrimination and related barriers continue to pose significant obstacles
for minority and womenowned businesses seeking to do business in federallyassisted
surface transportation markets," and that the continuing barriers "merit the continuation"
of the Federal DBE Program.74 Congress also found that it received and reviewed testimony
and documentation of race and gender discrimination which "provide a strong basis that
there is a compelling need for the continuation of the" Federal DBE Program.75
Burden of proof. Under the strict scrutiny analysis, and to the extent a state or local
governmental entity has implemented a race and genderconscious program, the governmental
entity has the initial burden of showing a strong basis in evidence (including statistical and
70 Adarand VII, 228 F.3d. at 116870; Western States Paving, 407 F.3d at 992; see DynaLantic, 885 F.Supp.2d 237, 2012 WL
3356813.
71 Adarand VII. at 117072; see DynaLantic, 885 F.Supp.2d 237, 2012 WL 3356813.
72 Id. at 117274; see DynaLantic, 885 F.Supp.2d 237, 2012 WL 3356813.
73 Id. at 117475.
74 Pub L. 112141, H.R. 4348, 1101(b), July 6, 2012, 126 Stat 405.
75 Id. at 1101(b)(1).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 14
anecdotal evidence) to support its remedial action.76 If the government makes its initial
showing, the burden shifts to the challenger to rebut that showing.77 The challenger bears the
ultimate burden of showing that the governmental entity's evidence "did not support an
inference of prior discrimination."78
Statistical evidence. Statistical evidence of discrimination is a primary method used to
determine whether or not a strong basis in evidence exists to develop, adopt and support a
remedial program (i.e., to prove a compelling governmental interest), or in the case of a
recipient complying with the Federal DBE Program, to prove narrow tailoring of program
implementation at the state recipient level.79 "Where gross statistical disparities can be shown,
they alone in a proper case may constitute prima facie proof of a pattern or practice of
discrimination."80
One form of statistical evidence is the comparison of a government's utilization of MBE/WBEs
compared to the relative availability of qualified, willing and able MBE/WBEs.81 The federal
courts have held that a significant statistical disparity between the utilization and availability of
minority and womenowned firms may raise an inference of discriminatory exclusion.82
However, a small statistical disparity, standing alone, may be insufficient to establish
discrimination.83
Other considerations regarding statistical evidence include:
Availability analysis. A disparity index requires an availability analysis. MBE/WBE and DBE
availability measures the relative number of MBE/WBEs and DBEs among all firms ready,
willing and able to perform a certain type of work within a particular geographic market
area.84 There is authority that measures of availability may be approached with different
levels of specificity and the practicality of various approaches must be considered,85 "An
76 See Rothe Development Corp. v. Department of Defense, 545 F.3d 1023, 1036 (Fed. Cir. 2008); N. Contracting, Inc. Illinois, 473
F.3d at 715, 721 (7th Cir. 2007) (Federal DBE Program); Western States Paving Co. v. Washington State DOT, 407 F.3d 983,
991 (9th Cir. 2005) (Federal DBE Program); Sherbrooke Turf, Inc. v. Minnesota DOT, 345 F.3d 964, 969 (8th Cir. 2003)
(Federal DBE Program); Adarand Constructors Inc. v. Slater ("Adarand VII"), 228 F.3d 1147, 1166 (10th Cir. 2000) (Federal
DBE Program); Eng'g Contractors Ass'n, 122 F.3d at 916; Monterey Mechanical Co. v. Wilson, 125 F.3d 702, 713 (9th Cir. 1997);
DynaLantic, 885 F.Supp.2d 237, 2012 WL 3356813; Hershell Gill Consulting Engineers, Inc. v. Miami Dade County, 333 F.
Supp.2d 1305, 1316 (S.D. Fla. 2004).
77 Adarand VII, 228 F.3d at 1166; Eng'g Contractors Ass'n, 122 F.3d at 916.
78 See, e.g., Adarand VII, 228 F.3d at 1166; Eng'g Contractors Ass'n, 122 F.3d at 916; see also Sherbrooke Turf, 345 F.3d at 971;
N. Contracting, 473 F.3d at 721.
79 See, e.g., Croson, 488 U.S. at 509; AGC, SDC v. Caltrans, 713 F.3d at 11951196; N. Contracting, 473 F.3d at 71819, 72324;
Western States Paving, 407 F.3d at 991; Adarand VII, 228 F.3d at 1166.
80 Croson, 488 U.S. at 501, quoting Hazelwood School Dist. v. United States, 433 U.S. 299, 30708 (1977).
81 Croson, 448 U.S. at 509; see AGC, SDC v. Caltrans, 713 F.3d at 11911197; Rothe, 545 F.3d at 10411042; Concrete Works of
Colo., Inc. v. City and County of Denver ("Concrete Works II"), 321 F.3d 950, 959 (10th Cir. 2003); Drabik II, 214 F.3d 730, 734
736.
82 See, e.g., Croson, 488 U.S. at 509; AGC, SDC v. Caltrans, 713 F.3d at 11911197; Rothe, 545 F.3d at 1041; Concrete Works II,
321 F.3d at 970; see Western States Paving, 407 F.3d at 1001.
83 Western States Paving, 407 F.3d at 1001.
84 See, e.g., Croson, 448 U.S. at 509; 49 C.F.R. 26.35; AGC, SDC V. Caltrans, 713 F.3d at 11911197; Rothe, 545 F.3d at 1041
1042; N. Contracting, 473 F.3d at 718, 72223; Western States Paving, 407 F.3d at 995.
85 Contractors Ass'n of Eastern Pennsylvania, Inc. v. City of Philadelphia ("CAEP II"), 91 F.3d 586, 603 (3d Cir. 1996).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 15
analysis is not devoid of probative value simply because it may theoretically be possible to
adopt a more refined approach."86
Utilization analysis. Courts have accepted measuring utilization based on the proportion of
an agency's contract dollars going to MBE/WBEs and DBEs.87
Disparity index. An important component of statistical evidence is the "disparity index."88 A
disparity index is defined as the ratio of the percent utilization to the percent availability
times 100. A disparity index below 80 has been accepted as evidence of adverse impact or
an inference of discrimination. This has been referred to as "The Rule of Thumb" or "The 80
percent Rule."89
Two standard deviation test. The standard deviation figure describes the probability that
the measured disparity is the result of mere chance. Some courts have held that a statistical
disparity corresponding to a standard deviation of less than two is not considered
statistically significant.90
Anecdotal evidence. Anecdotal evidence includes personal accounts of incidents, including of
discrimination, told from the witness' perspective. Anecdotal evidence of discrimination,
standing alone, generally is insufficient to show a systematic pattern of discrimination.91 But
personal accounts of actual discrimination may complement empirical evidence and play an
important role in bolstering statistical evidence.92 It has been held that anecdotal evidence of a
local or state government's institutional practices that exacerbate discriminatory market
conditions are often particularly probative.93
Examples of anecdotal evidence may include:
Testimony of MBE/WBE or DBE owners regarding whether they face difficulties or
barriers;
86 Id.
87 See, e.g. AGC, SDC v. Caltrans, 713 F.3d at 11911197; Eng'g Contractors Ass'n, 122 F.3d at 912; N. Contracting, 473 F.3d at
717720; Sherbrooke Turf, 345 F.3d at 973.
88 Eng'g Contractors Ass'n, 122 F.3d at 914; W.H. Scott Constr. Co. v. City of Jackson, 199 F.3d 206, 218 (5th Cir. 1999);
Contractors Ass'n of Eastern Pennsylvania, Inc. v. City of Philadelphia, 6 F.3d 990 at 1005 (3rd Cir. 1993).
89 See, e.g., Ricci v. DeStefano, 557 U.S. 557, 129 S.Ct. 2658, 2678 (2009); AGC, SDC v. Caltrans, 713 F.3d at 1191; Rothe, 545 F.3d
at 1041; Eng'g Contractors Ass'n, 122 F.3d at 914, 923; Concrete Works I, 36 F.3d at 1524.
90 Eng'g Contractors Ass'n, 122 F.3d at 914, 917, 923. The Eleventh Circuit found that a disparity greater than two or three
standard deviations has been held to be statistically significant and may create a presumption of discriminatory conduct.;
Peightal v. Metropolitan Eng'g Contractors Ass'n, 26 F.3d 1545, 1556 (11th Cir. 1994). The Seventh Circuit Court of Appeals in
Kadas v. MCI Systemhouse Corp., 255 F.3d 359 (7th Cir. 2001), raised questions as to the use of the standard deviation test
alone as a controlling factor in determining the admissibility of statistical evidence to show discrimination. Rather, the Court
concluded it is for the judge to say, on the basis of the statistical evidence, whether a particular significance level, in the
context of a particular study in a particular case, is too low to make the study worth the consideration of judge or jury. 255
F.3d at 363.
91 See, e.g., AGC, SDC v. Caltrans, 713 F.3d at 1192, 11961198; Eng'g Contractors Ass'n, 122 F.3d at 92425; Coral Constr. Co. v.
King County, 941 F.2d 910, 919 (9th Cir. 1991); O'Donnell Constr. Co. v. District of Columbia, 963 F.2d 420, 427 (D.C. Cir.
1992).
92 See, e.g., AGC, SDC v. Caltrans, 713 F.3d at 1192, 11961198; Eng'g Contractors Ass'n, 122 F.3d at 92526; Concrete Works, 36
F.3d at 1520; Contractors Ass'n, 6 F.3d at 1003; Coral Constr. Co. v. King County, 941 F.2d 910, 919 (9th Cir. 1991).
93 Concrete Works I, 36 F.3d at 1520.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 16
Descriptions of instances in which MBE/WBE or DBE owners believe they were treated
unfairly or were discriminated against based on their race, ethnicity, or gender or believe
they were treated fairly without regard to race, ethnicity, or gender;
Statements regarding whether firms solicit, or fail to solicit, bids or price quotes from
MBE/WBEs or DBEs on nongoal projects; and
Statements regarding whether there are instances of discrimination in bidding on specific
contracts and in the financing and insurance markets.94
Courts have accepted and recognize that anecdotal evidence is the witness' narrative of
incidents told from his or her perspective, including the witness' thoughts, feelings, and
perceptions, and thus anecdotal evidence need not be verified.95
b. The Narrow Tailoring Requirement
The second prong of the strict scrutiny analysis requires that a race or ethnicitybased program
or legislation implemented to remedy past identified discrimination in the relevant market be
"narrowly tailored" to reach that objective.
The narrow tailoring requirement has several components and the courts analyze several
criteria or factors in determining whether a program or legislation satisfies this requirement
including:
The necessity for the relief and the efficacy of alternative race, ethnicity, and gender
neutral remedies;
The program is limited to those groups that actually suffered discrimination;
The flexibility and duration of the relief, including the availability of waiver provisions;
The relationship of numerical goals to the relevant labor market; and
The impact of a race, ethnicity, or genderconscious remedy on the rights of third
parties.96
In connection with the implementation of the Federal DBE Program by recipients of federal
funds, the courts hold that strict scrutiny requires the recipient's DBE Program be "narrowly
94 See, e.g., AGC, SDC v. Caltrans, 713 F.3d at 1197; Northern Contracting, 2005 WL 2230195, at 1315 (N.D. Ill. 2005), affirmed,
473 F.3d 715 (7th Cir. 2007); e.g., Concrete Works, 321 F.3d at 989; Adarand VII, 228 F.3d at 116676. For additional
examples of anecdotal evidence, see Eng'g Contractors Ass'n, 122 F.3d at 924; Concrete Works, 36 F.3d at 1520; Cone Corp. v.
Hillsborough County, 908 F.2d 908, 915 (11th Cir. 1990); DynaLantic, 885 F.Supp.2d 237, 2012 WL 3356813; Florida A.G.C.
Council, Inc. v. State of Florida, 303 F. Supp.2d 1307, 1325 (N.D. Fla. 2004).
95 See, e.g., Concrete Works II, 321 F.3d at 989; Eng'g Contractors Ass'n, 122 F.3d at 92426; Cone Corp., 908 F.2d at 915;
Northern Contracting, Inc. v. Illinois, 2005 WL 2230195 at *21, N. 32 (N.D. Ill. Sept. 8, 2005), aff'd 473 F.3d 715 (7th Cir.
2007).
96 See, e.g., See, e.g., AGC, SDC v. Caltrans, 713 F.3d at 11981199; Rothe, 545 F.3d at 1036; Western States Paving, 407 F3d at
993995; Sherbrooke Turf, 345 F.3d at 971; Adarand VII, 228 F.3d at 1181; Eng'g Contractors Ass'n, 122 F.3d at 927 (internal
quotations and citations omitted).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 17
tailored" to remedy identified discrimination in the particular recipient's contracting and
procurement market.97
It should be pointed out that in the Northern Contracting decision (2007), the Seventh Circuit
Court of Appeals cited its earlier precedent in Milwaukee County Pavers v. Fielder to hold "that a
state is insulated from [a narrow tailoring] constitutional attack, absent a showing that the state
exceeded its federal authority. IDOT [Illinois DOT] here is acting as an instrument of federal
policy and Northern Contracting (NCI) cannot collaterally attack the federal regulations through
a challenge to IDOT's program."98 The Seventh Circuit Court of Appeals distinguished both the
Ninth Circuit Court of Appeals decision in Western States Paving and the Eighth Circuit Court of
Appeals decision in Sherbrooke Turf, relating to an asapplied narrow tailoring analysis.
The Seventh Circuit Court of Appeals held that the state DOT's [Illinois DOT] application of a
federally mandated program is limited to the question of whether the state exceeded its grant of
federal authority under the Federal DBE Program.99 The Seventh Circuit Court of Appeals
analyzed IDOT's compliance with the federal regulations regarding calculation of the availability
of DBEs, adjustment of its goal based on local market conditions and its use of raceneutral
methods set forth in the federal regulations.100 The court held NCI failed to demonstrate that
IDOT did not satisfy compliance with the federal regulations (49 C.F.R. Part 26).101 Accordingly,
the Seventh Circuit Court of Appeals affirmed the district court's decision upholding the validity
of IDOT's DBE program.102 See the discussion of the Northern Contracting decision below in
Section E.
In Western States Paving, the Ninth Circuit held the recipient of federal funds must have
independent evidence of discrimination within the recipient's own transportation contracting
and procurement marketplace in order to determine whether or not there is the need for race,
ethnicity, or genderconscious remedial action.103 Thus, the Ninth Circuit held in Western States
Paving that mere compliance with the Federal DBE Program does not satisfy strict scrutiny.104
In Western States Paving, the Court found that even where evidence of discrimination is present
in a recipient's market, a narrowly tailored program must apply only to those minority groups
who have actually suffered discrimination. Thus, under a race or ethnicity conscious program,
for each of the minority groups to be included in any race or ethnicityconscious elements in a
97 Western States Paving, 407 F3d at 995998; Sherbrooke Turf, 345 F.3d at 97071.
98 473 F.3d at 722.
99 Id. at 722.
100 Id. at 72324.
101 Id.
102 Id.; See, e.g., Geod Corp. v. New Jersey Transit Corp., et al., 746 F.Supp 2d 642 (D.N.J. 2010); South Florida Chapter of the A.G.C.
v. Broward County, Florida, 544 F.Supp.2d 1336 (S.D. Fla. 2008).
103 Western States Paving, 407 F.3d at 99798, 100203.
104 Id. at 9951003. The Seventh Circuit Court of Appeals in Northern Contracting stated in a footnote that the court in Western
States Paving "misread" the decision in Milwaukee County Pavers. 473 F.3d at 722, n. 5.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 18
recipient's implementation of the Federal DBE Program, there must be evidence that the
minority group suffered discrimination within the recipient's marketplace.105
To satisfy the narrowly tailored prong of the strict scrutiny analysis in the context of the Federal
DBE Program, the federal courts, which evaluated state DOT DBE Programs and their
implementation of the Federal DBE Program, have held the following factors are pertinent:
Evidence of discrimination or its effects in the state transportation contracting industry;
Flexibility and duration of a race or ethnicityconscious remedy;
Relationship of any numerical DBE goals to the relevant market;
Effectiveness of alternative race and ethnicityneutral remedies;
Impact of a race or ethnicityconscious remedy on third parties; and
Application of any race or ethnicityconscious program to only those minority groups who
have actually suffered discrimination.106
The Eleventh Circuit described the "the essence of the 'narrowly tailored' inquiry [as] the notion
that explicitly racial preferences must only be a 'last resort' option."107 Courts have found that
"[w]hile narrow tailoring does not require exhaustion of every conceivable raceneutral
alternative, it does require serious, good faith consideration of whether such alternatives could
serve the governmental interest at stake."108
Similarly, the Sixth Circuit Court of Appeals in Associated Gen. Contractors v. Drabik ("Drabik II"),
stated: "Adarand teaches that a court called upon to address the question of narrow tailoring
must ask, "for example, whether there was 'any consideration of the use of raceneutral means
to increase minority business participation' in government contracting or whether the
program was appropriately limited such that it 'will not last longer than the discriminatory
effects it is designed to eliminate.'"109
The Supreme Court in Parents Involved in Community Schools v. Seattle School District110 also
found that race and ethnicitybased measures should be employed as a last resort. The majority
opinion stated: "Narrow tailoring requires 'serious, good faith consideration of workable race
neutral alternatives,' and yet in Seattle several alternative assignment plansmany of which
would not have used express racial classificationswere rejected with little or no
105 407 F.3d at 9961000.
106 See, e.g., See, e.g., AGC, SDC v. Caltrans, 713 F.3d at 11981199; Western States Paving, 407 F.3d at 998; Sherbrooke Turf, 345
F.3d at 971; Adarand VII, 228 F.3d at 1181; Kornhass Construction, Inc. v. State of Oklahoma, Department of Central Services,
140 F.Supp.2d at 12471248.
107 Eng'g Contractors Ass'n, 122 F.3d at 926 (internal citations omitted); see also Virdi v. DeKalb County School District, 135 Fed.
Appx. 262, 264, 2005 WL 138942 (11th Cir. 2005) (unpublished opinion); Webster v. Fulton County, 51 F. Supp.2d 1354,
1380 (N.D. Ga. 1999), aff'd per curiam 218 F.3d 1267 (11th Cir. 2000).
108 See Grutter v. Bollinger, 539 U.S. 306, 339 (2003); Richmond v. J.A. Croson Co., 488 U.S. 469, 50910 (1989); AGC, SDC v.
Caltrans, 713 F.3d at 1199; Western States Paving, 407 F.3d at 993; see also Adarand I, 515 U.S. at 23738.
109 Associated Gen. Contractors of Ohio, Inc. v. Drabik ("Drabik II"), 214 F.3d 730, 738 (6th Cir. 2000).
110 551 U.S. 701, 73437, 127 S.Ct. 2738, 276061 (2007).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 19
consideration."111 The Court found that the District failed to show it seriously considered race
neutral measures.
The "narrowly tailored" analysis is instructive in terms of developing any potential legislation or
programs that involve DBEs and implementing the Federal DBE Program, or in connection with
determining appropriate remedial measures to achieve legislative objectives.
Race, ethnicity, and genderneutral measures. To the extent a "strong basis in evidence" exists
concerning discrimination in a local or state government's relevant contracting and
procurement market, the courts analyze several criteria or factors to determine whether a
state's implementation of a race or ethnicityconscious program is necessary and thus narrowly
tailored to achieve remedying identified discrimination. One of the key factors discussed above
is consideration of race, ethnicity and genderneutral measures.
The courts require that a local or state government seriously consider race, ethnicity and
genderneutral efforts to remedy identified discrimination.112 And the courts have held
unconstitutional those race and ethnicityconscious programs implemented without
consideration of race and ethnicityneutral alternatives to increase minority business
participation in state and local contracting.113
The Court in Croson followed by decisions from federal courts of appeal found that local and
state governments have at their disposal a "whole array of raceneutral devices to increase the
accessibility of city contracting opportunities to small entrepreneurs of all races."114
The federal regulations and the courts require that recipients of federal financial assistance
governed by 49 C.F.R. Part 26 implement or seriously consider race, ethnicity, and gender
neutral remedies prior to the implementation of race, ethnicity, and genderconscious
remedies.115 The courts have also found "the regulations require a state to 'meet the maximum
feasible portion of [its] overall goal by using race neutral means.116
Examples of race, ethnicity, and genderneutral alternatives include, but are not limited to, the
following:
111 551 U.S. 701, 73437, 127 S.Ct. at 276061; see also Grutter v. Bollinger, 539 U.S. 305 (2003).
112 See, e.g., AGC, SDC v. Caltrans, 713 F.3d at 1199; Western States Paving, 407 F.3d at 993; Sherbrooke Turf, 345 F.3d at 972;
Adarand VII, 228 F.3d at 1179; Eng'g Contractors Ass'n, 122 F.3d at 927; Coral Constr., 941 F.2d at 923.
113 See Croson, 488 U.S. at 507; Drabik I, 214 F.3d at 738 (citations and internal quotations omitted); see also Eng'g Contractors
Ass'n, 122 F.3d at 927; Virdi, 135 Fed. Appx. At 268.
114 Croson, 488 U.S. at 509510.
115 49 C.F.R. 26.51(a) requires recipients of federal funds to "meet the maximum feasible portion of your overall goal by
using raceneutral means of facilitating DBE participation." See, e.g., Adarand VII, 228 F.3d at 1179; Western States Paving,
407 F.3d at 993; Sherbrooke Turf, 345 F.3d at 972. Additionally, in September of 2005, the United States Commission on Civil
Rights (the "Commission") issued its report entitled "Federal Procurement After Adarand" setting forth its findings
pertaining to federal agencies' compliance with the constitutional standard enunciated in Adarand. United States
Commission on Civil Rights: Federal Procurement After Adarand (Sept. 2005), available at http://www.usccr.gov. The
Commission found that 10 years after the Court's Adarand decision, federal agencies have largely failed to narrowly tailor
their reliance on raceconscious programs and have failed to seriously consider raceneutral measures that would effectively
redress discrimination. See discussion of USCCR Report at Section G. below.
116 See, e.g., Northern Contracting, 473 F.3d at 723 724; Western States Paving, 407 F.3d at 993 (citing 49 C.F.R. 26.51(a)).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 20
Providing assistance in overcoming bonding and financing obstacles;
Relaxation of bonding requirements;
Providing technical, managerial and financial assistance;
Establishing programs to assist startup firms;
Simplification of bidding procedures;
Training and financial aid for all disadvantaged entrepreneurs;
Nondiscrimination provisions in contracts and in state law;
Mentorprotg programs and mentoring;
Efforts to address prompt payments to smaller businesses;
Small contract solicitations to make contracts more accessible to smaller businesses;
Expansion of advertisement of business opportunities;
Outreach programs and efforts;
"How to do business" seminars;
Sponsoring networking sessions throughout the state acquaint small firms with large firms;
Creation and distribution of MBE/WBE and DBE directories; and
Streamlining and improving the accessibility of contracts to increase small business
participation.117
49 C.F.R. 26.51(b) provides examples of race, ethnicity, and genderneutral measures that
should be seriously considered and utilized. The courts have held that while the narrow
tailoring analysis does not require a governmental entity to exhaust every possible race,
ethnicity, and genderneutral alternative, it does "require serious, good faith consideration of
workable raceneutral alternatives.118
In AGC, SDC v. Caltrans, the Ninth Circuit rejected the assertion that the state DOT's DBE
program was not narrowly tailored because it failed to evaluate raceneutral measures before
implementing race conscious goals, and said the law imposes no such requirement.119 The court
held states are not required to independently meet this aspect of narrow tailoring, and instead
concludes Western States Paving focuses on whether the federal statute sufficiently considered
raceneutral alternatives.120 In AGC, SDC v. Caltrans, the court found that narrow tailoring only
requires "serious, good faith consideration of workable raceneutral alternatives."121
117 See 49 C.F.R. 26.51(b); see, e.g., Croson, 488 U.S. at 509510; N. Contracting, 473 F.3d at 724; Adarand VII, 228 F.3d 1179;
49 C.F.R. 26.51(b); Eng'g Contractors Ass'n, 122 F.3d at 92729.
118 Western States Paving, 407 F.3d at 993.
119 AGC, SDC v. Caltrans, 713 F.3d at 1199.
120 AGC, SDC v. Caltrans, 713 F.3d at 1199.
121 AGC, SDC v. Caltrans, 713 F.3d at 1199; citing Grutter v. Bollinger, 539 U.S. 306, 339 (2003).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 21
Additional factors considered under narrow tailoring. In addition to the required consideration
of the necessity for the relief and the efficacy of alternative remedies (race and ethnicity
neutral efforts), the courts require evaluation of additional factors as listed above.122 For
example, to be considered narrowly tailored, courts have held that a MBE/WBE or DBEtype
program should include: (1) builtin flexibility;123 (2) good faith efforts provisions;124 (3) waiver
provisions;125 (4) a rational basis for goals;126 (5) graduation provisions;127 (6) remedies only for
groups for which there were findings of discrimination;128 (7) sunset provisions;129 and (8)
limitation in its geographical scope to the boundaries of the enacting jurisdiction.130
3. Intermediate Scrutiny Analysis
Certain Federal Courts of Appeal, including the Ninth Circuit Court of Appeals, apply
intermediate scrutiny to genderconscious programs.131 The Ninth Circuit and other courts have
interpreted this standard to require that genderbased classifications be:
1. Supported by both "sufficient probative" evidence or "exceedingly persuasive
justification" in support of the stated rationale for the program; and
2. Substantially related to the achievement of that underlying objective.132
Under the traditional intermediate scrutiny standard, the court reviews a genderconscious
program by analyzing whether the state actor has established a sufficient factual predicate for
the claim that femaleowned businesses have suffered discrimination, and whether the gender
conscious remedy is an appropriate response to such discrimination. This standard requires the
state actor to present "sufficient probative" evidence in support of its stated rationale for the
program.133
Intermediate scrutiny, as interpreted by the Ninth Circuit and other federal circuit courts of
appeal, requires a direct, substantial relationship between the objective of the gender
122 Eng'g Contractors Ass'n, 122 F.3d at 927.
123 CAEP I, 6 F.3d at 1009; Associated Gen. Contractors of Ca., Inc. v. Coalition for Economic Equality ("AGC of Ca."), 950 F.2d
1401, 1417 (9th Cir. 1991); Coral Constr. Co. v. King County, 941 F.2d 910, 923 (9th Cir. 1991); Cone Corp. v. Hillsborough
County, 908 F.2d 908, 917 (11th Cir. 1990).
124 CAEP I, 6 F.3d at 1019; Cone Corp., 908 F.2d at 917.
125 CAEP I, 6 F.3d at 1009; AGC of Ca., 950 F.2d at 1417; Cone Corp., 908 F.2d at 917.
126 Id.
127 Id.
128 Western States Paving, 407 F.3d at 998; AGC of Ca., 950 F.2d at 1417.
129 Peightal, 26 F.3d at 1559.
130 Coral Constr., 941 F.2d at 925.
131 See generally, AGC, SDC v. Caltrans, 713 F.3d at 1195; Western States Paving, 407 F.3d at 990 n. 6; Coral Constr. Co., 941 F.2d
at 931932 (9th Cir. 1991); Equal. Found. v. City of Cincinnati, 128 F.3d 289 (6th Cir. 1997); Eng'g Contractors Ass'n, 122 F.3d
at 905, 908, 910; Ensley Branch N.A.A.C.P. v. Seibels, 31 F.3d 1548 (11th Cir. 1994); see also U.S. v. Virginia, 518 U.S. 515, 532
and n. 6 (1996)("exceedingly persuasive justification.")
132 Id.
133 Id. The Seventh Circuit Court of Appeals, however, in Builders Ass'n of Greater Chicago v. County of Cook, Chicago, did not
hold there is a different level of scrutiny for gender discrimination or gender based programs. 256 F.3d 642, 64445 (7th Cir.
2001). The Court in Builders Ass'n rejected the distinction applied by the Eleventh Circuit in Engineering Contractors.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 22
preference and the means chosen to accomplish the objective. The measure of evidence required
to satisfy intermediate scrutiny is less than that necessary to satisfy strict scrutiny. Unlike strict
scrutiny, it has been held that the intermediate scrutiny standard does not require a showing of
government involvement, active or passive, in the discrimination it seeks to remedy.134 And the
Eleventh Circuit has held that "[w]hen a genderconscious affirmative action program rests on
sufficient evidentiary foundation, the government is not required to implement the program
only as a last resort . Additionally, under intermediate scrutiny, a genderconscious program
need not closely tie its numerical goals to the proportion of qualified women in the market."135
4. Washington State Civil Rights Act: RCW 49.60.400
Initiative Measure No. 200 was approved by the State of Washington voters in 1998. Initiative
200 is an Act relating to "prohibiting government entities from discriminating or granting
preferential treatment based on race, sex, color, ethnicity, or national origin;" and adding new
sections to Chapter 49.60 RCW.
RCW 49.60.400 is known as the Washington State Civil Rights Act. RCW 49.60.400(1) provides
that the state shall not discriminate against, or grant preferential treatment to, any individual or
group on the basis of race, sex, color, ethnicity, or national origin in the operation of public
employment, public education, or public contracting.136 The Washington State Civil Rights Act
(the "Act") provides that it applies only to action taken after December 3, 1998.
The Act also provides a federal program exception as follows: "This section does not prohibit
action that must be taken to establish or maintain eligibility for any federal program, if
ineligibility would result in a loss of federal funds to the state."137 For purposes of this section of
the Act, the term "state" includes, but is not necessarily limited to, the state itself, any city,
county, public college or university, community college, school district, special district, or other
political subdivision or governmental instrumentality of or within the state.138
5. Pending Cases (at the time of this report)
There are pending cases in the federal courts, at the time of this report, that may potentially
impact and be instructive to Port of Seattle, Washington as a recipient of federal funding under
the Federal DBE Program, including the following:
Midwest Fence Corporation v. United States Department of Transportation and Federal
Highway Administration, the Illinois Department of Transportation, the Illinois State Toll
Highway Authority, et al. In Midwest Fence Corporation v. USDOT, the FHWA, the Illinois DOT
and the Illinois State Toll Highway Authority, Case No. 1:103CV5627, United States District
Court for the Northern District of Illinois, Eastern Division, Plaintiff Midwest Fence Corporation,
which is a guardrail, bridge rail and fencing contractor owned and controlled by white males is
134 Coral Constr. Co., 941 F.2d at 931932; See Eng'g Contractors Ass'n, 122 F.3d at 910.
135 122 F.3d at 929 (internal citations omitted.)
136 RCW 49.60.400(1).
137 RCW 49.60.400(6).
138 RCW 49.60.400(8).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 23
challenging the constitutionality and the application of the USDOT, Disadvantaged Business
Enterprise ("DBE") Program. In addition, Midwest Fence similarly challenges the IDOT's
implementation of the Federal DBE Program for federally funded projects, IDOT's
implementation of its own DBE Program for statefunded projects and the Illinois State Toll
Highway Authority's separate DBE Program.
The federal district court has issued an Opinion and Order denying the Defendants' Motion to
Dismiss for lack of standing, denying the federal Defendants' Motion to Dismiss certain Counts of
the Complaint as a matter of law, granting IDOT Defendants' Motion to Dismiss certain Counts
and granting the Tollway Defendants' Motion to Dismiss certain Counts, but giving leave to
Midwest to replead subsequent to this Order. Midwest Fence Corp. v. United States DOT, Illinois
DOT, et al., 2011 WL 2551179 (N.D. Ill. June 27, 2011).
Midwest Fence in its Third Amended Complaint challenges the constitutionality of the Federal
DBE Program on its face and as applied, and challenges the IDOT's implementation of the
Federal DBE Program. Midwest Fence also seeks a declaration that the USDOT regulations have
not been properly authorized by Congress and a declaration that SAFETEALU is
unconstitutional. Midwest Fence seeks relief from the IDOT Defendants, including a declaration
that state statutes authorizing IDOT's DBE Program for Statefunded contracts are
unconstitutional; a declaration that IDOT does not follow the USDOT regulations; a declaration
that the IDOT DBE Program is unconstitutional and other relief against the IDOT. The remaining
Counts seek relief against the Tollway Defendants, including that the Tollway's DBE Program is
unconstitutional, and a request for punitive damages against the Tollway Defendants. The Court
on September 27, 2012 granted the Tollway Defendants' Motion to Dismiss Midwest Fence's
request for punitive damages.
This case, at the time of this report, is currently in the final expert witness discovery stage of the
litigation to be followed by the dispositive motions and pretrial stage of the litigation.
Geyer Signal, Inc., et al. v. Minnesota DOT, the United States DOT, the Federal Highway
Administration, et al. In Geyer Signal, Inc., et al. v. Minnesota DOT, U.S. DOT, Federal Highway
Administration, et al., Case No. 11CV321, United States District Court for the District Court of
Minnesota, the Plaintiffs Geyer Signal, Inc. and its owner filed this lawsuit against the Minnesota
DOT seeking a permanent injunction against enforcement and a declaration of
unconstitutionality of the Federal DBE Program and Minnesota DOT's implementation of the
DBE Program on its face and as applied. Geyer Signal seeks an injunction against the Minnesota
DOT prohibiting it from enforcing the DBE Program or, alternatively, from implementing the
Program improperly; a declaratory judgment declaring that the DBE Program violates the Equal
protection element of the Fifth Amendment of the United States Constitution and/or the Equal
Protection clause of the Fourteenth Amendment to the United States Constitution and is
unconstitutional, or, in the alternative that Minnesota DOT's implementation of the Program is
an unconstitutional violation of the Equal Protection Clause, and/or that the Program is void for
vagueness; and other relief.
Plaintiff Geyer Signal is a small, familyowned business that performs traffic control work
generally on road construction projects. Geyer Signal is a majorityowned firm by a Caucasian
male, who also is a named plaintiff.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 24
Subsequent to the lawsuit filed by Geyer Signal, the USDOT and the Federal Highway
Administration ("FHWA") filed their Motion to permit them to intervene as defendants in this
case. The Federal DefendantIntervenors requested intervention on the case in order to defend
the constitutionality of the Federal DBE Program and the federal regulations at issue. The
Federal DefendantIntervenors and the Plaintiffs filed a Stipulation that the Federal Defendant
Intervenors have the right to intervene and should be permitted to intervene in the matter, and
consequently the Plaintiffs did not contest the Federal DefendantIntervenor's Motion for
Intervention. The Court issued an Order that the Stipulation of Intervention, agreeing that the
Federal DefendantIntervenors may intervene in this lawsuit, be approved and that the Federal
DefendantIntervenors are permitted to intervene in this case.
At the time of this report, the case is pending in the Federal District Court of the District of
Minnesota and currently is in the dispositive motions and pretrial stage of the litigation.
Dispositive Motions for Summary Judgment by Defendant US DOT and Minnesota DOT have
been filed and are pending. The Court held a hearing on the motions on September 23, 2013, and
has taken the motions "Under Advisement."
Dunnet Bay Construction Company v. Gary Hannig, in its official capacity as Secretary of
Transportation for the Illinois DOT and the Illinois DOT. In Dunnet Bay Construction Company
v. Gary Hannig, in its official capacity as Secretary of the Illinois DOT and the Illinois DOT, Case No.
3:10CV3051, in the United States District Court for the Central District of Illinois, Springfield
Division, plaintiff Dunnet Bay Construction Company brought a lawsuit against the Secretary of
the IDOT in its official capacity and the IDOT challenging the IDOT DBE Program and its
implementation of the Federal DBE Program, including an alleged unwritten "no waiver" policy,
and that the IDOT's program is not narrowly tailored. The IDOT filed a Motion to Dismiss certain
Counts of the Complaint. In an Order from the United States District Court, the Court granted the
Motion to Dismiss Counts I, II and III against the IDOT primarily based on the defense of
immunity under the Eleventh Amendment to the United States Constitution. The Opinion held
that claims in Counts I and II against Secretary Hannig of the IDOT in his official capacity remain
pending.
In addition, there are other Counts of the Complaint that remain in the case that are not subject
to the Motion to Dismiss, which seek injunctive relief and damages based on the challenge to the
IDOT DBE Program and its application by the IDOT. Plaintiff Dunnet Bay alleges the IDOT DBE
Program is unconstitutional based on the unwritten nowaiver policy, requiring Dunnet Bay to
meet DBE goals and denying Dunnet Bay a waiver of the goals despite its good faith efforts, and
based on other allegations.
This case is currently pending in the discovery stage with dispositive Motions and a pretrial
conference, at the time of this report, scheduled for December 2013. See, Dunnet Bay
Construction Company v. Hannig, (Text Orders by the Court dated October 4, 2013 and
November 15, 2013). A date for the jury trial will be set at the final pretrial conference. (Text
Orders, October 4, 2013 and November 15, 2013). See also, Dunnet Bay, 2011 WL 5417123 (C.D.
Ill. November 9, 2011) (Court Order denying Dunnet Bay's Motion to Compel Production).
Mountain West Holding Co., Inc. v. The State of Montana, Montana DOT, et al. In Mountain
West Holding Co., Inc. v. The State of Montana, Montana DOT, et al., Case No. 1:13CV00049DLC,
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 25
United States District Court for the District of Montana, Billings Division, Plaintiff Mountain West
Holding Co., Inc. ("Mountain West"), alleges it is a contractor that provides constructionspecific
traffic planning and staffing for construction projects as well as the installation of signs,
guardrails, and concrete barriers, sued the Montana Department of Transportation ("MDT") and
the State of Montana, challenging their implementation of the Federal DBE Program. Mountain
West brought this action alleging violation of the Equal Protection Clause of the Fourteenth
Amendment of the United States Constitution, Title VI of the Civil Rights Act, 42 USC
2000(d)(7), and 42 USC 1983.
According to the First Amended Complaint, the State of Montana commissioned a disparity
study in 2009. Based upon the disparity study, Mountain West alleges the State of Montana
utilized race, national origin, and genderconscious goals in highway construction contracts.
Mountain West claims the State did not have a strong basis in evidence to show there was past
discrimination in the highway construction industry in Montana and that the implementation of
race, gender, and national origin preferences were necessary or appropriate. Mountain West
also alleges that Montana has instituted policies and practices which exceed the United States
Department of Transportation DBE requirements.
Mountain West asserts that the 2009 study concluded all "relevant" minority groups were
underutilized in "professional services" and Asian Pacific Americans and Hispanic Americans
were underutilized in "business categories combined," but it also concluded that all "relevant"
minority groups were significantly overutilized in construction. Mountain West thus alleges
that although the disparity study demonstrates that DBE groups are "significantly
overrepresented" in the highway construction field, MDT has established preferences for DBE
construction subcontractor firms over nonDBE construction subcontractor firms in the award
of contracts.
Mountain West also asserts that the Montana DBE Program does not have a valid statistical basis
for the establishment or inclusion of race, national origin, and gender conscious goals, that MDT
inappropriately relies upon the 2009 study as the basis for its DBE Program, and that the study
is flawed. Mountain West claims the Montana DBE Program is not narrowly tailored because it
disregards large differences in DBE firm utilization in MDT contracts as among three different
categories of subcontractors: business categories combined, construction, and professional
services; the MDT DBE certification process does not require the applicant to specify any
specific racial or ethnic prejudice or cultural bias that had a negative impact upon his or her
business success; and the certification process does not require the applicant to certify that he
or she was discriminated against in the State of Montana in highway construction.
The case is currently in the early discovery stage of litigation at this time with dispositive
motions scheduled to be filed by the end of September 2014.
This list of pending cases is not exhaustive, but is illustrative of current pending cases that may
impact recipients of federal funds implementing the Federal DBE Program.
Ongoing Review. The above represents a brief summary of the legal framework pertinent to
implementation of the Federal DBE Program and DBE, MBE/WBE, or race, ethnicity, or gender
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 26
neutral programs. Because this is a dynamic area of the law, the framework is subject to ongoing
review as the law continues to evolve. The following provides more detailed summaries of key
recent decisions.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 27
D. Recent Decisions Involving the Federal DBE Program and State or
Local Government MBE/WBE Programs In The Ninth Circuit.
1. Associated General Contractors of America, San Diego Chapter, Inc. v.
California Department of Transportation, et al., 713 F.3d 1187 (9th Cir. April
16, 2013)
The Associated General Contractors of America, Inc., San Diego Chapter, Inc. , ("AGC") sought
declaratory and injunctive relief against the California Department of Transportation
("Caltrans") and its officers on the grounds that Caltrans' Disadvantaged Business initial
Enterprise ("DBE") program unconstitutionally provided race and sexbased preferences to
African American, Native American, AsianPacific American, and womenowned firms on
certain transportation contracts. The federal district court upheld the constitutionality of
Caltrans' DBE program implementing the Federal DBE program and granted summary judgment
to Caltrans. The district court held that Caltrans' DBE program implementing the federal DBE
program satisfied strict scrutiny because Caltrans had a strong basis in evidence of
discrimination in the California transportation contracting industry, and the program was
narrowly tailored to those groups that actually suffered discrimination. The district court held
that Caltrans' substantial statistical and anecdotal evidence from a disparity study conducted by
BBC Research and Consulting, provided a strong basis in evidence of discrimination against the
four named groups, and that the program was narrowly tailored to benefit only those groups.
713 F.3d at 1190.
The AGC appealed the decision to the Ninth Circuit Court of Appeals. The Ninth Circuit initially
held that because the AGC did not identify any of the members who have suffered or will suffer
harm as a result of Caltrans' program, the AGC did not establish that it had associational
standing to bring the lawsuit. Id. Most significantly, the Ninth Circuit held that even if the AGC
could establish standing, its appeal failed because the Court found Caltrans' DBE program
implementing the Federal DBE program is constitutional and satisfied the applicable level of
strict scrutiny required by the Equal Protection Clause of the United States Constitution. Id. at
11941200.
Western States Paving Co. v. Washington State DOT. In 2005 the Ninth Circuit Court of Appeal
decided Western States Paving Co. v. Washington State Department of Transportation, 407 F. 3d.
983 (9th Cir. 2005), which involved a facial challenge to the constitutional validity of the federal
law authorizing the United States Department of Transportation to distribute funds to States for
transportationrelated projects. Id. at 1191. The challenge in the Western States Paving case also
included an asapplied challenge to the Washington DOT program implementing the federal
mandate. Id. Applying strict scrutiny, the Ninth Circuit upheld the constitutionality of the federal
statute and the federal regulations (the Federal DBE program), but struck down Washington
DOT's program because it was not narrowly tailored. Id., citing Western States Paving Co., 407
F.3d at 990995, 9991002.
In Western States Paving, the Ninth Circuit announced a twopronged test for "narrow tailoring":
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 28
"(1) the state must establish the presence of discrimination within its transportation contracting
industry, and (2) the remedial program must be limited to those minority groups that have
actually suffered discrimination." Id. 1191, citing Western States Paving Co., 407 F.3d at 997998.
Evidence Gathering and the 2007 Disparity Study. On May 1, 2006, Caltrans ceased to use race
and genderconscious measures in implementing their DBE program on federally assisted
contracts while it gathered evidence in an effort to comply with the Western States Paving
decision. Id. at 1191. Caltrans commissioned a disparity study by BBC Research and Consulting
to determine whether there was evidence of discrimination in California's transportation
contracting industry. Id. The Court noted that disparity analysis involves making a comparison
between the availability of minority and womenowned businesses and their actual utilization,
producing a number called a "disparity index." Id. An index of 100 represents statistical parity
between availability and utilization, and a number below 100 indicates underutilization. Id. An
index below 80 is considered a substantial disparity that supports an inference of
discrimination. Id.
The Court found the research firm and the disparity study gathered extensive data to calculate
disadvantaged business availability in the California transportation contracting industry. Id. at
1191. The Court stated: "Based on review of public records, interviews, assessments as to
whether a firm could be considered available, for Caltrans contracts, as well as numerous other
adjustments, the firm concluded that minority and womenowned businesses should be
expected to receive 13.5% of contact dollars from Caltrans administered federally assisted
contracts." Id. At 11911192
The Court said the research firm "examined over 10,000 transportationrelated contracts
administered by Caltrans between 2002 and 2006 to determine actual DBE utilization. The firm
assessed disparities across a variety of contracts, separately assessing contracts based on
funding source (state or federal), type of contract (prime or subcontract), and type of project
(engineering or construction)." Id. at 1192.
The Court pointed out a key difference between federally funded and state funded contracts is
that raceconscious goals were in place for the federally funded contracts during the 20022006
period, but not for the state funded contracts. Id. at 1192. Thus, the Court stated: "state funded
contracts functioned as a control group to help determine whether previous affirmative action
programs skewed the data." Id.
Moreover, the Court found the research firm measured disparities in all twelve of Caltrans'
administrative districts, and computed aggregate disparities based on statewide data. Id. at
1192. The firm evaluated statistical disparities by race and gender. The Court stated that within
and across many categories of contracts, the research firm found substantial statistical
disparities for African American, AsianPacific, and Native American firms. Id. However, the
research firm found that there were not substantial disparities for these minorities in every
subcategory of contract. Id. The Court noted that the disparity study also found substantial
disparities in utilization of womenowned firms for some categories of contracts. Id. After
publication of the disparity study, the Court pointed out the research firm calculated disparity
indices for all womenowned firms, including female minorities, showing substantial disparities
in the utilization of all womenowned firms similar to those measured for white women. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 29
The Court found that the disparity study and Caltrans also developed extensive anecdotal
evidence, by (1) conducting twelve public hearings to receive comments on the firm's findings;
(2) receiving letters from business owners and trade associations; and (3) interviewing
representatives from twelve trade associations and 79 owners/managers of transportation
firms. Id. at 1192. The Court stated that some of the anecdotal evidence indicated discrimination
based on race or gender. Id.
Caltrans' DBE Program. Caltrans concluded that the evidence from the disparity study supported
an inference of discrimination in the California transportation contracting industry. Id. at 1192
1193. Caltrans concluded that it had sufficient evidence to make race and genderconscious
goals for African American, AsianPacific American, Native American, and womenowned
firms. Id. The Court stated that Caltrans adopted the recommendations of the disparity report
and set an overall goal of 13.5% for disadvantaged business participation. Caltrans expected to
meet onehalf of the 13.5% goal using raceneutral measures. Id.
Caltrans submitted its proposed DBE program to the U.S. DOT for approval, including a request
for a waiver to implement the program only for the four identified groups. Id. at 1193. The
Caltrans' DBE program included 66 raceneutral measures that Caltrans already operated or
planned to implement, and subsequent proposals increased the number of raceneutral
measures to 150. Id. The U.S. DOT granted the waiver, but initially did not approve Caltrans' DBE
program until in 2009, the DOT approved Caltrans' DBE program for fiscal year 2009.
District Court Proceedings. AGC then filed a complaint alleging that Caltrans' implementation of
the federal DBE program violated the Fourteenth Amendment of the U.S. Constitution, Title VI of
the Civil Rights Act, and other laws. Ultimately, the AGC only argued an asapplied challenge to
Caltrans' DBE program. The district court on motions of summary judgment held that Caltrans'
program was "clearly constitutional," as it "was supported by a strong basis in evidence of
discrimination in the California contracting industry and was narrowly tailored to those groups
which had actually suffered discrimination. Id. at 1193.
Subsequent Caltrans Study and Program. While the appeal by the AGC was pending, Caltrans
commissioned a new disparity study from BBC to update its DBE program as required by the
federal regulations. Id. at 1193. In August 2012, BBC published its second disparity report, and
Caltrans concluded that the updated study provided evidence of continuing discrimination in
the California transportation contracting industry against the same four groups and Hispanic
Americans. Id. Caltrans submitted a modified DBE program that is nearly identical to the
program approved in 2009, except that it now includes Hispanic Americans and sets an overall
goal of 12.5%, of which 9.5% will be achieved through race and genderconscious measures. Id.
The U.S. DOT approved Caltrans' updated program in November 2012. Id.
Jurisdiction Issue. Initially, the Ninth Circuit Court of Appeals considered whether it had
jurisdiction over the AGC's appeal based on the doctrines of mootness and standing. The Court
held that the appeal is not moot because Caltrans' new DBE program is substantially similar to
the prior program and is alleged to disadvantage AGC's members "in the same fundamental
way" as the previous program. Id. at 1194.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 30
The Court, however, held that the AGC did not establish associational standing. Id. at 11941195:
The Court found that the AGC did not identify any affected members by name nor has it
submitted declarations by any of its members attesting to harm they have suffered or will suffer
under Caltrans' program. Id. at 11941195. Because AGC failed to establish standing, the Court
held it must dismiss the appeal due to lack of jurisdiction. Id. at 1195.
Caltrans' DBE Program Held Constitutional on the Merits. The Court then held that even if AGC
could establish standing, its appeal would fail. Id. at 1195. The Court held that Caltrans' DBE
program is constitutional because it survives the applicable level of scrutiny required by the
Equal Protection Clause and jurisprudence. Id. at 11951200.
The Court stated that raceconscious remedial programs must satisfy strict scrutiny and that
although strict scrutiny is stringent, it is not "fatal in fact." Id. at 1195 (quoting Adarand
Constructors, Inc. v. Pea, 515 U.S. 200, 237 (1995) (Adarand III)). The Court quoted Adarand III:
"The unhappy persistence of both the practice and the lingering effects of racial discrimination
against minority groups in this country is an unfortunate reality, and government is not
disqualified from acting in response to it." Id. (quoting Adarand III, 515 U.S. at 237.)
The Court pointed out that genderconscious programs must satisfy intermediate scrutiny
which requires that genderconscious programs be supported by an 'exceedingly persuasive
justification' and be substantially related to the achievement of that underlying objective. Id. at
1195 (citing Western States Paving, 407 F.3d at 990 n. 6.).
The Court held that Caltrans' DBE program contains both race and genderconscious measures,
and that the "entire program passes strict scrutiny." Id. at 1195.
A. Application of Strict Scrutiny Standard Articulated in Western States Paving. The Court held
that the framework for AGC's asapplied challenge to Caltrans' DBE program is governed by
Western States Paving. The Ninth Circuit in Western States Paving devised a twopronged test for
narrow tailoring: (1) the state must establish the presence of discrimination within its
transportation contracting industry, and (2) the remedial program must be "limited to those
minority groups that have actually suffered discrimination." Id. at 11951196 (quoting Western
States Paving, 407 F.3d at 99799).
1. Evidence of Discrimination in California Contracting Industry. The Court held that in Equal
Protection cases, courts consider statistical and anecdotal evidence to identify the existence of
discrimination. Id. at 1196. The U.S. Supreme Court has suggested that a "significant statistical
disparity" could be sufficient to justify raceconscious remedial programs. Id. at 1196 (citing City
of Richmond v. J.A. Croson Co., 488 U.S. 469, 509 (1989)). The Court stated that although
generally not sufficient, anecdotal evidence complements statistical evidence because of its
ability to bring "the cold numbers convincingly to life." Id. (quoting Int'l Bhd. of Teamsters v.
United States, 431 U.S. 324, 339 (1977)).
The Court pointed out that Washington DOT's DBE program in the Western States Paving case
was held invalid because Washington DOT had performed no statistical studies and it offered no
anecdotal evidence. Id. at 1196. The Court also stated that the Washington DOT used an
oversimplified methodology resulting in little weight being given by the Court to the purported
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 31
disparity because Washington's data "did not account for the relative capacity of disadvantaged
businesses to perform work, nor did it control for the fact that existing affirmative action
programs skewed the prior utilization of minority businesses in the state." Id. (quoting Western
States Paving, 407 F.3d at 9991001). The Court said that it struck down Washington's program
after determining that the record was devoid of any evidence suggesting that minorities
currently suffer or have ever suffered discrimination in the Washington transportation
contracting industry." Id.
Significantly, the Court held in this case as follows: "In contrast, Caltrans' affirmative action
program is supported by substantial statistical and anecdotal evidence of discrimination in the
California transportation contracting industry." Id. at 1196. The Court noted that the disparity
study documented disparities in many categories of transportation firms and the utilization of
certain minority and womenowned firms. Id. The Court found the disparity study "accounted
for the factors mentioned in Western States Paving as well as others, adjusting availability data
based on capacity to perform work and controlling for previously administered affirmative
action programs." Id. (citing Western States, 407 F.3d at 1000).
The Court also held: "Moreover, the statistical evidence from the disparity study is bolstered by
anecdotal evidence supporting an inference of discrimination. The substantial statistical
disparities alone would give rise to an inference of discrimination, see Croson, 488 U.S. at 509,
and certainly Caltrans' statistical evidence combined with anecdotal evidence passes
constitutional muster." Id. at 1196.
The Court specifically rejected the argument by AGC that strict scrutiny requires Caltrans to
provide evidence of "specific acts" of "deliberate" discrimination by Caltrans employees or
prime contractors. Id. at 11961197. The Court found that the Supreme Court in Croson explicitly
states that "[t]he degree of specificity required in the findings of discrimination may vary." Id.
at 1197 (quoting Croson, 488 U.S. at 489). The Court concluded that a rule requiring a state to
show specific acts of deliberate discrimination by identified individuals would run contrary to
the statement in Croson that statistical disparities alone could be sufficient to support race
conscious remedial programs. Id. (citing Croson, 488 U.S. at 509). The Court rejected AGC's
argument that Caltrans' program does not survive strict scrutiny because the disparity study
does not identify individual acts of deliberate discrimination. Id.
The Court rejected a second argument by AGC that this study showed inconsistent results for
utilization of minority businesses depending on the type and nature of the contract, and thus
cannot support an inference of discrimination in the entire transportation contracting industry.
Id. at 1197. AGC argued that each of these subcategories of contracts must be viewed in isolation
when considering whether an inference of discrimination arises, which the Court rejected. Id.
The Court found that AGC's argument overlooks the rationale underpinning the constitutional
justification for remedial raceconscious programs: they are designed to root out "patterns of
discrimination." Id. quoting Croson, 488 U.S. at 504.
The Court stated that the issue is not whether Caltrans can show underutilization of
disadvantaged businesses in every measured category of contract. But rather, the issue is
whether Caltrans can meet the evidentiary standard required by Western States Paving if,
looking at the evidence in its entirety, the data show substantial disparities in utilization of
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 32
minority firms suggesting that public dollars are being poured into "a system of racial exclusion
practiced by elements of the local construction industry." Id. at 1197 quoting Croson 488 U.S. at
492.
The Court concluded that the disparity study and anecdotal evidence document a pattern of
disparities for the four groups, and that the study found substantial underutilization of these
groups in numerous categories of California transportation contracts, which the anecdotal
evidence confirms. Id. at 1197. The Court held this is sufficient to enable Caltrans to infer that
these groups are systematically discriminated against in publiclyfunded contracts. Id.
Third, the Court considered and rejected AGC's argument that the anecdotal evidence has little
or no probative value in identifying discrimination because it is not verified. Id. at 1197. The
Court noted that the Fourth and Tenth Circuits have rejected the need to verify anecdotal
evidence, and the Court stated the AGC made no persuasive argument that the Ninth Circuit
should hold otherwise. Id.
The Court pointed out that AGC attempted to discount the anecdotal evidence because some
accounts ascribe minority underutilization to factors other than overt discrimination, such as
difficulties with obtaining bonding and breaking into the "good ole boy" network of contractors.
Id. at 11971198. The Court held, however, that the federal courts and regulations have
identified precisely these factors as barriers that disadvantage minority firms because of the
lingering effects of discrimination. Id at 1198., citing Western States, 407 and AGCC II, 950 F.2d at
1414.
The Court found that AGC ignores the many incidents of racial and gender discrimination
presented in the anecdotal evidence. Id. at 1198. The Court said that Caltrans does not claim, and
the anecdotal evidence does not need to prove, that every minorityowned business is
discriminated against. Id. The Court concluded : "It is enough that the anecdotal evidence
supports Caltrans' statistical data showing a pervasive pattern of discrimination." Id. The
individual accounts of discrimination offered by Caltrans, according to the Court, met this
burden. Id.
Fourth, the Court rejected AGC's contention that Caltrans' evidence does not support an
inference of discrimination against all women because genderbased disparities in the study are
limited to white women. Id. at 1198. AGC, the Court said, misunderstands the statistical
techniques used in the disparity study, and that the study correctly isolates the effect of gender
by limiting its data pool to white women, ensuring that statistical results for genderbased
discrimination are not skewed by discrimination against minority women on account of their
race. Id.
In addition, after AGC's early incorrect objections to the methodology, the research firm
conducted a followup analysis of all womenowned firms that produced a disparity index of 59.
Id. at 1198. The Court held that this index is evidence of a substantial disparity that raises an
inference of discrimination and is sufficient to support Caltrans' decision to include all women in
its DBE program. Id. at 1195.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 33
2. Program Tailored to Groups Who Actually Suffered Discrimination. The Court pointed out
that the second prong of the test articulated in Western States Paving requires that a DBE
program be limited to those groups that actually suffered discrimination in the state's
contracting industry. Id. at 1198. The Court found Caltrans' DBE program is limited to those
minority groups that have actually suffered discrimination. Id. The Court held that the 2007
disparity study showed systematic and substantial underutilization of African American, Native
American, AsianPacific American, and womenowned firms across a range of contract
categories. Id. at 11981199. These disparities, according to the Court, support an inference of
discrimination against those groups. Id.
Caltrans concluded that the statistical evidence did not support an inference of a pattern of
discrimination against Hispanic or Subcontinent Asian Americans. Id. at 1199. California applied
for and received a waiver from the US DOT in order to limit its 2009 program to African
American, Native American, AsianPacific American, and womenowned firms. Id. The Court held
that Caltrans' program "adheres precisely to the narrow tailoring requirements of Western
States." Id.
The Court rejected the AGC contention that the DBE program is not narrowly tailored because it
creates racebased preferences for all transportationrelated contracts, rather than
distinguishing between construction and engineering contracts. Id. at 1199. The Court stated
that AGC cited no case that requires a state preference program to provide separate goals for
disadvantaged business participation on construction and engineering contracts. Id. The Court
noted that to the contrary, the federal guidelines for implementing the federal program instruct
states not to separate different types of contracts. Id. The Court found there are "sound policy
reasons to not require such parsing, including the fact that there is substantial overlap in firms
competing for construction and engineering contracts, as prime and subcontractors." Id.
B. Consideration of RaceNeutral Alternatives. The Court rejected the AGC assertion that
Caltrans' program is not narrowly tailored because it failed to evaluate raceneutral measures
before implementing the system of racial preferences, and stated the law imposes no such
requirement. Id. at 1199. The Court held that Western States Paving does not require states to
independently meet this aspect of narrow tailoring, and instead focuses on whether the federal
statute sufficiently considered raceneutral alternatives. Id.
Second, the Court found that even if this requirement does apply to Caltrans' program, narrow
tailoring only requires "serious, good faith consideration of workable raceneutral alternatives.
Id. at 1199, citing Grutter v. Bollinger, 539 U.S. 306, 339 (2003). The Court found that the
Caltrans program has considered an increasing number of raceneutral alternatives, and it
rejected AGC's claim that Caltrans' program does not sufficiently consider raceneutral
alternatives. Id. at 1199.
C. Certification Affidavits for Disadvantaged Business Enterprises. The Court rejected the AGC
argument that Caltrans' program is not narrowly tailored because affidavits that applicants
must submit to obtain certification as DBEs do not require applicants to assert they have
suffered discrimination in California. Id. at 11991200. The Court held the certification process
employed by Caltrans follows the process detailed in the federal regulations, and that this is an
impermissible collateral attack on the facial validity of the Congressional Act authorizing the
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 34
federal DBE program and the federal regulations promulgated by the U.S. DOT (The Safe,
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, Pub.L.No. 10959,
1101(b), 119 Sect. 1144 (2005)). Id. at 1200.
D. Application of Program to Mixed State and Federally Funded Contracts. The Court also
rejected AGC's challenge that Caltrans applies its program to transportation contracts funded by
both federal and state money. Id. at 1200. The Court held that this is another impermissible
collateral attack on the federal program, which explicitly requires goals to be set for mixfunded
contracts. Id.
E. CONCLUSION. The Court concluded that the AGC did not have standing, and that further,
Caltrans' DBE program survives strict scrutiny by: 1) having a strong basis in evidence of
discrimination within the California transportation contracting industry, and 2) being narrowly
tailored to benefit only those groups that have actually suffered discrimination. Id. at 1200. The
Court then dismissed the appeal. Id.
2. Associated General Contractors of America, San Diego Chapter, Inc. v.
California Department of Transportation, et al., U.S.D.C., E.D. Cal. Civil
Action No. S091622, Slip Opinion (E.D. Cal. April 20, 2011), appeal
dismissed based on standing, on other grounds Ninth Circuit held Caltrans'
DBE Program constitutional, Associated General Contractors of America,
San Diego Chapter, Inc. v. California Department of Transportation, et al.,
713 F.3d 1187 (9th Cir. April 16, 2013)
This case involved a challenge by the Associated General Contractors of America, San Diego
Chapter, Inc. ("AGC") against the California Department of Transportation ("Caltrans"), to the
DBE program adopted by Caltrans implementing the Federal DBE Program at 49 C.F.R. Part 26.
The AGC sought an injunction against Caltrans enjoining its use of the DBE program and
declaratory relief from the court declaring the Caltrans DBE program to be unconstitutional.
Caltrans' DBE program set a 13.5 percent DBE goal for its federallyfunded contracts. The 13.5
percent goal, as implemented by Caltrans, included utilizing half raceneutral means and half
raceconscious means to achieve the goal. Slip Opinion Transcript at 42. Caltrans did not include
all minorities in the raceconscious component of its goal, excluding Hispanic males and
Subcontinent Asian American males. Id. at 42. Accordingly, the raceconscious component of the
Caltrans DBE program applied only to African Americans, Native Americans, Asian Pacific
Americans, and white women. Id.
Caltrans established this goal and its DBE program following a disparity study conducted by BBC
Research & Consulting, which included gathering statistical and anecdotal evidence of race and
gender disparities in the California construction industry. Slip Opinion Transcript at 42.
The parties filed motions for summary judgment. The district court issued its ruling at the
hearing on the motions for summary judgment granting Caltrans' motion for summary judgment
in support of its DBE program and denying the motion for summary judgment filed by the
plaintiffs. Slip Opinion Transcript at 54. The court held Caltrans' DBE program applying and
implementing the provisions of the Federal DBE Program is valid and constitutional. Id. at 56.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 35
The district court analyzed Caltrans' implementation of the DBE program under the strict
scrutiny doctrine and found the burden of justifying different treatment by ethnicity or gender is
on the government. The district court applied the Ninth Circuit Court of Appeals ruling in
Western States Paving Company v. Washington State DOT, 407 F.3d 983 (9th Cir. 2005). The court
stated that the federal government has a compelling interest "in ensuring that its funding is not
distributed in a manner that perpetuates the effects of either public or private discrimination
within the transportation contracting industry." Slip Opinion Transcript at 43, quoting Western
States Paving, 407 F.3d at 991, citing City of Richmond v. J.A. Croson Company, 488 U.S. 469
(1989).
The district court pointed out that the Ninth Circuit in Western States Paving and the Tenth
Circuit Court of Appeals and the Eighth Circuit Court of Appeals have upheld the facial validity of
the Federal DBE Program.
The district court stated that based on Western States Paving, the court is required to look at the
Caltrans DBE program itself to see if there is a strong basis in evidence to show that Caltrans is
acting for a proper purpose and if the program itself has been narrowly tailored. Slip Opinion
Transcript at 45. The court concluded that narrow tailoring "does not require exhaustion of
every conceivable raceneutral alternative, but it does require serious, goodfaith consideration
of workable raceneutral alternatives." Slip Opinion Transcript at 45.
The district court identified the issues as whether Caltrans has established a compelling interest
supported by a strong basis in evidence for its program, and does Caltrans' raceconscious
program meet the strict scrutiny required. Slip Opinion Transcript at 5152. The court also
phrased the issue as whether the Caltrans DBE program, "which does give preference based on
race and sex, whether that program is narrowly tailored to remedy the effects of identified
discrimination", and whether Caltrans has complied with the Ninth Circuit's guidance in
Western States Paving. Slip Opinion Transcript at 52.
The district court held "that Caltrans has done what the Ninth Circuit has required it to do, what
the federal government has required it to do, and that it clearly has implemented a program
which is supported by a strong basis in evidence that gives rise to a compelling interest, and that
its raceconscious program, the aspect of the program that does implement raceconscious
alternatives, it does under a strictscrutiny standard meet the requirement that it be narrowly
tailored as set forth in the case law." Slip Opinion Transcript at 52.
The court rejected the plaintiff's arguments that anecdotal evidence failed to identify specific
acts of discrimination, finding "there are numerous instances of specific discrimination." Slip
Opinion Transcript at 52. The district court found that after the Western States Paving case,
Caltrans went to a racially neutral program, and the evidence showed that the program would
not meet the goals of the federallyfunded program, and the federal government became
concerned about what was going on with Caltrans' program applying only raceneutral
alternatives. Id. at 5253. The court then pointed out that Caltrans engaged in an "extensive
disparity study, anecdotal evidence, both of which is what was missing" in the Western States
Paving case. Id. at 53.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 36
The court concluded that Caltrans "did exactly what the Ninth Circuit required" and that
Caltrans has gone "as far as is required." Slip Opinion Transcript at 53.
The court held that as a matter of law, the Caltrans DBE program is, under Western States Paving
and the Supreme Court cases, "clearly constitutional," and "narrowly tailored." Slip Opinion
Transcript at 56. The court found there are significant differences between Caltrans' program
and the program in the Western States Paving case. Id. at 5455. In Western States Paving, the
court said there were no statistical studies performed to try and establish the discrimination in
the highway contracting industry, and that Washington simply compared the proportion of DBE
firms in the state with the percentage of contracting funds awarded to DBEs on raceneutral
contracts to calculate a disparity. Id. at 55.
The district court stated that the Ninth Circuit in Western States Paving found this to be
oversimplified and entitled to little weight "because it did not take into account factors that may
affect the relative capacity of DBEs to undertake contracting work." Slip Opinion Transcript at
55. Whereas, the district court held the "disparity study used by Caltrans was much more
comprehensive and accounted for this and other factors." Id. at 55. The district noted that the
State of Washington did not introduce any anecdotal information. The difference in this case, the
district court found, "is that the disparity study includes both extensive statistical evidence, as
well as anecdotal evidence gathered through surveys and public hearings, which support the
statistical findings of the underutilization faced by DBEs without the DBE program. Add to that
the anecdotal evidence submitted in support of the summary judgment motion as well. And this
evidence before the Court clearly supports a finding that this program is constitutional." Id. at
56.
The court held that because "Caltrans' DBE program is based on substantial statistical and
anecdotal evidence of discrimination in the California contracting industry and because the
Court finds that it is narrowly tailored, the Court upholds the program as constitutional." Slip
Opinion Transcript at 56.
The decision of the district court was appealed to the Ninth Circuit Court of Appeals. The Ninth
Circuit dismissed the appeal based on lack of standing by the AGC, San Diego Chapter, but ruled
on the merits on alternative grounds holding constitutional Caltrans' DBE Program. See
discussion above of AGC, SDC v. Cal. DOT, 713 F. 3d 1187 (9th Cir. April 16, 2013).
3. Western States Paving Co. v. Washington State DOT, 407 F.3d 983 (9th Cir.
2005), cert. denied, 546 U.S. 1170 (2006)
This case out of the Ninth Circuit struck down a state's implementation of the Federal DBE
Program for failure to pass constitutional muster. In Western States Paving, the Ninth Circuit
held that the State of Washington's implementation of the Federal DBE Program was
unconstitutional because it did not satisfy the narrow tailoring element of the constitutional
test. The Ninth Circuit held that the State must present its own evidence of past discrimination
within its own boundaries in order to survive constitutional muster and could not merely rely
upon data supplied by Congress. The United States Supreme Court denied certiorari. The
analysis in the decision also is instructive in particular as to the application of the narrowly
tailored prong of the strict scrutiny test.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 37
Plaintiff Western States Paving Co. ("plaintiff") was a white maleowned asphalt and paving
company. 407 F.3d 983, 987 (9th Cir. 2005). In July of 2000, plaintiff submitted a bid for a project
for the City of Vancouver; the project was financed with federal funds provided to the
Washington State DOT ("WSDOT") under the Transportation Act for the 21st Century ("TEA
21"). Id.
Congress enacted TEA21 in 1991 and after multiple renewals, it was set to expire on May 31,
2004. Id. at 988. TEA21 established minimum minorityowned business participation
requirements (10%) for certain federallyfunded projects. Id. The regulations require each state
accepting federal transportation funds to implement a DBE program that comports with the
TEA21. Id. TEA21 indicates the 10 percent DBE utilization requirement is "aspirational," and
the statutory goal "does not authorize or require recipients to set overall or contract goals at the
10 percent level, or any other particular level, or to take any special administrative steps if their
goals are above or below 10 percent." Id.
TEA21 sets forth a twostep process for a state to determine its own DBE utilization goal: (1)
the state must calculate the relative availability of DBEs in its local transportation contracting
industry (one way to do this is to divide the number of ready, willing and able DBEs in a state by
the total number of ready, willing and able firms); and (2) the state is required to "adjust this
base figure upward or downward to reflect the proven capacity of DBEs to perform work (as
measured by the volume of work allocated to DBEs in recent years) and evidence of
discrimination against DBEs obtained from statistical disparity studies." Id. at 989 (citing
regulation). A state is also permitted to consider discrimination in the bonding and financing
industries and the present effects of past discrimination. Id. (citing regulation). TEA21 requires
a generalized, "undifferentiated" minority goal and a state is prohibited from apportioning their
DBE utilization goal among different minority groups (e.g., between Hispanics, blacks, and
women). Id. at 990 (citing regulation).
"A state must meet the maximum feasible portion of this goal through race [and gender]
neutral means, including informational and instructional programs targeted toward all small
businesses." Id. (citing regulation). Race and genderconscious contract goals must be used to
achieve any portion of the contract goals not achievable through race and genderneutral
measures. Id. (citing regulation). However, TEA21 does not require that DBE participation goals
be used on every contract or at the same level on every contract in which they are used; rather,
the overall effect must be to "obtain that portion of the requisite DBE participation that cannot
be achieved through race [and gender] neutral means." Id. (citing regulation).
A prime contractor must use "good faith efforts" to satisfy a contract's DBE utilization goal. Id.
(citing regulation). However, a state is prohibited from enacting rigid quotas that do not
contemplate such good faith efforts. Id. (citing regulation).
Under the TEA21 minority utilization requirements, the City set a goal of 14 percent minority
participation on the first project plaintiff bid on; the prime contractor thus rejected plaintiff's
bid in favor of a higher bidding minorityowned subcontracting firm. Id. at 987. In September of
2000, plaintiff again submitted a bid on a project financed with TEA21 funds and was again
rejected in favor of a higher bidding minorityowned subcontracting firm. Id. The prime
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 38
contractor expressly stated that he rejected plaintiff's bid due to the minority utilization
requirement. Id.
Plaintiff filed suit against the WSDOT, Clark County, and the City, challenging the minority
preference requirements of TEA21 as unconstitutional both facially and as applied. Id. The
district court rejected both of plaintiff's challenges. The district court held the program was
facially constitutional because it found that Congress had identified significant evidence of
discrimination in the transportation contracting industry and the TEA21 was narrowly tailored
to remedy such discrimination. Id. at 988. The district court rejected the asapplied challenge
concluding that Washington's implementation of the program comported with the federal
requirements and the state was not required to demonstrate that its minority preference
program independently satisfied strict scrutiny. Id. Plaintiff appealed to the Ninth Circuit Court
of Appeals. Id.
The Ninth Circuit considered whether the TEA21, which authorizes the use of race and gender
based preferences in federallyfunded transportation contracts, violated equal protection, either
on its face or as applied by the State of Washington.
The court applied a strict scrutiny analysis to both the facial and asapplied challenges to TEA
21. Id. at 99091. The court did not apply a separate intermediate scrutiny analysis to the
genderbased classifications because it determined that it "would not yield a different result." Id.
at 990, n. 6.
Facial challenge (Federal Government). The court first noted that the federal government has a
compelling interest in "ensuring that its funding is not distributed in a manner that perpetuates
the effects of either public or private discrimination within the transportation contracting
industry." Id. at 991, citing City of Richmond v. J.A. Croson Co., 488 U.S. 469, 492 (1989) and
Adarand Constructors, Inc. v. Slater ("Adarand VII"), 228 F.3d 1147, 1176 (10th Cir. 2000). The
court found that "[b]oth statistical and anecdotal evidence are relevant in identifying the
existence of discrimination." Id. at 991. The court found that although Congress did not have
evidence of discrimination against minorities in every state, such evidence was unnecessary for
the enactment of nationwide legislation. Id. However, citing both the Eighth and Tenth Circuits,
the court found that Congress had ample evidence of discrimination in the transportation
contracting industry to justify TEA21. Id. The court also found that because TEA21 set forth
flexible raceconscious measures to be used only when raceneutral efforts were unsuccessful,
the program was narrowly tailored and thus satisfied strict scrutiny. Id. at 99293. The court
accordingly rejected plaintiff's facial challenge. Id.
Asapplied challenge (State of Washington). Plaintiff alleged TEA21 was unconstitutional as
applied because there was no evidence of discrimination in Washington's transportation
contracting industry. Id. at 995. The State alleged that it was not required to independently
demonstrate that its application of TEA21 satisfied strict scrutiny. Id. The United States
intervened to defend TEA21's facial constitutionality, and "unambiguously conceded that TEA
21's race conscious measures can be constitutionally applied only in those states where the
effects of discrimination are present." Id. at 996; see also Br. for the United States at 28 (April 19,
2004) ("DOT's regulations are designed to assist States in ensuring that raceconscious
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 39
remedies are limited to only those jurisdictions where discrimination or its effects are a problem
and only as a last resort when raceneutral relief is insufficient." (emphasis in original)).
The court found that the Eighth Circuit was the only other court to consider an asapplied
challenge to TEA21 in Sherbrooke Turf, Inc. v. Minnesota DOT, 345 F.3d 964 (8th Cir. 2003), cert.
denied 124 S. Ct. 2158 (2004). Id. at 996. The Eighth Circuit did not require Minnesota and
Nebraska to identify a compelling purpose for their programs independent of Congress's
nationwide remedial objective. Id. However, the Eighth Circuit did consider whether the states'
implementation of TEA21 was narrowly tailored to achieve Congress's remedial objective. Id.
The Eighth Circuit thus looked to the states' independent evidence of discrimination because "to
be narrowly tailored, a national program must be limited to those parts of the country where its
racebased measures are demonstrably needed." Id. (internal citations omitted). The Eighth
Circuit relied on the states' statistical analyses of the availability and capacity of DBEs in their
local markets conducted by outside consulting firms to conclude that the states satisfied the
narrow tailoring requirement. Id. at 997.
The court concurred with the Eighth Circuit and found that Washington did not need to
demonstrate a compelling interest for its DBE program, independent from the compelling
nationwide interest identified by Congress. Id. However, the court determined that the district
court erred in holding that mere compliance with the federal program satisfied strict scrutiny.
Id. Rather, the court held that whether Washington's DBE program was narrowly tailored was
dependent on the presence or absence of discrimination in Washington's transportation
contracting industry. Id. at 99798. "If no such discrimination is present in Washington, then the
State's DBE program does not serve a remedial purpose; it instead provides an unconstitutional
windfall to minority contractors solely on the basis of their race or sex." Id. at 998. The court
held that a Sixth Circuit decision to the contrary, Tennessee Asphalt Co. v. Farris, 942 F.2d 969,
970 (6th Cir. 1991), misinterpreted earlier case law. Id. at 997, n. 9.
The court found that moreover, even where discrimination is present in a state, a program is
narrowly tailored only if it applies only to those minority groups who have actually suffered
discrimination. Id. at 998, citing Croson, 488 U.S. at 478. The court also found that in Monterey
Mechanical Co. v. Wilson, 125 F.3d 702, 713 (9th Cir. 1997), it had "previously expressed similar
concerns about the haphazard inclusion of minority groups in affirmative action programs
ostensibly designed to remedy the effects of discrimination." Id. In Monterey Mechanical, the
court held that "the overly inclusive designation of benefited minority groups was a 'red flag
signaling that the statute is not, as the Equal Protection Clause requires, narrowly tailored.'" Id.,
citing Monterey Mechanical, 125 F.3d at 714. The court found that other courts are in accord. Id.
at 99899, citing Builders Ass'n of Greater Chi. v. County of Cook, 256 F.3d 642, 647 (7th Cir. 2001);
Associated Gen. Contractors of Ohio, Inc. v. Drabik, 214 F.3d 730, 737 (6th Cir. 2000); O'Donnell
Constr. Co. v. District of Columbia, 963 F.2d 420, 427 (D.C. Cir. 1992). Accordingly, the court
found that each of the principal minority groups benefited by WSDOT's DBE program must have
suffered discrimination within the State. Id. at 999.
The court found that WSDOT's program closely tracked the sample USDOT DBE program. Id.
WSDOT calculated its DBE participation goal by first calculating the availability of ready, willing
and able DBEs in the State (dividing the number of transportation contracting firms in the
Washington State Office of Minority, Women and Disadvantaged Business Enterprises Directory
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 40
by the total number of transportation contracting firms listed in the Census Bureau's
Washington database, which equaled 11.17%). Id. WSDOT then upwardly adjusted the 11.17
percent base figure to 14 percent "to account for the proven capacity of DBEs to perform work,
as reflected by the volume of work performed by DBEs [during a certain time period]." Id.
Although DBEs performed 18 percent of work on State projects during the prescribed time
period, Washington set the final adjusted figure at 14 percent because TEA21 reduced the
number of eligible DBEs in Washington by imposing more stringent certification requirements.
Id. at 999, n. 11. WSDOT did not make an adjustment to account for discriminatory barriers in
obtaining bonding and financing. Id. WSDOT similarly did not make any adjustment to reflect
present or past discrimination "because it lacked any statistical studies evidencing such
discrimination." Id.
WSDOT then determined that it needed to achieve 5 percent of its 14 percent goal through race
conscious means based on a 9 percent DBE participation rate on statefunded contracts that did
not include affirmative action components (i.e., 9% participation could be achieved through
raceneutral means). Id. at 1000. The USDOT approved WSDOT goalsetting program and the
totality of its 2000 DBE program. Id.
Washington conceded that it did not have statistical studies to establish the existence of past or
present discrimination. Id. It argued, however, that it had evidence of discrimination because
minorityowned firms had the capacity to perform 14 percent of the State's transportation
contracts in 2000 but received only 9 percent of the subcontracting funds on contracts that did
not include an affirmative action's component. Id. The court found that the State's methodology
was flawed because the 14 percent figure was based on the earlier 18 percent figure, discussed
supra, which included contracts with affirmative action components. Id. The court concluded
that the 14 percent figure did not accurately reflect the performance capacity of DBEs in a race
neutral market. Id. The court also found the State conceded as much to the district court. Id.
The court held that a disparity between DBE performance on contracts with an affirmative
action component and those without "does not provide any evidence of discrimination against
DBEs." Id. The court found that the only evidence upon which Washington could rely was the
disparity between the proportion of DBE firms in the State (11.17%) and the percentage of
contracts awarded to DBEs on raceneutral grounds (9%). Id. However, the court determined
that such evidence was entitled to "little weight" because it did not take into account a multitude
of other factors such as firm size. Id.
Moreover, the court found that the minimal statistical evidence was insufficient evidence,
standing alone, of discrimination in the transportation contracting industry. Id. at 1001. The
court found that WSDOT did not present any anecdotal evidence. Id. The court rejected the
State's argument that the DBE applications themselves constituted evidence of past
discrimination because the applications were not properly in the record, and because the
applicants were not required to certify that they had been victims of discrimination in the
contracting industry. Id. Accordingly, the court held that because the State failed to proffer
evidence of discrimination within its own transportation contracting market, its DBE program
was not narrowly tailored to Congress's compelling remedial interest. Id. at 100203.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 41
The court affirmed the district court's grant on summary judgment to the United States
regarding the facial constitutionality of TEA21, reversed the grant of summary judgment to
Washington on the asapplied challenge, and remanded to determine the State's liability for
damages.
The dissent argued that where the State complied with TEA21 in implementing its DBE
program, it was not susceptible to an asapplied challenge.
4. Western States Paving Co. v. Washington DOT, US DOT & FHWA, 2006 WL
1734163 (W.D. Wash. June 23, 2006) (unpublished opinion)
This case was before the district court pursuant to the Ninth Circuit's remand order in Western
States Paving Co. Washington DOT, US DOT, and FHWA, 407 F.3d 983 (9th Cir. 2005), cert. denied,
546 U.S. 1170 (2006). In this decision, the district court adjudicated cross Motions for Summary
Judgment on plaintiff's claim for injunction and for damages under 42 U.S.C. 1981, 1983, and
2000d.
Because the WSDOT voluntarily discontinued its DBE program after the Ninth Circuit decision,
supra, the district court dismissed plaintiff's claim for injunctive relief as moot. The court found
"it is absolutely clear in this case that WSDOT will not resume or continue the activity the Ninth
Circuit found unlawful in Western States," and cited specifically to the informational letters
WSDOT sent to contractors informing them of the termination of the program.
Second, the court dismissed Western States Paving's claims under 42 U.S.C. 1981, 1983, and
2000d against Clark County and the City of Vancouver holding neither the City or the County
acted with the requisite discriminatory intent. The court held the County and the City were
merely implementing the WSDOT's unlawful DBE program and their actions in this respect were
involuntary and required no independent activity. The court also noted that the County and the
City were not parties to the precise discriminatory actions at issue in the case, which occurred
due to the conduct of the "State defendants." Specifically, the WSDOT and not the County or
the City developed the DBE program without sufficient anecdotal and statistical evidence, and
improperly relied on the affidavits of contractors seeking DBE certification "who averred that
they had been subject to 'general societal discrimination.'"
Third, the court dismissed plaintiff's 42 U.S.C. 1981 and 1983 claims against WSDOT, finding
them barred by the Eleventh Amendment sovereign immunity doctrine. However, the court
allowed plaintiff's 42 U.S.C. 2000d claim to proceed against WSDOT because it was not
similarly barred. The court held that Congress had conditioned the receipt of federal highway
funds on compliance with Title VI (42 U.S.C. 2000d et seq.) and the waiver of sovereign
immunity from claims arising under Title VI. Section 2001 specifically provides that "a State
shall not be immune under the Eleventh Amendment of the Constitution of the United States
from suit in Federal court for a violation of Title VI." The court held that this language put the
WSDOT on notice that it faced private causes of action in the event of noncompliance.
The court held that WSDOT's DBE program was not narrowly tailored to serve a compelling
government interest. The court stressed that discriminatory intent is an essential element of a
plaintiff's claim under Title VI. WSDOT argued that even if sovereign immunity did not bar
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 42
plaintiff's 2000d claim, WSDOT could not be held liable for damages because there was no
evidence that WSDOT staff knew of or consciously considered plaintiff's race when calculating
the annual utilization goal. The court held that since the policy was not "facially neutral" and
was in fact "specifically race conscious" any resulting discrimination was therefore
intentional, whether the reason for the classification was benign or its purpose remedial. As
such, WSDOT's program was subject to strict scrutiny.
In order for the court to uphold the DBE program as constitutional, WSDOT had to show that the
program served a compelling interest and was narrowly tailored to achieve that goal. The court
found that the Ninth Circuit had already concluded that the program was not narrowly tailored
and the record was devoid of any evidence suggesting that minorities currently suffer or have
suffered discrimination in the Washington transportation contracting industry. The court
therefore denied WSDOT's Motion for Summary Judgment on the 2000d claim. The remedy
available to Western States remains for further adjudication and the case is currently pending.
5. M.K. Weeden Construction v. State of Montana, Montana Department of
Transportation, et al., 2013 WL 4774517 (D. Mont.) (September 4, 2013)
This case involved a challenge by a prime contractor, M.K. Weeden Construction, Inc.
("Weeden") against the State of Montana, Montana Department of Transportation ("DOT") and
others, to the DBE Program adopted by Montana DOT implementing the Federal DBE Program at
49 C.F.R. Part 26. Weeden sought an application for Temporary Restraining Order and
Preliminary Injunction against the State of Montana and the Montana DOT.
Factual Background and Claims. Weeden was the low dollar bidder with a bid of
$14,770,163.01 on the Arrow Creek Slide Project. The project received federal funding, and as
such, was required to comply with the U.S. DOT's DBE Program. 2013 WL 4774517 at *1.
Montana DOT had established an overall goal of 5.83% DBE participation in Montana's highway
construction projects. On the Arrow Creek Slide Project, Montana DOT established a DBE goal of
2%. Id.
Plaintiff Weeden, although it submitted the low dollar bid, did not meet the 2% DBE
requirement. 2013 WL 4774517 at *1. Weeden claimed that its bid relied upon only 1.87% DBE
subcontractors (although the court points out that Weeden's bid actually identified only .81%
DBE subcontractors). Weeden was the only bidder out of the six bidders who did not meet the
2% DBE goal. The other five bidders exceeded the 2% goal, with bids ranging from 2.19% DBE
participation to 6.98% DBE participation. Id. at *2.
Weeden attempted to utilize a good faith exception to the DBE requirement under the Federal
DBE Program and Montana's DBE Program. Montana DOT's DBE Participation Review
Committee considered Weeden's good faith documentation and found that Weeden's bid was
noncompliant as to the DBE requirement, and that Weeden failed to demonstrate good faith
efforts to solicit DBE subcontractor participation in the contract. 2013 WL 4774517 at *2.
Weeden appealed that decision to the Montana DOT DBE Review Board and appeared before the
Board at a hearing. The DBE Review Board affirmed the Committee decision finding that
Weeden's bid was not in compliance with the contract DBE goal and that Weeden had failed to
make a good faith effort to comply with the goal. Id. at *2. The DBE Review Board found that
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 43
Weeden had received a DBE bid for traffic control, but Weeden decided to perform that work
itself in order to lower its bid amount. Id. at *2. Additionally, the DBE Review Board found that
Weeden's mass email to 158 DBE subcontractors without any follow up was a pro forma effort
not credited by the Review Board as an active and aggressive effort to obtain DBE participation.
Id.
Plaintiff Weeden sought an injunction in federal district court against Montana DOT to prevent it
from letting the contract to another bidder. Weeden claimed that Montana DOT's DBE Program
violated the Equal Protection Clause of the U.S. Constitution and the Montana Constitution,
asserting that there was no supporting evidence of discrimination in the Montana highway
construction industry, and therefore, there was no government interest that would justify
favoring DBE entities. 2013 WL 4774517 at *2. Weeden also claimed that its right to Due
Process under the U.S. Constitution and Montana Constitution had been violated. Specifically,
Weeden claimed that Montana DOT did not provide reasonable notice of the good faith effort
requirements. Id.
No proof of irreparable harm and balance of equities favor Montana DOT. First, the Court
found that Weeden did not prove for a certainty that it would suffer irreparable harm based on
the Court's conclusion that in the past four years, Weeden had obtained six state highway
construction contracts valued at approximately $26 million, and that Montana DOT had $50
million more in highway construction projects to be let during the remainder of 2013 alone.
2013 WL 4774517 at *3. Thus, the Court concluded that as demonstrated by its past
performance, Weeden has the capacity to obtain other highway construction contracts and thus
there is little risk of irreparable injury in the event Montana DOT awards the Project to another
bidder. Id.
Second, the Court found the balance of the equities did not tip in Weeden's favor. 2013 WL
4774517 at *3. Weeden had asserted that Montana DOT and U.S. DOT rules regarding good faith
efforts to obtain DBE subcontractor participation are confusing, nonspecific and contradictory.
Id. The Court held that it is obvious the other five bidders were able to meet and exceed the 2%
DBE requirement without any difficulty whatsoever. Id. The Court found that Weeden's bid is
not responsive to the requirements, therefore is not and cannot be the lowest responsible bid.
Id. The balance of the equities, according to the Court, do not tilt in favor of Weeden, who did not
meet the requirements of the contract, especially when numerous other bidders ably
demonstrated an ability to meet those requirements. Id.
No Standing. The Court also questioned whether Weeden raised any serious issues on the merits
of its equal protection claim because Weeden is a prime contractor and not a subcontractor.
Since Weeden is a prime contractor, the Court held it is clear that Weeden lacks Article III
standing to assert its equal protection claim. Id. at *3. The Court held that a prime contractor,
such as Weeden, is not permitted to challenge Montana DOT's DBE Project as if it were a non
DBE subcontractor because Weeden cannot show that it was subjected to a racial or gender
based barrier in its competition for the prime contract. Id. at *3. Because Weeden was deprived
of the ability to compete on equal footing with the other bidders, the Court found Weeden
suffered no equal protection injury and lacks standing to assert an equal protection claim as it
were a nonDBE subcontractor. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 44
Court applies AGC v. California DOT case; evidence supports narrowly tailored DBE program.
Significantly, the Court found that even if Weeden had standing to present an equal protection
claim, Montana DOT presented significant evidence of underutilization of DBE's generally,
evidence that supports a narrowly tailored race and gender preference program. 2013 WL
4774517 at *4. Moreover, the Court noted that although Weeden points out that some business
categories in Montana's highway construction industry do not have a history of discrimination
(namely, the category of construction businesses in contrast to the category of professional
businesses), the Ninth Circuit "has recently rejected a similar argument requiring the evidence
of discrimination in every single segment of the highway construction industry before a
preference program can be implemented." Id., citing Associated General Contractors v. California
Dept. of Transportation, 713 F.3d 1187 (9th Cir. 2013)(holding that Caltrans' DBE program
survived strict scrutiny, was narrowly tailored, did not violate equal protection, and was
supported by substantial statistical and anecdotal evidence of discrimination).
The Court stated that particularly relevant in this case, "the Ninth Circuit held that California's
DBE program need not isolate construction from engineering contracts or prime from
subcontracts to determine whether the evidence in each and every category gives rise to an
inference of discrimination." Id. at 4, citing Associated General Contractors v. California DOT, 713
F.3d at 1197. Instead, according to the Court, California and, by extension, Montana "is
entitled to look at the evidence 'in its entirety' to determine whether there are 'substantial
disparities in utilization of minority firms' practiced by some elements of the construction
industry." 2013 WL 4774517 at *4, quoting AGC v. California DOT, 713 F.3d at 1197. The Court,
also quoting the decision in AGC v. California DOT, said: "It is enough that the anecdotal evidence
supports Caltrans' statistical data showing a pervasive pattern of discrimination." Id. at *4,
quoting AGC v. California DOT, 713 F.3d at 1197.
The Court pointed out that there is no allegation that Montana DOT has exceeded any federal
requirement or done other than complied with U.S. DOT regulations. 2013 WL 4774517 at *4.
Therefore, the Court concluded that given the similarities between Weeden's claim and AGC's
equal protection claim against California DOT in the AGC v. California DOT case, it does not
appear likely that Weeden will succeed on the merits of its equal protection claim. Id. at *4.
Due Process claim. The Court also rejected Weeden's bald assertion that it has a protected
property right in the contract that has not been awarded to it where the government agency
retains discretion to determine the responsiveness of the bid. The Court found that Montana law
requires that an award of a public contract for construction must be made to the lowest
responsible bidder and that the applicable Montana statute confers upon the government agency
broad discretion in the award of a public works contract. Thus, a lower bidder such as Weeden
requires no vested property right in a contract until the contract has been awarded, which here
obviously had not yet occurred. 2013 WL 4774517 at *5. In any event, the Court noted that
Weeden was granted notice, hearing and appeal for Montana DOT's decision denying the good
faith exception to the DBE contract requirement, and therefore it does not appear likely that
Weeden would succeed on its due process claim. Id. at *5.
Holding and Voluntary Dismissal. The Court denied Plaintiff Weeden's application for
Temporary Restraining Order and Preliminary Injunction. Subsequently, Weeden filed a Notice
of Voluntary Dismissal Without Prejudice on September 10, 2013.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 45
6. Monterey Mechanical v. Wilson, 125 F.3d 702 (9th Cir. 1997)
This case is instructive in that the Ninth Circuit analyzed and held invalid the enforcement of a
MBE/WBEtype program. Although the program at issue utilized the term "goals" as opposed to
"quotas," the Ninth Circuit rejected such a distinction, holding "[t]he relevant question is not
whether a statute requires the use of such measures, but whether it authorizes or encourages
them." The case also is instructive because it found the use of "goals" and the application of
"good faith efforts" in connection with achieving goals to trigger strict scrutiny.
Monterey Mechanical Co. (the "plaintiff") submitted the low bid for a construction project for the
California Polytechnic State University (the "University"). 125 F.3d 702, 704 (9th Cir. 1994). The
University rejected the plaintiff's bid because the plaintiff failed to comply with a state statute
requiring prime contractors on such construction projects to subcontract 23 percent of the work
to MBE/WBEs or, alternatively, demonstrate good faith outreach efforts. Id. The plaintiff
conducted good faith outreach efforts but failed to provide the requisite documentation; the
awardee prime contractor did not subcontract any portion of the work to MBE/WBEs but did
include documentation of good faith outreach efforts. Id.
Importantly, the University did not conduct a disparity study, and instead argued that because
"the 'goal requirements' of the scheme '[did] not involve racial or gender quotas, setasides or
preferences,'" the University did not need a disparity study. Id. at 705. The plaintiff protested the
contract award and sued the University's trustees, and a number of other individuals
(collectively the "defendants") alleging the state law was violative of the Equal Protection
Clause. Id. The district court denied the plaintiff's motion for an interlocutory injunction and the
plaintiff appealed to the Ninth Circuit Court of Appeals. Id.
The defendants first argued that the statute was constitutional because it treated all general
contractors alike, by requiring all to comply with the MBE/WBE participation goals. Id. at 708.
The court held, however, that a minority or women business enterprise could satisfy the
participation goals by allocating the requisite percentage of work to itself. Id. at 709. The court
held that contrary to the district court's finding, such a difference was not de minimis. Id.
The defendant's also argued that the statute was not subject to strict scrutiny because the
statute did not impose rigid quotas, but rather only required good faith outreach efforts. Id. at
710. The court rejected the argument finding that although the statute permitted awards to
bidders who did not meet the percentage goals, "they are rigid in requiring precisely described
and monitored efforts to attain those goals." Id. The court cited its own earlier precedent to hold
that "the provisions are not immunized from scrutiny because they purport to establish goals
rather than quotas [T]he relevant question is not whether a statute requires the use of such
measures, but whether it authorizes or encourages them." Id. at 71011 (internal citations and
quotations omitted). The court found that the statute encouraged set asides and cited Concrete
Works of Colorado v. Denver, 36 F.3d 1512 (10th Cir. 1994), as analogous support for the
proposition. Id. at 711.
The court found that the statute treated contractors differently based upon their race, ethnicity
and gender, and although "worded in terms of goals and good faith, the statute imposes
mandatory requirements with concreteness." Id. The court also noted that the statute may
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 46
impose additional compliance expenses upon nonMBE/WBE firms who are required to make
good faith outreach efforts (e.g., advertising) to MBE/WBE firms. Id. at 712.
The court then conducted strict scrutiny (race), and an intermediate scrutiny (gender) analyses.
Id. at 71213. The court found the University presented "no evidence" to justify the race and
genderbased classifications and thus did not consider additional issues of proof. Id. at 713. The
court found that the statute was not narrowly tailored because the definition of "minority" was
overbroad (e.g., inclusion of Aleuts). Id. at 714, citing Wygant v. Jackson Board of Education, 476
U.S. 267, 284, n. 13 (1986) and City of Richmond v. J.A. Croson, Co., 488 U.S. 469, 50506 (1989).
The court found "[a] broad program that sweeps in all minorities with a remedy that is in no
way related to past harms cannot survive constitutional scrutiny." Id. at 714, citing Hopwood v.
State of Texas, 78 F.3d 932, 951 (5th Cir. 1996). The court held that the statute violated the Equal
Protection Clause.
7. Associated Gen. Contractors of California, Inc. v. Coalition for Econ. Equity
("AGCC"), 950 F.2d 1401 (9th Cir. 1991)
In Associated Gen. Contractors of California, Inc. v. Coalition for Econ. Equity ("AGCC"), the Ninth
Circuit Court of Appeals denied plaintiffs request for preliminary injunction to enjoin
enforcement of the city's bid preference program. 950 F.2d 1401 (9th Cir. 1991). Although an
older case, AGCC is instructive as to the analysis conducted by the Ninth Circuit. The court
discussed the utilization of statistical evidence and anecdotal evidence in the context of the strict
scrutiny analysis. Id. at 141318.
The City of San Francisco adopted an ordinance in 1989 providing bid preferences to prime
contractors who were members of groups found disadvantaged by previous bidding practices,
and specifically provided a 5 percent bid preference for LBEs, WBEs and MBEs. 950 F.2d at
1405. Local MBEs and WBEs were eligible for a 10 percent total bid preference, representing the
cumulative total of the five percent preference given Local Business Enterprises ("LBEs") and
the 5 percent preference given MBEs and WBEs. Id. The ordinance defined "MBE" as an
economically disadvantaged business that was owned and controlled by one or more minority
persons, which were defined to include Asian, blacks and Latinos. "WBE" was defined as an
economically disadvantaged business that was owned and controlled by one or more women.
Economically disadvantaged was defined as a business with average gross annual receipts that
did not exceed $14 million. Id.
The Motion for Preliminary Injunction challenged the constitutionality of the MBE provisions of
the 1989 Ordinance insofar as it pertained to Public Works construction contracts. Id. at 1405.
The district court denied the Motion for Preliminary Injunction on the AGCC's constitutional
claim on the ground that AGCC failed to demonstrate a likelihood of success on the merits. Id. at
1412.
The Ninth Circuit Court of Appeals applied the strict scrutiny analysis following the decision of
the U.S. Supreme Court in City of Richmond v. Croson. The court stated that according to the U.S.
Supreme Court in Croson, a municipality has a compelling interesting in redressing, not only
discrimination committed by the municipality itself, but also discrimination committed by
private parties within the municipalities' legislative jurisdiction, so long as the municipality in
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 47
some way perpetuated the discrimination to be remedied by the program. Id. at 141213, citing
Croson at 488 U.S. at 49192, 53738. To satisfy this requirement, "the governmental actor need
not be an active perpetrator of such discrimination; passive participation will satisfy this sub
part of strict scrutiny review." Id. at 1413, quoting Coral Construction Company v. King County,
941 F.2d 910 at 916 (9th Cir. 1991). In addition, the [m]ere infusion of tax dollars into a
discriminatory industry may be sufficient governmental involvement to satisfy this prong." Id. at
1413 quoting Coral Construction, 941 F.2d at 916.
The court pointed out that the City had made detailed findings of prior discrimination in
construction and building within its borders, had testimony taken at more than ten public
hearings and received numerous written submissions from the public as part of its anecdotal
evidence. Id. at 1414. The City Departments continued to discriminate against MBEs and WBEs
and continued to operate under the "old boy network" in awarding contracts, thereby
disadvantaging MBEs and WBEs. Id. And, the City found that large statistical disparities existed
between the percentage of contracts awarded to MBEs and the percentage of available MBEs.
950 F.2d at 1414. The court stated the City also found "discrimination in the private sector
against MBEs and WBEs that is manifested in and exacerbated by the City's procurement
practices." Id. at 1414.
The Ninth Circuit found the study commissioned by the City indicated the existence of large
disparities between the award of city contracts to available nonminority businesses and to
MBEs. Id. at 1414. Using the City and County of San Francisco as the "relevant market," the study
compared the number of available MBE prime construction contractors in San Francisco with
the amount of contract dollars awarded by the City to San Franciscobased MBEs for a particular
year. Id. at 1414. The study found that available MBEs received far fewer city contracts in
proportion to their numbers than their available nonminority counterparts. Id. Specifically, the
study found that with respect to prime construction contracting, disparities between the
number of available local Asian, black and Hispanicowned firms and the number of contracts
awarded to such firms were statistically significant and supported an inference of
discrimination. Id. For example, in prime contracting for construction, although MBE availability
was determined to be at 49.5 percent, MBE dollar participation was only 11.1 percent. Id. The
Ninth Circuit stated than in its decision in Coral Construction, it emphasized that such statistical
disparities are "an invaluable tool and demonstrating the discrimination necessary to establish a
compelling interest. Id. at 1414, citing to Coral Construction, 941 F.2d at 918 and Croson, 488 U.S.
at 509.
The court noted that the record documents a vast number of individual accounts of
discrimination, which bring "the cold numbers convincingly to life. Id. at 1414, quoting Coral
Construction, 941 F.2d at 919. These accounts include numerous reports of MBEs being denied
contracts despite being the low bidder, MBEs being told they were not qualified although they
were later found qualified when evaluated by outside parties, MBEs being refused work even
after they were awarded contracts as low bidder, and MBEs being harassed by city personnel to
discourage them from bidding on city contracts. Id at 1415. The City pointed to numerous
individual accounts of discrimination, that an "old boy network" still exists, and that racial
discrimination is still prevalent within the San Francisco construction industry. Id. The court
found that such a "combination of convincing anecdotal and statistical evidence is potent." Id. at
1415 quoting Coral Construction, 941 F.2d at 919.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 48
The court also stated that the 1989 Ordinance applies only to resident MBEs. The City, therefore,
according to the court, appropriately confined its study to the city limits in order to focus on
those whom the preference scheme targeted. Id. at 1415. The court noted that the statistics
relied upon by the City to demonstrate discrimination in its contracting processes considered
only MBEs located within the City of San Francisco. Id.
The court pointed out the City's findings were based upon dozens of specific instances of
discrimination that are laid out with particularity in the record, as well as the significant
statistical disparities in the award of contracts. The court noted that the City must simply
demonstrate the existence of past discrimination with specificity, but there is no requirement
that the legislative findings specifically detail each and every incidence that the legislative body
has relied upon in support of this decision that affirmative action is necessary. Id. at 1416.
In its analysis of the "narrowly tailored" requirement, the court focused on three characteristics
identified by the decision in Croson as indicative of narrow tailoring. First, an MBE program
should be instituted either after, or in conjunction with, raceneutral means of increasing
minority business participation in public contracting. Id. at 1416. Second, the plan should avoid
the use of "rigid numerical quotas." Id. According to the Supreme Court, systems that permit
waiver in appropriate cases and therefore require some individualized consideration of the
applicants pose a lesser danger of offending the Constitution. Id. Mechanisms that introduce
flexibility into the system also prevent the imposition of a disproportionate burden on a few
individuals. Id. Third, "an MBE program must be limited in its effective scope to the boundaries
of the enacting jurisdiction. Id. at 1416 quoting Coral Construction, 941 F.2d at 922.
The court found that the record showed the City considered, but rejected as not viable, specific
raceneutral alternatives including a fund to assist newly established MBEs in meeting bonding
requirements. The court stated that "while strict scrutiny requires serious, good faith
consideration of raceneutral alternatives, strict scrutiny does not require exhaustion of every
possible such alternative however irrational, costly, unreasonable, and unlikely to succeed
such alternative may be." Id. at 1417 quoting Coral Construction, 941 F2d at 923. The court found
the City ten years before had attempted to eradicate discrimination in city contracting through
passage of a raceneutral ordinance that prohibited city contractors from discriminating against
their employees on the basis of race and required contractors to take steps to integrate their
work force; and that the City made and continues to make efforts to enforce the anti
discrimination ordinance. Id. at 1417. The court stated inclusion of such raceneutral measures
is one factor suggesting that an MBE plan is narrowly tailored. Id. at 1417.
The court also found that the Ordinance possessed the requisite flexibility. Rather than a rigid
quota system, the City adopted a more modest system according to the court, that of bid
preferences. Id. at 1417. The court pointed out that there were no goals, quotas, or setasides
and moreover, the plan remedies only specifically identified discrimination: the City provides
preferences only to those minority groups found to have previously received a lower percentage
of specific types of contracts than their availability to perform such work would suggest. Id. at
1417.
The court rejected the argument of AGCC that to pass constitutional muster any remedy must
provide redress only to specific individuals who have been identified as victims of
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 49
discrimination. Id. at 1417, n. 12. The Ninth Circuit agreed with the district court that an iron
clad requirement limiting any remedy to individuals personally proven to have suffered prior
discrimination would render any raceconscious remedy "superfluous," and would thwart the
Supreme Court's directive in Croson that raceconscious remedies may be permitted in some
circumstances. Id. at 1417, n. 12. The court also found that the burdens of the bid preferences on
those not entitled to them appear "relatively light and well distributed." Id. at 1417. The court
stated that the Ordinance was "limited in its geographical scope to the boundaries of the
enacting jurisdiction. Id. at 1418, quoting Coral Construction, 941 F.2d at 925. The court found
that San Francisco had carefully limited the ordinance to benefit only those MBEs located within
the City's borders. Id. 1418.
8. Coral Construction Co. v. King County, 941 F.2d 910 (9th Cir. 1991)
In Coral Construction Co. v. King County, 941 F.2d 910 (9th Cir. 1991), the Ninth Circuit examined
the constitutionality of King County, Washington's minority and women business setaside
program in light of the standard set forth in City of Richmond v. J.A. Croson Co. The court held that
although the County presented ample anecdotal evidence of disparate treatment of MBE
contractors and subcontractors, the total absence of preprogram enactment statistical evidence
was problematic to the compelling government interest component of the strict scrutiny
analysis. The court remanded to the district court for a determination of whether the post
program enactment studies constituted a sufficient compelling government interest. Per the
narrow tailoring prong of the strict scrutiny test, the court found that although the program
included raceneutral alternative measures and was flexible (i.e., included a waiver provision),
the over breadth of the program to include MBEs outside of King County was fatal to the narrow
tailoring analysis.
The court also remanded on the issue of whether the plaintiffs were entitled to damages under
42 U.S.C. 1981 and 1983, and in particular to determine whether evidence of causation
existed. With respect to the WBE program, the court held the plaintiff had standing to challenge
the program, and applying the intermediate scrutiny analysis, held the WBE program survived
the facial challenge.
In finding the absence of any statistical data in support of the County's MBE Program, the court
made it clear that statistical analyses have served and will continue to serve an important role in
cases in which the existence of discrimination is a disputed issue. 941 F.2d at 918. The court
noted that it has repeatedly approved the use of statistical proof to establish a prima facie case
of discrimination. Id. The court pointed out that the U.S. Supreme Court in Croson held that
where "gross statistical disparities can be shown, they alone may in a proper case constitute
prima facie proof of a pattern or practice of discrimination." Id. at 918, quoting Hazelwood School
Dist. v. United States, 433 U.S. 299, 30708, and Croson, 488 U.S. at 501.
The court points out that statistical evidence may not fully account for the complex factors and
motivations guiding employment decisions, many of which may be entirely raceneutral. Id. at
919. The court noted that the record contained a plethora of anecdotal evidence, but that
anecdotal evidence, standing alone, suffers the same flaws as statistical evidence. Id. at 919.
While anecdotal evidence may suffice to prove individual claims of discrimination, rarely,
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 50
according to the court, if ever, can such evidence show a systemic pattern of discrimination
necessary for the adoption of an affirmative action plan. Id.
Nonetheless, the court held that the combination of convincing anecdotal and statistical
evidence is potent. Id. at 919. The court pointed out that individuals who testified about their
personal experiences brought the cold numbers of statistics "convincingly to life." Id. at 919,
quoting International Brotherhood of Teamsters v. United States, 431 U.S 324, 339 (1977). The
court also pointed out that the Eleventh Circuit Court of Appeals, in passing upon a minority set
aside program similar to the one in King County, concluded that the testimony regarding
complaints of discrimination combined with the gross statistical disparities uncovered by the
County studies provided more than enough evidence on the question of prior discrimination and
need for racial classification to justify the denial of a Motion for Summary Judgment. Id. at 919,
citing Cone Corp. v. Hillsborough County, 908 F.2d 908, 916 (11th Cir. 1990).
The court found that the MBE Program of the County could not stand without a proper statistical
foundation. Id. at 919. The court addressed whether postenactment studies done by the County
of a statistical foundation could be considered by the court in connection with determining the
validity of the County MBE Program. The court held that a municipality must have some concrete
evidence of discrimination in a particular industry before it may adopt a remedial program. Id.
at 920. However, the court said this requirement of some evidence does not mean that a
program will be automatically struck down if the evidence before the municipality at the time of
enactment does not completely fulfill both prongs of the strict scrutiny test. Id. Rather, the court
held, the factual predicate for the program should be evaluated based upon all evidence
presented to the district court, whether such evidence was adduced before or after enactment of
the MBE Program. Id. Therefore, the court adopted a rule that a municipality should have before
it some evidence of discrimination before adopting a raceconscious program, while allowing
postadoption evidence to be considered in passing on the constitutionality of the program. Id.
The court, therefore, remanded the case to the district court for determination of whether the
consultant studies that were performed after the enactment of the MBE Program could provide
an adequate factual justification to establish a "propelling government interest" for King
County's adopting the MBE Program. Id. at 922.
The court also found that Croson does not require a showing of active discrimination by the
enacting agency, and that passive participation, such as the infusion of tax dollars into a
discriminatory industry, suffices. Id. at 922, citing Croson, 488 U.S. at 492. The court pointed out
that the Supreme Court in Croson concluded that if the City had evidence before it, that non
minority contractors were systematically excluding minority businesses from subcontracting
opportunities, it could take action to end the discriminatory exclusion. Id. at 922. The court
points out that if the record ultimately supported a finding of systemic discrimination, the
County adequately limited its program to those businesses that receive tax dollars, and the
program imposed obligations upon only those businesses which voluntarily sought King County
tax dollars by contracting with the County. Id.
The court addressed several factors in terms of the narrowly tailored analysis, and found that
first, an MBE program should be instituted either after, or in conjunction with, raceneutral
means of increasing minority business participation and public contracting. Id. at 922, citing
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 51
Croson, 488 U.S. at 507. The second characteristic of the narrowlytailored program, according
to the court, is the use of minority utilization goals on a casebycase basis, rather than upon a
system of rigid numerical quotas. Id. Finally, the court stated that an MBE program must be
limited in its effective scope to the boundaries of the enacting jurisdiction. Id.
Among the various narrowly tailored requirements, the court held consideration of raceneutral
alternatives is among the most important. Id. at 922. Nevertheless, the court stated that while
strict scrutiny requires serious, good faith consideration of raceneutral alternatives, strict
scrutiny does not require exhaustion of every possible such alternative. Id. at 923. The court
noted that it does not intend a government entity exhaust every alternative, however irrational,
costly, unreasonable, and unlikely to succeed such alternative might be. Id. Thus, the court
required only that governments, such as states, cities or counties, exhaust raceneutral
measures that the government is authorized to enact, and that have a reasonable possibility of
being effective. Id. The court noted in this case the County considered alternatives, but
determined that they were not available as a matter of law. Id. The County cannot be required to
engage in conduct that may be illegal, nor can it be compelled to expend precious tax dollars on
projects where potential for success is marginal at best. Id.
The court noted that King County had adopted some raceneutral measures in conjunction with
the MBE Program, for example, hosting one or two training sessions for small businesses,
covering such topics as doing business with the government, small business management, and
accounting techniques. Id. at 923. In addition, the County provided information on assessing
Small Business Assistance Programs. Id. The court found that King County fulfilled its burden of
considering raceneutral alternative programs. Id.
A second indicator of a program's narrowly tailoring is program flexibility. Id. at 924. The court
found that an important means of achieving such flexibility is through use of casebycase
utilization goals, rather than rigid numerical quotas or goals. Id. at 924. The court pointed out
that King County used a "percentage preference" method, which is not a quota, and while the
preference is locked at five percent, such a fixed preference is not unduly rigid in light of the
waiver provisions. The court found that a valid MBE Program should include a waiver system
that accounts for both the availability of qualified MBEs and whether the qualified MBEs have
suffered from the effects of past discrimination by the County or prime contractors. Id. at 924.
The court found that King County's program provided waivers in both instances, including
where neither minority nor a woman's business is available to provide needed goods or services
and where available minority and/or women's businesses have given price quotes that are
unreasonably high. Id.
The court also pointed out other attributes of the narrowly tailored and flexible MBE program,
including a bidder that does not meet planned goals, may nonetheless be awarded the contract
by demonstrating a good faith effort to comply. Id. The actual percentages of required MBE
participation are determined on a casebycase basis. Levels of participation may be reduced if
the prescribed levels are not feasible, if qualified MBEs are unavailable, or if MBE price quotes
are not competitive. Id.
The court concluded that an MBE program must also be limited in its geographical scope to the
boundaries of the enacting jurisdiction. Id. at 925. Here the court held that King County's MBE
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 52
program fails this third portion of "narrowly tailored" requirement. The court found the
definition of "minority business" included in the Program indicated that a minorityowned
business may qualify for preferential treatment if the business has been discriminated against in
the particular geographical areas in which it operates. The court held this definition as overly
broad. Id. at 925. The court held that the County should ask the question whether a business has
been discriminated against in King County. Id. This determination, according to the court, is not
an insurmountable burden for the County, as the rule does not require finding specific instances
of discriminatory exclusion for each MBE. Id. Rather, if the County successfully proves malignant
discrimination within the King County business community, an MBE would be presumptively
eligible for relief if it had previously sought to do business in the County. Id.
In other words, if systemic discrimination in the County is shown, then it is fair to presume that
an MBE was victimized by the discrimination. Id. at 925. For the presumption to attach to the
MBE, however, it must be established that the MBE is, or attempted to become, an active
participant in the County's business community. Id. Because King County's program permitted
MBE participation even by MBEs that have no prior contact with King County, the program was
overbroad to that extent. Id. Therefore, the court reversed the grant of summary judgment to
King County on the MBE program on the basis that it was geographically overbroad.
The court considered the genderspecific aspect of the MBE program. The court determined the
degree of judicial scrutiny afforded genderconscious programs was intermediate scrutiny,
rather than strict scrutiny. Id. at 930. Under intermediate scrutiny, genderbased classification
must serve an important governmental objective, and there must be a direct, substantial
relationship between the objective and the means chosen to accomplish the objective. Id. at 931.
In this case, the court concluded, that King County's WBE preference survived a facial challenge.
Id. at 932. The court found that King County had a legitimate and important interest in
remedying the many disadvantages that confront women business owners and that the means
chosen in the program were substantially related to the objective. Id. The court found the record
adequately indicated discrimination against women in the King County construction industry,
noting the anecdotal evidence including an affidavit of the president of a consulting engineering
firm. Id. at 933. Therefore, the court upheld the WBE portion of the MBE program and affirmed
the district court's grant of summary judgment to King County for the WBE program.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 53
E. Recent Decisions Involving the Federal DBE Program and its
Implementation in Other Jurisdictions
There are several recent and pending cases involving challenges to the United States Federal
DBE Program and its implementation by the states and their governmental entities for federally
funded projects. These cases could have a significant impact on the nature and provisions of
contracting and procurement on federallyfunded projects, including and relating to the
utilization of DBEs. In addition, these cases provide an instructive analysis of the recent
application of the strict scrutiny test to MBE/WBE and DBEtype programs.
1. Northern Contracting, Inc. v. Illinois, 473 F.3d 715 (7th Cir. 2007)
In Northern Contracting, Inc. v. Illinois, the Seventh Circuit affirmed the district court decision
upholding the validity and constitutionality of the Illinois Department of Transportation's
("IDOT") DBE Program. Plaintiff Northern Contracting Inc. ("NCI") was a white maleowned
construction company specializing in the construction of guardrails and fences for highway
construction projects in Illinois. 473 F.3d 715, 717 (7th Cir. 2007). Initially, NCI challenged the
constitutionality of both the federal regulations and the Illinois statute implementing these
regulations. Id. at 719. The district court granted the USDOT's Motion for Summary Judgment,
concluding that the federal government had demonstrated a compelling interest and that TEA
21 was sufficiently narrowly tailored. NCI did not challenge this ruling and thereby forfeited the
opportunity to challenge the federal regulations. Id. at 720. NCI also forfeited the argument that
IDOT's DBE program did not serve a compelling government interest. Id. The sole issue on
appeal to the Seventh Circuit was whether IDOT's program was narrowly tailored. Id.
IDOT typically adopted a new DBE plan each year. Id. at 718. In preparing for Fiscal Year 2005,
IDOT retained a consulting firm to determine DBE availability. Id. The consultant first identified
the relevant geographic market (Illinois) and the relevant product market (transportation
infrastructure construction). Id. The consultant then determined availability of minority and
womenowned firms through analysis of Dun & Bradstreet's Marketplace data. Id. This initial list
was corrected for errors in the data by surveying the D&B list. Id. In light of these surveys, the
consultant arrived at a DBE availability of 22.77 percent. Id. The consultant then ran a
regression analysis on earnings and business information and concluded that in the absence of
discrimination, relative DBE availability would be 27.5 percent. Id. IDOT considered this, along
with other data, including DBE utilization on IDOTs "zero goal" experiment conducted in 2002 to
2003, in which IDOT did not use DBE goals on 5 percent of its contracts (1.5% utilization) and
data of DBE utilization on projects for the Illinois State Toll Highway Authority which does not
receive federal funding and whose goals are completely voluntary (1.6% utilization). Id. at 719.
On the basis of all of this data, IDOT adopted a 22.77 percent goal for 2005. Id.
Despite the fact the NCI forfeited the argument that IDOT's DBE program did not serve a
compelling state interest, the Seventh Circuit briefly addressed the compelling interest prong of
the strict scrutiny analysis, noting that IDOT had satisfied its burden. Id. at 720. The court noted
that, postAdarand, two other circuits have held that a state may rely on the federal
government's compelling interest in implementing a local DBE plan. Id. at 72021, citing Western
States Paving Co., Inc. v. Washington State DOT, 407 F.3d 983, 987 (9th Cir. 2005), cert. denied,
126 S.Ct. 1332 (Feb. 21, 2006) and Sherbrooke Turf, Inc. v. Minnesota DOT, 345 F.3d 964, 970 (8th
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 54
Cir. 2003), cert. denied, 541 U.S. 1041 (2004). The court stated that NCI had not articulated any
reason to break ranks from the other circuits and explained that "[i]nsofar as the state is merely
complying with federal law it is acting as the agent of the federal government . If the state does
exactly what the statute expects it to do, and the statute is conceded for purposes of litigation to
be constitutional, we do not see how the state can be thought to have violated the Constitution."
Id. at 721, quoting Milwaukee County Pavers Association v. Fielder, 922 F.2d 419, 423 (7th Cir.
1991). The court did not address whether IDOT had an independent interest that could have
survived constitutional scrutiny.
In addressing the narrowly tailored prong with respect to IDOT's DBE program, the court held
that IDOT had complied. Id. The court concluded its holding in Milwaukee that a state is
insulated from a constitutional attack absent a showing that the state exceeded its federal
authority remained applicable. Id. at 72122. The court noted that the Supreme Court in Adarand
Constructors v. Pena, 515 U.S. 200 (1995) did not seize the opportunity to overrule that decision,
explaining that the Court did not invalidate its conclusion that a challenge to a state's application
of a federally mandated program must be limited to the question of whether the state exceeded
its authority. Id. at 722.
The court further clarified the Milwaukee opinion in light of the interpretations of the opinions
offered in by the Ninth Circuit in Western States and Eighth Circuit in Sherbrooke. Id. The court
stated that the Ninth Circuit in Western States misread the Milwaukee decision in concluding that
Milwaukee did not address the situation of an asapplied challenge to a DBE program. Id. at 722,
n. 5. Relatedly, the court stated that the Eighth Circuit's opinion in Sherbrooke (that the
Milwaukee decision was compromised by the fact that it was decided under the prior law "when
the 10 percent federal setaside was more mandatory") was unconvincing since all recipients of
federal transportation funds are still required to have compliant DBE programs. Id. at 722.
Federal law makes more clear now that the compliance could be achieved even with no DBE
utilization if that were the result of a good faith use of the process. Id. at 722, n. 5. The court
stated that IDOT in this case was acting as an instrument of federal policy and NCI's collateral
attack on the federal regulations was impermissible. Id. at 722.
The remainder of the court's opinion addressed the question of whether IDOT exceeded its
grant of authority under federal law, and held that all of NCI's arguments failed. Id. First, NCI
challenged the method by which the local base figure was calculated, the first step in the goal
setting process. Id. NCI argued that the number of registered and prequalified DBEs in Illinois
should have simply been counted. Id. The court stated that while the federal regulations list
several examples of methods for determining the local base figure, Id. at 723, these examples are
not intended as an exhaustive list. The court pointed out that the fifth item in the list is entitled
"Alternative Methods," and states: "You may use other methods to determine a base figure for
your overall goal. Any methodology you choose must be based on demonstrable evidence of
local market conditions and be designated to ultimately attain a goal that is rationally related to
the relative availability of DBEs in your market." Id. (citing 49 C.F.R. 26.45(c)(5)). According to
the court, the regulations make clear that "relative availability" means "the availability of ready,
willing and able DBEs relative to all business ready, willing, and able to participate" on DOT
contracts. Id. The court stated NCI pointed to nothing in the federal regulations that indicated
that a recipient must so narrowly define the scope of the ready, willing, and available firms to a
simple count of the number of registered and prequalified DBEs. Id. The court agreed with the
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 55
district court that the remedial nature of the federal scheme militates in favor of a method of
DBE availability calculation that casts a broader net. Id.
Second, NCI argued that the IDOT failed to properly adjust its goal based on local market
conditions. Id. The court noted that the federal regulations do not require any adjustments to the
base figure, but simply provide recipients with authority to make such adjustments if necessary.
Id. According to the court, NCI failed to identify any aspect of the regulations requiring IDOT to
separate prime contractor availability from subcontractor availability, and pointed out that the
regulations require the local goal to be focused on overall DBE participation. Id.
Third, NCI contended that IDOT violated the federal regulations by failing to meet the maximum
feasible portion of its overall goal through raceneutral means of facilitating DBE participation.
Id. at 72324. NCI argued that IDOT should have considered DBEs who had won subcontracts on
goal projects where the prime contractor did not consider DBE status, instead of only
considering DBEs who won contracts on nogoal projects. Id. at 724. The court held that while
the regulations indicate that where DBEs win subcontracts on goal projects strictly through low
bid this can be counted as raceneutral participation, the regulations did not require IDOT to
search for this data, for the purpose of calculating past levels of raceneutral DBE participation.
Id. According to the court, the record indicated that IDOT used nearly all the methods described
in the regulations to maximize the portion of the goal that will be achieved through raceneutral
means. Id.
The court affirmed the decision of the district court upholding the validity of the IDOT DBE
program and found that it was narrowly tailored to further a compelling governmental interest.
Id.
2. Northern Contracting, Inc. v. Illinois, 2005 WL 2230195 (N.D. Ill. Sept. 8,
2005), aff'd 473 F.3d 715 (7th Cir. 2007)
This decision is the district court's order that was affirmed by the Seventh Circuit Court of
Appeals. This decision is instructive in that it is one of the recent cases to address the validity of
the Federal DBE Program and local and state governments' implementation of the program as
recipients of federal funds. The case also is instructive in that the court set forth a detailed
analysis of race, ethnicity, and genderneutral measures as well as evidentiary data required to
satisfy constitutional scrutiny.
The district court conducted a trial after denying the parties' Motions for Summary Judgment in
Northern Contracting, Inc. v. State of Illinois, Illinois DOT, and USDOT, 2004 WL 422704 (N.D. Ill.
March 3, 2004), discussed infra. The following summarizes the opinion of the district court.
Northern Contracting, Inc. (the "plaintiff"), an Illinois highway contractor, sued the State of
Illinois, the Illinois DOT, the United States DOT, and federal and state officials seeking a
declaration that federal statutory provisions, the federal implementing regulations ("TEA21"),
the state statute authorizing the DBE program, and the Illinois DBE program itself were
unlawful and unconstitutional. 2005 WL 2230195 at *1 (N.D. Ill. Sept, 8, 2005).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 56
Under TEA21, a recipient of federal funds is required to meet the "maximum feasible portion"
of its DBE goal through raceneutral means. Id. at *4 (citing regulations). If a recipient projects
that it cannot meet its overall DBE goal through raceneutral means, it must establish contract
goals to the extent necessary to achieve the overall DBE goal. Id. (citing regulation). [The court
provided an overview of the pertinent regulations including compliance requirements and
qualifications for DBE status.]
Statistical evidence. To calculate its 2005 DBE participation goals, IDOT followed the twostep
process set forth in TEA21: (1) calculation of a base figure for the relative availability of DBEs,
and (2) consideration of a possible adjustment of the base figure to reflect the effects of the DBE
program and the level of participation that would be expected but for the effects of past and
present discrimination. Id. at *6. IDOT engaged in a study to calculate its base figure and conduct
a custom census to determine whether a more reliable method of calculation existed as opposed
to its previous method of reviewing a bidder's list. Id.
In compliance with TEA21, IDOT used a study to evaluate the base figure using a sixpart
analysis: (1) the study identified the appropriate and relevant geographic market for its
contracting activity and its prime contractors; (2) the study identified the relevant product
markets in which IDOT and its prime contractors contract; (3) the study sought to identify all
available contractors and subcontractors in the relevant industries within Illinois using Dun &
Bradstreet's Marketplace; (4) the study collected lists of DBEs from IDOT and 20 other public
and private agencies; (5) the study attempted to correct for the possibility that certain
businesses listed as DBEs were no longer qualified or, alternatively, businesses not listed as
DBEs but qualified as such under the federal regulations; and (6) the study attempted to correct
for the possibility that not all DBE businesses were listed in the various directories. Id. at *67.
The study utilized a standard statistical sampling procedure to correct for the latter two biases.
Id. at *7. The study thus calculated a weighted average base figure of 22.7 percent. Id.
IDOT then adjusted the base figure based upon two disparity studies and some reports
considering whether the DBE availability figures were artificially low due to the effects of past
discrimination. Id. at *8. One study examined disparities in earnings and business formation
rates as between DBEs and their white maleowned counterparts. Id. Another study included a
survey reporting that DBEs are rarely utilized in nongoals projects. Id.
IDOT considered three reports prepared by expert witnesses. Id. at *9. The first report
concluded that minority and womenowned businesses were underutilized relative to their
capacity and that such underutilization was due to discrimination. Id. The second report
concluded, after controlling for relevant variables such as credit worthiness, "that minorities
and women are less likely to form businesses, and that when they do form businesses, those
businesses achieve lower earnings than did businesses owned by white males." Id. The third
report, again controlling for relevant variables (education, age, marital status, industry and
wealth), concluded that minority and femaleowned businesses' formation rates are lower than
those of their white male counterparts, and that such businesses engage in a disproportionate
amount of government work and contracts as a result of their inability to obtain private sector
work. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 57
IDOT also conducted a series of public hearings in which a number of DBE owners who testified
that they "were rarely, if ever, solicited to bid on projects not subject to disadvantagedfirm
hiring goals." Id. Additionally, witnesses identified 20 prime contractors in IDOT District 1 alone
who rarely or never solicited bids from DBEs on nongoals projects. Id. The prime contractors
did not respond to IDOT's requests for information concerning their utilization of DBEs. Id.
Finally, IDOT reviewed unremediated market data from four different markets (the Illinois State
Toll Highway Authority, the Missouri DOT, Cook County's public construction contracts, and a
"nongoals" experiment conducted by IDOT between 2001 and 2002), and considered past
utilization of DBEs on IDOT projects. Id. at *11. After analyzing all of the data, the study
recommended an upward adjustment to 27.51 percent. However, IDOT decided to maintain its
figure at 22.77 percent. Id.
IDOT's representative testified that the DBE program was administered on a "contractby
contract basis." Id. She testified that DBE goals have no effect on the award of prime contracts
but that contracts are awarded exclusively to the "lowest responsible bidder." IDOT also allowed
contractors to petition for a waiver of individual contract goals in certain situations (e.g., where
the contractor has been unable to meet the goal despite having made reasonable good faith
efforts). Id. at *12. Between 2001 and 2004, IDOT received waiver requests on 8.53 percent of
its contracts and granted three out of four; IDOT also provided an appeal procedure for a denial
from a waiver request. Id.
IDOT implemented a number of race and genderneutral measures both in its fiscal year 2005
plan and in response to the district court's earlier summary judgment order, including:
1. A "prompt payment provision" in its contracts, requiring that subcontractors be paid
promptly after they complete their work, and prohibiting prime contractors from
delaying such payments;
2. An extensive outreach program seeking to attract and assist DBE and other small firms
enter and achieve success in the industry (including retaining a network of consultants
to provide management, technical and financial assistance to small businesses, and
sponsoring networking sessions throughout the state to acquaint small firms with larger
contractors and to encourage the involvement of small firms in major construction
projects);
3. Reviewing the criteria for prequalification to reduce any unnecessary burdens;
4. "Unbundling" large contracts; and
5. Allocating some contracts for bidding only by firms meeting the SBA's definition of small
businesses.
Id. (internal citations omitted). IDOT was also in the process of implementing bonding and
financing initiatives to assist emerging contractors obtain guaranteed bonding and lines of
credit, and establishing a mentorprotg program. Id.
The court found that IDOT attempted to achieve the "maximum feasible portion" of its overall
DBE goal through race and genderneutral measures. Id. at *13. The court found that IDOT
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 58
determined that race and genderneutral measures would account for 6.43 percent of its DBE
goal, leaving 16.34 percent to be reached using race and genderconscious measures. Id.
Anecdotal evidence. A number of DBE owners testified to instances of perceived discrimination
and to the barriers they face. Id. The DBE owners also testified to difficulties in obtaining work
in the private sector and "unanimously reported that they were rarely invited to bid on such
contracts." Id. The DBE owners testified to a reluctance to submit unsolicited bids due to the
expense involved and identified specific firms that solicited bids from DBEs for goals projects
but not for nongoals projects. Id. A number of the witnesses also testified to specific instances of
discrimination in bidding, on specific contracts, and in the financing and insurance markets. Id.
at *1314. One witness acknowledged that all small firms face difficulties in the financing and
insurance markets, but testified that it is especially burdensome for DBEs who "frequently are
forced to pay higher insurance rates due to racial and gender discrimination." Id. at *14. The
DBE witnesses also testified they have obstacles in obtaining prompt payment. Id.
The plaintiff called a number of nonDBE business owners who unanimously testified that they
solicit business equally from DBEs and nonDBEs on nongoals projects. Id. Some nonDBE firm
owners testified that they solicit bids from DBEs on a goals project for work they would
otherwise complete themselves absent the goals; others testified that they "occasionally award
work to a DBE that was not the low bidder in order to avoid scrutiny from IDOT." Id. A number
of nonDBE firm owners accused of failing to solicit bids from DBEs on nongoals projects
testified and denied the allegations. Id. at *15.
Strict scrutiny. The court applied strict scrutiny to the program as a whole (including the
genderbased preferences). Id. at *16. The court, however, set forth a different burden of proof,
finding that the government must demonstrate identified discrimination with specificity and
must have a "'strong basis in evidence' to conclude that remedial action was necessary, before it
embarks on an affirmative action program If the government makes such a showing, the party
challenging the affirmative action plan bears the 'ultimate burden' of demonstrating the
unconstitutionality of the program." Id. The court held that challenging party's burden "can only
be met by presenting credible evidence to rebut the government's proffered data." Id. at *17.
To satisfy strict scrutiny, the court found that IDOT did not need to demonstrate an independent
compelling interest; however, as part of the narrowly tailored prong, IDOT needed to show "that
there is a demonstrable need for the implementation of the Federal DBE Program within its
jurisdiction." Id. at *16.
The court found that IDOT presented "an abundance" of evidence documenting the disparities
between DBEs and nonDBEs in the construction industry. Id. at *17. The plaintiff argued that
the study was "erroneous because it failed to limit its DBE availability figures to those firms
registered and prequalified with IDOT." Id. The plaintiff also alleged the calculations of the DBE
utilization rate were incorrect because the data included IDOT subcontracts and prime
contracts, despite the fact that the latter are awarded to the lowest bidder as a matter of law. Id.
Accordingly, the plaintiff alleged that IDOT's calculation of DBE availability and utilization rates
was incorrect. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 59
The court found that other jurisdictions had utilized the custom census approach without
successful challenge. Id. at *18. Additionally, the court found "that the remedial nature of the
federal statutes counsels for the casting of a broader net when measuring DBE availability." Id.
at *19. The court found that IDOT presented "an array of statistical studies concluding that DBEs
face disproportionate hurdles in the credit, insurance, and bonding markets." Id. at *21. The
court also found that the statistical studies were consistent with the anecdotal evidence. Id. The
court did find, however, that "there was no evidence of even a single instance in which a prime
contractor failed to award a job to a DBE that offered the low bid. This is [also] supported by
the statistical data which shows that at least at the level of subcontracting, DBEs are generally
utilized at a rate in line with their ability." Id. at *21, n. 31. Additionally, IDOT did not verify the
anecdotal testimony of DBE firm owners who testified to barriers in financing and bonding.
However, the court found that such verification was unnecessary. Id. at *21, n. 32.
The court further found:
That such discrimination indirectly affects the ability of DBEs to compete for
prime contracts, despite the fact that they are awarded solely on the basis of low
bid, cannot be doubted: '[E]xperience and size are not race and genderneutral
variables [DBE] construction firms are generally smaller and less experienced
because of industry discrimination.'
Id. at *21, citing Concrete Works of Colorado, Inc. v. City and County of Denver, 321 F.3d 950 (10th
Cir. 2003).
The parties stipulated to the fact that DBE utilization goals exceed DBE availability for 2003 and
2004. Id. at *22. IDOT alleged, and the court so found, that the high utilization on goals projects
was due to the success of the DBE program, and not to an absence of discrimination. Id. The
court found that the statistical disparities coupled with the anecdotal evidence indicated that
IDOT's fiscal year 2005 goal was a "'plausible lowerbound estimate' of DBE participation in the
absence of discrimination." Id. The court found that the plaintiff did not present persuasive
evidence to contradict or explain IDOT's data. Id.
The plaintiff argued that even if accepted at face value, IDOT's marketplace data did not support
the imposition of race and genderconscious remedies because there was no evidence of direct
discrimination by prime contractors. Id. The court found first that IDOT's indirect evidence of
discrimination in the bonding, financing, and insurance markets was sufficient to establish a
compelling purpose. Id. Second, the court found:
[M]ore importantly, Plaintiff fails to acknowledge that, in enacting its DBE
program, IDOT acted not to remedy its own prior discriminatory practices, but
pursuant to federal law, which both authorized and required IDOT to remediate
the effects of private discrimination on federallyfunded highway contracts. This
is a fundamental distinction [A] state or local government need not
independently identify a compelling interest when its actions come in the
course of enforcing a federal statute.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 60
Id. at *23. The court distinguished Builders Ass'n of Greater Chicago v. County of Cook, 123 F.
Supp.2d 1087 (N.D. Ill. 2000), aff'd 256 F.3d 642 (7th Cir. 2001), noting that the program in that
case was not federallyfunded. Id. at *23, n. 34.
The court also found that "IDOT has done its best to maximize the portion of its DBE goal"
through race and genderneutral measures, including antidiscrimination enforcement and
small business initiatives. Id. at *24. The antidiscrimination efforts included: an internet
website where a DBE can file an administrative complaint if it believes that a prime contractor is
discriminating on the basis of race or gender in the award of subcontracts; and requiring
contractors seeking prequalification to maintain and produce solicitation records on all projects,
both public and private, with and without goals, as well as records of the bids received and
accepted. Id. The small business initiative included: "unbundling" large contracts; allocating
some contracts for bidding only by firms meeting the SBA's definition of small businesses; a
"prompt payment provision" in its contracts, requiring that subcontractors be paid promptly
after they complete their work, and prohibiting prime contractors from delaying such payments;
and an extensive outreach program seeking to attract and assist DBE and other small firms DBE
and other small firms enter and achieve success in the industry (including retaining a network
of consultants to provide management, technical and financial assistance to small businesses,
and sponsoring networking sessions throughout the state to acquaint small firms with larger
contractors and to encourage the involvement of small firms in major construction projects). Id.
The court found "[s]ignificantly, Plaintiff did not question the efficacy or sincerity of these race
and genderneutral measures." Id. at *25. Additionally, the court found the DBE program had
significant flexibility in that utilized contractbycontract goal setting (without a fixed DBE
participation minimum) and contained waiver provisions. Id. The court found that IDOT
approved 70 percent of waiver requests although waivers were requested on only 8 percent of
all contracts. Id., citing Adarand Constructors, Inc. v. Slater "Adarand VII", 228 F.3d 1147, 1177
(10th Cir. 2000) (citing for the proposition that flexibility and waiver are critically important).
The court held that IDOT's DBE plan was narrowly tailored to the goal of remedying the effects
of racial and gender discrimination in the construction industry, and was therefore
constitutional.
3. Northern Contracting, Inc. v. State of Illinois, Illinois DOT, and USDOT, 2004
WL 422704 (N.D. Ill. March 3, 2004)
This is the earlier decision in Northern Contracting, Inc., 2005 WL 2230195 (N.D. Ill. Sept. 8,
2005), see above, which resulted in the remand of the case to consider the implementation of the
Federal DBE Program by the IDOT. This case involves the challenge to the Federal DBE Program.
The plaintiff contractor sued the IDOT and the USDOT challenging the facial constitutionality of
the Federal DBE Program (TEA21 and 49 C.F.R. Part 26) as well as the implementation of the
Federal Program by the IDOT (i.e., the IDOT DBE Program). The court held valid the Federal DBE
Program, finding there is a compelling governmental interest and the federal program is
narrowly tailored. The court also held there are issues of fact regarding whether IDOT's DBE
Program is narrowly tailored to achieve the federal government's compelling interest. The court
denied the Motions for Summary Judgment filed by the plaintiff and by IDOT, finding there were
issues of material fact relating to IDOT's implementation of the Federal DBE Program.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 61
The court in Northern Contracting, held that there is an identified compelling governmental
interest for implementing the Federal DBE Program and that the Federal DBE Program is
narrowly tailored to further that interest. Therefore, the court granted the Federal defendants'
Motion for Summary Judgment challenging the validity of the Federal DBE Program. In this
connection, the district court followed the decisions and analysis in Sherbrooke Turf, Inc. v.
Minnesota Department of Transportation, 345 F.3d 964 (8th Cir. 2003) and Adarand Constructors,
Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000) ("Adarand VII"), cert. granted then dismissed as
improvidently granted, 532 U.S. 941, 534 U.S. 103 (2001). The court held, like these two Courts
of Appeals that have addressed this issue, that Congress had a strong basis in evidence to
conclude that the DBE Program was necessary to redress private discrimination in federally
assisted highway subcontracting. The court agreed with the Adarand VII and Sherbrooke Turf
courts that the evidence presented to Congress is sufficient to establish a compelling
governmental interest, and that the contractors had not met their burden of introducing
credible particularized evidence to rebut the Government's initial showing of the existence of a
compelling interest in remedying the nationwide effects of past and present discrimination in
the federal construction procurement subcontracting market. 2004 WL422704 at *34, citing
Adarand VII, 228 F.3d at 1175.
In addition, the court analyzed the second prong of the strict scrutiny test, whether the
government provided sufficient evidence that its program is narrowly tailored. In making this
determination, the court looked at several factors, such as the efficacy of alternative remedies;
the flexibility and duration of the raceconscious remedies, including the availability of waiver
provisions; the relationships between the numerical goals and relevant labor market; the impact
of the remedy on third parties; and whether the program is overorunderinclusive. The narrow
tailoring analysis with regard to the asapplied challenge focused on IDOT's implementation of
the Federal DBE Program.
First, the court held that the Federal DBE Program does not mandate the use of raceconscious
measures by recipients of federal dollars, but in fact requires only that the goal reflect the
recipient's determination of the level of DBE participation it would expect absent the effects of
the discrimination. 49 C.F.R. 26.45(b). The court recognized, as found in the Sherbrooke Turf
and Adarand VII cases, that the Federal Regulations place strong emphasis on the use of race
neutral means to increase minority business participation in government contracting, that
although narrow tailoring does not require exhaustion of every conceivable raceneutral
alternative, it does require "serious, good faith consideration of workable raceneutral
alternatives." 2004 WL422704 at *36, citing and quoting Sherbooke Turf, 345 F.3d at 972,
quoting Grutter v. Bollinger, 539 U.S. 306 (2003). The court held that the Federal regulations,
which prohibit the use of quotas and severely limit the use of setasides meet this requirement.
The court agreed with the Adarand VII and Sherbrooke Turf courts that the Federal DBE Program
does require recipients to make a serious good faith consideration of workable raceneutral
alternatives before turning to raceconscious measures.
Second, the court found that because the Federal DBE Program is subject to periodic
reauthorization, and requires recipients of Federal dollars to review their programs annually,
the Federal DBE scheme is appropriately limited to last no longer than necessary.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 62
Third, the court held that the Federal DBE Program is flexible for many reasons, including that
the presumption that women and minority are socially disadvantaged is deemed rebutted if an
individual's personal net worth exceeds $750,000.00, and a firm owned by individual who is not
presumptively disadvantaged may nevertheless qualify for such status if the firm can
demonstrate that its owners are socially and economically disadvantaged. 49 C.F.R.
26.67(b)(1)(d). The court found other aspects of the Federal Regulations provide ample
flexibility, including recipients may obtain waivers or exemptions from any requirements.
Recipients are not required to set a contract goal on every USDOTassisted contract. If a
recipient estimates that it can meet the entirety of its overall goals for a given year through race
neutral means, it must implement the Program without setting contract goals during the year. If
during the course of any year in which it is using contract goals a recipient determines that it
will exceed its overall goals, it must adjust the use of raceconscious contract goals accordingly.
49 C.F.R. 26.51(e)(f). Recipients also administering a DBE Program in good faith can not be
penalized for failing to meet their DBE goals, and a recipient may terminate its DBE Program if it
meets its annual overall goal through raceneutral means for two consecutive years. 49 C.F.R.
26.51(f). Further, a recipient may award a contract to a bidder/offeror that does not meet the
DBE Participation goals so long as the bidder has made adequate good faith efforts to meet the
goals. 49 C.F.R. 26.53(a)(2). The regulations also prohibit the use of quotas. 49 C.F.R. 26.43.
Fourth, the court agreed with the Sherbooke Turf court's assessment that the Federal DBE
Program requires recipients to base DBE goals on the number of ready, willing and able
disadvantaged business in the local market, and that this exercise requires recipients to
establish realistic goals for DBE participation in the relevant labor markets.
Fifth, the court found that the DBE Program does not impose an unreasonable burden on third
parties, including nonDBE subcontractors and taxpayers. The court found that the Federal DBE
Program is a limited and properly tailored remedy to cure the effects of prior discrimination, a
sharing of the burden by parties such as nonDBEs is not impermissible.
Finally, the court found that the Federal DBE Program was not overinclusive because the
regulations do not provide that every women and every member of a minority group is
disadvantaged. Preferences are limited to small businesses with a specific average annual gross
receipts over three fiscal years of $16.6 million or less (at the time of this decision), and
businesses whose owners' personal net worth exceed $750,000.00 are excluded. 49 C.F.R.
26.67(b)(1). In addition, a firm owned by a white male may qualify as socially and economically
disadvantaged. 49 C.F.R. 26.67(d).
The court analyzed the constitutionality of the IDOT DBE Program. The court adopted the
reasoning of the Eighth Circuit in Sherbrooke Turf, that a recipient's implementation of the
Federal DBE Program must be analyzed under the narrow tailoring analysis but not the
compelling interest inquiry. Therefore, the court agreed with Sherbrooke Turf that a recipient
need not establish a distinct compelling interest before implementing the Federal DBE Program,
but did conclude that a recipient's implementation of the Federal DBE Program must be
narrowly tailored. The court found that issues of fact remain in terms of the validity of the
IDOT's DBE Program as implemented in terms of whether it was narrowly tailored to achieve
the Federal Government's compelling interest. The court, therefore, denied the contractor
plaintiff's Motion for Summary Judgment and the Illinois DOT's Motion for Summary Judgment.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 63
4. Sherbrooke Turf, Inc. v. Minnesota DOT, and Gross Seed Company v.
Nebraska Department of Road, 345 F.3d 964 (8th Cir. 2003), cert. denied, 541
U.S. 1041 (2004)
This case is instructive in its analysis of state DOT DBEtype programs and their evidentiary
basis and implementation. This case also is instructive in its analysis of the narrowly tailored
requirement for state DBE programs. In upholding the challenged Federal DBE Program at issue
in this case, the Eighth Circuit emphasized the race, ethnicity and genderneutral elements, the
ultimate flexibility of the Program, and the fact the Program was tied closely only to labor
markets with identified discrimination.
In Sherbrooke Turf, Inc. v. Minnesota DOT, and Gross Seed Company v. Nebraska Department of
Road, the U.S. Court of Appeals for the Eighth Circuit upheld the constitutionality of the Federal
DBE Program (49 C.F.R. Part 26 ). The court held the Federal Program was narrowly tailored to
remedy a compelling governmental interest. The court also held the federal regulations
governing the states' implementation of the Federal DBE Program were narrowly tailored, and
the state DOT's implementation of the Federal DBE Program was narrowly tailored to serve a
compelling government interest.
Sherbrooke and Gross Seed both contended that the Federal DBE Program on its face and as
applied in Minnesota and Nebraska violated the Equal Protection component of the Fifth
Amendment's Due Process Clause. The Eighth Circuit engaged in a review of the Federal DBE
Program and the implementation of the Program by the Minnesota DOT and the Nebraska
Department of Roads ("Nebraska DOR") under a strict scrutiny analysis and held that the
Federal DBE Program was valid and constitutional and that the Minnesota DOT's and Nebraska
DOR's implementation of the Program also was constitutional and valid. Applying the strict
scrutiny analysis, the court first considered whether the Federal DBE Program established a
compelling governmental interest, and found that it did. It concluded that Congress had a strong
basis in evidence to support its conclusion that racebased measures were necessary for the
reasons stated by the Tenth Circuit in Adarand, 228 F.3d at 116776. Although the contractors
presented evidence that challenged the data, they failed to present affirmative evidence that no
remedial action was necessary because minorityowned small businesses enjoy non
discriminatory access to participation in highway contracts. Thus, the court held they failed to
meet their ultimate burden to prove that the DBE Program is unconstitutional on this ground.
Finally, Sherbrooke and Gross Seed argued that the Minnesota DOT and Nebraska DOR must
independently satisfy the compelling governmental interest test aspect of strict scrutiny review.
The government argued, and the district courts below agreed, that participating states need not
independently meet the strict scrutiny standard because under the DBE Program the state must
still comply with the DOT regulations. The Eighth Circuit held that this issue was not addressed
by the Tenth Circuit in Adarand. The Eighth Circuit concluded that neither side's position is
entirely sound.
The court rejected the contention of the contractors that their facial challenges to the DBE
Program must be upheld unless the record before Congress included strong evidence of race
discrimination in construction contracting in Minnesota and Nebraska. On the other hand, the
court held a valid racebased program must be narrowly tailored, and to be narrowly tailored, a
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 64
national program must be limited to those parts of the country where its racebased measures
are demonstrably needed to the extent that the federal government delegates this tailoring
function, as a state's implementation becomes relevant to a reviewing court's strict scrutiny.
Thus, the court left the question of state implementation to the narrow tailoring analysis.
The court held that a reviewing court applying strict scrutiny must determine if the racebased
measure is narrowly tailored. That is, whether the means chosen to accomplish the
government's asserted purpose are specifically and narrowly framed to accomplish that
purpose. The contractors have the ultimate burden of establishing that the DBE Program is not
narrowly tailored. Id. The compelling interest analysis focused on the record before Congress;
the narrowtailoring analysis looks at the roles of the implementing highway construction
agencies.
For determining whether a raceconscious remedy is narrowly tailored, the court looked at
factors such as the efficacy of alternative remedies, the flexibility and duration of the race
conscious remedy, the relationship of the numerical goals to the relevant labor market, and the
impact of the remedy on third parties. Id. Under the DBE Program, a state receiving federal
highway funds must, on an annual basis, submit to USDOT an overall goal for DBE participation
in its federallyfunded highway contracts. See, 49 C.F.R. 26.45(f)(1). The overall goal "must be
based on demonstrable evidence" as to the number of DBEs who are ready, willing, and able to
participate as contractors or subcontractors on federallyassisted contracts. 49 C.F.R. 26.45(b).
The number may be adjusted upward to reflect the state's determination that more DBEs would
be participating absent the effects of discrimination, including racerelated barriers to entry. See,
49 C.F.R. 26.45(d).
The state must meet the "maximum feasible portion" of its overall goal by raceneutral means
and must submit for approval a projection of the portion it expects to meet through raceneutral
means. See, 49 C.F.R. 26.45(a), (c). If raceneutral means are projected to fall short of achieving
the overall goal, the state must give preference to firms it has certified as DBEs. However, such
preferences may not include quotas. 49 C.F.R. 26.45(b). During the course of the year, if a state
determines that it will exceed or fall short of its overall goal, it must adjust its use of race
conscious and raceneutral methods "[t]o ensure that your DBE program continues to be
narrowly tailored to overcome the effects of discrimination." 49 C.F.R. 26.51(f).
Absent bad faith administration of the program, a state's failure to achieve its overall goal will
not be penalized. See, 49 C.F.R. 26.47. If the state meets its overall goal for two consecutive
years through raceneutral means, it is not required to set an annual goal until it does not meet
its prior overall goal for a year. See, 49 C.F.R. 26.51(f)(3). In addition, DOT may grant an
exemption or waiver from any and all requirements of the Program. See, 49 C.F.R. 26.15(b).
Like the district courts below, the Eighth Circuit concluded that the USDOT regulations, on their
face, satisfy the Supreme Court's narrowing tailoring requirements. First, the regulations place
strong emphasis on the use of raceneutral means to increase minority business participation in
government contracting. 345 F.3d at 972. Narrow tailoring does not require exhaustion of every
conceivable raceneutral alternative, but it does require serious good faith consideration of
workable raceneutral alternatives. 345 F.3d at 971, citing Grutter v. Bollinger, 539 U.S. 306.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 65
Second, the revised DBE program has substantial flexibility. A state may obtain waivers or
exemptions from any requirements and is not penalized for a good faith effort to meet its overall
goal. In addition, the program limits preferences to small businesses falling beneath an earnings
threshold, and any individual whose net worth exceeds $750,000.00 cannot qualify as
economically disadvantaged. See, 49 C.F.R. 26.67(b). Likewise, the DBE program contains built
in durational limits. 345 F.3d at 972. A state may terminate its DBE program if it meets or
exceeds its annual overall goal through raceneutral means for two consecutive years. Id.; 49
C.F.R. 26.51(f)(3).
Third, the court found, the USDOT has tied the goals for DBE participation to the relevant labor
markets. The regulations require states to set overall goals based upon the likely number of
minority contractors that would have received federal assisted highway contracts but for the
effects of past discrimination. See, 49 C.F.R. 26.45(c)(d)(Steps 1 and 2). Though the underlying
estimates may be inexact, the exercise requires states to focus on establishing realistic goals for
DBE participation in the relevant contacting markets. Id. at 972.
Finally, Congress and DOT have taken significant steps, the court held, to minimize the racebase
nature of the DBE Program. Its benefits are directed at all small businesses owned and
controlled by the socially and economically disadvantaged. While TEA21 creates a presumption
that members of certain racial minorities fall within that class, the presumption is rebuttable,
wealthy minority owners and wealthy minorityowned firms are excluded, and certification is
available to persons who are not presumptably disadvantaged that demonstrate actual social
and economic disadvantage. Thus, race is made relevant in the Program, but it is not a
determinative factor. 345 F.3d at 973. For these reasons, the court agreed with the district
courts that the revised DBE Program is narrowly tailored on its face.
Sherbrooke and Gross Seed also argued that the DBE Program as applied in Minnesota and
Nebraska is not narrowly tailored. Under the Federal Program, states set their own goals, based
on local market conditions; their goals are not imposed by the federal government; nor do
recipients have to tie them to any uniform national percentage. 345 F.3d at 973, citing 64 Fed.
Reg. at 5102.
The court analyzed what Minnesota and Nebraska did in connection with their implementation
of the Federal DBE Program. Minnesota DOT commissioned a disparity study of the highway
contracting market in Minnesota. The study group determined that DBEs made up 11.4 percent
of the prime contractors and subcontractors in a highway construction market. Of this number,
0.6 percent were minorityowned and 10.8 percent womenowned. Based upon its analysis of
business formation statistics, the consultant estimated that the number of participating
minorityowned business would be 34 percent higher in a raceneutral market. Therefore, the
consultant adjusted its DBE availability figure from 11.4 percent to 11.6 percent. Based on the
study, Minnesota DOT adopted an overall goal of 11.6 percent DBE participation for federally
assisted highway projects. Minnesota DOT predicted that it would need to meet 9 percent of that
overall goal through race and genderconscious means, based on the fact that DBE participation
in State highway contracts dropped from 10.25 percent in 1998 to 2.25 percent in 1999 when its
previous DBE Program was suspended by the injunction by the district court in an earlier
decision in Sherbrooke. Minnesota DOT required each prime contract bidder to make a good
faith effort to subcontract a prescribed portion of the project to DBEs, and determined that
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 66
portion based on several individualized factors, including the availability of DBEs in the extent
of subcontracting opportunities on the project.
The contractor presented evidence attacking the reliability of the data in the study, but it failed
to establish that better data were available or that Minnesota DOT was otherwise unreasonable
in undertaking this thorough analysis and relying on its results. Id. The precipitous drop in DBE
participation when no raceconscious methods were employed, the court concluded, supports
Minnesota DOT's conclusion that a substantial portion of its overall goal could not be met with
raceneutral measures. Id. On that record, the court agreed with the district court that the
revised DBE Program serves a compelling government interest and is narrowly tailored on its
face and as applied in Minnesota.
In Nebraska, the Nebraska DOR commissioned a disparity study also to review availability and
capability of DBE firms in the Nebraska highway construction market. The availability study
found that between 1995 and 1999, when Nebraska followed the mandatory 10 percent set
aside requirement, 9.95 percent of all available and capable firms were DBEs, and DBE firms
received 12.7 percent of the contract dollars on federally assisted projects. After apportioning
part of this DBE contracting to raceneutral contracting decisions, Nebraska DOR set an overall
goal of 9.95 percent DBE participation and predicted that 4.82 percent of this overall goal would
have to be achieved by raceandgender conscious means. The Nebraska DOR required that
prime contractors make a good faith effort to allocate a set portion of each contract's funds to
DBE subcontractors. The Eighth Circuit concluded that Gross Seed, like Sherbrooke, failed to
prove that the DBE Program is not narrowly tailored as applied in Nebraska. Therefore, the
court affirmed the district courts' decisions in Gross Seed and Sherbrooke. (See district court
opinions discussed infra.).
5. Sherbrooke Turf, Inc. v. Minnesota DOT, 2001 WL 1502841, No. 00CV1026
(D. Minn. 2001) (unpublished opinion), aff'd 345 F.3d 964 (8th Cir. 2003)
Sherbrooke involved a landscaping service contractor owned and operated by Caucasian males.
The contractor sued the Minnesota DOT claiming the Federal DBE provisions of the TEA21 are
unconstitutional. Sherbrooke challenged the "federal affirmative action programs," the USDOT
implementing regulations, and the Minnesota DOT's participation in the DBE Program. The
USDOT and the FHWA intervened as Federal defendants in the case. Sherbrooke, 2001 WL
1502841 at *1.
The United States District Court in Sherbrooke relied substantially on the Tenth Circuit Court of
Appeals decision in Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000), in
holding that the Federal DBE Program is constitutional. The district court addressed the issue of
"random inclusion" of various groups as being within the Program in connection with whether
the Federal DBE Program is "narrowly tailored." The court held that Congress cannot enact a
national program to remedy discrimination without recognizing classes of people whose history
has shown them to be subject to discrimination and allowing states to include those people in its
DBE Program.
The court held that the Federal DBE Program attempts to avoid the "potentially invidious effects
of providing blanket benefits to minorities" in part,
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 67
by restricting a state's DBE preference to identified groups actually
appearing in the target state. In practice, this means Minnesota can only
certify members of one or another group as potential DBEs if they are
present in the local market. This minimizes the chance that individuals
simply on the basis of their birth will benefit from Minnesota's DBE
program. If a group is not present in the local market, or if they are found
in such small numbers that they cannot be expected to be able to
participate in the kinds of construction work TEA21 covers, that group
will not be included in the accounting used to set Minnesota's overall
DBE contracting goal.
Sherbrooke, 2001 WL 1502841 at *10 (D. Minn.).
The court rejected plaintiff's claim that the Minnesota DOT must independently demonstrate
how its program comports with Croson's strict scrutiny standard. The court held that the
"Constitution calls out for different requirements when a state implements a federal affirmative
action program, as opposed to those occasions when a state or locality initiates the Program." Id.
at *11 (emphasis added). The court in a footnote ruled that TEA21, being a federal program,
"relieves the state of any burden to independently carry the strict scrutiny burden." Id. at *11 n.
3. The court held states that establish DBE programs under TEA21 and 49 C.F.R. Part 26 are
implementing a Congressionallyrequired program and not establishing a local one. As such, the
court concluded that the state need not independently prove its DBE program meets the strict
scrutiny standard. Id.
6. Gross Seed Co. v. Nebraska Department of Roads, Civil Action File No.
4:00CV3073 (D. Neb. May 6, 2002), aff'd 345 F.3d 964 (8th Cir. 2003)
The United States District Court for the District of Nebraska held in Gross Seed Co. v. Nebraska
(with the USDOT and FHWA as Interveners), that the Federal DBE Program (codified at 49 C.F.R.
Part 26) is constitutional. The court also held that the Nebraska Department of Roads
("Nebraska DOR") DBE Program adopted and implemented solely to comply with the Federal
DBE Program is "approved" by the court because the court found that 49 C.F.R. Part 26 and TEA
21 were constitutional.
The court concluded, similar to the court in Sherbrooke Turf, that the State of Nebraska did not
need to independently establish that its program met the strict scrutiny requirement because
the Federal DBE Program satisfied that requirement, and was therefore constitutional. The court
did not engage in a thorough analysis or evaluation of the Nebraska DOR Program or its
implementation of the Federal DBE Program. The court points out that the Nebraska DOR
Program is adopted in compliance with the Federal DBE Program, and that the USDOT approved
the use of Nebraska DOR's proposed DBE goals for fiscal year 2001, pending completion of
USDOT's review of those goals. Significantly, however, the court in its findings does note that the
Nebraska DOR established its overall goals for fiscal year 2001 based upon an independent
availability/disparity study.
The court upheld the constitutionality of the Federal DBE Program by finding the evidence
presented by the federal government and the history of the federal legislation are sufficient to
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 68
demonstrate that past discrimination does exist "in the construction industry" and that racial
and gender discrimination "within the construction industry" is sufficient to demonstrate a
compelling interest in individual areas, such as highway construction. The court held that the
Federal DBE Program was sufficiently "narrowly tailored" to satisfy a strict scrutiny analysis
based again on the evidence submitted by the federal government as to the Federal DBE
Program.
7. Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000) cert.
granted then dismissed as improvidently granted sub nom. Adarand
Constructors, Inc. v. Mineta, 532 U.S. 941, 534 U.S. 103 (2001)
This is the Adarand decision by the United States Court of Appeals for the Tenth Circuit, which
was on remand from the earlier Supreme Court decision applying the strict scrutiny analysis to
any constitutional challenge to the Federal DBE Program. See Adarand Constructors, Inc. v. Pena,
515 U.S. 200 (1995). The decision of the Tenth Circuit in this case was considered by the United
States Supreme Court, after that court granted certiorari to consider certain issues raised on
appeal. The Supreme Court subsequently dismissed the writ of certiorari "as improvidently
granted" without reaching the merits of the case. The court did not decide the constitutionality
of the Federal DBE Program as it applies to state DOTs or local governments.
The Supreme Court held that the Tenth Circuit had not considered the issue before the Supreme
Court on certiorari, namely whether a racebased program applicable to direct federal
contracting is constitutional. This issue is distinguished from the issue of the constitutionality of
the USDOT DBE Program as it pertains to procurement of federal funds for highway projects let
by states, and the implementation of the Federal DBE Program by state DOTs. Therefore, the
Supreme Court held it would not reach the merits of a challenge to federal laws relating to direct
federal procurement.
Turning to the Tenth Circuit decision in Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th
Cir. 2000), the Tenth Circuit upheld in general the facial constitutionality of the Federal DBE
Program. The court found that the federal government had a compelling interest in not
perpetuating the effects of racial discrimination in its own distribution of federal funds and in
remediating the effects of past discrimination in government contracting, and that the evidence
supported the existence of past and present discrimination sufficient to justify the Federal DBE
Program. The court also held that the Federal DBE Program is "narrowly tailored," and therefore
upheld the constitutionality of the Federal DBE Program.
It is significant to note that the court in determining the Federal DBE Program is "narrowly
tailored" focused on the current regulations, 49 C.F.R. Part 26, and in particular 26.1(a), (b),
and (f). The court pointed out that the federal regulations instruct recipients as follows:
[y]ou must meet the maximum feasible portion of your overall
goal by using raceneutral means of facilitating DBE
participation, 49 C.F.R. 26.51(a)(2000); see also 49 C.F.R.
26.51(f)(2000) (if a recipient can meet its overall goal through
raceneutral means, it must implement its program without
the use of raceconscious contracting measures), and
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 69
enumerate a list of raceneutral measures, see 49 C.F.R.
26.51(b)(2000). The current regulations also outline several
raceneutral means available to program recipients including
assistance in overcoming bonding and financing obstacles,
providing technical assistance, establishing programs to assist
startup firms, and other methods. See 49 C.F.R. 26.51(b). We
therefore are dealing here with revisions that emphasize the
continuing need to employ nonraceconscious methods even
as the need for raceconscious remedies is recognized. 228
F.3d at 11781179.
In considering whether the Federal DBE Program is narrowly tailored, the court also addressed
the argument made by the contractor that the program is over and underinclusive for several
reasons, including that Congress did not inquire into discrimination against each particular
minority racial or ethnic group. The court held that insofar as the scope of inquiry suggested
was a particular state's construction industry alone, this would be at odds with its holding
regarding the compelling interest in Congress's power to enact nationwide legislation. Id. at
11851186. The court held that because of the "unreliability of racial and ethnic categories and
the fact that discrimination commonly occurs based on much broader racial classifications,"
extrapolating findings of discrimination against the various ethnic groups "is more a question of
nomenclature than of narrow tailoring." Id. The court found that the "Constitution does not erect
a barrier to the government's effort to combat discrimination based on broad racial
classifications that might prevent it from enumerating particular ethnic origins falling within
such classifications." Id.
Finally, the Tenth Circuit did not specifically address a challenge to the letting of federally
funded construction contracts by state departments of transportation. The court pointed out
that plaintiff Adarand "conceded that its challenge in the instant case is to 'the federal program,
implemented by federal officials,' and not to the letting of federallyfunded construction
contracts by state agencies." 228 F.3d at 1187. The court held that it did not have before it a
sufficient record to enable it to evaluate the separate question of Colorado DOT's
implementation of raceconscious policies. Id. at 11871188.
8. Geod Corporation v. New Jersey Transit Corporation, et. al., 746 F. Supp.2d
642, 2010 WL 4193051 (D. N. J. October 19, 2010)
Plaintiffs, white male owners of Geod Corporation ("Geod"), brought this action against the New
Jersey Transit Corporation ("NJT") alleging discriminatory practices by NJT in designing and
implementing the Federal DBE program. 746 F. Supp 2d at 644. The Plaintiffs alleged that the
NJT's DBE program violated the United States Constitution, 42 U.S.C. 1981, Title VI of the Civil
Rights Act of 1964, 42 U.S.C. 2000(d) and state law. The district court previously dismissed the
Complaint against all Defendants except for NJT and concluded that a genuine issue material fact
existed only as to whether the method used by NJT to determine its DBE goals during 2010 were
sufficiently narrowly tailored, and thus constitutional. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 70
New Jersey Transit Program and Disparity Study
NJT relied on the analysis of consultants for the establishment of their goals for the DBE
program. The study established the effects of past discrimination, the district court found, by
looking at the disparity and utilization of DBEs compared to their availability in the market. Id.
at 648. The study used several data sets and averaged the findings in order to calculate this
ratio, including: (1) the New Jersey DBE vendor List; (2) a Survey of MinorityOwned Business
Enterprises (SMOBE) and a Survey of WomenOwned Enterprises (SWOBE) as determined by
the U.S. Census Bureau; and (3) detailed contract files for each racial group. Id.
The court found the study determined an average annual utilization of 23 percent for DBEs, and
to examine past discrimination, several analyses were run to measure the disparity among DBEs
by race. Id. at 648. The Study found that all but one category was underutilized among the racial
and ethnic groups. Id. All groups other than Asian DBEs were found to be underutilized. Id.
The court held that the test utilized by the study, "conducted to establish a pattern of
discrimination against DBEs, proved that discrimination occurred against DBEs during the pre
qualification process and in the number of contracts that are awarded to DBEs. Id. at 649. The
court found that DBEs are more likely than nonDBEs to be prequalified for small construction
contracts, but are less likely to prequalify for larger construction projects. Id.
For fiscal year 2010, the study consultant followed the "threestep process pursuant to USDOT
regulations to establish the NJT DBE goal." Id. at 649. First, the consultant determined "the base
figure for the relative availability of DBEs in the specific industries and geographical market
from which DBE and nonDBE contractors are drawn." Id. In determining the base figure, the
consultant (1) defined the geographic marketplace, (2) identified "the relevant industries in
which NJ Transit contracts," and (3) calculated "the weighted availability measure." Id. at 649.
The court found that the study consultant used political jurisdictional methods and virtual
methods to pinpoint the location of contracts and/or contractors for NJT, and determined that
the geographical market place for NJT contracts included New Jersey, New York and
Pennsylvania. Id. at 649. The consultant used contract files obtained from NJT and data obtained
from Dun & Bradstreet to identify the industries with which NJT contracts in these geographical
areas. Id. The consultant then used existing and estimated expenditures in these particular
industries to determine weights corresponding to NJT contracting patterns in the different
industries for use in the availability analysis. Id.
The availability of DBEs was calculated by using the following data: Unified Certification
Program Business Directories for the states of New Jersey, New York and Pennsylvania; NJT
Vendor List; Dun & Bradstreet database; 2002 Survey of Small Business Owners; and NJT Pre
Qualification List. Id. at 649650. The availability rates were then "calculated by comparing the
number of ready, willing, and able minority and womenowned firms in the defined geographic
marketplace to the total number of ready, willing, and able firms in the same geographic
marketplace. Id. The availability rates in each industry were weighed in accordance with NJT
expenditures to determine a base figure. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 71
Second, the consultant adjusted the base figure due to evidence of discrimination against DBE
prime contractors and disparities in small purchases and construction prequalification. Id. at
650. The discrimination analysis examined discrimination in small purchases, discrimination in
prequalification, two regression analyses, an Essex County disparity study, market
discrimination, and previous utilization. Id. at 650.
The Final Recommendations Report noted that there were sizeable differences in the small
purchases awards to DBEs and nonDBEs with the awards to DBEs being significantly smaller.
Id. at 650. DBEs were also found to be less likely to be prequalified for contracts over $1 million
in comparison to similarly situated nonDBEs. Id. The regression analysis using the dummy
variable method yielded an average estimate of a discriminatory effect of 28.80 percent. Id. The
discrimination regression analysis using the residual difference method showed that on average
12.2 percent of the contract amount disparity awarded to DBEs and nonDBEs was unexplained.
Id.
The consultant also considered evidence of discrimination in the local market in accordance
with 49 C.F.R. 26.45(d). The Final Recommendations Report cited in the 2005 Essex County
Disparity Study suggested that discrimination in the labor market contributed to the
unexplained portion of the selfemployment, employment, unemployment, and wage gaps in
Essex County, New Jersey. Id. at 650.
The consultant recommended that NJT focus on increasing the number of DBE prime
contractors. Because qualitative evidence is difficult to quantify, according to the consultant,
only the results from the regression analyses were used to adjust the base goal. Id. The base goal
was then adjusted from 19.74 percent to 23.79 percent. Id.
Third, in order to partition the DBE goal by raceneutral and raceconscious methods, the
consultant analyzed the share of all DBE contract dollars won with no goals. Id. at 650. He also
performed two different regression analyses: one involving predicted DBE contract dollars and
DBE receipts if the goal was set at zero. Id. at 651. The second method utilized predicted DBE
contract dollars with goals and predicted DBE contract dollars without goals to forecast how
much firms with goals would receive had they not included the goals. Id. The consultant
averaged his results from all three methods to conclude that the fiscal year 2010 NJT a portion
of the raceneutral DBE goal should be 11.94 percent and a portion of the raceconscious DBE
goal should be 11.84 percent. Id. at 651.
The district court applied the strict scrutiny standard of review. The district court already
decided, in the course of the motions for summary judgment, that compelling interest was
satisfied as New Jersey was entitled to adopt the federal government's compelling interest in
enacting TEA21 and its implementing regulations. Id. at 652, citing Geod v. N.J. Transit Corp.,
678 F.Supp.2d 276, 282 (D.N.J. 2009). Therefore, the court limited its analysis to whether NJT's
DBE program was narrowly tailored to further that compelling interest in accordance with "its
grant of authority under federal law." Id. at 652 citing Northern Contracting, Inc. v. Illinois
Department of Transportation, 473 F.3d 715, 722 (7th Cir. 2007).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 72
Applying Northern Contracting v. Illinois
The district court clarified its prior ruling in 2009 (see 678 F.Supp.2d 276) regarding summary
judgment, that the court agreed with the holding in Northern Contracting, Inc. v. Illinois, that "a
challenge to a state's application of a federally mandated program must be limited to the
question of whether the state exceeded its authority." Id. at 652 quoting Northern Contracting,
473 F.3d at 721. The district court in Geod followed the Seventh Circuit explanation that when a
state department of transportation is acting as an instrument of federal policy, a plaintiff cannot
collaterally attack the federal regulations through a challenge to a state's program. Id. at 652,
citing Northern Contracting, 473 F.3d at 722. Therefore, the district court held that the inquiry is
limited to the question of whether the state department of transportation "exceeded its grant of
authority under federal law." Id. at 652653, quoting Northern Contracting, 473 F.3d at 722 and
citing also Tennessee Asphalt Co. v. Farris, 942 F.2d 969, 975 (6th Cir. 1991).
The district court found that the holding and analysis in Northern Contracting does not
contradict the Eighth Circuit's analysis in Sherbrooke Turf, Inc. v. Minnesota Department of
Transportation, 345 F.3d 964, 97071 (8th Cir. 2003). Id. at 653. The court held that the Eighth
Circuit's discussion of whether the DBE programs as implemented by the State of Minnesota and
the State of Nebraska were narrowly tailored focused on whether the states were following the
USDOT regulations. Id. at 653 citing Sherbrooke Turf, 345 F.3d 97374. Therefore, "only when
the state exceeds its federal authority is it susceptible to an asapplied constitutional challenge."
Id. at 653 quoting Western States Paving Co., Inc. v. Washington State Department of
Transportation, 407 F.3d 983 (9th Cir. 2005)(McKay, C.J.)(concurring in part and dissenting in
part) and citing South Florida Chapter of the Associated General Contractors v. Broward County,
544 F.Supp.2d 1336, 1341 (S.D.Fla.2008).
The court held the initial burden of proof falls on the government, but once the government has
presented proof that its affirmative action plan is narrowly tailored, the party challenging the
affirmative action plan bears the ultimate burden of proving that the plan is unconstitutional. Id.
at 653.
In analyzing whether NJT's DBE program was constitutionally defective, the district court
focused on the basis of plaintiffs' argument that it was not narrowly tailored because it includes
in the category of DBEs racial or ethnic groups as to which the plaintiffs alleged NJT had no
evidence of past discrimination. Id. at 653. The court found that most of plaintiffs' arguments
could be summarized as questioning whether NJT presented demonstrable evidence of the
availability of ready, willing and able DBEs as required by 49 C.F.R. 26.45. Id. The court held
that NJT followed the goal setting process required by the federal regulations. Id. The court
stated that NJT began this process with the 2002 disparity study that examined past
discrimination and found that all of the groups listed in the regulations were underutilized with
the exception of Asians. Id. at 654. In calculating the fiscal year 2010 goals, the consultant used
contract files and data from Dun & Bradstreet to determine the geographical location
corresponding to NJT contracts and then further focused that information by weighting the
industries according to NJT's use. Id.
The consultant used various methods to calculate the availability of DBEs, including: the UCP
Business Directories for the states of New Jersey, New York and Pennsylvania; NJT Vendor List;
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 73
Dun & Bradstreet database; 2002 Survey of Small Business Owners; and NJT PreQualification
List. Id. at 654. The court stated that NJT only utilized one of the examples listed in 49 C.F.R.
26.45(c), the DBE directories method, in formulating the fiscal year 2010 goals. Id.
The district court pointed out, however, the regulations state that the "examples are provided as
a starting point for your goal setting process and that the examples are not intended as an
exhaustive list. Id. at 654, citing 46 C.F.R. 26.45(c). The court concluded the regulations clarify
that other methods or combinations of methods to determine a base figure may be used. Id. at
654.
The court stated that NJT had used these methods in setting goals for prior years as
demonstrated by the reports for 2006 and 2009. Id. at 654. In addition, the court noted that the
Seventh Circuit held that a custom census, the Dun & Bradstreet database, and the IDOT's list of
DBEs were an acceptable combination of methods with which to determine the base figure for
TEA21 purposes. Id. at 654, citing Northern Contracting, 473 F.3d at 718.
The district court found that the expert witness for plaintiffs had not convinced the court that
the data were faulty, and the testimony at trial did not persuade the court that the data or
regression analyses relied upon by NJT were unreliable or that another method would provide
more accurate results. Id. at 654655.
The court in discussing step two of the goals setting process pointed out that the data examined
by the consultant is listed in the regulations as proper evidence to be used to adjust the base
figure. Id. at 655, citing 49 C.F.R. 26.45(d). These data included evidence from disparity studies
and statistical disparities in the ability of DBEs to get prequalification. Id. at 655. The consultant
stated that evidence of societal discrimination was not used to adjust the base goal and that the
adjustment to the goal was based on the discrimination analysis, which controls for size of firm
and effect of having a DBE goal. Id. at 655.
The district court then analyzed NJT's division of the adjusted goal into raceconscious and race
neutral portions. Id. at 655. The court noted that narrowly tailoring does not require exhaustion
of every conceivable raceneutral alternative, but instead requires serious, good faith
consideration of workable raceneutral alternatives. Id. at 655. The court agreed with Western
States Paving that only "when raceneutral efforts prove inadequate do these regulations
authorize a State to resort to raceconscious measures to achieve the remainder of its DBE
utilization goal." Id. at 655, quoting Western States Paving, 407 F.3d at 99394.
The court found that the methods utilized by NJT had been used by it on previous occasions,
which were approved by the USDOT. Id. at 655. The methods used by NJT, the court found, also
complied with the examples listed in 49 C.F.R. 26.51, including arranging solicitations, times
for the presentation of bids, quantities, specifications, and delivery schedules in ways that
facilitate DBE participation; providing prequalification assistance; implementing supportive
services programs; and ensuring distribution of DBE directories. Id. at 655. The court held that
based on these reasons and following the Northern Contracting, Inc. v. Illinois line of cases, NJT's
DBE program did not violate the Constitution as it did not exceed its federal authority. Id. at 655.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 74
However, the district court also found that even under the Western States Paving Co., Inc. v.
Washington State DOT standard, the NJT program still was constitutional. Id. at 655. Although
the court found that the appropriate inquiry is whether NJT exceeded its federal authority as
detailed in Northern Contracting, Inc. v. Illinois, the court also examined the NJT DBE program
under Western States Paving Co. v. Washington State DOT. Id. at 655656. The court stated that
under Western States Paving, a Court must "undertake an asapplied inquiry into whether [the
state's] DBE program is narrowly tailored." Id. at 656, quoting Western States Paving, 407 F.3d at
997.
Applying Western States Paving
The district court then analyzed whether the NJT program was narrowly tailored applying
Western States Paving. Under the first prong of the narrowly tailoring analysis, a remedial
program is only narrowly tailored if its application is limited to those minority groups that have
actually suffered discrimination. Id. at 656, citing Western States Paving, 407 F.3d at 998. The
court acknowledged that according to the 2002 Final Report, the ratios of DBE utilization to DBE
availability was 1.31. Id. at 656. However, the court found that the Plaintiffs' argument failed as
the facts in Western States Paving were distinguishable from those of NJT, because NJT did
receive complaints, i.e., anecdotal evidence, of the lack of opportunities for Asian firms. Id. at
656. NJT employees testified that Asian firms informally and formally complained of a lack of
opportunity to grow and indicated that the DBE program was assisting with this issue. Id. In
addition, Plaintiff's expert conceded that Asian firms have smaller average contract amounts in
comparison to nonDBE firms. Id.
The Plaintiff relied solely on the utilization rate as evidence that Asians are not discriminated
against in NJT contracting. Id. at 656. The court held this was insufficient to overcome the
consultant's determination that discrimination did exist against Asians, and thus this group was
properly included in the DBE program. Id. at 656.
The district court rejected Plaintiffs' argument that the first step of the narrow tailoring analysis
was not met because NJT focuses its program on subcontractors when NJT's expert identified
"prime contracting" as the area in which NJT procurements evidence discrimination. Id. at 656.
The court held that narrow tailoring does not require exhaustion of every conceivable race
neutral alternative but it does require serious, good faith consideration of workable raceneutral
alternatives. Id. at 656, citing Sherbrook Turf, 345 F.3d at 972 (quoting Grutter v. Bollinger, 539
U.S. 306, 339, (2003)). In its efforts to implement raceneutral alternatives, the court found NJT
attempted to break larger contracts up in order to make them available to smaller contractors
and continues to do so when logistically possible and feasible to the procurement department.
Id. at 656657.
The district court found NJT satisfied the third prong of the narrowly tailored analysis, the
"relationship of the numerical goals to the relevant labor market." Id. at 657. Finally, under the
fourth prong, the court addressed the impact on thirdparties. Id. at 657. The court noted that
placing a burden on third parties is not impermissible as long as that burden is minimized. Id. at
657, citing Western States Paving, 407 F.3d at 995. The court stated that instances will inevitably
occur where nonDBEs will be bypassed for contracts that require DBE goals. However, TEA21
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 75
and its implementing regulations contain provisions intended to minimize the burden on non
DBEs. Id. at 657, citing Western States Paving, 407 F.3d at 994995.
The court pointed out the Ninth Circuit in Western States Paving found that inclusion of
regulations allowing firms that were not presumed to be DBEs to demonstrate that they were
socially and economically disadvantaged, and thus qualified for DBE programs, as well as the net
worth limitations, were sufficient to minimize the burden on DBEs. Id. at 657, citing Western
States Paving, 407 F.3d at 955. The court held that the Plaintiffs did not provide evidence that
NJT was not complying with implementing regulations designed to minimize harm to third
parties. Id.
Therefore, even if the district court utilized the asapplied narrow tailoring inquiry set forth in
Western States Paving, NJT's DBE program would not be found to violate the Constitution, as the
court held it was narrowly tailored to further a compelling governmental interest. Id. at 657.
9. Geod Corporation v. New Jersey Transit Corporation, et. seq. 678 F.Supp.2d
276, 2009 WL 2595607 (D.N.J. August 20, 2009)
Plaintiffs Geod and its officers, who are white males, sued the NJT and state officials seeking a
declaration that NJT's DBE program was unconstitutional and in violation of the United States
5th and 14th Amendment to the United States Constitution and the Constitution of the State of
New Jersey, and seeking a permanent injunction against NJT for enforcing or utilizing its DBE
program. The NJT's DBE program was implemented in accordance with the Federal DBE
Program and TEA21 and 49 C.F.R. Part 26.
The parties filed cross Motions for Summary Judgment. The plaintiff Geod challenged the
constitutionality of NJT's DBE program for multiple reasons, including alleging NJT could not
justify establishing a program using race and sexbased preferences; the NJT's disparity study
did not provide a sufficient factual predicate to justify the DBE Program; NJT's statistical
evidence did not establish discrimination; NJT did not have anecdotal data evidencing a "strong
basis in evidence" of discrimination which justified a race and sexbased program; NJT's
program was not narrowly tailored and overinclusive; NJT could not show an exceedingly
persuasive justification for gender preferences; and that NJT's program was not narrowly
tailored because raceneutral alternatives existed. In opposition, NJT filed a Motion for Summary
Judgment asserting that its DBE program was narrowly tailored because it fully complied with
the requirements of the Federal DBE Program and TEA21.
The district court held that states and their agencies are entitled to adopt the federal
governments' compelling interest in enacting TEA21 and its implementing regulations. 2009
WL 2595607 at *4. The court stated that plaintiff's argument that NJT cannot establish the need
for its DBE program was a "red herring, which is unsupported." The plaintiff did not question the
constitutionality of the compelling interest of the Federal DBE Program. The court held that all
states "inherit the federal governments' compelling interest in establishing a DBE program." Id.
The court found that establishing a DBE program "is not contingent upon a state agency
demonstrating a need for same, as the federal government has already done so." Id. The court
concluded that this reasoning rendered plaintiff's assertions that NJT's disparity study did not
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 76
have sufficient factual predicate for establishing its DBE program, and that no exceedingly
persuasive justification was found to support gender based preferences, as without merit. Id.
The court held that NJT does not need to justify establishing its DBE program, as it has already
been justified by the legislature. Id.
The court noted that both plaintiff's and defendant's arguments were based on an alleged split in
the Federal Circuit Courts of Appeal. Plaintiff Geod relies on Western States Paving Company v.
Washington State DOT, 407 F.3d 983(9th Cir. 2005) for the proposition that an asapplied
challenge to the constitutionality of a particular DBE program requires a demonstration by the
recipient of federal funds that the program is narrowly tailored. Id at *5. In contrast, the NJT
relied primarily on Northern Contracting, Inc. v. State of Illinois, 473 F.3d 715 (7th Cir. 2007) for
the proposition that if a DBE program complies with TEA21, it is narrowly tailored. Id.
The court viewed the various Federal Circuit Court of Appeals decisions as fact specific
determinations which have lead to the parties distinguishing cases without any substantive
difference in the application of law. Id.
The court reviewed the decisions by the Ninth Circuit in Western States Paving and the Seventh
Circuit of Northern Contracting. In Western States Paving, the district court stated that the Ninth
Circuit held for a DBE program to pass constitutional muster, it must be narrowly tailored;
specifically, the recipient of federal funds must evidence past discrimination in the relevant
market in order to utilize race conscious DBE goals. Id. at *5. The Ninth Circuit, according to
district court, made a fact specific determination as to whether the DBE program complied with
TEA21 in order to decide if the program was narrowly tailored to meet the federal regulation's
requirements. The district court stated that the requirement that a recipient must evidence past
discrimination "is nothing more than a requirement of the regulation." Id.
The court stated that the Seventh Circuit in Northern Contracting held a recipient must
demonstrate that its program is narrowly tailored, and that generally a recipient is insulated
from this sort of constitutional attack absent a showing that the state exceeded its federal
authority. Id., citing Northern Contracting, 473 F.3d at 721. The district court held that implicit in
Northern Contracting is the fact one may challenge the constitutionality of a DBE program, as it
is applied, to the extent that the program exceeds its federal authority. Id.
The court, therefore, concluded that it must determine first whether NJT's DBE program
complies with TEA21, then whether NJT exceeded its federal authority in its application of its
DBE program. In other words, the district court stated it must determine whether the NJT DBE
program complies with TEA21 in order to determine whether the program, as implemented by
NJT, is narrowly tailored. Id.
The court pointed out that the Eighth Circuit Court of Appeals in Sherbrook Turf, Inc. v.
Minnesota DOT, 345 F.3d 964 (8th Cir. 2003) found Minnesota's DBE program was narrowly
tailored because it was in compliance with TEA21's requirements. The Eighth Circuit in
Sherbrook, according to the district court, analyzed the application of Minnesota's DBE program
to ensure compliance with TEA21's requirements to ensure that the DBE program implemented
by Minnesota DOT was narrowly tailored. Id. at *5.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 77
The court held that TEA21 delegates to each state that accepts federal transportation funds the
responsibility of implementing a DBE program that comports with TEA21. In order to comport
with TEA21, the district court stated a recipient must (1) determine an appropriate DBE
participation goal, (2) examine all evidence and evaluate whether an adjustment, if any, is
needed to arrive at their goal, and (3) if the adjustment is based on continuing effects of past
discrimination, provide demonstrable evidence that is logically and directly related to the effect
for which the adjustment is sought. Id. at *6, citing Western States Paving Company, 407 F.3d at
983, 988.
First, the district court stated a recipient of federal funds must determine, at the local level, the
figure that would constitute an appropriate DBE involvement goal, based on their relative
availability of DBEs. Id. at *6, citing 49 C.F.R. 26.45(c). In this case, the court found that NJT did
determine a base figure for the relative availability of DBEs, which accounted for demonstrable
evidence of local market conditions and was designed to be rationally related to the relative
availability of DBEs. Id. The court pointed out that NJT conducted a disparity study, and the
disparity study utilized NJT's DBE lists from fiscal years 19951999 and Census Data to
determine its base DBE goal. The court noted that the plaintiffs' argument that the data used in
the disparity study were stale, was without merit and had no basis in law. The court found that
the disparity study took into account the primary industries, primary geographic market, and
race neutral alternatives, then adjusted its goal to encompass these characteristics. Id. at *6.
The court stated that the use of DBE directories and Census data are what the legislature
intended for state agencies to utilize in making a base DBE goal determination. Id. Also, the court
stated that "perhaps more importantly, NJT's DBE goal was approved by the USDOT every year
from 2002 until 2008." Id. at *6. Thus, the court found NJT appropriately determined their DBE
availability, which was approved by the USDOT, pursuant to 49 C.F.R. 26.45(c). Id. at *6. The
court held that NJT demonstrated its overall DBE goal is based on demonstrable evidence of the
availability of ready, willing, and able DBEs relative to all businesses ready, willing, and able to
participate in DOT assisted contracts and reflects its determination of the level of DBE
participation it would expect absent the effects of discrimination. Id.
Also of significance, the court pointed out that plaintiffs did not provide any evidence that NJT
did not set a DBE goal based upon 49 C.F. 26.45(c). The court thus held that genuine issues of
material fact remain only as to whether a reasonable jury may find that the method used by NJT
to determine its DBE goal was sufficiently narrowly tailored. Id. at *6.
The court pointed out that to determine what adjustment to make, the disparity study examined
qualitative data such as focus groups on the prequalification status of DBEs, working with
prime contractors, securing credit, and its effect on DBE participation, as well as procurement
officer interviews to analyze, and compare and contrast their relationships with nonDBE
vendors and DBE vendors. Id. at *7. This qualitative information was then compared to DBE bids
and DBE goals for each year in question. NJT's adjustment to its DBE goal also included an
analysis of the overall disparity ratio, as well as, DBE utilization based on race, gender and
ethnicity. Id. A decomposition analysis was also performed. Id.
The court concluded that NJT provided evidence that it, at a minimum, examined the current
capacity of DBEs to perform work in its DOTassisted contracting program, as measured by the
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 78
volume of work DBEs have performed in recent years, as well as utilizing the disparity study
itself. The court pointed out there were two methods specifically approved by 49 C.F.R.
26.45(d). Id.
The court also found that NJT took into account race neutral measures to ensure that the
greatest percentage of DBE participation was achieved through race and gender neutral means.
The district court concluded that "critically," plaintiffs failed to provide evidence of another,
more perfect, method that could have been utilized to adjust NJT's DBE goal. Id. at *7. The court
held that genuine issues of material fact remain only as to whether NJT's adjustment to its DBE
goal is sufficiently narrowly tailored and thus constitutional. Id.
NJT, the court found, adjusted its DBE goal to account for the effects of past discrimination,
noting the disparity study took into account the effects of past discrimination in the pre
qualification process of DBEs. Id. at *7. The court quoted the disparity study as stating that it
found nontrivial and statistically significant measures of discrimination in contract amounts
awarded during the study period. Id. at *8.
The court found, however, that what was "gravely critical" about the finding of the past effects of
discrimination is that it only took into account six groups including American Indian, Hispanic,
Asian, blacks, women and "unknown," but did not include an analysis of past discrimination for
the ethnic group "Iraqi," which is now a group considered to be a DBE by the NJT. Id. Because the
disparity report included a category entitled "unknown," the court held a genuine issue of
material fact remains as to whether "Iraqi" is legitimately within NJT's defined DBE groups and
whether a demonstrable finding of discrimination exists for Iraqis. Therefore, the court denied
both plaintiffs' and defendants' Motions for Summary Judgment as to the constitutionality of
NJT's DBE program.
The court also held that because the law was not clearly established at the time NJT established
its DBE program to comply with TEA21, the individual state defendants were entitled to
qualified immunity and their Motion for Summary Judgment as to the state officials was granted.
The court, in addition, held that plaintiff's Title VI claims were dismissed because the individual
defendants were not recipients of federal funds, and that the NJT as an instrumentality of the
State of New Jersey is entitled to sovereign immunity. Therefore, the court held that the
plaintiff's claims based on the violation of 42 U.S.C. 1983 were dismissed and NJT's Motion for
Summary Judgment was granted as to that claim.
10. South Florida Chapter of the Associated General Contractors v. Broward
County, Florida, 544 F. Supp.2d 1336 (S.D. Fla. 2008)
Plaintiff, the South Florida Chapter of the Associated General Contractors, brought suit against
the Defendant, Broward County, Florida challenging Broward County's implementation of the
Federal DBE Program and Broward County's issuance of contracts pursuant to the Federal DBE
Program. Plaintiff filed a Motion for a Preliminary Injunction. The court considered only the
threshold legal issue raised by Plaintiff in the Motion, namely whether or not the decision in
Western States Paving Company v. Washington State Department of Transportation, 407 F.3d 983
(9th Cir. 2005) should govern the Court's consideration of the merits of Plaintiffs' claim. 544
F.Supp.2d at 1337. The court identified the threshold legal issue presented as essentially,
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 79
"whether compliance with the federal regulations is all that is required of Defendant Broward
County." Id. at 1338.
The Defendant County contended that as a recipient of federal funds implementing the Federal
DBE Program, all that is required of the County is to comply with the federal regulations, relying
on case law from the Seventh Circuit in support of its position. 544 F.Supp.2d at 1338, citing
Northern Contracting v. Illinois, 473 F.3d 715 (7th Cir. 2007). The Plaintiffs disagreed, and
contended that the County must take additional steps beyond those explicitly provided for in the
federal regulations to ensure the constitutionality of the County's implementation of the Federal
DBE Program, as administered in the County, citing Western States Paving, 407 F.3d 983. The
court found that there was no case law on point in the Eleventh Circuit Court of Appeals. Id. at
1338.
Ninth Circuit Approach: Western States
The district court analyzed the Ninth Circuit Court of Appeals approach in Western States Paving
and the Seventh Circuit approach in Milwaukee County Pavers Association v. Fiedler, 922 F.2d 419
(7th Cir. 1991) and Northern Contracting, 473 F.3d 715. The district court in Broward County
concluded that the Ninth Circuit in Western States Paving held that whether Washington's DBE
program is narrowly tailored to further Congress's remedial objective depends upon the
presence or absence of discrimination in the State's transportation contracting industry, and
that it was error for the district court in Western States Paving to uphold Washington's DBE
program simply because the state had complied with the federal regulations. 544 F.Supp.2d at
13381339. The district court in Broward County pointed out that the Ninth Circuit in Western
States Paving concluded it would be necessary to undertake an asapplied inquiry into whether
the state's program is narrowly tailored. 544 F.Supp.2d at 1339, citing Western States Paving,
407 F.3d at 997.
In a footnote, the district court in Broward County noted that the USDOT "appears not to be of
one mind on this issue, however." 544 F.Supp.2d at 1339, n. 3. The district court stated that the
"United States DOT has, in analysis posted on its Web site, implicitly instructed states and
localities outside of the Ninth Circuit to ignore the Western States Paving decision, which would
tend to indicate that this agency may not concur with the 'opinion of the United States' as
represented in Western States." 544 F.Supp.2d at 1339, n. 3. The district court noted that the
United States took the position in the Western States Paving case that the "state would have to
have evidence of past or current effects of discrimination to use raceconscious goals." 544
F.Supp.2d at 1338, quoting Western States Paving.
The Court also pointed out that the Eighth Circuit Court of Appeals in Sherbrooke Turf, Inc. v.
Minnesota Department of Transportation, 345 F.3d 964 (8th Cir. 2003) reached a similar
conclusion as in Western States Paving. 544 F.Supp.2d at 1339. The Eighth Circuit in Sherbrooke,
like the court in Western States Paving, "concluded that the federal government had delegated
the task of ensuring that the state programs are narrowly tailored, and looked to the underlying
data to determine whether those programs were, in fact, narrowly tailored, rather than simply
relying on the states' compliance with the federal regulations." 544 F.Supp.2d at 1339.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 80
Seventh Circuit Approach: Milwaukee County and Northern Contracting
The district court in Broward County next considered the Seventh Circuit approach. The
Defendants in Broward County agreed that the County must make a local finding of
discrimination for its program to be constitutional. 544 F.Supp.2d at 1339. The County, however,
took the position that it must make this finding through the process specified in the federal
regulations, and should not be subject to a lawsuit if that process is found to be inadequate. Id. In
support of this position, the County relied primarily on the Seventh Circuit's approach, first
articulated in Milwaukee County Pavers Association v. Fiedler, 922 F.2d 419 (7th Cir. 1991), then
reaffirmed in Northern Contracting, 473 F.3d 715 (7th Cir. 2007). 544 F.Supp.2d at 1339.
Based on the Seventh Circuit approach, insofar as the state is merely doing what the statute and
federal regulations envisage and permit, the attack on the state is an impermissible collateral
attack on the federal statute and regulations. 544 F.Supp.2d at 13391340. This approach
concludes that a state's role in the federal program is simply as an agent, and insofar "as the
state is merely complying with federal law it is acting as the agent of the federal government and
is no more subject to being enjoined on equal protection grounds than the federal civil servants
who drafted the regulations." 544 F.Supp.2d at 1340, quoting Milwaukee County Pavers, 922 F.2d
at 423.
The Ninth Circuit addressed the Milwaukee County Pavers case in Western States Paving, and
attempted to distinguish that case, concluding that the constitutionality of the federal statute
and regulations were not at issue in Milwaukee County Pavers. 544 F.Supp.2d at 1340. In 2007,
the Seventh Circuit followed up the critiques made in Western States Paving in the Northern
Contracting decision. Id. The Seventh Circuit in Northern Contracting concluded that the majority
in Western States Paving misread its decision in Milwaukee County Pavers as did the Eighth
Circuit Court of Appeals in Sherbrooke. 544 F.Supp.2d at 1340, citing Northern Contracting, 473
F.3d at 722, n.5. The district court in Broward County pointed out that the Seventh Circuit in
Northern Contracting emphasized again that the state DOT is acting as an instrument of federal
policy, and a plaintiff cannot collaterally attack the federal regulations through a challenge to the
state DOT's program. 544 F.Supp.2d at 1340, citing Northern Contracting, 473 F.3d at 722.
The district court in Broward County stated that other circuits have concurred with this
approach, including the Sixth Circuit Court of Appeals decision in Tennessee Asphalt Company v.
Farris, 942 F.2d 969 (6th Cir. 1991). 544 F.Supp.2d at 1340. The district court in Broward County
held that the Tenth Circuit Court of Appeals took a similar approach in Ellis v. Skinner, 961 F.2d
912 (10th Cir. 1992). 544 F.Supp.2d at 1340. The district court in Broward County held that these
Circuit Courts of Appeal have concluded that "where a state or county fully complies with the
federal regulations, it cannot be enjoined from carrying out its DBE program, because any such
attack would simply constitute an improper collateral attack on the constitutionality of the
regulations." 544 F.Supp.2d at 134041.
The district court in Broward County held that it agreed with the approach taken by the Seventh
Circuit Court of Appeals in Milwaukee County Pavers and Northern Contracting and concluded
that "the appropriate factual inquiry in the instant case is whether or not Broward County has
fully complied with the federal regulations in implementing its DBE program." 544 F.Supp.2d at
1341. It is significant to note that the Plaintiffs did not challenge the asapplied constitutionality
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 81
of the federal regulations themselves, but rather focused their challenge on the constitutionality
of Broward County's actions in carrying out the DBE program. 544 F.Supp.2d at 1341. The
district court in Broward County held that this type of challenge is "simply an impermissible
collateral attack on the constitutionality of the statute and implementing regulations." Id.
The district court concluded that it would apply the case law as set out in the Seventh Circuit
Court of Appeals and concurring circuits, and that the trial in this case would be conducted
solely for the purpose of establishing whether or not the County has complied fully with the
federal regulations in implementing its DBE program. 544 F.Supp.2d at 1341.
Subsequently, there was a Stipulation of Dismissal filed by all parties in the district court, and an
Order of Dismissal was filed without a trial of the case in November 2008.
11. Klaver Construction, Inc. v. Kansas DOT, 211 F. Supp.2d 1296 (D. Kan. 2002)
This is another case that involved a challenge to the USDOT Regulations that implement TEA21
(49 C.F.R. Part 26), in which the plaintiff contractor sought to enjoin the Kansas Department of
Transportation ("DOT") from enforcing its DBE Program on the grounds that it violates the
Equal Protection Clause under the Fourteenth Amendment. This case involves a direct
constitutional challenge to racial and gender preferences in federallyfunded state highway
contracts. This case concerned the constitutionality of the Kansas DOT's implementation of the
Federal DBE Program, and the constitutionality of the genderbased policies of the federal
government and the race and genderbased policies of the Kansas DOT. The court granted the
federal and state defendants' (USDOT and Kansas DOT) Motions to Dismiss based on lack of
standing. The court held the contractor could not show the specific aspects of the DBE Program
that it contends are unconstitutional have caused its alleged injuries.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 82
F. Recent Decisions Involving State or Local Government MBE/WBE
Programs in Other Jurisdictions
Recent Decisions in Federal Circuit Courts of Appeal
1. H. B. Rowe Co., Inc. v. W. Lyndo Tippett, NCDOT, et al., 615 F.3d 233 (4th Cir.
2010)
The State of North Carolina enacted statutory legislation that required prime contractors to
engage in good faith efforts to satisfy participation goals for minority and women
subcontractors on statefunded projects. (See facts as detailed in the decision of the United
States District Court for the Eastern District of North Carolina discussed below.). The plaintiff, a
prime contractor, brought this action after being denied a contract because of its failure to
demonstrate good faith efforts to meet the participation goals set on a particular contract that it
was seeking an award to perform work with the North Carolina Department of Transportation
("NCDOT"). Plaintiff asserted that the participation goals violated the Equal Protection Clause
and sought injunctive relief and money damages.
After a bench trial, the district court held the challenged statutory scheme constitutional both on
its face and as applied, and the plaintiff prime contractor appealed. 615 F.3d 233 at 236. The
Court of Appeals held that the State did not meet its burden of proof in all respects to uphold the
validity of the state legislation. But, the Court agreed with the district court that the State
produced a strong basis in evidence justifying the statutory scheme on its face, and as applied to
African American and Native American subcontractors, and that the State demonstrated that the
legislative scheme is narrowly tailored to serve its compelling interest in remedying
discrimination against these racial groups. The Court thus affirmed the decision of the district
court in part, reversed it in part and remanded for further proceedings consistent with the
opinion. Id.
The Court found that the North Carolina statutory scheme "largely mirrored the federal
Disadvantaged Business Enterprise ("DBE") program, with which every state must comply in
awarding highway construction contracts that utilize federal funds." 615 F.3d 233 at 236. The
Court also noted that federal courts of appeal "have uniformly upheld the Federal DBE Program
against equalprotection challenges." Id., at footnote 1, citing, Adarand Constructors, Inc. v. Slater,
228 F.3d 1147 (10th Cir. 2000).
In 2004, the State retained a consultant to prepare and issue a third study of subcontractors
employed in North Carolina's highway construction industry. The study, according to the Court,
marshaled evidence to conclude that disparities in the utilization of minority subcontractors
persisted. 615 F.3d 233 at 238. The Court pointed out that in response to the study, the North
Carolina General Assembly substantially amended state legislation section 13628.4 and the
new law went into effect in 2006. The new statute modified the previous statutory scheme,
according to the Court in five important respects. Id.
First, the amended statute expressly conditions implementation of any participation goals on
the findings of the 2004 study. Second, the amended statute eliminates the 5 and 10 percent
annual goals that were set in the predecessor statute. 615 F.3d 233 at 238239. Instead, as
amended, the statute requires the NCDOT to "establish annual aspirational goals, not mandatory
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 83
goals, for the overall participation in contracts by disadvantaged minorityowned and women
owned businesses [that] shall not be applied rigidly on specific contracts or projects." Id. at
239, quoting, N.C. Gen.Stat. 13628.4(b)(2010). The statute further mandates that the NCDOT
set "contractspecific goals or projectspecific goals for each disadvantaged minorityowned
and womenowned business category that has demonstrated significant disparity in contract
utilization" based on availability, as determined by the study. Id.
Third, the amended statute narrowed the definition of "minority" to encompass only those
groups that have suffered discrimination. Id. at 239. The amended statute replaced a list of
defined minorities to any certain groups by defining "minority" as "only those racial or ethnicity
classifications identified by [the study] that have been subjected to discrimination in the
relevant marketplace and that have been adversely affected in their ability to obtain contracts
with the Department." Id. at 239 quoting section 13628.4(c)(2)(2010).
Fourth, the amended statute required the NCDOT to reevaluate the Program over time and
respond to changing conditions. 615 F.3d 233 at 239. Accordingly, the NCDOT must conduct a
study similar to the 2004 study at least every five years. Id. 13628.4(b). Finally, the amended
statute contained a sunset provision which was set to expire on August 31, 2009, but the
General Assembly subsequently extended the sunset provision to August 31, 2010. Id. Section
13628.4(e) (2010).
The Court also noted that the statute required only good faith efforts by the prime contractors to
utilize subcontractors, and that the good faith requirement, the Court found, proved permissive
in practice: prime contractors satisfied the requirement in 98.5 percent of cases, failing to do so
in only 13 of 878 attempts. 615 F.3d 233 at 239.
Strict scrutiny. The Court stated the strict scrutiny standard was applicable to justify a race
conscious measure, and that it is a substantial burden but not automatically "fatal in fact." 615
F.3d 233 at 241. The Court pointed out that "[t]he unhappy persistence of both the practice and
the lingering effects of racial discrimination against minority groups in this country is an
unfortunate reality, and government is not disqualified from acting in response to it." Id. at 241
quoting Alexander v. Estepp, 95 F.3d 312, 315 (4th Cir. 1996). In so acting, a governmental entity
must demonstrate it had a compelling interest in "remedying the effects of past or present racial
discrimination." Id., quoting Shaw v. Hunt, 517 U.S. 899, 909 (1996).
Thus, the Court found that to justify a raceconscious measure, a state must identify that
discrimination, public or private, with some specificity, and must have a strong basis in evidence
for its conclusion that remedial action is necessary. 615 F.3d 233 at 241 quoting, Croson, 488 U.S.
at 504 and Wygant v. Jackson Board of Education, 476 U.S. 267, 277 (1986)(plurality opinion).
The Court significantly noted that: "There is no 'precise mathematical formula to assess the
quantum of evidence that rises to the Croson 'strong basis in evidence' benchmark.'" 615 F.3d
233 at 241, quoting Rothe Dev. Corp. v. Department of Defense, 545 F.3d 1023, 1049 (Fed.Cir.
2008). The Court stated that the sufficiency of the State's evidence of discrimination "must be
evaluated on a casebycase basis." Id. at 241. (internal quotation marks omitted).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 84
The Court held that a state "need not conclusively prove the existence of past or present racial
discrimination to establish a strong basis in evidence for concluding that remedial action is
necessary. 615 F.3d 233 at 241, citing Concrete Works, 321 F.3d at 958. "Instead, a state may
meet its burden by relying on "a significant statistical disparity" between the availability of
qualified, willing, and able minority subcontractors and the utilization of such subcontractors by
the governmental entity or its prime contractors. Id. at 241, citing Croson, 488 U.S. at 509
(plurality opinion). The Court stated that we "further require that such evidence be
'corroborated by significant anecdotal evidence of racial discrimination.'" Id. at 241, quoting
Maryland Troopers Association, Inc. v. Evans, 993 F.2d 1072, 1077 (4th Cir. 1993).
The Court pointed out that those challenging racebased remedial measures must "introduce
credible, particularized evidence to rebut" the state's showing of a strong basis in evidence for
the necessity for remedial action. Id. at 241242, citing Concrete Works, 321 F.3d at 959.
Challengers may offer a neutral explanation for the state's evidence, present contrasting
statistical data, or demonstrate that the evidence is flawed, insignificant, or not actionable. Id. at
242 (citations omitted). However, the Court stated "that mere speculation that the state's
evidence is insufficient or methodologically flawed does not suffice to rebut a state's showing. Id.
at 242, citing Concrete Works, 321 F.3d at 991.
The Court held that to satisfy strict scrutiny, the state's statutory scheme must also be "narrowly
tailored" to serve the state's compelling interest in not financing private discrimination with
public funds. 615 F.3d 233 at 242, citing Alexander, 95 F.3d at 315 (citing Adarand, 515 U.S. at
227).
Intermediate scrutiny. The Court held that courts apply "intermediate scrutiny" to statutes that
classify on the basis of gender. Id. at 242. The Court found that a defender of a statute that
classifies on the basis of gender, meets this intermediate scrutiny burden "by showing at least
that the classification serves important governmental objectives and that the discriminatory
means employed are substantially related to the achievement of those objectives." Id., quoting
Mississippi University for Women v. Hogan, 458 U.S. 718, 724 (1982). The Court noted that
intermediate scrutiny requires less of a showing than does "the most exacting" strict scrutiny
standard of review. Id. at 242. The Court found that its "sister circuits" provide guidance in
formulating a governing evidentiary standard for intermediate scrutiny. These courts agree that
such a measure "can rest safely on something less than the 'strong basis in evidence' required to
bear the weight of a race or ethnicityconscious program." Id. at 242, quoting Engineering
Contractors, 122 F.3d at 909 (other citations omitted).
In defining what constitutes "something less" than a 'strong basis in evidence,' the courts, also
agree that the party defending the statute must 'present [ ] sufficient probative evidence in
support of its stated rationale for enacting a gender preference, i.e.,the evidence [must be]
sufficient to show that the preference rests on evidenceinformed analysis rather than on
stereotypical generalizations." 615 F.3d 233 at 242 quoting Engineering Contractors, 122 F.3d at
910 and Concrete Works, 321 F.3d at 959. The genderbased measures must be based on
"reasoned analysis rather than on the mechanical application of traditional, often inaccurate,
assumptions." Id. at 242 quoting Hogan, 458 U.S. at 726.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 85
Plaintiff's burden. The Court found that when a plaintiff alleges that a statute violates the Equal
Protection Clause as applied and on its face, the plaintiff bears a heavy burden. In its facial
challenge, the Court held that a plaintiff "has a very heavy burden to carry, and must show that
[a statutory scheme] cannot operate constitutionally under any circumstance." Id. at 243,
quoting West Virginia v. U.S. Department of Health & Human Services, 289 F.3d 281, 292 (4th
Cir. 2002).
Statistical evidence. The Court examined the State's statistical evidence of discrimination in
publicsector subcontracting, including its disparity evidence and regression analysis. The Court
noted that the statistical analysis analyzed the difference or disparity between the amount of
subcontracting dollars minority and womenowned businesses actually won in a market and
the amount of subcontracting dollars they would be expected to win given their presence in that
market. 615 F.3d 233 at 243. The Court found that the study grounded its analysis in the
"disparity index," which measures the participation of a given racial, ethnic, or gender group
engaged in subcontracting. Id. In calculating a disparity index, the study divided the percentage
of total subcontracting dollars that a particular group won by the percent that group represents
in the available labor pool, and multiplied the result by 100. Id. The closer the resulting index is
to 100, the greater that group's participation. Id.
The Court held that after Croson, "a number of our sister circuits have recognized the utility of
the disparity index in determining statistical disparities in the utilization of minority and
womenowned businesses." Id. at 243244 (Citations to multiple federal circuit court decisions
omitted.) The Court also found that generally "courts consider a disparity index lower than 80 as
an indication of discrimination." Id. at 244. Accordingly, the study considered only a disparity
index lower than 80 as warranting further investigation. Id.
The Court pointed out that after calculating the disparity index for each relevant racial or gender
group, the consultant tested for the statistical significance of the results by conducting standard
deviation analysis through the use of ttests. The Court noted that standard deviation analysis
"describes the probability that the measured disparity is the result of mere chance." 615 F.3d
233 at 244, quoting Eng'g Contractors, 122 F.3d at 914. The consultant considered the finding of
two standard deviations to demonstrate "with 95 percent certainty that disparity, as
represented by either overutilization or underutilization, is actually present." Id., citing Eng'g
Contractors, 122 F.3d at 914.
The study analyzed the participation of minority and women subcontractors in construction
contracts awarded and managed from the central NCDOT office in Raleigh, North Carolina. 615
F.3d 233 at 244. To determine utilization of minority and women subcontractors, the consultant
developed a master list of contracts mainly from Statemaintained electronic databases and
hard copy files; then selected from that list a statistically valid sample of contracts, and
calculated the percentage of subcontracting dollars awarded to minority and womenowned
businesses during the 5year period ending in June 2003. (The study was published in 2004). Id.
at 244.
The Court found that the use of data for centrallyawarded contracts was sufficient for its
analysis. It was noted that data from construction contracts awarded and managed from the
NCDOT divisions across the state and from preconstruction contracts, which involve work from
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 86
engineering firms and architectural firms on the design of highways, was incomplete and not
accurate. 615 F.3d 233 at 244, n.6. These data were not relied upon in forming the opinions
relating to the study. Id. at 244, n. 6.
To estimate availability, which the Court defined as the percentage of a particular group in the
relevant market area, the consultant created a vendor list comprising: (1) subcontractors
approved by the department to perform subcontract work on statefunded projects, (2)
subcontractors that performed such work during the study period, and (3) contractors qualified
to perform prime construction work on statefunded contracts. 615 F.3d 233 at 244. The Court
noted that prime construction work on statefunded contracts was included based on the
testimony by the consultant that prime contractors are qualified to perform subcontracting
work and often do perform such work. Id. at 245. The Court also noted that the consultant
submitted its master list to the NCDOT for verification. Id. at 245.
Based on the utilization and availability figures, the study prepared the disparity analysis
comparing the utilization based on the percentage of subcontracting dollars over the five year
period, determining the availability in numbers of firms and their percentage of the labor pool, a
disparity index which is the percentage of utilization in dollars divided by the percentage of
availability multiplied by 100, and a T Value. 615 F.3d 233 at 245.
The Court concluded that the figures demonstrated prime contractors underutilized all of the
minority subcontractor classifications on statefunded construction contracts during the study
period. 615 F.3d 233 245. The disparity index for each group was less than 80 and, thus, the
Court found warranted further investigation. Id. The ttest results, however, demonstrated
marked underutilization only of African American and Native American subcontractors. Id. For
African Americans the tvalue fell outside of two standard deviations from the mean and,
therefore, was statistically significant at a 95 percent confidence level. Id. The Court found there
was at least a 95 percent probability that prime contractors' underutilization of African
American subcontractors was not the result of mere chance. Id.
For Native American subcontractors, the tvalue of 1.41 was significant at a confidence level of
approximately 85 percent. 615 F.3d 233 at 245. The tvalues for Hispanic American and Asian
American subcontractors, demonstrated significance at a confidence level of approximately 60
percent. The disparity index for women subcontractors found that they were overutilized during
the study period. The overutilization was statistically significant at a 95 percent confidence
level. Id.
To corroborate the disparity study, the consultant conducted a regression analysis studying the
influence of certain company and business characteristics with a particular focus on owner
race and gender on a firm's gross revenues. 615 F.3d 233 at 246. The consultant obtained the
data from a telephone survey of firms that conducted or attempted to conduct business with the
NCDOT. The survey pool consisted of a random sample of such firms. Id.
The consultant used the firms' gross revenues as the dependent variable in the regression
analysis to test the effect of other variables, including company age and number of fulltime
employees, and the owners' years of experience, level of education, race, ethnicity, and gender.
615 F.3d 233 at 246. The analysis revealed that minority and women ownership universally had
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 87
a negative effect on revenue, and African American ownership of a firm had the largest negative
effect on that firm's gross revenue of all the independent variables included in the regression
model. Id. These findings led to the conclusion that for African Americans the disparity in firm
revenue was not due to capacityrelated or managerial characteristics alone. Id.
The Court rejected the arguments by the plaintiffs attacking the availability estimates. The Court
rejected the plaintiff's expert, Dr. George LaNoue, who testified that bidder data reflecting the
number of subcontractors that actually bid on Department subcontracts estimates availability
better than "vendor data." 615 F.3d 233 at 246. Dr. LaNoue conceded, however, that the State
does not compile bidder data and that bidder data actually reflects skewed availability in the
context of a goals program that urges prime contractors to solicit bids from minority and
women subcontractors. Id. The Court found that the plaintiff's expert did not demonstrate that
the vendor data used in the study was unreliable, or that the bidder data would have yielded less
support for the conclusions reached. In sum, the Court held that the plaintiffs challenge to the
availability estimate failed because it could not demonstrate that the 2004 study's availability
estimate was inadequate. Id. at 246. The Court cited Concrete Works, 321 F.3d at 991 for the
proposition that a challenger cannot meet its burden of proof through conjecture and
unsupported criticisms of the state's evidence," and that the plaintiff Rowe presented no viable
alternative for determining availability. Id. at 246247, citing Concrete Works, 321 F.3d 991 and
Sherbrooke Turf, Inc. v. Minn. Department of Transportation, 345 F.3d 964, 973 (8th Cir. 2003).
The Court also rejected the plaintiff's argument that minority subcontractors participated on
statefunded projects at a level consistent with their availability in the relevant labor pool, based
on the state's response that evidence as to the number of minority subcontractors working with
statefunded projects does not effectively rebut the evidence of discrimination in terms of
subcontracting dollars. 615 F.3d 233 at 247. The State pointed to evidence indicating that prime
contractors used minority businesses for lowvalue work in order to comply with the goals, and
that African American ownership had a significant negative impact on firm revenue unrelated to
firm capacity or experience. Id. The Court concluded plaintiff did not offer any contrary
evidence. Id.
The Court found that the State bolstered its position by presenting evidence that minority
subcontractors have the capacity to perform highervalue work. 615 F.3d 233 at 247. The study
concluded, based on a sample of subcontracts and reports of annual firm revenue, that exclusion
of minority subcontractors from contracts under $500,000 was not a function of capacity. Id. at
247. Further, the State showed that over 90 percent of the NCDOT's subcontracts were valued at
$500,000 or less, and that capacity constraints do not operate with the same force on
subcontracts as they may on prime contracts because subcontracts tend to be relatively small.
Id. at 247. The Court pointed out that the Court in Rothe II, 545 F.3d at 104245, faulted disparity
analyses of total construction dollars, including prime contracts, for failing to account for the
relative capacity of firms in that case. Id. at 247.
The Court pointed out that in addition to the statistical evidence, the State also presented
evidence demonstrating that from 1991 to 1993, during the Program's suspension, prime
contractors awarded substantially fewer subcontracting dollars to minority and women
subcontractors on statefunded projects. The Court rejected the plaintiff's argument that
evidence of a decline in utilization does not raise an inference of discrimination. 615 F.3d 233 at
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 88
247248. The Court held that the very significant decline in utilization of minority and women
subcontractors nearly 38 percent "surely provides a basis for a fact finder to infer that
discrimination played some role in prime contractors' reduced utilization of these groups during
the suspension." Id. at 248, citing Adarand v. Slater, 228 F.3d at 1174 (finding that evidence of
declining minority utilization after a program has been discontinued "strongly supports the
government's claim that there are significant barriers to minority competition in the public
subcontracting market, raising the specter of racial discrimination.") The Court found such an
inference is particularly compelling for minorityowned businesses because, even during the
study period, prime contractors continue to underutilize them on statefunded road projects. Id.
at 248.
Anecdotal evidence. The State additionally relied on three sources of anecdotal evidence
contained in the study: a telephone survey, personal interviews, and focus groups. The Court
found the anecdotal evidence showed an informal "good old boy" network of white contractors
that discriminated against minority subcontractors. 615 F.3d 233 at 248. The Court noted that
threequarters of African American respondents to the telephone survey agreed that an informal
network of prime and subcontractors existed in the State, as did the majority of other minorities,
that more than half of African American respondents believed the network excluded their
companies from bidding or awarding a contract as did many of the other minorities. Id. at 248.
The Court found that nearly half of nonminority male respondents corroborated the existence of
an informal network, however, only 17 percent of them believed that the network excluded their
companies from bidding or winning contracts. Id.
Anecdotal evidence also showed a large majority of African American respondents reported that
double standards in qualifications and performance made it more difficult for them to win bids
and contracts, that prime contractors view minority firms as being less competent than
nonminority firms, and that nonminority firms change their bids when not required to hire
minority firms. 615 F.3d 233 at 248. In addition, the anecdotal evidence showed African
American and Native American respondents believed that prime contractors sometimes
dropped minority subcontractors after winning contracts. Id. at 248. The Court found that
interview and focusgroup responses echoed and underscored these reports. Id.
The anecdotal evidence indicated that prime contractors already know who they will use on the
contract before they solicit bids: that the "good old boy network" affects business because prime
contractors just pick up the phone and call their buddies, which excludes others from that
market completely; that prime contractors prefer to use other less qualified minorityowned
firms to avoid subcontracting with African Americanowned firms; and that prime contractors
use their preferred subcontractor regardless of the bid price. 615 F.3d 233 at 248249. Several
minority subcontractors reported that prime contractors do not treat minority firms fairly,
pointing to instances in which prime contractors solicited quotes the day before bids were due,
did not respond to bids from minority subcontractors, refused to negotiate prices with them, or
gave minority subcontractors insufficient information regarding the project. Id. at 249.
The Court rejected the plaintiffs' contention that the anecdotal data was flawed because the
study did not verify the anecdotal data and that the consultant oversampled minority
subcontractors in collecting the data. The Court stated that the plaintiffs offered no rationale as
to why a fact finder could not rely on the State's "unverified" anecdotal data, and pointed out
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 89
that a fact finder could very well conclude that anecdotal evidence need not and indeed cannot
be verified because it "is nothing more than a witness' narrative of an incident told from the
witness' perspective and including the witness' perceptions." 615 F.3d 233 at 249, quoting
Concrete Works, 321 F.3d at 989.
The Court held that anecdotal evidence simply supplements statistical evidence of
discrimination. Id. at 249. The Court rejected plaintiffs' argument that the study oversampled
representatives from minority groups, and found that surveying more nonminority men would
not have advanced the inquiry. Id. at 249. It was noted that the samples of the minority groups
were randomly selected. Id. The Court found the state had compelling anecdotal evidence that
minority subcontractors face racebased obstacles to successful bidding. Id. at 249.
Strong basis in evidence that the minority participation goals were necessary to remedy
discrimination. The Court held that the State presented a "strong basis in evidence" for its
conclusion that minority participation goals were necessary to remedy discrimination against
African American and Native American subcontractors." 615 F.3d 233 at 250. Therefore, the
Court held that the State satisfied the strict scrutiny test. The Court found that the State's data
demonstrated that prime contractors grossly underutilized African American and Native
American subcontractors in public sector subcontracting during the study. Id. at 250. The Court
noted that these findings have particular resonance because since 1983, North Carolina has
encouraged minority participation in statefunded highway projects, and yet African American
and Native American subcontractors continue to be underutilized on such projects. Id. at 250.
In addition, the Court found the disparity index in the study demonstrated statistically
significant underutilization of African American subcontractors at a 95 percent confidence level,
and of Native American subcontractors at a confidence level of approximately 85 percent. 615
F.3d 233 at 250. The Court concluded the State bolstered the disparity evidence with regression
analysis demonstrating that African American ownership correlated with a significant, negative
impact on firm revenue, and demonstrated there was a dramatic decline in the utilization of
minority subcontractors during the suspension of the program in the 1990s. Id.
Thus, the Court held the State's evidence showing a gross statistical disparity between the
availability of qualified American and Native American subcontractors and the amount of
subcontracting dollars they win on public sector contracts established the necessary statistical
foundation for upholding the minority participation goals with respect to these groups. 615 F.3d
233 at 250. The Court then found that the State's anecdotal evidence of discrimination against
these two groups sufficiently supplemented the State's statistical showing. Id. The survey in the
study exposed an informal, racially exclusive network that systemically disadvantaged minority
subcontractors. Id. at 251. The Court held that the State could conclude with good reason that
such networks exert a chronic and pernicious influence on the marketplace that calls for
remedial action. Id. The Court found the anecdotal evidence indicated that racial discrimination
is a critical factor underlying the gross statistical disparities presented in the study. Id. at 251.
Thus, the Court held that the State presented substantial statistical evidence of gross disparity,
corroborated by "disturbing" anecdotal evidence.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 90
The Court held in circumstances like these, the Supreme Court has made it abundantly clear a
state can remedy a public contracting system that withholds opportunities from minority
groups because of their race. 615 F.3d 233 at 251252.
Narrowly tailored. The Court then addressed whether the North Carolina statutory scheme was
narrowly tailored to achieve the State's compelling interest in remedying discrimination against
African American and Native American subcontractors in publicsector subcontracting. The
following factors were considered in determining whether the statutory scheme was narrowly
tailored.
Neutral measures. The Court held that narrowly tailoring requires "serious, good faith
consideration of workable raceneutral alternatives," but a state need not "exhaust [ ] every
conceivable raceneutral alternative." 615 F.3d 233 at 252 quoting Grutter v. Bollinger, 539 U.S.
306, 339 (2003). The Court found that the study details numerous alternative raceneutral
measures aimed at enhancing the development and competitiveness of small or otherwise
disadvantaged businesses in North Carolina. Id. at 252. The Court pointed out various race
neutral alternatives and measures, including a Small Business Enterprise Program; waiving
institutional barriers of bonding and licensing requirements on certain small business contracts
of $500,000 or less; and the Department contracts for support services to assist disadvantaged
business enterprises with bookkeeping and accounting, taxes, marketing, bidding, negotiation,
and other aspects of entrepreneurial development. Id. at 252.
The Court found that plaintiff identified no viable raceneutral alternatives that North Carolina
had failed to consider and adopt. The Court also found that the State had undertaken most of the
raceneutral alternatives identified by USDOT in its regulations governing the Federal DBE
Program. 615 F.3d 233 at 252, citing 49 C.F.R. 26.51(b). The Court concluded that the State
gave serious good faith consideration to raceneutral alternatives prior to adopting the statutory
scheme. Id.
The Court concluded that despite these raceneutral efforts, the study demonstrated disparities
continue to exist in the utilization of African American and Native American subcontractors in
statefunded highway construction subcontracting, and that these "persistent disparities
indicate the necessity of a raceconscious remedy." 615 F.3d 233 at 252.
Duration. The Court agreed with the district court that the program was narrowly tailored in
that it set a specific expiration date and required a new disparity study every five years. 615
F.3d 233 at 253. The Court found that the program's inherent time limit and provisions
requiring regular reevaluation ensure it is carefully designed to endure only until the
discriminatory impact has been eliminated. Id. at 253, citing Adarand Constructors v. Slater, 228
F.3d at 1179 (quoting United States v. Paradise, 480 U.S. 149, 178 (1987)).
Program's goals related to percentage of minority subcontractors. The Court concluded that
the State had demonstrated that the Program's participation goals are related to the percentage
of minority subcontractors in the relevant markets in the State. 615 F.3d 233 at 253. The Court
found that the NCDOT had taken concrete steps to ensure that these goals accurately reflect the
availability of minorityowned businesses on a projectbyproject basis. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 91
Flexibility. The Court held that the Program was flexible and thus satisfied this indicator of
narrow tailoring. 615 F.3d 233 at 253. The Program contemplated a waiver of projectspecific
goals when prime contractors make good faith efforts to meet those goals, and that the good
faith efforts essentially require only that the prime contractor solicit and consider bids from
minorities. Id. The State does not require or expect the prime contractor to accept any bid from
an unqualified bidder, or any bid that is not the lowest bid. Id. The Court found there was a
lenient standard and flexibility of the "good faith" requirement, and noted the evidence showed
only 13 of 878 good faith submissions failed to demonstrate good faith efforts. Id.
Burden on nonMWBE/DBEs. The Court rejected the two arguments presented by plaintiff that
the Program created onerous solicitation and followup requirements, finding that there was no
need for additional employees dedicated to the task of running the solicitation program to
obtain MBE/WBEs, and that there was no evidence to support the claim that plaintiff was
required to subcontract millions of dollars of work that it could perform itself for less money.
615 F.3d 233 at 254. The State offered evidence from the study that prime contractors need not
submit subcontract work that they can selfperform. Id.
Overinclusive. The Court found by its own terms the statutory scheme is not overinclusive
because it limited relief to only those racial or ethnicity classifications that have been subjected
to discrimination in the relevant marketplace and that had been adversely affected in their
ability to obtain contracts with the Department. 615 F.3d 233 at 254. The Court concluded that
in tailoring the remedy this way, the legislature did not randomly include racial groups that may
never have suffered from discrimination in the construction industry, but rather, contemplated
participation goals only for those groups shown to have suffered discrimination. Id.
In sum, the Court held that the statutory scheme is narrowly tailored to achieve the State's
compelling interest in remedying discrimination in publicsector subcontracting against African
American and Native American subcontractors. Id. at 254.
Womenowned businesses overutilized. The study's publicsector disparity analysis
demonstrated that womenowned businesses won far more than their expected share of
subcontracting dollars during the study period. 615 F.3d 233 at 254. In other words, the Court
concluded that prime contractors substantially overutilized women subcontractors on public
road construction projects. Id. The Court found the publicsector evidence did not evince the
"exceedingly persuasive justification" the Supreme Court requires. Id. at 255.
The Court noted that the State relied heavily on privatesector data from the study attempting to
demonstrate that prime contractors significantly underutilized women subcontractors in the
general construction industry statewide and in the Charlotte, North Carolina area. 615 F.3d 233
at 255. However, because the study did not provide a ttest analysis on the privatesector
disparity figures to calculate statistical significance, the Court could not determine whether this
private underutilization was "the result of mere chance." Id. at 255. The Court found troubling
the "evidentiary gap" that there was no evidence indicating the extent to which womenowned
businesses competing on publicsector road projects vied for privatesector subcontracts in the
general construction industry. Id. at 255. The Court also found that the State did not present any
anecdotal evidence indicating that women subcontractors successfully bidding on State
contracts faced privatesector discrimination. Id. In addition, the Court found missing any
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 92
evidence prime contractors that discriminate against women subcontractors in the private
sector nevertheless win publicsector contracts. Id.
The Court pointed out that it did not suggest that the proponent of a genderconscious program
"must always tie private discrimination to public action." 615 F.3d 233 at 255, n. 11. But, the
Court held where, as here, there existed substantial probative evidence of overutilization in the
relevant public sector, a state must present something more than generalized privatesector
data unsupported by compelling anecdotal evidence to justify a genderconscious program. Id. at
255, n. 11.
Moreover, the Court found the state failed to establish the amount of overlap between general
construction and road construction subcontracting. 615 F.3d 233 at 256. The Court said that the
dearth of evidence as to the correlation between public road construction subcontracting and
private general construction subcontracting severely limits the private data's probative value in
this case. Id.
Thus, the Court held that the State could not overcome the strong evidence of overutilization in
the public sector in terms of gender participation goals, and that the proffered privatesector
data failed to establish discrimination in the particular field in question. 615 F.3d 233 at 256.
Further, the anecdotal evidence, the Court concluded, indicated that most women
subcontractors do not experience discrimination. Id. Thus, the Court held that the State failed to
present sufficient evidence to support the Program's current inclusion of women subcontractors
in setting participation goals. Id.
Holding. The Court held that the state legislature had crafted legislation that withstood the
constitutional scrutiny. 615 F.3d 233 at 257. The Court concluded that in light of the statutory
scheme's flexibility and responsiveness to the realities of the marketplace, and given the State's
strong evidence of discrimination again African American and Native American subcontractors
in publicsector subcontracting, the State's application of the statute to these groups is
constitutional. Id. at 257. However, the Court also held that because the State failed to justify its
application of the statutory scheme to women, Asian American, and Hispanic American
subcontractors, the Court found those applications were not constitutional.
Therefore, the Court affirmed the judgment of the district court with regard to the facial validity
of the statute, and with regard to its application to African American and Native American
subcontractors. 615 F.3d 233 at 258. The Court reversed the district court's judgment insofar as
it upheld the constitutionality of the state legislature as applied to women, Asian American and
Hispanic American subcontractors. Id. The Court thus remanded the case to the district court to
fashion an appropriate remedy consistent with the opinion. Id.
Concurring opinions. It should be pointed out that there were two concurring opinions by the
three Judge panel: one judge concurred in the judgment, and the other judge concurred fully in
the majority opinion and the judgment.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 93
2. JanaRock Construction, Inc. v. New York State Dept. of Economic
Development, 438 F.3d 195 (2d Cir. 2006)
This recent case is instructive in connection with the determination of the groups that may be
included in a MBE/WBEtype program, and the standard of analysis utilized to evaluate a local
government's noninclusion of certain groups. In this case, the Second Circuit Court of Appeals
held racial classifications that are challenged as "underinclusive" (i.e., those that exclude
persons from a particular racial classification) are subject to a "rational basis" review, not strict
scrutiny.
Plaintiff Luiere, a 70 percent shareholder of JanaRock Construction, Inc. ("Jana Rock") and the
"son of a Spanish mother whose parents were born in Spain," challenged the constitutionality of
the State of New York's definition of "Hispanic" under its local minorityowned business
program. 438 F.3d 195, 199200 (2d Cir. 2006). Under the USDOT regulations, 49 C.F.R. 26.5,
"Hispanic Americans" are defined as "persons of Mexican, Puerto Rican, Cuban, Dominican,
Central or South American, or other Spanish or Portuguese culture or origin, regardless of race."
Id. at 201. Upon proper application, JanaRock was certified by the New York Department of
Transportation as a Disadvantaged Business Enterprise ("DBE") under the federal regulations.
Id.
However, unlike the federal regulations, the State of New York's local minorityowned business
program included in its definition of minorities "Hispanic persons of Mexican, Puerto Rican,
Dominican, Cuban, Central or South American of either Indian or Hispanic origin, regardless of
race." The definition did not include all persons from, or descendants of persons from, Spain or
Portugal. Id. Accordingly, JanaRock was denied MBE certification under the local program; Jana
Rock filed suit alleging a violation of the Equal Protection Clause. Id. at 20203. The plaintiff
conceded that the overall minorityowned business program satisfied the requisite strict
scrutiny, but argued that the definition of "Hispanic" was fatally underinclusive. Id. at 205.
The Second Circuit found that the narrowtailoring prong of the strict scrutiny analysis "allows
New York to identify which groups it is prepared to prove are in need of affirmative action
without demonstrating that no other groups merit consideration for the program." Id. at 206.
The court found that evaluating underinclusiveness as an element of the strict scrutiny analysis
was at odds with the United States Supreme Court decision in City of Richmond v. J.A. Croson Co.,
488 U.S. 469 (1989) which required that affirmative action programs be no broader than
necessary. Id. at 20708. The court similarly rejected the argument that the state should mirror
the federal definition of "Hispanic," finding that Congress has more leeway than the states to
make broader classifications because Congress is making such classifications on the national
level. Id. at 209.
The court opined without deciding that it may be impermissible for New York to simply
adopt the "federal USDOT definition of Hispanic without at least making an independent
assessment of discrimination against Hispanics of Spanish Origin in New York." Id. Additionally,
finding that the plaintiff failed to point to any discriminatory purpose by New York in failing to
include persons of Spanish or Portuguese descent, the court determined that the rational basis
analysis was appropriate. Id. at 213.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 94
The court held that the plaintiff failed the rational basis test for three reasons: (1) because it was
not irrational nor did it display animus to exclude persons of Spanish and Portuguese descent
from the definition of Hispanic; (2) because the fact the plaintiff could demonstrate evidence of
discrimination that he personally had suffered did not render New York's decision to exclude
persons of Spanish and Portuguese descent irrational; and (3) because the fact New York may
have relied on Census data including a small percentage of Hispanics of Spanish descent did not
mean that it was irrational to conclude that Hispanics of Latin American origin were in greater
need of remedial legislation. Id. at 21314. Thus, the Second Circuit affirmed the conclusion that
New York had a rational basis for its definition to not include persons of Spanish and Portuguese
descent, and thus affirmed the district court decision upholding the constitutionality of the
challenged definition.
3. Rapid Test Prods., Inc. v. Durham Sch. Servs., Inc., 460 F.3d 859 (7th Cir.
2006)
In Rapid Test Products, Inc. v. Durham School Services Inc., the Seventh Circuit Court of Appeals
held that 42 U.S.C. 1981 (the federal antidiscrimination law) did not provide an "entitlement"
in disadvantaged businesses to receive contracts subject to set aside programs; rather, 1981
provided a remedy for individuals who were subject to discrimination.
Durham School Services, Inc. ("Durham"), a prime contractor, submitted a bid for and won a
contract with an Illinois school district. The contract was subject to a setaside program
reserving some of the subcontracts for disadvantaged business enterprises (a race and gender
conscious program). Prior to bidding, Durham negotiated with Rapid Test Products, Inc. ("Rapid
Test"), made one payment to Rapid Test as an advance, and included Rapid Test in its final bid.
Rapid Test believed it had received the subcontract. However, after the school district awarded
the contract to Durham, Durham gave the subcontract to one of Rapid Test's competitor's, a
business owned by an Asian male. The school district agreed to the substitution. Rapid Test
brought suit against Durham under 42 U.S.C. 1981 alleging that Durham discriminated against
it because Rapid's owner was a black woman.
The district court granted summary judgment in favor of Durham holding the parties' dealing
had been too indefinite to create a contract. On appeal, the Seventh Circuit Court of Appeals
stated that " 1981 establishes a rule against discrimination in contracting and does not create
any entitlement to be the beneficiary of a contract reserved for firms owned by specified racial,
sexual, ethnic, or religious groups. Arguments that a particular setaside program is a lawful
remedy for prior discrimination may or may not prevail if a potential subcontractor claims to
have been excluded, but it is to victims of discrimination rather than frustrated beneficiaries
that 1981 assigns the right to litigate."
The court held that if race or sex discrimination is the reason why Durham did not award the
subcontract to Rapid Test, then 1981 provides relief. Having failed to address this issue, the
Seventh Circuit Court of Appeals remanded the case to the district court to determine whether
Rapid Test had evidence to back up its claim that race and sex discrimination, rather than a
nondiscriminatory reason such as inability to perform the services Durham wanted, accounted
for Durham's decision to hire Rapid Test's competitor.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 95
4. Virdi v. DeKalb County School District, 135 Fed. Appx. 262, 2005 WL 138942
(11th Cir. 2005) (unpublished opinion)
Although it is an unpublished opinion, Virdi v. DeKalb County School District is a recent Eleventh
Circuit decision reviewing a challenge to a local government MBE/WBEtype program, which is
instructive to the disparity study. In Virdi, the Eleventh Circuit struck down a MBE/WBE goal
program that the court held contained racial classifications. The court based its ruling primarily
on the failure of the DeKalb County School District (the "District") to seriously consider and
implement a raceneutral program and to the infinite duration of the program.
Plaintiff Virdi, an Asian American architect of Indian descent, filed suit against the District,
members of the DeKalb County Board of Education (both individually and in their official
capacities) (the "Board") and the Superintendent (both individually and in his official capacity)
(collectively "defendants") pursuant to 42 U.S.C. 1981 and 1983 and the Fourteenth
Amendment alleging that they discriminated against him on the basis of race when awarding
architectural contracts. 135 Fed. Appx. 262, 264 (11th Cir. 2005). Virdi also alleged the school
district's Minority Vendor Involvement Program was facially unconstitutional. Id.
The district court initially granted the defendants' Motions for Summary Judgment on all of
Virdi's claims and the Eleventh Circuit Court of Appeals reversed in part, vacated in part, and
remanded. Id. On remand, the district court granted the defendants' Motion for Partial Summary
Judgment on the facial challenge, and then granted the defendants' motion for a judgment as a
matter of law on the remaining claims at the close of Virdi's case. Id.
In 1989, the Board appointed the Tillman Committee (the "Committee") to study participation of
female and minorityowned businesses with the District. Id. The Committee met with various
District departments and a number of minority contractors who claimed they had
unsuccessfully attempted to solicit business with the District. Id. Based upon a "general feeling"
that minorities were underrepresented, the Committee issued the Tillman Report (the
"Report") stating "the Committee's impression that '[m]inorities ha[d] not participated in school
board purchases and contracting in a ratio reflecting the minority makeup of the community."
Id. The Report contained no specific evidence of past discrimination nor any factual findings of
discrimination. Id.
The Report recommended that the District: (1) Advertise bids and purchasing opportunities in
newspapers targeting minorities, (2) conduct periodic seminars to educate minorities on doing
business with the District, (3) notify organizations representing minority firms regarding
bidding and purchasing opportunities, and (4) publish a "how to" booklet to be made available
to any business interested in doing business with the District.
Id. The Report also recommended that the District adopt annual, aspirational participation goals
for women and minorityowned businesses. Id. The Report contained statements indicating the
selection process should remain neutral and recommended that the Board adopt a non
discrimination statement. Id.
In 1991, the Board adopted the Report and implemented several of the recommendations,
including advertising in the AJC, conducting seminars, and publishing the "how to" booklet. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 96
The Board also implemented the Minority Vendor Involvement Program (the "MVP") which
adopted the participation goals set forth in the Report. Id. at 265.
The Board delegated the responsibility of selecting architects to the Superintendent. Id. Virdi
sent a letter to the District in October 1991 expressing interest in obtaining architectural
contracts. Id. Virdi sent the letter to the District Manager and sent followup literature; he re
contacted the District Manager in 1992 and 1993. Id. In August 1994, Virdi sent a letter and a
qualifications package to a project manager employed by Heery International. Id. In a followup
conversation, the project manager allegedly told Virdi that his firm was not selected not based
upon his qualifications, but because the "District was only looking for 'blackowned firms.'" Id.
Virdi sent a letter to the project manager requesting confirmation of his statement in writing
and the project manager forwarded the letter to the District. Id.
After a series of meetings with District officials, in 1997, Virdi met with the newly hired
Executive Director. Id. at 266. Upon request of the Executive Director, Virdi resubmitted his
qualifications but was informed that he would be considered only for future projects (Phase III
SPLOST projects). Id. Virdi then filed suit before any Phase III SPLOST projects were awarded. Id.
The Eleventh Circuit considered whether the MVP was facially unconstitutional and whether the
defendants intentionally discriminated against Virdi on the basis of his race. The court held that
strict scrutiny applies to all racial classifications and is not limited to merely setasides or
mandatory quotas; therefore, the MVP was subject to strict scrutiny because it contained racial
classifications. Id. at 267. The court first questioned whether the identified government interest
was compelling. Id. at 268. However, the court declined to reach that issue because it found the
racebased participation goals were not narrowly tailored to achieving the identified
government interest. Id.
The court held the MVP was not narrowly tailored for two reasons. Id. First, because no evidence
existed that the District considered raceneutral alternatives to "avoid unwitting
discrimination." The court found that "[w]hile narrow tailoring does not require exhaustion of
every conceivable raceneutral alternative, it does require serious, good faith consideration of
whether such alternatives could serve the governmental interest at stake." Id., citing Grutter v.
Bollinger, 539 U.S. 306, 339 (2003), and Richmond v. J.A. Croson Co., 488 U.S. 469, 50910 (1989).
The court found that District could have engaged in any number of equally effective raceneutral
alternatives, including using its outreach procedure and tracking the participation and success
of minorityowned business as compared to nonminorityowned businesses. Id. at 268, n.8.
Accordingly, the court held the MVP was not narrowly tailored. Id. at 268.
Second, the court held that the unlimited duration of the MVP's racial goals negated a finding of
narrow tailoring. Id. "[R]ace conscious policies must be limited in time." Id., citing Grutter, 539
U.S. at 342, and Walker v. City of Mesquite, TX, 169 F.3d 973, 982 (5th Cir. 1999). The court held
that because the government interest could have been achieved utilizing raceneutral measures,
and because the racial goals were not temporally limited, the MVP could not withstand strict
scrutiny and was unconstitutional on its face. Id. at 268.
With respect to Virdi's claims of intentional discrimination, the court held that although the MVP
was facially unconstitutional, no evidence existed that the MVP or its unconstitutionality caused
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 97
Virdi to lose a contract that he would have otherwise received. Id. Thus, because Virdi failed to
establish a causal connection between the unconstitutional aspect of the MVP and his own
injuries, the court affirmed the district court's grant of judgment on that issue. Id. at 269.
Similarly, the court found that Virdi presented insufficient evidence to sustain his claims against
the Superintendent for intentional discrimination. Id.
The court reversed the district court's order pertaining to the facial constitutionality of the
MVP's racial goals, and affirmed the district court's order granting defendants' motion on the
issue of intentional discrimination against Virdi. Id. at 270.
5. Concrete Works of Colorado, Inc. v. City and County of Denver, 321 F.3d 950
(10th Cir. 2003), cert. denied, 540 U.S. 1027, 124 S. Ct. 556 (2003) (Scalia,
Justice with whom the Chief Justice Rehnquist, joined, dissenting from the
denial of certiorari)
This case is instructive to the disparity study because it is one of the only recent decisions to
uphold the validity of a local government MBE/WBE program. It is significant to note that the
Tenth Circuit did not apply the narrowly tailored test and thus did not rule on an application of
the narrowly tailored test, instead finding that the plaintiff had waived that challenge in one of
the earlier decisions in the case. This case also is one of the only cases to have found private
sector marketplace discrimination as a basis to uphold an MBE/WBEtype program.
In Concrete Works the United States Court of Appeals for the Tenth Circuit held that the City and
County of Denver had a compelling interest in limiting race discrimination in the construction
industry, that the City had an important governmental interest in remedying gender
discrimination in the construction industry, and found that the City and County of Denver had
established a compelling governmental interest to have a race and genderbased program. In
Concrete Works, the Court of Appeals did not address the issue of whether the MWBE Ordinance
was narrowly tailored because it held the district court was barred under the law of the case
doctrine from considering that issue since it was not raised on appeal by the plaintiff
construction companies after they had lost that issue on summary judgment in an earlier
decision. Therefore, the Court of Appeals did not reach a decision as to narrowly tailoring or
consider that issue in the case.
Case history. Plaintiff, Concrete Works of Colorado, Inc. ("CWC") challenged the constitutionality
of an "affirmative action" ordinance enacted by the City and County of Denver (hereinafter the
"City" or "Denver"). 321 F.3d 950, 954 (10th Cir. 2003). The ordinance established participation
goals for racial minorities and women on certain City construction and professional design
projects. Id.
The City enacted an Ordinance No. 513 ("1990 Ordinance") containing annual goals for
MBE/WBE utilization on all competitively bid projects. Id. at 956. A prime contractor could also
satisfy the 1990 Ordinance requirements by using "good faith efforts." Id. In 1996, the City
replaced the 1990 Ordinance with Ordinance No. 304 (the "1996 Ordinance"). The district court
stated that the 1996 Ordinance differed from the 1990 Ordinance by expanding the definition of
covered contracts to include some privately financed contracts on Cityowned land; added
updated information and findings to the statement of factual support for continuing the
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 98
program; refined the requirements for MBE/WBE certification and graduation; mandated the
use of MBEs and WBEs on change orders; and expanded sanctions for improper behavior by
MBEs, WBEs or majorityowned contractors in failing to perform the affirmative action
commitments made on City projects. Id. at 95657.
The 1996 Ordinance was amended in 1998 by Ordinance No. 948 (the "1998 Ordinance"). The
1998 Ordinance reduced annual percentage goals and prohibited an MBE or a WBE, acting as a
bidder, from counting selfperformed work toward project goals. Id. at 957.
CWC filed suit challenging the constitutionality of the 1990 Ordinance. Id. The district court
conducted a bench trial on the constitutionality of the three ordinances. Id. The district court
ruled in favor of CWC and concluded that the ordinances violated the Fourteenth Amendment.
Id. The City then appealed to the Tenth Circuit Court of Appeals. Id. The Court of Appeals
reversed and remanded. Id. at 954.
The Court of Appeals applied strict scrutiny to racebased measures and intermediate scrutiny
to the genderbased measures. Id. at 95758, 959. The Court of Appeals also cited Richmond v.
J.A. Croson Co., for the proposition that a governmental entity "can use its spending powers to
remedy private discrimination, if it identifies that discrimination with the particularity required
by the Fourteenth Amendment." 488 U.S. 469, 492 (1989) (plurality opinion). Because "an effort
to alleviate the effects of societal discrimination is not a compelling interest," the Court of
Appeals held that Denver could demonstrate that its interest is compelling only if it (1)
identified the past or present discrimination "with some specificity," and (2) demonstrated that
a "strong basis in evidence" supports its conclusion that remedial action is necessary. Id. at 958,
quoting Shaw v. Hunt, 517 U.S. 899, 90910 (1996).
The court held that Denver could meet its burden without conclusively proving the existence of
past or present racial discrimination. Id. Rather, Denver could rely on "empirical evidence that
demonstrates 'a significant statistical disparity between the number of qualified minority
contractors and the number of such contractors actually engaged by the locality or the
locality's prime contractors.'" Id., quoting Croson, 488 U.S. at 509 (plurality opinion).
Furthermore, the Court of Appeals held that Denver could rely on statistical evidence gathered
from the sixcounty Denver Metropolitan Statistical Area (MSA) and could supplement the
statistical evidence with anecdotal evidence of public and private discrimination. Id.
The Court of Appeals held that Denver could establish its compelling interest by presenting
evidence of its own direct participation in racial discrimination or its passive participation in
private discrimination. Id. The Court of Appeals held that once Denver met its burden, CWC had
to introduce "credible, particularized evidence to rebut [Denver's] initial showing of the
existence of a compelling interest, which could consist of a neutral explanation for the statistical
disparities." Id. (internal citations and quotations omitted). The Court of Appeals held that CWC
could also rebut Denver's statistical evidence "by (1) showing that the statistics are flawed; (2)
demonstrating that the disparities shown by the statistics are not significant or actionable; or
(3) presenting contrasting statistical data." Id. (internal citations and quotations omitted). The
Court of Appeals held that the burden of proof at all times remained with CWC to demonstrate
the unconstitutionality of the ordinances. Id. at 960.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 99
The Court of Appeals held that to meet its burden of demonstrating an important governmental
interest per the intermediate scrutiny analysis, Denver must show that the genderbased
measures in the ordinances were based on "reasoned analysis rather than through the
mechanical application of traditional, often inaccurate, assumptions." Id., quoting Miss. Univ. for
Women v. Hogan, 458 U.S. 718, 726 (1982).
The studies. Denver presented historical, statistical and anecdotal evidence in support of its
MBE/WBE programs. Denver commissioned a number of studies to assess its MBE/WBE
programs. Id. at 962. The consulting firm hired by Denver utilized disparity indices in part. Id. at
962. The 1990 Study also examined MBE and WBE utilization in the overall Denver MSA
construction market, both public and private. Id. at 963.
The consulting firm also interviewed representatives of MBEs, WBEs, majorityowned
construction firms, and government officials. Id. Based on this information, the 1990 Study
concluded that, despite Denver's efforts to increase MBE and WBE participation in Denver
Public Works projects, some Denver employees and private contractors engaged in conduct
designed to circumvent the goals program. Id. After reviewing the statistical and anecdotal
evidence contained in the 1990 Study, the City Council enacted the 1990 Ordinance. Id.
After the Tenth Circuit decided Concrete Works II, Denver commissioned another study (the
"1995 Study"). Id. at 963. Using 1987 Census Bureau data, the 1995 Study again examined
utilization of MBEs and WBEs in the construction and professional design industries within the
Denver MSA. Id. The 1995 Study concluded that MBEs and WBEs were more likely to be one
person or familyrun businesses. The Study concluded that Hispanicowned firms were less
likely to have paid employees than whiteowned firms but that Asian/Native Americanowned
firms were more likely to have paid employees than white or other minorityowed firms. To
determine whether these factors explained overall market disparities, the 1995 Study used the
Census data to calculate disparity indices for all firms in the Denver MSA construction industry
and separately calculated disparity indices for firms with paid employees and firms with no paid
employees. Id. at 964.
The Census Bureau information was also used to examine average revenues per employee for
Denver MSA construction firms with paid employees. Hispanic, Asian, Native American, and
womenowned firms with paid employees all reported lower revenues per employee than
majorityowned firms. The 1995 Study also used 1990 Census data to calculate rates of self
employment within the Denver MSA construction industry. The Study concluded that the
disparities in the rates of selfemployment for blacks, Hispanics, and women persisted even
after controlling for education and length of work experience. The 1995 Study controlled for
these variables and reported that blacks and Hispanics working in the Denver MSA construction
industry were less than half as likely to own their own businesses as were whites of comparable
education and experience. Id.
In late 1994 and early 1995, a telephone survey of construction firms doing business in the
Denver MSA was conducted. Id. at 965. Based on information obtained from the survey, the
consultant calculated percentage utilization and percentage availability of MBEs and WBEs.
Percentage utilization was calculated from revenue information provided by the responding
firms. Percentage availability was calculated based on the number of MBEs and WBEs that
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 100
responded to the survey question regarding revenues. Using these utilization and availability
percentages, the 1995 Study showed disparity indices of 64 for MBEs and 70 for WBEs in the
construction industry. In the professional design industry, disparity indices were 67 for MBEs
and 69 for WBEs. The 1995 Study concluded that the disparity indices obtained from the
telephone survey data were more accurate than those obtained from the 1987 Census data
because the data obtained from the telephone survey were more recent, had a narrower focus,
and included data on C corporations. Additionally, it was possible to calculate disparity indices
for professional design firms from the survey data. Id.
In 1997, the City conducted another study to estimate the availability of MBEs and WBEs and to
examine, inter alia, whether race and gender discrimination limited the participation of MBEs
and WBEs in construction projects of the type typically undertaken by the City (the "1997
Study"). Id. at 966. The 1997 Study used geographic and specialization information to calculate
MBE/WBE availability. Availability was defined as "the ratio of MBE/WBE firms to the total
number of firms in the fourdigit SIC codes and geographic market area relevant to the City's
contracts." Id.
The 1997 Study compared MBE/WBE availability and utilization in the Colorado construction
industry. Id. The statewide market was used because necessary information was unavailable for
the Denver MSA. Id. at 967. Additionally, data collected in 1987 by the Census Bureau was used
because more current data was unavailable. The Study calculated disparity indices for the
statewide construction market in Colorado as follows: 41 for African American firms, 40 for
Hispanic firms, 14 for Asian and other minorities, and 74 for womenowned firms. Id.
The 1997 Study also contained an analysis of whether African Americans, Hispanics, or Asian
Americans working in the construction industry are less likely to be selfemployed than
similarly situated whites. Id. Using data from the Public Use Microdata Samples ("PUMS") of the
1990 Census of Population and Housing, the Study used a sample of individuals working in the
construction industry. The Study concluded that in both Colorado and the Denver MSA, African
Americans, Hispanics, and Native Americans working in the construction industry had lower
selfemployment rates than whites. Asian Americans had higher selfemployment rates than
whites.
Using the availability figures calculated earlier in the Study, the Study then compared the actual
availability of MBE/WBEs in the Denver MSA with the potential availability of MBE/WBEs if
they formed businesses at the same rate as whites with the same characteristics. Id. Finally, the
Study examined whether selfemployed minorities and women in the construction industry
have lower earnings than white males with similar characteristics. Id. at 968. Using linear
regression analysis, the Study compared business owners with similar years of education, of
similar age, doing business in the same geographic area, and having other similar demographic
characteristics. Even after controlling for several factors, the results showed that selfemployed
African Americans, Hispanics, Native Americans, and women had lower earnings than white
males. Id.
The 1997 Study also conducted a mail survey of both MBE/WBEs and nonMBE/WBEs to obtain
information on their experiences in the construction industry. Of the MBE/WBEs who
responded, 35 percent indicated that they had experienced at least one incident of disparate
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 101
treatment within the last five years while engaged in business activities. The survey also posed
the following question: "How often do prime contractors who use your firm as a subcontractor
on public sector projects with [MBE/WBE] goals or requirements also use your firm on public
sector or private sector projects without [MBE/WBE] goals or requirements?" Fiftyeight
percent of minorities and 41 percent of white women who responded to this question indicated
they were "seldom or never" used on nongoals projects. Id.
MBE/WBEs were also asked whether the following aspects of procurement made it more
difficult or impossible to obtain construction contracts: (1) bonding requirements, (2) insurance
requirements, (3) large project size, (4) cost of completing proposals, (5) obtaining working
capital, (6) length of notification for bid deadlines, (7) prequalification requirements, and (8)
previous dealings with an agency. This question was also asked of nonMBE/WBEs in a separate
survey. With one exception, MBE/WBEs considered each aspect of procurement more
problematic than nonMBE/WBEs. To determine whether a firm's size or experience explained
the different responses, a regression analysis was conducted that controlled for age of the firm,
number of employees, and level of revenues. The results again showed that with the same, single
exception, MBE/WBEs had more difficulties than nonMBE/WBEs with the same characteristics.
Id. at 96869.
After the 1997 Study was completed, the City enacted the 1998 Ordinance. The 1998 Ordinance
reduced the annual goals to 10 percent for both MBEs and WBEs and eliminated a provision
which previously allowed MBE/WBEs to count their own work toward project goals. Id. at 969.
The anecdotal evidence included the testimony of the senior vicepresident of a large, majority
owned construction firm who stated that when he worked in Denver, he received credible
complaints from minority and womenowned construction firms that they were subject to
different work rules than majorityowned firms. Id. He also testified that he frequently observed
graffiti containing racial or gender epithets written on job sites in the Denver metropolitan area.
Further, he stated that he believed, based on his personal experiences, that many majority
owned firms refused to hire minority or womenowned subcontractors because they believed
those firms were not competent. Id.
Several MBE/WBE witnesses testified that they experienced difficulty prequalifying for private
sector projects and projects with the City and other governmental entities in Colorado. One
individual testified that her company was required to prequalify for a private sector project
while no similar requirement was imposed on majorityowned firms. Several others testified
that they attempted to prequalify for projects but their applications were denied even though
they met the prequalification requirements. Id.
Other MBE/WBEs testified that their bids were rejected even when they were the lowest bidder;
that they believed they were paid more slowly than majorityowned firms on both City projects
and private sector projects; that they were charged more for supplies and materials; that they
were required to do additional work not part of the subcontracting arrangement; and that they
found it difficult to join unions and trade associations. Id. There was testimony detailing the
difficulties MBE/WBEs experienced in obtaining lines of credit. One WBE testified that she was
given a false explanation of why her loan was declined; another testified that the lending
institution required the cosignature of her husband even though her husband, who also owned
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 102
a construction firm, was not required to obtain her cosignature; a third testified that the bank
required her father to be involved in the lending negotiations. Id.
The court also pointed out anecdotal testimony involving recitations of racially and gender
motivated harassment experienced by MBE/WBEs at work sites. There was testimony that
minority and female employees working on construction projects were physically assaulted and
fondled, spat upon with chewing tobacco, and pelted with twoinch bolts thrown by males from
a height of 80 feet. Id. at 96970.
The legal framework applied by the court. The Court held that the district court incorrectly
believed Denver was required to prove the existence of discrimination. Instead of considering
whether Denver had demonstrated strong evidence from which an inference of past or present
discrimination could be drawn, the district court analyzed whether Denver's evidence showed
that there is pervasive discrimination. Id. at 970. The court, quoting Concrete Works II, stated
that "the Fourteenth Amendment does not require a court to make an ultimate finding of
discrimination before a municipality may take affirmative steps to eradicate discrimination." Id.
at 970, quoting Concrete Works II, 36 F.3d 1513, 1522 (10th Cir. 1994). Denver's initial burden
was to demonstrate that strong evidence of discrimination supported its conclusion that
remedial measures were necessary. Strong evidence is that "approaching a prima facie case of a
constitutional or statutory violation," not irrefutable or definitive proof of discrimination. Id. at
97, quoting Croson, 488 U.S. at 500. The burden of proof at all times remained with the
contractor plaintiff to prove by a preponderance of the evidence that Denver's "evidence did not
support an inference of prior discrimination and thus a remedial purpose." Id., quoting Adarand
VII, 228 F.3d at 1176.
Denver, the Court held, did introduce evidence of discrimination against each group included in
the ordinances. Id. at 971. Thus, Denver's evidence did not suffer from the problem discussed by
the court in Croson. The Court held the district court erroneously concluded that Denver must
demonstrate that the private firms directly engaged in any discrimination in which Denver
passively participates do so intentionally, with the purpose of disadvantaging minorities and
women. The Croson majority concluded that a "city would have a compelling interest in
preventing its tax dollars from assisting [local trade] organizations in maintaining a racially
segregated construction market." Id. at 971, quoting Croson, 488 U.S. 503. Thus, the Court held
Denver's burden was to introduce evidence which raised the inference of discriminatory
exclusion in the local construction industry and linked its spending to that discrimination. Id.
The Court noted the Supreme Court has stated that the inference of discriminatory exclusion can
arise from statistical disparities. Id., citing Croson, 488 U.S. at 503. Accordingly, it concluded that
Denver could meet its burden through the introduction of statistical and anecdotal evidence. To
the extent the district court required Denver to introduce additional evidence to show
discriminatory motive or intent on the part of private construction firms, the district court
erred. Denver, according to the Court, was under no burden to identify any specific practice or
policy that resulted in discrimination. Neither was Denver required to demonstrate that the
purpose of any such practice or policy was to disadvantage women or minorities. Id. at 972.
The court found Denver's statistical and anecdotal evidence relevant because it identifies
discrimination in the local construction industry, not simply discrimination in society. The court
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 103
held the genesis of the identified discrimination is irrelevant and the district court erred when it
discounted Denver's evidence on that basis. Id.
The court held the district court erroneously rejected the evidence Denver presented on
marketplace discrimination. Id. at 973. The court rejected the district court's erroneous legal
conclusion that a municipality may only remedy its own discrimination. The court stated this
conclusion is contrary to the holdings in Concrete Works II and the plurality opinion in Croson.
Id. The court held it previously recognized in this case that "a municipality has a compelling
interest in taking affirmative steps to remedy both public and private discrimination specifically
identified in its area." Id., quoting Concrete Works II, 36 F.3d at 1529 (emphasis added). In
Concrete Works II, the court stated that "we do not read Croson as requiring the municipality to
identify an exact linkage between its award of public contracts and private discrimination." Id.,
quoting Concrete Works II, 36 F.3d at 1529.
The court stated that Denver could meet its burden of demonstrating its compelling interest
with evidence of private discrimination in the local construction industry coupled with evidence
that it has become a passive participant in that discrimination. Id. at 973. Thus, Denver was not
required to demonstrate that it is "guilty of prohibited discrimination" to meet its initial burden.
Id.
Additionally, the court had previously concluded that Denver's statistical studies, which
compared utilization of MBE/WBEs to availability, supported the inference that "local prime
contractors" are engaged in racial and gender discrimination. Id. at 974, quoting Concrete Works
II, 36 F.3d at 1529. Thus, the court held Denver's disparity studies should not have been
discounted because they failed to specifically identify those individuals or firms responsible for
the discrimination. Id.
The Court's rejection of CWC's arguments and the district court findings
Use of marketplace data. The court held the district court, inter alia, erroneously concluded
that the disparity studies upon which Denver relied were significantly flawed because they
measured discrimination in the overall Denver MSA construction industry, not discrimination by
the City itself. Id. at 974. The court found that the district court's conclusion was directly
contrary to the holding in Adarand VII that evidence of both public and private discrimination in
the construction industry is relevant. Id., citing Adarand VII, 228 F.3d at 116667).
The court held the conclusion reached by the majority in Croson that marketplace data are
relevant in equal protection challenges to affirmative action programs was consistent with the
approach later taken by the court in Shaw v. Hunt. Id. at 975. In Shaw, a majority of the court
relied on the majority opinion in Croson for the broad proposition that a governmental entity's
"interest in remedying the effects of past or present racial discrimination may in the proper case
justify a government's use of racial distinctions." Id., quoting Shaw, 517 U.S. at 909. The Shaw
court did not adopt any requirement that only discrimination by the governmental entity, either
directly or by utilizing firms engaged in discrimination on projects funded by the entity, was
remediable. The court, however, did set out two conditions that must be met for the
governmental entity to show a compelling interest. "First, the discrimination must be identified
discrimination." Id. at 976, quoting Shaw, 517 U.S. at 910. The City can satisfy this condition by
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 104
identifying the discrimination, "'public or private, with some specificity.' " Id. at 976, citing Shaw,
517 U.S. at 910, quoting Croson, 488 U.S. at 504 (emphasis added). The governmental entity
must also have a "strong basis in evidence to conclude that remedial action was necessary." Id.
Thus, the court concluded Shaw specifically stated that evidence of either public or private
discrimination could be used to satisfy the municipality's burden of producing strong evidence.
Id. at 976.
In Adarand VII, the court noted it concluded that evidence of marketplace discrimination can be
used to support a compelling interest in remedying past or present discrimination through the
use of affirmative action legislation. Id., citing Adarand VII, 228 F.3d at 116667 ("[W]e may
consider public and private discrimination not only in the specific area of government
procurement contracts but also in the construction industry generally; thus any findings
Congress has made as to the entire construction industry are relevant." (emphasis added)).
Further, the court pointed out in this case it earlier rejected the argument CWC reasserted here
that marketplace data are irrelevant and remanded the case to the district court to determine
whether Denver could link its public spending to "the Denver MSA evidence of industrywide
discrimination." Id., quoting Concrete Works II, 36 F.3d at 1529. The court stated that evidence
explaining "the Denver government's role in contributing to the underutilization of MBEs and
WBEs in the private construction market in the Denver MSA" was relevant to Denver's burden of
producing strong evidence. Id., quoting Concrete Works II, 36 F.3d at 1530 (emphasis added).
Consistent with the court's mandate in Concrete Works II, the City attempted to show at trial that
it "indirectly contributed to private discrimination by awarding public contracts to firms that in
turn discriminated against MBE and/or WBE subcontractors in other private portions of their
business." Id. The City can demonstrate that it is a "'passive participant' in a system of racial
exclusion practiced by elements of the local construction industry" by compiling evidence of
marketplace discrimination and then linking its spending practices to the private discrimination.
Id., quoting Croson, 488 U.S. at 492.
The court rejected CWC's argument that the lending discrimination studies and business
formation studies presented by Denver were irrelevant. In Adarand VII, the court concluded that
evidence of discriminatory barriers to the formation of businesses by minorities and women
and fair competition between MBE/WBEs and majorityowned construction firms shows a
"strong link" between a government's "disbursements of public funds for construction contracts
and the channeling of those funds due to private discrimination." Id. at 977, quoting Adarand VII,
228 F.3d at 116768. The court found that evidence that private discrimination resulted in
barriers to business formation is relevant because it demonstrates that MBE/WBEs are
precluded at the outset from competing for public construction contracts. The court also found
that evidence of barriers to fair competition is relevant because it again demonstrates that
existing MBE/WBEs are precluded from competing for public contracts. Thus, like the studies
measuring disparities in the utilization of MBE/WBEs in the Denver MSA construction industry,
studies showing that discriminatory barriers to business formation exist in the Denver
construction industry are relevant to the City's showing that it indirectly participates in industry
discrimination. Id. at 977.
The City presented evidence of lending discrimination to support its position that MBE/WBEs in
the Denver MSA construction industry face discriminatory barriers to business formation.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 105
Denver introduced a disparity study prepared in 1996 and sponsored by the Denver Community
Reinvestment Alliance, Colorado Capital Initiatives, and the City. The Study ultimately concluded
that "despite the fact that loan applicants of three different racial/ethnic backgrounds in this
sample were not appreciably different as businesspeople, they were ultimately treated
differently by the lenders on the crucial issue of loan approval or denial." Id. at 97778. In
Adarand VII, the court concluded that this study, among other evidence, "strongly support[ed]
an initial showing of discrimination in lending." Id. at 978, quoting, Adarand VII, 228 F.3d at
1170, n. 13 ("Lending discrimination alone of course does not justify action in the construction
market. However, the persistence of such discrimination supports the assertion that the
formation, as well as utilization, of minorityowned construction enterprises has been
impeded."). The City also introduced anecdotal evidence of lending discrimination in the Denver
construction industry.
CWC did not present any evidence that undermined the reliability of the lending discrimination
evidence but simply repeated the argument, foreclosed by circuit precedent, that it is irrelevant.
The court rejected the district court criticism of the evidence because it failed to determine
whether the discrimination resulted from discriminatory attitudes or from the neutral
application of banking regulations. The court concluded that discriminatory motive can be
inferred from the results shown in disparity studies. The court held the district court's criticism
did not undermine the study's reliability as an indicator that the City is passively participating in
marketplace discrimination. The court noted that in Adarand VII it took "judicial notice of the
obvious causal connection between access to capital and ability to implement public works
construction projects." Id. at 978, quoting Adarand VII, 228 F.3d at 1170.
Denver also introduced evidence of discriminatory barriers to competition faced by MBE/WBEs
in the form of business formation studies. The 1990 Study and the 1995 Study both showed that
all minority groups in the Denver MSA formed their own construction firms at rates lower than
the total population but that women formed construction firms at higher rates. The 1997 Study
examined selfemployment rates and controlled for gender, marital status, education,
availability of capital, and personal/family variables. As discussed, supra, the Study concluded
that African Americans, Hispanics, and Native Americans working in the construction industry
have lower rates of selfemployment than similarly situated whites. Asian Americans had higher
rates. The 1997 Study also concluded that minority and female business owners in the
construction industry, with the exception of Asian American owners, have lower earnings than
white male owners. This conclusion was reached after controlling for education, age, marital
status, and disabilities. Id. at 978.
The court held that the district court's conclusion that the business formation studies could not
be used to justify the ordinances conflicts with its holding in Adarand VII. "[T]he existence of
evidence indicating that the number of [MBEs] would be significantly (but unquantifiably)
higher but for such barriers is nevertheless relevant to the assessment of whether a disparity is
sufficiently significant to give rise to an inference of discriminatory exclusion." Id. at 979,
quoting Adarand VII,228 F.3d at 1174.
In sum, the court held the district court erred when it refused to consider or give sufficient
weight to the lending discrimination study, the business formation studies, and the studies
measuring marketplace discrimination. That evidence was legally relevant to the City's burden
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 106
of demonstrating a strong basis in evidence to support its conclusion that remedial legislation
was necessary. Id. at 97980.
Variables. CWC challenged Denver's disparity studies as unreliable because the disparities
shown in the studies may be attributable to firm size and experience rather than discrimination.
Denver countered, however, that a firm's size has little effect on its qualifications or its ability to
provide construction services and that MBE/WBEs, like all construction firms, can perform most
services either by hiring additional employees or by employing subcontractors. CWC responded
that elasticity itself is relative to size and experience; MBE/WBEs are less capable of expanding
because they are smaller and less experienced. Id. at 980.
The court concluded that even if it assumed that MBE/WBEs are less able to expand because of
their smaller size and more limited experience, CWC did not respond to Denver's argument and
the evidence it presented showing that experience and size are not race and genderneutral
variables and that MBE/WBE construction firms are generally smaller and less experienced
because of industry discrimination. Id. at 981. The lending discrimination and business
formation studies, according to the court, both strongly supported Denver's argument that
MBE/WBEs are smaller and less experienced because of marketplace and industry
discrimination. In addition, Denver's expert testified that discrimination by banks or bonding
companies would reduce a firm's revenue and the number of employees it could hire. Id.
Denver also argued its Studies controlled for size and the 1995 Study controlled for experience.
It asserted that the 1990 Study measured revenues per employee for construction for
MBE/WBEs and concluded that the resulting disparities, "suggest[ ] that even among firms of
the same employment size, industry utilization of MBEs and WBEs was lower than that of non
minority maleowned firms." Id. at 982. Similarly, the 1995 Study controlled for size, calculating,
inter alia, disparity indices for firms with no paid employees which presumably are the same
size.
Based on the uncontroverted evidence presented at trial, the court concluded that the district
court did not give sufficient weight to Denver's disparity studies because of its erroneous
conclusion that the studies failed to adequately control for size and experience. The court held
that Denver is permitted to make assumptions about capacity and qualification of MBE/WBEs to
perform construction services if it can support those assumptions. The court found the
assumptions made in this case were consistent with the evidence presented at trial and
supported the City's position that a firm's size does not affect its qualifications, willingness, or
ability to perform construction services and that the smaller size and lesser experience of
MBE/WBEs are, themselves, the result of industry discrimination. Further, the court pointed out
CWC did not conduct its own disparity study using marketplace data and thus did not
demonstrate that the disparities shown in Denver's studies would decrease or disappear if the
studies controlled for size and experience to CWC's satisfaction. Consequently, the court held
CWC's rebuttal evidence was insufficient to meet its burden of discrediting Denver's disparity
studies on the issue of size and experience. Id. at 982.
Specialization. The district court also faulted Denver's disparity studies because they did not
control for firm specialization. The court noted the district court's criticism would be
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 107
appropriate only if there was evidence that MBE/WBEs are more likely to specialize in certain
construction fields. Id. at 982.
The court found there was no identified evidence showing that certain construction
specializations require skills less likely to be possessed by MBE/WBEs. The court found relevant
the testimony of the City's expert, that the data he reviewed showed that MBEs were
represented "widely across the different [construction] specializations." Id. at 98283. There was
no contrary testimony that aggregation bias caused the disparities shown in Denver's studies. Id.
at 983.
The court held that CWC failed to demonstrate that the disparities shown in Denver's studies are
eliminated when there is control for firm specialization. In contrast, one of the Denver studies,
which controlled for SICcode subspecialty and still showed disparities, provided support for
Denver's argument that firm specialization does not explain the disparities. Id. at 983.
The court pointed out that disparity studies may make assumptions about availability as long as
the same assumptions can be made for all firms. Id. at 983.
Utilization of MBE/WBEs on City projects. CWC argued that Denver could not demonstrate a
compelling interest because it overutilized MBE/WBEs on City construction projects. This
argument, according to the court, was an extension of CWC's argument that Denver could justify
the ordinances only by presenting evidence of discrimination by the City itself or by contractors
while working on City projects. Because the court concluded that Denver could satisfy its burden
by showing that it is an indirect participant in industry discrimination, CWC's argument relating
to the utilization of MBE/WBEs on City projects goes only to the weight of Denver's evidence. Id.
at 984.
Consistent with the court's mandate in Concrete Works II, at trial Denver sought to demonstrate
that the utilization data from projects subject to the goals program were tainted by the program
and "reflect[ed] the intended remedial effect on MBE and WBE utilization." Id. at 984, quoting
Concrete Works II, 36 F.3d at 1526. Denver argued that the nongoals data were the better
indicator of past discrimination in public contracting than the data on all City construction
projects. Id. at 98485. The court concluded that Denver presented ample evidence to support
the conclusion that the evidence showing MBE/WBE utilization on City projects not subject to
the ordinances or the goals programs is the better indicator of discrimination in City
contracting. Id. at 985.
The court rejected CWC's argument that the marketplace data were irrelevant but agreed that
the nongoals data were also relevant to Denver's burden. The court noted that Denver did not
rely heavily on the nongoals data at trial but focused primarily on the marketplace studies to
support its burden. Id. at 985.
In sum, the court held Denver demonstrated that the utilization of MBE/WBEs on City projects
had been affected by the affirmative action programs that had been in place in one form or
another since 1977. Thus, the nongoals data were the better indicator of discrimination in
public contracting. The court concluded that, on balance, the nongoals data provided some
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 108
support for Denver's position that racial and gender discrimination existed in public contracting
before the enactment of the ordinances. Id. at 98788.
Anecdotal evidence. The anecdotal evidence, according to the court, included several incidents
involving profoundly disturbing behavior on the part of lenders, majorityowned firms, and
individual employees. Id. at 989. The court found that the anecdotal testimony revealed
behavior that was not merely sophomoric or insensitive, but which resulted in real economic or
physical harm. While CWC also argued that all new or small contractors have difficulty obtaining
credit and that treatment the witnesses characterized as discriminatory is experienced by all
contractors, Denver's witnesses specifically testified that they believed the incidents they
experienced were motivated by race or gender discrimination. The court found they supported
those beliefs with testimony that majorityowned firms were not subject to the same
requirements imposed on them. Id.
The court held there was no merit to CWC's argument that the witnesses' accounts must be
verified to provide support for Denver's burden. The court stated that anecdotal evidence is
nothing more than a witness' narrative of an incident told from the witness' perspective and
including the witness' perceptions. Id.
After considering Denver's anecdotal evidence, the district court found that the evidence "shows
that race, ethnicity and gender affect the construction industry and those who work in it" and
that the egregious mistreatment of minority and women employees "had direct financial
consequences" on construction firms. Id. at 989, quoting Concrete Works III, 86 F. Supp.2d at
1074, 1073. Based on the district court's findings regarding Denver's anecdotal evidence and its
review of the record, the court concluded that the anecdotal evidence provided persuasive,
unrebutted support for Denver's initial burden. Id. at 98990, citing Int'l Bhd. of Teamsters v.
United States, 431 U.S. 324, 339 (1977) (concluding that anecdotal evidence presented in a
pattern or practice discrimination case was persuasive because it "brought the cold [statistics]
convincingly to life").
Summary. The court held the record contained extensive evidence supporting Denver's position
that it had a strong basis in evidence for concluding that the 1990 Ordinance and the 1998
Ordinance were necessary to remediate discrimination against both MBEs and WBEs. Id. at 990.
The information available to Denver and upon which the ordinances were predicated, according
to the court, indicated that discrimination was persistent in the local construction industry and
that Denver was, at least, an indirect participant in that discrimination.
To rebut Denver's evidence, the court stated CWC was required to "establish that Denver's
evidence did not constitute strong evidence of such discrimination." Id. at 991, quoting Concrete
Works II, 36 F.3d at 1523. CWC could not meet its burden of proof through conjecture and
unsupported criticisms of Denver's evidence. Rather, it must present "credible, particularized
evidence." Id., quoting Adarand VII, 228 F.3d at 1175. The court held that CWC did not meet its
burden. CWC hypothesized that the disparities shown in the studies on which Denver relies
could be explained by any number of factors other than racial discrimination. However, the
court found it did not conduct its own marketplace disparity study controlling for the disputed
variables and presented no other evidence from which the court could conclude that such
variables explain the disparities. Id. at 99192.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 109
Narrow tailoring. Having concluded that Denver demonstrated a compelling interest in the race
based measures and an important governmental interest in the genderbased measures, the
court held it must examine whether the ordinances were narrowly tailored to serve the
compelling interest and are substantially related to the achievement of the important
governmental interest. Id. at 992.
The court stated it had previously concluded in its earlier decisions that Denver's program was
narrowly tailored. CWC appealed the grant of summary judgment and that appeal culminated in
the decision in Concrete Works II. The court reversed the grant of summary judgment on the
compellinginterest issue and concluded that CWC had waived any challenge to the narrow
tailoring conclusion reached by the district court. Because the court found Concrete Works did
not challenge the district court's conclusion with respect to the second prong of Croson's strict
scrutiny standard i.e., that the Ordinance is narrowly tailored to remedy past and present
discrimination the court held it need not address this issue. Id. at 992, citing Concrete Works
II, 36 F.3d at 1531, n. 24.
The court concluded that the district court lacked authority to address the narrow tailoring
issue on remand because none of the exceptions to the law of the case doctrine are applicable.
The district court's earlier determination that Denver's affirmativeaction measures were
narrowly tailored is law of the case and binding on the parties.
6. Kornhass Construction, Inc. v. State of Oklahoma, Department of Central
Services, 140 F.Supp.2d 1232 (W.D. OK. 2001)
Plaintiffs, nonminority contractors, brought this action against the State of Oklahoma
challenging minority bid preference provisions in the Oklahoma Minority Business Enterprise
Assistance Act ("MBE Act"). The Oklahoma MBE Act established a bid preference program by
which certified minority business enterprises are given favorable treatment on competitive bids
submitted to the state. 140 F.Supp.2d at 123536. Under the MBE Act, the bids of nonminority
contractors were raised by 5 percent, placing them at a competitive disadvantage according to
the district court. Id. at 12351236.
The named plaintiffs bid on state contracts in which their bids were increased by 5 percent as
they were nonminority business enterprises. Although the plaintiffs actually submitted the
lowest dollar bids, once the 5 percent factor was applied, minority bidders became the
successful bidders on certain contracts. 140 F.Supp. at 1237.
In determining the constitutionality or validity of the Oklahoma MBE Act, the district court was
guided in its analysis by the Tenth Circuit Court of Appeals decision in Adarand Constructors, Inc.
v. Slater, 288 F.3d 1147 (10th Cir. 2000). The district court pointed out that in Adarand VII, the
Tenth Circuit found compelling evidence of barriers to both minority business formation and
existing minority businesses. Id. at 1238. In sum, the district court noted that the Tenth Circuit
concluded that the Government had met its burden of presenting a strong basis in evidence
sufficient to support its articulated, constitutionally valid, compelling interest. 140 F.Supp.2d at
1239, citing Adarand VII, 228 F.3d 1147, 1174.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 110
Compelling state interest. The district court, following Adarand VII, applied the strict scrutiny
analysis, arising out of the Fourteenth Amendment's Equal Protection Clause, in which a race
based affirmative action program withstands strict scrutiny only if it is narrowly tailored to
serve a compelling governmental interest. Id. at 1239. The district court pointed out that it is
clear from Supreme Court precedent, there may be a compelling interest sufficient to justify
raceconscious affirmative action measures. Id. The Fourteenth Amendment permits race
conscious programs that seek both to eradicate discrimination by the governmental entity itself
and to prevent the governmental entity from becoming a "passive participant" in a system of
racial exclusion practiced by private businesses. Id. at 1240. Therefore, the district court
concluded that both the federal and state governments have a compelling interest assuring that
public dollars do not serve to finance the evil of private prejudice. Id.
The district court stated that a "mere statistical disparity in the proportion of contracts awarded
to a particular group, standing alone, does not demonstrate the evil of private or public racial
prejudice." Id. Rather, the court held that the "benchmark for judging the adequacy of a state's
factual predicate for affirmative action legislation is whether there exists a strong basis in the
evidence of the state's conclusion that remedial action was necessary." Id. The district court
found that the Supreme Court made it clear that the state bears the burden of demonstrating a
strong basis in evidence for its conclusion that remedial action was necessary by proving either
that the state itself discriminated in the past or was "a passive participant" in private industry's
discriminatory practices. Id. at 1240, citing to Associated General Contractors of Ohio, Inc. v.
Drabik, 214 F.3d 730, 735 (6th Cir. 2000) and City of Richmond v. J.A. Croson Company, 488 U.S.
469 at 486492 (1989).
With this background, the State of Oklahoma stated that its compelling state interest "is to
promote the economy of the State and to ensure that minority business enterprises are given an
opportunity to compete for state contracts." Id. at 1240. Thus, the district court found the State
admitted that the MBE Act's bid preference "is not based on past discrimination," rather, it is
based on a desire to "encourag[e] economic development of minority business enterprises
which in turn will benefit the State of Oklahoma as a whole." Id. In light of Adarand VII, and
prevailing Supreme Court case law, the district court found that this articulated interest is not
"compelling" in the absence of evidence of past or present racial discrimination. Id.
The district court considered testimony presented by Intervenors who participated in the case
for the defendants and asserted that the Oklahoma legislature conducted an interim study prior
to adoption of the MBE Act, during which testimony and evidence were presented to members
of the Oklahoma Legislative Black Caucus and other participating legislators. The study was
conducted more than 14 years prior to the case and the Intervenors did not actually offer any of
the evidence to the court in this case. The Intervenors submitted an affidavit from the witness
who serves as the Title VI Coordinator for the Oklahoma Department of Transportation. The
court found that the affidavit from the witness averred in general terms that minority
businesses were discriminated against in the awarding of state contracts. The district court
found that the Intervenors have not produced or indeed even described the evidence of
discrimination. Id. at 1241. The district court found that it cannot be discerned from the
documents which minority businesses were the victims of discrimination, or which racial or
ethnic groups were targeted by such alleged discrimination. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 111
The court also found that the Intervenors' evidence did not indicate what discriminatory acts or
practices allegedly occurred, or when they occurred. Id. The district court stated that the
Intervenors did not identify "a single qualified, minorityowned bidder who was excluded from a
state contract." Id. The district court, thus, held that broad allegations of "systematic" exclusion
of minority businesses were not sufficient to constitute a compelling governmental interest in
remedying past or current discrimination. Id. at 1242. The district court stated that this was
particularly true in light of the "State's admission here that the State's governmental interest
was not in remedying past discrimination in the state competitive bidding process, but in
'encouraging economic development of minority business enterprises which in turn will benefit
the State of Oklahoma as a whole.'" Id. at 1242.
The court found that the State defendants failed to produce any admissible evidence of a single,
specific discriminatory act, or any substantial evidence showing a pattern of deliberate
exclusion from state contracts of minorityowned businesses. Id. at 1241 1242, footnote 11.
The district court also noted that the Sixth Circuit Court of Appeals in Drabik rejected Ohio's
statistical evidence of underutilization of minority contractors because the evidence did not
report the actual use of minority firms; rather, they reported only the use of those minority
firms that had gone to the trouble of being certified and listed by the state. Id. at 1242, footnote
12. The district court stated that, as in Drabik, the evidence presented in support of the
Oklahoma MBE Act failed to account for the possibility that some minority contractors might not
register with the state, and the statistics did not account for any contracts awarded to
businesses with minority ownership of less than 51 percent, or for contracts performed in large
part by minorityowned subcontractors where the prime contractor was not a certified
minorityowned business. Id.
The district court found that the MBE Act's minority bidding preference was not predicated
upon a finding of discrimination in any particular industry or region of the state, or
discrimination against any particular racial or ethnic group. The court stated that there was no
evidence offered of actual discrimination, past or present, against the specific racial and ethnic
groups to whom the preference was extended, other than an attempt to show a history of
discrimination against African Americans. Id. at 1242.
Narrow tailoring. The district court found that even if the State's goals could not be considered
"compelling," the State did not show that the MBE Act was narrowly tailored to serve those
goals. The court pointed out that the Tenth Circuit in Adarand VII identified six factors the court
must consider in determining whether the MBE Act's minority preference provisions were
sufficiently narrowly tailored to satisfy equal protection: (1) the availability of raceneutral
alternative remedies; (2) limits on the duration of the challenged preference provisions; (3)
flexibility of the preference provisions; (4) numerical proportionality; (5) the burden on third
parties; and (6) over or underinclusiveness. Id. at 12421243.
First, in terms of raceneutral alternative remedies, the court found that the evidence offered
showed, at most, that nominal efforts were made to assist minorityowned businesses prior to
the adoption of the MBE Act's racial preference program. Id. at 1243. The court considered
evidence regarding the Minority Assistance Program, but found that to be primarily
informational services only, and was not designed to actually assist minorities or other
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 112
disadvantaged contractors to obtain contracts with the State of Oklahoma. Id. at 1243. In
contrast to this "informational" program, the court noted the Tenth Circuit in Adarand VII
favorably considered the federal government's use of racially neutral alternatives aimed at
disadvantaged businesses, including assistance with obtaining project bonds, assistance with
securing capital financing, technical assistance, and other programs designed to assist startup
businesses. Id. at 1243 citing Adarand VII, 228 F.3d at 11781179.
The district court found that it does not appear from the evidence that Oklahoma's Minority
Assistance Program provided the type of raceneutral relief required by the Tenth Circuit in
Adarand VII, in the Supreme Court in the Croson decision, nor does it appear that the Program
was racially neutral. Id. at 1243. The court found that the State of Oklahoma did not show any
meaningful form of assistance to new or disadvantaged businesses prior to the adoption of the
MBE Act, and thus, the court found that the state defendants had not shown that Oklahoma
considered raceneutral alternative means to achieve the state's goal prior to adoption of the
minority bid preference provisions. Id. at 1243.
In a footnote, the district court pointed out that the Tenth Circuit has recognized racially neutral
programs designed to assist all new or financially disadvantaged businesses in obtaining
government contracts tend to benefit minorityowned businesses, and can help alleviate the
effects of past and presentday discrimination. Id. at 1243, footnote 15 citing Adarand VII.
The court considered the evidence offered of postenactment efforts by the State to increase
minority participation in State contracting. The court found that most of these efforts were
directed toward encouraging the participation of certified minority business enterprises, "and
are thus not racially neutral. This evidence fails to demonstrate that the State employed race
neutral alternative measures prior to or after adopting the Minority Business Enterprise
Assistance Act." Id. at 1244. Some of the efforts the court found were directed toward
encouraging the participation of certified minority business enterprises and thus not racially
neutral, included mailing vendor registration forms to minority vendors, telephoning and
mailing letters to minority vendors, providing assistance to vendors in completing registration
forms, assuring the vendors received bid information, preparing a minority business directory
and distributing it to all state agencies, periodically mailing construction project information to
minority vendors, and providing commodity information to minority vendors upon request. Id.
at 1244, footnote 16.
In terms of durational limits and flexibility, the court found that the "goal" of 10 percent of the
state's contracts being awarded to certified minority business enterprises had never been
reached, or even approached, during the thirteen years since the MBE Act was implemented. Id.
at 1244. The court found the defendants offered no evidence that the bid preference was likely
to end at any time in the foreseeable future, or that it is otherwise limited in its duration. Id.
Unlike the federal programs at issue in Adarand VII, the court stated the Oklahoma MBE Act has
no inherent time limit, and no provision for disadvantaged minorityowned businesses to
"graduate" from preference eligibility. Id. The court found the MBE Act was not limited to those
minorityowned businesses which are shown to be economically disadvantaged. Id.
The court stated that the MBE Act made no attempt to address or remedy any actual,
demonstrated past or present racial discrimination, and the MBE Act's duration was not tied in
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 113
any way to the eradication of such discrimination. Id. Instead, the court found the MBE Act rests
on the "questionable assumption that 10 percent of all state contract dollars should be awarded
to certified minorityowned and operated businesses, without any showing that this assumption
is reasonable." Id. at 1244.
By the terms of the MBE Act, the minority preference provisions would continue in place for five
years after the goal of 10 percent minority participation was reached, and thus the district court
concluded that the MBE Act's minority preference provisions lacked reasonable durational
limits. Id. at 1245.
With regard to the factor of "numerical proportionality" between the MBE Act's aspirational goal
and the number of existing available minorityowned businesses, the court found the MBE Act's
10 percent goal was not based upon demonstrable evidence of the availability of minority
contractors who were either qualified to bid or who were ready, willing and able to become
qualified to bid on state contracts. Id. at 12461247. The court pointed out that the MBE Act
made no attempt to distinguish between the four minority racial groups, so that contracts
awarded to members of all of the preferred races were aggregated in determining whether the
10 percent aspirational goal had been reached. Id. at 1246. In addition, the court found the MBE
Act aggregated all state contracts for goods and services, so that minority participation was
determined by the total number of dollars spent on state contracts. Id.
The court stated that in Adarand VII, the Tenth Circuit rejected the contention that the
aspirational goals were required to correspond to an actual finding as to the number of existing
minorityowned businesses. Id. at 1246. The court noted that the government submitted
evidence in Adarand VII, that the effects of past discrimination had excluded minorities from
entering the construction industry, and that the number of available minority subcontractors
reflected that discrimination. Id. In light of this evidence, the district court said the Tenth Circuit
held that the existing percentage of minorityowned businesses is "not necessarily an absolute
cap" on the percentage that a remedial program might legitimately seek to achieve. Id. at 1246,
citing Adarand VII, 228 F.3d at 1181.
Unlike Adarand VII, the court found that the Oklahoma State defendants did not offer
"substantial evidence" that the minorities given preferential treatment under the MBE Act were
prevented, through past discrimination, from entering any particular industry, or that the
number of available minority subcontractors in that industry reflects that discrimination. 140
F.Supp.2d at 1246. The court concluded that the Oklahoma State defendants did not offer any
evidence of the number of minorityowned businesses doing business in any of the many
industries covered by the MBE Act. Id. at 12461247.
With regard to the impact on third parties factor, the court pointed out the Tenth Circuit in
Adarand VII stated the mere possibility that innocent parties will share the burden of a remedial
program is itself insufficient to warrant the conclusion that the program is not narrowly
tailored. Id. at 1247. The district court found the MBE Act's bid preference provisions prevented
nonminority businesses from competing on an equal basis with certified minority business
enterprises, and that in some instances plaintiffs had been required to lower their intended bids
because they knew minority firms were bidding. Id. The court pointed out that the 5 percent
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 114
preference is applicable to all contracts awarded under the state's Central Purchasing Act with
no time limitation. Id.
In terms of the "under and overinclusiveness" factor, the court observed that the MBE Act
extended its bidding preference to several racial minority groups without regard to whether
each of those groups had suffered from the effects of past or present racial discrimination. Id. at
1247. The district court reiterated the Oklahoma State defendants did not offer any evidence at
all that the minority racial groups identified in the Act had actually suffered from discrimination.
Id.
Second, the district court found the MBE Act's bidding preference extends to all contracts for
goods and services awarded under the State's Central Purchasing Act, without regard to
whether members of the preferred minority groups had been the victims of past or present
discrimination within that particular industry or trade. Id.
Third, the district court noted the preference extends to all businesses certified as minority
owned and controlled, without regard to whether a particular business is economically or
socially disadvantaged, or has suffered from the effects of past or present discrimination. Id. The
court thus found that the factor of overinclusiveness weighs against a finding that the MBE Act
was narrowly tailored. Id.
The district court in conclusion found that the Oklahoma MBE Act violated the Constitution's
Fifth Amendment guarantee of equal protection and granted the plaintiffs' Motion for Summary
Judgment.
7. In re City of Memphis, 293 F.3d 345 (6th Cir. 2002)
This case is instructive to the disparity study in particular based on its holding that a local
government may be prohibited from utilizing postenactment evidence in support of a
MBE/WBEtype program. The United States Court of Appeals for Sixth Circuit held that pre
enactment evidence was required to justify the City of Memphis' MBE/WBE Program. The Sixth
Circuit held that a government must have had sufficient evidentiary justification for a racially
conscious statute in advance of its passage. The district court had ruled that the City could not
introduce the postenactment study as evidence of a compelling interest to justify its MBE/WBE
Program. The Sixth Circuit denied the City's application for an interlocutory appeal on the
district court's order and refused to grant the City's request to appeal this issue.
8. Builders Ass'n of Greater Chicago v. County of Cook, Chicago, 256 F.3d 642
(7th Cir. 2001)
This case is instructive to the disparity study because of its analysis of the Cook County
MBE/WBE program and the evidence used to support that program. The decision emphasizes
the need for any raceconscious program to be based upon credible evidence of discrimination
by the local government against MBE/WBEs and to be narrowly tailored to remedy only that
identified discrimination.
In Builders Ass'n of Greater Chicago v. County of Cook, Chicago, 256 F.3d 642 (7th Cir. 2001) the
United States Court of Appeals for the Seventh Circuit held the Cook County, Chicago MBE/WBE
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 115
Program was unconstitutional. The court concluded there was insufficient evidence of a
compelling interest. The court held there was no credible evidence that Cook County in the
award of construction contacts discriminated against any of the groups "favored" by the
Program. The court also found that the Program was not "narrowly tailored" to remedy the
wrong sought to be redressed, in part because it was overinclusive in the definition of
minorities. The court noted the list of minorities included groups that have not been subject to
discrimination by Cook County.
The court considered as an unresolved issue whether a different, and specifically a more
permissive, standard than strict scrutiny is applicable to preferential treatment on the basis of
sex, rather than race or ethnicity. 256 F.3d at 644. The court noted that the United States
Supreme Court in United States v. Virginia ("VMI"), 518 U.S. 515, 532 and n.6 (1996), held racial
discrimination to a stricter standard than sex discrimination, although the court in Cook County
stated the difference between the applicable standards has become "vanishingly small." Id. The
court pointed out that the Supreme Court said in the VMI case, that "parties who seek to defend
genderbased government action must demonstrate an 'exceedingly persuasive' justification for
that action " and, realistically, the law can ask no more of racebased remedies either." 256
F.3d at 644, quoting in part VMI, 518 U.S. at 533. The court indicated that the Eleventh Circuit
Court of Appeals in the Engineering Contract Association of South Florida, Inc. v. Metropolitan
Dade County, 122 F.3d 895, 910 (11th Cir. 1997) decision created the "paradox that a public
agency can provide stronger remedies for sex discrimination than for race discrimination; it is
difficult to see what sense that makes." 256 F.3d at 644. But, since Cook County did not argue for
a different standard for the minority and women's "set aside programs," the women's program
the court determined must clear the same "hurdles" as the minority program." 256 F.3d at 644
645.
The court found that since the ordinance requires prime contractors on public projects to
reserve a substantial portion of the subcontracts for minority contractors, which is inapplicable
to private projects, it is "to be expected that there would be more soliciting of these contractors
on public than on private projects." Id. Therefore, the court did not find persuasive that there
was discrimination based on this difference alone. 256 F.3d at 645. The court pointed out the
County "conceded that [it] had no specific evidence of preenactment discrimination to support
the ordinance." 256 F.3d at 645 quoting the district court decision, 123 F.Supp.2d at 1093. The
court held that a "public agency must have a strong evidentiary basis for thinking a
discriminatory remedy appropriate before it adopts the remedy." 256 F.3d at 645 (emphasis in
original).
The court stated that minority enterprises in the construction industry "tend to be
subcontractors, moreover, because as the district court found not clearly erroneously, 123
F.Supp.2d at 1115, they tend to be new and therefore small and relatively untested factors
not shown to be attributable to discrimination by the County." 256 F.3d at 645. The court held
that there was no basis for attributing to the County any discrimination that prime contractors
may have engaged in. Id. The court noted that "[i]f prime contractors on County projects were
discriminating against minorities and this was known to the County, whose funding of the
contracts thus knowingly perpetuated the discrimination, the County might be deemed
sufficiently complicit to be entitled to take remedial action." Id. But, the court found "of that
there is no evidence either." Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 116
The court stated that if the County had been complicit in discrimination by prime contractors, it
found "puzzling" to try to remedy that discrimination by requiring discrimination in favor of
minority stockholders, as distinct from employees. 256 F.3d at 646. The court held that even if
the record made a case for remedial action of the general sort found in the MWBE ordinance by
the County, it would "flunk the constitutional test" by not being carefully designed to achieve the
ostensible remedial aim and no more. 256 F.3d at 646. The court held that a state and local
government that has discriminated just against blacks may not by way of remedy discriminate
in favor of blacks and Asian Americans and women. Id. Nor, the court stated, may it discriminate
more than is necessary to cure the effects of the earlier discrimination. Id. "Nor may it continue
the remedy in force indefinitely, with no effort to determine whether, the remedial purpose
attained, continued enforcement of the remedy would be a gratuitous discrimination against
nonminority persons." Id. The court, therefore, held that the ordinance was not "narrowly
tailored" to the wrong that it seeks to correct. Id.
The court thus found that the County both failed to establish the premise for a racial remedy,
and also that the remedy goes further than is necessary to eliminate the evil against which it is
directed. 256 F.3d at 647. The court held that the list of "favored minorities" included groups
that have never been subject to significant discrimination by Cook County. Id. The court found it
unreasonable to "presume" discrimination against certain groups merely on the basis of having
an ancestor who had been born in a particular country. Id. Therefore, the court held the
ordinance was overinclusive.
The court found that the County did not make any effort to show that, were it not for a history of
discrimination, minorities would have 30 percent, and women 10 percent, of County
construction contracts. 256 F.3d at 647. The court also rejected the proposition advanced by the
County in this case"that a comparison of the fraction of minority subcontractors on public and
private projects established discrimination against minorities by prime contractors on the latter
type of project." 256 F.3d at 647648.
9. Associated Gen. Contractors v. Drabik, 214 F.3d 730 (6th Cir. 2000),
affirming Case No. C298943, 998 WL 812241 (S.D. Ohio 1998)
This case is instructive to the disparity study based on the analysis applied in finding the
evidence insufficient to justify an MBE/WBE program, and the application of the narrowly
tailored test. The Sixth Circuit Court of Appeals enjoined the enforcement of the state MBE
program, and in so doing reversed state court precedent finding the program constitutional.
This case affirmed a district court decision enjoining the award of a "setaside" contract based
on the State of Ohio's MBE program with the award of construction contracts. The court held,
among other things, that the mere existence of societal discrimination was insufficient to
support a racial classification. The court found that the economic data were insufficient and too
outdated. The court held the State could not establish a compelling governmental interest and
that the statute was not narrowly tailored. The court held, among other things, the statute failed
the narrow tailoring test because there was no evidence that the State had considered race
neutral remedies.
The court was mindful of the fact that it was striking down an entire class of programs by
declaring the State of Ohio MBE statute in question unconstitutional, and noted that its decision
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 117
was "not reconcilable" with the Ohio Supreme Court's decision in Ritchie Produce, 707 N.E.2d
871 (Ohio 1999) (upholding the Ohio State MBE Program).
10. W.H. Scott Constr. Co. v. City of Jackson, 199 F.3d 206 (5th Cir. 1999)
This case is instructive to the disparity study because the decision highlights the evidentiary
burden imposed by the courts necessary to support a local MBE/WBE program. In addition, the
Fifth Circuit permitted the aggrieved contractor to recover lost profits from the City of Jackson,
Mississippi due to the City's enforcement of the MBE/WBE program that the court held was
unconstitutional.
The Fifth Circuit, applying strict scrutiny, held that the City of Jackson, Mississippi failed to
establish a compelling governmental interest to justify its policy placing 15 percent minority
participation goals for City construction contracts. In addition, the court held the evidence upon
which the City relied was faulty for several reasons, including because it was restricted to the
letting of prime contracts by the City under the City's Program, and it did not include an analysis
of the availability and utilization of qualified minority subcontractors, the relevant statistical
pool in the City's construction projects. Significantly, the court also held that the plaintiff in this
case could recover lost profits against the City as damages as a result of being denied a bid
award based on the application of the MBE/WBE program.
11. Eng'g Contractors Ass'n of S. Florida v. Metro. Dade County, 122 F.3d 895
(11th Cir. 1997)
Engineering Contractors Association of South Florida v. Metropolitan Engineering Contractors
Association is a paramount case in the Eleventh Circuit and is instructive to the disparity study.
This decision has been cited and applied by the courts in various circuits that have addressed
MBE/WBEtype programs or legislation involving local government contracting and
procurement.
In Engineering Contractors Association, six trade organizations (the "plaintiffs") filed suit in the
district court for the Southern District of Florida, challenging three affirmative action programs
administered by Engineering Contractors Association, Florida, (the "County") as violative of the
Equal Protection Clause. 122 F.3d 895, 900 (11th Cir. 1997). The three affirmative action
programs challenged were the Black Business Enterprise program ("BBE"), the Hispanic
Business Enterprise program ("HBE"), and the Woman Business Enterprise program, ("WBE"),
(collectively "MWBE" programs). Id. The plaintiffs challenged the application of the program to
County construction contracts. Id.
For certain classes of construction contracts valued over $25,000, the County set participation
goals of 15 percent for BBEs, 19 percent for HBEs, and 11 percent for WBEs. Id. at 901. The
County established five "contract measures" to reach the participation goals: (1) set asides, (2)
subcontractor goals, (3) project goals, (4) bid preferences, and (5) selection factors. Once a
contract was identified as covered by a participation goal, a review committee would determine
whether a contract measure should be utilized. Id. The County Commission would make the final
determination and its decision was appealable to the County Manager. Id. The County reviewed
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 118
the efficacy of the MWBE programs annually, and reevaluated the continuing viability of the
MWBE programs every five years. Id.
In a bench trial, the district court applied strict scrutiny to the BBE and HBE programs and held
that the County lacked the requisite "strong basis in evidence" to support the race and
ethnicityconscious measures. Id. at 902. The district court applied intermediate scrutiny to the
WBE program and found that the "County had presented insufficient probative evidence to
support its stated rationale for implementing a gender preference." Id. Therefore, the County
had failed to demonstrate a "compelling interest" necessary to support the BBE and HBE
programs, and failed to demonstrate an "important interest" necessary to support the WBE
program. Id. The district court assumed the existence of a sufficient evidentiary basis to support
the existence of the MWBE programs but held the BBE and HBE programs were not narrowly
tailored to the interests they purported to serve; the district court held the WBE program was
not substantially related to an important government interest. Id. The district court entered a
final judgment enjoining the County from continuing to operate the MWBE programs and the
County appealed. The Eleventh Circuit Court of Appeals affirmed. Id. at 900, 903.
On appeal, the Eleventh Circuit considered four major issues:
1. Whether the plaintiffs had standing. [The Eleventh Circuit answered this in the affirmative
and that portion of the opinion is omitted from this summary];
2. Whether the district court erred in finding the County lacked a "strong basis in evidence" to
justify the existence of the BBE and HBE programs;
3. Whether the district court erred in finding the County lacked a "sufficient probative basis in
evidence" to justify the existence of the WBE program; and
4. Whether the MWBE programs were narrowly tailored to the interests they were purported
to serve.
Id. at 903.
The Eleventh Circuit held that the BBE and HBE programs were subject to the strict scrutiny
standard enunciated by the U.S. Supreme Court in City of Richmond v. J.A. Croson Co., 488 U.S. 469
(1989). Id. at 906. Under this standard, "an affirmative action program must be based upon a
'compelling government interest' and must be 'narrowly tailored' to achieve that interest." Id.
The Eleventh Circuit further noted:
In practice, the interest that is alleged in support of racial
preferences is almost always the same remedying past or
present discrimination. That interest is widely accepted as
compelling. As a result, the true test of an affirmative action
program is usually not the nature of the government's interest,
but rather the adequacy of the evidence of discrimination
offered to show that interest.
Id. (internal citations omitted).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 119
Therefore, strict scrutiny requires a finding of a "'strong basis in evidence' to support the
conclusion that remedial action is necessary." Id., citing Croson, 488 U.S. at 500). The requisite
"'strong basis in evidence' cannot rest on 'an amorphous claim of societal discrimination, on
simple legislative assurances of good intention, or on congressional findings of discrimination in
the national economy.'" Id. at 907, citing Ensley Branch, NAACP v. Seibels, 31 F.3d 1548, 1565
(11th Cir. 1994) (citing and applying Croson)). However, the Eleventh Circuit found that a
governmental entity can "justify affirmative action by demonstrating 'gross statistical
disparities' between the proportion of minorities hired and the proportion of minorities
willing and able to do the work Anecdotal evidence may also be used to document
discrimination, especially if buttressed by relevant statistical evidence." Id. (internal citations
omitted).
Notwithstanding the "exceedingly persuasive justification" language utilized by the Supreme
Court in United States v. Virginia, 116 S. Ct. 2264 (1996) (evaluating genderbased government
action), the Eleventh Circuit held that the WBE program was subject to traditional intermediate
scrutiny. Id. at 908. Under this standard, the government must provide "sufficient probative
evidence" of discrimination, which is a lesser standard than the "strong basis in evidence" under
strict scrutiny. Id. at 910.
The County provided two types of evidence in support of the MWBE programs: (1) statistical
evidence, and (2) nonstatistical "anecdotal" evidence. Id. at 911. As an initial matter, the
Eleventh Circuit found that in support of the BBE program, the County permissibly relied on
substantially "postenactment" evidence (i.e., evidence based on data related to years following
the initial enactment of the BBE program). Id. However, "such evidence carries with it the
hazard that the program at issue may itself be masking discrimination that might otherwise be
occurring in the relevant market." Id. at 912. A district court should not "speculate about what
the data might have shown had the BBE program never been enacted." Id.
The statistical evidence. The County presented five basic categories of statistical evidence: (1)
County contracting statistics; (2) County subcontracting statistics; (3) marketplace data
statistics; (4) The Wainwright Study; and (5) The Brimmer Study. Id. In summary, the Eleventh
Circuit held that the County's statistical evidence (described more fully below) was subject to
more than one interpretation. Id. at 924. The district court found that the evidence was
"insufficient to form the requisite strong basis in evidence for implementing a racial or ethnic
preference, and that it was insufficiently probative to support the County's stated rationale for
imposing a gender preference." Id. The district court's view of the evidence was a permissible
one. Id.
County contracting statistics. The County presented a study comparing three factors for County
nonprocurement construction contracts over two time periods (19811991 and 1993): (1) the
percentage of bidders that were MWBE firms; (2) the percentage of awardees that were MWBE
firms; and (3) the proportion of County contract dollars that had been awarded to MWBE firms.
Id. at 912.
The Eleventh Circuit found that notably, for the BBE and HBE statistics, generally there were no
"consistently negative disparities between the bidder and awardee percentages. In fact, by 1993,
the BBE and HBE bidders are being awarded more than their proportionate 'share' when the
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 120
bidder percentages are used as the baseline." Id. at 913. For the WBE statistics, the
bidder/awardee statistics were "decidedly mixed" as across the range of County construction
contracts. Id.
The County then refined those statistics by adding in the total percentage of annual County
construction dollars awarded to MBE/WBEs, by calculating "disparity indices" for each program
and classification of construction contract. The Eleventh Circuit explained:
[A] disparity index compares the amount of contract awards a
group actually got to the amount we would have expected it to
get based on that group's bidding activity and awardee success
rate. More specifically, a disparity index measures the
participation of a group in County contracting dollars by
dividing that group's contract dollar percentage by the related
bidder or awardee percentage, and multiplying that number by
100 percent.
Id. at 914. "The utility of disparity indices or similar measures has been recognized by a
number of federal circuit courts." Id.
The Eleventh Circuit found that "[i]n general disparity indices of 80 percent or greater, which
are close to full participation, are not considered indications of discrimination." Id. The Eleventh
Circuit noted that "the EEOC's disparate impact guidelines use the 80 percent test as the
boundary line for determining a prima facie case of discrimination." Id., citing 29 C.F.R.
1607.4D. In addition, no circuit that has "explicitly endorsed the use of disparity indices [has]
indicated that an index of 80 percent or greater might be probative of discrimination." Id., citing
Concrete Works v. City & County of Denver, 36 F.3d 1513, 1524 (10th Cir. 1994) (crediting
disparity indices ranging from 0% to 3.8%); Contractors Ass'n v. City of Philadelphia, 6 F.3d 990
(3d Cir. 1993) (crediting disparity index of 4%).
After calculation of the disparity indices, the County applied a standard deviation analysis to test
the statistical significance of the results. Id. at 914. "The standard deviation figure describes the
probability that the measured disparity is the result of mere chance." Id. The Eleventh Circuit
had previously recognized "[s]ocial scientists consider a finding of two standard deviations
significant, meaning there is about one chance in 20 that the explanation for the deviation could
be random and the deviation must be accounted for by some factor other than chance." Id.
The statistics presented by the County indicated "statistically significant underutilization of
BBEs in County construction contracting." Id. at 916. The results were "less dramatic" for HBEs
and mixed as between favorable and unfavorable for WBEs. Id.
The Eleventh Circuit then explained the burden of proof:
[O]nce the proponent of affirmative action introduces its
statistical proof as evidence of its remedial purpose, thereby
supplying the [district] court with the means for determining
that [it] had a firm basis for concluding that remedial action was
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 121
appropriate, it is incumbent upon the [plaintiff] to prove their
case; they continue to bear the ultimate burden of persuading
the [district] court that the [defendant's] evidence did not
support an inference of prior discrimination and thus a
remedial purpose, or that the plan instituted on the basis of this
evidence was not sufficiently 'narrowly tailored.'
Id. (internal citations omitted).
The Eleventh Circuit noted that a plaintiff has at least three methods to rebut the inference of
discrimination with a "neutral explanation" by: "(1) showing that the statistics are flawed; (2)
demonstrating that the disparities shown by the statistics are not significant or actionable; or
(3) presenting contrasting statistical data." Id. (internal quotations and citations omitted). The
Eleventh Circuit held that the plaintiffs produced "sufficient evidence to establish a neutral
explanation for the disparities." Id.
The plaintiffs alleged that the disparities were "better explained by firm size than by
discrimination [because] minority and femaleowned firms tend to be smaller, and that it
stands to reason smaller firms will win smaller contracts." Id. at 91617. The plaintiffs produced
Census data indicating, on average, minority and femaleowned construction firms in
Engineering Contractors Association were smaller than nonMBE/WBE firms. Id. at 917. The
Eleventh Circuit found that the plaintiff's explanation of the disparities was a "plausible one, in
light of the uncontroverted evidence that MBE/WBE construction firms tend to be substantially
smaller than nonMBE/WBE firms." Id.
Additionally, the Eleventh Circuit noted that the County's own expert admitted that "firm size
plays a significant role in determining which firms win contracts." Id. The expert stated:
The size of the firm has got to be a major determinant because
of course some firms are going to be larger, are going to be
better prepared, are going to be in a greater natural capacity to
be able to work on some of the contracts while others simply by
virtue of their small size simply would not be able to do it. Id.
The Eleventh Circuit then summarized:
Because they are bigger, bigger firms have a bigger chance to
win bigger contracts. It follows that, all other factors being equal
and in a perfectly nondiscriminatory market, one would expect
the bigger (on average) nonMWBE firms to get a
disproportionately higher percentage of total construction
dollars awarded than the smaller MWBE firms. Id.
In anticipation of such an argument, the County conducted a regression analysis to control for
firm size. Id. A regression analysis is "a statistical procedure for determining the relationship
between a dependent and independent variable, e.g., the dollar value of a contract award and
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 122
firm size." Id. (internal citations omitted). The purpose of the regression analysis is "to
determine whether the relationship between the two variables is statistically meaningful." Id.
The County's regression analysis sought to identify disparities that could not be explained by
firm size, and theoretically instead based on another factor, such as discrimination. Id. The
County conducted two regression analyses using two different proxies for firm size: (1) total
awarded value of all contracts bid on; and (2) largest single contract awarded. Id. The regression
analyses accounted for most of the negative disparities regarding MBE/WBE participation in
County construction contracts (i.e., most of the unfavorable disparities became statistically
insignificant, corresponding to standard deviation values less than two). Id.
Based on an evaluation of the regression analysis, the district court held that the demonstrated
disparities were attributable to firm size as opposed to discrimination. Id. at 918. The district
court concluded that the few unexplained disparities that remained after regressing for firm size
were insufficient to provide the requisite "strong basis in evidence" of discrimination of BBEs
and HBEs. Id. The Eleventh Circuit held that this decision was not clearly erroneous. Id.
With respect to the BBE statistics, the regression analysis explained all but one negative
disparity, for one type of construction contract between 19891991. Id. The Eleventh Circuit
held the district court permissibly found that this did not constitute a "strong basis in evidence"
of discrimination. Id.
With respect to the HBE statistics, one of the regression methods failed to explain the
unfavorable disparity for one type of contract between 19891991, and both regression
methods failed to explain the unfavorable disparity for another type of contract during that
same time period. Id. However, by 1993, both regression methods accounted for all of the
unfavorable disparities, and one of the disparities for one type of contract was actually favorable
for HBEs. Id. The Eleventh Circuit held the district court permissibly found that this did not
constitute a "strong basis in evidence" of discrimination. Id.
Finally, with respect to the WBE statistics, the regression analysis explained all but one negative
disparity, for one type of construction contract in the 1993 period. Id. The regression analysis
explained all of the other negative disparities, and in the 1993 period, a disparity for one type of
contract was actually favorable to WBEs. Id. The Eleventh Circuit held the district court
permissibly found that this evidence was not "sufficiently probative of discrimination." Id.
The County argued that the district court erroneously relied on the disaggregated data (i.e.,
broken down by contract type) as opposed to the consolidated statistics. Id. at 919. The district
court declined to assign dispositive weight to the aggregated data for the BBE statistics for
19891991 because (1) the aggregated data for 1993 did not show negative disparities when
regressed for firm size, (2) the BBE disaggregated data left only one unexplained negative
disparity for one type of contract for 19891991 when regressed for firm size, and (3) "the
County's own expert testified as to the utility of examining the disaggregated data 'insofar as
they reflect different kinds of work, different bidding practices, perhaps a variety of other
factors that could make them heterogeneous with one another." Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 123
Additionally, the district court noted, and the Eleventh Circuit found that "the aggregation of
disparity statistics for nonheterogenous data populations can give rise to a statistical
phenomenon known as 'Simpson's Paradox,' which leads to illusory disparities in improperly
aggregated data that disappear when the data are disaggregated." Id. at 919, n. 4 (internal
citations omitted). "Under those circumstances," the Eleventh Circuit held that the district court
did not err in assigning less weight to the aggregated data, in finding the aggregated data for
BBEs for 19891991 did not provide a "strong basis in evidence" of discrimination, or in finding
that the disaggregated data formed an insufficient basis of support for any of the MBE/WBE
programs given the applicable constitutional requirements. Id. at 919.
County subcontracting statistics. The County performed a subcontracting study to measure
MBE/WBE participation in the County's subcontracting businesses. For each MBE/WBE
category (BBE, HBE, and WBE), "the study compared the proportion of the designated group
that filed a subcontractor's release of lien on a County construction project between 1991 and
1994 with the proportion of sales and receipt dollars that the same group received during the
same time period." Id.
The district court found the statistical evidence insufficient to support the use of race and
ethnicityconscious measures, noting problems with some of the data measures. Id. at 920.
Most notably, the denominator used in the calculation of the
MWBE sales and receipts percentages is based upon the total
sales and receipts from all sources for the firm filing a
subcontractor's release of lien with the County. That means, for
instance, that if a nationwide nonMWBE company performing
99 percent of its business outside of Dade County filed a single
subcontractor's release of lien with the County during the
relevant time frame, all of its sales and receipts for that time
frame would be counted in the denominator against which
MWBE sales and receipts are compared. As the district court
pointed out, that is not a reasonable way to measure Dade
County subcontracting participation.
Id. The County's argument that a strong majority (72%) of the subcontractors were located in
Dade County did not render the district court's decision to fail to credit the study erroneous. Id.
Marketplace data statistics. The County conducted another statistical study "to see what the
differences are in the marketplace and what the relationships are in the marketplace." Id. The
study was based on a sample of 568 contractors, from a pool of 10,462 firms, that had filed a
"certificate of competency" with Dade County as of January 1995. Id. The selected firms
participated in a telephone survey inquiring about the race, ethnicity, and gender of the firm's
owner, and asked for information on the firm's total sales and receipts from all sources. Id. The
County's expert then studied the data to determine "whether meaningful relationships existed
between (1) the race, ethnicity, and gender of the surveyed firm owners, and (2) the reported
sales and receipts of that firm. Id. The expert's hypothesis was that unfavorable disparities may
be attributable to marketplace discrimination. The expert performed a regression analysis using
the number of employees as a proxy for size. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 124
The Eleventh Circuit first noted that the statistical pool used by the County was substantially
larger than the actual number of firms, willing, able, and qualified to do the work as the
statistical pool represented all those firms merely licensed as a construction contractor. Id.
Although this factor did not render the study meaningless, the district court was entitled to
consider that in evaluating the weight of the study. Id. at 921. The Eleventh Circuit quoted the
Supreme Court for the following proposition: "[w]hen special qualifications are required to fill
particular jobs, comparisons to the general population (rather than to the smaller group of
individuals who possess the necessary qualifications) may have little probative value." Id.,
quoting Croson, 488 U.S. at 501, quoting Hazelwood Sch. Dist. v. United States, 433 U.S. 299, 308 n.
13 (1977).
The Eleventh Circuit found that after regressing for firm size, neither the BBE nor WBE data
showed statistically significant unfavorable disparities. Id. Although the marketplace data did
reveal unfavorable disparities even after a regression analysis, the district court was not
required to assign those disparities controlling weight, especially in light of the dissimilar
results of the County Contracting Statistics, discussed supra. Id.
The Wainwright Study. The County also introduced a statistical analysis prepared by Jon
Wainwright, analyzing "the personal and financial characteristics of selfemployed persons
working fulltime in the Dade County construction industry, based on data from the 1990 Public
Use Microdata Sample database" (derived from the decennial census). Id. The study "(1)
compared construction business ownership rates of MBE/WBEs to those of nonMBE/WBEs,
and (2) analyzed disparities in personal income between MBE/WBE and nonMBE/WBE
business owners." Id. "The study concluded that blacks, Hispanics, and women are less likely to
own construction businesses than similarly situated white males, and MBE/WBEs that do enter
the construction business earn less money than similarly situated white males." Id.
With respect to the first conclusion, Wainwright controlled for "human capital" variables
(education, years of labor market experience, marital status, and English proficiency) and
"financial capital" variables (interest and dividend income, and home ownership). Id. The
analysis indicated that blacks, Hispanics and women enter the construction business at lower
rates than would be expected, once numerosity, and identified human and financial capital are
controlled for. Id. The disparities for blacks and women (but not Hispanics) were substantial and
statistically significant. Id. at 922. The underlying theory of this business ownership component
of the study is that any significant disparities remaining after control of variables are due to the
ongoing effects of past and present discrimination. Id.
The Eleventh Circuit held, in light of Croson, the district court need not have accepted this
theory. Id. The Eleventh Circuit quoted Croson, in which the Supreme Court responded to a
similar argument advanced by the plaintiffs in that case: "There are numerous explanations for
this dearth of minority participation, including past societal discrimination in education and
economic opportunities as well as both black and white career and entrepreneurial choices.
Blacks may be disproportionately attracted to industries other than construction." Id., quoting
Croson, 488 U.S. at 503. Following the Supreme Court in Croson, the Eleventh Circuit held "the
disproportionate attraction of a minority group to nonconstruction industries does not mean
that discrimination in the construction industry is the reason." Id., quoting Croson, 488 U.S. at
503. Additionally, the district court had evidence that between 1982 and 1987, there was a
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 125
substantial growth rate of MBE/WBE firms as opposed to nonMBE/WBE firms, which would
further negate the proposition that the construction industry was discriminating against
minority and womenowned firms. Id. at 922.
With respect to the personal income component of the Wainwright study, after regression
analyses were conducted, only the BBE statistics indicated a statistically significant disparity
ratio. Id. at 923. However, the Eleventh Circuit held the district court was not required to assign
the disparity controlling weight because the study did not regress for firm size, and in light of
the conflicting statistical evidence in the County Contracting Statistics and Marketplace Data
Statistics, discussed supra, which did regress for firm size. Id.
The Brimmer Study. The final study presented by the County was conducted under the
supervision of Dr. Andrew F. Brimmer and concerned only blackowned firms. Id. The key
component of the study was an analysis of the business receipts of blackowned construction
firms for the years of 1977, 1982 and 1987, based on the Census Bureau's Survey of Minority
and WomenOwned Businesses, produced every five years. Id. The study sought to determine
the existence of disparities between sales and receipts of blackowned firms in Dade County
compared to the sales and receipts of all construction firms in Dade County. Id.
The study indicated substantial disparities in 1977 and 1987 but not 1982. Id. The County
alleged that the absence of disparity in 1982 was due to substantial raceconscious measures for
a major construction contract (Metrorail project), and not due to a lack of discrimination in the
industry. Id. However, the study made no attempt to filter for the Metrorail project and
"complete[ly] fail[ed]" to account for firm size. Id. Accordingly, the Eleventh Circuit found the
district court permissibly discounted the results of the Brimmer study. Id. at 924.
Anecdotal evidence. In addition, the County presented a substantial amount of anecdotal
evidence of perceived discrimination against BBEs, a small amount of similar anecdotal evidence
pertaining to WBEs, and no anecdotal evidence pertaining to HBEs. Id. The County presented
three basic forms of anecdotal evidence: "(1) the testimony of two County employees
responsible for administering the MBE/WBE programs; (2) the testimony, primarily by affidavit,
of twentythree MBE/WBE contractors and subcontractors; and (3) a survey of blackowned
construction firms." Id.
The County employees testified that the decentralized structure of the County construction
contracting system affords great discretion to County employees, which in turn creates the
opportunity for discrimination to infect the system. Id. They also testified to specific incidents of
discrimination, for example, that MBE/WBEs complained of receiving lengthier punch lists than
their nonMBE/WBE counterparts. Id. They also testified that MBE/WBEs encounter difficulties
in obtaining bonding and financing. Id.
The MBE/WBE contractors and subcontractors testified to numerous incidents of perceived
discrimination in the Dade County construction market, including:
Situations in which a project foreman would refuse to deal
directly with a black or female firm owner, instead preferring to
deal with a white employee; instances in which an MWBE
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 126
owner knew itself to be the low bidder on a subcontracting
project, but was not awarded the job; instances in which a low
bid by an MWBE was "shopped" to solicit even lower bids from
nonMWBE firms; instances in which an MWBE owner received
an invitation to bid on a subcontract within a day of the bid due
date, together with a "letter of unavailability" for the MWBE
owner to sign in order to obtain a waiver from the County; and
instances in which an MWBE subcontractor was hired by a
prime contractor, but subsequently was replaced with a non
MWBE subcontractor within days of starting work on the
project.
Id. at 92425.
Finally, the County submitted a study prepared by Dr. Joe E. Feagin, comprised of interviews of
78 certified blackowned construction firms. Id. at 925. The interviewees reported similar
instances of perceived discrimination, including: "difficulty in securing bonding and financing;
slow payment by general contractors; unfair performance evaluations that were tainted by
racial stereotypes; difficulty in obtaining information from the County on contracting processes;
and higher prices on equipment and supplies than were being charged to nonMBE/WBE firms."
Id.
The Eleventh Circuit found that numerous black and some femaleowned construction firms in
Dade County perceived that they were the victims of discrimination and two County employees
also believed that discrimination could taint the County's construction contracting process. Id.
However, such anecdotal evidence is helpful "only when it [is] combined with and reinforced by
sufficiently probative statistical evidence." Id. In her plurality opinion in Croson, Justice
O'Connor found that "evidence of a pattern of individual discriminatory acts can, if supported by
appropriate statistical proof, lend support to a local government's determination that broader
remedial relief is justified." Id., quoting Croson, 488 U.S. at 509 (emphasis added by the Eleventh
Circuit). Accordingly, the Eleventh Circuit held that "anecdotal evidence can play an important
role in bolstering statistical evidence, but that only in the rare case will anecdotal evidence
suffice standing alone." Id. at 925. The Eleventh Circuit also cited to opinions from the Third,
Ninth and Tenth Circuits as supporting the same proposition. Id. at 926. The Eleventh Circuit
affirmed the decision of the district court enjoining the continued operation of the MBE/WBE
programs because they did not rest on a "constitutionally sufficient evidentiary foundation." Id.
Although the Eleventh Circuit determined that the MBE/WBE program did not survive
constitutional muster due to the absence of a sufficient evidentiary foundation, the Eleventh
Circuit proceeded with the second prong of the strict scrutiny analysis of determining whether
the MBE/WBE programs were narrowly tailored (BBE and HBE programs) or substantially
related (WBE program) to the legitimate government interest they purported to serve, i.e.,
"remedying the effects of present and past discrimination against blacks, Hispanics, and women
in the Dade County construction market." Id.
Narrow tailoring. "The essence of the 'narrowly tailored' inquiry is the notion that explicitly
racial preferences must only be a 'last resort' option." Id., quoting Hayes v. North Side Law
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 127
Enforcement Officers Ass'n, 10 F.3d 207, 217 (4th Cir. 1993) and citing Croson, 488 U.S. at 519
(Kennedy, J., concurring in part and concurring in the judgment) ("[T]he strict scrutiny standard
forbids the use of even narrowly drawn racial classifications except as a last resort.").
The Eleventh Circuit has identified four factors to evaluate whether a race or ethnicity
conscious affirmative action program is narrowly tailored: (1) "the necessity for the relief and
the efficacy of alternative remedies; (2) the flexibility and duration of the relief; (3) the
relationship of numerical goals to the relevant labor market; and (4) the impact of the relief on
the rights of innocent third parties." Id. at 927, citing Ensley Branch, 31 F.3d at 1569. The four
factors provide "a useful analytical structure." Id. at 927. The Eleventh Circuit focused only on
the first factor in the present case "because that is where the County's MBE/WBE programs are
most problematic." Id.
The Eleventh Circuit
flatly reject[ed] the County's assertion that 'given a strong basis
in evidence of a racebased problem, a racebased remedy is
necessary.' That is simply not the law. If a raceneutral remedy
is sufficient to cure a racebased problem, then a raceconscious
remedy can never be narrowly tailored to that problem." Id.,
citing Croson, 488 U.S. at 507 (holding that affirmative action
program was not narrowly tailored where "there does not
appear to have been any consideration of the use of raceneutral
means to increase minority business participation in city
contracting") Supreme Court decisions teach that a race
conscious remedy is not merely one of many equally acceptable
medications the government may use to treat a racebased
problem. Instead, it is the strongest of medicines, with many
potential side effects, and must be reserved for those severe
cases that are highly resistant to conventional treatment.
Id. at 927.
The Eleventh Circuit held that the County "clearly failed to give serious and good faith
consideration to the use of race and ethnicityneutral measures." Id. Rather, the determination
of the necessity to establish the MWBE programs was based upon a conclusory legislative
statement as to its necessity, which in turn was based upon an "equally conclusory analysis" in
the Brimmer study, and a report that the SBA only was able to direct 5 percent of SBA financing
to blackowned businesses between 19681980. Id.
The County admitted, and the Eleventh Circuit concluded, that the County failed to give any
consideration to any alternative to the HBE affirmative action program. Id. at 928. Moreover, the
Eleventh Circuit found that the testimony of the County's own witnesses indicated the viability
of race and ethnicityneutral measures to remedy many of the problems facing black and
Hispanicowned construction firms. Id. The County employees identified problems, virtually all
of which were related to the County's own processes and procedures, including: "the
decentralized County contracting system, which affords a high level of discretion to County
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 128
employees; the complexity of County contract specifications; difficulty in obtaining bonding;
difficulty in obtaining financing; unnecessary bid restrictions; inefficient payment procedures;
and insufficient or inefficient exchange of information." Id. The Eleventh Circuit found that the
problems facing MBE/WBE contractors were "institutional barriers" to entry facing every new
entrant into the construction market, and were perhaps affecting the MBE/WBE contractors
disproportionately due to the "institutional youth" of black and Hispanicowned construction
firms. Id. "It follows that those firms should be helped the most by dismantling those barriers,
something the County could do at least in substantial part." Id.
The Eleventh Circuit noted that the race and ethnicityneutral options available to the County
mirrored those available and cited by Justice O'Connor in Croson:
[T]he city has at its disposal a whole array of raceneutral
measures to increase the accessibility of city contracting
opportunities to small entrepreneurs of all races. Simplification
of bidding procedures, relaxation of bonding requirements, and
training and financial aid for disadvantaged entrepreneurs of all
races would open the public contracting market to all those who
have suffered the effects of past societal discrimination and
neglect The city may also act to prohibit discrimination in the
provision of credit or bonding by local suppliers and banks.
Id., quoting Croson, 488 U.S. at 50910. The Eleventh Circuit found that except for some "half
hearted programs" consisting of "limited technical and financial aid that might benefit BBEs and
HBEs," the County had not "seriously considered" or tried most of the race and ethnicityneutral
alternatives available. Id. at 928. "Most notably the County has not taken any action
whatsoever to ferret out and respond to instances of discrimination if and when they have
occurred in the County's own contracting process." Id.
The Eleventh Circuit found that the County had taken no steps to "inform, educate, discipline, or
penalize" discriminatory misconduct by its own employees. Id. at 929. Nor had the County
passed any local ordinances expressly prohibiting discrimination by local contractors,
subcontractors, suppliers, bankers, or insurers. Id. "Instead of turning to race and ethnicity
conscious remedies as a last resort, the County has turned to them as a first resort." Accordingly,
the Eleventh Circuit held that even if the BBE and HBE programs were supported by the
requisite evidentiary foundation, they violated the Equal Protection Clause because they were
not narrowly tailored. Id.
Substantial relationship. The Eleventh Circuit held that due to the relaxed "substantial
relationship" standard for genderconscious programs, if the WBE program rested upon a
sufficient evidentiary foundation, it could pass the substantial relationship requirement. Id.
However, because it did not rest upon a sufficient evidentiary foundation, the WBE program
could not pass constitutional muster. Id.
For all of the foregoing reasons, the Eleventh Circuit affirmed the decision of the district court
declaring the MBE/WBE programs unconstitutional and enjoining their continued operation.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 129
Recent District Court Decisions
12. H.B. Rowe Corp., Inc. v. W. Lyndo Tippett, North Carolina DOT, et al., 589 F.
Supp.2d 587 (E.D.N.C. 2008), affirmed in part, reversed in part, and
remanded, 615 F.3d 233 (4th Cir. 2010)
In H.B. Rowe Company v. Tippett, North Carolina Department of Transportation, et al. ("Rowe"),
the United States District Court for the Eastern District of North Carolina, Western Division,
heard a challenge to the State of North Carolina MBE and WBE Program, which is a State of
North Carolina "affirmative action" program administered by the NCDOT. The NCDOT MWBE
Program challenged in Rowe involves projects funded solely by the State of North Carolina and
not funded by the USDOT. 589 F.Supp.2d 587.
Background. In this case plaintiff, a familyowned road construction business, bid on a NCDOT
initiated statefunded project. NCDOT rejected plaintiff's bid in favor of the next low bid that had
proposed higher minority participation on the project as part of its bid. According to NCDOT,
plaintiff's bid was rejected because of plaintiff's failure to demonstrate "good faith efforts" to
obtain predesignated levels of minority participation on the project.
As a prime contractor, plaintiff Rowe was obligated under the MWBE Program to either obtain
participation of specified levels of MBE and WBE participation as subcontractors, or to
demonstrate good faith efforts to do so. For this particular project, NCDOT had set MBE and
WBE subcontractor participation goals of 10 percent and 5 percent, respectively. Plaintiff's bid
included 6.6 percent WBE participation, but no MBE participation. The bid was rejected after a
review of plaintiff's good faith efforts to obtain MBE participation. The next lowest bidder
submitted a bid including 3.3 percent MBE participation and 9.3 percent WBE participation, and
although not obtaining a specified level of MBE participation, it was determined to have made
good faith efforts to do so. (Order of the District Court, dated March 29, 2007).
NCDOT's MWBE Program "largely mirrors" the Federal DBE Program, which NCDOT is required
to comply with in awarding construction contracts that utilize Federal funds. (589 F.Supp.2d
587; Order of the District Court, dated September 28, 2007). Like the Federal DBE Program,
under NCDOT's MWBE Program, the goals for minority and female participation are aspirational
rather than mandatory. Id. An individual target for MBE participation was set for each project.
Id.
Historically, NCDOT had engaged in several disparity studies. The most recent study was done in
2004. Id. The 2004 study, which followed the study in 1998, concluded that disparities in
utilization of MBEs persist and that a basis remains for continuation of the MWBE Program. The
new statute as revised was approved in 2006, which modified the previous MBE statute by
eliminating the 10 percent and 5 percent goals and establishing a fixed expiration date of 2009.
Plaintiff filed its complaint in this case in 2003 against the NCDOT and individuals associated
with the NCDOT, including the Secretary of NCDOT, W. Lyndo Tippett. In its complaint, plaintiff
alleged that the MWBE statute for NCDOT was unconstitutional on its face and as applied. 589
F.Supp.2d 587.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 130
March 29, 2007 Order of the District Court. The matter came before the district court initially
on several motions, including the defendants' Motion to Dismiss or for Partial Summary
Judgment, defendants' Motion to Dismiss the Claim for Mootness and plaintiff's Motion for
Summary Judgment. The court in its October 2007 Order granted in part and denied in part
defendants' Motion to Dismiss or for partial summary judgment; denied defendants' Motion to
Dismiss the Claim for Mootness; and dismissed without prejudice plaintiff's Motion for Summary
Judgment.
The court held the Eleventh Amendment to the United States Constitution bars plaintiff from
obtaining any relief against defendant NCDOT, and from obtaining a retrospective damages
award against any of the individual defendants in their official capacities. The court ruled that
plaintiff's claims for relief against the NCDOT were barred by the Eleventh Amendment, and the
NCDOT was dismissed from the case as a defendant. Plaintiff's claims for interest, actual
damages, compensatory damages and punitive damages against the individual defendants sued
in their official capacities also was held barred by the Eleventh Amendment and were dismissed.
But, the court held that plaintiff was entitled to sue for an injunction to prevent state officers
from violating a federal law, and under the Ex Parte Young exception, plaintiff's claim for
declaratory and injunctive relief was permitted to go forward as against the individual
defendants who were acting in an official capacity with the NCDOT. The court also held that the
individual defendants were entitled to qualified immunity, and therefore dismissed plaintiff's
claim for money damages against the individual defendants in their individual capacities. Order
of the District Court, dated March 29, 2007.
Defendants argued that the recent amendment to the MWBE statute rendered plaintiff's claim
for declaratory injunctive relief moot. The new MWBE statute adopted in 2006, according to the
court, does away with many of the alleged shortcomings argued by the plaintiff in this lawsuit.
The court found the amended statute has a sunset date in 2009; specific aspirational
participation goals by women and minorities are eliminated; defines "minority" as including
only those racial groups which disparity studies identify as subject to underutilization in state
road construction contracts; explicitly references the findings of the 2004 Disparity Study and
requires similar studies to be conducted at least once every five years; and directs NCDOT to
enact regulations targeting discrimination identified in the 2004 and future studies.
The court held, however, that the 2004 Disparity Study and amended MWBE statute do not
remedy the primary problem which the plaintiff complained of: the use of remedial race and
gender based preferences allegedly without valid evidence of past racial and gender
discrimination. In that sense, the court held the amended MWBE statute continued to present a
live case or controversy, and accordingly denied the defendants' Motion to Dismiss Claim for
Mootness as to plaintiff's suit for prospective injunctive relief. Order of the District Court, dated
March 29, 2007.
The court also held that since there had been no analysis of the MWBE statute apart from the
briefs regarding mootness, plaintiff's pending Motion for Summary Judgment was dismissed
without prejudice. Order of the District Court, dated March 29, 2007.
September 28, 2007 Order of the District Court. On September 28, 2007, the district court
issued a new order in which it denied both the plaintiff's and the defendants' Motions for
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 131
Summary Judgment. Plaintiff claimed that the 2004 Disparity Study is the sole basis of the
MWBE statute, that the study is flawed, and therefore it does not satisfy the first prong of strict
scrutiny review. Plaintiff also argued that the 2004 study tends to prove nondiscrimination in
the case of women; and finally the MWBE Program fails the second prong of strict scrutiny
review in that it is not narrowly tailored.
The court found summary judgment was inappropriate for either party and that there are
genuine issues of material fact for trial. The first and foremost issue of material fact, according to
the court, was the adequacy of the 2004 Disparity Study as used to justify the MWBE Program.
Therefore, because the court found there was a genuine issue of material fact regarding the
2004 Study, summary judgment was denied on this issue.
The court also held there was confusion as to the basis of the MWBE Program, and whether it
was based solely on the 2004 Study or also on the 1993 and 1998 Disparity Studies. Therefore,
the court held a genuine issue of material fact existed on this issue and denied summary
judgment. Order of the District Court, dated September 28, 2007.
December 9, 2008 Order of the District Court (589 F.Supp.2d 587). The district court on
December 9, 2008, after a bench trial, issued an Order that found as a fact and concluded as a
matter of law that plaintiff failed to satisfy its burden of proof that the North Carolina Minority
and Women's Business Enterprise program, enacted by the state legislature to affect the
awarding of contracts and subcontracts in state highway construction, violated the United States
Constitution.
Plaintiff, in its complaint filed against the NCDOT alleged that N.C. Gen. St. 13628.4 is
unconstitutional on its face and as applied, and that the NCDOT while administering the MWBE
program violated plaintiff's rights under the federal law and the United States Constitution.
Plaintiff requested a declaratory judgment that the MWBE program is invalid and sought actual
and punitive damages.
As a prime contractor, plaintiff was obligated under the MWBE program to either obtain
participation of specified levels of MBE and WBE subcontractors, or to demonstrate that good
faith efforts were made to do so. Following a review of plaintiff's good faith efforts to obtain
minority participation on the particular contract that was the subject of plaintiff's bid, the bid
was rejected. Plaintiff's bid was rejected in favor of the next lowest bid, which had proposed
higher minority participation on the project as part of its bid. According to NCDOT, plaintiff's bid
was rejected because of plaintiff's failure to demonstrate good faith efforts to obtain pre
designated levels of minority participation on the project. 589 F.Supp.2d 587.
North Carolina's MWBE program. The MWBE program was implemented following
amendments to N.C. Gen. Stat. 13628.4. Pursuant to the directives of the statute, the NCDOT
promulgated regulations governing administration of the MWBE program. See N.C. Admin. Code
tit. 19A, 2D.1101, et seq. The regulations had been amended several times and provide that
NCDOT shall ensure that MBEs and WBEs have the maximum opportunity to participate in the
performance of contracts financed with nonfederal funds. N.C. Admin. Code Tit. 19A 2D.1101.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 132
North Carolina's MWBE program, which affected only highway bids and contracts funded solely
with state money, according to the district court, largely mirrored the Federal DBE Program
which NCDOT is required to comply with in awarding construction contracts that utilize federal
funds. 589 F.Supp.2d 587. Like the Federal DBE Program, under North Carolina's MWBE
program, the targets for minority and female participation were aspirational rather than
mandatory, and individual targets for disadvantaged business participation were set for each
individual project. N.C. Admin. Code tit. 19A 2D.1108. In determining what level of MBE and
WBE participation was appropriate for each project, NCDOT would take into account "the
approximate dollar value of the contract, the geographical location of the proposed work, a
number of the eligible funds in the geographical area, and the anticipated value of the items of
work to be included in the contract." Id. NCDOT would also consider "the annual goals mandated
by Congress and the North Carolina General Assembly." Id.
A firm could be certified as a MBE or WBE by showing NCDOT that it is "owner controlled by one
or more socially and economically disadvantaged individuals." NC Admin. Code tit. 1980,
2D.1102.
The district court stated the MWBE program did not directly discriminate in favor of minority
and women contractors, but rather "encouraged prime contractors to favor MBEs and WBEs in
subcontracting before submitting bids to NCDOT." 589 F.Supp.2d 587. In determining whether
the lowest bidder is "responsible," NCDOT would consider whether the bidder obtained the level
of certified MBE and WBE participation previously specified in the NCDOT project proposal. If
not, NCDOT would consider whether the bidder made good faith efforts to solicit MBE and WBE
participation. N.C .Admin. Code tit. 19A 2D.1108.
There were multiple studies produced and presented to the North Carolina General Assembly in
the years 1993, 1998 and 2004. The 1998 and 2004 studies concluded that disparities in the
utilization of minority and women contractors persist, and that there remains a basis for
continuation of the MWBE program. The MWBE program as amended after the 2004 study
includes provisions that eliminated the 10 percent and 5 percent goals and instead replaced
them with contractspecific participation goals created by NCDOT; established a sunset
provision that has the statute expiring on August 31, 2009; and provides reliance on a disparity
study produced in 2004.
The MWBE program, as it stood at the time of this decision, provides that NCDOT "dictates to
prime contractors the express goal of MBE and WBE subcontractors to be used on a given
project. However, instead of the state hiring the MBE and WBE subcontractors itself, the NCDOT
makes the prime contractor solely responsible for vetting and hiring these subcontractors. If a
prime contractor fails to hire the goal amount, it must submit efforts of 'good faith' attempts to
do so." 589 F.Supp.2d 587.
Compelling interest. The district court held that NCDOT established a compelling governmental
interest to have the MWBE program. The court noted that the United States Supreme Court in
Croson made clear that a state legislature has a compelling interest in eradicating and remedying
private discrimination in the private subcontracting inherent in the letting of road construction
contracts. 589 F.Supp.2d 587, citing Croson, 488 U.S. at 492. The district court found that the
North Carolina Legislature established it relied upon a strong basis of evidence in concluding
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 133
that prior race discrimination in North Carolina's road construction industry existed so as to
require remedial action.
The court held that the 2004 Disparity Study demonstrated the existence of previous
discrimination in the specific industry and locality at issue. The court stated that disparity ratios
provided for in the 2004 Disparity Study highlighted the underutilization of MBEs by prime
contractors bidding on state funded highway projects. In addition, the court found that evidence
relied upon by the legislature demonstrated a dramatic decline in the utilization of MBEs during
the program's suspension in 1991. The court also found that anecdotal support relied upon by
the legislature confirmed and reinforced the general data demonstrating the underutilization of
MBEs. The court held that the NCDOT established that, "based upon a clear and strong inference
raised by this Study, they concluded minority contractors suffer from the lingering effects of
racial discrimination." 589 F.Supp.2d 587.
With regard to WBEs, the court applied a different standard of review. The court held the
legislative scheme as it relates to MWBEs must serve an important governmental interest and
must be substantially related to the achievement of those objectives. The court found that
NCDOT established an important governmental interest. The 2004 Disparity Study provided
that the average contracts awarded WBEs are significantly smaller than those awarded non
WBEs. The court held that NCDOT established based upon a clear and strong inference raised by
the Study, women contractors suffer from past gender discrimination in the road construction
industry.
Narrowly tailored. The district court noted that the Fourth Circuit of Appeals lists a number of
factors to consider in analyzing a statute for narrow tailoring: (1) the necessity of the policy and
the efficacy of alternative race neutral policies; (2) the planned duration of the policy; (3) the
relationship between the numerical goal and the percentage of minority group members in the
relevant population; (4) the flexibility of the policy, including the provision of waivers if the goal
cannot be met; and (5) the burden of the policy on innocent third parties. 589 F.Supp.2d 587,
quoting Belk v. CharlotteMecklenburg Board of Education, 269 F.3d 305, 344 (4th Cir. 2001).
The district court held that the legislative scheme in N.C. Gen. Stat. 13628.4 is narrowly
tailored to remedy private discrimination of minorities and women in the private
subcontracting inherent in the letting of road construction contracts. The district court's
analysis focused on narrowly tailoring factors (2) and (4) above, namely the duration of the
policy and the flexibility of the policy. With respect to the former, the court held the legislative
scheme provides the program be reviewed at least every five years to revisit the issue of
utilization of MWBEs in the road construction industry. N.C. Gen. Stat. 13628.4(b). Further, the
legislative scheme includes a sunset provision so that the program will expire on August 31,
2009, unless renewed by an act of the legislature. Id. at 13628.4(e). The court held these
provisions ensured the legislative scheme last no longer than necessary.
The court also found that the legislative scheme enacted by the North Carolina legislature
provides flexibility insofar as the participation goals for a given contract or determined on a
project by project basis. 13628.4(b)(1). Additionally, the court found the legislative scheme in
question is not overbroad because the statute applies only to "those racial or ethnicity
classifications identified by a study conducted in accordance with this section that had been
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 134
subjected to discrimination in a relevant marketplace and that had been adversely affected in
their ability to obtain contracts with the Department." 13628.4(c)(2). The court found that
plaintiff failed to provide any evidence that indicates minorities from nonrelevant racial groups
had been awarded contracts as a result of the statute.
The court held that the legislative scheme is narrowly tailored to remedy private discrimination
of minorities and women in the private subcontracting inherent in the letting of road
construction contracts, and therefore found that 13628.4 is constitutional.
The decision of the district court was appealed to the United States Court of Appeals for the
Fourth Circuit, which affirmed in part and reversed in part the decision of the district court. See
615 F3d 233 (4th Cir. 2010), discussed above.
13. Thomas v. City of Saint Paul, 526 F. Supp.2d 959 (D. Minn 2007), affirmed,
321 Fed. Appx. 541, 2009 WL 777932 (8th Cir. March 26, 2009) (unpublished
opinion), cert. denied, 130 S.Ct. 408 (2009)
In Thomas v. City of Saint Paul, the plaintiffs are African American business owners who brought
this lawsuit claiming that the City of Saint Paul, Minnesota discriminated against them in
awarding publiclyfunded contracts. The City moved for summary judgment, which the United
States District Court granted and issued an order dismissing the plaintiff's lawsuit in December
2007.
The background of the case involves the adoption by the City of Saint Paul of a Vendor Outreach
Program ( "VOP") that was designed to assist minority and other small business owners in
competing for City contracts. Plaintiffs were VOPcertified minority business owners. Plaintiffs
contended that the City engaged in racially discriminatory illegal conduct in awarding City
contracts for publiclyfunded projects. Plaintiff Thomas claimed that the City denied him
opportunities to work on projects because of his race arguing that the City failed to invite him to
bid on certain projects, the City failed to award him contracts and the fact independent
developers had not contracted with his company. 526 F. Supp.2d at 962. The City contended that
Thomas was provided opportunities to bid for the City's work.
Plaintiff Brian Conover owned a trucking firm, and he claimed that none of his bids as a
subcontractor on 22 different projects to various independent developers were accepted. 526 F.
Supp.2d at 962. The court found that after years of discovery, plaintiff Conover offered no
admissible evidence to support his claim, had not identified the subcontractors whose bids were
accepted, and did not offer any comparison showing the accepted bid and the bid he submitted.
Id. Plaintiff Conover also complained that he received bidding invitations only a few days before
a bid was due, which did not allow him adequate time to prepare a competitive bid. Id. The court
found, however, he failed to identify any particular project for which he had only a single day of
bid, and did not identify any similarly situated person of any race who was afforded a longer
period of time in which to submit a bid. Id. at 963. Plaintiff Newell claimed he submitted
numerous bids on the City's projects all of which were rejected. Id. The court found, however,
that he provided no specifics about why he did not receive the work. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 135
The VOP. Under the VOP, the City sets annual bench marks or levels of participation for the
targeted minorities groups. Id. at 963. The VOP prohibits quotas and imposes various "good
faith" requirements on prime contractors who bid for City projects. Id. at 964. In particular, the
VOP requires that when a prime contractor rejects a bid from a VOPcertified business, the
contractor must give the City its basis for the rejection, and evidence that the rejection was
justified. Id. The VOP further imposes obligations on the City with respect to vendor contracts.
Id. The court found the City must seek where possible and lawful to award a portion of vendor
contracts to VOPcertified businesses. Id. The City contract manager must solicit these bids by
phone, advertisement in a local newspaper or other means. Where applicable, the contract
manager may assist interested VOP participants in obtaining bonds, lines of credit or insurance
required to perform under the contract. Id. The VOP ordinance provides that when the contract
manager engages in one or more possible outreach efforts, he or she is in compliance with the
ordinance. Id.
Analysis and Order of the Court. The district court found that the City is entitled to summary
judgment because plaintiffs lack standing to bring these claims and that no genuine issue of
material fact remains. Id. at 965. The court held that the plaintiffs had no standing to challenge
the VOP because they failed to show they were deprived of an opportunity to compete, or that
their inability to obtain any contract resulted from an act of discrimination. Id. The court found
they failed to show any instance in which their race was a determinant in the denial of any
contract. Id. at 966. As a result, the court held plaintiffs failed to demonstrate the City engaged in
discriminatory conduct or policy which prevented plaintiffs from competing. Id. at 965966.
The court held that in the absence of any showing of intentional discrimination based on race,
the mere fact the City did not award any contracts to plaintiffs does not furnish that causal nexus
necessary to establish standing. Id. at 966. The court held the law does not require the City to
voluntarily adopt "aggressive racebased affirmative action programs" in order to award specific
groups publiclyfunded contracts. Id. at 966. The court found that plaintiffs had failed to show a
violation of the VOP ordinance, or any illegal policy or action on the part of the City. Id.
The court stated that the plaintiffs must identify a discriminatory policy in effect. Id. at 966. The
court noted, for example, even assuming the City failed to give plaintiffs more than one day's
notice to enter a bid, such a failure is not, per se, illegal. Id. The court found the plaintiffs offered
no evidence that anyone else of any other race received an earlier notice, or that he was given
this allegedly tardy notice as a result of his race. Id.
The court concluded that even if plaintiffs may not have been hired as a subcontractor to work
for prime contractors receiving City contracts, these were independent developers and the City
is not required to defend the alleged bad acts of others. Id. Therefore, the court held plaintiffs
had no standing to challenge the VOP. Id. at 966.
Plaintiff's claims. The court found that even assuming plaintiffs possessed standing, they failed
to establish facts which demonstrated a need for a trial, primarily because each theory of
recovery is viable only if the City "intentionally" treated plaintiffs unfavorably because of their
race. Id. at 967. The court held to establish a prima facie violation of the equal protection clause,
there must be state action. Id. Plaintiffs must offer facts and evidence that constitute proof of
"racially discriminatory intent or purpose." Id. at 967. Here, the court found that plaintiff failed
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 136
to allege any single instance showing the City "intentionally" rejected VOP bids based on their
race. Id.
The court also found that plaintiffs offered no evidence of a specific time when any one of them
submitted the lowest bid for a contract or a subcontract, or showed any case where their bids
were rejected on the basis of race. Id. The court held the alleged failure to place minority
contractors in a preferred position, without more, is insufficient to support a finding that the
City failed to treat them equally based upon their race. Id.
The City rejected the plaintiffs claims of discrimination because the plaintiffs did not establish
by evidence that the City "intentionally" rejected their bid due to race or that the City
"intentionally" discriminated against these plaintiffs. Id. at 967968. The court held that the
plaintiffs did not establish a single instance showing the City deprived them of their rights, and
the plaintiffs did not produce evidence of a "discriminatory motive." Id. at 968. The court
concluded that plaintiffs had failed to show that the City's actions were "racially motivated." Id.
The Eighth Circuit Court of Appeals affirmed the ruling of the district court. Thomas v. City of
Saint Paul, 2009 WL 777932 (8th Cir. 2009)(unpublished opinion). The Eighth Circuit affirmed
based on the decision of the district court and finding no reversible error.
14. Thompson Building Wrecking Co. v. Augusta, Georgia, No. 1:07CV019, 2007
WL 926153 (S.D. Ga. Mar. 14, 2007)(Slip. Op.)
This case considered the validity of the City of Augusta's local minority DBE program. The
district court enjoined the City from favoring any contract bid on the basis of racial classification
and based its decision principally upon the outdated and insufficient data proffered by the City
in support of its program. 2007 WL 926153 at *910.
The City of Augusta enacted a local DBE program based upon the results of a disparity study
completed in 1994. The disparity study examined the disparity in socioeconomic status among
races, compared blackowned businesses in Augusta with those in other regions and those
owned by other racial groups, examined "Georgia's racist history" in contracting and
procurement, and examined certain data related to Augusta's contracting and procurement. Id.
at *14. The plaintiff contractors and subcontractors challenged the constitutionality of the DBE
program and sought to extend a temporary injunction enjoining the City's implementation of
racial preferences in public bidding and procurement.
The City defended the DBE program arguing that it did not utilize racial classifications because it
only required vendors to make a "good faith effort" to ensure DBE participation. Id. at *6. The
court rejected this argument noting that bidders were required to submit a "Proposed DBE
Participation" form and that bids containing DBE participation were treated more favorably
than those bids without DBE participation. The court stated: "Because a person's business can
qualify for the favorable treatment based on that person's race, while a similarly situated person
of another race would not qualify, the program contains a racial classification." Id.
The court noted that the DBE program harmed subcontractors in two ways: first, because prime
contractors will discriminate between DBE and nonDBE subcontractors and a bid with a DBE
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 137
subcontractor would be treated more favorably; and second, because the City would favor a bid
containing DBE participation over an equal or even superior bid containing no DBE
participation. Id.
The court applied the strict scrutiny standard set forth in Croson and Engineering Contractors
Association to determine whether the City had a compelling interest for its program and
whether the program was narrowly tailored to that end. The court noted that pursuant to
Croson, the City would have a compelling interest in assuring that tax dollars would not
perpetuate private prejudice. But, the court found (citing to Croson), that a state or local
government must identify that discrimination, "public or private, with some specificity before
they may use raceconscious relief." The court cited the Eleventh Circuit's position that "'gross
statistical disparities' between the proportion of minorities hired by the public employer and
the proportion of minorities willing and able to work" may justify an affirmative action program.
Id. at *7. The court also stated that anecdotal evidence is relevant to the analysis.
The court determined that while the City's disparity study showed some statistical disparities
buttressed by anecdotal evidence, the study suffered from multiple issues. Id. at *78.
Specifically, the court found that those portions of the study examining discrimination outside
the area of subcontracting (e.g., socioeconomic status of racial groups in the Augusta area) were
irrelevant for purposes of showing a compelling interest. The court also cited the failure of the
study to differentiate between different minority races as well as the improper aggregation of
race and genderbased discrimination referred to as Simpson's Paradox.
The court assumed for purposes of its analysis that the City could show a compelling interest but
concluded that the program was not narrowly tailored and thus could not satisfy strict scrutiny.
The court found that it need look no further beyond the fact of the thirteenyear duration of the
program absent further investigation, and the absence of a sunset or expiration provision, to
conclude that the DBE program was not narrowly tailored. Id. at *8. Noting that affirmative
action is permitted only sparingly, the court found: "[i]t would be impossible for Augusta to
argue that, 13 years after last studying the issue, racial discrimination is so rampant in the
Augusta contracting industry that the City must affirmatively act to avoid being complicit." Id.
The court held in conclusion, that the plaintiffs were "substantially likely to succeed in proving
that, when the City requests bids with minority participation and in fact favors bids with such,
the plaintiffs will suffer racial discrimination in violation of the Equal Protection Clause." Id. at
*9.
In a subsequent Order dated September 5, 2007, the court denied the City's motion to continue
plaintiff's Motion for Summary Judgment, denied the City's Rule 12(b)(6) motion to dismiss, and
stayed the action for 30 days pending mediation between the parties. Importantly, in this Order,
the court reiterated that the female and locallyowned business components of the program
(challenged in plaintiff's Motion for Summary Judgment) would be subject to intermediate
scrutiny and rational basis scrutiny, respectively. The court also reiterated its rejection of the
City's challenge to the plaintiffs' standing. The court noted that under Adarand, preventing a
contractor from competing on an equal footing satisfies the particularized injury prong of
standing. And showing that the contractor will sometime in the future bid on a City contract
"that offers financial incentives to a prime contractor for hiring disadvantaged subcontractors"
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 138
satisfies the second requirement that the particularized injury be actual or imminent.
Accordingly, the court concluded that the plaintiffs have standing to pursue this action.
15. Hershell Gill Consulting Engineers, Inc. v. MiamiDade County, 333 F.
Supp.2d 1305 (S.D. Fla. 2004)
The decision in Hershell Gill Consulting Engineers, Inc. v. MiamiDade County, is significant to the
disparity study because it applied and followed the Engineering Contractors Association decision
in the context of contracting and procurement for goods and services (including architect and
engineer services). Many of the other cases focused on construction, and thus Hershell Gill is
instructive as to the analysis relating to architect and engineering services. The decision in
Hershell Gill also involved a district court in the Eleventh Circuit imposing compensatory and
punitive damages upon individual County Commissioners due to the district court's finding of
their willful failure to abrogate an unconstitutional MBE/WBE Program. In addition, the case is
noteworthy because the district court refused to follow the 2003 Tenth Circuit Court of Appeals
decision in Concrete Works of Colorado, Inc. v. City and County of Denver, 321 .3d 950 (10th Cir.
2003). See discussion, infra.
Six years after the decision in Engineering Contractors Association, two white maleowned
engineering firms (the "plaintiffs") brought suit against Engineering Contractors Association
(the "County"), the former County Manager, and various current County Commissioners (the
"Commissioners") in their official and personal capacities (collectively the "defendants"),
seeking to enjoin the same "participation goals" in the same MWBE program deemed to violate
the Fourteenth Amendment in the earlier case. 333 F. Supp. 1305, 1310 (S.D. Fla. 2004). After
the Eleventh Circuit's decision in Engineering Contractors Association striking down the MWBE
programs as applied to construction contracts, the County enacted a Community Small Business
Enterprise ("CSBE") program for construction contracts, "but continued to apply racial, ethnic,
and gender criteria to its purchases of goods and services in other areas, including its
procurement of A&E services." Id. at 1311.
The plaintiffs brought suit challenging the Black Business Enterprise (BBE) program, the
Hispanic Business Enterprise (HBE) program, and the Women Business Enterprise (WBE)
program (collectively "MBE/WBE"). Id. The MBE/WBE programs applied to A&E contracts in
excess of $25,000. Id. at 1312. The County established five "contract measures" to reach the
participation goals: (1) set asides, (2) subcontractor goals, (3) project goals, (4) bid preferences,
and (5) selection factors. Id. Once a contract was identified as covered by a participation goal, a
review committee would determine whether a contract measure should be utilized. Id. The
County was required to review the efficacy of the MBE/WBE programs annually, and
reevaluated the continuing viability of the MBE/WBE programs every five years. Id. at 1313.
However, the district court found "the participation goals for the three MBE/WBE programs
challenged remained unchanged since 1994." Id.
In 1998, counsel for plaintiffs contacted the County Commissioners requesting the
discontinuation of contract measures on A&E contracts. Id. at 1314. Upon request of the
Commissioners, the county manager then made two reports (an original and a followup)
measuring parity in terms of dollars awarded and dollars paid in the areas of A&E for blacks,
Hispanics, and women, and concluded both times that the "County has reached parity for black,
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 139
Hispanic, and Womenowned firms in the areas of [A&E] services." The final report further
stated "Based on all the analyses that have been performed, the County does not have a basis for
the establishment of participation goals which would allow staff to apply contract measures." Id.
at 1315. The district court also found that the Commissioners were informed that "there was
even less evidence to support [the MBE/WBE] programs as applied to architects and engineers
then there was in contract construction." Id. Nonetheless, the Commissioners voted to continue
the MBE/WBE participation goals at their previous levels. Id.
In May of 2000 (18 months after the lawsuit was filed), the County commissioned Dr. Manuel J.
Carvajal, an econometrician, to study architects and engineers in the county. His final report had
four parts:
(1) data identification and collection of methodology for displaying the research results; (2)
presentation and discussion of tables pertaining to architecture, civil engineering, structural
engineering, and awards of contracts in those areas; (3) analysis of the structure and empirical
estimates of various sets of regression equations, the calculation of corresponding indices, and
an assessment of their importance; and (4) a conclusion that there is discrimination against
women and Hispanics but not against blacks in the fields of architecture and engineering.
Id. The district court issued a preliminary injunction enjoining the use of the MBE/WBE
programs for A&E contracts, pending the United States Supreme Court decisions in Gratz v.
Bollinger, 539 U.S. 244 (2003) and Grutter v. Bollinger, 539 U.S. 306 (2003). Id. at 1316.
The court considered whether the MBE/WBE programs were violative of Title VII of the Civil
Rights Act, and whether the County and the County Commissioners were liable for
compensatory and punitive damages.
The district court found that the Supreme Court decisions in Gratz and Grutter did not alter the
constitutional analysis as set forth in Adarand and Croson. Id. at 1317. Accordingly, the race and
ethnicitybased classifications were subject to strict scrutiny, meaning the County must present
"a strong basis of evidence" indicating the MBE/WBE program was necessary and that it was
narrowly tailored to its purported purpose. Id. at 1316. The genderbased classifications were
subject to intermediate scrutiny, requiring the County to show the "genderbased classification
serves an important governmental objective, and that it is substantially related to the
achievement of that objective." Id. at 1317 (internal citations omitted). The court found that the
proponent of a genderbased affirmative action program must present "sufficient probative
evidence" of discrimination. Id. (internal citations omitted). The court found that under the
intermediate scrutiny analysis, the County must (1) demonstrate past discrimination against
women but not necessarily at the hands of the County, and (2) that the genderconscious
affirmative action program need not be used only as a "last resort." Id.
The County presented both statistical and anecdotal evidence. Id. at 1318. The statistical
evidence consisted of Dr. Carvajal's report, most of which consisted of "postenactment"
evidence. Id. Dr. Carvajal's analysis sought to discover the existence of racial, ethnic and gender
disparities in the A&E industry, and then to determine whether any such disparities could be
attributed to discrimination. Id. The study used four data sets: three were designed to establish
the marketplace availability of firms (architecture, structural engineering, and civil
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 140
engineering), and the fourth focused on awards issued by the County. Id. Dr. Carvajal used the
phone book, a list compiled by infoUSA, and a list of firms registered for technical certification
with the County's Department of Public Works to compile a list of the "universe" of firms
competing in the market. Id. For the architectural firms only, he also used a list of firms that had
been issued an architecture professional license. Id.
Dr. Carvajal then conducted a phone survey of the identified firms. Based on his data, Dr.
Carvajal concluded that disparities existed between the percentage of A&E firms owned by
blacks, Hispanics, and women, and the percentage of annual business they received. Id. Dr.
Carvajal conducted regression analyses "in order to determine the effect a firm owner's gender
or race had on certain dependent variables." Id. Dr. Carvajal used the firm's annual volume of
business as a dependent variable and determined the disparities were due in each case to the
firm's gender and/or ethnic classification. Id. at 1320. He also performed variants to the
equations including: (1) using certification rather than survey data for the experience / capacity
indicators, (2) with the outliers deleted, (3) with publiclyowned firms deleted, (4) with the
dummy variables reversed, and (5) using only currently certified firms." Id. Dr. Carvajal's results
remained substantially unchanged. Id.
Based on his analysis of the marketplace data, Dr. Carvajal concluded that the "gross statistical
disparities" in the annual business volume for Hispanic and womenowned firms could be
attributed to discrimination; he "did not find sufficient evidence of discrimination against
blacks." Id.
The court held that Dr. Carvajal's study constituted neither a "strong basis in evidence" of
discrimination necessary to justify race and ethnicityconscious measures, nor did it constitute
"sufficient probative evidence" necessary to justify the genderconscious measures. Id. The court
made an initial finding that no disparity existed to indicate underutilization of MBE/WBEs in the
award of A&E contracts by the County, nor was there underutilization of MBE/WBEs in the
contracts they were awarded. Id. The court found that an analysis of the award data indicated,
"[i]f anything, the data indicates an overutilization of minorityowned firms by the County in
relation to their numbers in the marketplace." Id.
With respect to the marketplace data, the County conceded that there was insufficient evidence
of discrimination against blacks to support the BBE program. Id. at 1321. With respect to the
marketplace data for Hispanics and women, the court found it "unreliable and inaccurate" for
three reasons: (1) the data failed to properly measure the geographic market, (2) the data failed
to properly measure the product market, and (3) the marketplace survey was unreliable. Id. at
132125.
The court ruled that it would not follow the Tenth Circuit decision of Concrete Works of
Colorado, Inc. v. City and County of Denver, 321 F.3d 950 (10th Cir. 2003), as the burden of proof
enunciated by the Tenth Circuit conflicts with that of the Eleventh Circuit, and the "Tenth
Circuit's decision is flawed for the reasons articulated by Justice Scalia in his dissent from the
denial of certiorari." Id. at 1325 (internal citations omitted).
The defendant intervenors presented anecdotal evidence pertaining only to discrimination
against women in the County's A&E industry. Id. The anecdotal evidence consisted of the
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 141
testimony of three A&E professional women, "nearly all" of which was related to discrimination
in the award of County contracts. Id. at 1326. However, the district court found that the
anecdotal evidence contradicted Dr. Carvajal's study indicating that no disparity existed with
respect to the award of County A&E contracts. Id.
The court quoted the Eleventh Circuit in Engineering Contractors Association for the proposition
"that only in the rare case will anecdotal evidence suffice standing alone." Id. (internal citations
omitted). The court held that "[t]his is not one of those rare cases." The district court concluded
that the statistical evidence was "unreliable and fail[ed] to establish the existence of
discrimination," and the anecdotal evidence was insufficient as it did not even reach the level of
anecdotal evidence in Engineering Contractors Association where the County employees
themselves testified. Id.
The court made an initial finding that a number of minority groups provided preferential
treatment were in fact majorities in the County in terms of population, voting capacity, and
representation on the County Commission. Id. at 13261329. For purposes only of conducting
the strict scrutiny analysis, the court then assumed that Dr. Carvajal's report demonstrated
discrimination against Hispanics (note the County had conceded it had insufficient evidence of
discrimination against blacks) and sought to determine whether the HBE program was narrowly
tailored to remedying that discrimination. Id. at 1330. However, the court found that because
the study failed to "identify who is engaging in the discrimination, what form the discrimination
might take, at what stage in the process it is taking place, or how the discrimination is
accomplished it is virtually impossible to narrowly tailor any remedy, and the HBE program
fails on this fact alone." Id.
The court found that even after the County Managers informed the Commissioners that the
County had reached parity in the A&E industry, the Commissioners declined to enact a CSBE
ordinance, a raceneutral measure utilized in the construction industry after Engineering
Contractors Association. Id. Instead, the Commissioners voted to continue the HBE program. Id.
The court held that the County's failure to even explore a program similar to the CSBE ordinance
indicated that the HBE program was not narrowly tailored. Id. at 1331.
The court also found that the County enacted a broad antidiscrimination ordinance imposing
harsh penalties for a violation thereof. Id. However, "not a single witness at trial knew of any
instance of a complaint being brought under this ordinance concerning the A&E industry,"
leading the court to conclude that the ordinance was either not being enforced, or no
discrimination existed. Id. Under either scenario, the HBE program could not be narrowly
tailored. Id.
The court found the waiver provisions in the HBE program inflexible in practice. Id. Additionally,
the court found the County had failed to comply with the provisions in the HBE program
requiring adjustment of participation goals based on annual studies, because the County had not
in fact conducted annual studies for several years. Id. The court found this even "more
problematic" because the HBE program did not have a builtin durational limit, and thus
blatantly violated Supreme Court jurisprudence requiring that racial and ethnic preferences
"must be limited in time." Id. at 1332, citing Grutter, 123 S. Ct. at 2346. For the foregoing reasons,
the court concluded the HBE program was not narrowly tailored. Id. at 1332.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 142
With respect to the WBE program, the court found that "the failure of the County to identify who
is discriminating and where in the process the discrimination is taking place indicates (though
not conclusively) that the WBE program is not substantially related to eliminating that
discrimination." Id. at 1333. The court found that the existence of the antidiscrimination
ordinance, the refusal to enact a small business enterprise ordinance, and the inflexibility in
setting the participation goals rendered the WBE program unable to satisfy the substantial
relationship test. Id.
The court held that the County was liable for any compensatory damages. Id. at 133334. The
court held that the Commissioners had absolute immunity for their legislative actions; however,
they were not entitled to qualified immunity for their actions in voting to apply the race,
ethnicity, and genderconscious measures of the MBE/WBE programs if their actions violated
"clearly established statutory or constitutional rights of which a reasonable person would have
known Accordingly, the question is whether the state of the law at the time the
Commissioners voted to apply [race, ethnicity, and genderconscious measures] gave them
'fair warning' that their actions were unconstitutional. " Id. at 133536 (internal citations
omitted).
The court held that the Commissioners were not entitled to qualified immunity because they
"had before them at least three cases that gave them fair warning that their application of the
MBE/WBE programs were unconstitutional: Croson, Adarand and [Engineering Contractors
Association]." Id. at 1137. The court found that the Commissioners voted to apply the contract
measures after the Supreme Court decided both Croson and Adarand. Id. Moreover, the Eleventh
Circuit had already struck down the construction provisions of the same MBE/WBE programs.
Id. Thus, the case law was "clearly established" and gave the Commissioners fair warning that
the MBE/WBE programs were unconstitutional. Id.
The court also found the Commissioners had specific information from the County Manager and
other internal studies indicating the problems with the MBE/WBE programs and indicating that
parity had been achieved. Id. at 1338. Additionally, the Commissioners did not conduct the
annual studies mandated by the MBE/WBE ordinance itself. Id. For all the foregoing reasons, the
court held the Commissioners were subject to individual liability for any compensatory and
punitive damages.
The district court enjoined the County, the Commissioners, and the County Manager from using,
or requiring the use of, gender, racial, or ethnic criteria in deciding (1) whether a response to an
RFP submitted for A&E work is responsive, (2) whether such a response will be considered, and
(3) whether a contract will be awarded to a consultant submitting such a response. The court
awarded the plaintiffs $100 each in nominal damages and reasonable attorneys' fees and costs,
for which it held the County and the Commissioners jointly and severally liable.
16. Florida A.G.C. Council, Inc. v. State of Florida, 303 F. Supp.2d 1307 (N.D. Fla.
2004)
This case is instructive to the disparity study as to the manner in which district courts within the
Eleventh Circuit are interpreting and applying Engineering Contractors Association. It is also
instructive in terms of the type of legislation to be considered by the local and state
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 143
governments as to what the courts consider to be a "raceconscious" program and/or legislation,
as well as to the significance of the implementation of the legislation to the analysis.
The plaintiffs, A.G.C. Council, Inc. and the South Florida Chapter of the Associated General
Contractors brought this case challenging the constitutionality of certain provisions of a Florida
statute (Section 287.09451, et seq.). The plaintiffs contended that the statute violated the Equal
Protection Clause of the Fourteenth Amendment by instituting race and genderconscious
"preferences" in order to increase the numeric representation of "MBEs" in certain industries.
According to the court, the Florida Statute enacted raceconscious and genderconscious
remedial programs to ensure minority participation in state contracts for the purchase of
commodities and in construction contracts. The State created the Office of Supplier Diversity
("OSD") to assist MBEs to become suppliers of commodities, services and construction to the
state government. The OSD had certain responsibilities, including adopting rules meant to
assess whether state agencies have made good faith efforts to solicit business from MBEs, and to
monitor whether contractors have made good faith efforts to comply with the objective of
greater overall MBE participation.
The statute enumerated measures that contractors should undertake, such as minoritycentered
recruitment in advertising as a means of advancing the statute's purpose. The statute provided
that each State agency is "encouraged" to spend 21 percent of the monies actually expended for
construction contracts, 25 percent of the monies actually expended for architectural and
engineering contracts, 24 percent of the monies actually expended for commodities and 50.5
percent of the monies actually expended for contractual services during the fiscal year for the
purpose of entering into contracts with certified MBEs. The statute also provided that state
agencies are allowed to allocate certain percentages for black Americans, Hispanic Americans
and for American women, and the goals are broken down by construction contracts,
architectural and engineering contracts, commodities and contractual services.
The State took the position that the spending goals were "precatory." The court found that the
plaintiffs had standing to maintain the action and to pursue prospective relief. The court held
that the statute was unconstitutional based on the finding that the spending goals were not
narrowly tailored to achieve a governmental interest. The court did not specifically address
whether the articulated reasons for the goals contained in the statute had sufficient evidence,
but instead found that the articulated reason would, "if true," constitute a compelling
governmental interest necessitating raceconscious remedies. Rather than explore the evidence,
the court focused on the narrowly tailored requirement and held that it was not satisfied by the
State.
The court found that there was no evidence in the record that the State contemplated race
neutral means to accomplish the objectives set forth in Section 287.09451 et seq., such as
"'simplification of bidding procedures, relaxation of bonding requirements, training or financial
aid for disadvantaged entrepreneurs of all races [which] would open the public contracting
market to all those who have suffered the effects of past discrimination.'" Florida A.G.C. Council,
303 F.Supp.2d at 1315, quoting Eng'g Contractors Ass'n, 122 F.3d at 928, quoting Croson, 488 U.S.
at 50910.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 144
The court noted that defendants did not seem to disagree with the report issued by the State of
Florida Senate that concluded there was little evidence to support the spending goals outlined in
the statute. Rather, the State of Florida argued that the statute is "permissive." The court,
however, held that "there is no distinction between a statute that is precatory versus one that is
compulsory when the challenged statute 'induces an employer to hire with an eye toward
meeting [a] numerical target.' Florida A.G.C. Council, 303 F.Supp.2d at 1316.
The court found that the State applies pressure to State agencies to meet the legislative
objectives of the statute extending beyond simple outreach efforts. The State agencies, according
to the court, were required to coordinate their MBE procurement activities with the OSD, which
includes adopting a MBE utilization plan. If the State agency deviated from the utilization plan in
two consecutive and three out of five total fiscal years, then the OSD could review any and all
solicitations and contract awards of the agency as deemed necessary until such time as the
agency met its utilization plan. The court held that based on these factors, although alleged to be
"permissive," the statute textually was not.
Therefore, the court found that the statute was not narrowly tailored to serve a compelling
governmental interest, and consequently violated the Equal Protection Clause of the Fourteenth
Amendment.
17. The Builders Ass'n of Greater Chicago v. The City of Chicago, 298 F. Supp.2d
725 (N.D. Ill. 2003)
This case is instructive because of the court's focus and analysis on whether the City of Chicago's
MBE/WBE program was narrowly tailored. The basis of the court's holding that the program
was not narrowly tailored is instructive for any program considered because of the reasons
provided as to why the program did not pass muster.
The plaintiff, the Builders Association of Greater Chicago, brought this suit challenging the
constitutionality of the City of Chicago's construction Minority and WomenOwned Business
("MWBE") Program. The court held that the City of Chicago's MWBE program was
unconstitutional because it did not satisfy the requirement that it be narrowly tailored to
achieve a compelling governmental interest. The court held that it was not narrowly tailored for
several reasons, including because there was no "meaningful individualized review" of
MBE/WBEs; it had no termination date nor did it have any means for determining a termination;
the "graduation" revenue amount for firms to graduate out of the program was very high,
$27,500,000, and in fact very few firms graduated; there was no net worth threshold; and,
waivers were rarely or never granted on construction contracts. The court found that the City
program was a "rigid numerical quota," not related to the number of available, willing and able
firms. Formulistic percentages, the court held, could not survive the strict scrutiny.
The court held that the goals plan did not address issues raised as to discrimination regarding
market access and credit. The court found that a goals program does not directly impact prime
contractor's selection of subcontractors on nongoals private projects. The court found that a
setaside or goals program does not directly impact difficulties in accessing credit, and does not
address discriminatory loan denials or higher interest rates. The court found the City has not
sought to attack discrimination by primes directly, "but it could." 298 F.2d 725. "To monitor
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 145
possible discriminatory conduct it could maintain its certification list and require those
contracting with the City to consider unsolicited bids, to maintain bidding records, and to justify
rejection of any certified firm submitting the lowest bid. It could also require firms seeking City
work to post private jobs above a certain minimum on a website or otherwise provide public
notice " Id.
The court concluded that other raceneutral means were available to impact credit, high interest
rates, and other potential marketplace discrimination. The court pointed to raceneutral means
including linked deposits, with the City banking at institutions making loans to startup and
smaller firms. Other raceneutral programs referenced included quick pay and contract
downsizing; restricting selfperformance by prime contractors; a direct loan program; waiver of
bonds on contracts under $100,000; a bank participation loan program; a 2 percent local
business preference; outreach programs and technical assistance and workshops; and seminars
presented to new construction firms.
The court held that race and ethnicity do matter, but that racial and ethnic classifications are
highly suspect, can be used only as a last resort, and cannot be made by some mechanical
formulation. Therefore, the court concluded the City's MWBE Program could not stand in its
present guise. The court held that the present program was not narrowly tailored to remedy
past discrimination and the discrimination demonstrated to now exist.
The court entered an injunction, but delayed the effective date for six months from the date of its
Order, December 29, 2003. The court held that the City had a "compelling interest in not having
its construction projects slip back to near monopoly domination by white male firms." The court
ruled a brief continuation of the program for six months was appropriate "as the City rethinks
the many tools of redress it has available." Subsequently, the court declared unconstitutional the
City's MWBE Program with respect to construction contracts and permanently enjoined the City
from enforcing the Program. 2004 WL 757697 (N.D. Ill 2004).
18. Associated Utility Contractors of Maryland, Inc. v. Mayor and City Council of
Baltimore, 218 F. Supp.2d 749 (D. Md. 2002)
This case is instructive because the court found the Executive Order of the Mayor of the City of
Baltimore was precatory in nature (creating no legal obligation or duty) and contained no
enforcement mechanism or penalties for noncompliance and imposed no substantial
restrictions; the Executive Order announced goals that were found to be aspirational only.
The Associated Utility Contractors of Maryland, Inc. ("AUC") sued the City of Baltimore
challenging its ordinance providing for minority and womenowned business enterprise
("MWBE") participation in city contracts. Previously, an earlier City of Baltimore MWBE
program was declared unconstitutional. Associated Utility Contractors of Maryland, Inc. v. Mayor
and City Council of Baltimore, 83 F. Supp.2d 613 (D. Md. 2000). The City adopted a new
ordinance that provided for the establishment of MWBE participation goals on a contractby
contract basis, and made several other changes from the previous MWBE program declared
unconstitutional in the earlier case.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 146
In addition, the Mayor of the City of Baltimore issued an Executive Order that announced a goal
of awarding 35 percent of all City contracting dollars to MBE/WBEs. The court found this goal of
35 percent participation was aspirational only and the Executive Order contained no
enforcement mechanism or penalties for noncompliance. The Executive Order also specified
many "noncoercive" outreach measures to be taken by the City agencies relating to increasing
participation of MBE/WBEs. These measures were found to be merely aspirational and no
enforcement mechanism was provided.
The court addressed in this case only a motion to dismiss filed by the City of Baltimore arguing
that the Associated Utility Contractors had no standing. The court denied the motion to dismiss
holding that the association had standing to challenge the new MBE/WBE ordinance, although
the court noted that it had significant issues with the AUC having representational standing
because of the nature of the MBE/WBE plan and the fact the AUC did not have any of its
individual members named in the suit. The court also held that the AUC was entitled to bring an
as applied challenge to the Executive Order of the Mayor, but rejected it having standing to bring
a facial challenge based on a finding that it imposes no requirement, creates no sanctions, and
does not inflict an injury upon any member of the AUC in any concrete way. Therefore, the
Executive Order did not create a "case or controversy" in connection with a facial attack. The
court found the wording of the Executive Order to be precatory and imposing no substantive
restrictions.
After this decision the City of Baltimore and the AUC entered into a settlement agreement and a
dismissal with prejudice of the case. An order was issued by the court on October 22, 2003
dismissing the case with prejudice.
19. Associated Utility Contractors of Maryland, Inc. v. The Mayor and City
Council of Baltimore, 83 F. Supp.2d 613 (D. Md. 2000)
The court held unconstitutional the City of Baltimore's "affirmative action" program, which had
construction subcontracting "setaside" goals of 20 percent for MBEs and 3 percent for WBEs.
The court held there was no data or statistical evidence submitted by the City prior to
enactment of the Ordinance. There was no evidence showing a disparity between MBE/WBE
availability and utilization in the subcontracting construction market in Baltimore. The court
enjoined the City Ordinance.
20. Webster v. Fulton County, 51 F. Supp.2d 1354 (N.D. Ga. 1999), a'ffd per
curiam 218 F.3d 1267 (11th Cir. 2000)
This case is instructive as it is another instance in which a court has considered, analyzed, and
ruled upon a race, ethnicity and genderconscious program, holding the local government
MBE/WBEtype program failed to satisfy the strict scrutiny constitutional standard. The case
also is instructive in its application of the Engineering Contractors Association case, including to
a disparity analysis, the burdens of proof on the local government, and the narrowly tailored
prong of the strict scrutiny test.
In this case, plaintiff Webster brought an action challenging the constitutionality of Fulton
County's (the "County") minority and female business enterprise program ("M/FBE") program.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 147
51 F. Supp.2d 1354, 1357 (N.D. Ga. 1999). [The district court first set forth the provisions of the
M/FBE program and conducted a standing analysis at 51 F. Supp.2d at 135662].
The court, citing Engineering Contractors Association of S. Florida, Inc. v. Metro. Engineering
Contractors Association, 122 F.3d 895 (11th Cir. 1997), held that "[e]xplicit racial preferences
may not be used except as a 'last resort.'" Id. at 136263. The court then set forth the strict
scrutiny standard for evaluating racial and ethnic preferences and the four factors enunciated in
Engineering Contractors Association, and the intermediate scrutiny standard for evaluating
gender preferences. Id. at 1363. The court found that under Engineering Contractors Association,
the government could utilize both postenactment and preenactment evidence to meet its
burden of a "strong basis in evidence" for strict scrutiny, and "sufficient probative evidence" for
intermediate scrutiny. Id.
The court found that the defendant bears the initial burden of satisfying the aforementioned
evidentiary standard, and the ultimate burden of proof remains with the challenging party to
demonstrate the unconstitutionality of the M/FBE program. Id. at 1364. The court found that the
plaintiff has at least three methods "to rebut the inference of discrimination with a neutral
explanation: (1) demonstrate that the statistics are flawed; (2) demonstrate that the disparities
shown by the statistics are not significant; or (3) present conflicting statistical data." Id., citing
Eng'g Contractors Ass'n, 122 F.3d at 916.
[The district court then set forth the Engineering Contractors Association opinion in detail.]
The court first noted that the Eleventh Circuit has recognized that disparity indices greater than
80 percent are generally not considered indications of discrimination. Id. at 1368, citing Eng'g
Contractors Assoc., 122 F.3d at 914. The court then considered the County's pre1994 disparity
study (the "BrimmerMarshall Study") and found that it failed to establish a strong basis in
evidence necessary to support the M/FBE program. Id. at 1368.
First, the court found that the study rested on the inaccurate assumption that a statistical
showing of underutilization of minorities in the marketplace as a whole was sufficient evidence
of discrimination. Id. at 1369. The court cited City of Richmond v. J.A. Croson Co., 488 U.S. 496
(1989) for the proposition that discrimination must be focused on contracting by the entity that
is considering the preference program. Id. Because the BrimmerMarshall Study contained no
statistical evidence of discrimination by the County in the award of contracts, the court found
the County must show that it was a "passive participant" in discrimination by the private sector.
Id. The court found that the County could take remedial action if it had evidence that prime
contractors were systematically excluding minorityowned businesses from subcontracting
opportunities, or if it had evidence that its spending practices are "exacerbating a pattern of
prior discrimination that can be identified with specificity." Id. However, the court found that the
BrimmerMarshall Study contained no such data. Id.
Second, the BrimmerMarshall study contained no regression analysis to account for relevant
variables, such as firm size. Id. at 136970. At trial, Dr. Marshall submitted a followup to the
earlier disparity study. However, the court found the study had the same flaw in that it did not
contain a regression analysis. Id. The court thus concluded that the County failed to present a
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 148
"strong basis in evidence" of discrimination to justify the County's racial and ethnic preferences.
Id.
The court next considered the County's post1994 disparity study. Id. at 1371. The study first
sought to determine the availability and utilization of minority and femaleowned firms. Id. The
court explained:
Two methods may be used to calculate availability: (1) bid analysis; or (2)
bidder analysis. In a bid analysis, the analyst counts the number of bids
submitted by minority or female firms over a period of time and divides it by the
total number of bids submitted in the same period. In a bidder analysis, the
analyst counts the number of minority or female firms submitting bids and
divides it by the total number of firms which submitted bids during the same
period.
Id. The court found that the information provided in the study was insufficient to establish a
firm basis in evidence to support the M/FBE program. Id. at 137172. The court also found it
significant to conduct a regression analysis to show whether the disparities were either due to
discrimination or other neutral grounds. Id. at 137576.
The plaintiff and the County submitted statistical studies of data collected between 1994 and
1997. Id. at 1376. The court found that the data were potentially skewed due to the operation of
the M/FBE program. Id. Additionally, the court found that the County's standard deviation
analysis yielded nonstatistically significant results (noting the Eleventh Circuit has stated that
scientists consider a finding of two standard deviations significant). Id. (internal citations
omitted).
The court considered the County's anecdotal evidence, and quoted Engineering Contractors
Association for the proposition that "[a]necdotal evidence can play an important role in
bolstering statistical evidence, but that only in the rare case will anecdotal evidence suffice
standing alone." Id., quoting Eng'g Contractors Ass'n, 122 F.3d at 907. The BrimmerMarshall
Study contained anecdotal evidence. Id. at 1379. Additionally, the County held hearings but after
reviewing the tape recordings of the hearings, the court concluded that only two individuals
testified to discrimination by the County; one of them complained that the County used the
M/FBE program to only benefit African Americans. Id. The court found the most common
complaints concerned barriers in bonding, financing, and insurance and slow payment by prime
contractors. Id. The court concluded that the anecdotal evidence was insufficient in and of itself
to establish a firm basis for the M/FBE program. Id.
The court also applied a narrow tailoring analysis of the M/FBE program. "The Eleventh Circuit
has made it clear that the essence of this inquiry is whether racial preferences were adopted
only as a 'last resort.'" Id. at 1380, citing Eng'g Contractors Assoc., 122 F.3d at 926. The court
cited the Eleventh Circuit's fourpart test and concluded that the County's M/FBE program failed
on several grounds. First, the court found that a racebased problem does not necessarily
require a racebased solution. "If a raceneutral remedy is sufficient to cure a racebased
problem, then a raceconscious remedy can never be narrowly tailored to that problem." Id.,
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 149
quoting Eng'g Contractors Ass'n, 122 F.3d at 927. The court found that there was no evidence of
discrimination by the County. Id. at 1380.
The court found that even though a majority of the Commissioners on the County Board were
African American, the County had continued the program for decades. Id. The court held that the
County had not seriously considered raceneutral measures:
There is no evidence in the record that any Commissioner has offered a resolution during this
period substituting a program of raceneutral measures as an alternative to numerical setasides
based upon race and ethnicity. There is no evidence in the record of any proposal by the staff of
Fulton County of substituting a program of raceneutral measures as an alternative to numerical
setasides based upon race and ethnicity. There has been no evidence offered of any debate
within the Commission about substituting a program of raceneutral measures as an alternative
to numerical setasides based upon race and ethnicity. Id.
The court found that the random inclusion of ethnic and racial groups who had not suffered
discrimination by the County also mitigated against a finding of narrow tailoring. Id. The court
found that there was no evidence that the County considered raceneutral alternatives as an
alternative to raceconscious measures nor that raceneutral measures were initiated and failed.
Id. at 1381. The court concluded that because the M/FBE program was not adopted as a last
resort, it failed the narrow tailoring test. Id.
Additionally, the court found that there was no substantial relationship between the numerical
goals and the relevant market. Id. The court rejected the County's argument that its program
was permissible because it set "goals" as opposed to "quotas," because the program in
Engineering Contractors Association also utilized "goals" and was struck down. Id.
Per the M/FBE program's genderbased preferences, the court found that the program was
sufficiently flexible to satisfy the substantial relationship prong of the intermediate scrutiny
standard. Id. at 1383. However, the court held that the County failed to present "sufficient
probative evidence" of discrimination necessary to sustain the genderbased preferences
portion of the M/FBE program. Id.
The court found the County's M/FBE program unconstitutional and entered a permanent
injunction in favor of the plaintiff. Id. On appeal, the Eleventh Circuit affirmed per curiam, stating
only that it affirmed on the basis of the district court's opinion. Webster v. Fulton County,
Georgia, 218 F.3d 1267 (11th Cir. 2000).
21. Associated Gen. Contractors v. Drabik, 50 F. Supp.2d 741 (S.D. Ohio 1999)
In this decision, the district court reaffirmed its earlier holding that the State of Ohio's MBE
program of construction contract awards is unconstitutional. The court cited to F. Buddie
Contracting v. Cuyahoga Community College, 31 F. Supp.2d 571 (N.D. Ohio 1998), holding a
similar local Ohio program unconstitutional. The court repudiated the Ohio Supreme Court's
holding in Ritchey Produce, 707 N.E. 2d 871 (Ohio 1999), which held that the State's MBE
program as applied to the state's purchase of nonconstructionrelated goods and services was
constitutional. The court found the evidence to be insufficient to justify the MBE program. The
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 150
court held that the program was not narrowly tailored because there was no evidence that the
State had considered a raceneutral alternative.
This opinion underscored that governments must show four factors to demonstrate narrow
tailoring: (1) the necessity for the relief and the efficacy of alternative remedies, (2) flexibility
and duration of the relief, (3) relationship of numerical goals to the relevant labor market, and
(4) impact of the relief on the rights of third parties. The court held the Ohio MBE program failed
to satisfy this test.
22. Phillips & Jordan, Inc. v. Watts, 13 F. Supp.2d 1308 (N.D. Fla. 1998)
This case is instructive because it addressed a challenge to a state and local government
MBE/WBEtype program and considered the requisite evidentiary basis necessary to support
the program. In Phillips & Jordan, the district court for the Northern District of Florida held that
the Florida Department of Transportation's ("FDOT") program of "setting aside" certain highway
maintenance contracts for African American and Hispanicowned businesses violated the Equal
Protection Clause of the Fourteenth Amendment to the United States Constitution. The parties
stipulated that the plaintiff, a nonminority business, had been excluded in the past and may be
excluded in the future from competing for certain highway maintenance contracts "set aside" for
business enterprises owned by Hispanic and African American individuals. The court held that
the evidence of statistical disparities was insufficient to support the Florida DOT program.
The district court pointed out that Florida DOT did not claim that it had evidence of intentional
discrimination in the award of its contracts. The court stated that the essence of FDOT's claim
was that the two year disparity study provided evidence of a disparity between the proportion
of minorities awarded FDOT road maintenance contracts and a portion of the minorities
"supposedly willing and able to do road maintenance work," and that FDOT did not itself engage
in any racial or ethnic discrimination, so FDOT must have been a passive participant in
"somebody's" discriminatory practices.
Since it was agreed in the case that FDOT did not discriminate against minority contractors
bidding on road maintenance contracts, the court found that the record contained insufficient
proof of discrimination. The court found the evidence insufficient to establish acts of
discrimination against African American and Hispanicowned businesses.
The court raised questions concerning the choice and use of the statistical pool of available firms
relied upon by the disparity study. The court expressed concern about whether it was
appropriate to use Census data to analyze and determine which firms were available (qualified
and/or willing and able) to bid on FDOT road maintenance contracts.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 151
G. Recent Decisions and Authorities Involving Federal Procurement
That May Impact DBE and MBE/WBE Programs
1. Rothe Development Corp. v. U.S. Department of Defense, et al., 545 F.3d
1023 (Fed. Cir. 2008)
Although this case does not involve the Federal DBE Program (49 C.F.R. Part 26), it is an
analogous case that may impact the legal analysis and law related to the validity of programs
implemented by recipients of federal funds, including the Federal DBE Program. Additionally, it
underscores the requirement that race, ethnic and genderbased programs of any nature must
be supported by substantial evidence. In Rothe, an unsuccessful bidder on a federal defense
contract brought suit alleging that the application of an evaluation preference, pursuant to a
federal statute, to a small disadvantaged bidder (SDB) to whom a contract was awarded,
violated the Equal Protection clause of the U.S. Constitution. The federal statute challenged is
Section 1207 of the National Defense Authorization Act of 1987 and as reauthorized in 2003.
The statute provides a goal that 5 percent of the total dollar amount of defense contracts for
each fiscal year would be awarded to small businesses owned and controlled by socially and
economically disadvantages individuals. 10 U.S.C. 2323. Congress authorized the Department
of Defense ("DOD") to adjust bids submitted by nonsocially and economically disadvantaged
firms upwards by 10 percent (the "Price Evaluation Adjustment Program" or "PEA").
The district court held the federal statute, as reauthorized in 2003, was constitutional on its face.
The court held the 5 percent goal and the PEA program as reauthorized in 1992 and applied in
1998 was unconstitutional. The basis of the decision was that Congress considered statistical
evidence of discrimination that established a compelling governmental interest in the
reauthorization of the statute and PEA program in 2003. Congress had not documented or
considered substantial statistical evidence that the DOD discriminated against minority small
businesses when it enacted the statute in 1992 and reauthorized it in 1998. The plaintiff
appealed the decision.
The Federal Circuit found that the "analysis of the facial constitutionality of an act is limited to
evidence before Congress prior to the date of reauthorization." 413 F.3d 1327 (Fed. Cir.
2005)(affirming in part, vacating in part, and remanding 324 F. Supp.2d 840 (W.D. Tex. 2004).
The court limited its review to whether Congress had sufficient evidence in 1992 to reauthorize
the provisions in 1207. The court held that for evidence to be relevant to a strict scrutiny
analysis, "the evidence must be proven to have been before Congress prior to enactment of the
racial classification." The Federal Circuit held that the district court erred in relying on the
statistical studies without first determining whether the studies were before Congress when it
reauthorized section 1207. The Federal Circuit remanded the case and directed the district court
to consider whether the data presented was so outdated that it did not provide the requisite
strong basis in evidence to support the reauthorization of section 1207.
On August 10, 2007 the Federal District Court for the Western District of Texas in Rothe
Development Corp. v. U.S. Dept. of Defense, 499 F.Supp.2d 775 (W.D.Tex. Aug 10, 2007) issued its
Order on remand from the Federal Circuit Court of Appeals decision in Rothe, 413 F.3d 1327
(Fed Cir. 2005). The district court upheld the constitutionality of the 2006 Reauthorization of
Section 1207 of the National Defense Authorization Act of 1987 (10 USC 2323), which permits
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 152
the U.S. Department of Defense to provide preferences in selecting bids submitted by small
businesses owned by socially and economically disadvantaged individuals ("SDBs"). The district
court found the 2006 Reauthorization of the 1207 Program satisfied strict scrutiny, holding that
Congress had a compelling interest when it reauthorized the 1207 Program in 2006, that there
was sufficient statistical and anecdotal evidence before Congress to establish a compelling
interest, and that the reauthorization in 2006 was narrowly tailored.
The district court, among its many findings, found certain evidence before Congress was "stale,"
that the plaintiff (Rothe) failed to rebut other evidence which was not stale, and that the
decisions by the Eighth, Ninth and Tenth Circuits in the decisions in Concrete Works, Adarand
Constructors, Sherbrooke Turf and Western States Paving (discussed above and below) were
relevant to the evaluation of the facial constitutionality of the 2006 Reauthorization.
2007 Order of the District Court (499 F.Supp.2d 775). In the Section 1207 Act, Congress set a
goal that 5 percent of the total dollar amount of defense contracts for each fiscal year would be
awarded to small businesses owned and controlled by socially and economically disadvantaged
individuals. In order to achieve that goal, Congress authorized the DOD to adjust bids submitted
by nonsocially and economically disadvantaged firms up to 10 percent. 10 U.S.C. 2323(e)(3).
Rothe, 499 F.Supp.2d. at 782. Plaintiff Rothe did not qualify as an SDB because it was owned by a
Caucasian female. Although Rothe was technically the lowest bidder on a DOD contract, its bid
was adjusted upward by 10 percent, and a third party, who qualified as a SDB, became the
"lowest" bidder and was awarded the contract. Id. Rothe claims that the 1207 Program is facially
unconstitutional because it takes race into consideration in violation of the Equal Protection
component of the Due Process Clause of the Fifth Amendment. Id. at 78283. The district court's
decision only reviewed the facial constitutionality of the 2006 Reauthorization of the 2007
Program.
The district court initially rejected six legal arguments made by Rothe regarding strict scrutiny
review based on the rejection of the same arguments by the Eighth, Ninth, and Tenth Circuit
Courts of Appeal in the Sherbrooke Turf, Western States Paving, Concrete Works, Adarand VII
cases, and the Federal Circuit Court of Appeal in Rothe. Rothe at 825833.
The district court discussed and cited the decisions in Adarand VII (2000), Sherbrooke Turf
(2003), and Western States Paving (2005), as holding that Congress had a compelling interest in
eradicating the economic roots of racial discrimination in highway transportation programs
funded by federal monies, and concluding that the evidence cited by the government,
particularly that contained in The Compelling Interest (a.k.a. the Appendix), more than satisfied
the government's burden of production regarding the compelling interest for a raceconscious
remedy. Rothe at 827. Because the Urban Institute Report, which presented its analysis of 39
state and local disparity studies, was crossreferenced in the Appendix, the district court found
the courts in Adarand VII, Sherbrooke Turf, and Western States Paving, also relied on it in support
of their compelling interest holding. Id. at 827.
The district court also found that the Tenth Circuit decision in Concrete Works IV, 321 F.3d 950
(10th Cir. 2003), established legal principles that are relevant to the court's strict scrutiny
analysis. First, Rothe's claims for declaratory judgment on the racial constitutionality of the
earlier 1999 and 2002 Reauthorizations were moot. Second, the government can meet its
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 153
burden of production without conclusively proving the existence of past or present racial
discrimination. Third, the government may establish its own compelling interest by presenting
evidence of its own direct participation in racial discrimination or its passive participation in
private discrimination. Fourth, once the government meets its burden of production, Rothe must
introduce "credible, particularized" evidence to rebut the government's initial showing of the
existence of a compelling interest. Fifth, Rothe may rebut the government's statistical evidence
by giving a raceneutral explanation for the statistical disparities, showing that the statistics are
flawed, demonstrating that the disparities shown are not significant or actionable, or presenting
contrasting statistical data. Sixth, the government may rely on disparity studies to support its
compelling interest, and those studies may control for the effect that preexisting affirmative
action programs have on the statistical analysis. Id. at 82932.
Based on Concrete Works IV, the district court did not require the government to conclusively
prove that there is pervasive discrimination in the relevant market, that each presumptively
disadvantaged group suffered equally from discrimination, or that private firms intentionally
and purposefully discriminated against minorities. The court found that the inference of
discriminatory exclusion can arise from statistical disparities. Id. at 83031.
The district court held that Congress had a compelling interest in the 2006 Reauthorization of
the 1207 Program, which was supported by a strong basis in the evidence. The court relied in
significant part upon six state and local disparity studies that were before Congress prior to the
2006 Reauthorization of the 1207 Program. The court based this evidence on its finding that
Senator Kennedy had referenced these disparity studies, discussed and summarized findings of
the disparity studies, and Representative Cynthia McKinney also cited the same six disparity
studies that Senator Kennedy referenced. The court stated that based on the content of the floor
debate, it found that these studies were put before Congress prior to the date of the
Reauthorization of Section 1207. Id. at 838.
The district court found that these six state and local disparity studies analyzed evidence of
discrimination from a diverse crosssection of jurisdictions across the United States, and "they
constitute prima facie evidence of a nationwide pattern or practice of discrimination in public
and private contracting." Id. at 83839. The court found that the data used in these six disparity
studies is not "stale" for purposes of strict scrutiny review. Id. at 839. The court disagreed with
Rothe's argument that all the data were stale (data in the studies from 1997 through 2002),
"because this data was the most current data available at the time that these studies were
performed." Id. The court found that the governmental entities should be able to rely on the
most recently available data so long as those data are reasonably uptodate. Id. The court
declined to adopt a "brightline rule for determining staleness." Id.
The court referred to the reliance by the Ninth Circuit and the Eighth Circuit on the Appendix to
affirm the constitutionality of the USDOT MBE [now DBE] Program, and rejected five years as a
brightline rule for considering whether data are "stale." Id. at n.86. The court also stated that it
"accepts the reasoning of the Appendix, which the court found stated that for the most part "the
federal government does business in the same contracting markets as state and local
governments. Therefore, the evidence in state and local studies of the impact of discriminatory
barriers to minority opportunity in contracting markets throughout the country is relevant to
the question of whether the federal government has a compelling interest to take remedial
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 154
action in its own procurement activities." Id. at 839, quoting 61 Fed.Reg. 2604201, 26061
(1996).
The district court also discussed additional evidence before Congress that it found in
Congressional Committee Reports and Hearing Records. Id. at 86571. The court noted SBA
Reports that were before Congress prior to the 2006 Reauthorization. Id. at 871.
The district court found that the data contained in the Appendix, the Benchmark Study, and the
Urban Institute Report were "stale," and the court did not consider those reports as evidence of
a compelling interest for the 2006 Reauthorization. Id. at 87275. The court stated that the
Eighth, Ninth and Tenth Circuits relied on the Appendix to uphold the constitutionality of the
Federal DBE Program, citing to the decisions in Sherbrooke Turf, Adarand VII, and Western States
Paving. Id. at 872. The court pointed out that although it does not rely on the data contained in
the Appendix to support the 2006 Reauthorization, the fact the Eighth, Ninth, and Tenth Circuits
relied on these data to uphold the constitutionality of the Federal DBE Program as recently as
2005, convinced the court that a brightline staleness rule is inappropriate. Id. at 874.
Although the court found that the data contained in the Appendix, the Urban Institute Report,
and the Benchmark Study were stale for purposes of strict scrutiny review regarding the 2006
Reauthorization, the court found that Rothe introduced no concrete, particularized evidence
challenging the reliability of the methodology or the data contained in the six state and local
disparity studies, and other evidence before Congress. The court found that Rothe failed to rebut
the data, methodology or anecdotal evidence with "concrete, particularized" evidence to the
contrary. Id. at 875. The district court held that based on the studies, the government had
satisfied its burden of producing evidence of discrimination against African Americans, Asian
Americans, Hispanic Americans, and Native Americans in the relevant industry sectors. Id. at
876.
The district court found that Congress had a compelling interest in reauthorizing the 1207
Program in 2006, which was supported by a strong basis of evidence for remedial action. Id. at
877. The court held that the evidence constituted prima facie proof of a nationwide pattern or
practice of discrimination in both public and private contracting, that Congress had sufficient
evidence of discrimination throughout the United States to justify a nationwide program, and
the evidence of discrimination was sufficiently pervasive across racial lines to justify granting a
preference to all five purportedly disadvantaged racial groups. Id.
The district court also found that the 2006 Reauthorization of the 1207 Program was narrowly
tailored and designed to correct present discrimination and to counter the lingering effects of
past discrimination. The court held that the government's involvement in both present
discrimination and the lingering effects of past discrimination was so pervasive that the DOD
and the Department of Air Force had become passive participants in perpetuating it. Id. The
court stated it was law of the case and could not be disturbed on remand that the Federal Circuit
in Rothe III had held that the 1207 Program was flexible in application, limited in duration and it
did not unduly impact on the rights of third parties. Id., quoting Rothe III, 262 F.3d at 1331.
The district court thus conducted a narrowly tailored analysis that reviewed three factors:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 155
1. The efficacy of raceneutral alternatives;
2. Evidence detailing the relationship between the stated numerical goal of 5 percent and
the relevant market; and
3. Over and underinclusiveness.
Id. The court found that Congress examined the efficacy of raceneutral alternatives prior to the
enactment of the 1207 Program in 1986 and that these programs were unsuccessful in
remedying the effects of past and present discrimination in federal procurement. Id. The court
concluded that Congress had attempted to address the issues through raceneutral measures,
discussed those measures, and found that Congress' adoption of raceconscious provisions were
justified by the ineffectiveness of such raceneutral measures in helping minorityowned firms
overcome barriers. Id. The court found that the government seriously considered and enacted
raceneutral alternatives, but these raceneutral programs did not remedy the widespread
discrimination that affected the federal procurement sector, and that Congress was not required
to implement or exhaust every conceivable raceneutral alternative. Id. at 880. Rather, the court
found that narrow tailoring requires only "serious, good faith consideration of workable race
neutral alternatives." Id.
The district court also found that the 5 percent goal was related to the minority business
availability identified in the six state and local disparity studies. Id. at 881. The court concluded
that the 5 percent goal was aspirational, not mandatory. Id. at 882. The court then examined and
found that the regulations implementing the 1207 Program were not overinclusive for several
reasons.
November 4, 2008 decision by the Federal Circuit Court of Appeals. On November 4, 2008, the
Federal Circuit Court of Appeals reversed the judgment of the district court in part, and
remanded with instructions to enter a judgment (1) denying Rothe any relief regarding the
facial constitutionality of Section 1207 as enacted in 1999 or 2002, (2) declaring that Section
1207 as enacted in 2006 (10 U.S.C. 2323) is facially unconstitutional, and (3) enjoining
application of Section 1207 (10 U.S.C. 2323).
The Federal Circuit Court of Appeals held that Section 1207, on its face, as reenacted in 2006,
violated the Equal Protection component of the Fifth Amendment right to due process. The court
found that because the statute authorized the DOD to afford preferential treatment on the basis
of race, the court applied strict scrutiny, and because Congress did not have a "strong basis in
evidence" upon which to conclude that the DOD was a passive participant in pervasive,
nationwide racial discrimination at least not on the evidence produced by the DOD and relied
on by the district court in this case Section 1207 failed to meet this strict scrutiny test. 545
F.3d at 1050.
Strict scrutiny framework. The Federal Circuit Court of Appeals recognized that the Supreme
Court has held a government may have a compelling interest in remedying the effects of past or
present racial discrimination. 545 F.3d at 1036. The court cited the decision in Croson, 488 U.S.
at 492, that it is "beyond dispute that any public entity, state or federal, has a compelling interest
in assuring that public dollars, drawn from the tax contributions of all citizens, do not serve to
finance the evil of private prejudice." 545 F.3d. at 1036, quoting Croson, 488 U.S. at 492.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 156
The court held that before resorting to raceconscious measures, the government must identify
the discrimination to be remedied, public or private, with some specificity, and must have a
strong basis of evidence upon which to conclude that remedial action is necessary. 545 F.3d at
1036, quoting Croson, 488 U.S. at 500, 504. Although the party challenging the statute bears the
ultimate burden of persuading the court that it is unconstitutional, the Federal Circuit stated
that the government first bears a burden to produce strong evidence supporting the legislature's
decision to employ raceconscious action. 545 F.3d at 1036.
Even where there is a compelling interest supported by strong basis in evidence, the court held
the statute must be narrowly tailored to further that interest. Id. The court noted that a narrow
tailoring analysis commonly involves six factors: (1) the necessity of relief; (2) the efficacy of
alternative, raceneutral remedies; (3) the flexibility of relief, including the availability of waiver
provisions; (4) the relationship with the stated numerical goal to the relevant labor market; (5)
the impact of relief on the rights of third parties; and (6) the overinclusiveness or
underinclusiveness of the racial classification. Id.
Compelling interest strong basis in evidence. The Federal Circuit pointed out that the
statistical and anecdotal evidence relief upon by the district court in its ruling below included
six disparity studies of state or local contracting. The Federal Circuit also pointed out that the
district court found that the data contained in the Appendix, the Urban Institute Report, and the
Benchmark Study were stale for purposes of strict scrutiny review of the 2006 Authorization,
and therefore, the district court concluded that it would not rely on those three reports as
evidence of a compelling interest for the 2006 reauthorization of the 1207 Program. 545 F.3d
1023, citing to Rothe VI, 499 F.Supp.2d at 875. Since the DOD did not challenge this finding on
appeal, the Federal Circuit stated that it would not consider the Appendix, the Urban Institute
Report, or the Department of Commerce Benchmark Study, and instead determined whether the
evidence relied on by the district court was sufficient to demonstrate a compelling interest. Id.
Six state and local disparity studies. The Federal Circuit found that disparity studies can be
relevant to the compelling interest analysis because, as explained by the Supreme Court in
Croson, "[w]here there is a significant statistical disparity between the number of qualified
minority contractors willing and able to perform a particular service and the number of such
contractors actually engaged by [a] locality or the locality's prime contractors, an inference of
discriminatory exclusion could arise." 545 F.3d at 10371038, quoting Croson, 488 U.S.C. at 509.
The Federal Circuit also cited to the decision by the Fifth Circuit Court of Appeals in W.H. Scott
Constr. Co. v. City of Jackson, 199 F.3d 206 (5th Cir. 1999) that given Croson's emphasis on
statistical evidence, other courts considering equal protection challenges to minority
participation programs have looked to disparity indices, or to computations of disparity
percentages, in determining whether Croson's evidentiary burden is satisfied. 545 F.3d at 1038,
quoting W.H. Scott, 199 F.3d at 218.
The Federal Circuit noted that a disparity study is a study attempting to measure the difference
or disparity between the number of contracts or contract dollars actually awarded minority
owned businesses in a particular contract market, on the one hand, and the number of contracts
or contract dollars that one would expect to be awarded to minorityowned businesses given
their presence in that particular contract market, on the other hand. 545 F.3d at 1037.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 157
Staleness. The Federal Circuit declined to adopt a per se rule that data more than five years old
are stale per se, which rejected the argument put forth by Rothe. 545 F.3d at 1038. The court
pointed out that the district court noted other circuit courts have relied on studies containing
data more than five years old when conducting compelling interest analyses, citing to Western
States Paving v. Washington State Department of Transportation, 407 F.3d 983, 992 (9th Cir.
2005) and Sherbrooke Turf, Inc. v. Minnesota Department of Transportation, 345 F.3d 964, 970
(8th Cir. 2003)(relying on the Appendix, published in 1996).
The Federal Circuit agreed with the district court that Congress "should be able to rely on the
most recently available data so long as that data is reasonably uptodate." 545 F.3d at 1039. The
Federal Circuit affirmed the district court's conclusion that the data analyzed in the six disparity
studies were not stale at the relevant time because the disparity studies analyzed data pertained
to contracts awarded as recently as 2000 or even 2003, and because Rothe did not point to more
recent, available data. Id.
Before Congress. The Federal Circuit found that for evidence to be relevant in the strict scrutiny
analysis, it "must be proven to have been before Congress prior to enactment of the racial
classification." 545 F.3d at 1039, quoting Rothe V, 413 F.3d at 1338. The Federal Circuit had
issues with determining whether the six disparity studies were actually before Congress for
several reasons, including that there was no indication that these studies were debated or
reviewed by members of Congress or by any witnesses, and because Congress made no findings
concerning these studies. 545 F.3d at 10391040. However, the court determined it need not
decide whether the six studies were put before Congress, because the court held in any event
that the studies did not provide a substantially probative and broadbased statistical foundation
necessary for the strong basis in evidence that must be the predicate for nationwide, race
conscious action. Id. at 1040.
The court did note that findings regarding disparity studies are to be distinguished from formal
findings of discrimination by the DOD "which Congress was emphatically not required to make."
Id. at 1040, footnote 11 (emphasis in original). The Federal Circuit cited the Dean v. City of
Shreveport case that the "government need not incriminate itself with a formal finding of
discrimination prior to using a raceconscious remedy." 545 F.3d at 1040, footnote 11 quoting
Dean v. City of Shreveport, 438 F.3d 448, 445 (5th Cir. 2006).
Methodology. The Federal Circuit found that there were methodological defects in the six
disparity studies. The court found that the objections to the parameters used to select the
relevant pool of contractors was one of the major defects in the studies. 545 F.3d at 10401041.
The court stated that in general, "[a] disparity ratio less than 0.80" i.e., a finding that a given
minority group received less than 80 percent of the expected amount "indicates a relevant
degree of disparity," and "might support an inference of discrimination." 545 F.3d at 1041,
quoting the district court opinion in Rothe VI, 499 F.Supp.2d at 842; and citing Engineering
Contractors Association of South Florida, Inc. v. Metropolitan Dade County, 122 F.3d 895, 914
(11th Cir. 1997). The court noted that this disparity ratio attempts to calculate a ratio between
the expected contract amount of a given race/gender group and the actual contract amount
received by that group. 545 F.3d at 1041.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 158
The court considered the availability analysis, or benchmark analysis, which is utilized to ensure
that only those minorityowned contractors who are qualified, willing and able to perform the
prime contracts at issue are considered when performing the denominator of a disparity ratio.
545 F.3d at 1041. The court cited to an expert used in the case that a "crucial question" in
disparity studies is to develop a credible methodology to estimate this benchmark share of
contracts minorities would receive in the absence of discrimination and the touchstone for
measuring the benchmark is to determine whether the firm is ready, willing, and able to do
business with the government. 545 F.3d at 10411042.
The court concluded the contention by Rothe, that the six studies misapplied this "touchstone"
of Croson and erroneously included minorityowned firms that were deemed willing or
potentially willing and able, without regard to whether the firm was qualified, was not a defect
that substantially undercut the results of four of the six studies, because "the bulk of the
businesses considered in these studies were identified in ways that would tend to establish their
qualifications, such as by their presence on city contract records and bidder lists." 545 F.3d at
1042. The court noted that with regard to these studies available prime contractors were
identified via certification lists, willingness survey of chamber membership and trade
association membership lists, public agency and certification lists, utilized prime contractor,
bidder lists, county and other government records and other type lists. Id.
The court stated it was less confident in the determination of qualified minorityowned
businesses by the two other studies because the availability methodology employed in those
studies, the court found, appeared less likely to have weeded out unqualified businesses. Id.
However, the court stated it was more troubled by the failure of five of the studies to account
officially for potential differences in size, or "relative capacity," of the business included in those
studies. 545 F.3d at 10421043.
The court noted that qualified firms may have substantially different capacities and thus might
be expected to bring in substantially different amounts of business even in the absence of
discrimination. 545 F.3d at 1043. The Federal Circuit referred to the Eleventh Circuit
explanation similarly that because firms are bigger, bigger firms have a bigger chance to win
bigger contracts, and thus one would expect the bigger (on average) nonMWBE firms to get a
disproportionately higher percentage of total construction dollars awarded than the smaller
MWBE firms. 545 F.3d at 1043 quoting Engineering Contractors Association, 122 F.3d at 917. The
court pointed out its issues with the studies accounting for the relative sizes of contracts
awarded to minorityowned businesses, but not considering the relative sizes of the businesses
themselves. Id. at 1043.
The court noted that the studies measured the availability of minorityowned businesses by the
percentage of firms in the market owned by minorities, instead of by the percentage of total
marketplace capacity those firms could provide. Id. The court said that for a disparity ratio to
have a significant probative value, the same time period and metric (dollars or numbers) should
be used in measuring the utilization and availability shares. 545 F.3d at 1044, n. 12.
The court stated that while these parameters relating to the firm size may have ensured that
each minorityowned business in the studies met a capacity threshold, these parameters did not
account for the relative capacities of businesses to bid for more than one contract at a time,
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 159
which failure rendered the disparity ratios calculated by the studies substantially less probative
on their own, of the likelihood of discrimination. Id. at 1044. The court pointed out that the
studies could have accounted for firm size even without changing the disparity ratio
methodologies by employing regression analysis to determine whether there was a statistically
significant correlation between the size of a firm and the share of contract dollars awarded to it.
545 F.3d at 1044 citing to Engineering Contractors Association, 122 F.3d at 917. The court noted
that only one of the studies conducted this type of regression analysis, which included the
independent variables of a firmage of a company, owner education level, number of employees,
percent of revenue from the private sector and owner experience for industry groupings. Id. at
10441045.
The court stated, to "be clear," that it did not hold that the defects in the availability and capacity
analyses in these six disparity studies render the studies wholly unreliable for any purpose. Id.
at 1045. The court said that where the calculated disparity ratios are low enough, the court does
not foreclose the possibility that an inference of discrimination might still be permissible for
some of the minority groups in some of the studied industries in some of the jurisdictions. Id.
The court recognized that a minorityowned firm's capacity and qualifications may themselves
be affected by discrimination. Id. The court held, however, that the defects it noted detracted
dramatically from the probative value of the six studies, and in conjunction with their limited
geographic coverage, rendered the studies insufficient to form the statistical core of the strong
basis and evidence required to uphold the statute. Id.
Geographic coverage. The court pointed out that whereas municipalities must necessarily
identify discrimination in the immediate locality to justify a racebased program, the court does
not think that Congress needs to have had evidence before it of discrimination in all 50 states in
order to justify the 1207 program. Id. The court stressed, however, that in holding the six studies
insufficient in this particular case, "we do not necessarily disapprove of decisions by other
circuit courts that have relied, directly or indirectly, on municipal disparity studies to establish a
federal compelling interest." 545 F.3d at 1046. The court stated in particular, the Appendix
relied on by the Ninth and Tenth Circuits in the context of certain raceconscious measures
pertaining to federal highway construction, references the Urban Institute Report, which itself
analyzed over 50 disparity studies and relied for its conclusions on over 30 of those studies, a
far broader basis than the six studies provided in this case. Id.
Anecdotal evidence. The court held that given its holding regarding statistical evidence, it did
not review the anecdotal evidence before Congress. The court did point out, however, that there
was not evidence presented of a single instance of alleged discrimination by the DOD in the
course of awarding a prime contract, or to a single instance of alleged discrimination by a
private contractor identified as the recipient of a prime defense contract. 545 F.3d at 1049. The
court noted this lack of evidence in the context of the opinion in Croson that if a government has
become a passive participant in a system of racial exclusion practiced by elements of the local
construction industry, then that government may take affirmative steps to dismantle the
exclusionary system. 545 F.3d at 1048, citing Croson, 488 U.S. at 492.
The Federal Circuit pointed out that the Tenth Circuit in Concrete Works noted the City of
Denver offered more than dollar amounts to link its spending to private discrimination, but
instead provided testimony from minority business owners that general contractors who use
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 160
them in city construction projects refuse to use them on private projects, with the result that
Denver had paid tax dollars to support firms that discriminated against other firms because of
their race, ethnicity and gender. 545 F.3d at 1049, quoting Concrete Works, 321 F.3d at 976977.
In concluding, the court stated that it stressed its holding was grounded in the particular items
of evidence offered by the DOD, and "should not be construed as stating blanket rules, for
example about the reliability of disparity studies. As the Fifth Circuit has explained, there is no
'precise mathematical formula' to assess the quantum of evidence that rises to the Croson
'strong basis in evidence' benchmark.'" 545 F.3d at 1049, quoting W.H. Scott Constr. Co., 199 F.3d
at 218 n. 11.
Narrowly tailoring. The Federal Circuit only made two observations about narrowly tailoring,
because it held that Congress lacked the evidentiary predicate for a compelling interest. First, it
noted that the 1207 Program was flexible in application, limited in duration, and that it did not
unduly impact on the rights of third parties. 545 F.3d at 1049. Second, the court held that the
absence of strongly probative statistical evidence makes it impossible to evaluate at least one of
the other narrowly tailoring factors. Without solid benchmarks for the minority groups covered
by the Section 1207, the court said it could not determine whether the 5 percent goal is
reasonably related to the capacity of firms owned by members of those minority groups i.e.,
whether that goal is comparable to the share of contracts minorities would receive in the
absence of discrimination." 545 F.3d at 10491050.
2. DynaLantic Corp. v. United States Dept. of Defense, et al., 885 F.Supp.2d
237, 2012 WL 3356813 (D.D.C. Aug. 15, 2012), appeal pending, United
States Court of Appeals for the District of Columbia, Docket Number 12
5330
Plaintiff, the DynaLantic Corporation ("DynaLantic"), is a small business that designs and
manufactures aircraft, submarine, ship, and other simulators and training equipment.
DynaLantic sued the United States Department of Defense ("DoD"), the Department of the Navy,
and the Small Business Administration ("SBA") challenging the constitutionality of Section 8(a)
of the Small Business Act (the "Section 8(a) program"), on its face and as applied: namely, the
SBA's determination that it is necessary or appropriate to set aside contracts in the military
simulation and training industry. 885 F.Supp. 2d at 242, 279. The Section 8(a) program
authorizes the federal government to limit the issuance of certain contracts to socially and
economically disadvantaged businesses. Id. at 242. DynaLantic claimed that the Section 8(a) is
unconstitutional on its face because the DoD's use of the program, which is reserved for "socially
and economically disadvantaged individuals," constitutes an illegal racial preference in violation
of the equal protection in violating its right to equal protection under the Due Process Clause of
the Fifth Amendment to the Constitution and other rights. Id. at 242. DynaLantic also claimed
the Section 8(a) program is unconstitutional as applied by the federal defendants in
DynaLantic's specific industry, defined as the military simulation and training industry. Id.
As described in DynaLantic Corp. v. United States Department of Defense, 503 F.Supp. 2d 262
(D.D.C. 2007), the court previously had denied Motions for Summary Judgment by the parties
and directed them to propose future proceedings in order to supplement the record with
additional evidence subsequent to 2007 before Congress. 503 F.Supp. 2d at 267.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 161
The Section 8(a) Program. The Section 8(a) program is a business development program for
small businesses owned by individuals who are both socially and economically disadvantaged as
defined by the specific criteria set forth in the congressional statute and federal regulations at
15 U.S.C. 632, 636 and 637; see 13 C.F.R. 124. "Socially disadvantaged" individuals are
persons who have been "subjected to racial or ethnic prejudice or cultural bias within American
society because of their identities as members of groups without regard to their individual
qualities." 13 C.F.R. 124.103(a); see also 15 U.S.C. 637(a)(5). "Economically disadvantaged"
individuals are those socially disadvantaged individuals "whose ability to compete in the free
enterprise system has been impaired due to diminished capital and credit opportunities as
compared to others in the same or similar line of business who are not socially disadvantaged."
13 C.F.R. 124.104(a); see also 15 U.S.C. 637(a)(6)(A). DynaLantic Corp., 885 F.Supp. 2d at 243
244.
Individuals who are members of certain racial and ethnic groups are presumptively socially
disadvantaged, such groups include, but are not limited to, Black Americans, Hispanic
Americans, Native Americans, Indian tribes, Asian Pacific Americans, Native Hawaiian
Organizations, and other minorities. Id. at 244 quoting 15 U.S.C. 631(f)(1)(B)(c); see also 13
C.F.R. 124.103(b)(1). All prospective program participants must show that they are
economically disadvantaged, which requires an individual to show a net worth of less than
$250,000 upon entering the program, and a showing that the individual's income for three years
prior to the application and the fair market value of all assets do not exceed a certain threshold.
Id. at 244245; see 13 C.F.R. 124.104(c)(2).
Congress has established an "aspirational goal" for procurement from socially and economically
disadvantaged individuals, which includes but is not limited to the Section 8(a) program, of five
percent of procurements dollars government wide. See 15 U.S.C. 644(g)(1). DynaLantic, at 244
245. Congress has not, however, established a numerical goal for procurement from the Section
8(a) program specifically. See Id. Each federal agency establishes its own goal by agreement
between the agency head and the SBA. Id. DoD has established a goal of awarding approximately
two percent of prime contract dollars through the Section 8(a) program. DynaLantic, at 245. The
Section 8(a) program allows the SBA, "whenever it determines such action is necessary and
appropriate," to enter into contracts with other government agencies and then subcontract with
qualified program participants. 15 U.S.C. 637(a)(1). Section 8(a) contracts can be awarded on a
"sole source" basis (i.e., reserved to one firm) or on a "competitive" basis (i.e., between two or
more Section 8(a) firms). DynaLantic, at 245; 13 C.F.R. 124.501(b).
Plaintiff's Business and the Simulation and Training Industry. DynaLantic performs contracts
and subcontracts in the simulation and training industry. The simulation and training industry is
composed of those organizations that develop, manufacture, and acquire equipment used to
train personnel in any activity where there is a humanmachine interface. DynaLantic, at 246.
Compelling Interest. The Court rules that the government must make two showings to articulate
a compelling interest served by the legislative enactment to satisfy the strict scrutiny standard
that racial classifications are constitutional only if they are narrowly tailored measures that
further compelling governmental interests." DynaLantic, at 250. First, the government must
"articulate a legislative goal that is properly considered a compelling government interest." Id.
quoting Sherbrooke Turf v. Minn. DOT., 345 F.3d 964, 969 (8th Cir.2003). Second, in addition to
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 162
identifying a compelling government interest, "the government must demonstrate 'a strong
basis in evidence' supporting its conclusion that racebased remedial action was necessary to
further that interest." DynaLantic, at 250, quoting Sherbrooke, 345 F.3d at 969.
After the government makes an initial showing, the burden shifts to DynaLantic to present
"credible, particularized evidence" to rebut the government's "initial showing of a compelling
interest." DynaLantic, at 251 quoting Concrete Works of Colorado, Inc. v. City and County of
Denver, 321 F.3d 950, 959 (10th Cir. 2003). The court points out that although Congress is
entitled to no deference in its ultimate conclusion that raceconscious action is warranted, its
factfinding process is generally entitled to a presumption of regularity and deferential review.
DynaLantic, at 251, citing Rothe Dev. Corp. v. U.S. Dep't of Def. ("Rothe III "), 262 F.3d 1306, 1321
n. 14 (Fed. Cir. 2001).
The court held that the federal Defendants state a compelling purpose in seeking to remediate
either public discrimination or private discrimination in which the government has been a
"passive participant." DynaLantic, at 252. The Court rejected DynaLantic's argument that the
federal Defendants could only seek to remedy discrimination by a governmental entity, or
discrimination by private individuals directly using government funds to discriminate.
DynaLantic, at 251. The Court held that it is well established that the federal government has a
compelling interest in ensuring that its funding is not distributed in a manner that perpetuates
the effect of either public or private discrimination within an industry in which it provides
funding. DynaLantic, at 251, citing Western States Paving v. Washington State DOT, 407 F.3d 983,
991 (9th Cir. 2005).
The Court noted that any public entity, state or federal, has a compelling interest in assuring that
public dollars, drawn from the tax dollars of all citizens, do not serve to finance the evils of
private prejudice, and such private prejudice may take the form of discriminatory barriers to the
formation of qualified minority businesses, precluding from the outset competition for public
contracts by minority enterprises. DynaLantic at 251252 quoting City of Richmond v. J. A. Croson
Co., 488 U.S. 469, 492 (1995), and Adarand Constructors, Inc. v. Slater, 228 F.3d 1147, 116768
(10th Cir. 2000). In addition, private prejudice may also take the form of "discriminatory
barriers" to "fair competition between minority and nonminority enterprises ... precluding
existing minority firms from effectively competing for public construction contracts."
DynaLantic, at 252, quoting Adarand VII, 228 F.3d at 1168.
Thus, the Court concluded that the government may implement raceconscious programs not
only for the purpose of correcting its own discrimination, but also to prevent itself from acting
as a "passive participant" in private discrimination in the relevant industries or markets.
DynaLantic, at 252, citing Concrete Works IV, 321 F.3d at 958.
Evidence before Congress. The Court analyzed the legislative history of the Section 8(a)
program, and then addressed the issue as to whether the Court is limited to the evidence before
Congress when it enacted Section 8(a) in 1978 and revised it in 1988, or whether it could
consider postenactment evidence. DynaLantic, at 255257. The Court found that nearly every
circuit court to consider the question has held that reviewing courts may consider post
enactment evidence in addition to evidence that was before Congress when it embarked on the
program. DynaLantic, at 257258. The Court noted that postenactment evidence is particularly
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 163
relevant when the statute is over thirty years old, and evidence used to justify Section 8(a) is
stale for purposes of determining a compelling interest in the present. Id. The Court then
followed the Tenth Circuit Court of Appeals' approach in Adarand VII, and reviewed the post
enactment evidence in three broad categories: (1) evidence of barriers to the formation of
qualified minority contractors due to discrimination, (2) evidence of discriminatory barriers to
fair competition between minority and nonminority contractors, and (3) evidence of
discrimination in state and local disparity studies. DynaLantic, at 258.
The Court found that the government presented sufficient evidence of barriers to minority
business formation, including evidence on racebased denial of access to capital and credit,
lending discrimination, routine exclusion of minorities from critical business relationships,
particularly through closed or "old boy" business networks that make it especially difficult for
minorityowned businesses to obtain work, and that minorities continue to experience barriers
to business networks. DynaLantic, at 258262. The Court considered as part of the evidentiary
basis before Congress multiple disparity studies conducted throughout the United States and
submitted to Congress, and qualitative and quantitative testimony submitted at Congressional
hearings. Id.
The Court also found that the government submitted substantial evidence of barriers to
minority business development, including evidence of discrimination by prime contractors,
private sector customers, suppliers, and bonding companies. DynaLantic, at 262265. The Court
again based this finding on recent evidence submitted before Congress in the form of disparity
studies, reports and Congressional hearings. Id.
State and Local Disparity Studies. Although the Court noted there have been hundreds of
disparity studies placed before Congress, the Court considers in particular studies submitted by
the federal Defendants of 50 disparity studies, encompassing evidence from 28 states and the
District of Columbia, which have been before Congress since 2006. DynaLantic, at 266270. The
Court stated it reviewed the studies with a focus on two indicators that other courts have found
relevant in analyzing disparity studies. First, the Court considered the disparity indices
calculated, which was a disparity index, calculated by dividing the percentage of MBE, WBE,
and/or DBE firms utilized in the contracting market by the percentage of M/W/DBE firms
available in the same market. DynaLantic, at 267. The Court said that normally, a disparity index
of 100 demonstrates full M/W/DBE participation; the closer the index is to zero, the greater the
M/W/DBE disparity due to underutilization. DynaLantic, at 267.
Second, the Court reviewed the method by which studies calculated the availability and capacity
of minority firms. DynaLantic, at 267268. The Court noted that some courts have looked closely
at these factors to evaluate the reliability of the disparity indices, reasoning that the indices are
not probative unless they are restricted to firms of significant size and with significant
government contracting experience. DynaLantic, at 267. The Court pointed out that although
discriminatory barriers to formation and development would impact capacity, the Supreme
Court decision in Croson and the Court of Appeals decision in O'Donnell Construction Co. v.
District of Columbia, et al., 963 F.2d 420 (D.C. Cir. 1992) "require the additional showing that
eligible minority firms experience disparities, notwithstanding their abilities, in order to give
rise to an inference of discrimination." DynaLantic, at 267, n. 10.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 164
Analysis: Strong Basis in Evidence. Based on an analysis of the disparity studies and other
evidence, the Court concluded that the government articulated a compelling interest for the
Section 8(a) program and satisfied its initial burden establishing that Congress had a strong
basis in evidence permitting raceconscious measures to be used under the Section 8(a)
program. DynaLantic, at 271280. The Court held that DynaLantic did not meet its burden to
establish that the Section 8(a) program is unconstitutional on its face, finding that DynaLantic
could not show that Congress did not have a strong basis in evidence for permitting race
conscious measures to be used under any circumstances, in any sector or industry in the
economy. DynaLantic, at 271.
The Court discussed and analyzed the evidence before Congress, which included extensive
statistical analysis, qualitative and quantitative consideration of the unique challenges facing
minorities from all businesses, and an examination of their raceneutral measures that have
been enacted by previous Congresses, but had failed to reach the minority owned firms.
DynaLantic, at 272273. The Court said Congress had spent decades compiling evidence of race
discrimination in a variety of industries, including but not limited to construction. DynaLantic, at
273. The Court also found that the federal government produced significant evidence related to
professional services, architecture and engineering, and other industries. DynaLantic, at 273.
The Court stated that the government has therefore "established that there are at least some
circumstances where it would be 'necessary or appropriate' for the SBA to award contracts to
businesses under the Section 8(a) program. DynaLantic, at 273, citing 15 U.S.C. 637(a)(1).
Therefore, the Court concluded that in response to Plaintiff's facial challenge, the government
met its initial burden to present a strong basis in evidence sufficient to support its articulated,
constitutionally valid, compelling interest. DynaLantic, at *273274. The Court also found that
the evidence from around the country is sufficient for Congress to authorize a nationwide
remedy. DynaLantic, at 273, n. 13.
Rejection of DynaLantic's Rebuttal Arguments. The Court held that since the federal Defendants
made the initial showing of a compelling interest, the burden shifted to the Plaintiff to show why
the evidence relied on by Defendants fails to demonstrate a compelling governmental interest.
DynaLantic, at 274. The Court rejected each of the challenges by DynaLantic, including holding
that: the legislative history is sufficient; the government compiled substantial evidence that
identified private racial discrimination which affected minority utilization in specific industries
of government contracting, both before and after the enactment of the Section 8(a) program;
any flaws in the evidence, including the disparity studies, DynaLantic has identified in the data
do not rise to the level of credible, particularized evidence necessary to rebut the government's
initial showing of a compelling interest; DynaLantic cited no authority in support of its claim
that fraud in the administration of raceconscious programs is sufficient to invalidate Section
8(a) program on its face; and Congress had strong evidence that the discrimination is
sufficiently pervasive across racial lines to justify granting a preference for all five groups
included in Section 8(a). DynaLantic, at 274279.
In this connection, the Court stated it agreed with Croson and its progeny that the government
may properly be deemed a "passive participant" when it fails to adjust its procurement practices
to account for the effects of identified private discrimination on the availability and utilization of
minorityowned businesses in government contracting. DynaLantic, at 276. In terms of flaws in
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 165
the evidence, the Court pointed out that the proponent of the raceconscious remedial program
is not required to unequivocally establish the existence of discrimination, nor is it required to
negate all evidence of nondiscrimination. DynaLantic, at 276, citing Concrete Work IV, 321 F.3d
at 991. Rather, a strong basis in evidence exists, the Court stated, when there is evidence
approaching a prima facie case of a constitutional or statutory violation, not irrefutable or
definitive proof of discrimination. Id, citing Crowson, 488 U.S. 500. Accordingly, the Court stated
that DynaLantic's claim that the government must independently verify the evidence presented
to it is unavailing. Id. DynaLantic, at 276277.
Also in terms of DynaLantic's arguments about flaws in the evidence, the Court noted that
Defendants placed in the record approximately 50 disparity studies which had been introduced
or discussed in Congressional Hearings since 2006, which DynaLantic did not rebut or even
discuss any of the studies individually. DynaLantic, at 277. DynaLantic asserted generally that
the studies did not control for the capacity of the firms at issue, and were therefore unreliable.
Id. The Court pointed out that Congress need not have evidence of discrimination in all 50 states
to demonstrate a compelling interest, and that in this case, the federal Defendants presented
recent evidence of discrimination in a significant number of states and localities which, taken
together, represents a broad crosssection of the nation. DynaLantic, at 277, n. 15. The Court
stated that while not all of the disparity studies accounted for the capacity of the firms, many of
them did control for capacity and still found significant disparities between minority and non
minority owned firms. DynaLantic, at 277. In short, the Court found that DynaLantic's "general
criticism" of the multitude of disparity studies does not constitute particular evidence
undermining the reliability of the particular disparity studies and therefore is of little persuasive
value. DynaLantic, at 277.
In terms of the argument by DynaLantic as to requiring proof of evidence of discrimination
against each minority group, the Court stated that Congress has a strong basis in evidence if it
finds evidence of discrimination is sufficiently pervasive across racial lines to justify granting a
preference to all five disadvantaged groups included in Section 8(a). The Court found Congress
had strong evidence that the discrimination is sufficiently pervasive across racial lines to justify
a preference to all five groups. DynaLantic, at 278. The fact that specific evidence varies, to some
extent, within and between minority groups, was not a basis to declare this statute facially
invalid. DynaLantic, at 279.
Facial Challenge: Conclusion. The Court concluded Congress had a compelling interest in
eliminating the roots of racial discrimination in federal contracting and had established a strong
basis of evidence to support its conclusion that remedial action was necessary to remedy that
discrimination by providing significant evidence in three different areas. DynaLantic, at 279.
First, it provided extensive evidence of discriminatory barriers to minority business formation.
DynaLantic, at 279. Second, it provided "forceful" evidence of discriminatory barriers to
minority business development. Id. Third, it provided significant evidence that, even when
minority businesses are qualified and eligible to perform contracts in both the public and
private sectors, they are awarded these contracts far less often than their similarly situated non
minority counterparts. Id. The Court found the evidence was particularly strong, nationwide, in
the construction industry, and that there was substantial evidence of widespread disparities in
other industries such as architecture and engineering, and professional services. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 166
AsApplied Challenge. DynaLantic also challenged the SBA and DoD's use of the Section 8(a)
program as applied: namely, the agencies' determination that it is necessary or appropriate to
set aside contracts in the military simulation and training industry. DynaLantic, at 280.
Significantly, the Court points out that the federal Defendants "concede that they do not have
evidence of discrimination in this industry." Id. Moreover, the Court points out that the federal
Defendants admitted that there "is no Congressional report, hearing or finding that references,
discusses or mentions the simulation and training industry." DynaLantic, at 280. The federal
Defendants also admit that they are "unaware of any discrimination in the simulation and
training industry." Id. In addition, the federal Defendants admit that none of the documents they
have submitted as justification for the Section 8(a) program mentions or identifies instances of
past or present discrimination in the simulation and training industry. DynaLantic, at 280.
The federal Defendants maintain that the government need not tie evidence of discriminatory
barriers to minority business formation and development to evidence of discrimination in any
particular industry. DynaLantic, at 280. The Court concludes that the federal Defendants'
position is irreconcilable with binding authority upon the Court, specifically, the United States
Supreme Court's decision in Croson, as well as the Federal Circuit's decision in O'Donnell
Construction Company, which adopted Croson's reasoning. DynaLantic, at 280. The Court holds
that Croson made clear the government must provide evidence demonstrating there were
eligible minorities in the relevant market. DynaLantic, at 280. The Court held that absent an
evidentiary showing that, in a highly skilled industry such as the military simulation and
training industry, there are eligible minorities who are qualified to undertake particular tasks
and are nevertheless denied the opportunity to thrive there, the government cannot comply
with Croson's evidentiary requirement to show an inference of discrimination. DynaLantic, at
281, citing Croson, 488 U.S. at 501. The Court rejects the federal government's position that it
does not have to make an industrybased showing in order to show strong evidence of
discrimination. DynaLantic, at 281282.
The Court notes that the Department of Justice has recognized that the federal government must
take an industrybased approach to demonstrating compelling interest. DynaLantic, at 282,
citing Cortez III Service Corp. v. National Aeronautics & Space Administration, 950 F.Supp. 357
(D.D.C. 1996). In Cortez, the Court found the Section 8(a) program constitutional on its face, but
found the program unconstitutional as applied to the NASA contract at issue because the
government had provided no evidence of discrimination in the industry in which the NASA
contract would be performed. DynaLantic, at 282. The Court pointed out that the Department of
Justice had advised federal agencies to make industryspecific determinations before offering
setaside contracts and specifically cautioned them that without such particularized evidence,
setaside programs may not survive Croson and Adarand. DynaLantic, at 282.
The Court recognized that legislation considered in Croson, Adarand and O'Donnell were all
restricted to one industry, whereas this case presents a different factual scenario, because
Section 8(a) is not industryspecific. DynaLantic, at 282, n. 17. The Court noted that the
government did not propose an alternative framework to Croson within which the Court can
analyze the evidence, and that in fact, the evidence the government presented in the case is
industry specific. Id.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 167
The Court concluded that agencies have a responsibility to decide if there has been a history of
discrimination in the particular industry at issue. DynaLantic, at 282. According to the Court, it
need not take a party's definition of "industry" at face value, and may determine the appropriate
industry to consider is broader or narrower than that proposed by the parties. Id. However, the
Court stated, in this case the government did not argue with Plaintiff's industry definition, and
more significantly, it provided no evidence whatsoever from which an inference of
discrimination in that industry could be made. DynaLantic, at 283.
Narrowly Tailoring. In addition to showing strong evidence that a raceconscious program
serves a compelling interest, the government is required to show that the means chosen to
accomplish the government's asserted purpose are specifically and narrowly framed to
accomplish that purpose. DynaLantic, at 283. The Court considered several factors in the
narrowly tailoring analysis: the efficacy of alternative, raceneutral remedies, flexibility, over or
underinclusiveness of the program, duration, the relationship between numerical goals and the
relevant labor market, and the impact of the remedy on third parties. DynaLantic, at 283
The Court analyzed each of these factors and found that the federal government satisfied all six
factors. DynaLantic, at 283291. The Court found that the federal government presented
sufficient evidence that Congress attempted to use raceneutral measures to foster and assist
minority owned businesses relating to the raceconscious component in Section 8(a), and that
these raceneutral measures failed to remedy the effects of discrimination on minority small
business owners. DynaLantic, at 283285. The Court found that the Section 8(a) program is
sufficiently flexible in granting raceconscious relief because race is made relevant in the
program, but it is not a determinative factor or a rigid racial quota system. DynaLantic, at 285
286. The Court noted that the Section 8(a) program contains a waiver provision and that the
SBA will not accept a procurement for award as an 8(a) contract if it determines that acceptance
of the procurement would have an adverse impact on small businesses operating outside the
Section 8(a) program. DynaLantic, at 286.
The Court found that the Section 8(a) program was not over and underinclusive because the
government had strong evidence of discrimination which is sufficiently pervasive across racial
lines to all five disadvantaged groups, and Section 8(a) does not provide that every member of a
minority group is disadvantaged. DynaLantic, at 286. In addition, the program is narrowly
tailored because it is based not only on social disadvantage, but also on an individualized inquiry
into economic disadvantage, and that a firm owned by a nonminority may qualify as socially
and economically disadvantaged. DynaLantic, at 286.
The Court also found that the Section 8(a) program places a number of strict durational limits
on a particular firm's participation in the program, places temporal limits on every individual's
participation in the program, and that a participant's eligibility is continually reassessed and
must be maintained throughout its program term. DynaLantic, at 287. Section 8(a)'s inherent
time limit and graduation provisions ensure that it is carefully designed to endure only until the
discriminatory impact has been eliminated, and thus it is narrowly tailored. DynaLantic, at 287
288.
In light of the government's evidence, the Court concluded that the aspirational goals at issue, all
of which were less than five percent of contract dollars, are facially constitutional. DynaLantic, at
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 168
288289. The evidence, the Court noted, established that minority firms are ready, willing, and
able to perform work equal to two to five percent of government contracts in industries
including but not limited to construction. Id. at 289. The Court found the effects of past
discrimination have excluded minorities from forming and growing businesses, and the number
of available minority contractors reflects that discrimination. DynaLantic, at 289.
Finally, the Court found that the Section 8(a) program takes appropriate steps to minimize the
burden on third parties, and that the Section 8(a) program is narrowly tailored on its face.
DynaLantic, at 289290. The Court concluded that the government is not required to eliminate
the burden on nonminorities in order to survive strict scrutiny, but a limited and properly
tailored remedy to cure the effects of prior discrimination is permissible even when it burdens
third parties. Id. at 290. The Court points to a number of provisions designed to minimize the
burden on nonminority firms, including the presumption that a minority applicant is socially
disadvantaged may be rebutted, an individual who is not presumptively disadvantaged may
qualify for such status, the 8(a) program requires an individualized determination of economic
disadvantage, and it is not open to individuals whose net worth exceeds $250,000 regardless of
race. Id.
Conclusion. The Court concluded that the Section 8(a) program is constitutional on its face. The
Court also held that it is unable to conclude that the federal Defendants have produced evidence
of discrimination in the military simulation and training industry sufficient to demonstrate a
compelling interest. Therefore, DynaLantic prevailed on its asapplied challenge. DynaLantic, at
293. Accordingly, the Court granted the federal Defendants' Motion for Summary Judgment in
part (holding the Section 8(a) program is valid on its face) and denied it in part, and granted the
Plaintiff's Motion for Summary Judgment in part (holding the program is invalid as applied to
the military simulation and training industry) and denied it in part. The Court held that the SBA
and the DoD are enjoined from awarding procurements for military simulators under the
Section 8(a) program without first articulating a strong basis in evidence for doing so.
Appeal Pending. A Notice of Appeal by the federal defendants and Notice of Cross Appeal by
DynaLantic were filed in this case to the United States Court of Appeals for the District of
Columbia: Docket Numbers 125329 and 125330. The federal defendants subsequently
dismissed their appeal (Number 5329). DynaLantics's crossappeal (Number 125330)
challenging the ruling on the facial constitutionality of Section 8(a) remains pending at the time
of this report.
3. DynaLantic Corp. v. United States Dept. of Defense, et al., 503 F. Supp.2d
262 (D.D.C. 2007)
DynaLantic Corp. involves a challenge to the DOD's utilization of the Small Business
Administration's ("SBA") 8(a) Business Development Program ("8(a) Program"). In its Order of
August 23, 2007, the district court denied both parties' Motions for Summary Judgment because
there was no information in the record regarding the evidence before Congress supporting its
2006 reauthorization of the program in question; the court directed the parties to propose
future proceedings to supplement the record. 503 F. Supp.2d 262, 263 (D.D.C. 2007).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 169
The court first explained that the 8(a) Program sets a goal that no less than 5 percent of total
prime federal contract and subcontract awards for each fiscal year be awarded to socially and
economically disadvantaged individuals. Id. Each federal government agency is required to
establish its own goal for contracting but the goals are not mandatory and there is no sanction
for failing to meet the goal. Upon application and admission into the 8(a) Program, small
businesses owned and controlled by disadvantaged individuals are eligible to receive
technological, financial, and practical assistance, and support through preferential award of
government contracts. For the past few years, the 8(a) Program was the primary preferential
treatment program the DOD used to meet its 5 percent goal. Id. at 264.
This case arose from a Navy contract that the DOD decided to award exclusively through the
8(a) Program. The plaintiff owned a small company that would have bid on the contract but for
the fact it was not a participant in the 8(a) Program. After multiple judicial proceedings the D.C.
Circuit dismissed the plaintiff's action for lack of standing but granted the plaintiff's motion to
enjoin the contract procurement pending the appeal of the dismissal order. The Navy cancelled
the proposed procurement but the D.C. Circuit allowed the plaintiff to circumvent the mootness
argument by amending its pleadings to raise a facial challenge to the 8(a) program as
administered by the SBA and utilized by the DOD. The D.C. Circuit held the plaintiff had standing
because of the plaintiff's inability to compete for DOD contracts reserved to 8(a) firms, the injury
was traceable to the raceconscious component of the 8(a) Program, and the plaintiff's injury
was imminent due to the likelihood the government would in the future try to procure another
contract under the 8(a) Program for which the plaintiff was ready, willing, and able to bid. Id. at
26465.
On remand, the plaintiff amended its complaint to challenge the constitutionality of the 8(a)
Program and sought an injunction to prevent the military from awarding any contract for
military simulators based upon the race of the contractors. Id. at 265. The district court first held
that the plaintiff's complaint could be read only as a challenge to the DOD's implementation of
the 8(a) Program [pursuant to 10 U.S.C. 2323] as opposed to a challenge to the program as a
whole. Id. at 266. The parties agreed that the 8(a) Program uses raceconscious criteria so the
district court concluded it must be analyzed under the strict scrutiny constitutional standard.
The court found that in order to evaluate the government's proffered "compelling government
interest," the court must consider the evidence that Congress considered at the point of
authorization or reauthorization to ensure that it had a strong basis in evidence of
discrimination requiring remedial action. The court cited to Western States Paving in support of
this proposition. Id. The court concluded that because the DOD program was reauthorized in
2006, the court must consider the evidence before Congress in 2006.
The court cited to the recent Rothe decision as demonstrating that Congress considered
significant evidentiary materials in its reauthorization of the DOD program in 2006, including
six recently published disparity studies. The court held that because the record before it in the
present case did not contain information regarding this 2006 evidence before Congress, it could
not rule on the parties' Motions for Summary Judgment. The court denied both motions and
directed the parties to propose future proceedings in order to supplement the record. Id. at 267.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 170
4. "Federal Procurement After Adarand" (USCCR Report September, 2005)
In September of 2005, the United States Commission on Civil Rights ("Commission") issued its
report entitled "Federal Procurement After Adarand" setting forth its findings pertaining to
federal agencies' compliance with the constitutional standard enunciated in Adarand. United
States Commission on Civil Rights: Federal Procurement After Adarand (Sept. 2005), available at
http://www.usccr.gov, citing Adarand, 515 U.S. at 23738. The following is a brief summary of
the report.
In 1995, the United States Supreme Court decided Adarand Constructors, Inc. v. Pena, 515 U.S.
200 (1995), which set forth the constitutional standard for evaluating raceconscious programs
in federal contracting. The Commission states in its report that the court in Adarand held that
racial classifications imposed by federal, state and local governments are subject to strict
scrutiny and the burden is upon the government entity to show that the racial classification is
the least restrictive way to serve a "compelling public interest;" the government program must
be narrowly tailored to meet that interest. The court held that narrow tailoring requires, among
other things, that "agencies must first consider raceneutral alternatives before using race
conscious measures." [p. ix]
Scope and methodology of the Commission's report. The purpose of the Commission's study
was to examine the raceneutral programs and strategies implemented by agencies to meet the
requirements set forth in Adarand. Accordingly, the study considered the following questions:
Do agencies seriously consider workable raceneutral alternatives, as required by Adarand?
Do agencies sufficiently promote and participate in raceneutral practices such as mentor
protg programs, outreach, and financial and technical assistance?
Do agencies employ and disclose to each other specific best practices for consideration of
raceneutral alternatives?
How do agencies measure the effects of raceneutral programs on federal contracting?
What raceneutral mechanisms exist to ensure government contracting is not
discriminatory?
The Commission's staff conducted background research, reviewing government documents,
federal procurement and economic data, federal contracting literature, and pertinent statutes,
regulations and court decisions. The Commission selected seven agencies to study in depth and
submitted interrogatories to assess the agencies' procurement methods. The agencies selected
for evaluation procure relatively large amounts of goods and services, have high numbers of
contracts with small businesses, SDBs, or HUBZone firms, or play a significant support or
enforcement role: the Small Business Administration (SBA), and the Departments of Defense
(DOD), Transportation (DOT), Education (DOEd), Energy (DOEn), Housing and Urban
Development (HUD), and State (DOS).
The report did not evaluate existing disparity studies or assess the validity of data suggesting
the persistence of discrimination. It also did not seek to identify whether, or which, aspects of
the contracting process disparately affect minorityowned firms.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 171
Findings and recommendations. The Commission concluded that "among other requirements,
agencies must consider raceneutral strategies before adopting any that allow eligibility based,
even in part, on race." [p. ix] The Commission further found "that federal agencies have not
complied with their constitutional obligation, according to the Supreme Court, to narrowly tailor
programs that use racial classifications by considering raceneutral alternatives to redress
discrimination." [p. ix]
The Commission found that "agencies have largely failed to apply the Supreme Court's
requirements, or [the U.S. Department of Justice's ("DOJ")] guidelines, to their contracting
programs." [p. 70] The Commission found that agencies "have not seriously considered race
neutral alternatives, relying instead on SBArun programs, without developing new initiatives or
properly assessing the results of existing programs." [p. 70]
The Commission identified four elements that underlie "serious consideration" of raceneutral
efforts, ensure an inclusive and fair raceneutral system, and tailor raceconscious programs to
meet a documented need: "Element 1: Standards Agencies must develop policy, procedures,
and statistical standards for evaluating raceneutral alternatives; Element 2: Implementation
Agencies must develop or identify a wide range of raceneutral approaches, rather than relying
on only one or two generic governmentwide programs; Element 3: Evaluation Agencies must
measure the effectiveness of their chosen procurement strategies based on established
empirical standards and benchmarks; Element 4: Communication Agencies should
communicate and coordinate raceneutral practices to ensure maximum efficiency and
consistency governmentwide." [p. xi]
The Commission found that "despite the requirements that Adarand imposed, federal agencies
fail to consider raceneutral alternatives in the manner required by the Supreme Court's
decision." [p. xiii] The Commission also concluded that "[a]gencies engage in few raceneutral
strategies designed to make federal contracting more inclusive, but do not exert the effort
associated with serious consideration that the Equal Protection Clause requires. Moreover, they
do not integrate raceneutral strategies into a comprehensive procurement approach for small
and disadvantaged businesses." [p. xiii]
Serious consideration [P. 71]
Finding: Most agencies could not demonstrate that they consider raceneutral alternatives
before resorting to raceconscious programs. Due to the lack of specific guidance from the DOJ,
"agencies appear to give little thought to their legal obligations and disagree both about what
the law requires and about the legal ramifications of their actions."
Recommendation: Agencies must adopt and follow guidelines to ensure consideration of race
neutral alternatives, which system could include: (1) identifying and evaluating a wide range of
alternatives; (2) articulating the underlying facts that demonstrate whether raceneutral plans
work; (3) collecting empirical research to evaluate success; (4) ensuring such assessments are
based on current, competent and comprehensive data; (5) periodically reviewing race conscious
plans to determine their continuing need; and (6) establishing causal relationships before
concluding that a raceneutral plan is ineffective. Best practices could include: (1) statistical
standards by which agencies would determine when to abandon race raceconscious efforts; (2)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 172
ongoing data collection, including racial and ethnic information, by which agencies would assess
effectiveness; and (3) policies for reviewing what constitutes disadvantaged status and the
continued necessity for strategies to increase inclusiveness.
Antidiscrimination policy and enforcement [P. 72]
Finding: The federal government lacks an appropriate framework for enforcing
nondiscrimination in procurement. Limited causes of action are available to contractors and
subcontractors, but the most accessible mechanisms are restricted to procedural complaints
about bidding processes.
Recommendation: The enactment of legislation expressly prohibiting discrimination based on
race, color, religion, sex, national origin, age, and disability, in federal contracting and
procurement. Such legislation should include protections for both contractors and
subcontractors and establish clear sanctions, remedies and compliance standards. Enforcement
authority should be delegated to each agency with contracting capabilities.
Finding: Most agencies do not have policies or procedures to prevent discrimination in
contracting. Generally, agencies are either unaware of or confused about whether federal law
protects government contractors from discrimination.
Recommendation: The facilitation of agency development and implementation of civil rights
enforcement policies for contracting. Agencies must establish strong enforcement systems to
provide individuals a means to file and resolve complaints of discriminatory conduct. Agencies
must also adopt clear compliance review standards and delegate authority for these functions to
a specific, highlevel component. Once agencies adopt nondiscrimination policies, they should
conduct regular compliance reviews of prime and other large contract recipients, such as state
and local agencies. Agencies should widely publicize complaint procedures, include them with
bid solicitations, and codify them in acquisition regulations. Civil rights personnel in each agency
should work with procurement officers to ensure that contractors understand their rights and
responsibilities and implement additional policies upon legislative action.
Finding: Agencies generally employ systems for reviewing compliance with subcontracting goals
made at the bidding stage, but do not establish norms for the number of reviews they will
conduct, nor the frequency with which they will do so.
Recommendation: Good faith effort policies should be rooted in raceneutral outreach. Agencies
should set standards for and carry out regular onsite audits and formal compliance reviews of
SDB subcontracting plans to make determinations of contractors' good faith efforts to achieve
established goals. Agencies should develop and disseminate clear regulations for what
constitutes a good faith effort, specific to individual procurement goals and procedures.
Agencies should also require that all prime contractors be subject to audits, and require prime
contractors to demonstrate all measures taken to ensure equal opportunity for SDBs to
compete, paying particular attention to contractors that have not achieved goals expressed in
their offers.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 173
Ongoing review [P. 73]
Finding: Narrow tailoring requires regular review of raceconscious programs to determine
their continued necessity and to ensure that they are focused enough to serve their intended
purpose. However, no agency reported policies, procedures, or statistical standards for when to
use raceconscious instead of raceneutral strategies, nor had agencies established procedures
to reassess presumptions of disadvantage.
Recommendation: Agencies must engage in regular, systematic reviews (perhaps biennial) of
raceconscious programs, including those that presume racebased disadvantage. They should
develop and document clear policies, standards and justifications for when raceconscious
programs are in effect. Agencies should develop and implement standards for the quality of data
they collect and use to analyze raceconscious and raceneutral programs and apply these
criteria when deciding effectiveness. Agencies should also evaluate whether raceneutral
alternatives could reasonably generate the same or similar outcomes, and should implement
such alternatives whenever possible.
Data and measurement [P. 7375]
Finding: Agencies have neither conducted race disparity studies nor collected empirical data to
assess the effects of procurement programs on minorityowned firms.
Recommendation: Agencies should conduct regular benchmark studies which should be
tailored to each agency's specific contracting needs; and the results of the studies should be used
in setting procurement goals.
Finding: The current procurement data does not evaluate the effectiveness or continuing need
for raceneutral and/or raceconscious programs.
Recommendation: A task force should determine what data is necessary to implement narrow
tailoring and assess whether (1) raceconscious programs are still necessary, and (2) the extent
to which raceneutral strategies are effective as an alternative to raceconscious programs.
Finding: Agencies do not assess the effectiveness of individual raceneutral strategies (e.g.,
whether contract unbundling is a successful raceneutral strategy).
Recommendation: Agencies should measure the success of raceneutral strategies
independently so they can determine viability as alternatives to raceconscious measures (e.g.,
agencies could track the number and dollar value of contracts broken apart, firms to which
smaller contracts are awarded, and the effect of such efforts on traditionally excluded firms).
Communication and collaboration [P. 75]
Finding: Agencies do not communicate effectively with each other about efforts to strengthen
procurement practices (e.g., there is no exchange of raceneutral best practices).
Recommendation: Agencies should engage in regular meetings with each other to share
information and best practices, coordinate outreach, and develop measurement strategies.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 174
Outreach [P. 76]
Finding: Even though agencies engage in outreach efforts, there is little evidence that their
efforts to reach small and disadvantaged businesses are successful. They do not produce
planning or reporting documents on outreach activities, nor do they apply methods for tracking
activities, expenditures, or the number and types of beneficiaries.
Recommendation: Widely broadcast information on the Internet and in popular media is only
one of several steps necessary for a comprehensive and effective outreach program. Agencies
can use a variety of formats conferences, meetings, forums, targeted media, Internet, printed
materials, ad campaigns, and public service announcements to reach appropriate audiences.
In addition, agencies should capitalize on technological capabilities, such as listservs, text
messaging, audio subscription services, and new technologies associated with portable listening
devices, to circulate information about contracting opportunities. Agencies should include
outreach in budget and planning documents, establish goals for conducting outreach activities,
track the events and diversity of the audience, and train staff in outreach strategies and skills.
Conclusion
The Commission found that 10 years after the Supreme Court's Adarand decision, federal
agencies have largely failed to narrowly tailor their reliance on raceconscious programs and
have failed to seriously consider raceneutral decisions that would effectively redress
discrimination. Although some agencies employ some raceneutral strategies, the agencies fail
"to engage in the basic activities that are the hallmarks of serious consideration," including
program evaluation, outcomes measurement, reliable empirical research and data collection,
and periodic review.
The Commission found that most federal agencies have not implemented "even the most basic
raceneutral strategy to ensure equal access, i.e., the development, dissemination, and
enforcement of clear, effective antidiscrimination policies. Significantly, most agencies do not
provide clear recourse for contractors who are victims of discrimination or guidelines for
enforcement."
One Commission member, Michael Yaki, filed an extensive Dissenting Statement to the Report.
[pp. 79170]. This Dissenting Statement by Commissioner Yaki was referred to and discussed by
the district court in Rothe Development Corp. v. US DOD, 499 F.Supp.2d 775, 86465 (W.D. Tex.
August 10, 2007), reversed on appeal, Rothe, 545 F.3d 1023 (Fed.Cir 2008), (see discussion of
Rothe above. In his dissent, Commissioner Yaki criticized the Majority Opinion, including noting
that his statistical data was "deleted" from the original version of the draft Majority Opinion that
was received by all Commissioners. The district court in Rothe considered the data discussed by
Yaki.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX B, PAGE 175
APPENDIX C.
Utilization Analysis Methodology
The utilization analysis examined the percentage of contract dollars that went to minority and
womenowned business enterprises (MBE/WBEs) on construction and constructionrelated
professional services contracts that the Port of Seattle (the Port) awarded during the study period.
The study team included the participation of all MBE/WBES in its calculations of MBE/WBE
utilization, regardless of whether they were certified as Disadvantaged Business Enterprises
(DBEs), MBEs, or WBEs through the Washington State Office of Minority and Women's Business
Enterprises (OMWBE). The study team also calculated the utilization of nonHispanic white male
owned businesses (i.e., majorityowned businesses).
The study team compiled and analyzed the most comprehensive set of data that was available on
prime contracts and subcontracts that the Port awarded during the study period. BBC sought data
that consistently included information about prime contractors and subcontractors, regardless of
ownership or DBE certification status. The study team analyzed both Federal Aviation
Administration (FAA)funded and locallyfunded construction and constructionrelated
professional services contracts as part of the utilization analysis.
Appendix C describes the study team's utilization data collection and review processes in four
parts:
A. Collection of the Port's contract data;
B. Collection of vendor information;
C. Collection of the Port's bid and proposal data; and
D. Port review.
A. Collection of the Port's Contract Data
The study team collected contract data on construction and constructionrelated professional
services contracts that the Port awarded during the study period (January 1, 2010 to September
30, 2013). BBC collected prime contract and subcontract data from the Port's Central
Procurement Office. BBC also collected a substantial amount of subcontractor data directly from
utilized prime contractors.
Prime contract data collection. BBC collected the following information about each relevant
construction and constructionrelated professional services prime contract:
Contract number;
Description of work;
Award date;
Amount paidtodate;
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX C, PAGE 1
Total invoice amount paid in 2013;1
Whether the contract included FAA funding; and
Prime contractor name and identification number.
Subcontract data collection. BBC collected the following information about each relevant
construction and constructionrelated professional services subcontract:
Associated prime contract number;
Amount paidtodate on the subcontract;
Total invoice amount paid in 2013;2
Description of work; and
Subcontractor name and identification number.
The Port maintains comprehensive subcontractor data for all construction contracts executed
during the study period. Therefore, BBC used the subcontract paidtodate amount for all
construction contracts included in the study. The Port began maintaining subcontractor data on
constructionrelated professional services contracts in 2013. In order to gather comprehensive
subcontractor data for the entire study period, the study team collected data on associated
constructionrelated professional services subcontracts from two main sourcessurveys of prime
contractors and the Port's 2013 prime contract and subcontract invoice records.3
Surveys of professional services prime contractors. BBC sent out surveys to request subcontract
data from constructionrelated professional services prime contractors to which the Port awarded
at least one prime contract with a paidtodate value of $50,000 or more. BBC initially sent
surveys to 72 prime contractors and received responses from 28 of them. With the Port's
assistance, BBC fielded a second round of surveys to prime contractors who did not respond to the
initial survey. The Port called the 25 prime contractors with the highest remaining paidtodate
amounts, and BBC sent a second round of mail surveys to the remaining unresponsive prime
contractors. The second round of prime surveys yielded 13 responses. Thus, the overall response
rate for the professional services prime contractor outreach effort was 41 of 72 prime contractors,
or 57 percent.
2013 professional services invoice records. The Port began maintaining subcontractor data on
professional services contracts in 2013. Thus, in addition to the prime contractor outreach effort,
BBC collected 2013 prime contract and subcontract invoice records from the Port for all
constructionrelated professional services contracts that were active in 2013.4, 5
1 The study team collected 2013 prime contract invoice information for constructionrelated professional services contracts
only.
2 The study team collected 2013 subcontract invoice information for constructionrelated professional services contracts only.
3 If data for a particular contract were available from multiple sources, then the study team used the source with the most
comprehensive subcontract data.
4 Subcontractor invoice information was not available for years prior to 2013.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX C, PAGE 2
Methodology for constructionrelated professional services contract data. BBC used 2013
invoice information for two types of constructionrelated professional services contractsthose
for which BBC did not receive a prime contractor survey response and those for which the prime
contractor appeared to have filled out the survey incorrectly.6 If BBC received an accurately
completed prime contractor survey response, that subcontractor information was used in the
disparity study analyses. In total, there were 65 prime contracts for which BBC used 2013 invoice
information. Because that data only represented a portion of the dollars paid during the study
period, BBC applied a weight to the 2013 invoice dollar values in order to estimate the total prime
contract and subcontract dollars for the entire study period.7, 8
B. Collection of Vendor Information
The Port provided information on prime contractors and subcontractors that were utilized on
construction and constructionrelated professional services contracts that the agency awarded
during the study period. The Port provided the following information about each utilized
business:
Firm name;
Addresses and phone numbers; and
DBE/MBE/WBE certification status (when available).
BBC obtained additional information about utilized businesses from business lists that the study
team purchased from Dun & Bradstreet (D&B) and from telephone surveys that the study team
conducted with prime contractors and subcontractors. BBC obtained the following additional
information about utilized businesses:
Primary line of work;
Firm size;
Establishment year;
Race/ethnic and gender of owners; and
Additional contact information.
5 There were three contracts that were active in 2013 for which BBC did not receive a prime contractor survey response or 2013
invoice data. BBC made the assumption that there were no subcontract dollars on those contracts.
6 BBC and the Port reviewed the prime contractor survey responses and identified several that were unreliable.
7 BBC weighted contract values that were sourced from 2013 invoice data to equal the total paidtodate amount for the entire
study period for those particular contracts.
8 BBC reviewed that methodology with the Port prior to performing the analysis.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX C, PAGE 3
For the purposes of the study, BBC relied on definitions that the Federal DBE Program uses to
specify groups that are presumed to be disadvantaged:
Black American;
AsianPacific American;
Subcontinent Asian American;
Hispanic American;
Native American; and
Women.
In addition to information from telephone surveys, BBC relied on several other sources of
information to determine whether businesses were owned by minorities or women and whether
MBE/WBEs were certified as DBEs or as MBEs/WBEs:
Information from OMWBE directories;
Port vendor data;
Port staff review; and
Information from D&B and other sources.
C. Collection of the Port's Bid and Proposal Data
BBC conducted a case study analysis of bids and proposals for a sample of construction and
constructionrelated professional services contracts that the Port awarded during the study
period. The Port provided bid, proposal, and other related information to the BBC study team. For
details about the case study analysis, see Chapter 8.
Construction contracts. BBC examined proposal information for a sample of 165 construction
contracts that the Port executed during the study period. The study team did not analyze 24 of
those contracts because they were not subject to the Port's public works procurement process.
The Port was able to provide complete proposal evaluation information for the remaining 141
contracts.
Professional services contracts. BBC examined bid information for a sample of 48
professional services contracts that the Port awarded during the study period. The Port was able
to provide complete proposal evaluation information for all 48 contracts.
D. Port Review
The Port reviewed BBC's utilization data during several stages of the study process. The BBC
study team met with Port staff to review the data collection process, information that the study
team gathered, and summary results. Port staff also reviewed contract and vendor information.
BBC incorporated the Port's feedback in the final contract and vendor data that the study team
used as part of the disparity study.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX C, PAGE 4
APPENDIX D.
General Approach to Availability Analysis
The study team used a custom census approach to analyze the availability of minority and
womenowned business enterprises (MBE/WBEs) for construction and constructionrelated
professional services prime contracts and subcontracts that the Port of Seattle (the Port)
executed between January 1, 2010 and September 30, 2013. Appendix D expands on the
information presented in Chapter 5 to describe the study team's:
A. General approach to collecting availability information;
B. Development of the business establishments list;
C. Development of the survey instrument;
D. Execution of surveys; and
E. Additional considerations related to measuring availability.
A. General Approach to Collecting Availability Information
BBC contracted with Customer Research International (CRI) to conduct telephone surveys with
thousands of business establishments in the Seattle Metropolitan Area.1 Business
establishments that CRI surveyed were businesses with locations in the Seattle Metropolitan
Area that the study team identified as doing work in fields closely related to the types of
construction and constructionrelated professional services contracts that the Port awarded
during the study period. The study team began the survey process by determining the
subindustries for each relevant Port contract element and identifying 8digit Dun & Bradstreet
(D&B) work specialization codes that best corresponded to those subindustries.2 The study
team then collected information about local business establishments that D&B listed as having
their primary lines of business within those work specializations. Rather than drawing a sample
of business listings from D&B, the study team attempted to contact every business
establishment listed under relevant work specialization codes.3
A portion of the telephone surveys that BBC conducted for the Port availability analysis were
originally conducted in connection with recent availability analyses for the Washington State
Department of Transportation (WSDOT) and Sound Transit. BBC included survey data from the
WSDOT and Sound Transit studies from businesses that:
1 For the purposes of this study, the Seattle Metropolitan Area is defined as King, Pierce, and Snohomish counties.
2 D&B has developed 8digit industry codes that provide more precise definitions of firm specializations than the 4digit
Standard Industrial Classification (SIC) codes or the North American Industry Classification System (NAICS) codes that the
federal government has prepared.
3 Because D&B organizes its database by "business establishment" and not by "business" or "firm," BBC purchased business
listings in that fashion. Therefore, in many cases, the study team purchased information about multiple Washington locations
of a single business and called all of those locations. BBC's method for consolidating information for different establishments
that were related to the same business is described later in Appendix D.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 1
Had locations in the Seattle Metropolitan Area;
Reported working within subindustries relevant to Port contracts; and
Indicated that they were qualified and interested in performing relevant work for local
agencies.
Businesses meeting those criteria were included in the database of companies that the study
team considered potentially available for Port work. Businesses had to also meet other criteria
for the study team to consider them as available for specific Port prime contracts or
subcontracts of certain types and sizes.
As part of the three telephone survey efforts, the study team attempted to contact 8,859
business establishments in the local marketplace relevant to Port contracting. That total
included 6,727 construction establishments and 2,132 constructionrelated professional
services establishments. The study team was able to successfully contact 2,890 of those
establishmentsabout 45 percent of the establishments with valid phone listings (2,380
business establishments did not have valid phone listings). Of business establishments that the
study team contacted successfully, 1,917 establishments completed availability surveys.
B. Development of the Business Establishments List
The study team did not expect every business establishment that it contacted to be potentially
available for Port work. The study team's goal was to developwith a high degree of
precisionunbiased estimates of the availability of MBE/WBEs for the types of construction
and constructionrelated contracts that the Port awarded during the study period. In fact, for
some subindustries, BBC anticipated that few businesses would be available to perform that
type of work for the Port.
In addition, BBC did not design the research effort so that the study team would contact every
local business possibly performing construction or constructionrelated professional services
work. To do so would have required the study team to include subindustries that are only
marginally related or unrelated to the types of construction and constructionrelated
professional services contracts that the Port awarded during the study period. In addition, some
business establishments working in relevant subindustries may have been missing from
corresponding D&B listings.
BBC determined the types of work involved in Port contract elements by reviewing prime
contract and subcontract dollars that went to different types of businesses during the study
period. Figure D1 lists the 8digit work specialization codes within construction and
constructionrelated professional services that the study team determined were most related to
the contract dollars that the Port awarded during the study period and that BBC considered as
part of the availability analysis. The study team grouped those specializations into distinct
subindustries, which are presented as headings in Figure D1.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 2
Figure D1.
Construction and constructionrelated professional services work specializations included in the availability analysis
Industry code Industry description Industry code Industry description
Construction
Excavation, grading, drainage, drilling, and demolition Water, sewer, and utility lines
16110203 Grading 16230000 Water, sewer, and utility lines
16290400 Land preparation construction 16230200 Communication line and transmission tower construction
16299902 Earthmoving contractor 16230203 Telephone and communication line construction
17940000 Excavation work 16230300 Water and sewer line construction
17949901 Excavation and grading, building construction 16230303 Water main construction
17950000 Wrecking and demolition work 16239904 Pipeline construction, nsk
17959901 Concrete breaking for streets and highways 16239906 Underground utilities contractor
17959902 Demolition, buildings and other structures 17310302 Fiber optic cable installation
17990900 Building site preparation
17990901 Boring for building construction Electrical work, lighting, and signals
17999906 Core drilling and cutting 17310000 Electrical work
17310100 Electric power systems contractors
Construction, sand, and gravel 17310103 Standby or emergency power specialization
14420000 Construction sand and gravel 17310200 Electronic controls installation
14420201 Gravel mining 17319903 General electric contractor
52110506 Sand and gravel 17319904 Lighting contractor
Painting, striping, and marking Trucking and hauling
17210200 Commercial painting 42120000 Local trucking, without storage
17210300 Industrial painting 42129905 Dump truck haulage
17210303 Pavement marking contractor 42129908 Heavy machinery transport, local
42129912 Steel hauling, local
Heavy construction equipment rental 42139905 Heavy machinery transport
35319908 Road construction and maintenance machinery
73530000 Heavy construction equipment rental Marine work and dredging
73899909 Crane and aerial lift service 16290106 Dredging contractor
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 3
Figure D1.
Construction and constructionrelated professional services work specializations included in the availability analysis (continued)
Construction (continued)
Heavy construction Heavy construction (continued)
16110000 Highway and street construction 17719902 Concrete repair
16110200 Surfacing and paving 17719904 Foundation and footing contractor
16110202 Concrete construction; roads, highways, sidewalks, etc. 17919902 Concrete reinforcement, placing of
16110204 Highway and street paving contractor
16110205 Resurfacing contractor Landscaping and erosion control
16110207 Gravel or dirt road construction 07810200 Landscape services
16119901 General contractor, highway and street construction 07829903 Landscape contractors
16119902 Highway and street maintenance
16220000 Bridge, tunnel, and elevated highway construction Asphalt and concrete supply
16229901 Bridge construction 29510000 Asphalt paving mixtures and blocks
16229902 Highway construction, elevated 29510200 Paving mixtures
16229903 Tunnel construction 29510201 Asphalt and asphaltic paving mixtures
16229904 Viaduct construction 29510203 Concrete, asphaltic
16290105 Drainage system construction 32720000 Concrete products, nec
16299904 Pile driving contractor 32730000 Readymixed concrete
17410100 Foundation and retaining wall construction 35310401 Asphalt plant, including gravelmix type
17410102 Retaining wall construction 50320100 Paving materials
17710000 Concrete work 52110502 Cement
17710100 Stucco, gunite, and grouting contractors 52110503 Concrete and cinder block
17710102 Grouting work
17710103 Gunite contractor Fencing, guardrails, barriers, and signs
17710201 Curb construction 16110100 Highway signs and guardrails
17710202 Sidewalk contractor 16110101 Guardrail construction, highways
17710300 Driveway, parking lot, and blacktop contractors 16110102 Highway and street sign installation
17710301 Blacktop (asphalt) work 17999912 Fence construction
17710303 Parking lot construction 39930100 Electric Signs
17719901 Concrete pumping 39939907 Signs, not made in custom painting shops
73599912 Work zone traffic equipment (flags, cones, barrels, etc.)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 4
Figure D1.
Construction and constructionrelated professional services work specializations included in the availability analysis (continued)
Construction (continued)
Other construction services Other construction supplies
15420101 Commercial and office buildings, new construction 32720300 Precast terrazo or concrete products
15420103 Commercial and office buildings, renovation and repair 33120405 Structural shapes and pilings, steel
17110000 Plumbing, heating, airconditioning 34490000 Miscellaneous metalwork
17110401 Mechanical contractor 34490101 Bars, concrete reinforcing: fabricated steel
17310201 Computerized control installation 50399912 Soil erosion control fabrics
17310300 Communications specialization 50510209 Forms, concrete construction (steel)
17420000 Plastering, drywall, and insulation 50630202 Cable conduit
17610000 Roofing, siding, and sheetmetal work 50630504 Signaling equipment, electrical
17919907 Precast concrete structural framing or panels, placing of 34410000 Fabricated structural metal
17960000 Installing building equipment 34419901 Building components, structural steel
17990302 Service station equipment installation, maint., and repair 36990500 Security devices
17990500 Exterior cleaning, including sandblasting 50510214 Pipe and tubing, steel
17990801 Absestors removal and encapsulation 50630205 Electrical construction materials
49590100 Road, airport, and parking lot maintenance service
76992501 Elevators: Inspection, service, and repair Traffic control and flagging services
73899921 Flagging services (traffic control)
Structural steel erection
17910000 Structural steel erection Railroad construction
17919905 Iron work, structural 16290200 Railroad and subway construction
Constructionrelated professional services
Surveying Environmental research, consulting and testing
73890800 Mapmaking services 73890200 Inspection and testing services
73890801 Mapmaking or drafting, including aerial 87340300 Pollution testing
73890802 Photogrammetric mapping 87340301 Hazardous waste testing
87130000 Surveying services 87349909 Soil analysis
87489905 Environmental consultant
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 5
Figure D1.
Construction and constructionrelated professional services work specializations included in the availability analysis (continued)
Constructionrelated professional services (continued)
Engineering Engineering (continued)
87110000 Engineering services 87420410 Transportation consultant
87110400 Construction and civil engineering 87480204 Traffic consultant
87110402 Civil engineering
87119901 Acoustical engineering Other professional services
87119902 Aviation and/or aeronautical engineering 07810201 Landscape architects
87119903 Consulting engineer 87330201 Archeological expeditions
87119905 Electrical or electronic engineering
87119908 Marine engineering Construction management
87120100 Architectural engineering 87419902 Construction management
87120101 Architectural engineering 87420402 Construction project management consultant
Source: BBC Research & Consulting.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 6
C. Development of the Survey Instrument
BBC drafted an availability survey instrument to collect business information from construction
and constructionrelated professional services business establishments in the Seattle
Metropolitan Area. Port staff reviewed the survey instrument before the study team used it in
the field. The survey instrument that the study team used with construction establishments is
presented at the end of Appendix D. The study team modified the construction survey
instrument slightly for use with professional services establishments in order to reflect terms
more commonly used in the professional services industry (e.g., the study team substituted the
words "prime contractor" and "subcontractor" with "prime consultant" and "subconsultant"
when surveying professional services establishments).4
Survey structure. The availability survey included 15 sections, and CRI attempted to cover all
sections with each business establishment that they successfully contacted and that was willing
to complete a survey. Surveyors did not know the race/ethnicity or gender of business owners
when calling business establishments.
1. Identification of purpose. The surveys began by identifying the Port as the survey sponsor
and describing the purpose of the study (i.e., "developing a list of companies involved in
construction, maintenance, or design work on a wide range of port and airportrelated
projects").
2. Verification of correct business name. The surveyor verified that he or she had reached the
correct business, and if not, inquired about the correct contact information for the correct
business. When the business name was not correct, surveyors asked if the respondent knew how
to contact the business. CRI followed up with the desired company based on the new contact
information (see areas "X" and "Y" of the availability survey instrument at the end of Appendix D).
3. Verification of work related to relevant projects. The surveyor asked whether the
organization does work or provides materials related to construction, maintenance, or design on
transportationrelated projects (Question A1). Surveyors continued the survey with businesses
that responded "yes" to that question.
4. Verification of forprofit business status. The surveyor asked whether the organization was a
forprofit business as opposed to a government or notforprofit entity (Question A2). Surveyors
continued the survey with businesses that responded "yes" to that question.
5. Confirmation of main lines of business. Construction businesses confirmed their main lines of
business according to work type categories related to construction (Question A3).5 All businesses
also confirmed their main lines of business according to D&B (Question A4a). If D&B's work
specialization codes were incorrect, businesses then described their main lines of business
(Question A4b). After the survey was complete, BBC coded new information on main lines of
business into appropriate 8digit D&B work specialization codes.
4 BBC also developed a fax and email version of the survey instrument for business establishments that reported a preference
to complete the survey in those formats.
5 Professional services businesses were not asked Question A3.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 7
6. Sole location or multiple locations. Because the study team surveyed business
establishments and not businesses or firms, the surveyor asked business owners or managers if
their businesses had other locations (Question A5), and whether their establishments were
affiliates or subsidiaries of other firms (Questions A8 and A9).
7. Past bids or work with government agencies and private sector organizations. The surveyor
asked about bids and work on past government and private sector contracts. CRI asked those
questions in connection with both prime contracts and subcontracts (Questions B1 through B8).
8. Qualifications and interest in future work. The surveyor asked about businesses'
qualifications and interest in future work with the Port. CRI asked those questions in connection
with both prime contracts and subcontracts (Questions B10 and B12).
9. Geographic areas. The surveyor asked questions about the geographic regions within the
Seattle Metropolitan Area in which businesses serve customers (Questions C1a and C1c).
10. Year established. The surveyor asked businesses to identify the approximate year in which
they were established (Question D1).
11. Largest contracts. The study team asked businesses to identify the value of the largest
contract on which they had bid on or had been awarded in Washington during the past five
years. CRI asked those questions for both prime contracts and subcontracts (Questions D2
through D4).
12. Ownership. The surveyor asked whether businesses were at least 51 percent owned and
controlled by women and/or minorities. If businesses indicated that they were minorityowned,
they were also asked about the race/ethnicity of ownership (Questions E1 through E3). The
study team confirmed that information through several other data sources, including:
Information from the Washington State Office of Minority and Women's Business
Enterprises (OMWBE) Directory of Certified Firms;
Port vendor data;
Port staff review; and
Information from D&B and other sources.
When information about race/ethnicity or gender of ownership conflicted between sources, the
study team reconciled that information through followup telephone calls with the businesses.
13. Business size. The surveyor asked several questions about the size of businesses in terms of
their revenues and number of employees. For businesses with multiple locations, the Business
Size section also asked about their revenues and number of employees across all locations
(Questions F1 through F6).
14. Potential barriers in the marketplace. The surveyor asked a series of questions concerning
general insights about the marketplace and Port contracting practices (Questions G1a through
G1j). The survey also included an openended question about the local marketplace (Question
G2). In addition, the surveyor included a question asking whether respondents would be willing
to participate in a followup interview about marketplace conditions (Question G3).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 8
15. Contact information. The survey concluded by collecting complete contact information for
the establishment and the individual who completed the survey (Questions H1 through H6).
D. Execution of Surveys
BBC held planning and training sessions both in person and via telephone with CRI executives
and surveyors prior to conducting the availability surveys. CRI conducted the surveys in 2012,
2013, and 2014. CRI programmed the surveys, conducted them via telephone, and provided BBC
with weekly data reports. To minimize nonresponse, CRI made at least five attempts on
different times of day and on different days of the week to successfully reach each business
establishment. CRI identified and attempted to survey an available company representative such
as the owner, manager, chief financial officer, or other key official who could provide accurate
and detailed responses to survey questions.
Establishments that the study team successfully contacted. Figure D2 presents the
disposition of the 8,859 business establishments that the study team attempted to contact for
availability surveys and how that number resulted in the 2,890 establishments that the study
team was able to successfully contact.
Figure D2.
Percent of
Disposition of
Number of business
attempts to survey
establishments listings
business
establishments
Beginning list 8,859
Less duplicate numbers 203
Note: Less nonworking phone numbers 1,759
CRI made up to five attempts to Less wrong number/business 418
complete a survey with each
establishment.
Unique business listings with working phone numbers 6,479 100.0 %
Less no answer 796 12.3
Source: Less could not reach responsible staff member 2,431 37.5
BBC Research & Consulting from Less language barrier 48 0.7
20122014 availability surveys. Less unreturned fax/email 314 4.8
Establishments successfully contacted 2,890 44.6 %
Nonworking or wrong phone numbers. Some of the business listings that the study team
purchased from D&B and that CRI attempted to contact were:
Duplicate phone numbers (203 listings);
Nonworking phone numbers (1,759 listings); or
Wrong numbers for the desired businesses (418 listings).
Some nonworking phone numbers and wrong numbers reflected firms going out of business or
changing their names and phone numbers between the time that D&B listed them and the time
that the study team attempted to contact them.
Working phone numbers. As shown in Figure D2, there were 6,479 business establishments
with working phone numbers that CRI attempted to contact. CRI was unsuccessful in contacting
many of those businesses for various reasons:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 9
CRI could not reach anyone after five attempts at different times of the day and on different
days of the week for 796 establishments.
CRI could not reach a responsible staff member after five attempts at different times of the
day on different days of the week for 2,431 establishments.
CRI could not conduct the availability survey due to language barriers for 48
establishments.
CRI sent hardcopy fax or email availability surveys upon request but did not ultimately
receive completed surveys from 314 establishments.
After taking those unsuccessful attempts into account, CRI was able to successfully contact 2,890
business establishments, or about 45 percent of establishments with valid phone listings.
Establishments included in the availability database. Figure D3 presents the
disposition of the 2,890 business establishments that CRI successfully contacted and how that
number resulted in the 620 businesses that the study team included in the availability database.
Figure D3.
Number of
Disposition of
establishments
successfully
contacted business
Establishments successfully contacted 2,890
establishments Less establishments not interested in discussing availability for 973
local public agency work
Source: Establishments that completed interviews about firm characteristics 1,917
BBC Research & Consulting from Less no relevant work 1,137
20122014 availability surveys. Less not a forprofit business 16
Less line of work outside scope 32
Less no past bid/award 44
Less no interest in future work 21
Less established after the study period (2013) 1
Less multiple establishments 46
Establishments available for Port work 620
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 10
Establishments not interested in discussing availability for Port work. Of the 2,890 business
establishments that the study team successfully contacted, 973 establishments were not
interested in discussing their availability for Port work. In total, 1,917 (66%) successfully
contacted business establishments completed availability surveys.
Establishments available for Port work. The study team only deemed a portion of the business
establishments that completed availability surveys as potentially available for the construction
or constructionrelated professional services prime contracts and subcontracts that the Port
awarded during the study period. The study team excluded many of the businesses that
completed surveys from the availability database for various reasons:
BBC excluded 1,137 establishments that indicated that their businesses were not involved
in relevant contracting work.
Of the establishments that completed availability surveys, 16 indicated that they were not a
forprofit business. The survey ended when respondents reported that their
establishments were not forprofit businesses.
BBC excluded 32 establishments that indicated that their businesses were involved in
construction or constructionrelated professional services work but reported that their
main lines of business were outside of the study scope.
BBC excluded 44 establishments that reported not having bid on or been awarded
contracts in Washington within the past five years.
BBC excluded 21 establishments that reported not being qualified or interested in either
prime contracting or subcontracting opportunities with the Port or other local agencies.
BBC excluded one business establishment that reported being established in October 2013
or later. That business establishment would not have been available for contract elements
that the Port awarded during the study period.
Fortysix establishments represented different locations of the same businesses. Prior to
analyzing results, BBC combined responses from multiple locations of the same business
into a single data record.
After those exclusions, BBC compiled a database of 620 businesses that are potentially available
for Port work.
Coding responses from multilocation businesses. Responses from different locations of the
same business were combined into a single, summary data record according to several rules:
If any of the establishments reported bidding or working on a contract within a particular
subindustry, the study team considered the business to have bid or worked on a contract in
that subindustry.
The study team combined the different roles of work that establishments of the same
business reported (i.e., prime contractor or subcontractor) into a single response, again
corresponding to the appropriate subindustry. For example, if one establishment reported
that it works as a prime contractor and another establishment reported that it works as a
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 11
subcontractor, then the study team considered the business as available for both prime
contracts and subcontracts within the relevant subindustry.
Except when there were large discrepancies among individual responses regarding
establishment dates, BBC used the earliest founding date that establishments of the same
business provided. In cases of large discrepancies, BBC followed up with the business
establishments to obtain accurate establishment date information.
BBC considered the largest contract that any establishments of the same business reported
having bid or worked on as the business' relative capacity (i.e., the largest contract for
which the business could be considered available).
BBC considered the largest revenue total that any establishments of the same business
reported as the business' revenue cap (for purposes of determining status as potential
Disadvantaged Business Enterprises (DBEs)).
BBC determined the number of employees for businesses by calculating the mode or the
mean of responses from its establishments.
BBC coded businesses as minority or womenowned if the majority of its establishments
reported such status.
E. Additional Considerations Related to Measuring Availability
The study team made several additional considerations related to its approach to measuring
availability, particularly as those considerations related to the Port's implementation of the
Federal DBE program.
Not providing a count of all businesses available for Port work. The purpose of the
availability surveys was to provide precise and representative estimates of the percentage of
MBE/WBEs potentially available for Port work. The availability analysis did not provide a
comprehensive listing of every business that could be available for Port work and should not be
used in that way. Federal courts have approved the custom census approach to measuring
availability that BBC used in this study. The United States Department of Transportation's
(USDOT's) "Tips for Goals Setting in the Disadvantaged Business Enterprise (DBE) Program"
also recommends a similar approach to measuring availability for agencies implementing the
Federal DBE Program.6
Not basing the availability analysis on MBE/WBE or DBE directories,
prequalification lists, or bidders lists. USDOT guidance for determining MBE/WBE
availability recommends dividing the number of businesses in an agency's DBE directory by the
total number of businesses in the marketplace, as reported in U.S. Census data. As another
option, USDOT suggests using a list of prequalified businesses or a bidders list to estimate the
availability of MBE/WBEs for an agency's prime contracts and subcontracts.
6 Tips for Goals Setting in the Disadvantaged Business Enterprise (DBE) Program,
http://www.osdbu.dot.gov/dbeprogram/tips.cfm.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 12
The primary reason why the study team rejected such approaches when measuring MBE/WBE
availability for Port work is that dividing a simple count of certified DBEs by the total number of
businesses does not provide the data on business characteristics that the study team desired for
the disparity study. The methodology applied in this study takes a custom census approach to
measuring availability and adds several layers of refinement to a simple head count approach.
For example, the surveys provided data on qualifications, relative capacity, and interest in Port
work for each business, which allowed the study team to take a more refined approach to
measuring availability. Court cases involving implementation of the Federal DBE Program have
approved the use of a custom census approach to measuring availability.
Note that BBC used MBE/WBE and DBE directories and other sources of information to confirm
information about the race/ethnicity and gender of business ownership that it obtained from
availability surveys.
Using D&B lists as the sample frame. BBC began its custom census approach by measuring
availability with D&B business lists. D&B does not require firms to pay a fee to be included in its
listingsit is completely free to listed firms. D&B provides the most comprehensive private
database of business listings in the United States. Even so, the database does not include all
establishments operating in the Seattle Metropolitan Area:
There can be a lag between formation of a new business and inclusion in D&B, meaning
that the newest businesses may be underrepresented in the sample frame. Based on
information from BBC's survey effort, newly formed businesses are more likely to be
minority or womenowned, suggesting that MBE/WBEs might be underrepresented in the
final availability database.
Although D&B includes homebased businesses, those businesses are more difficult to
identify and are thus somewhat less likely than other businesses to be included in D&B
listings. Small, homebased businesses are more likely than large businesses to be
minority or womenowned, which again suggests that MBE/WBEs might be
underrepresented in the final availability database.
BBC is not able to quantify how much, if any, underrepresentation of MBE/WBEs exists in the
final availability database. However, BBC concludes that any such underrepresentation would be
minor and would not have a meaningful effect on the availability and disparity analyses
presented in this report. In addition, there are no alternative business listings that would better
address such issues.
Selection of specific subindustries. Defining subindustries based on specific work
specialization codes (e.g., NAICS, SIC, or D&B industry codes) is a standard step in analyzing
businesses in an economic sector. Government and private sector economic data are typically
organized according to such codes. As with any such research, there are limitations when
choosing specific D&B work specialization codes to define sets of establishments to be surveyed.
For example, it was not possible for BBC to include all businesses possibly doing work in the
construction and constructionrelated professional services industries without conducting
surveys with nearly every business in the relevant geographic market area.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 13
In addition, some industry codes are imprecise and overlap with other business specialties, and
D&B does not maintain an 8digit level of detail for each firm in its database. Some businesses
span several types of work, even at the 4digit level of specificity. That overlap can make
classifying firms into single main lines of business difficult and imprecise. When the study team
asked business owners and managers to identify main lines of business, they often gave broad
answers. For those and other reasons, BBC collapsed many of the work specialization codes into
broader subindustries to more accurately classify firms in the availability database.
Nonresponse bias. An analysis of nonresponse bias considers whether businesses that were
not successfully surveyed are systematically different from those that were successfully
surveyed and included in the final data set. There are opportunities for nonresponse bias in any
survey effort. The study team considered the potential for nonresponse bias due to:
Research sponsorship;
Work specializations; and
Language barriers.
Research sponsorship. Surveyors introduced themselves by identifying the Port as the survey
sponsor because businesses may be less likely to answer somewhat sensitive business questions
if the surveyor was unable to identify the sponsor. In past survey effortsparticularly those
related to availability studiesBBC has found that identifying the sponsor substantially
increases response rate.
Work specializations. Businesses in highly mobile fields, such as trucking, may be more difficult
to reach for availability surveys than businesses more likely to work out of fixed offices
(e.g., engineering firms). That assertion suggests that response rates may differ by work
specialization. Simply counting all surveyed businesses across work specializations to
determine overall MBE/WBE availability would lead to estimates that were biased in favor of
businesses that could be easily contacted by telephone.
However, work specialization as a potential source of nonresponse bias in the BBC availability
analysis is minimized, because the availability analysis examines businesses within particular
work fields before determining an MBE/WBE availability figure. In other words, the potential
for trucking firms to be less likely to complete a survey is less important, because the percentage
of MBE/WBE availability is calculated within trucking before being combined with information
from other work fields in a dollarweighted fashion. In this example, work specialization would
be a greater source of nonresponse bias if particular subsets of trucking firms were less likely
than other subsets to be easily contacted by telephone.
Language barriers. Port contracting documents are in English and are not in other languages.
For that reason, the study team made the decision to only include businesses able to complete
surveys in English in the availability analysis. Businesses unable to complete the survey due to
language barriers represented less than one percent of the business list.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 14
Response reliability. Business owners and managers were asked questions that may be difficult
to answer, including questions about revenues and employment. For that reason, the study team
collected corresponding D&B information for their establishments and asked respondents to
confirm that information or provide more accurate estimates. Further, respondents were not
typically asked to give absolute figures for difficult questions such as revenue and number of
employees. Rather, they were given ranges of dollar figures and employment levels.
BBC explored the reliability of survey responses in a number of ways. For example:
BBC reviewed data from the availability surveys in light of information from other sources
such as the OMWBE Directory of Certified Firms and vendor information that the study
team collected from the Port. For example, the OMWBE Directory of Certified Firms
includes data on the race/ethnicity and gender of the owners of DBEcertified businesses.
The study team compared survey responses concerning business ownership with OMWBE
data.
BBC examined Port contract data to further explore the largest contracts and subcontracts
awarded to businesses that participated in the availability surveys. BBC compared survey
responses about the largest contracts that businesses won during the past five years with
actual Port contract data.
The Port reviewed vendor data that the study team collected and compiled as part of the
availability analysis and provided feedback regarding its accuracy.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 15
Port of Seattle Disparity Study
Availability Survey Instrument [Construction]
Hello. My name is [interviewer name] from Customer Research International. We are
calling on behalf of the Port of Seattle, which operates harbor facilities in the Seattle area
and the SeattleTacoma International Airport.
This is not a sales call. The Port of Seattle is developing a list of companies involved in
construction, maintenance, or design on a wide range of port and airportrelated
projects. Who can I speak with to get the information we need from your firm?
[After reaching an appropriately senior staff member, the interviewer should reintroduce the
purpose of the survey and begin with questions]
[IF ASKED, THE INFORMATION DEVELOPED IN THESE INTERVIEWS WILL ADD TO THE PORT OF
SEATTLE'S EXISTING DATA ON COMPANIES INTERESTED IN WORKING WITH THE PORT]
X1. I have a few basic questions about your company and the type of work you do. Can you
confirm that this is [firm name]?
1=RIGHT COMPANY SKIP TO A1
2=NOT RIGHT COMPANY
99=REFUSE TO GIVE INFORMATION TERMINATE
Y1. Can you give me any information about [firm name]?
1=Yes, same owner doing business under a different name SKIP TO Y4
2=Yes, can give information about named company
3=Company bought/sold/changed ownership SKIP TO Y4
98=No, does not have information TERMINATE
99=Refused to give information TERMINATE
Y3. Can you give me the complete address or city for [firm name]? SKIP TO Y5
(NOTE TO INTERVIEWER RECORD IN THE FOLLOWING FORMAT:
. STREET ADDRESS
. CITY
. STATE
. ZIP
1=VERBATIM
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 16
Y4. And what is the new name of the business that used to be [firm name]?
(ENTER UPDATED NAME)
1=VERBATIM
Y5. Can you give me the name of the owner or manager of the new business?
(ENTER UPDATED NAME)
1=VERBATIM
Y6. Can I have a telephone number for him/her?
(ENTER UPDATED PHONE)
1=VERBATIM
Y7. Can you give me the complete address or city for [new firm name]?
1=VERBATIM
Y8. Do you work for this new company?
1=YES
2=NO TERMINATE
A1. First, I want to confirm that your firm does work or provides materials related to
construction, maintenance, or design on transportationrelated projects. Is this correct?
(NOTE TO INTERVIEWER includes any work related to construction, maintenance or design such
as building and parking facilities, paving and concrete, tunnels, bridges, roads, rail, and other
transportationrelated projects. it also includes trucking and hauling and any construction or
engineering work for the Port of Seattle.)
(NOTE TO INTERVIEWER includes having done work, trying to sell this work, or providing
materials)
1=Yes
2=No TERMINATE
A2. Let me confirm that [firm name / new firm name] is a business, as opposed to a non
profit organization, a foundation, or a government office. Is that correct?
1=Yes, a business
2=No, other TERMINATE
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 17
A3. Next, we're interested in the types of work that [firm name / new firm name]
performs. Does your firm do work in the area of:
[READ, MULTIPUNCH]
1 = Highway, street, and tunnel construction?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES CEMENT CONCRETE
CURB AND GUTTER; ASPHALT CONCRETE CURB AND GUTTER; CEMENT CONCRETE
PAVING; ASPHALT CONCRETE PAVING; CONCRETE RESTORATION; CONCRETE SAWING,
CORING, AND GROOVING; CONCRETE SURFACE TREATMENT; PRODUCTION AND
PLACING OF CRUSHED MATERIALS; BITUMINOUS SURFACE TREATMENT; AND DRILLED
LARGE DIAMETER SLURRY SHAFTS]
2 = Bridge and elevated highway construction?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES BRIDGES AND
STRUCTURES; STEEL FABRICATION; BRIDGE DECK REPAIR; PILEDRIVING; AND DECK
SEAL]
3 = Excavation, grading, drainage, drilling, and demolition?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES CLEARING, GRUBBING,
GRADING, AND DRAINING; DEMOLITION; TUNNELS AND SHAFT EXCAVATION; GROUND
MODIFICATION; ASBESTOS ABATEMENTS; DRILLING AND BLASTING; AND WELL
DRILLING]
4 = Water and sewer lines?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES SEWER AND WATER
MAINS; AND WATER DISTRIBUTION AND IRRIGATION]
5 = Painting, striping, and marking?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES PAINTING; PAVEMENT
MARKING (EXCLUDING PAINTING); SANDBLASTING AND STEAM CLEANING; PAINT
STRIPING; AND STRUCTURAL TILE CLEANING]
6 = Fencing, guardrails, barriers, and signs?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES CONCRETE
STRUCTURES EXCEPT BRIDGES; RIPRAP AND ROCK WALLS; SIGNING; FENCING; PRECAST
MEDIAN BARRIERS; WIRE MESH SLOPE PROTECTION; PERMENANT TIEBACK ANCHOR;
GUARDRAIL; GABION AND GABION CONSTRUCTION; IMPACT ATTENUATORS; AND
SLURRY DIAPHRAGM AND CUTOFF WALLS]
7 = Electrical work, lighting, and signal systems?
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 18
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES ILLUMINATION AND
GENERAL ELECTRIC; TRAFFIC SIGNALS; ELECTRONICSFIBER OPTIC BASED
COMMUNICATIONS SYSTEMS; AND INTELLIGENT TRANSPORTATION SYSTEMS (ITS)]
8 = Traffic control and flagging services?
9 = Trucking and hauling?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES MATERIALS
TRANSPORTING; HAZARDOUS WASTE REMOVAL; AND SEWAGE DISPOSAL]
10 = Plumbing and HVAC?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES PLUMBING, HVAC, AND
OTHER MECHANICAL WORK]
11 = Landscaping and erosion control?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES EROSION CONTROL;
LANDSCAPING; AND STREET CLEANING]
12 = Commercial and industrial building construction?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES BUILDING
CONSTRUCTION AND REMODELING]
13 = Railroad construction?
[NOTE TO INTERVIEWER: IF ASKED, THIS WORK AREA INCLUDES RAILROAD SUBGRADE
CONSTRUCTION; PLACING OF BALLAST, TIES, AND TRACK; AND OTHER RAILROAD
RELATED WORK]
14 = Marine work and dredging?
15 = Engineering?
16 = Surveying?
A4a. Let me also confirm what kind of business this is. The information we have from Dun
& Bradstreet indicates that your main line of business is [SIC Code description]. Is this
correct?
(NOTE TO INTERVIEWER IF ASKED, DUN & BRADSTREET OR D&B, IS A COMPANY THAT
COMPILES BUSINESS INFORMATION THROUGHOUT THE COUNTRY)
1=Yes SKIP TO A5
2=No
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 19
98=(DON'T KNOW)
99=(REFUSED)
A4b. What would you say is the main line of business at [firm name / new firm name]?
(NOTE TO INTERVIEWER: IF RESPONDENT INDICATES THAT FIRM'S MAIN LINE OF BUSINESS IS
"GENERAL CONSTRUCTION" OR GENERAL CONTRACTOR," PROBE TO FIND OUT IF MAIN LINE OF
BUSINESS IS CLOSER TO INDUSTRIAL BUILDING CONSTRUCTION OR HIGHWAY AND ROAD
CONSTRUCTION.)
(ENTER VERBATIM RESPONSE)
1=VERBATIM
A5. Is this the sole location for your business, or do you have offices in other locations?
1=Sole location
2=Have other locations
98=(DON'T KNOW)
99=(REFUSED)
A8. Is your company a subsidiary or affiliate of another firm?
1=Independent SKIP TO B1
2=Subsidiary or affiliate of another firm
98=(DON'T KNOW) SKIP TO B1
99=(REFUSED) SKIP TO B1
A9. What is the name of your parent company?
1=ENTER NAME
98=(DON'T KNOW)
99=(REFUSED)
A9. ENTER NAME OF PARENT COMPANY
1=VERBATIM
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 20
B1. Next, I have a few questions about your company's role in transportationrelated
construction, maintenance, or design. During the past five years, has your company
submitted a bid or a price quote for any part of a contract for a state or local government
agency in Washington?
1=Yes
2=No SKIP TO B3
98=(DON'T KNOW) SKIP TO B3
99=(REFUSED) SKIP TO B
B2. Were those bids or price quotes to work as a prime contractor, a subcontractor, a
trucker/hauler, or as a supplier?
[MULTIPUNCH]
1=Prime contractor 4=Supplier (or manufacturer)
2=Subcontractor 98=(DON'T KNOW)
3=Trucker/hauler 99=(REFUSED)
B3. During the past five years, has your company worked on any part of a contract for a
state or local government agency in Washington?
1=Yes
2=No SKIP TO B5
98=(DON'T KNOW) SKIP TO B5
99=(REFUSED) SKIP TO B5
B4. Did your company work on those contracts as a prime contractor, a subcontractor, a
trucker/hauler, or as a supplier?
[MULTIPUNCH]
1=Prime contractor 4=Supplier (or manufacturer)
2=Subcontractor 98=(DON'T KNOW)
3=Trucker/hauler 99=(REFUSED)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 21
B5. During the past five years, has your company submitted a bid or a price quote for any
part of a contract for a private sector organization in Washington?
1=Yes
2=No SKIP TO B7
98=(DON'T KNOW) SKIP TO B7
99=(REFUSED) SKIP TO B7
B6. Were those bids or price quotes to work as a prime contractor, a subcontractor, a
trucker/hauler, or as a supplier?
[MULTIPUNCH]
1=Prime contractor 4=Supplier (or manufacturer)
2=Subcontractor 98=(DON'T KNOW)
3=Trucker/hauler 99=(REFUSED)
B7. During the past five years, has your company worked on any part of a contract for a
private sector organization in Washington?
1=Yes
2=No SKIP TO B10
98=(DON'T KNOW) SKIP TO B10
99=(REFUSED) SKIP TO B10
B8. Did your company work on those contracts as a prime contractor, a subcontractor, a
trucker/hauler, or as a supplier?
[MULTIPUNCH]
1=Prime contractor 4=Supplier (or manufacturer)
2=Subcontractor 98=(DON'T KNOW)
3=Trucker/hauler 99=(REFUSED)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 22
B10. Is your company qualified and interested in working with the Port of Seattle as a
prime contractor?
1=Yes
2=No
98=(DON'T KNOW)
99=(REFUSED)
B12. Is your company qualified and interested in working with the Port of Seattle as a
subcontractor, trucker/hauler, or supplier?
1=Yes
2=No
98=(DON'T KNOW)
99=(REFUSED)
Now I want to ask you about the geographic areas your company serves within
Washington. As you answer, think about whether your company could be involved in
potential transportationrelated projects in that region.
C1a. Could your company do work in the Tacoma area?
[NOTE TO INTERVIEWER: IF ASKED, TACOMA IS IN PIERCE COUNTY.]
1=Yes
2=No
98=(DON'T KNOW)
99=(REFUSED)
C1c. Could your company do work in the Seattle and Everett areas?
[NOTE TO INTERVIEWER: IF ASKED, THE SEATTLE AND EVERETT AREAS INCLUDES KING AND
SNOHOMISH COUNTIES.]
1=Yes
2=No
98=(DON'T KNOW)
99=(REFUSED)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 23
D1. About what year was your firm established?
(RECORD FOURDIGIT YEAR, e.g., '1977')
9998 = (DON'T KNOW)
9999 = (REFUSED)
1=NUMERIC (16002008)
D2. In rough dollar terms, what was the largest transportationrelated contract or
subcontract your company won in Washington during the past five years?
(NOTE TO INTERVIEWER IF ASKED, INCLUDES EITHER PRIVATE SECTOR OR PUBLIC SECTOR)
(NOTE TO INTERVIEWER INCLUDES CONTRACTS NOT YET COMPLETE)
(NOTE TO INTERVIEWER READ CATEGORIES IF NECESSARY)
1=$100,000 or less 8=More than $20 to $50 million
2=More than $100,000 to $500,000 9=More than $50 to $100 million
3=More than $500,000 to $1 million 10= More than $100 to $200 million
4=More than $1 to $2 million 11=$200 million or greater
5=More than $2 to $5 million 97=(NONE)
6=More than $5 to $10 million 98=(DON'T KNOW)
7=More than $10 to $20 million 99=(REFUSED
D3. Was that the largest transportationrelated contract or subcontract that your
company bid on or submitted quotes for in Washington during the past five years?
1=Yes SKIP TO E1
2=No
98=(DON'T KNOW) SKIP TO E1
99=(REFUSED) SKIP TO E1
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 24
D4. What was the largest transportationrelated contract or subcontract that your
company bid on or submitted quotes for in Washington during the past five years?
(NOTE TO INTERVIEWER IF ASKED, INCLUDES EITHER PRIVATE SECTOR OR PUBLIC SECTOR)
(NOTE TO INTERVIEWER READ CATEGORIES IF NECESSARY)
1=$100,000 or less 8=More than $20 to $50 million
2=More than $100,000 to $500,000 9=More than $50 to $100 million
3=More than $500,000 to $1 million 10= More than $100 to $200 million
4=More than $1 to $2 million 11=$200 million or greater
5=More than $2 to $5 million 97=(NONE)
6=More than $5 to $10 million 98=(DON'T KNOW)
7=More than $10 to $20 million 99=(REFUSED)
E1. My next questions are about the ownership of the business. A business is defined as
womanowned if more than half that is, 51 percent or more of the ownership and
control is by women. By this definition, is [firm name / new firm name] a womanowned
business?
1=Yes
2=No
98=(DON'T KNOW)
99=(REFUSED)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 25
E2. A business is defined as minorityowned if more than half that is, 51 percent or
more of the ownership and control is African American, Asian, Hispanic, Native
American or another minority group. By this definition, is [firm name || new firm name] a
minorityowned business?
1=Yes
2=No SKIP TO F1
3=(OTHER GROUP SPECIFY)
98=(DON'T KNOW) SKIP TO F1
99=(REFUSED) SKIP TO F1
E2. OTHER GROUP SPECIFY
1=VERBATIM
E2. OTHER GROUP SPECIFY
1=VERBATIM
E3. Would you say that the minority group ownership of your company is mostly African
American, AsianPacific American, Subcontinent Asian American, Hispanic American, or
Native American?
1=AfricanAmerican
2=Asian Pacific American (persons whose origins are from Japan, China, Taiwan, Korea,
Burma (Myanmar), Vietnam, Laos, Cambodia(Kampuchea),Thailand, Malaysia,
Indonesia, the Philippines, Brunei, Samoa, Guam, the U.S. Trust Territories of the Pacific
Islands (Republic of Palau), the Commonwealth of the Northern Marianas Islands,
Macao, Fiji, Tonga, Kiribati, Tuvalu, Nauru, Federated States of Micronesia, or Hong
Kong)
3=Hispanic American (persons of Mexican, Puerto Rican, Cuban, Dominican, Central or
South American, or other Spanish or Portuguese culture or origin, regardless of race)
4=Native American (American Indians, Eskimos, Aleuts, or Native Hawaiians)
5=Subcontinent Asian American (persons whose Origins are from India, Pakistan,
Bangladesh, Bhutan, the Maldives Islands, Nepal or Sri Lanka)
6=(OTHER SPECIFY)
98=(DON'T KNOW)
99=(REFUSED)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 26
E3. OTHER SPECIFY
1=VERBATIM
F1. Dun & Bradstreet indicates that your company has about [number] employees
working out of just your location. Is that an accurate estimate of your company's average
employees during the most recent threeyear period?
(NOTE TO INTERVIEWER INCLUDES EMPLOYEES WHO WORK AT THAT LOCATION AND THOSE
WHO WORK FROM THAT LOCATION)
1=Yes SKIP TO F3
2=No
98=(DON'T KNOW) SKIP TO F3
99=(REFUSED) SKIP TO F3
F2. About how many employees did you have working out of just your location, on
average, during the most recent threeyear period?
(RECORD NUMBER OF EMPLOYEES)
1=NUMERIC (1999999999)
F3. Dun & Bradstreet lists the average annual gross revenue of your company, just
considering your location, to be [dollar amount]. Is that an accurate estimate for your
company's average annual gross revenue during the most recent threeyear period?
1=Yes SKIP TO F5
2=No
98=(DON'T KNOW) SKIP TO F5
99=(REFUSED) SKIP TO F5
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 27
F4. Roughly, what was the average annual gross revenue of your company, just
considering your location, during the most recent threeyear period? Would you say . . .
(READ LIST)
1=Less than $1 Million 6=$14.1 Million $18.5 Million
2=$1 Million $4.5 Million 7=$18.6 Million $22.4 Million
3=$4.6 Million $7 Million 8=$22.5 Million or more
4=$7.1 Million $12 Million 98= (DON'T KNOW)
5=$12.1 Million $14.0 Million 99= (REFUSED)
F5. About how many employees did you have, on average, for all of your locations during
the most recent threeyear period? ONLY ASK IF A5 = 2
1=(ENTER RESPONSE)
98=(DON'T KNOW)
99=(REFUSED)
F5. RECORD NUMBER OF EMPLOYEES ONLY ASK IF A5 = 2
1=VERBATIM
F6. Roughly, what was the average annual gross revenue of your company, for all of your
locations during the most recent threeyear period? Would you say . . . (READ LIST) ONLY
ASK IF A5 = 2
1=Less than $1 Million 6=$16.6 Million $18.5 Million
2=$1 Million $4.5 Million 7=$18.6 Million $22.4 Million
3=$4.6 Million $7 Million 8=$22.5 Million or more
4=$7.1 Million $12 Million 98= (DON'T KNOW)
5=$12.1 Million $16.5 Million 99= (REFUSED)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 28
Finally, we're interested in whether your company has experienced barriers or
difficulties associated with starting or expanding a business in your industry or with
obtaining work. Think about your experiences in the Seattle Metropolitan area within the
past five years as we ask you these questions.
G1a. Has your company experienced any difficulties in obtaining lines of credit or loans?
1=Yes
2=No
98=(DON'T KNOW)
99=(DOES NOT APPLY)
G1b. Has your company obtained or tried to obtain a bond for a project?
1=Yes
2=No SKIP TO G1d
98=(DON'T KNOW) SKIP TO G1d
99=(DOES NOT APPLY) SKIP TO G1
G1c. Has your company experienced any difficulties obtaining bonds needed for a
project?
1=Yes
2=No
98=(DON'T KNOW)
99=(DOES NOT APPLY)
G1d. Have any insurance requirements on projects presented a barrier to bidding?
1=Yes
2=No
98=(DON'T KNOW)
99=(DOES NOT APPLY)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 29
G1e. Has the size of projects presented a barrier to bidding?
1=Yes
2=No
98=(DON'T KNOW)
99=(DOES NOT APPLY)
G1f. Has your company experienced any difficulties learning about bid opportunities with
the Port of Seattle?
1=Yes
2=No
98=(Don't know)
99=(Does not apply)
G1h. Has your company experienced any difficulties with learning about bid
opportunities in the private sector in the Seattle Metropolitan area?
1=Yes
2=No
98=(DON'T KNOW)
99=(DOES NOT APPLY)
G1i. Has your company experienced any difficulties learning about subcontracting
opportunities in the Seattle Metropolitan area?
1=Yes
2=No
98=(Don't know)
99=(Does not apply)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 30
G1j. Has your company experienced any difficulties receiving payment in a timely
manner?
1=Yes
2=No
98=(DON'T KNOW)
99=(DOES NOT APPLY)
G2. Finally, we're asking for general insights on starting and expanding a business in your
industry or winning work in the Seattle Metropolitan area. Do you have any thoughts to
offer on these topics?
1=VERBATIM (PROBE FOR COMPLETE THOUGHTS)
97=(NOTHING/NONE/NO COMMENTS)
98=(DON'T KNOW)
99=(REFUSED)
G3. Would you be willing to participate in a followup interview about any of these issues?
1=Yes
2=No
98=(DON'T KNOW)
99=(REFUSED)
H1. Just a few last questions. What is your name?
(RECORD FULL NAME)
1=VERBATIM
H2. What is your position at [firm name / new firm name]?
1=Receptionist 6=Assistant to Owner/CEO
2=Owner 7=Sales manager
3=Manager 8=Office manager
4=CFO 9=President
5=CEO 9=(OTHER SPECIFY)
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 31
99=(REFUSED)
H2. OTHER SPECIFY
1=VERBATIM
H3. For purposes of receiving information from the Port of Seattle, is your mailing
address [firm address]:
1=Yes SKIP TO H5
2=No
98=(DON'T KNOW)
99=(REFUSED)
H4. What mailing address should they use to get any materials to you?
1=VERBATIM
H5. What fax number could the Port of Seattle use to fax any materials to you?
1=NUMERIC (10000000009999999999)
H6. What email address could the Port of Seattle use to get any materials to you?
1=ENTER EMAIL
97=(NO EMAIL ADDRESS)
98=(DON'T KNOW)
99=(REFUSED)
H6. (RECORD EMAIL ADDRESS) (VERIFY ADDRESS LETTER BY LETTER: EXAMPLE:
'John@CRIRESEARCH.COM' SHOULD BE VERIFIED AS: JOHNatCRIhyphenRESEA
RCHdotcom)
1=VERBATIM
Thank you very much for your participation. If you have any questions, please contact
Mian Rice at Port of Seattle at 2067877951 or via email at rice.m@portseattle.org.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX D, PAGE 32
APPENDIX E.
Entry and Advancement in the Seattle
Metropolitan Area Construction and
Engineering Industries
Business ownership often results from an individual entering an industry as an employee and
then advancing within that industry. Within the entry and advancement process, there may be
some barriers that limit opportunities for minorities and women. Appendix E uses 1980 and
2000 Census data as well as 20092011 American Community Survey (ACS) data to analyze
education, employment, and workplace advancementall factors that may influence whether
individuals form construction or engineering businessesin the Seattle Metropolitan Area.1,2
BBC studied barriers to entry into construction and engineering separately, because entrance
requirements and opportunities for advancement differ for those industries.
Construction Industry
BBC examined how education, training, employment, and advancement may have affected the
number of businesses that individuals of different races/ethnicities and genders owned in the
Seattle Metropolitan Area construction industry in 1980, 2000, and 2009 through 2011.
Education. Formal education beyond high school is not a prerequisite for most construction
jobs. For that reason, the construction industry often attracts individuals who have lower levels
of educational attainment. Most construction industry employees in the Seattle Metropolitan
Area do not have a fouryear college degree. Based on the 20092011 ACS, 35 percent of
workers in the Seattle Metropolitan Area construction industry were high school graduates with
no postsecondary education and 15 percent had not finished high school. Only 16 percent of
those working in the Seattle Metropolitan Area construction industry had a fouryear college
degree or higher compared to 38 percent of all workers.
Race/ethnicity. Hispanic Americans working in the Seattle Metropolitan Area were especially
unlikely to have a postsecondary education. In 2009 through 2011, only 16 percent of all
Hispanic American workers 25 and older in the Seattle Metropolitan Area held at least a four
year college degree, far below the figure for nonHispanic whites working in the region (40%).
The percentage of Black American (22%) and Native American (22%) workers in the Seattle
Metropolitan Area with a fouryear college degree was also substantially lower than that of non
Hispanic whites in 2009 through 2011. Based on educational requirements of entrylevel jobs
1 In Appendix E and other appendices that present information about local marketplace conditions, information for
"engineering" refers to architectural, engineering, and related services. In the 2000 Census industrial classification system,
"Architectural, engineering and related services" was coded as 729. In the 20092011 ACS, the same industry was coded as
7290.
2 For the purposes of this study, the Seattle Metropolitan Area is defined as King, Pierce, and Snohomish counties.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 1
and the limited education beyond high school for many Black Americans, Native Americans, and
Hispanic Americans in the Seattle Metropolitan Area, one would expect a relatively high
representation of those groups in the local construction industry, particularly in entrylevel
positions.
In contrast to Black Americans, Hispanic Americans, and Native Americans, a relatively large
proportion of AsianPacific American workers (41%) and Subcontinent Asian American workers
(74%) age 25 and older in the Seattle Metropolitan Area had fouryear college degrees in 2009
through 2011. Given the high levels of education for AsianPacific Americans and Subcontinent
Asian Americans, the representation of those groups in the local construction industry might be
lower than that of nonHispanic whites.
Gender. Female workers age 25 and older in the Seattle Metropolitan Area achieved a similar
level of education, on average, as men. Based on 2009 through 2011 data, 41 percent of female
workers and 40 percent of male workers age 25 and older had at least a fouryear college
degree.
Apprenticeship and training. Training in the construction industry is largely onthejob or
offered through trade schools and apprenticeship programs. Entrylevel jobs for workers out of
high school are often for laborers, helpers, or apprentices. More skilled positions in the
construction industry may require additional training through a technical or trade school, an
apprenticeship, or another employerprovided training program. Apprenticeship programs can
be developed by employers, trade associations, trade unions, or other groups. Workers can
enter apprenticeship programs from high school or trade school. Apprenticeships have
traditionally been three to fiveyear programs that combine onthejob training with classroom
instruction.3 Opportunities for those programs across race/ethnicity are discussed later in
Appendix E.
Employment. With educational attainment for minorities and women as context, the study
team examined employment in the Seattle Metropolitan Area construction industry. Figure E1
presents data from 1980, 2000, and 2009 through 2011 to compare the demographic
composition of the construction industry with the total workforce in the Seattle Metropolitan
Area, Washington, and the United States as a whole.
3 Bureau of Labor Statistics, U.S. Department of Labor. 200607. "Construction." Career Guide to Industries.
http://www.bls.gov/oco/cg/cgs003.htm (accessed February 15, 2007).
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 2
Figure E1.
Demographics of workers in construction and all industries, 1980, 2000, and 20092011
All industries Construction
Seattle Metropolitan Area 1980 2000 200911 1980 2000 200911
(n= 53,471) (n=74,555) (n=53,463) (n=3,441) (n=5,076) (n=3,423)
Race/ethnicity
Black American 4.0 % 5.0 % 5.8 % 2.2% ** 2.9 % ** 3.1 % **
AsianPacific American 3.5 8.5 11.7 0.9 ** 2.8 ** 4.1 **
Subcontinent Asian American 0.1 0.7 1.7 0.1 ** 0.1 0.2 **
Hispanic American 2.0 4.8 7.9 1.6 6.3 ** 13.3 **
Native American 1.0 1.9 1.7 1.1 1.9 2.1
Other minority group 0.1 0.6 0.2 0.2 0.7 0.2
Total minority 10.7 % 21.5 % 29.2 % 6.1 % 14.5 % 23.0 %
NonHispanic white 89.3 78.5 70.8 93.9 ** 85.5 ** 77.0 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Gender
Female 41.7 % 45.7 % 46.2 % 8.3 % ** 12.8 % ** 11.8 % **
Male 58.3 54.3 53.8 91.7 ** 87.2 ** 88.2 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
All industries Construction
Washington 1980 2000 200911 1980 2000 200911
(n= 99,341) (n=148,859) (n=102,372) (n=7,147) (n=10,598) (n=6,938)
Race/ethnicity
Black American 2.5 % 3.4 % 4.0 % 1.4% ** 1.8 % ** 2.0 % **
AsianPacific American 2.4 5.9 8.0 0.5 ** 1.9 ** 2.7 **
Subcontinent Asian American 0.1 0.5 1.1 0.1 0.0 0.1 **
Hispanic American 2.7 6.4 9.9 2.0 ** 5.7 11.0
Native American 1.3 2.3 2.2 1.5 2.7 2.5
Other minority group 0.1 0.5 0.2 0.1 0.6 0.3
Total minority 9.0 % 19.0 % 25.3 % 5.7 % 12.6 % 18.7 %
NonHispanic white 91.0 81.0 74.7 94.3 ** 87.4 ** 81.3 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Gender
Female 40.8 % 45.8 % 46.3 % 8.7 % ** 11.8 % ** 11.7 % **
Male 59.2 54.2 53.7 91.3 ** 88.2 ** 88.3 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
All industries Construction
United States 1980 2000 200911 1980 2000 200911
(n=5,287,471) (n=6,832,970) (n=1,521,561) (n=330,464) (n=480,280) (n=98,508)
Race/ethnicity
Black American 10.1 % 10.9 % 11.9 % 7.4 % ** 6.2 % ** 6.0 % **
AsianPacific American 1.4 3.4 4.3 0.6 ** 1.2 ** 1.6 **
Subcontinent Asian American 0.2 0.7 1.1 0.1 ** 0.2 ** 0.3 **
Hispanic American 5.7 10.7 15.4 5.9 ** 15.0 ** 23.8 **
Native American 0.6 1.2 1.1 0.9 ** 1.6 ** 1.3 **
Other minority group 0.1 0.4 0.2 0.1 0.4 0.2
Total minority 18.1 % 27.3 % 34.1 % 14.9 % 24.5 % 33.2 %
NonHispanic white 81.9 72.7 65.9 85.1 ** 75.5 ** 66.8 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Gender
Female 42.2 % 46.5 % 47.2 % 0.8 % ** 9.9 % ** 9.0 % **
Male 57.8 53.5 52.8 92.1 ** 90.1 ** 91.0 **
Total 100.0 % 100.0 % 100.0 % 92.9 % 100.0 % 100.0 %
Note: ** Denotes that the difference in proportions between workers in the construction industry and all industries for the given Census/ACS
year is statistically significant at the 95% confidence level.
Source: BBC Research & Consulting from 1980 and 2000 U.S. Census 5% sample and 20092011 ACS Public Use Microdata samples. The raw data
extracts were obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 3
Race/ethnicity. Based on 20092011 ACS data, 23 percent of people working in the Seattle
Metropolitan Area construction industry were minorities compared to only 15 percent in 2000.
Much of that increase was due to an increase in the number of Hispanic American construction
workers. Considering 2009 through 2011 data on the workforce in the Seattle Metropolitan
Area construction industry:
13 percent was made up of Hispanic Americans;
4 percent was made up of AsianPacific Americans;
3 percent was made up of Black Americans;
2 percent was made up of Native Americans; and
Less than 1 percent was made up of Subcontinent Asian Americans and other minorities.
Hispanic Americans in the Seattle Metropolitan Area made up a larger percentage of workers in
construction (13%) than in the entire workforce as a whole (8%). In contrast, Black Americans,
AsianPacific Americans, and Subcontinent Asian Americans working in the Seattle Metropolitan
Area were less likely to work in construction than all industries considered together.
Average educational attainment of Black Americans is consistent with requirements for
construction jobs so education does not explain the relatively low number of Black American
workers in the Seattle Metropolitan Area construction industry. Several studies throughout the
United States have argued that race discrimination by construction unions has contributed to
the low employment of Black Americans in construction trades, a position that is discussed later
in Appendix E.4
AsianPacific Americans made up 4 percent of the construction workforce and 12 percent of all
workers in the Seattle Metropolitan Area in 2009 through 2011. The fact that AsianPacific
Americans were more likely than other groups to go to college in 2009 through 2011 may
explain part of that difference.
Overall, the percentage of construction workers who are minorities has increased in the Seattle
Metropolitan Area over the past three decades (6% in 1980, 15% in 2000, and 23% in 2009
through 2011), as has the percentage of all Seattle Metropolitan Area workers who are
minorities (11% in 1980, 22% in 2000, and 29% in 2009 through 2011).
Gender. There were large differences between the percentage of all workers who were women
and the percentage of construction workers who were women in the Seattle Metropolitan Area
in 2009 through 2011. During those years, women represented 46 percent of all workers in the
Seattle Metropolitan Area but only 12 percent of construction workers. That difference was
similar to differences that the study team observed for Washington and the United States as a
whole.
4 Waldinger, Roger and Thomas Bailey. 1991. "The Continuing Significance of Race: Racial Conflict and Racial Discrimination in
Construction." Politics & Society, 19(3).
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 4
Academic research concerning the affect of race and genderbased discrimination.
There is a substantial academic literature that has examined whether race or genderbased
discrimination affects opportunities for minorities and women to enter construction trades in
the United States. Many studies indicate that race and genderbased discrimination affects
opportunities for minorities and women in the construction industry. The literature concerning
women in construction trades has identified substantial barriers to entry and advancement due
to gender discrimination and sexual harassment.5 Research concerning highway construction
projects in three major U.S. cities (Boston, Los Angeles, and Oakland) identified evidence of
prevailing attitudes that women do not belong in construction, and that such discrimination was
worse for women of color than for white women.6
Importance of unions to entry in the construction industry. Labor researchers
characterize construction as a historically volatile industry that is sensitive to business cycles,
making the presence of labor unions important for stability and job security within the
industry.7 The temporary nature of construction work results in uncertain job prospects, and
the relatively high turnover of laborers presents a disincentive for construction firms to invest
in training. Some researchers have claimed that constant turnover has lent itself to informal
recruitment practices and nepotism, compelling laborers to tap social networks for training and
work. Those researchers blame the importance of social networks for the high degree of ethnic
segmentation in the construction industry.8 They argue that Black Americans and other
minorities faced longstanding historical barriers to entering the industry, because they have
been unable to integrate themselves into traditionally white social networks that exist in the
construction industry.9
Construction unions aim to provide a reliable source of labor for employers and preserve job
opportunities for workers by formalizing the recruitment process; coordinating training and
apprenticeships; enforcing standards of work; and mitigating wage competition. The unionized
sector of the construction industry would seemingly be the best road for Black Americans and
other underrepresented groups into the industry. However, some researchers have identified
racial discrimination by trade unions that has historically prevented minorities from obtaining
employment in skilled trades.10 Some researchers argue that union discrimination has taken
place in a variety of forms, including the following examples:
5 See, for example, Erickson, Julia A and Donna E. Palladino. 2009. "Women Pursuing Careers in Trades and Construction."
Journal of Career Development. 36(1): 6889.
6 Note that interviews with women took place between 1996 and 1999. Price, Vivian, 2002. "Race, Affirmative Action and
Women's Participation in U.S. Highway Construction." Feminist Economics. 8(2), 87113.
7 Applebaum, Herbert. 1999. Construction Workers, U.S.A. Westport: Greenwood Press.
8 Waldinger, Roger and Thomas Bailey. 1991. "The Continuing Significance of Race: Racial Conflict and Racial Discrimination in
Construction." Politics & Society, 19(3).
9 Feagin, Joe R. and Nikitah Imani. 1994. "Racial Barriers to African American Entrepreneurship: An Exploratory Study." Social
Problems. 41( 4): 562584.
10 U.S. Department of Justice. 1996. Proposed Reforms to Affirmative Action in Federal Procurement. 61 FR 26042.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 5
Unions have used admissions criteria that adversely affect minorities. In the 1970s, federal
courts ruled that standardized testing requirements for unions unfairly disadvantaged
minority applicants who had less exposure to testing. In addition, the policies that required
new union members to have relatives who were already in the union perpetuated the
effects of past discrimination.11
Of those minority individuals who are admitted to unions, a disproportionately low
number are admitted into unioncoordinated apprenticeship programs. Apprenticeship
programs are an important means of producing skilled construction laborers, and the
reported exclusion of Black Americans from those programs has severely limited their
access to skilled occupations in the construction industry.12
Although formal training and apprenticeship programs exist within unions, most training
of union members takes place informally through social networking. Nepotism
characterizes the unionized sector of the construction industry as it does the non
unionized sector, and that practice favors a whitedominated status quo.13
Traditionally, white unions have been successful in resisting policies designed to increase
Black American participation in training programs. The political strength of unions in
resisting affirmative action in construction has hindered the advancement of Black
Americans in the industry.14
Discriminatory practices in employee referral procedures, including apportioning work
based on seniority, have precluded minority union members from having the same access
to construction work as their white counterparts.15
According to testimony from Black American union members, even when unions
implement meritocratic mechanisms of apportioning employment to laborers, white
workers are often allowed to circumvent procedures and receive preference for
construction jobs.16
However, more recent research suggests that the relationship between minorities and unions
has been changing. As a result, historical observations may not be indicative of current dynamics
in construction unions. Recent studies focusing on the role of unions in apprenticeship programs
have compared minority and female participation and graduation rates for apprenticeships in
joint programs (that unions and employers organize together) with rates in employeronly
11 Ibid. See United States v. Iron Workers Local 86 (1971), Sims v. Sheet Metal Workers International Association (1973), and
United States v. International Association of Bridge, Structural and Ornamental Iron Workers (1971).
12 Applebaum. 1999. Construction Workers, U.S.A.
13 Ibid. 299. A high percentage of skilled workers reported having a father or relative in the same trade. However, the author
suggests this may not be indicative of current trends.
14 Waldinger and Bailey. 1991. "The Continuing Significance of Race: Racial Conflict and Racial Discrimination in
Construction."
15 U.S. Department of Justice. 1996. Proposed Reforms to Affirmative Action in Federal Procurement. 61 FR 26042. See United
Steelworkers of America v. Weber (1979) and Taylor v. United States Department of Labor (1982).
16 Feagin and Imani. 1994. "Racial Barriers to African American Entrepreneurship: An Exploratory Study." Social Problems. 41
(4): 562584.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 6
programs. Many of those studies conclude that the impact of union involvement is generally
positive or neutral for minorities and women, compared to nonHispanic white males:
Glover and Bilginsoy (2005) analyzed apprenticeship programs in the U.S. construction
industry during the period 1996 through 2003. Their dataset covered about 65 percent of
apprenticeships during that time. The authors found that joint programs had "much higher
enrollments and participation of women and ethnic/racial minorities" and exhibited
"markedly better performance for all groups on rates of attrition and completion"
compared to employerrun programs.17
In a similar analysis focusing on female apprentices, Bilginsoy and Berik (2006) found that
women were most likely to work in highlyskilled construction professions as a result of
enrollment in joint programs as opposed to employerrun programs. Moreover, the effect
of union involvement in apprenticeship training was higher for Black American women
than for white women.18
A recent study on the presence of Black Americans and Hispanic Americans in
apprenticeship programs found that Black Americans were 8 percent more likely to be
enrolled in a joint program than in an employerrun program. However, Hispanic
Americans were less likely to be in a joint program than in an employerrun program.19
Those data suggest that Hispanic Americans may be more likely than Black Americans to
enter the construction industry without the support of a union.
Other data also indicate a more productive relationship between unions and minority workers
than that which may have prevailed in the past. For example, 2012 Current Population Survey
(CPS) data indicate that union membership rates for Black Americans is slightly higher than for
nonHispanic whites and union membership rates for Hispanic Americans are similar to those of
nonHispanic whites.20 The CPS asked participants, "Are you a member of a labor union or of an
employee association similar to a union?" CPS data showed union membership to be 13 percent
for Black American workers, 10 percent for Hispanic American workers, and 11 percent for non
Hispanic white workers. In the construction industry, the union membership rates for both
Black American workers and nonHispanic white workers is 17 percent but the rate for Hispanic
construction workers is only 8 percent.
Although union membership and union program participation varies based on race/ethnicity,
the causes of those differences and their effects on employment in the construction industry are
unresolved. Research is especially limited on the impact of unions on Asian American
employment. It is unclear from past studies whether unions presently help or hinder equal
17 Glover, Robert and Bilginsoy, Cihan. 2005. "Registered Apprenticeship Training in the U.S. Construction Industry." Education
& Training, Vol. 47, 4/5, p 337.
18 Gnseli Berik, Cihan Bilginsoy. 2006. "Still a wedge in the door: women training for the construction trades in the USA",
International Journal of Manpower, Vol. 27 Iss: 4, pp.321 341
19 Bilginsoy, Cihan. 2005. "How Unions Affect Minority Representation in Building Trades Apprenticeship Programs." Journal
of Labor Research, 57(1).
20 2012 Current Population Survey (CPS), Merged Outgoing Rotation Groups, U.S. Census Bureau and Bureau of Labor
Statistics.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 7
opportunity in construction and whether effects in the Seattle Metropolitan Area are different
from other parts of the country. In addition, the current research indicates that the effects of
unions on entry into the construction industry may be different for different minority groups.
Advancement. To research opportunities for advancement in the Seattle Metropolitan Area
construction industry, the study team examined the representation of minorities and women in
construction occupations defined by the U.S. Bureau of Labor Statistics.21 Appendix I provides
full descriptions of construction trades with large enough sample sizes for analysis in the 2000
Census and 20092011 ACS.
Racial/ethnic composition of construction occupations. Figures E2 and E3 summarize the
race/ethnicity of workers in select constructionrelated occupations in the Seattle Metropolitan
Area, including lowskill occupations (e.g., construction laborers), higherskill construction
trades (e.g., electricians), and supervisory roles. Figure E2 and E3 present those data for 2000
and 2009 through 2011, respectively.
21 Bureau of Labor Statistics, U.S. Department of Labor. 2001. "Standard Occupational Classification Major Groups."
http://www.bls.gov/soc/soc_majo.htm (accessed February 15, 2007).
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 8
Figuure E2.
Minnorities as a ppercentage of selected consstruction occuupations in thhe
Seaattle Metropoolitan Area, 20000
Notee: ** Denotes thatt the difference in prroportions between all workers in the construction industry aand those in specific occupations is
statistically signnificant at the 95% coonfidence level.
Crane and toweer operators; dredge,, excavating and loadding machine and draagline operators; pavving, surfacing and tamping equipment
operators; and miscellaneous construction equipment ooperators were combbined into the single category of equipmeent operators.
Sourcce: BBC Research && Consulting from 20000 U.S. Census 5% saample Public Use Microsample data. Thee raw data extract wwas obtained throughh
the IPUMS proggram of the MN Popuulation Center: http:///usa.ipums.org/usaa/.
BBCC RESEARCH & CCONSULTINGFINAL REPORT APPENDIX E, PAAGE 9
Figuure E3.
Minnorities as a ppercentage of selected consstruction occuupations in thhe Seattle Mettropolitan
Areea, 200920111
Notee: ** Denotes thatt the difference in prroportions between all workers in the construction industry aand those in specific occupations is
statistically signnificant at the 95% coonfidence level.
Crane and toweer operators; dredge,, excavating and loadding machine and draagline operators; pavving, surfacing and tamping equipment
operators; and miscellaneous construction equipment ooperators were combbined into the single category of equipmeent operators.
Sourcce: BBC Research && Consulting from 200092011 American CCommunity Survey daata. The raw data exttract was obtained through the IPUMS
program of the MN Population Centter: http://usa.ipumss.org/usa/.
Bassed on 2000 CCensus and 20092011 ACCS data, there are large diffferences in thhe racial/ethnnic
maakeup of workkers in variouus constructioon trades in thhe Seattle Meetropolitan Arrea. Overall,
minnorities compprised 15 percent of constrruction workkers in 2000 aand 23 percennt of
connstruction woorkers in 20099 through 2011. Minoritiees comprised a relatively laarge share of f the
workforce of:
Drywall, ceeiling tile installers, and tappers (28% inn 2000 and 522% in 2009 thhrough 2011));
BBCC RESEARCH & CCONSULTINGFINAL REPORT AAPPENDIX E, PAGGE 10
Construction laborers (26% in 2000 and 35% in 2009 through 2011);
Roofers (24% in 2000 and 52% in 2009 through 2011); and
Painters (22% in 2000 and 49% in 2009 through 2011).
Some occupations had relatively low representations of minorities, including:
Drivers, sales workers, and truck drivers (12% in 2000 and 14% in 2009 through 2011);
Electricians (11% in 2000 and 12% in 2009 through 2011); and
Sheet metal workers (12% in 2000 and 10 in 2009 through 2011).
About 8 percent of firstline supervisors were minorities in 2000, less than the total percentage
of Seattle Metropolitan Area construction workers who were minorities (15%). Minorities made
up a larger percentage of firstline supervisors (15%) in 2009 through 2011, but that percentage
was still less than the total percentage of construction workers who were minorities during
those years (23%).
The majority of minorities working in the Seattle Metropolitan Area construction industry in
2009 through 2011 were Hispanic Americans. The representation of Hispanic Americans was
substantially larger among drywall, ceiling tile installers, and tapers (51%); roofers (44%);
painters (43%); and construction laborers (21%) than among all construction workers (13%).
Those occupations tend to be lowskill occupations. Only 10 percent of firstline supervisors
were Hispanic American in the Seattle Metropolitan Area in 2009 through 2011.
Gender composition of construction occupations. The study team also analyzed the proportion
of women in constructionrelated occupations. Figures E4 and E5 summarize the gender of
workers in select constructionrelated occupations for 2000 and 2009 through 2011,
respectively. Overall, only about 13 percent of construction workers in the Seattle Metropolitan
Area were women in 2000 and 12 percent were women in 2009 through 2011.
In both 2000 and 2009 through 2011, less than 4 percent of workers were women in the
following trades:
Roofers;
Brickmasons, blockmasons, and stonemasons;
Carpet, floor and tile installers, and finishers;
Carpenters;
Equipment operators; and
Sheet metal workers.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 11
Figuure E4.
Woomen as a percentage of coonstruction woorkers in seleccted occupatiions in the Seattle
Meetropolitan Area, 2000
Notee: ** Denotes thatt the difference in prroportions between aall workers in the construction industry aand those in specific occupations is
statistically signnificant at the 95% coonfidence level.
Crane and toweer operators; dredge,, excavating and loadding machine and draagline operators; pavving, surfacing and taamping equipment
operators; and miscellaneous construction equipment ooperators were combbined into the single category of equipmeent operators.
Sourcce: BBC Research && Consulting from 20000 U.S. Census 5% saample Public Use Microsample data. Thee raw data extract wwas obtained throughh
the IPUMS proggram of the MN Popuulation Center: http:///usa.ipums.org/usaa/.
BBCC RESEARCH & CCONSULTINGFINAL REPORT AAPPENDIX E, PAGGE 12
Figuure E5.
Woomen as a percentage of coonstruction woorkers in seleccted occupatiions in the Seattle
Meetropolitan Area, 200920111
Notee: ** Denotes thatt the difference in prroportions between aall workers in the construction industry aand those in specific occupations is
statistically signnificant at the 95% coonfidence level.
Crane and toweer operators; dredge,, excavating and loadding machine and draagline operators; pavving, surfacing and tamping equipment
operators; and miscellaneous construction equipment ooperators were combbined into the single category of equipmeent operators.
Sourcce: BBC Research && Consulting from 200092011 American CCommunity Survey daata. The raw data exttract was obtained through the IPUMS
program of the MN Population Centter: http://usa.ipumss.org/usa/.
Ammong all of thee individual occupations listed in Figurees E4 and E5, the followiing occupatioons
shoowed an increease in the representation of women beetween 2000 and 2009 thrrough 2011:
Drivers, salles workers, aand truck drivvers;
Sheet metaal workers; annd
Firstline supervisors.
BBCC RESEARCH & CCONSULTINGFINAL REPORT AAPPENDIX E, PAGGE 13
Despite an increase in the representation of women among firstline supervisors in 2009
through 2011 (7% compared to 3% in 2000), that percentage was still less than the total
percentage of construction workers who were women during those years (12%).
Percentage of minorities and women who are managers. To further assess advancement
opportunities for minorities and women in the Seattle Metropolitan Area construction industry,
the study team examined differences between groups in the proportion of construction workers
who reported being managers. Figure E6 presents the percentage of construction workers who
reported being construction managers in 1980, 2000, and 2009 through 2011 for the Seattle
Metropolitan Area, Washington, and the United States as a whole by racial/ethnic and gender
group.
Racial/ethnic composition of managers. In 2009 through 2011, about 11 percent of nonHispanic
whites in the Seattle Metropolitan Area construction industry were managers. Compared with
nonHispanic whites, a smaller percentage of all minority groups were managers in the Seattle
Metropolitan Area construction industry. However, only the difference for Hispanic Americans
was statistically significant, in part due to the small sample sizes of other minority groups. Only
2 percent of Hispanic Americans working in the Seattle Metropolitan Area construction industry
were managers, compared to 11 percent of nonHispanic whites.
In the state of Washington as a whole, there were statistically significant differences in the
percentage of construction workers who worked as managers for AsianPacific Americans,
Hispanic Americans, and Native Americans when compared to nonHispanic whites.
Gender composition of managers. Female construction workers were less likely than their male
counterparts to be managers in both 2000 and in 2009 through 2011 in the Seattle Metropolitan
Area, Washington, and the United States as a whole. In the Seattle Metropolitan Area in 2009
through 2011, 6 percent of female construction workers were managers compared to 10
percent of male construction workers.
Engineering Industry
BBC also examined the representation of minorities and females working in the Seattle
Metropolitan Area engineering industry.
Education. In contrast to the construction industry, lack of educational attainment may
preclude workers' entry into the engineering industry because many occupations require at
least a fouryear college degree and some require licensure. According to the 20092011 ACS,
73 percent of individuals working in the Seattle Metropolitan Area engineering industry had at
least a fouryear college degree. Eightyfive percent of civil engineers had at least a fouryear
college degree. Barriers to education can restrict employment opportunities, advancement
opportunities, and, ultimately, business ownership. Any disparities in business ownership rates
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 14
in engineeringrelated work could have resulted from the lack of sufficient education for
particular racial/ethnic and gender groups.22
Figure E6.
Percentage of construction Seattle Metropolitan Area 1980 2000 20092011
workers who worked as a
Race/ethnicity
manager, 1980, 2000, and
20092011 Black American 5.3 % 1.9 % ** 6.5 %
AsianPacific American 3.2 6.0 7.1
Note: Subcontinent Asian American 0.0 0.0 0.0
** Denotes that the difference in Hispanic American 5.6 1.2 ** 2.2 **
proportions between the minority Native American 2.6 7.5 8.5
group and nonHispanic whites (or
Other minority group 0.0 8.8 0.0
between females and males) for the
given Census/ACS year is statistically NonHispanic white 5.6 10.3 11.2
significant at the 95% confidence level.
Gender
Female 7.4 % 5.4 % ** 6.0 % **
Source:
BBC Research & Consulting from the Male 5.4 9.8 10.1
2000 U.S. Census 5% sample and 2009 All individuals 5.5 % 9.3 % 9.6 %
2011 ACS Public Use Microdata
samples. The raw data extracts were
obtained through the IPUMS program Washington 1980 2000 20092011
of the MN Population Center:
http://usa.ipums.org/usa/. Race/ethnicity
Black American 5.0 % 1.9 % ** 5.3 %
AsianPacific American 2.6 5.5 5.6 **
Subcontinent Asian American 0.0 0.0 0.0
Hispanic American 2.8 1.9 ** 1.9 **
Native American 1.9 ** 4.3 5.1 **
Other minority group 0.0 8.4 0.0
NonHispanic white 5.2 9.2 10.3
Gender
Female 6.4 % 4.7 % ** 5.2 % **
Male 4.9 8.9 9.5
All individuals 10.1 % 8.4 % 9.0 %
United States 1980 2000 20092011
Race/ethnicity
Black American 1.5 % ** 3.1 % ** 4.2 % **
AsianPacific American 4.2 7.7 7.4 **
Subcontinent Asian American 5.7 11.7 8.1
Hispanic American 2.0 ** 2.5 ** 2.7 **
Native American 2.5 ** 4.6 ** 5.7 **
Other minority group 4.8 6.2 5.2
NonHispanic white 4.9 7.5 8.7
Gender
Female 5.7 % ** 4.1 % ** 5.0 % **
Male 4.4 6.7 7.1
All individuals 4.5 % 6.5 % 6.9 %
22 Feagin, Joe R. and Nikitah Imani. 1994. "Racial Barriers to African American Entrepreneurship: An Exploratory Study."
Social Problems. 42 (4): 562584.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 15
Based on 2000 Census data and 20092011 ACS data, Figure E7 presents the percentage of
workers age 25 and older with at least a fouryear college degree in the Seattle Metropolitan
Area, Washington, and the United States as a whole. The level of education necessary to work in
the engineering industry may partially restrict employment opportunities for Black Americans,
Hispanic Americans, and Native Americans. For each of those groups, the percentage of workers
age 25 or older with a bachelor's degree or higher was substantially lower than that of non
Hispanic whites in the Seattle Metropolitan Area, the State of Washington, and in the United
States for 2000 and 2009 through 2011.
Figure E7.
Seattle Metropolitan Area 2000 20092011
Percentage of all workers 25 and
older with at least a fouryear
Race/ethnicity
degree, 2000 and 20092011
Black American 24.1 % ** 25.4 ** %
AsianPacific American 41.4 44.9
Note:
Subcontinent Asian American 65.5 ** 77.6 **
** Denotes that the difference in proportions
between the minority and nonHispanic white Hispanic American 19.6 ** 19.0 **
groups (or female and male gender groups) for the Native American 21.9 ** 25.7 **
given Census/ACS year is statistically significant at
Other minority group 30.9 36.6
the 95% confidence level.
NonHispanic white 39.0 43.0
Source: Gender
BBC Research & Consulting from 2000 U.S. Census Female 36.7 % ** 41.4 ** %
5% sample and 20092011 ACS Public Use Micro
sample data. The raw data extracts were obtained Male 38.2 40.3
through the IPUMS program of the MN Population
Center: http://usa.ipums.org/usa/. Washington 2000 20092011
Race/ethnicity
Black American 24.5 % ** 26.2 ** %
AsianPacific American 39.7 ** 42.9 **
Subcontinent Asian American 64.7 ** 76.4 **
Hispanic American 12.8 ** 13.7 **
Native American 17.7 ** 21.1 **
Other minority group 27.2 33.4
NonHispanic white 33.7 36.9
Gender
Female 31.7 % ** 35.7 ** %
Male 32.8 34.5
United States 2000 20092011
Race/ethnicity
Black American 19.1 % ** 23.1 ** %
AsianPacific American 45.4 ** 48.9 **
Subcontinent Asian American 68.4 ** 74.2 **
Hispanic American 13.4 ** 15.5 **
Native American 17.3 ** 20.6 **
Other minority group 30.0 ** 37.2
NonHispanic white 32.5 36.9
Gender
Female 29.3 % ** 34.2 ** %
Male 30.2 31.9
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 16
Race/ethnicity. In the Seattle Metropolitan Area, about 43 percent of all nonHispanic white
workers age 25 and older had at least a fouryear degree in 2009 through 2011. For other
racial/ethnic groups, education data for the Seattle Metropolitan Area indicated that:
About 25 percent of Black Americans had at least a fouryear college degree;
Only 19 percent of Hispanic Americans had at least a fouryear college degree; and
About 26 percent of Native Americans had at least a fouryear college degree.
Some minority groups in the Seattle Metropolitan Area were more likely than nonHispanic
whites to be college graduates in 2009 through 201145 percent of AsianPacific Americans
and 78 percent of Subcontinent Asian Americans had at least a fouryear college degree. In the
Seattle Metropolitan Area, all minority groups except Hispanic Americans showed an increase
between 2000 and 2009 through 2011 in the proportion of workers with a bachelor's degree. In
both Washington and the United States as a whole, all minority groups, including Hispanic
Americans, showed an increase between 2000 and 2009 through 2011 in the proportion of
workers with a bachelor's degree.
Gender. In the Seattle Metropolitan Area in 2000, about 37 percent of women and 38 percent of
men had at least a fouryear college degree. In 2009 through 2011, 41 percent of women and 40
percent of men had a bachelor's degree.
Additional indices of educational attainment. A 2010 report by the National Center for
Education Statistics examined the educational attainment and performance of students in the
United States by race/ethnicity. Despite increases in the number of students of each
race/ethnicity group who have completed high school and have pursued a postsecondary
education, disparities persist in a number of key performance indicators among nonHispanic
whites, Asian Americans, Black Americans, Hispanic Americans, and Native Americans.
Some of the results from the report that were related to high school student achievement
include the following:
Reading. On the 2007 National Assessment of Educational Progress (NAEP) reading
assessment, 40 percent of nonHispanic white 8th graders scored at or above "proficient,"
compared to only 13 percent of Black American, 15 percent of Hispanic American, and 18
percent of Native American 8th grade students. The percentage of Asian American 8th
graders who exhibited "proficient" scores (41%) was similar to that of nonHispanic
whites. Results for 12th graders were similarhigher percentages of nonHispanic white
(43%) and Asian American (36%) students scored at or above "proficient" compared with
their Black American (16%), Hispanic American (20%), and Native American (26%) peers.
Mathematics. On the NAEP mathematics assessment conducted in 2009 (for 8th graders)
and 2005 (for 12th graders), a higher proportion of Asian American students in both 8th and
12th grade scored at or above "proficient" than all other racial/ethnic groups. Among 8th
graders, 54 percent of Asian American students met the proficiency benchmark compared
to 44 percent of nonHispanic white, 12 percent of Black American, 17 percent of Hispanic
American, and 18 percent of Native American students. Proficiency was lower for all
groups in 12th grade but similar disparities persisted.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 17
College readiness. Diversity among SAT and ACT college entrance exam testtakers
increased substantially between 1998 and 2008, but differences in performance on those
exams persisted. Average scores for nonHispanic whites and Asian Americans were
substantially higher than average scores for Black Americans, Hispanic Americans, and
Native Americans. The same organization that administers the ACT also measures "college
readiness" in English, Mathematics, Reading, and Science using a benchmark scorethe
minimum score in each subject area that indicates a 50 percent chance of obtaining a "B" or
higher or a 75 percent chance of obtaining a "C" or higher in corresponding collegelevel
courses. A higher percentage of Asian Americans (33%) and nonHispanic whites (27%)
who took the ACT in 2008 met the benchmark score in all four subject areas than any other
racial/ethnic group. Only 3 percent of Black Americans, 10 percent of Hispanic Americans,
and 11 percent of Native Americans taking the ACT met the college readiness benchmark in
all four subjects.23
The report also considered trends in postsecondary education among different racial/ethnic
groups:
College participation. The college participation rate, defined as the percentage of 18 to 24
year olds enrolled in 2year or 4year colleges or universities, was higher in 2008 than in
1980 for nonHispanic whites, Black Americans, and Hispanic Americans. Even so, the
participation rate in 2008 for nonHispanic whites (44%) was substantially higher than for
Black Americans (32%), Hispanic Americans (26%), and Native Americans (22%).
Although there was no measurable increase in the college participation rate for Asian
Americans between 1990 and 2008, that group maintained the highest overall college
participation rate at 58 percent.24
Engineeringrelated degrees. Approximately 5 percent of all bachelor's degrees awarded in
2007 through 2008 were in engineering and engineering technologies. Asian Americans
exhibited the highest percentage of bachelor's degrees awarded in engineering (9%) and
Black Americans exhibited the lowest percentage (3%). Four percent of bachelor's degrees
awarded to Hispanic Americans and Native Americans and 5 percent of bachelor's degrees
awarded to nonHispanic whites were in engineering and engineering technologies. Those
trends were similar for master's and doctoral degrees.
Engineering Industry Employment. After consideration of educational opportunities and
attainment for minorities and women, the study team examined the race/ethnicity and gender
composition of workers in the engineering industry in Seattle Metropolitan Area. Figure E8
compares the demographic composition of workers in the Seattle Metropolitan Area
engineering industry to that of all workers in the Seattle Metropolitan Area who are 25 years or
older and have a college degree. Results are presented for 1980, 2000, and 2009 through 2011.
23 BBC examined college readiness benchmarks for Washington students graduating in 2012 who took the ACT as
sophomores, juniors, or seniors, and results were similar.
24 College participation data for Asian Americans were not available for 1980.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 18
Figure E8.
Demographic distribution of engineeringrelated workers and workers 25 and older
with a fouryear college degree in all industries, 1980, 2000, and 20092011
Workers 25+ with college degree Engineering industry workforce
1980 2000 200911 1980 2000 200911
Seattle Metropolitan Area (n=11,042) (n=23,656) (n=20,211) (n=481) (n=994) (n=741)
Race/ethnicity
# Black American 2.0 % 3.1 % 3.4 % 1.0 % ** 1.6 % 1.2 % **
# AsianPacific American 4.9 9.2 12.9 6.9 9.8 9.7 **
# Subcontinent Asian American 0.2 1.2 3.4 0.2 1.1 1.0 **
# Hispanic American 1.2 2.2 3.4 1.0 2.5 4.6
# Native American 0.3 1.1 1.1 0.6 0.6 0.7
# Other minority group 0.1 0.5 0.2 0.2 0.4 0.3
Total minority 8.8 % 17.2 % 24.4 % 10.0 % 16.0 % 17.5 %
# NonHispanic white 91.2 82.8 75.6 90.0 84.0 82.5 **
7 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Gender
8 Female 33.7 % 44.3 % 46.4 % 21.4 % ** 31.7 %** 32.6 % **
9 Male 66.3 55.7 53.6 78.6 ** 68.3 ** 67.4 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Workers 25+ with college degree Engineering industry workforce
1980 2000 200911 1980 2000 200911
Washington (n=18,139) (n=38,976) (n=32,701) (n=744) (n=1,745) (n=1,306)
Race/ethnicity
# Black American 1.5 % 2.4 % 2.8 % 0.9 % 1.1 %** 1.3 % **
# AsianPacific American 3.6 7.1 9.9 5.6 ** 7.1 7.4 **
# Subcontinent Asian American 0.2 1.0 2.4 0.1 1.0 0.9 **
# Hispanic American 1.2 2.2 3.5 1.1 2.7 4.2
# Native American 0.5 1.2 1.3 0.9 1.1 1.5
# Other minority group 0.1 0.4 0.2 0.5 0.4 0.3
Total minority 7.1 % 14.4 % 20.0 % 9.3 % 13.4 % 15.7 %
# NonHispanic white 92.9 85.6 80.0 90.7 ** 86.6 84.3 **
7 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Gender
8 Female 33.0 % 44.5 % 46.6 % 20.8 % ** 28.5 %** 29.4 % **
9 Male 67.0 55.5 53.4 79.2 ** 71.5 ** 70.6 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Workers 25+ with college degree Engineering industry workforce
1980 2000 200911 1980 2000 200911
United States (n=858,511) (n=1,631,919) (n=452,049) (n=28,869) (n=58,221) (n=15,919)
Race/ethnicity
# Black American 5.3 % 6.8 % 8.1 % 3.1 % ** 4.2 %** **4.7 %
# AsianPacific American 2.7 5.2 6.6 2.8 4.6 ** 6.0 **
# Subcontinent Asian American 0.6 1.7 2.7 1.1 ** 1.3 ** 1.8 **
# Hispanic American 2.5 4.4 6.9 3.5 ** 5.5 ** 7.6 **
# Native American 0.3 0.7 0.7 0.3 ** 0.7 0.8
# Other minority group 0.1 0.4 0.2 0.1 0.4 0.2
Total minority 11.4 % 19.1 % 25.2 % 10.9 % 16.7 % 21.3 %
# NonHispanic white 88.6 80.9 74.8 88.9 83.3 ** 78.7 **
Total 100.0 % 100.0 % 100.0 % 99.8 % 100.0 % 100.0 %
Gender
8 Female 34.7 % 45.6 % 48.8 % 21.1 % ** 26.0 %** 27.1 % **
9 Male 65.3 54.4 51.2 78.9 ** 74.0 ** 72.9 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Note: ** Denotes that the difference in proportions between engineers and workers in all industry groups for the given Census/ACS year is
statistically significant at the 95% confidence level.
The engineeringrelated industry in 2000 and 20092011 is "architectural, engineering, and related services," and in 1980 is "engineering,
architectural and surveying services." Though closely related, the groups are not exactly comparable.
Source: BBC Research & Consulting from 1980 and 2000 U.S. Census 5% sample and 20092011 ACS Public Use Microsample data. The raw data
extracts were obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 19
Race/ethnicity. In 2009 through 2011, about 18 percent of the workforce in the Seattle
Metropolitan Area engineering industry was made up of minorities. Of that workforce:
About 1 percent was made up of Black Americans;
About 10 percent was made up of AsianPacific Americans;
About 1 percent was made up of Subcontinent Asian Americans;
About 5 percent was made up of Hispanic Americans; and
About 1 percent was made up of Native Americans.
Other minorities comprised less than one half of one percent of the Seattle Metropolitan Area
engineering workforce in 2009 through 2011.
In 2009 through 2011, minorities as a single group comprised a smaller percentage of workers
in engineeringrelated industries (18%) than all workers 25 and older with a fouryear college
degree (24%). In particular, Subcontinent Asian Americans made up 3 percent of workers with a
college degree but only 1 percent of engineering workers. Black Americans also made up 3
percent of workers with a fouryear college degree but only 1 percent of workers in the
engineering industry. AsianPacific Americans also had a smaller representation among
engineers (10%) than they did among all workers with a college degree (13%). Both Hispanic
Americans and Native Americans comprised a similar percentage of workers in the engineering
industry and of workers with a college degree in all industries.
Gender. Compared to their representation among workers 25 and older with a college degree in
all industries, relatively few women work in the engineering industry. In 2009 through 2011,
women represented about 46 percent of all workers with a fouryear college degree but only 33
percent of engineeringrelated workers in the Seattle Metropolitan Area.
Civil Engineering Employment. The study team also examined the number of minorities and
women among civil engineers in the Seattle Metropolitan Area in 1980, 2000, and 2009 through
2011. Figure E9 presents those results. Overall, in 2009 through 2011, the percentage of civil
engineers who were minorities (28%) was largely consistent with the percentage of all Seattle
Metropolitan Area workers with college degrees who were minorities (24%). That result is
similar to Washington and the United States as a whole where the percentage of civil engineers
who were minorities (23% and 24%, respectively) was similar to the percentage of all workers
with college degrees who were minorities (20% and 25%, respectively).
Only 18 percent of civil engineers in the Seattle Metropolitan Area were women in 2009 through
2011, far less than the percentage of all workers with college degrees that were women (46%).
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 20
Figure E9.
Demographics of civil engineers and workers 25 and older with a college degree,
1980, 2000, and 20092011
Workers 25+ with college degree Civil engineering workforce
1980 2000 200911 1980 2000 200911
Seattle Metropolitan Area (n=11,042) (n=23,656) (n=20,211) (n=139) (n=253) (n=204)
Race/ethnicity
# Black American 2.0 % 3.1 % 3.4 % 1.4 % 3.2 % 3.5 %
# AsianPacific American 4.9 9.2 12.9 5.8 14.1 13.2
# Subcontinent Asian American 0.2 1.2 3.4 0.7 1.1 3.0
# Hispanic American 1.2 2.2 3.4 1.4 2.5 6.2
# Native American 0.3 1.1 1.1 0.0 0.6 2.3
# Other minority group 0.1 0.5 0.2 0.0 0.7 0.0
Total minority 8.8 % 17.2 % 24.4 % 9.4 % 22.1 % 28.3 %
# NonHispanic white 91.2 82.8 75.6 90.6 77.9 71.7
7 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Gender
8 Female 33.7 % 44.3 % 46.4 % 4.3 % ** 18.1 % ** 17.5 % **
9 Male 66.3 55.7 53.6 95.7 ** 81.9 ** 82.5 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Workers 25+ with college degree Civil engineering workforce
1980 2000 200911 1980 2000 200911
Washington (n=18,139) (n=38,976) (n=32,701) (n=267) (n=437) (n=358)
Race/ethnicity
# Black American 1.5 % 2.4 % 2.8 % 0.7 % 2.3 % 2.4 %
# AsianPacific American 3.6 7.1 9.9 4.5 9.4 9.9
# Subcontinent Asian American 0.2 1.0 2.4 0.7 0.8 2.2
# Hispanic American 1.2 2.2 3.5 0.7 3.2 5.9 **
# Native American 0.5 1.2 1.3 1.1 1.2 2.6
# Other minority group 0.1 0.4 0.2 0.0 0.4 0.0
Total minority 7.1 % 14.4 % 20.0 % 7.9 % 17.4 % 23.1 %
# NonHispanic white 92.9 85.6 80.0 92.1 82.6 76.9
7 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Gender
8 Female 33.0 % 44.5 % 46.6 % 4.5 % ** 14.4 % ** 15.7 % **
9 Male 67.0 55.5 53.4 95.5 ** 85.6 ** 84.3 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Workers 25+ with college degree Civil engineering workforce
1980 2000 200911 1980 2000 200911
United States (n=858,511) (n=1,631,919) (n=452,049) (n=10,088) (n=12,912) (n=3,295)
Race/ethnicity
# Black American 5.3 % 6.8 % 8.1 % 2.5 % ** 3.7 % ** 4.4 % **
# AsianPacific American 2.7 5.2 6.6 4.0 ** 6.2 ** 8.6 **
# Subcontinent Asian American 0.6 1.7 2.7 2.0 ** 2.6 ** 3.1
# Hispanic American 2.5 4.4 6.9 2.9 ** 4.4 6.0
# Native American 0.3 0.7 0.7 0.3 0.8 0.8
# Other minority group 0.1 0.4 0.2 0.2 ** 0.4 0.7 **
Total minority 11.4 % 19.1 % 25.2 % 11.8 % 18.2 % 23.7 %
# NonHispanic white 88.6 80.9 74.8 88.2 81.8 76.3
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Gender
8 Female 34.7 % 45.6 % 48.8 % 3.0 % ** 10.3 % ** 13.5 % **
9 Male 65.3 54.4 51.2 97.0 ** 89.7 ** 86.5 **
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Note: ** Denotes that the difference in proportions between civil engineers and workers 25+ with a college degree for the given Census/ACS
year is statistically significant at the 95% confidence level.
Source: BBC Research & Consulting from the 1980 and 2000 U.S. Census 5% sample s and 20092011 ACS Public Use Microsample data. The raw
data extracts were obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 21
Summary
BBC's analysis suggests that there are barriers to entry for certain minority groups and for
women in the construction and engineering industries in the Seattle Metropolitan Area. For the
construction industry, there appears to be barriers within the industry that continue through
occupational advancement.
Fewer Black Americans, AsianPacific Americans, and Subcontinent Asian Americans
worked in the Seattle Metropolitan Area construction and engineering industries than
what might be expected based on their representation in the overall workforce or the
workforce with college degrees (2009 through 2011).
Women accounted for particularly few workers in the Seattle Metropolitan Area
construction and engineering industries.
Lack of education appears to be a barrier to entry into the Seattle Metropolitan Area
engineering industry for Black Americans, Hispanic Americans, and Native Americans.
Workers in each of those groups were less likely to have a fouryear college degree
compared to nonHispanic whites.
Barriers to advancement in the construction industry may also be an important reason for the
relatively low number of minority and female business owners.
Representation of minorities and women was much lower in certain construction trades
(including firstline supervisors) compared with others.
Compared to nonHispanic whites in the construction industry, Hispanic Americans were
less likely to be managers. Women are also less likely to be managers than men in the
Seattle Metropolitan Area construction industry.
BBC RESEARCH & CONSULTINGFINAL REPORT APPENDIX E, PAGE 22
APPENDIX F.
Business Ownership in the Seattle
Metropolitan Area Construction and
Engineering Industries
Approximately one in five construction industry workers in the Seattle Metropolitan Area were
selfemployed business owners in 2009 through 2011.1 Sixteen percent of workers in the local
engineering industry were selfemployed business owners. BBC examined business ownership
in those two industries for different racial/ethnic and gender groups in the Seattle Metropolitan
Area. BBC used Public Use Microdata Samples (PUMS) data from the 1990 and 2000 Census and
from the 2009 through 2011 American Community Survey (ACS) to study business ownership
rates in the local construction and engineering industries. Note that "selfemployment" and
"business ownership" are used interchangeably in Appendix F.
Business Ownership Rates
Many studies have explored differences between minority and nonminority business
ownership at the national level. Although overall selfemployment rates have increased for
minorities and women over time, a number of studies indicate that race/ethnicity and gender
continue to affect opportunities for business ownership.2 The extent to which such individual
characteristics may limit business ownership opportunities differs from industry to industry
and from state to state.
Construction industry. Compared to other industries, construction has a relatively large
number of business owners. In 2009 through 2011, 20 percent of workers in the local
construction industry were selfemployed (in incorporated or unincorporated businesses)
compared with only 9 percent of workers across all industries. However, rates of self
employment in the local construction industry vary by race/ethnicity and gender. Figure F1
shows the percentage of workers who were selfemployed in the construction industry by group
for 1990, 2000, and 2009 through 2011. Figure F1 also shows corresponding sample sizes for
those percentages. Due to small sample sizes, Subcontinent Asian Americans are included in the
"other race minority" category. Figure F1 presents results for the Seattle Metropolitan Area,
Washington, and for the United States as a whole.
1 The "Seattle Metropolitan Area" refers to Pierce, King, and Snohomish counties.
2 For example, see Waldinger, Roger and Howard E. Aldrich. 1990. Ethnicity and Entrepreneurship. Annual Review of Sociology.
111135.; Fairlie, Robert W. and Bruce D. Meyer. 1996. Ethnic and Racial SelfEmployment Differences and Possible
Explanations. The Journal of Human Resources, Volume 31, Issue 4, 757793.; Fairlie, Robert W. and Alicia M. Robb. 2007. Why
are BlackOwned Businesses Less Successful than WhiteOwned Businesses? The Role of Families, Inheritances and Business
Human Capital. Journal of Labor Economics, 25(2), 289323.; and Fairlie, Robert W. and Alicia M. Robb. 2006. Race, Families
and Business Success: A Comparison of AfricanAmerican, Asian, and WhiteOwned Businesses. Russell Sage Foundation.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 1
Figure F1.
Percentage of workers in the construction industry who were selfemployed,
1990, 2000, and 20092011
SelfEmployment Rate Sample size
Seattle Metropolitan Area 1990 2000 20092011 1990 2000 20092011
Race/ethnicity
Black American 5.8 % ** 8.1 % ** 15.6 % 79 128 76
AsianPacific American 18.3 21.5 22.6 66 143 131
Hispanic American 9.1 ** 8.9 ** 12.0 ** 79 322 359
Native American 6.6 ** 16.9 10.8 ** 80 115 67
Other race minority 0.0 4.3 ** 26.8 6 37 13
NonHispanic white 18.0 21.0 21.5 3,711 4,332 2,777
Gender
Female 14.9 % 12.4 % ** 13.9 % ** 483 651 430
Male 17.6 20.7 20.7 3,538 4,426 2,993
All individuals 17.3 % 19.7 % 19.9 % 4,021 5,077 3,423
SelfEmployment Rate Sample size
Washington 1990 2000 20092011 1990 2000 20092011
Race/ethnicity
Black American 5.8 % ** 7.8 % ** 13.9 % * 97 157 102
AsianPacific American 17.3 21.4 21.1 88 188 170
Hispanic American 7.0 ** 9.1 ** 13.3 ** 163 566 570
Native American 8.8 ** 12.9 ** 8.3 ** 179 366 195
Other race minority 0.0 11.9 30.8 9 66 24
NonHispanic white 18.9 22.6 21.8 7,260 9,261 5,877
Gender
Female 16.6 % 16.1 % ** 15.9 % ** 883 1,228 850
Male 18.4 22.0 21.0 6,913 9,376 6,088
All individuals 18.2 % 21.3 % 20.4 % 7,796 10,604 6,938
SelfEmployment Rate Sample size
United States 1990 2000 20092011 1990 2000 20092011
Race/ethnicity
Black American 10.5 % ** 15.2 % ** 18.9 % ** 25,166 26,752 4,847
AsianPacific American 14.5 ** 21.3 ** 25.0 * 3,889 5,297 1,488
Hispanic American 11.1 ** 12.2 ** 17.4 ** 36,411 66,531 18,084
Native American 12.6 ** 19.2 ** 18.0 ** 4,397 8,089 1,580
Other race minority 11.3 ** 22.2 * 24.7 844 2,648 416
NonHispanic white 21.0 25.4 27.5 339,345 371,152 72,093
Gender
Female 13.5 % ** 16.8 % ** 16.4 % ** 39,376 46,791 9,567
Male 19.7 23.3 25.2 370,676 433,678 88,941
All individuals 19.1 % 22.6 % 24.4 % 410,052 480,469 98,508
Note: Other race minority includes Subcontinent Asian Americans.
*, ** Denotes that the difference in proportions between the minority and nonHispanic white groups (or female and male groups) for
the given Census/ACS year is statistically significant at the 90% or 95% confidence level, respectively.
Source: BBC Research & Consulting from 1990 and 2000 U.S. Census 5% sample and 20092011 ACS Public Use Microdata samples. The raw
data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 2
Business ownership rates in 2000. The 2000 Census provides information on the largest sample
of construction workers of any of the data sets that the study team examined. In 2000, 21
percent of nonHispanic whites working in the Seattle Metropolitan Area construction industry
were selfemployed. Business ownership rates were lower for all minority groups that the study
team examined, except for AsianPacific Americans (21.5%). Business ownership rates were
also lower for women than for men.
Black Americans in the Seattle Metropolitan Area construction industry owned businesses
at a rate of only 8 percent, roughly onethird of the rate of nonHispanic whites and
substantially lower than the national business ownership rate for Black Americans.
About 9 percent of Hispanic Americans in the local construction industry owned
businesses, less than half of the rate of nonHispanic whites.
The business ownership rate of Native Americans in the local construction industry was 17
percent, but that difference was not statistically significant.
Compared with about 21 percent of men, 12 percent of women working in the construction
industry in the Seattle Metropolitan Area owned businesses in 2000. That difference was
consistent with trends observed for the entire nation.
National trends also indicated that there are disparities between minority and nonHispanic
white business ownership rates in the construction industry, but the disparity for Black
Americans is much greater in the Seattle Metropolitan Area and in Washington. In addition,
women were less likely to own businesses than men in the construction industry at the national
level.
Changes in business ownership rates since 2000. Business ownership rates in the Seattle
Metropolitan Area construction industry increased among all minority groups except Native
Americans between 2000 and 2009 through 2011.
In 2009 through 2011, a substantially smaller percentage of Hispanic Americans (12%)
than nonHispanic whites (22%) were business owners in the local construction industry.
About 11 percent of Native Americans working in the local construction industry owned
their businesses, much lower than the rate for nonHispanic whites.
The business ownership rate of Black Americans rose to 16 percent, still below that of non
Hispanic whites but no longer a statistically significant difference.
AsianPacific Americans continued to own businesses at a slightly higher rate than non
Hispanic whites in 2009 through 2011.
Substantial differences in business ownership rates persisted between women (14%) and
men (21%) in 2009 through 2011, consistent with state and national trends.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 3
Engineering industry. BBC also examined business ownership rates in the engineering
industry. Figure F2 presents the percentage (and corresponding sample sizes) of workers who
were selfemployed in the engineering industry in 1990, 2000, and 2009 through 2011. Figure
F2 presents results for the Seattle Metropolitan Area, Washington, and for the United States as a
whole. Due to small sample sizes, all minority groups except AsianPacific Americans are
combined in the "other race minority" category.
Figure F2.
Percentage of workers in the engineering industry who were selfemployed,
1990, 2000, and 20092011
SelfEmployment Rate Sample size
Seattle Metropolitan Area 1990 2000 20092011 1990 2000 20092011
Race/ethnicity
AsianPacific American 10.6 6.1 10.7 30 93 82
Other race minority 18.4 7.4 9.9 27 61 46
NonHispanic white 14.7 13.8 17.6 487 840 613
Gender
Female 7.6 % ** 6.6 % ** 10.3 % ** 152 322 249
Male 17.4 15.5 19.3 392 672 492
All individuals 14.7 % 12.7 % 16.4 % 544 994 741
SelfEmployment Rate Sample size
Washington 1990 2000 20092011 1990 2000 20092011
Race/ethnicity
AsianPacific American 9.8 5.9 * 9.4 33 117 109
Other race minority 20.1 6.9 7.3 ** 39 108 96
NonHispanic white 13.8 13.8 13.5 728 1,520 1,155
Gender
Female 6.6 % ** 7.0 % ** 8.7 % ** 208 497 412
Male 16.5 15.1 14.4 592 1,248 948
All individuals 13.9 % 12.8 % 12.7 % 800 1,745 1,360
SelfEmployment Rate Sample size
United States 1990 2000 20092011 1990 2000 20092011
Race/ethnicity
AsianPacific American 10.0 ** 8.5 ** 8.3 ** 1,249 2,620 876
Other race minority 9.9 ** 7.6 ** 7.2 ** 2,846 6,781 2,084
NonHispanic white 15.8 14.2 13.2 28,944 48,823 13,510
Gender
Female 6.8 % ** 7.5 % ** 7.1 % ** 7,901 15,191 4,369
Male 17.7 15.1 13.8 25,138 43,033 12,101
All individuals 15.1 % 13.2 % 12.1 % 33,039 58,224 16,470
Note: Other race minority includes Black Americans, Subcontinent Asian Americans, Hispanic Americans, Native Americans and other minorities.
*, ** Denotes that the difference in proportions between the minority and nonHispanic white groups (or female and male groups) for the
given Census/ACS year is statistically significant at the 90% or 95% confidence level, respectively.
Source: BBC Research & Consulting from 1990 and 2000 U.S. Census 5% sample and 20092011 ACS Public Use Microdata samples. The raw data
extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 4
Business ownership rates in 2000. In 2000, about 14 percent of nonHispanic whites working in
the local engineering industry were selfemployed. Although disparities between ownership
rates for nonHispanic whites and minorities were apparent, those differences were not
statistically significant.
About 6 percent of AsianPacific Americans working in the engineering industry were self
employed, less than half the rate of nonHispanic whites.
Other race minorities showed a business ownership rate of 7 percent, substantially lower
than the rate of nonHispanic whites.
Approximately 7 percent of women working in the Seattle Metropolitan Area engineering
industry in 2000 were business owners compared with 16 percent of men in the Seattle
Metropolitan Area engineering industry. That difference was statistically significant.
Those differences were similar to trends in the State of Washington and the United States as a
whole.
Changes in business ownership rates since 2000. As shown in Figure F2, the rate of business
ownership in the Seattle Metropolitan Area engineering industry for nonHispanic whites
increased to about 18 percent in 2009 through 2011. Both AsianPacific Americans and other
race minorities had lower rates of business ownership than nonHispanic whites, but those
differences were not statistically significant.
The business ownership rate for AsianPacific Americans increased to 11 percent between
2000 and 2009 through 2011. That rate was still lower than that for nonHispanic whites.
The business ownership rate for other race minorities in 2009 through 2011 was 10
percent, which is lower than the rate for nonHispanic whites.
The rate of business ownership for both men and women working in the Seattle
Metropolitan Area engineering industry increased between 2000 and 2009 through 2011,
but a significant gender disparity persisted10 percent of women owned engineering
businesses compared to 19 percent of men.
Potential causes of differences in business ownership rates. Researchers have
examined whether there are disparities in business ownership rates after considering certain
personal characteristics of business owners such as education and age. Several studies have
found that disparities in business ownership still exist even after accounting for such race and
genderneutral factors.
Some studies have concluded that access to financial capital is a strong determinant of
business ownership. Researchers have consistently found a positive relationship between
startup capital and business formation, expansion, and survival.3 In addition, one study
found that housing appreciation measured at the Metropolitan Statistical Area (MSA) level
3 See Lofstrom, Magnus and Chunbei Wang. 2006. Hispanic SelfEmployment: A Dynamic Analysis of Business Ownership.
Working paper, Forschungsinstitut zur Zukunft der Arbeit (Institute for the Study of Labor).; and Fairlie, Robert W. and Alicia
M. Robb. 2006. Race, Families and Business Success: A Comparison of AfricanAmerican, Asian, and WhiteOwned Businesses.
Russell Sage Foundation.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 5
is a positive determinant of becoming selfemployed.4 However, unexplained differences
still exist when statistically controlling for those factors.5
Education has a positive effect on the probability of business ownership in most industries.
However, findings from multiple studies indicate that minorities are still less likely to own
a business than nonminorities with similar levels of education.6
Intergenerational links affect one's likelihood of selfemployment. One study found that
experience working for a selfemployed family member increases the likelihood of business
ownership for minorities.7
Time since immigration and assimilation into American society are also important
determinants of selfemployment, but unexplained differences in business ownership
between minorities and nonminorities still exist when accounting for those factors.8
In 1999, Initiative 200 amended Washington state law to prohibit discrimination and the
use of race and genderbased preferences in public contracting, public employment, and
public education, unless required by federal law. At least some academic research has
suggested adverse outcomes for minorities, women, and minority and womenowned
businesses as a result of Initiative 200.9
Business Ownership Regression Analysis
Race/ethnicity and gender can affect opportunities for business ownership, even after
accounting for individuals' race and genderneutral personal characteristics such as education,
age, and familial status. To further examine factors that predict business ownership, BBC
developed multivariate regression models to explore patterns of business ownership in the
Seattle Metropolitan Area. Those models estimate the effect of race/ethnicity and gender on the
probability of business ownership while statistically controlling for other potentially influential
factors.
4 Fairlie, Robert W. and Harry A. Krashinksy. 2006. Liquidity Constraints, Household Wealth and Entrepreneurship Revisited.
5 Lofstrom, Magnus and Chunbei Wang. 2006. Hispanic SelfEmployment: A Dynamic Analysis of Business Ownership. Working
paper, Forschungsinstitut zur Zukunft der Arbeit (Institute for the Study of Labor).
6 See Fairlie, Robert W. and Bruce D. Meyer. 1996. Ethnic and Racial SelfEmployment Differences and Possible Explanations.
The Journal of Human Resources, Volume 31, Issue 4, 757793; and Butler, John Sibley and Cedric Herring. 1991. Ethnicity and
Entrepreneurship in America: Toward an Explanation of Racial and Ethnic Group Variations in SelfEmployment. Sociological
Perspectives. 7994.
7 See Fairlie, Robert W. and Alicia M. Robb. 2006. Race, Families and Business Success: A Comparison of AfricanAmerican,
Asian, and WhiteOwned Businesses. Russell Sage Foundation; and Fairlie, Robert W. and Alicia M. Robb. 2007. Why are Black
Owned Businesses Less Successful than WhiteOwned Businesses? The Role of Families, Inheritances and Business Human Capital.
Journal of Labor Economics, 25(2), 289323.
8 See Fairlie, Robert W. and Bruce D. Meyer. 1996. Ethnic and Racial SelfEmployment Differences and Possible Explanations.
The Journal of Human Resources, Volume 31, Issue 4, 757793; and Butler, John Sibley and Cedric Herring. 1991. Ethnicity and
Entrepreneurship in America: Toward an Explanation of Racial and Ethnic Group Variations in SelfEmployment. Sociological
Perspectives. 7994.
9 Fairlie, R. & Marion, J. 2007. "Affirmative Action Programs and Business Ownership among Minorities and Women." Ford
Foundation and National Economic Development and Law Center.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 6
An extensive body of literature examines whether race and genderneutral personal factors
such as access to financial capital, education, age, and family characteristics (e.g., marital status)
help explain differences in business ownership. That subject has also been examined in other
disparity studies. For example, prior studies in Minnesota and Illinois have used econometric
analyses to investigate whether disparities in business ownership for minorities and women
working in the construction and engineering industries persist after statistically controlling for
race and genderneutral personal characteristics.10,11 Those studies have incorporated probit
econometric models using PUMS data from the 2000 Census and have been among the materials
that agencies have submitted to courts in subsequent litigation concerning implementation of
the Federal DBE Program.
BBC used similar probit regression models to predict business ownership from multiple
independent or "explanatory" variables.12 Independent variables included:
Personal characteristics that are potentially linked to the likelihood of business
ownershipage, agesquared, disability, marital status, number of children in the
household, number of elderly people in the household, and Englishspeaking ability;
Indicators of educational attainment;
Measures and indicators related to personal financial resources and constraintshome
ownership, home value, monthly mortgage payment, dividend and interest income, and
additional household income from a spouse or unmarried partner; and
Variables representing the race/ethnicity and gender of the individuals included in the
analysis.13
BBC developed four models using PUMS data from the 2000 Census and 2009 through 2011
ACS:
A probit regression model for the local construction industry in 2000 that included 4,362
observations;
A probit regression model for the local construction industry in 2009 through 2011 that
included 3,221 observations;
10 National Economic Research Associates, Inc. 2000. Disadvantaged Business Enterprise Availability Study. Prepared for the
Minnesota Department of Transportation.
11 National Economic Research Associates, Inc. 2004. Disadvantaged Business Enterprise Availability Study. Prepared for the
Illinois Department of Transportation.
12 Probit models estimate the effects of multiple independent or "predictor" variables in terms of a single, dichotomous
dependent or "outcome" variable in this case, business ownership. The dependent variable is binary, coded as "1" for
individuals in a particular industry who are selfemployed; "0" for individuals who are not selfemployed. The model enables
estimation of the probability that a worker in a given estimation sample is selfemployed. The study team excluded
observations where the Census Bureau had imputed values for the dependent variable, business ownership.
13 BBC also considered interaction variables to represent the combined effect of being minority and female but the terms were
not significant in any models and were excluded from the final regressions.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 7
A probit regression model for the local engineering industry in 2000 that included 904
observations; and
A probit regression model for the local engineering industry in 2009 through 2011 that
included 726 observations.
Construction industry. BBC developed probit regression models of business ownership in
the Seattle Metropolitan Area construction industry for 2000 and 2009 through 2011. In
addition, the study team developed simulations of business ownership rates if minorities and
women had the same probability of business ownership as similarly situated nonHispanic
whites and males, respectively.
Construction industry in 2000. Figure F3 presents the coefficients for the probit model for
individuals working in the Seattle Metropolitan Area construction industry in 2000. The model
indicates that several race and genderneutral factors are statistically significant predictors of
business ownership for workers in the industry:
Older individuals were more likely to be business owners, but the effect was smaller for the
oldest individuals;
Individuals with more children and individuals with more elderly persons living in the
household were more likely to be business owners;
Higher home values were associated with a higher probability of business ownership;
Workers with greater interest and dividend income were more likely to own a business;
Individuals that speak English well were more likely to own businesses; and
Having a fouryear degree was associated with a lower probability of business ownership.
After statistically controlling for race and genderneutral factors, statistically significant
disparities in business ownership rates remained for Black Americans, other race minorities
(including Subcontinent Asian Americans), and women working in the local construction
industry.
Simulations of business ownership rates. The probit modeling approach allowed for
simulations of business ownership rates for minorities and women if they had the same
probability of business ownership as similarly situated nonHispanic whites and males,
respectively. To conduct those simulations, BBC took the following steps:
1. BBC performed a probit regression analysis predicting business ownership using only
nonHispanic white (or nonHispanic white male) construction workers in the dataset.14
2. The study team then used the coefficients from that model and the mean personal
characteristics of individual minority groups (or women) working in the local
construction industry (i.e., personal characteristics, indicators of educational
14 That version of the model excluded the race/ethnicity and gender indicator variables, because the value of all of those
variables would be the same (i.e., 0).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 8
attainment, and indicators of personal financial resources and constraints) to estimate
the probability of business ownership of such groups.
Figure F3.
Variable Coefficient
Seattle Metropolitan Area
construction industry business
Constant 3.0748 **
ownership model, 2000
Age 0.0553 **
Agesquared 0.0003 *
Note:
Married 0.0158
Other race minority includes Subcontinent Asian
Americans. Disabled 0.0589
*,** Denote statistical significance at the 90% and 95% Number of children in household 0.0766 **
confidence levels, respectively.
Number of people over 65 in household 0.1527 *
Owns home 0.1321
Source:
Home value ($000s) 0.0014 **
BBC Research & Consulting from 2000 Census data. The
raw data extract was obtained through the IPUMS program Monthly mortgage payment ($000s) 0.0086
of the MN Population Center: http://usa.ipums.org/usa/. Interest and dividend income ($000s) 0.0049 **
Income of spouse or partner ($000s) 0.0012
Speaks English well 0.3960 **
Less than high school education 0.1041
Some college 0.0511
Fouryear degree 0.1696 **
Advanced degree 0.0182
Hispanic American 0.1043
Black American 0.3504 *
Native American 0.0444
AsianPacific American 0.0734
Other race minority 0.9032 *
Female 0.4651 **
The results of those simulations yielded estimates of business ownership rates for nonHispanic
whites (or nonHispanic white males) who shared similar characteristics of minorities (or
women) working in the Seattle Metropolitan Area construction industry. Higher simulated rates
indicate that, in reality, race/ethnicity or gender makes it less likely for minorities and women
to own businesses than similarlysituated nonHispanic whites (or nonHispanic white males).
BBC performed those calculations for only those groups for which race/ethnicity or gender was
a statistically significant negative factor in business ownership (i.e., Black Americans, other race
minority, which includes Subcontinent Asian Americans, and women).
Figure F4 presents simulated business ownership rates (i.e., "benchmark" rates) for Black
Americans, other race minorities, and nonHispanic white women, and compares them to the
actual, observed mean probability of business ownership for those groups. The disparity index
was calculated by taking the actual business ownership rate for each group and dividing it by
each group's benchmark rate, and then multiplying the result by 100. Values less than 100
indicate that, in reality, the group is less likely to own businesses than what would be expected
for similarlysituated nonHispanic whites (or nonHispanic white males)in other words that
race/ethnicity (or gender) affects the likelihood of those groups owning businesses in the local
construction industry. Similar simulation approaches have been incorporated in other disparity
studies that courts have reviewed.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 9
Figure F4.
Comparison of actual business ownership rates to simulated rates
for Seattle Metropolitan Area construction workers, 2000
Selfemployment rate Disparity index
Group Actual Benchmark (100 = parity)
Black American 9.3% 16.0% 58
Other race minority 3.2% 16.6% 19
NonHispanic white female 12.6% 25.1% 50
Note: As the benchmark figure can only be estimated for records with an observed (rather than imputed)
dependent variable, comparison is made with only this subset of the sample. For this reason, actual self
employment rates may differ slightly from those in Figure F1.
Other race minority includes Subcontinent Asian Americans.
Source: BBC Research & Consulting from statistical models of 2000 Census data. The raw data extract was
obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
Comparisons of the actual, observed business ownership rate of Black Americans in the Seattle
Metropolitan Area construction industry with the benchmark based on simulated business
ownership rates of similarlysituated nonHispanic white construction workers showed that
Black Americans own businesses at 58 percent of the rate that would be expected of non
Hispanic white construction workers who share similar personal, financial, and educational
characteristics. Other race minorities (disparity index of 19) also owned businesses at rates
substantially lower than what would be expected based on the simulated business ownership
rates of similarlysituated nonHispanic white construction workers.
NonHispanic white women (disparity index of 50) own businesses at half the rate that would be
expected based on the simulated business ownership rates of similarlysituated nonHispanic
white male construction workers.
Construction industry in 2009 through 2011. Figure F5 presents the coefficients from the
probit model predicting business ownership in the Seattle Metropolitan Area construction
industry in 2009 through 2011. It appears that many of the same race and genderneutral
factors important to predicting business ownership in the 2000 model also had an impact in
2009 through 2011:
Older individuals were more likely to be business owners, but the effect was smaller for the
oldest individuals;
Home owners were less likely to own businesses; however, for those that did own homes,
higher home values and higher monthly mortgage payments were associated with a higher
probability of business ownership; and
Individuals that speak English well were more likely to own a business.
After controlling for race and genderneutral factors, a statistically significant difference
remained in the rates of business ownership for Hispanic American and female construction
workers.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 10
Figure F5.
Variable Coefficient
Seattle Metropolitan Area construction
industry business ownership model,
Constant 2.3850 **
20092011
Age 0.0662 **
Agesquared 0.0005 **
Note:
Other race minority includes Subcontinent Asian Americans. Married 0.0876
*,** Denote statistical significance at the 90% and 95% Disabled 0.0848
confidence levels, respectively. Number of children in household 0.0392
Number of people over 65 in household 0.1504
Source: Owns home 0.1766 *
BBC Research & Consulting from 20092011 ACS data. The raw
Home value ($000s) 0.0003 **
data extract was obtained through the IPUMS program of the
MN Population Center: http://usa.ipums.org/usa/. Monthly mortgage payment ($000s) 0.0833 **
Interest and dividend income ($000s) 0.0026
Income of spouse or partner ($000s) 0.0005
Speaks English well 0.3604 *
Less than high school education 0.0664
Some college 0.0270
Fouryear degree 0.0294
Advanced degree 0.2516
Hispanic American 0.2594 *
African American 0.0337
Native American 0.3516
AsianPacific American 0.1707
Other race minority (incl subcont asian) 0.3147
Female 0.3713 **
Simulations of business ownership rates. Using the same approach as for the 2000 data, the
study team used the 2009 through 2011 results to simulate business ownership rates if
minorities and women had the same probability of selfemployment as similarly situated non
Hispanic whites and nonHispanic white males, respectively. Figure F6 shows actual and
simulated ("benchmark") business ownership rates for Hispanic American and nonHispanic
white women construction workers in the Seattle Metropolitan Area. Again, BBC performed
those simulations for only those groups where race/ethnicity or gender was a statistically
significant predictor of business ownership (i.e., Hispanic Americans and women).
Figure F6.
Comparison of actual business ownership rates to simulated rates
for Seattle Metropolitan Area construction workers, 20092011
Selfemployment rate Disparity index
Group Actual Benchmark (100 = parity)
Hispanic American 12.2% 23.5% 52
NonHispanic white female 15.6% 23.0% 68
Note: As the benchmark figure can only be estimated for records with an observed (rather than imputed)
dependent variable, comparison is made with only this subset of the sample. For this reason, actual self
employment rates may differ slightly from those in Figure F1.
Source: BBC Research & Consulting from statistical models of 20092011 ACS data. The raw data extract was
obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 11
Hispanic Americans (disparity index of 52) owned construction businesses at rates that were
about half of what would be expected based on the simulated business ownership rates of
similarlysituated nonHispanic white construction workers. Hispanic Americans (disparity
index of 68) owned construction businesses at rates that were about twothirds of what would
be expected based on the simulated business ownership rates of similarlysituated nonHispanic
white male construction workers.
Engineering industry. BBC developed separate business ownership models and simulations
for the Seattle Metropolitan Area engineering industry using 2000 Census data and 20092011
ACS data.
Engineering industry in 2000. Figure F7 presents the coefficients from the probit model
predicting business ownership in the Seattle Metropolitan Area engineering industry in 2000.
The following race and genderneutral factors were statistically significant predictors of
business ownership for the engineering industry in the Seattle Metropolitan Area in 2000:
Older individuals were more likely to be business owners, but the effect was smaller for the
oldest individuals;
Larger numbers of people over the age of 65 in households were associated with a higher
likelihood of business ownership;
Higher home values were associated with a greater likelihood of business ownership; and
Workers with a fouryear degree were more likely to be business owners.
After statistically controlling for race and genderneutral factors, the regression model for the
Seattle Metropolitan Area engineering industry indicated that women working in the industry
were less likely than men to own businesses. Although minorities had lower rates of business
ownership than nonminorities, the race/ethnicity terms in the model were not statistically
significant, perhaps due to small sample sizes.
Simulations of business ownership rates. The study team simulated business ownership rates
in the Seattle Metropolitan Area engineering industry using the same approach as it used for the
construction industry. Figure F8 presents actual and simulated ("benchmark") business
ownership rates for nonHispanic white women in the Seattle Metropolitan Area engineering
industry. BBC performed those simulations only for women, because gender was statistically
significant whereas the race/ethnicity terms were not.
Approximately 7 percent of nonHispanic white women in the Seattle Metropolitan Area
engineering industry were business owners in 2000 compared with a benchmark business
ownership rate of about 14 percent (a disparity index of 53). Those results indicate that women
working in the Seattle Metropolitan Area engineering industry own businesses at 53 percent of
the rate observed for similarlysituated nonHispanic white men (i.e., nonHispanic white males
who share the same personal, financial, and educational characteristics of nonHispanic white
females).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 12
Figure F7.
Variable Coefficient
Seattle Metropolitan Area engineering
industry business ownership model,
Constant 4.6570 **
2000
Age 0.0949 **
Agesquared 0.0008 *
Note:
Other race minority includes Black Americans, Disabled 0.3255
Subcontinent Asian Americans, Hispanic Americans, Native Married 0.2146
Americans and other minorities.
Number of children in household 0.0626
*,** Denote statistical significance at the 90% and 95%
confidence levels, respectively. Number of people over 65 in household 0.3197 **
"Speaks English Well" was excluded from the model Owns home 0.1184
because all engineering business owners spoke English Home value ($000s) 0.0012 **
well.
Monthly mortgage payment ($000s) 0.0044
Interest and dividend income ($000s) 0.0042
Source:
Income of spouse or partner ($000s) 0.0004
BBC Research & Consulting from 2000 Census data. The
raw data extract was obtained through the IPUMS program Speaks English well excluded
of the MN Population Center: http://usa.ipums.org/usa/.
Less than high school education 0.6740
Some college 0.6483
Fouryear degree 0.8631 *
Advanced degree 0.7186
AsianPacific American 0.2156
Other race minority 0.1212
Female 0.3298 **
Figure F8.
Comparison of actual business ownership rates to simulated rates
for Seattle Metropolitan Area workers in the engineering industry, 2000
Selfemployment rate Disparity index
Group Actual Benchmark (100 = parity)
NonHispanic white female 7.2% 13.7% 53
Note: As the benchmark figure can only be estimated for records with an observed (rather than imputed)
dependent variable, comparison is made with only this subset of the sample. For this reason, actual
selfemployment rates may differ slightly from those in Figure F2.
Source: BBC Research & Consulting from statistical models of 2000 Census data. The raw data extract was
obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
Engineering industry in 2009 through 2011. Figure F9 presents the coefficients from the probit
model predicting business ownership in the Seattle Metropolitan Area engineering industry in
2009 through 2011. There were several race and genderneutral factors that significantly
predicted business ownership in the 2009 through 2011 model:
Older individuals were more likely to be business owners;
Workers with greater interest and dividend income were more likely to own a business;
and
Individuals that speak English well were less likely to own a business.
Similar to the 2000 engineering model, genderbut not race/ethnicitywas a statistically
significant predictor of business ownership in the engineering industry in 2009 through 2011.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 13
Figure F9.
Variable Coefficient
Seattle Metropolitan Area engineering
industry business ownership model,
Constant 2.4936 *
20092011
Age 0.0778 *
Agesquared 0.0005
Note:
Disabled 0.1145
Other race minority includes Black Americans, Subcontinent
Asian Americans, Hispanic Americans, Native Americans and Married 0.1702
other minorities.
Number of children in household 0.1178
*,** Denote statistical significance at the 90% and 95%
Number of people over 65 in household 0.0551
confidence levels, respectively.
"Less than High School" was excluded from the model Owns home 0.0953
because only one engineering business owners had not Home value ($000s) 0.0002
completed high school.
Monthly mortgage payment ($000s) 0.0195
Interest and dividend income ($000s) 0.0108 **
Source:
Income of spouse or partner ($000s) 0.0020
BBC Research & Consulting from 20092011 ACS data. The raw
data extract was obtained through the IPUMS program of the Speaks English well 1.5775 **
MN Population Center: http://usa.ipums.org/usa/. Less than high school education excluded
Some college 0.4099
Fouryear degree 0.6791
Advanced degree 0.5583
AsianPacific American 0.2397
Other race minority 0.3814
Female 0.4111 **
Simulations of business ownership rates. The study team simulated business ownership rates
in the 2009 though 2011 Seattle Metropolitan Area engineering industry using the same
approach as it used for the construction industry and the 2000 engineering industry.
Figure F10 presents actual and simulated ("benchmark") business ownership rates for non
Hispanic white women in the Seattle Metropolitan Area engineering industry. Again, BBC
performed those simulations only for women, because gender was statistically significant
whereas the race/ethnicity terms were not.
Results for women were slightly improved from 2000. Approximately 12 percent of non
Hispanic white women in the Seattle Metropolitan Area engineering industry were business
owners in 2009 through 2011 compared with a benchmark business ownership rate of about 19
percent (a disparity index of 62). Those results indicate that women working in the Seattle
Metropolitan Area engineering industry own businesses at 62 percent of the rate observed for
similarlysituated nonHispanic white men.
Figure F10.
Comparison of actual business ownership rates to simulated rates for
Seattle Metropolitan Area workers in the engineering industry, 20092011
Selfemployment rate Disparity index
Group Actual Benchmark (100 = parity)
NonHispanic white female 11.8% 18.9% 62
Note: As the benchmark figure can only be estimated for records with an observed (rather than imputed)
dependent variable, comparison is made with only this subset of the sample. For this reason, actual
selfemployment rates may differ slightly from those in Figure F2.
Source: BBC Research & Consulting from statistical models of 20092011 ACS data. The raw data extract was
obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 14
Summary
Disparities in business ownership were present in the Seattle Metropolitan Area construction
industry:
In both 2000 and 2009 through 2011, business ownership rates for Hispanic Americans
were substantially lower than that of nonHispanic whites. Business ownership rates were
lower for Black Americans in 2000 but not in 2009 through 2011, and business ownership
rates were lower for Native Americans in 2009 through 2011 but not in 2000.
After statistically controlling for a number of race and genderneutral factors affecting
business ownership, substantially fewer Black Americans and other race minorities owned
firms than what would be expected if they owned businesses at the same rate as similarly
situated nonHispanic whites in 2000.
In 2009 through 2011, fewer Hispanic Americans owned firms than what would be
expected if they owned businesses at the same rate as similarlysituated nonHispanic
whites (after statistically controlling for a number of race and genderneutral factors).
In 2000 and in 2009 through 2011, women working in the local construction industry had
substantially lower rates of business ownership than men. After controlling for a number of
race and genderneutral factors using 2000 and 2009 through 2011 data, substantial
disparities persisted in business ownership rates for women.
BBC also identified disparities in business ownership rates in the Seattle Metropolitan Area
engineering industry:
The "other race minority" group (including Black Americans, Subcontinent Asian
Americans, Hispanic Americans, Native Americans, and other minorities) in the Seattle
Metropolitan Area engineering industry owned businesses at substantially lower rates
than nonHispanic whites in 2000 and 2009 through 2011, but those differences were not
statistically significant.
Business ownership rates were lower for AsianPacific Americans as well (in both 2000
and 2009 through 2011), but those differences were not statistically significant.
In 2000 and in 2009 through 2011, women working in the engineering industry in the
Seattle Metropolitan Area had substantially lower business ownership rates than men.
BBC used regression models to investigate the presence of race/ethnicity and gender
based disparities in business ownership rates in 2000 and 2009 through 2011 after
accounting for the effects of race and genderneutral factors. The results indicated
substantial disparities for women in both 2000 and 2009 through 2011.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX F, PAGE 15
APPENDIX G.
Access to Capital for Business Formation
and Success
Access to capital is one factor that researchers have examined when studying business
formation and success. If race or genderbased discrimination exists in capital markets,
minorities and women may have difficulty acquiring the capital necessary to start, operate, or
expand businesses.1, 2 Researchers have also found that the amount of startup capital can affect
longterm business success, and, on average, minority and womenowned businesses appear to
have less startup capital than majorityowned businesses and maleowned businesses.3 For
example:
In 2007, 30 percent of nonHispanic white maleowned businesses that responded to a
national U.S. Census Bureau survey indicated that they had startup capital of $25,000 or
more.4
Only 17 percent of Black Americanowned businesses indicated a comparable amount of
startup capital and disparities in startup capital were identified for every other minority
group except Asian Americans.
Nineteen percent of femaleowned businesses reported startup capital of $25,000 or more
compared with 32 percent of maleowned businesses (not including businesses that were
owned equally by men and women).
Race or genderbased discrimination in startup capital can have longterm consequences, as
can discrimination in access to business loans after businesses have already been formed.5
Appendix G presents information about homeownership and mortgage lending, because home
equity can be an important source of capital to start and expand businesses. Appendix G also
presents information about business loans, assessing whether minorities and females
experience any difficulties acquiring business capital.
1 For example, see: Mitchell, Karlyn and Douglas K. Pearce. 2005. "Availability of Financing to Small Firms Using the Survey of
Small Business Finances." U.S. Small Business Administration, Office of Advocacy. 57.
2 Fairlie, Robert W. and Alicia M. Robb. 2010. Race and Entrepreneurial Success. Cambridge: MIT Press.
3 Ibid.
4 Business owners were asked, "What was the total amount of capital used to start or acquire this business? (Capital includes
savings, other assets, and borrowed funds of owner(s))." From U.S. Census Bureau, Statistics for All U.S. Firms by Total Amount
of Capital Used to Start or Acquire the Business by Industry, Gender, Ethnicity, Race, and Veteran Status for the U.S.: 2007
Survey of Business Owners
http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=SBO_2007_00CSCB16&prodType=table.
5 Fairlie, Robert W. and Alicia M. Robb. 2010. Race and Entrepreneurial Success. Cambridge: MIT Press.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 1
Homeownership and Mortgage Lending
BBC analyzed homeownership and the mortgage lending industry to explore differences across
different racial/ethnic and gender groups that may lead to disparities in access to capital.
Homeownership. Wealth created through homeownership can be an important source of
capital to start or expand a business.6 In sum:
A home is a tangible asset that provides borrowing power;7
Wealth that accrues from housing equity and tax savings from homeownership contributes
to capital formation;8
Next to business loans, mortgage loans have traditionally been the second largest loan type
for small businesses;9 and
Homeownership is associated with an estimated 30 percent reduction in the probability of
loan denial for small businesses.10
Any barriers to homeownership and home equity growth for minorities or women can affect
business opportunities by constraining their available funding. Similarly, any barriers to
accessing home equity through home mortgages can also affect available capital for new or
expanding businesses. The study team analyzed homeownership rates and home values before
considering loan denial and subprime lending.
Homeownership rates. Many studies have documented past discrimination in the national
housing market. The United States has a history of restrictive real estate covenants and property
laws that affect the ownership rights of minorities and women.11 For example, in the past, a
woman's participation in homeownership was secondary to that of her husband and parents.12
BBC used 2000 Census and 20092011 American Community Survey (ACS) data to examine
homeownership rates in the Seattle Metropolitan Area, Washington, and in the United States. 13
Figure G1 presents homeownership rates for minority groups and nonHispanic whites.
6 The housing and mortgage crisis beginning in late 2006 has substantially impacted the ability of small businesses to secure
loans through home equity. Later in this appendix, BBC discusses the consequences to small businesses and MBE/WBEs.
7 Nevin, Allen. 2006. "Homeownership in California: A CBIA Economic Treatise." California Building Industry Association. 2.
8 Jackman, Mary R. and Robert W. Jackman 1980. "Racial Inequalities in Home Ownership." Social Forces. 58. 12211234.
9 Berger, Allen N. and Gregory F. Udell. 1998. "The Economics of Small Business Finance: The Roles of Private Equity and Debt
Markets in the Financial Growth Cycle." Journal of Banking and Finance. 22.
10 Cavalluzzo, Ken and John Wolken. 2005. "Small Business Loan Turndowns, Personal Wealth and Discrimination." Journal of
Business. 78:21532178.
11 Ladd, Helen F. 1982. "Equal Credit Opportunity: Women and Mortgage Credit." The American Economic Review.
72:166170.
12 Card, Emily. 1980. "Women, Housing Access, and Mortgage Credit." Signs. 5:215219.
13 The "Seattle Metropolitan Area" refers to Pierce, King, and Snohomish counties.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 2
Figuure G1.
Hommeownershipp
ratees, 2000 and
200092011
Notee:
The ssample universe is all
households.
** Deenotes that the
difference in proportionss
from nonHispanic white
for thhe given year is
statisstically significant at
the 995% confidence level.
Sourcce:
BBC Research & Consultinng
from 2000 U.S. Census annd
200992011 ACS data. Thee
raw ddata extract was
obtained through the
IPUMMS program of the MN
Popuulation Center:
http://usa.ipums.org/usaa/.
As shown in Figure G1, 66 percent of nonnHispanic whhite househollds owned hoomes in the
Seaattle Metropolitan Area in 2000. Homeoownership raates were mucch lower for BBlack Americans
(366%), Subcontiinent Asian AAmericans (444%), and Hisppanic Americans (37%). The
hommeownershipp rates in 20000 for AsianPPacific Americcans (57%) and Native Ammericans (50%%)
were also lowerr than that of nonHispanicc whites. Dispparities in hommeownershipp rates betweeen
raccial/ethnic miinorities and nonminoritiies were also apparent in 22009 throughh 2011:14
14 AAlthough not presented in this repoort, the study teamm also examined homeownership rates for heads oof households working
in thhe construction annd engineering inndustries. Each mminority group exccept AsianPacificc Americans in thhe construction
induustry had a lower rate of home ownership than nonnHispanic whitess in the Seattle Meetropolitan Area. Black Americanss and
Subccontinent Asian AAmericans in the eengineering industry had a lower rate of home ownnership than nonHispanic whites.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX G, PAAGE 3
Approximately 33 percent of Black American households owned homes in 2009 through
2011, compared to 65 percent of nonHispanic white households;
About 39 percent of Hispanic American households owned homes in 2009 through 2011;
The homeownership rates in 2009 through 2011 for Subcontinent Asian Americans and
AsianPacific Americans were 51 percent and 61 percent, respectively; and
Native American households owned homes at a rate of 46 percent.
Similar disparities for those groups were found in Washington as a whole. In general, rates of
homeownership were lower in Washington than in the nation as a whole, except for Asian
Pacific Americans.
Lower rates of homeownership may reflect lower incomes for minorities. That relationship may
be selfreinforcing, as low wealth puts individuals at a disadvantage in becoming homeowners,
which has historically been a path to building wealth. An older study found that the probability
of homeownership is considerably lower for Black Americans than it is for comparable non
Hispanic whites throughout the United States.15
Home values. Research has shown homeownership and home values to be direct determinants
of available capital to form or expand businesses.16 Using 2000 Census and 2009 through 2011
ACS data, BBC compared median home values by racial/ethnic group.
Figure G2 presents results for the Seattle Metropolitan Area, Washington, and the United States
in 2000. In 2000, the median home value of homes owned by nonHispanic whites in the Seattle
Metropolitan Area was approximately $196,000, substantially greater than the median value of
homes owned by Black Americans ($166,000), Hispanic Americans ($161,000), and Native
Americans ($153,000). The median home value for AsianPacific Americans ($196,000) was the
same as that of nonHispanic whites. On average, Subcontinent Asian Americans ($247,000)
owned homes of greater value than nonHispanic whites.
Figure G3 presents median home values by racial/ethnic groups in the Seattle Metropolitan
Area, Washington, and the United States based on 20092011 ACS data. Similar to 2000 data,
Black Americans ($265,000), Hispanic Americans ($260,000), and Native Americans ($250,000)
exhibited lower median home values than nonHispanic whites ($320,000) in the Seattle
Metropolitan Area. Median home values for AsianPacific Americans ($335,000) and
Subcontinent Asian Americans ($400,000) were higher than nonHispanic whites in the Seattle
Metropolitan Area. Similar trends were evident in Washington and the United States as a whole,
except in Washington, median home values for Black Americans were the same as nonHispanic
whites ($255,000).
15 Jackman. 1980. "Racial Inequalities in Home Ownership."
16 Fairlie, Robert W. and Harry A. Krashinky. 2006. "Liquidity Constraints, Household Wealth, and Entrepreneurship
Revisited." IZA Discussion Paper. No. 2201.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 4
Figuure G2.
Meedian home vaalues, 2000
Notee: The sample univverse is all ownerocccupied housing unitss.
Sourcce: BBC Research && Consulting from 20000 U.S. Census data.. The raw data extracct was obtained throough the IPUMS proggram of the MN
Population Center: http://usa.ipums.org/usa/.
Moortgage lendding. Minorities may be ddenied opporttunities to owwn homes, to purchase moore
exppensive homees, or to accesss equity in thheir homes if tthey are discriminated against when
appplying for homme mortgagess. In a recent lawsuit, Bankk of America paid $335 miillion to settlee
alleegations that its Countrywwide Financiall unit discrimminated againsst Black Amerrican and
Hisspanic Americcan borrowerrs between 20004 and 20088. The case wwas brought byy the Securitiies
andd Exchange Coommission affter finding evvidence of "sttatistically siggnificant dispparities by racce
andd ethnicity" ammong Countrrywide Financcial customerrs.17
17 Saavage, Charlie. Deecember 22, 20111. "$335 Million Settlement on Couuntywide Lendingg Bias." NYTimes.ccom. Available onnline
at htttp://www.nytimmes.com/2011/122/22/business/ussettlementreportedoncountryywidelending.htmml.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX G, PAAGE 5
Figuure G3.
Meedian home vaalues, 200920011
Notee: The sample univverse is all ownerocccupied housing unitss.
Sourcce: BBC Research && Consulting from 200092011 American CCommunity Survey daata. The raw data exttract was obtained through the IPUMS
program of the MN Population Centter: http://usa.ipumss.org/usa/.
BBC explored mmarket conditiions for mortggage lending in the Seattlee Metropolitaan Area,
Waashington, andd in the nation as a whole. The best avaailable sourcee of informatiion concerninng
moortgage lendinng comes fromm Home Morttgage Disclosuure Act (HMDDA) data, whiich contain
infoormation on mmortgage loan applicationns that financiial institutionns, savings baanks, credit
uniions, and somme mortgage ccompanies receive.18 Those data includde informationn about the
location, dollar aamount, and ttypes of loans made, as weell as race/etthnicity, incomme, and crediit
chaaracteristics oof all loan appplicants. The ddata are availlable for homme purchases, loan refinancces,
andd home improovement loanns.
18 Fiinancial institutioons were requiredd to report 2012 HMDA data if theey had assets of mmore than $41 milllion ($39 millionn for
2009 and $35 millionn for 2006); have a branch office inn a metropolitan aarea; and originaated at least one hhome purchase orr
refinnance loan in the reporting calendar year. Mortgagee companies are rrequired to reporrt HMDA if they aare forprofit
instiitutions; had homme purchase loan originations exceeeding 10 percentt of all loan obligaations in the pastt year; are locatedd in a
Metrropolitan Statistical Area (MSA: orr originated five oor more home purrchase loans in a particular MSA); and either had mmore
thann $10 million in asssets or made at lleast 100 home purchase or refinaance loans in the ccalendar year.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX G, PAAGE 6
BBC examined HMDA statistics provided by the Federal Financial Institutions Examination
Council (FFIEC) for 2006, 2009, and 2012. Although 2012 provides the most current
representation of the home mortgage market, the 2006 data represent market conditions from
before the recent mortgage crisis. Many of the institutions that originated loans in 2006 were no
longer in business by the 2012 reporting date for HMDA data.19 For example, the 2006 HMDA
data include information about 483,000 loan applications in the Seattle Metropolitan Area that
about 700 lenders processed. The 2012 HMDA data for the Seattle Metropolitan Area include
information about 292,000 loan applications processed by about 600 lenders. In addition, the
percentage of governmentinsured loans that the study team did not include in its analysis
increased dramatically between 2006 and 2012, decreasing the proportion of total loans that
the study team analyzed in the 2012 data.20
Mortgage denials. BBC examined mortgage denial rates on conventional loan applications made
by highincome households. Conventional loans are loans that are not insured by a government
program. Highincome applicants are those households with 120 percent or more of the U.S.
Department of Housing and Urban Development (HUD) area median family income.21 Loan
denial rates are calculated as the percentage of mortgage loan applications that were denied,
excluding applications that the potential borrowers terminated and applications that were
closed due to incompleteness.22
Figure G4 presents loan denial results for the Seattle Metropolitan Area, Washington, and the
United States in 2006, 2009, and 2012. Data for 2006 show higher denial rates for all groups in
the Seattle Metropolitan Area compared with 2012. In 2006, Black American, Asian American,
Hispanic American, Native American, and Native Hawaiian and other Pacific Islander high
income applicants all exhibited higher loan denial rates compared with nonHispanic white
applicants. Results in 2009 were similar. In 2012, loan denial rates remained high for all
minority loan applicants except Hispanic Americans in the Seattle Metropolitan Area:
The denial rate was particularly high among Black American applicants (16%) and Native
American applicants (14%), compared to nonHispanic white applicants (7%).
Loan denial rates in 2012 were also higher for Asian Americans (9%) and Native Hawaiian
or other Pacific Islanders (9%) compared with nonHispanic whites.
19 According to an article by the Federal Reserve, the volume of reported loan applications and originations fell sharply from
2007 to 2008 after previously falling between 2006 and 2007. See Avery, Brevoort, and Canner, ''The 2008 HMDA Data: The
Mortgage Market during a Turbulent Year.'' The article is available online at:
http://www.federalreserve.gov/pubs/bulletin/2009/pdf/hmda08draft.pdf.
20 Loans insured by government programs have surged since 2006. In 2006, about 10 percent of first lien home loans were
insured by a government program. More than half of home loans were insured by government programs in 2009. Source: "The
2009 HMDA Data: The Mortgage Market in a Time of Low Interest Rates and Economic Distress," Federal Reserve Bulletin.
December 2010, pp A39A77.
21 The median family income in 2012 was about $65,000 for the United States as a whole and $88,000 for the SeattleBellevue
MSA (in 2012 dollars). Median family income for 2006 was $68,000 for the United States as a whole and $85,000 for the
SeattleBellevue MSA (in 2012 dollars). Source: U.S. Department of Housing and Urban Development (HUD) at
www.huduser.org.
22 For this analysis, loan applications are considered to be applications for which a specific property was identified, thus
excluding preapproval requests.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 7
Figuure G4.
Dennial rates of
connventional
purrchase loans tto
highincome
houuseholds,
20006, 2009, and
20112
Notee:
Highincome borrowers aare
thosee households with 1220% or
moree than the HUD area
mediian family income (MMFI).
Sourcce:
FFIECC HMDA data 2006, 22009
and 22012.
Addditional reseaarch. Several national studdies have exaamined disparrities in loan denial rates aand
loan amounts foor minorities iin the presennce of other innfluences. Forr example:
A study by the Federal RReserve Bankk of Boston is one of the moost cited studdies of mortgaage
lending disscrimination.223 It was condducted using tthe most commprehensive sset of credit
characterisstics ever asseembled for a study on morrtgage discrimmination.24 Thhe study
23 MMunnell, Alicia H., Geoffrey Tootell, Lynn Browne annd James McEneanney. 1996. "Mortggage Lending in BBoston: Interpretiing
HMDDA Data." The Ammerican Economic Review. 86: 25533.
24 Laadd, Helen F. 19998. "Evidence on DDiscrimination in Mortgage Lendinng." The Journal ofof Economic Persppectives. 12:41622.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX G, PAAGE 8
provided persuasive evidence that lenders in the Boston area discriminated against
minorities in 1990.25
Analyses based on the Federal Reserve Board's 1983 Survey of Consumer Finances and the
1980 Census of Population and Housing data revealed that minority households were one
third as likely to receive conventional loans as nonHispanic white households after taking
into account financial and demographic variables.26
Findings from a Midwest study indicate a relationship between race and both the number
and size of mortgage loans. Data matched on socioeconomic characteristics revealed that
Black American borrowers across 13 census tracts received significantly fewer loans and of
smaller sizes compared to their white counterparts.27
However, other studies have found that differences in preferences for Federal Housing
Administration (FHA) loansmortgage loans that the government insuresversus
conventional loans among racial and ethnic groups may partially explain disparities found in
conventional loan approvals between minorities and nonminorities.28 Several studies have
found that, historically, minority borrowers are far more likely to seek FHA loans than
comparable nonHispanic white borrowers across different income and wealth levels. The
insurance on FHA loans protects the lender, but the borrower can be disadvantaged by higher
borrowing costs. 29
Subprime lending. Loan denial is only one way minorities might be discriminated against in the
home mortgage market. Mortgage lending discrimination can also occur through higher fees and
interest rates. Subprime lending provides a unique environment for such types of
discrimination. Until recent years, one of the fastest growing segments of the home mortgage
industry was subprime lending. From 1994 through 2003, subprime mortgage activity grew by
25 percent per year and accounted for $330 billion of U.S. mortgages in 2003, up from $35
billion a decade earlier. In 2006, subprime loans represented about onefifth of all mortgages in
the United States.30 With higher interest rates than prime loans, subprime loans were
historically marketed to customers with blemished or limited credit histories who would not
typically qualify for prime loans. Over time, subprime loans also became available to
homeowners who did not want to make a down payment; did not want to provide proof of
income and assets; or wanted to purchase a home with a cost above that for which they would
25 Yinger, John. 1995. Closed Doors, Opportunities Lost: The Continuing Costs of Housing Discrimination. New York: Russell Sage
Foundation, 71.
26 Canner, Glenn B., Stuart A. Gabriel and J. Michael Woolley. 1991. "Race, Default Risk and Mortgage Lending: A Study of the
FHA and Conventional Loan Markets." Southern Economic Journal. 58:249262.
27 Leahy, Peter J. 1985. "Are Racial Factors Important for the Allocation of Mortgage Money?: A QuasiExperimental Approach
to an Aspect of Discrimination." American Journal of Economics and Sociology. 44:185196.
28 Canner. 1991. "Race, Default Risk and Mortgage Lending: A Study of the FHA and Conventional Loan Markets."
29 Yinger. 1995. Closed Doors, Opportunities Lost: The Continuing Costs of Housing Discrimination. 80.
30 Avery, Brevoort, and Canner, ''The 2006 HMDA Data.'' Federal Reserve Bulletin, December 2007, pp. A73A109.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 9
qualify from a prime lender.31 Because of higher interest rates and additional costs, subprime
loans affected homeowners' ability to grow home equity and increased their risks of foreclosure.
Although there is no standard definition of a subprime loan, there are several commonlyused
approaches to examining rates of subprime lending. BBC used a "ratespread method"in
which subprime loans are identified as those loans with substantially aboveaverage interest
ratesto measure rates of subprime lending in 2006, 2009, and 2012.32 Because lending
patterns and borrower motivations differ depending on the type of loan being sought, the study
team separately considered home purchase loans and refinance loans. Patterns in subprime
lending did not differ substantially between the different types of loans.
Subprime home purchase loans. Figure G5 shows the percent of conventional home purchase
loans that were subprime in the Seattle Metropolitan Area, Washington, and the United States,
based on 2006, 2009, and 2012 HMDA data. The rates of subprime lending in 2009 and 2012
were dramatically lower overall than in 2006 due to the collapse of the mortgage lending
market in the late 2000s.
In the Seattle Metropolitan Area, Black American and Native American borrowers were more
likely to receive subprime home purchase loans than nonHispanic whites in all three years
(2006, 2009, and 2012). Hispanic American borrowers were also more likely than nonHispanic
whites to receive subprime loans in both 2006 and 2009, and Native Hawaiian or other Pacific
Islanders were more likely than nonHispanic whites to receive subprime loans in 2006.
Data for 2006 indicate substantial disparities for all minority groups except Asian Americans:
About 16 percent of home purchase loans issued to nonHispanic whites were subprime.
Fortytwo percent of home purchase loans that were issued to Black Americans were
subprime.
Fortythree percent of home purchase loans that were issued to Hispanic Americans were
subprime.
Onefifth (20%) of home purchase loans issued to Native Americans and
onethird (34%) of home purchase loans issued to Native Hawaiians or other Pacific
Islanders were subprime.
31 Gerardi, Shapiro, and P. Willen. 2008. "Subprime Outcomes: Risky Mortgages, Homeownership Experiences, and
Foreclosure. Federal Reserve Bank of Boston.
32 Prior to October 2009, first lien loans were identified as subprime if they had an annual percentage rate (APR) that was 3.0
percentage points or greater than the federal treasury security rate of like maturity. As of October 2009, rate spreads in HMDA
data were calculated as the difference between APR and Average Prime Offer Rate, with subprime loans defined as 1.5
percentage points of the rate spread or more. BBC identified subprime loans according to those measures in the corresponding
time periods.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 10
Figuure G5.
Perrcent of
connventional home
purrchase loans tthat
were subprime,
20006, 2009, and
20112
Sourcce:
FFIECC HMDA data 2006, 22009
and 22012.
Althhough the ovverall volume of subprime loans droppeed substantially between 22006 and 20112,
raccial/ethnic dissparities in suubprime lendding persistedd:
In 2012, 2 ppercent of conventional hoome purchasee loans issuedd to nonHisppanic white
borrowers were subprimme.
About 3 percent of home purchase looans issued too Black Americans were suubprime.
About 4 percent of home purchase looans issued too Native Americans were ssubprime.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX G, PAGGE 11
Subbprime refinance loans. FFigure G6 presents the peercentage of hhome refinance loans that
were subprime in the Seattlee Metropolitann Area, Washhington, and tthe United Staates. As with
homme purchase loans, the rattes of subprimme lending in 2009 and 20012 were drammatically lowwer
for refinance loaans than in 20006 due to the collapse of the mortgagee lending marrket.
Figuure G6.
Perrcent of
connventional
refiinance loans tthat
were subprime,
20006, 2009, and
20112
Sourcce:
FFIECC HMDA data 2006, 22009
and 22012.
In tthe Seattle Meetropolitan AArea, subprimme trends for rrefinance loanns were simillar to subprimme
trennds for homee purchase loaans. Compareed to nonHisppanic white bborrowers, Bllack Americanns,
Hisspanic Americcans, and Nattive Americanns were moree likely to receeive subprime refinance
loans in 2006, 2009, and 20112; Native Hawwaiian or Othher Pacific Islanders were more likely tto
recceive subprimme refinance loans in both 2006 and 20009; and Asiann Americans wwere more likkely
to rreceive subprrime refinancce loans in 2006.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX G, PAGGE 12
In 2006, about 44 percent of refinance loans issued to Black Americans, 25 percent of refinance
loans issued to Asian Americans, 37 percent of refinance loans issued to Hispanic Americans, 30
percent of refinance loans issued to Native Americans, and 39 percent of refinance loans issued
to Native Hawaiians or other Pacific Islanders were subprime. In contrast, only 23 percent of
refinance loans issued to nonHispanic whites in 2006 were subprime.
By 2012, subprime loans made up a much smaller proportion of the total conventional home
refinance loans issued in that year (in the Seattle Metropolitan Area and in the United States).
The decrease in subprime refinance loans was evident for all racial/ethnic groups but
disparities for some minority groups compared to nonHispanic whites persisted.
Approximately 1.3 percent of conventional home refinance loans issued to African
American were subprime, compared to 0.7 percent for nonHispanic white borrowers.
About 1.4 percent of home refinance loans issued to Native Americans were subprimethe
highest of any racial/ethnic group included in the analysis.
Among Hispanic American borrowers, 0.9 percent of home refinance loans were subprime,
lower than the rate for nonHispanic white borrowers.
Additional research. Some evidence suggests that lenders sought out and offered subprime
loans to individuals who often would not be able to pay off the loan, a form of "predatory
lending."33 Furthermore, some research has found that many recipients of subprime loans could
have qualified for prime loans.34 Previous studies of subprime lending suggest that predatory
lenders have disproportionately targeted minorities. A 2001 HUD study using 1998 HMDA data
found that subprime loans were disproportionately concentrated in Black American
neighborhoods compared with white neighborhoods, even after accounting for income.35 For
example, borrowers in higherincome Black American neighborhoods were six times more likely
to refinance with a subprime loan than borrowers in higherincome white neighborhoods.
Implications of the recent mortgage lending crisis. The turmoil in the housing market since late
2006 has been farreaching, resulting in the loss of home equity, decreased demand for housing,
and increased rates of foreclosure.36 Much of the blame has been placed on risky practices in the
mortgage industry including substantial increases in subprime lending. As discussed above, the
number of subprime mortgages increased at an extraordinary rate between the mid1990s and
mid2000s. Those highcost, highinterest loans increased from 8 percent of originations in
33 Department of Housing and Urban Development (HUD) and the Department of Treasury. 2001. HUDTreasury National
Predatory Lending Task Force Report. HUD; Carr, J. and L. Kolluri. 2001. Predatory Lending: An Overview. Fannie Mae
Foundation; and California Reinvestment Coalition, Community Reinvestment Association of North Carolina, Empire Justice
Center, Massachusetts Affordable Housing Alliance, Neighborhood Economic Development Advocacy Project, Ohio Fair
Lending Coalition and Woodstock Institute, 2008. "Paying More for the American Dream."
34 Freddie Mac. 1996, September. "Automated Underwriting: Making Mortgage Lending Simpler and Fairer for America's
Families." Freddie Mac. (accessed February 5, 2007); and Lanzerotti. 2006. "Homeownership at High Cost: Foreclosure Risk
and High Cost Loans in California." Federal Reserve Bank of San Francisco.
35 Department of Housing and Urban Development (HUD) and the Department of Treasury. 2001.
36 Joint Center for Housing Studies of Harvard University. 2008. "The State of the Nation's Housing."
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 13
2003 to 20 percent in 2005 and 2006.37 The preponderance of subprime lending is important,
because households repaying subprime loans have a higher likelihood of delinquency or
foreclosure. A 2008 study released from the Federal Reserve Bank of Boston found that,
"homeownerships that begin with a subprime purchase mortgage end up in foreclosure almost
20 percent of the time, or more than six times as often as experiences that begin with prime
purchase mortgages."38
Such problems substantially impact the ability of homeowners to secure capital through home
mortgages to start or expand small businesses. That issue has been highlighted in statements
made by members of the Board of Governors of the Federal Reserve System to the U.S. Senate
and U.S. House of Representatives:
On April 16, 2008, Frederic Mishkin informed the U.S. Senate Committee on Small Business
and Entrepreneurship that "one of the most important concerns about the future prospects
for small business access to credit is that many small businesses use real estate assets to
secure their loans. Looking forward, continuing declines in the value of their real estate
assets clearly have the potential to substantially affect the ability of those small businesses
to borrow. Indeed, anecdotal stories to this effect have already appeared in the press."39
On November 20, 2008, Randall Kroszner told the U.S. House of Representatives
Committee on Small Business that "small business and household finances are, in practice,
very closely intertwined. [T]he most recent SSBF indicated that about 15 percent of the
total value of small business loans in 2003 was collateralized by 'personal' real estate.
Because the condition of household balance sheets can be relevant to the ability of some
small businesses to obtain credit, the fact that declining house prices have weakened
household balancesheet positions suggests that the housing market crisis has likely had an
adverse impact on the volume and price of credit that small businesses are able to raise
over and above the effects of the broader credit market turmoil."40
Former Federal Reserve Chairman Ben Bernanke recognized the reality of those concerns in a
speech titled "Restoring the Flow of Credit to Small Businesses" on July 12, 2010.41 Bernanke
indicated that small businesses have had difficulty accessing credit and pointed to the declining
value of real estate as one of the primary obstacles. Furthermore, the National Federation of
Independent Business (NFIB) conducted a national survey of 751 small businesses in late2009
to investigate how the recession impacted access to capital.42, 43 NFIB concluded that "falling real
37 Ibid.
38 Gerardi, Shapiro, and P. Willen. 2008. "Subprime Outcomes: Risky Mortgages, Homeownership Experiences, and
Foreclosure. Federal Reserve Bank of Boston.
39 Mishkin, Frederic. 2008. "Statement of Frederic S. Mishkin, Member, Board of Governors of the Federal Reserve System
before the Committee on Small Business and Entrepreneurship, U.S. Senate on April 16."
40 Kroszner, Randall. 2008. "Effects of the financial crisis on small business." Testimony before the Committee on Small Business,
U.S. House of Representative on November 20.
41 Bernanke, Ben. 2010. Restoring the Flow of Credit to Small Businesses. Presented at the Federal Reserve Meeting Series:
Addressing the Financing Needs of Small Businesses on July 12.
42 The study defined a small business as a business employing no less than one individual in addition to the owner(s) and no
more than 250 individuals.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 14
estate values (residential and commercial) severely limit small business owner capacity to
borrow and strains currently outstanding credit relationships." Survey results indicated that 95
percent of small business employers owned real estate and 13 percent held "upsidedown"
propertythat is, property for which the mortgage is worth more than its appraised value.44
Another study analyzed the Survey of Consumer Finances to explore racial/ethnic disparities in
wealth and how those disparities were impacted by the recession.45 The study showed that
there are substantial wealth disparities between Black Americans and whites as well as between
Hispanics and whites and that those wealth disparities worsened between 1983 and 2010. In
addition to growing over time, the wealth disparity also grows with agewhites are on a higher
accumulation curve than Black Americans and Hispanic Americans. The study also reports that
the 2007 through 2009 recession exacerbated wealth disparities, particularly for Hispanic
Americans.
Opportunities to obtain business capital through home mortgages appear to be limited
especially for homeowners with little home equity. Furthermore, the increasing rates of default
and foreclosure, especially for homeowners with subprime loans, reflect shrinking access to
capital available through such loans. Those consequences are likely to have a disproportionate
impact on minorities in terms of both homeownership and the ability to secure capital for
business startup and growth.
Redlining. Redlining refers to mortgage lending discrimination against geographic areas
associated with high lender risk. Those areas are often racially determined, such as Black
American or mixedrace neighborhoods.46 That practice can perpetuate problems in already
poor neighborhoods.47 Most quantitative studies have failed to find strong evidence in support
of geographic dimensions of lender decisions. Studies in Columbus, Ohio; Boston,
Massachusetts; and Houston, Texas found that racial differences in loan denial had little to do
with the racial composition of a neighborhood but rather with the individual characteristics of
the borrower.48 Some studies found that the race of an applicantbut not the racial makeup of
the neighborhoodto be an important factor in loan denials.
Studies of redlining have primarily focused on the geographic aspect of lender decisions.
However, redlining can also include the practice of restricting credit flows to minority
neighborhoods through procedures that are not observable in actual loan decisions. Examples
43 National Federation of Independent Business (NFIB). 2010. Small Business Credit in a Deep Recession.
44 "Upsidedown property" is defined as a property for which the mortgage is worth more than the property's appraised value.
45 McKernan, SigneMary, Caroline Ratcliffe, Eugene Steverle and Sisi Zhang. 2013. "Less Than Equal: Racial Disparities in
Wealth Accumulation." Urban Institute.
46 Holloway, Steven R. 1998. "Exploring the Neighborhood Contingency of Race Discrimination in Mortgage Lending in
Columbus, Ohio." Annals of the Association of American Geographers. 88:252276.
47 Ladd, Helen F. 1998. "Evidence on Discrimination in Mortgage Lending." The Journal of Economic Perspectives.
12:4162.
48 See Holloway. 1998. "Exploring the Neighborhood Contingency of Race Discrimination in Mortgage Lending in Columbus,
Ohio."; Tootell. 1996. "Redlining in Boston: Do Mortgage Lenders Discriminate Against Neighborhoods?"; and Holmes, Andrew
and Paul Horvitz. 1994. "Mortgage Redlining: Race, Risk, and Demand." The Journal of Finance. 49:8199.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 15
include branch placement, advertising, and other preapplication procedures.49 Such practices
can deter minorities from starting businesses. Locations of financial institutions are important
to small business start up, because local banking sectors often finance local businesses.50
Redlining practices deny that resource to minorities.
Steering by real estate agents. Historically, differences in the types of loans that are issued to
minorities have also been attributed to "steering" by real estate agents, who serve as an
information filter.51 Despite the fact that steering has been prohibited by law for many decades,
some studies claim that real estate brokers provide different levels of assistance and different
information on loans to minorities than they do to nonminorities.52 Such steering can affect the
perception of minority borrowers about the availability of mortgage loans.
Gender discrimination in mortgage lending. Comparatively little information is available on
genderbased discrimination in mortgage lending markets. Historically, lending practices
overtly discriminated against women by requiring information on marital and childbearing
status. Perceived risk associated with granting loans to women of childbearing age and
unmarried women resulted in "income discounting," limiting the availability of loans to
women.53 The Equal Credit Opportunity Act (ECOA) in 1973 suspended such discriminatory
lending practices. However, certain barriers affecting women have persisted after 1973 in
mortgage lending markets. For example, there is some evidence that lenders have under
appraised properties for female borrowers.54
Access to Business Capital
Barriers to capital markets can have substantial impacts on small business formation and
expansion. For example, participants in interviews for this study and public meetings held in
conjunction with the 2012 Washington State Department of Transportation disparity study
identified, "discrimination in obtaining loans due to race and gender" as a barrier to business
success. In addition, several studies have found evidence that startup capital is important for
business profits, longevity, and other outcomes.
The amount of startup capital is positively associated with small business sales and other
outcomes;55
Limited access to capital has affected the size of Black Americanowned businesses;56, 57 and
49 Yinger, John. 1995. "Closed Doors, Opportunities Lost: The Continuing Costs of Housing Discrimination." Russell Sage
Foundation. New York. 7879.
50 Holloway. 1998. "Exploring the Neighborhood Contingency of Race Discrimination in Mortgage Lending in Columbus, Ohio."
51 Kantor, Amy C. and John D. Nystuen. 1982. "De Facto Redlining a Geographic View." Economic Geography. 4:309328.
52 Yinger. 1995. Closed Doors, Opportunities Lost: The Continuing Costs of Housing Discrimination. 7879.
53 Card. 1980. "Women, Housing Access, and Mortgage Credit."
54 Ladd, Helen F. 1982. "Equal Credit Opportunity: Women and Mortgage Credit." The American Economic Review. 72:166170.
55 See Fairlie, Robert W. and Harry A. Krashinsky. 2006. "Liquidity Constraints, Household Wealth, and Entrepreneurship
Revisited;" and Grown. 1991. "Commercial Bank Lending Practices and the Development of BlackOwned Construction
Companies."
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 16
Weak financial capital was identified as a reason that more Black Americanowned
businesses than nonHispanic whiteowned businesses closed over a fouryear period.58
Bank loans are one of the largest sources of debt capital for small businesses.59 Discrimination in
the application and approval processes of those loans and other credit resources could be
detrimental to the success of minority and womenowned businesses. Previous studies have
examined race/ethnicity and gender discrimination in capital markets by evaluating:
Loan denial rates;
Loan values;
Interest rates;
Business owners' fears that loan applications will be rejected;
Sources of capital; and
Relationships between startup capital and business survival.
To examine the role of race/ethnicity and gender in capital markets, the study team analyzed
data from the Federal Reserve Board's 1998 and 2003 Survey of Small Business Finances
(SSBF)the most comprehensive national source of credit characteristics of small businesses
(those with fewer than 500 employees). The survey contains information on loan denial and
interest rates as well as anecdotal information from businesses. The samples from 1998 and
2003 contain records for 3,521 and 4,240 businesses, respectively. The study team applied
sample weights to provide representative estimates.
The SSBF records the geographic location of businesses by Census Division not by city, county,
or state. The Pacific Census Division (referred to here as the Pacific region) contains data for
Washington, along with Alaska, California, Oregon, and Hawaii. The Pacific region is the level of
geographic detail of SSBF data most specific to the Seattle Metropolitan Area, and 2003 is the
most recent information available from the SSBF because the survey was discontinued after that
year.
56 Grown, C. and Bates, T. 1992. "Commercial Bank Lending Practices and the Development of BlackOwned Construction
Companies." Journal of Urban Affairs, 14: 2541.
57 Fairlie, Robert W. and Alicia M. Robb. 2010. Race and Entrepreneurial Success. Cambridge: MIT Press.
58 Grown, C. and Bates, T. 1992. "Commercial Bank Lending Practices and the Development of BlackOwned Construction
Companies." Journal of Urban Affairs, 14: 2541.
59 Data from the 1998 SSBF indicates that 70 percent of loans to small business are from commercial banks. This result is
present across all gender, race and ethnic groups with the exception of Black Americans, whose rate of lending from
commercial banks is even greater than other minorities. See Blanchard, Lloyd, Bo Zhao and John Yinger. 2005. "Do Credit
Market Barriers Exist for Minority and Woman Entrepreneurs." Center for Policy Research, Syracuse University.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 17
Loaan denial raates. Figure GG7 presents loan denial raates from thee 1998 and 20003 SSBFs forr
thee Pacific regioon and for thee United Statees.60 National SSSBF data forr 1998 reveall that Black
Ammerican, Asian American, and Hispanicc Americanowned busineesses exhibiteed loan deniall
rates considerabbly higher thaan that of nonnHispanic whhite maleowwned businessses. In 2003, tthe
loan denial rate for Black Ammericanowneed businesses (51%) in thee United Statees remained
subbstantially higgher than for nonHispanicc white maleowned businnesses (8%).
Figuure G7.
Bussiness loan
dennial rates,
19998 and 2003
Notee:
** Deenotes that the
difference in proportion
from nonHispanic white
maleeowned businesses is
statisstically significant at
the 995% confidence level.
Sourcce:
BBC Research &
Consulting from 1998 andd
20033 Survey of Small
Businness Finances.
As shown in Figure G7, abouut 34 percent of minority and womenowned businnesses in the
Paccific region reeported beingg denied loanss in 1998, a laarger percenttage than the 21 percent oof
nonnHispanic whhite maleowwned businessses that reporrted being denied loans. AAccording to
20003 SSBF data,, a smaller peercentage of mminority andd femaleowneed businessess in the Pacifiic
reggion were dennied loans commpared to noonHispanic wwhite maleowwned businessses, which was
inconsistent witth national reesults for thatt year. (Loan ddenial statistiics on individdual minority y
grooups in the Paacific region aare not reportted in Figure G7 due to reelatively smalll sample sizees.)
Othher researcheers' regressioon analyses off loan denial rates. Severaal studies havve investigateed
whhether dispariities in loan ddenial rates foor different raacial/ethnic aand gender grroups exist affter
conntrolling for oother factors tthat affect loaan approvals. Findings from those studdies include thhe
folllowing:
Commerciall banks are less likely to looan to Black AAmericanownned businesses than to non
Hispanic whhiteowned buusinesses afteer statisticallyy controlling for other facttors.61
60 The denial rates reepresent the propportion of businesss owners whose loan applications over the previous three years weere
alwaays denied, compared to business owners whose looan applications wwere always apprroved or sometimmes approved andd
sommetimes denied.
61 Cavalluzzo, Ken, Liinda Cavalluzzo aand John Wolken. 2002. "Competittion, Small Busineess Financing andd Discrimination:
Eviddence from a Neww Survey." Journall of Business. 75: 6641679.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX G, PAGGE 18
Black American, Hispanic American, and Asian American men are more likely to be denied
loans than nonHispanic white men. However, Black American borrowers are more likely to
apply for loans.62
Disparities in loan denial rates between Black Americanowned and nonHispanic white
owned businesses tend to decrease with increasing competitiveness of lender markets. A
similar phenomenon is observed when considering differences in loan denial rates between
male and femaleowned businesses.63
The probability of loan denial decreases with greater personal wealth. However, accounting
for personal wealth does not resolve the large differences in denial rates across Black
American, Hispanic American, Asian American, and nonHispanic whiteowned
businesses. Specifically, information about personal wealth explained some differences
between Hispanic and Asian Americanowned businesses and nonHispanic whiteowned
businesses, but they explained almost none of the differences between Black American
owned businesses and nonHispanic whiteowned businesses.64
Loan denial rates are higher for Black Americanowned businesses than for nonHispanic
whiteowned businesses after accounting for several factors such as creditworthiness and
other characteristics. Consistent evidence on loan denial rates and other indicators of
discrimination in credit markets was not found for other minorities or for women.65
Womenowned businesses are no less likely to apply or be approved for loans compared
with maleowned businesses.66
There are possible disparities in loan denial rates based on race/ethnicity and gender even
after accounting for other factors. Black Americanowned businesses showed the highest
probabilities of loan denial. Hispanic American and Asian Americanowned businesses also
showed relatively high rates of loan denial.67
BBC regression model for denial rates. The BBC study team conducted its own analysis of the
SSBF by developing a model to explore the relationship between loan denial and the
race/ethnicity and gender of business owners while statistically controlling for other factors. As
discussed above, there is extensive literature on business loan denials that provides the
theoretical basis for the regression models. Many studies have used probit econometric models
to investigate the effects of various owner, business, and loan characteristics on the likelihood of
62 Coleman, Susan. 2002. "Characteristics and Borrowing Behavior of Small, Womenowned Firms: Evidence from the 1998
National Survey of Small Business Finances." The Journal of Business and Entrepreneurship. 151166.
63 Cavalluzzo, 2002. "Competition, Small Business Financing and Discrimination: Evidence from a New Survey."
64 Cavalluzzo, Ken and John Wolken. 2002. "Small Business Turndowns, Personal Wealth and Discrimination." FEDS Working
Paper No. 200235.
65 Blanchflower, David G., Phillip B. Levine and David J. Zimmerman. 2003. "Discrimination in the Small Business Credit
Market." The Review of Economics and Statistics. 85:930943.
66 Coleman. 2002. "Characteristics and Borrowing Behavior of Small, Womenowned Firms: Evidence from the 1998 National
Survey of Small Business Finances."
67 CRA International. 2007. "Measuring Minority and WomanOwned Construction and Professional Service Firm Availability
and Utilization." Prepared for Santa Clara Valley Transportation Authority.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 19
loan denial. The standard model that the study team used includes three general categories of
variables:
The owner's demographic characteristics (including race and gender), credit, and resources
(14 variables);
Business characteristics and credit and financial health (29 variables); and
The environment in which the business and lender operate and characteristics of the loan
(19 variables).68
BBC developed two models, one for the 1998 SSBF and one for the 2003 SSBF, using those
standard variables. After excluding a small number of observations where the loan outcome was
imputed, the 1998 national sample included 931 businesses that had applied for a loan during
the three years preceding the 1998 SSBF and the Pacific region included 172 such businesses.
The 2003 national sample included 1,897 businesses that had applied for a loan during the three
years preceding the 2003 SSBF and the Pacific region included 298 such businesses.
Given the relatively small sample sizes for the Pacific region and the large number of variables in
the model, the study team included all U.S. businesses in the model and estimated any Pacific
region effects by including regional control variablesan approach commonly used in other
studies that analyze SSBF data.69 The regional variables include an indicator variable for
businesses located in the Pacific region and interaction variables that represent businesses
owned by minorities or women that are located in the Pacific region.70
1998 SSBF regression results. Figure G8 presents the marginal effects from the probit model
predicting loan denials from 1998 SSBF data. The results from the model indicate that a number
of race and genderneutral factors significantly affect the probability of loan denial. Those
effects include the following:
Being an older business owner is associated with an increased likelihood of loan denial;
Having a fouryear college degree or advanced degree is associated with a decreased
likelihood of loan denial;
More equity in the business owner's homeif he or she is a homeowner is associated
with a decreased likelihood of loan denial;
Being a business that filed for bankruptcy in the past seven years or is or that has been
delinquent in business transactions is associated with an increased likelihood of loan denial;
68 See, for example, Blanchard, Lloyd; Zao, Bo and John Yinger. 2005. "Do Credit Barriers Exist for Minority and Women
Entrepreneurs?" Center for Policy Research, Syracuse University.
69 Blanchflower, David G.; Levine, Phillip B. and David J. Zimmerman. 2003. "Discrimination in the SmallBusiness Credit
Market." The Review of Economics and Statistics. 85(4): 930943; NERA Economic Consulting. 2008. "Race, Sex, and Business
Enterprise: Evidence from the City of Austin." Prepared for the City of Austin, Texas; and CRA International. 2007. "Measuring
Minority and WomanOwned Construction and Professional Service Firm Availability and Utilization. Prepared for Santa Clara
Valley Transportation Authority.
70 BBC also considered an interaction variable to represent businesses that are both minority and femaleowned but the term
was not significant in 1998 or 2003.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 20
Figure G8.
Likelihood of business loan denial (probit regression) in the U.S. in the 1998 SSBF,
Dependent variable: loan denial
Variable Marginal Effect Variable Marginal Effect Variable Marginal Effect
Race/ethnicity and gender Firm's characteristics, credit and financial health Firm and lender environment and loan characteristics
African American 0.357 ** D&B credit score = moderate risk 0.094 Partnership 0.015
Asian American 0.015 D&B credit score = average risk 0.110 S corporation 0.022
Hispanic American 0.213 ** D&B credit score = significant risk 0.063 C corporation 0.030
Female 0.024 D&B credit score = high risk 0.066 Construction industry 0.098 **
Pacific region 0.012 Total employees 0.000 Manufacturing industry 0.005
African American in Pacific region 0.064 Percent of business owned by principal 0.000 Transportation, communications
Asian American in Pacific region 0.041 Familyowned business 0.076 ** and utilities industry 0.074
Hispanic American in Pacific region 0.008 Firm purchased 0.039 Finance, insurance and
Female in Pacific region 0.093 Firm inherited 0.022 real estate industries 0.022
Firm age 0.002 Engineering industry 0.122
Owner's characteristics, credit and resources Firm has checking account 0.030 Other industry 0.035
Age 0.002 * Firm has savings account 0.029 Herfindahl index = .10 to .18 0.390 **
Owner experience 0.001 Firm has line of credit 0.124 ** Herfindahl index = .18 or above 0.369 **
Less than high school education 0.075 Existing capital leases 0.008 Located in MSA 0.006
Some college 0.017 Existing mortgage for business 0.045 * Sales market local only 0.021
Fouryear degree 0.061 ** Existing vehicle loans 0.067 ** Loan amount 0.000
Advanced degree 0.043 Existing equipment loans 0.056 ** Capital lease application 0.024
Log of Home Equity 0.010 ** Existing loans from stockholders 0.111 ** Business mortgage application 0.066 **
Bankruptcy in past 7 years 0.315 ** Other existing loans 0.010 Vehicle loan application 0.093 **
Judgement against in past 3 years 0.228 ** Firm used trade credit in past year 0.038 Equipment loan application 0.072 **
Log of net worth excluding home 0.001 Log of total sales in prior year 0.000 Loan for other purposes 0.036
Owner has negative net worth 0.025 Negative sales in prior year 0.073
Log of cost of doing business in prior year 0.002
Log of total assets 0.005
Negative total assets 0.045
Log of total equity 0.015
Negative total equity 0.241
Firm bankruptcy in past 7 years 0.228 *
Firm delinquency in business transactions 0.258 **
Note: * Statistically significant at 90% confidence level.
** Statistically significant at 95% confidence level.
For ease of interpretation the marginal effects of the probit coefficients are displayed in the figure. Significance is calculated using tstatistics from the probit coefficients associated with the marginal effects.
"Native American or other minority" and "Mining industry" perfectly predicted loan outcome and were excluded from the final regression.
Source: BBC Research & Consulting analysis of 1998 SSBF data.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 21
Being a business owner who filed for bankruptcy in the past seven years or has had a
judgment against him or her is associated with an increased likelihood of loan denial;
Being a familyowned business is associated with an increased likelihood of loan denial;
Having an existing line of credit, an existing mortgage, or existing vehicle or equipment
loans is associated with a decreased likelihood of loan denial;
Having outstanding loans from stockholders is associated with a higher likelihood of loan
denial;
Being in the construction or engineering industry is associated with an increased likelihood
of loan denial;
Being in highly concentrated industry segments (as measured by the Herfindahl index) is
associated with an increased likelihood of loan denial; and
Applying for business mortgage applications and vehicle and equipment loan applications is
associated with a decreased likelihood of loan denial.
After statistically controlling for race and genderneutral influences, the study team observed
that businesses owned by Black Americans and Hispanic Americans were more likely to have
their loans denied than other businesses. The indicator variable for the Pacific region and the
interaction terms for Pacific region and minority and womenownership were not statistically
significant. That result indicates that the probability of loan denials for minority and women
owned businesses within the Pacific region are not significantly different from the U.S. as a
whole after controlling for other factors.
The study team simulated loan approval rates for minority groups with statistically significant
disparities (i.e., Black American and Hispanic Americanowned businesses) by comparing
observed loan approval rates with simulated loan approval rates.71 "Loan approval" means that
a business owner always or at least sometimes had his or her business loan applications
approved over the previous three years. "Rates" of loan approval represent the percentage of
businesses that received loan approvals (always or sometimes) during that time period.
The probit modeling approach allowed for simulations of loan approval rates for those groups
as if they had the same probability of loan approval as similarly situated nonHispanic white
maleowned businesses. To conduct those simulations, BBC took the following steps:
1. BBC performed a probit regression analysis predicting loan approval using only non
Hispanic white maleowned businesses in the dataset.72
2. The study team then used the coefficients from that model and the mean characteristics
of Black American and Hispanic Americanowned businesses (including the effects of a
business being in the Pacific region) to estimate the probability of loan approval of such
groups.
71 The approval rate is equal to one minus the denial rate.
72 That version of the model excluded the race/ethnicity and gender indicator variables, because the value of all of those
variables would be the same (i.e., 0).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 22
The probit modeling approach allowed for simulations of loan approval rates for those groups
as if they had the same probability of loan approval as similarly situated nonHispanic white
maleowned businesses. To conduct those simulations, BBC took the following steps:
1. BBC performed a probit regression analysis predicting loan approval using only non
Hispanic white maleowned businesses in the dataset.73
2. The study team then used the coefficients from that model and the mean characteristics
of Black American and Hispanic Americanowned businesses (including the effects of a
business being in the Pacific region) to estimate the probability of loan approval of such
groups.
The results of those simulations yielded estimates of loan approval rates for nonHispanic
whiteowned businesses who shared the same characteristics of Black American and Hispanic
Americanowned businesses. Higher simulated rates indicate that, in reality, Black American
and Hispanic Americanowned businesses are less likely to be approved for loans than similarly
situated nonHispanic white maleowned businesses. Figure G9 shows those simulated loan
approval rates ("benchmark") in comparison to the actual approval rates observed in the 1998
SSBF. The disparity index was calculated by taking the actual loan approval rate for each group
and dividing it by each group's benchmark, and then multiplying the result by 100. Values less
than 100 indicate that, in reality, the group is less likely to be approved for a loan than what
would be expected for similarlysituated nonHispanic white maleowned businessesin other
words that race/ethnicity affects the likelihood of those groups being approved for loans.
Figure G9.
Comparison of actual loan approval rates to simulated loan approval rates, 1998
Loan approval rates Disparity index
Group Actual Benchmark (100 = parity)
Black American 46.4% 76.8% 60
Hispanic American 53.7% 75.9% 71
Note: Actual approval rates presented here and denial rates in Figure G7 do not sum to 100% because
some observations were excluded from the probit regression.
"Loan approval" means that a business owner always or at least sometimes had his or her business
loan applications approved over the previous three years.
Source: BBC Research & Consulting analysis of 1998 NSSBF data.
Based on 1998 SSBF data, the actual loan approval rate for Black Americanowned businesses
was 46 percent. Model results showed that Black Americanowned businesses would have an
approval rate of about 77 percent if they were approved for loans at the same rate as similarly
situated nonHispanic white maleowned businesses (disparity index of 60). Similarly, Hispanic
Americanowned businesses would have an approval rate of about 76 percent if they were
approved for loans at the same rate as similarlysituated nonHispanic white maleowned
businesses, compared with the actual loan approval rate of 54 percent (disparity index of 71).
73 That version of the model excluded the race/ethnicity and gender indicator variables, because the value of all of those
variables would be the same (i.e., 0).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 23
2003 SSBF regression results. BBC also conducted a regression analysis with 2003 SSBF data.74
As in the 1998 regression analysis, the dependent variable represents whether a business' loan
applications over the past three years were always denied. Figure G10 presents the marginal
effects from the 2003 probit model predicting loan denial. In the 2003 model, the following race
and genderneutral factors significantly affected the probability of loan denial:
Location in the Pacific region is associated with an increased likelihood of loan denial;
Owner experience is associated with an increased likelihood of loan denial;
Having an advanced degree is associated with a decreased likelihood of loan denial;
Being a business owner who filed for bankruptcy in the past seven years is associated with
an increased likelihood of loan denial;
Being a business with an average or high risk credit score is associated with an increased
likelihood of loan denial;
Being an inherited business or older business is associated with a decreased likelihood of
loan denial;
Having an existing line of credit, checking account, or savings account is associated with a
decreased likelihood of loan denial;
Having existing loans (other than mortgage, vehicle, equipment or stockholder loans) is
associated with an increased likelihood of loan denial;
Higher total sales in the prior year is associated with a decreased likelihood of loan denial;
Being an S or C corporation is associated with an increased likelihood of loan denial;
Being in the transportation, communications, and utilities industry is associated with an
increased likelihood of loan denial;
Location in metropolitan areas is associated with an increased likelihood of loan denial; and
Applying for business mortgages, vehicle loans and loans for "other" purposes is associated
with a deceased likelihood of loan denial.
After statistically controlling for race and genderneutral influences, the study team observed
that businesses owned by Black Americans were more likely to have their loans denied than
other businesses. Figure G10 also indicates that although there is little or no overall influence of
business owner gender on rates of business loan denial. Female business owners in the Pacific
region appear to have a lower likelihood of loan denial than female business owners nationally.
74 The 2003 SSBF contains multiple implicates (five copies of each record) to better address the issue of missing values. The
values of all reported variables remain constant across the five implicates, but the values of imputed variables may differ. Only
1.8 percent of all values was missing and has been imputed. BBC's regression analysis is performed on the first implicate.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 24
Figure G10.
Likelihood of business loan denial (probit regression) in the U.S. in the 2003 SSBF,
Dependent variable: loan denial
Variable Marginal Effect Variable Marginal Effect Variable Marginal Effect
Race/ethnicity and gender Firm's characteristics, credit and financial health Firm and lender environment and loan characteristics
Black American 0.256 ** D&B credit score = moderate risk 0.007 Partnership 0.006
Asian American 0.017 D&B credit score = average risk 0.036 * S corporation 0.030 **
Hispanic American 0.011 D&B credit score = significant risk 0.017 C corporation 0.040 *
Native American or other minority 0.031 D&B credit score = high risk 0.059 ** Construction industry 0.029
Female 0.019 Total employees 0.000 Manufacturing industry 0.013
Pacific region 0.057 ** Percent of business owned by principal 0.000 Transportation, communications
African American in Pacific region 0.032 Familyowned business 0.023 and utilities industry 0.177 **
Asian American in Pacific region 0.033 Firm purchased 0.002 Finance, insurance and
Hispanic American in Pacific region 0.026 Firm inherited 0.036 ** real estate industries 0.016
Native American or other minority in Pacific region 0.017 Firm age 0.001 ** Engineering industry 0.003
Female in Pacific region 0.030 * Firm has checking account 0.147 * Other industry 0.003
Firm has savings account 0.025 ** Herfindahl index = .10 to .18 0.000
Owner's characteristics, credit and resources Firm has line of credit 0.085 ** Herfindahl index = .18 or above 0.028
Age 0.001 Existing capital leases 0.006 Located in MSA 0.023 *
Owner experience 0.002 ** Existing mortgage for business 0.021 Sales market local only 0.014
Some college 0.010 Existing vehicle loans 0.018 Loan amount 0.000
Fouryear degree 0.003 Existing equipment loans 0.012 Capital lease application 0.017
Advanced degree 0.026 * Existing loans from stockholders 0.021 Business mortgage application 0.032 **
Log of home equity 0.001 Other existing loans 0.030 * Vehicle loan application 0.051 **
Bankruptcy in past 7 years 0.098 * Firm used trade credit in past year 0.000 Equipment loan application 0.019
Judgement against in past 3 years 0.017 Log of total sales in prior year 0.012 * Loan for other purposes 0.022 *
Log of net worth excluding home 0.000 Log of cost of doing business in prior year 0.002
Log of total assets 0.001
Log of total equity 0.001
Negative total equity 0.010
Firm bankruptcy in past 7 years 0.026
Firm delinquency in business transactions 0.012
Note: * Statistically significant at 90% confidence level.
** Statistically significant at 95% confidence level.
For ease of interpretation the marginal effects of the probit coefficients are displayed in the figure. Significance is calculated using tstatistics from the probit coefficients associated with the marginal effects.
"Less than high school education," "Negative sales in prior year" and "Mining industry" perfectly predicted loan outcome and were excluded from the final regression; "Owner has negative net worth" and "Negative
total assets" dropped because of colinearity.
Source: BBC Research & Consulting analysis of 2003 SSBF data.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 25
The study team also simulated approval rates from the 2003 SSBF results using the same
approach as it used for the 1998 results. Figure G11 presents actual and simulated
("benchmark") approval rates for Black Americanowned businesses, the sole minority group
with statistically significant disparities in loan approval in the 2003 data. Simulated approval
rates indicated that Black Americanowned businesses are approved at 71 percent of the rate
observed for similarlysituated nonHispanic white maleowned businesses (i.e., nonHispanic
white maleowned businesses with the same demographic, credit, and financial health; lender
environment; and loan characteristics of Black Americanowned businesses).
Figure G11.
Comparison of actual loan approval rates to simulated loan approval rates, 2003
Loan approval rates Disparity index
Group Actual Benchmark (100 = parity)
Black American 49.1% 69.0% 71
Note: Actual approval rates presented here and denial rates in Figure G7 do not sum to 100% because some
observations were excluded from the probit regression.
"Loan approval" means that a business owner always or at least sometimes had his or her business loan
applications approved over the previous three years.
Source: BBC Research & Consulting analysis of 2003 NSSBF data.
Applying for loans. Fear of loan denial can be a barrier to business credit in the same way
that actual loan denial presents a barrier. The SSBF includes a question that gauges whether a
business owner did not apply for a loan due to fear of loan denial. Figure G12 presents the
percentage of businesses that reported needing credit but did not apply for loans because of
fears of denial based on data from the 1998 and 2003 SSBF,
In 1998 and 2003, Black American and Hispanicowned businesses were more likely than non
Hispanic white maleowned businesses to forgo applying for loans due to a fear of denial. Non
Hispanic white womenowned businesses were also more likely to forgo applying for loans due
to a fear of denial. In the Pacific region in both 1998 and 2003, fear of denial was greater for
minority and womenowned businesses than for nonHispanic white maleowned businesses
but the difference was not statistically significant.
Other researchers' regression analyses of fear of denial. Other studies have identified factors
that influence the decision to apply for a loan, such as business size, business age, owner age,
and educational attainment. Accounting for those factors can help in determining whether
race/ethnicity or gender of the business owner explain whether the owner did not apply for a
loan due to fear of loan denial. Results indicate that:
Black American and Hispanic American business owners are significantly less likely to apply
for loans due to fear of denial.75
75 Cavalluzzo, 2002. "Competition, Small Business Financing and Discrimination: Evidence from a New Survey."
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 26
Figuure G12.
Bussinesses that
neeeded loans buut
did not apply due
to ffear of denial,,
19998 and 2003
Notee:
** Deenotes that the
difference in proportionss
from nonHispanic white
maleeowned businesses is
statisstically significant at
the 995% confidence level.
Sourcce:
BBC Research & Consultinng
from 1998 and 2003 Survvey
of Smmall Business Financees.
After statistically controllling for educational attainnment, there wwere no diffeerences in loaan
application rates between nonHispannic white, Blaack American,, Hispanic Ammerican, and
Asian Ameriican male bussiness owners.76
Black Ameriicanowned bbusinesses weere more likeely than otherr businesses tto report beinng
seriously cooncerned withh credit markkets and weree less likely too apply for creedit in fear off
loan denial.777
A study thatt used a probiit econometriic model to innvestigate businesses thatt did not applyy
for loans forr fear of deniaal revealed poossible racebbased differennces in not appplying for loans
for fear of denial. Resultss indicated that Black Ameerican and Hiispanic Amerricanowned
businesses aare more likely to not applly for loans ouut of fear of bbeing denied. In addition,
results for bbusinesses loccated in the PPacific region did not differr significantlyy from nationnal
results.78
BBCC regression model for feaar of denial. TThe BBC studdy team conduucted its ownn econometricc
anaalysis of fear oof denial by ddeveloping a mmodel to expllore the relattionships betwween fear of
dennial and the raace/ethnicityy and gender of business oowners while statistically ccontrolling foor
othher factors, baased on SSBF data. The moodel was similar to the proobit regressioon for likelihoood
of ddenial except that the fear of denial reggression incluudes business owners whoo did not apply
for a loan and exxcludes loan ccharacteristiccs. After excluuding a small number of obbservations
whhere fear of deenial was impputed, the 19998 national saample includeed 3,457 busiinesses and thhe
Paccific region inncluded 715 such businessses. The 2003 national sammple includedd 4,231
76 CColeman, Susan. 2004. "Access to DDebt Capital for Smmall Women andd MinorityOwnedd Firms: Does Eduucational Attainmment
Have an Impact?" Jouurnal of Developmmental Entrepreneurship. 9:1271444.
77 BBlanchflower et all., 2003. Discriminnation in the Smaall Business Crediit Market.
78 CRA International.. 2007. "Measurinng Minority and WWomanOwned CConstruction and Professional Servvice Firm Availabbility
and Utilization. Prepaared for Santa Claara Valley Transpoortation Authorityty.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX G, PAGGE 27
businesses and the Pacific region included 736 such businesses. In both 1998 and 2003, Pacific
region effects are modeled using regional control variables in the national model.79
1998 SSBF regression results. Figure G13 presents the marginal effects from the probit
regression model predicting the likelihood that a business needs credit but will not apply due to
fear of loan denial. The results from the model indicate that a number of race and gender
neutral factors significantly affect the probability of forgoing application for a loan due to fear of
denial. Factors that are associated with an increased likelihood of not applying for a loan due to
fear of loan denial include:
The owner filing for bankruptcy in the past seven years or having had a judgment against
the business;
Having an average, significant, or high risk credit score;
Having an existing mortgage, existing vehicle loans, existing loans from stockholders, or
other existing loans;
Higher total assets; and
Having delinquency in business transactions or filing for bankruptcy in the past seven years.
Factors that are associated with a decreased likelihood of not applying for a loan due to fear of
loan denial include:
More equity in the business owner's homeif he or she is a homeownerand more
business owner net worth;
If the business was acquired through a purchase;
Having an older business;
Having a savings account or a line of credit; and
More sales in the prior year (but also negative sales in the prior year).
After statistically controlling for race and genderneutral influences, the study team observed
that Black Americanowned businesses were more likely to forgo applying for a loan due to fear
of denial. Overall, fear of denial tends to be higher in the Pacific region. However, both Black
American and Asian Americanowned businesses in the Pacific region were less likely to fear
denial than Black American and Asian Americanowned businesses nationwide.
79 Again, the study team considered an interaction variable to represent businesses that are both minority and female, but the
term was not significant in 1998 or 2003.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 28
Figure G13.
Likelihood of forgoing a loan application due to fear of denial (probit regression) in the U.S. in the 1998 SSBF,
Dependent variable: needed a loan but did not apply due to fear of denial
Variable Marginal Effect Variable Marginal Effect Variable Marginal Effect
Race/ethnicity and gender Firm's characteristics, credit and financial health Firm and lender environment and loan characteristics
Black American 0.294 ** D&B credit score = moderate risk 0.079 Partnership 0.008
Asian American 0.049 D&B credit score = average risk 0.103 ** S corporation 0.001
Hispanic American 0.025 D&B credit score = significant risk 0.163 ** C corporation 0.036
Native American 0.069 D&B credit score = high risk 0.209 ** Mining industry 0.078
Female 0.006 Total employees 0.001 Construction industry 0.034
Pacific region 0.074 ** Percent of business owned by principal 0.000 Manufacturing industry 0.006
African American in Pacific region 0.110 * Familyowned business 0.022 Transportation, communications
Asian American in Pacific region 0.099 * Firm purchased 0.070 ** and utilities industry 0.048
Hispanic American in Pacific region 0.034 Firm inherited 0.003 Finance, insurance and
Native American in Pacific region 0.025 Firm age 0.003 ** real estate industries 0.031
Female in Pacific region 0.066 Firm has checking account 0.050 Engineering industry 0.001
Firm has savings account 0.056 ** Other industry 0.034
Owner's characteristics, credit and resources Firm has line of credit 0.062 ** Herfindahl index = .10 to .18 0.000
Age 0.001 Existing capital leases 0.037 Herfindahl index = .18 or above 0.011
Owner experience 0.001 Existing mortgage for business 0.105 ** Located in MSA 0.031
Less than high school education 0.088 Existing vehicle loans 0.049 ** Sales market local only 0.017
Some college 0.003 Existing equipment loans 0.034
Fouryear degree 0.014 Existing loans from stockholders 0.097 **
Advanced degree 0.029 Other existing loans 0.067 **
Log of home equity 0.007 ** Firm used trade credit in past year 0.016
Bankruptcy in past 7 years 0.324 ** Log of total sales in prior year 0.022 **
Judgement against in past 3 years 0.093 ** Negative sales in prior year 0.167 **
Log of net worth excluding home 0.034 ** Log of cost of doing business in prior year 0.002
Owner has negative net worth 0.168 Log of total assets 0.020 **
Negative total assets 0.115
Log of total equity 0.009
Negative total equity 0.010
Firm bankruptcy in past 7 years 0.567 **
Firm delinquency in business transactions 0.237 **
Note: * Statistically significant at 90% confidence level.
** Statistically significant at 95% confidence level.
For ease of interpretation the marginal effects of the probit coefficients are displayed in the figure. Significance is calculated using tstatistics from the probit coefficients associated with the marginal effects.
Source: BBC Research & Consulting analysis of 1998 SSBF data.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 29
2003 SSBF regression results. Figure G14 presents the marginal effects from the probit model
predicting the likelihood that a business needs credit but will not apply for a loan due to fear of
denial. The results from the model indicate that a number of race and genderneutral factors
significantly affect the probability of forgoing application for a loan due to fear of denial. Factors
that are associated with an increased likelihood of not applying for a loan due to fear of loan
denial include:
The owner filing for bankruptcy or having had a judgment against them;
Having a significant or high risk credit score;
A larger percentage of business owned by the principal owner;
Having an existing mortgage; existing vehicle or equipment loans; existing loans from
stockholders; or other existing loans;
Higher cost of doing business in the prior year;
Having been delinquent in business transactions or filing for bankruptcy in the past seven
years; and
Location in a metropolitan area.
Factors that are associated with a decreased likelihood of not applying for a loan due to fear of
loan denial include:
Being older and having a fouryear college degree;
More equity in the business owner's homeif he or she is a homeownerand more
business owner net worth;
Having an older business;
More sales in the prior year (but also negative sales in the prior year); and
Having a local (as opposed to regional, national or international) sales market.
After statistically controlling for race and genderneutral influences, the study team observed
that Black American and Hispanic Americanowned businesses were more likely to forgo
applying for a loan due to fear of denial. In addition, BBC's model indicates that womenowned
businesses were also more likely to need a loan but choose not to apply due to fear of denial.
Although not found nationally, in the Pacific region, Native Americanowned businesses were
more likely to fear denial than other businesses.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 30
Figure G14.
Likelihood of forgoing a loan application due to fear of denial (probit regression) in the U.S. in the 2003 SSBF,
Dependent variable: needed a loan but did not apply due to fear of denial
Variable Marginal Effect Variable Marginal Effect Variable Marginal Effect
Race/ethnicity and gender Firm's characteristics, credit and financial health Firm and lender environment and loan characteristics
Black American 0.214 ** D&B credit score = moderate risk 0.011 Partnership 0.004
Asian American 0.049 D&B credit score = average risk 0.040 S corporation 0.014
Hispanic American 0.071 * D&B credit score = significant risk 0.046 * C corporation 0.020
Native American or other minority 0.026 D&B credit score = high risk 0.104 ** Construction industry 0.033
Female 0.046 ** Total employees 0.000 Manufacturing industry 0.012
Pacific region 0.037 Percent of business owned by principal 0.001 ** Transportation, communications
African American in Pacific region 0.081 Familyowned business 0.009 and utilities industry 0.049
Asian American in Pacific region 0.000 Firm purchased 0.010 Finance, insurance and
Hispanic American in Pacific region 0.047 Firm inherited 0.033 real estate industries 0.041
Native American or other minority in Pacific region 0.424 ** Firm age 0.003 ** Engineering industry 0.028
Female in Pacific region 0.051 Firm has checking account 0.010 Other industry 0.010
Firm has savings account 0.010 Herfindahl index = .10 to .18 0.005
Owner's characteristics, credit and resources Firm has line of credit 0.005 Herfindahl index = .18 or above 0.024
Age 0.002 ** Existing capital leases 0.030 Located in MSA 0.047 **
Owner experience 0.002 Existing mortgage for business 0.050 ** Sales market local only 0.063 **
Less than high school education 0.041 Existing vehicle loans 0.031 *
Some college 0.002 Existing equipment loans 0.043 *
Fouryear degree 0.036 * Existing loans from stockholders 0.074 **
Advanced degree 0.021 Other existing loans 0.106 **
Log of home equity 0.004 ** Firm used trade credit in past year 0.018
Bankruptcy in past 7 years 0.227 ** Log of total sales in prior year 0.022 **
Judgement against in past 3 years 0.256 ** Negative sales in prior year 0.092 *
Log of net worth excluding home 0.025 ** Log of cost of doing business in prior year 0.012 *
Log of total assets 0.005
Log of total equity 0.008
Negative total equity 0.033
Firm bankruptcy in past 7 years 0.210 **
Firm delinquency in business transactions 0.142 **
Note: * Statistically significant at 90% confidence level.
** Statistically significant at 95% confidence level.
For ease of interpretation the marginal effects of the probit coefficients are displayed in the figure. Significance is calculated using tstatistics from the probit coefficients associated with the marginal effects.
"Mining industry" perfectly predicted loan outcome and was excluded from the regression; "Owner has negative net worth" and "Negative total assets" dropped because of colinearity.
Source: BBC Research & Consulting analysis of 2003 SSBF data.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 31
Loaan values. TThe study teamm also considdered averagee loan values for businessees that receivved
loans. Results frrom the 1998 and 2003 SSBFs for meann loan values issued to diffferent
raccial/ethnic annd gender groups are preseented in Figurre G15. Commparisons of looan amounts
bettween nonHiispanic whitee maleownedd businesses aand minority and womennowned
bussinesses indiccated the folloowing:
In both 19998 and 2003, minority and womenowwned businessses in the Paccific region were
issued loanns worth less, on average, tthan loans isssued to nonHHispanic whitte maleowneed
businesses.
In 2003, naational resultss showed that minority annd womenowwned businessses were issued
loans that wwere worth, oon average, leess than half tthe loan amouunt issued to nonHispanic
white maleeowned businnesses. Howeever, nationall 1998 data suuggest that mminority and
womenowwned businessses were issuued loans thatt were worth slightly moree, on average,,
than loans issued to nonnHispanic whhite maleowwned businessses.
Figuure G15.
Meean value of approved businness loans, 19998 and 2003
Notee: ** Denotes thatt the difference in mmeans from nonHispaanic white maleownned businesses is statistically significant aat the 95% confidencce
level.
Sourcce: BBC Research && Consulting from 1998 and 2003 Survey of Small Business Finnances.
Preevious national studies havve found thatt Black Americanowned bbusinesses aree issued loanss
thaat are worth leess than loans issued to noonHispanic wwhiteowned businesses wwith similar
chaaracteristics. Examinationss of constructtion companiies in the Unitted States havve also revealed
thaat Black Amerricanowned bbusinesses arre issued loanns that are woorth less thann loans issuedd to
bussinesses withh otherwise iddentical charaacteristics.80
80 Grown. 1991. "Commmercial Bank Leending Practices aand the Developmment of BlackOwwned Constructionn Companies."
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX G, PAGGE 32
Intterest rates.. Based on 19998 and 20033 SSBF data, FFigure G16 prresents the avverage intereest
rates on commeercial loans byy the race/ethhnicity of bussiness ownerss. In 1998, onn average,
minnority and wwomenownedd businesses iin the Pacific region were issued loans with similar
inteerest rates to loans issuedd to nonHispaanic white maaleowned buusinesses. However, in 20003,
thee average inteerest rate on lloans issued tto minority aand womenoowned busineesses appeareed
to bbe higher (byy 1.6 percentaage points) than the mean interest rate of loans for nnonHispanic
whhite maleownned businessees. The overalll pattern in tthe Pacific reggion for loan iinterest ratess
was similar to thhat found in tthe United Staates in 1998 aand 2003.
Figuure G16.
Meean interest raate for business loans, 19988 and 2003
Notee: ** Denotes tthat the difference inn means from nonHispanic white maleoowned businesses is statistically significant at the 95%
confiidence level.
Sourcce: BBC Research && Consulting from 1998 and 2003 Survey of Small Business Finnances.
Othher researcheers' regressioon analyses off interest ratees. Previous studies have investigated
diffferences in innterest rates aacross race/eethnicity and ggender whilee statistically controlling foor
facttors such as individual creedit history, bbusiness credit history, andd Dun and Brradstreet creddit
scoores. Findingss from those sstudies includde the followiing:
Hispanic Ammericanowneed businessess had significaantly higher iinterest ratess for lines of
credit in plaaces with less credit markeet competitionn. However, tthe study found no evidennce
that Black AAmerican or ffemaleowned businesses received highher rates.81
Among a sammple of businnesses with noo past credit problems, Black Americannowned
businesses hhad significanntly higher interest rates oon approved lloans than othher groups.822
On a nationaal level, Blackk American aand Hispanic AAmericanowwned businesses pay a highher
interest ratee for loans thaan nonHispaanic whiteowwned businessses after statiistically
81 Cavalluzzo. 2002. ""Competition, Smmall Business Finaancing and Discrimmination: Evidennce from a New Suurvey."
82 Blanchflower. 2003. "Discriminatioon in the Small Buusiness Credit Marrket."
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX G, PAGGE 33
controlling for other factors. The study did not find any additional differences between
minority and nonminorityowned businesses located in the Pacific region.83
BBC regression model for interest rates in the SSBF. The 2003 SSBF data for the Pacific region
indicate higher interest rates, on average, for minority and womenowned businesses
compared with white maleowned businesses. The BBC study team conducted a regression
analysis of interest rates using data from both the 1998 and the 2003 SSBF's in order to explore
the relationships between interest rates and the race/ethnicity and gender of business owners
while statistically controlling for other factors. BBC developed a linear regression model using
the same control variables as the likelihood of denial model along with additional characteristics
of the loan received, such as whether the loan was guaranteed, if collateral was required, the
length of the loan, and whether the interest rate was fixed or variable.
After excluding a small number of observations where the interest rate was imputed, the 1998
national sample included 719 businesses that received a loan in the past three years, and the
Pacific region included 125 such businesses. The 2003 national sample included 1,606
businesses that received a loan in the past three years, and the Pacific region included 247 such
businesses. Again, Pacific region effects are modeled using regional control variables.84
1998 SSBF regression results. Figure G17 presents the coefficients from the 1998 linear
model. The results from the regression model indicate that a number of race and gender
neutral factors are significantly associated with the interest rates that businesses received,
including the following factors:
Being a business owner with less than a high school education is associated with higher
interest rates;
Being a businesses acquired through purchase is associated with lower interest rates;
Having existing loans (other than vehicle or equipment loans or loans from stockholders) is
associated with higher interest rates;
More sales in the prior year (but also negative sales in the prior year) are associated with
lower interest rates;
An increase in a business' total equity is associated with lower interest rates as is having
negative equity;
Capital leases are associated with higher interest rates; and
Collateral requirements are associated with lower interest rates.
83 CRA International. 2007. "Measuring Minority and WomanOwned Construction and Professional Service Firm Availability
and Utilization. Prepared for Santa Clara Valley Transportation Authority.
84 BBC considered an interaction variable to represent businesses that are both minority and female but the term was not
significant in 1998 or 2003.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 34
Figure G17.
Interest rate (linear regression) in the U.S. in the 1998 SSBF,
Dependent variable: interest rate on most recent approved loan
Variable Coefficient Variable Coefficient Variable Coefficient
Race/ethnicity and gender Firm's characteristics, credit and financial health Firm and lender environment and loan characteristics
Constant 14.625 ** D&B credit score = moderate risk 0.270 Partnership 0.060
Black American 1.464 D&B credit score = average risk 0.161 S corporation 0.246
Asian American 1.258 D&B credit score = significant risk 0.145 C corporation 0.225
Hispanic American 0.303 D&B credit score = high risk 0.502 Mining industry 0.079
Native American 0.609 Total employees 0.002 Construction industry 0.064
Female 0.304 Percent of business owned by principal 0.005 Manufacturing industry 0.020
Pacific region 0.093 Familyowned business 0.305 Transportation, communications
African American in Pacific region 2.668 Firm purchased 0.404 * and utilities industry 0.131
Asian American in Pacific region 2.001 Firm inherited 0.052 Finance, insurance and
Hispanic American in Pacific region 0.141 Firm age 0.001 real estate industries 0.528
Female in Pacific region 0.515 Firm has checking account 0.080 Engineering industry 0.134
Firm has savings account 0.359 Other industry 0.423
Firm has line of credit 0.315 Herfindahl index = .10 to .18 0.099
Owner's characteristics, credit and resources Existing capital leases 0.112 Herfindahl index = .18 or above 0.229
Age 0.001 Existing mortgage for business 0.044 Located in MSA 0.060
Owner experience 0.014 Existing vehicle loans 0.138 Sales market local only 0.165
Less than high school education 1.192 ** Existing equipment loans 0.080 Approved Loan amount 0.000
Some college 0.182 Existing loans from stockholders 0.234 Capital lease application 1.267 **
Fouryear degree 0.154 Other existing loans 0.601 ** Business mortgage application 0.272
Advanced degree 0.059 Firm used trade credit in past year 0.200 Vehicle loan application 0.478
Log of home equity 0.049 Log of total sales in prior year 0.206 * Equipment loan application 0.068
Bankruptcy in past 7 years 0.985 Negative sales in prior year 3.222 ** Loan for other purposes 0.452
Judgement against in past 3 years 0.330 Log of cost of doing business in prior year 0.019 Loan guaranteed 0.071
Log of net worth excluding home 0.049 Log of total assets 0.027 Collateral required 0.388 *
Owner has negative net worth 0.058 Negative total assets 1.990 Length of loan (months) 0.002
Log of total equity 0.173 ** Fixed rate 0.037
Negative total equity 2.236 **
Firm bankruptcy in past 7 years 0.597
Firm delinquency in business transactions 0.430
Note: * Statistically significant at 90% confidence level.
** Statistically significant at 95% confidence level.
Coefficients are presented in percentage form.
Source: BBC Research & Consulting analysis of 1998 SSBF data.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 35
After statistically controlling for race and genderneutral influences, the study team did not
observe any differences between minority and femaleowned businesses and nonHispanic
whiteowned businesses in loan interest rates.
2003 SSBF regression results. Figure G18 presents the coefficients from the 2003 model. The
results from the regression model indicate that a number of race and genderneutral factors are
significantly associated with interest rates, including the following factors:
Location in the Pacific region is associated with higher interest rates;
Having an advanced degree is associated with lower interest rates;
Increased net worth for the ownerexcluding the owner's homeis associated with a
lower interest rate;
High risk credit scores are associated with higher interest rates (by approximately 1
percentage point);
An increase in a business' total equity is associated with higher interest rates as is having
negative equity;
Being in the construction industry is associated with lower interest rates but being in the
transportation, communications, and utilities industry is associated with higher interest
rates;
Capital leases are associated with have higher interest rates, and vehicle loans are
associated with lower interest rates;
Collateral requirements are associated with lower interest rates;
Longer loans are associated with lower interest rates; and
Fixedrate loans are associated with higher interest rates.
After statistically controlling for race and genderneutral influences, the study team observed
that Hispanic Americanowned businesses received higher interest rates than nonHispanic
whiteowned businesses (about 1 percentage point higher). Black Americanowned businesses
in the Pacific region received higher interest rates than other businesses.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 36
Figure G18.
Interest rate (linear regression) in the U.S. in the 2003 SSBF,
Dependent variable: interest rate on most recent approved loan
Variable Coefficient Variable Coefficient Variable Coefficient
Race/ethnicity and gender Firm's characteristics, credit and financial health Firm and lender environment and loan characteristics
Constant 11.993 ** D&B credit score = moderate risk 0.241 Partnership 0.510
Black American 1.787 D&B credit score = average risk 0.192 S corporation 0.142
Asian American 0.119 D&B credit score = significant risk 0.279 C corporation 0.113
Hispanic American 1.096 * D&B credit score = high risk 1.013 ** Mining industry 0.228
Native American or other minority 0.437 Total employees 0.002 Construction industry 0.555 *
Female 0.212 Percent of business owned by principal 0.001 Manufacturing industry 0.235
Pacific region 1.224 ** Familyowned business 0.516 Transportation, communications
African American in Pacific region 2.906 * Firm purchased 0.001 and utilities industry 1.367 **
Asian American in Pacific region 0.235 Firm inherited 0.065 Finance, insurance and
Hispanic American in Pacific region 0.139 Firm age 0.012 real estate industries 0.036
Native American or other minority in Pacific region 0.972 Firm has checking account 0.354 Engineering industry 0.515
Female in Pacific region 0.403 Firm has savings account 0.017 Other industry 0.372
Firm has line of credit 0.028 Herfindahl index = .10 to .18 0.550
Owner's characteristics, credit and resources Existing capital leases 0.132 Herfindahl index = .18 or above 0.876
Age 0.013 Existing mortgage for business 0.028 Located in MSA 0.111
Owner experience 0.011 Existing vehicle loans 0.344 Sales market local only 0.148
Less than high school education 0.284 Existing equipment loans 0.563 Approved Loan amount 0.000
Some college 0.239 Existing loans from stockholders 0.191 Capital lease application 1.221 *
Fouryear degree 0.324 Other existing loans 0.380 Business mortgage application 0.547
Advanced degree 0.572 * Firm used trade credit in past year 0.252 Vehicle loan application 1.062 **
Log of home equity 0.006 Log of total sales in prior year 0.157 Equipment loan application 0.261
Bankruptcy in past 7 years 0.241 Negative sales in prior year 2.286 Loan for other purposes 0.369
Judgement against in past 3 years 0.205 Log of cost of doing business in prior year 0.144 Loan guaranteed 0.312
Log of net worth excluding home 0.149 ** Log of total assets 0.142 Collateral required 0.842 **
Log of total equity 0.182 * Length of loan (months) 0.004 **
Negative total equity 2.132 * Fixed rate 1.185 **
Firm bankruptcy in past 7 years 0.206
Firm delinquency in business transactions 0.179
Note: * Statistically significant at 90% confidence level.
** Statistically significant at 95% confidence level.
"Owner has negative net worth" and "Negative total assets" dropped out of the regression because of colinearity.
Source: BBC Research & Consulting analysis of 2003 SSBF data.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 37
Results from BBC availability interviews. As part of the 20122014 availability interviews
that the study team conducted, BBC asked several questions related to potential barriers or
difficulties that businesses have faced in the local marketplace. The interviewer introduced those
questions with the following statement: "Finally, we're interested in whether your company has
experienced barriers or difficulties associated with starting or expanding a business in your
industry or with obtaining work. Think about your experiences in the Seattle Metropolitan Area
within the past five years as we ask you these questions."85
For each potential barrier, the study team examined whether the percentage of businesses that
indicated that they had experienced that specific barrier or difficulty differed among minority
owned business enterprises (MBEs), nonHispanic white womenowned business enterprises
(WBEs), and majorityowned businesses (i.e., nonHispanic white maleowned businesses). The
study team also examined if affirmative responses differed for young businesses (i.e., businesses
that were 10 years old or younger).
Access to lines of credit and loans. The first question was, "Has your company experienced any
difficulties in obtaining lines of credit or loans?" As shown in Figure G19, of all businesses, 31
percent of MBEs and 27 percent of WBEs reported difficulties obtaining lines of credit or loans. A
smaller percentage of majorityowned businesses (14%) reported that they had experienced
difficulties with obtaining lines of credit or loans.
Overall, a larger percentage of young businesses reported that they had experienced difficulties
with obtaining lines of credit or loans compared to all businesses. Similar to all businesses,
young MBEs (44%) and WBEs (33%) were more likely to report such difficulties than young
majorityowned businesses (18%).
85 Firms that received the WSDOT availability survey were told, "Finally, we're interested in whether your company has
experienced barriers or difficulties associated with starting or expanding a business in your industry or with obtaining work.
Think about your experiences in Washington within the past five years as we ask you these questions."
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 38
Figuure G19.
Hass your companny
experienced any
difficulties in obttaining
linees of credit or loans?
Sourcce:
BBC RResearch & Consultinng from 2012
2014 Availability Interviewws.
Recceiving timelyy payment. NNeed for businness credit is, in part, linkeed to whetherr businesses aare
paidd for their woork in a timelyy manner. In the availabiliity interviewss, BBC asked, "Has your
commpany had anny difficulties receiving payyment in a timmely manner??" Figure G20 shows thatt
manny MBEs, WBBEs, and majorityowned bbusinesses repported difficuulties with recceiving timelyy
payyment. Overalll, MBEs (56%%) were moree likely to repport difficultiees receiving ppayment in a
timely manner thhan WBEs (46%) and majorityowned businesses (448%). Young businesses wwere
lesss likely to report such difficulties compaared with all businesses. YYoung MBEs ((53%) were
morre likely to reeport difficultties receiving timely paymments than youung majorityowned
bussinesses (40%%), and youngg majorityowwned businessses were sommewhat more likely to repoort
such difficulties than young WWBEs (32%).
Figuure G20.
Hass your companny
experienced any
difficulties receivving
payyment in a timmely
mannner?
Sourcce:
BBC RResearch & Consultinng from 2012
2014 Availability Interviewws.
BBCC RESEARCH & CONSULTING FFINAL REPORTT APPPENDIX G, PAGE 39
Bonding and Insurancee
Acccess to bondinng is closely rrelated to acceess to capital. Some nationnal studies haave identifiedd
barriers for MBEE/WBEs in atttempting to aaccess surety bonds for puublic construcction projectss.86
Bonnding. To research whethher bonding rrepresented aa barrier for local businessses, BBC askeed
firmms completingg availability interviews:
Has your commpany obtainned or tried too obtain a bonnd for a projeect?
[and if so] Has your comppany had any difficulties obtaining bonds needed forr a project?
Figuure G21 pressents results ffor those queestions. Amonng businessess that reporteed that they had
obtained or triedd to obtain a bbond, 41 perccent of MBEs reported diffficulties with obtaining boonds
neeeded for a prooject. A smalleer percentagee of WBEs (255%) and majoorityowned bbusinesses
(15%) reported difficulties wwith obtainingg bonds for a pproject. Givenn the small nuumber of youung
firmms that responnded to the qquestions regaarding bondinng, BBC did nnot include seeparate analysses
for young busineesses' experieences with obbtaining bondding.
Figuure G21.
Hass your companny had
anyy difficulties obtaining
bonnds needed foor a
projject?
Sourcce:
BBC RResearch & Consultinng from 2012
2014 Availability Interviewws.
Insurance. Highh insurance rrequirements on public secctor projects may also reppresent a barrrier
for certain consttruction and cconstructionrelated profeessional serviices firms atteempting to doo
bussiness with goovernment aggencies. BBC eexamined whhether MBEs aand WBEs weere more likelly
thann majorityowwned businessses to reportt that insurannce requiremeents represennt a barrier too
biddding. Figure GG22 presentss those resultts. About 29 ppercent of MBBEs reported such difficultties.
Commpared to MBBEs, a smallerr percentage oof WBEs (15%%) and majorrityowned buusinesses (133%)
indiicated that innsurance requuirements preesent a barrieer to bidding on projects.
Youung MBEs (399%) were much more likely than all othher types of fiirms to indicaate that
insuurance requirrements on a project preseent a barrier tto bidding. Coompared to yyoung MBEs, aa
smaaller percentaage of young WWBEs (16%) and young mmajorityowneed businessess (15%)
indiicated that innsurance requuirements preesent a barrieer to their bussiness.
86 Foor example, Enchaautegui, Maria E. et al. 1997. "Do MMinorityOwned BBusinesses Get a FFair Share of Govvernment Contraccts?"
The UUrban Institute: 11117, p. 56.
BBCC RESEARCH & CONSULTING FFINAL REPORTT APPPENDIX G, PAGE 40
Figuure G22.
Havve any insurannce
requirements on projects
pressented a barrier to
biddding?
Sourcce:
BBC RResearch & Consultinng from 2012
2014 Availability Interviewws.
Summmary
Theere is evidencce that minoriities and wommen continue to face certain disadvantaages in accesssing
capital that is neecessary to staart, operate, aand expand bbusinesses. Caapital is requiired to start
commpanies, so baarriers accesssing capital caan affect the nnumber of miinorities and women who are
ablee to start busiinesses. In adddition, minorrities and women start buusiness with leess capital
(based on nationnal data). A nuumber of studdies have demmonstrated thhat lower starrtup capital
advversely affectss prospects foor those businnesses. Key reesults includeed the followiing:
Home equitty is an imporrtant source oof funds for bbusiness starttup and growwth. Fewer Black
Americans, Hispanic Ammericans, and Native Ameriicans in the SSeattle Metroppolitan Area
own homess compared wwith nonHisppanic whites. TThose Black AAmericans, HHispanic
Americans, and Native AAmericans whho do own homes tend to hhave lower hoome values thhan
nonHispannic whites.
AsianPaciffic Americans and Subconttinent Asian AAmericans aree also less likkely to own
homes in thhe Seattle Mettropolitan Area comparedd with nonHispanic whites. However,
those who ddo own homees tend to havve similar or hhigher home values.
High incomme Black Amerricans, Asian Americans, NNative Americcans, and Nattive Hawaiiann or
Other Pacifific Islanders aapplying for hhome mortgagges in the Seaattle Metropoolitan Area haave
been more likely than noonHispanic wwhites to havve their appliccations denied.
Black Amerrican, Hispaniic American, NNative Ameriican, and Natiive Hawaiian or Other Paccific
Islander moortgage borroowers in the SSeattle Metroopolitan Area have been mmore likely thaan
nonHispannic whites to bbe issued subbprime loans.
There is eviidence that Black Americaan and Hispannic American business ownners were moore
likely to havve been denieed business looan applicatioons than simiilarly situatedd non
minorities. Results for thhe Pacific region appear coonsistent withh national ressults.
Among business ownerss who reporteed needing buusiness loans,, there is eviddence that Blaack
Americans, Hispanic Ammericans, and women are mmore likely too forgo applying for loans ddue
to fear of deenial than simmilarlysituateed nonminorrities and meen. Results forr the Pacific
region appeear to be conssistent with nnational resullts. In the Paccific region in 2003, Nativee
BBCC RESEARCH & CONSULTING FFINAL REPORTT APPPENDIX G, PAGE 41
American business owners were also more likely to forgo applying for loans due to fear of
denial than other business owners.
There is evidence from 2003 that Hispanic American business owners receiving business
loans paid higher interests rates than similarlysituated nonminorities (with results for the
Pacific region consistent with national results). In the Pacific region, it appeared that Black
Americanowned businesses also paid higher interest rates than other businesses.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX G, PAGE 42
APPENDIX H.
Success of Businesses in the Seattle
Metropolitan Area Construction and
Engineering Industries
BBC examined the success of minority and womenowned business enterprises (MBE/WBEs) in
the Seattle Metropolitan Area construction and constructionrelated professional services
industries.1,2 The study team assessed whether business outcomes for MBE/WBEs differ from
those of nonHispanic white maleowned businesses (i.e., majorityowned businesses). Figure H
1 provides a framework for the study team's analyses.
Figure H1.
Operating businesses
Business
outcomes
Source:
Available markets Public sector Private sector
BBC Research &
Consulting.
Contract roles Prime contractor Subcontractor
Outcomes Expansion Stability Contraction Closure
Business earnings
BBC researched outcomes for MBE/WBEs and majorityowned businesses in terms of:
Participation in public and private sector markets, including contractor roles and sizes of
contracts bid on and performed;
Business closures, expansions, and contractions;
Business receipts and earnings; and
Potential barriers to starting or expanding businesses.
1 The "Seattle Metropolitan Area" refers to Pierce, King, and Snohomish counties.
2 The study team uses the terms "MBEs" and "WBEs" to refer to businesses that are owned and controlled by minorities or
women (according to the race/ethnicity and gender definitions listed above), regardless of whether they are certified or meet
the revenue and net worth requirements for DBE certification and regardless of whether they are certified as MBEs or WBEs
through the Washington State Office of Minority and Women's Business Enterprises.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 1
Participation in Public and Private Sector Markets
BBC drew on information that the study team collected as part of the availability analysis to
examine business outcomes for MBE/WBEs and majorityowned businesses in the relevant
geographic market area, including information about:
Whether businesses have been successful in the private sector, public sectors, or both;
Whether businesses have bid on and won contracts in study industries and the sizes of those
contracts; and
Whether businesses have worked as prime contractors, subcontractors, or both.
Public sector versus private sector work. BBC examined whether minority and women
owned construction or constructionrelated professional services businesses were any more or
less likely to work in the private sector than the public sector. The study team separately
examined responses for businesses working in the construction and constructionrelated
professional services industries.3,4
Construction. Figure H2 presents the distribution of majority, minority, and womenowned
businesses that reported bidding on government and private sector prime contracts and
subcontracts, based on availability interview responses.
Of the 138 construction businesses that reported bidding on public sector prime contracts
in the past five years, 77 percent were majorityowned, 13 percent were MBEs, and 10
percent were WBEs.
Of the 158 construction businesses that reported bidding on private sector prime contracts
in the past five years, 78 percent were majorityowned, 13 percent were MBEs, and 9
percent were WBEs.
The percentage of MBEs that reported bidding as prime contractors was slightly lower than
the percentage of MBEs that reported bidding as subcontractors on public sector work. For
private sector work, the percentage of MBEs that reported bidding as prime contractors and
the percentage of MBEs that reported bidding as subcontractors were about the same.
The percentage of WBEs that reported bidding as subcontractors was about the same as the
percentage of WBEs that reported bidding as prime contractors. The study team observed
that result for both public and private sector work.
The percentage of MBE/WBEs bidding as prime contractors was about the same for private
sector work (22%) and public sector work (23%).
3 The study team deemed a business to have performed or bid on public sector work if it answered "yes" to either of the
following questions in availability interviews: (a) "During the past five years, has your company submitted a bid or a price
quote for any part of a contract for a state or local government agency in Washington?"; or (b) "During the past five years, has
your company worked on any part of a contract for a state or local government agency in Washington?"
4 The study team deemed a business to have performed or bid on private sector work if it answered "yes" to either of the
following questions in availability interviews: (a) "During the past five years, has your company submitted a bid or a price
quote for any part of a contract for a private sector organization in Washington?"; or (b) "During the past five years, has your
company worked on any part of a contract for a private sector organization in Washington?"
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 2
Thee study team also asked coonstruction businesses if tthey had workked on any puublic sector
conntracts (includding both prime contractss and subconttracts). Whenn asked to connsider the passt
fivee years, aboutt 90 percent oof MBE construction businnesses reportted that they hhad been
succcessful in obttaining publicc sector workk. A slightly laarger percenttage of WBEs (92%) and
maajorityownedd businesses ((91%) said thhat they had oobtained publlic sector worrk.
Oveerall, all businnesses were mmore successful obtainingg constructionn work in the private sectoor
thaan in the public sector. Onee hundred perrcent of MBEs and WBEs rreported thatt they had beeen
succcessful in obttaining privatte sector worrk in the past five years. A slightly smaller percentagge
(955%) of majoriityowned buusinesses repoorted that theey had been ssuccessful in oobtaining work in
thee private sectoor in the pastt five years.
Figuure H2.
MBBEs, WBEs, andd majorityowwned construcction businessses bidding onn public
andd private sectoor work in Waashington in tthe past five yyears
Notee: "WBE" represennts white womenowwned firms.
Total may not aadd to 100 percent due to rounding.
Sourcce: BBC Research && Consulting from 200122014 Availability Interviews.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAAGE 3
Connstructionreelated professsional servicees. The study team also annalyzed the reepresentationn of
MBBE/WBEs amoong all busineesses biddingg on public annd private secctor constructtionrelated
proofessional serrvices prime ccontracts andd subcontractts. Figure H3 presents thee distribution of
maajority, minorrity, and wommenowned cconstructionrelated profeessional serviices businessees
thaat reported bidding on pubblic and private sector primme contracts and subcontrracts.
Figuure H3.
MBBEs, WBEs, andd majorityowwned construcctionrelated professional sservices
bussinesses bidding on public aand private seector work in Washington iin the past fivve years
Notee: "WBE" represennts white womenowwned firms.
Total may not aadd to 100 percent due to rounding.
Sourcce: BBC Research && Consulting from 200122014 Availability Interviews.
Thee results for cconstructionrelated profeessional services businessees were simillar to those foor
connstruction businesses for ppublic sector and private ssector prime ccontracts. Construction
relaated professional services MBE/WBEs represented about 25 perrcent of businnesses that
repported bidding on public seector prime ccontracts andd about 22 perrcent of businnesses that
repported bidding on private ssector prime contracts. A sslightly larger percentage of MBE/WBEEs
repported bidding on subconttracts in the ppublic sector tthan on primee contracts inn the public
secctor.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAAGE 4
Thee study team also asked coonstructionrelated professsional servicces businessess if they had
recceived any proofessional serrvices work inn the past fivve years. Abouut 97 percentt of WBE
connstructionrellated professional servicess businesses rreported thatt they had been successfull in
obttaining publicc sector workk. A slightly smmaller percenntage of MBEss (90%) and mmajorityownned
bussinesses (93%%) said that thhey had obtaiined public seector work. WWBEs, MBEs, aand majority
owwned businessses were similarly successfful in obtaininng private secctor work (977%, 95%, andd
99%%, respectiveely).
Oveerall, majorityyowned businesses and MMBEs were sliightly more ssuccessful in oobtaining privvate
secctor constructtionrelated pprofessional sservices workk than public sector constrructionrelateed
proofessional serrvices work. WWBEs were abbout equally ssuccessful in obtaining priivate sector wwork
andd public sectoor work. MBEs were slightly less successsful in obtainning work thaan majority
owwned businessses and WBEss in both the pprivate and puublic sectors..
Biddding as prime contractors and subcontractors/suppliers. BBC furtheer examined tthe
perrcentage of MMBEs, WBEs, aand majorityowned businnesses that bidd on public annd private sector
work in differennt roles (i.e., aas prime contrractors, subcoontractors, or both). Thosse results perttain
to bbidding withiin the Washinngton contraccting industryy within the ppast five yearss.
Connstruction. Fiigure H4 preesents the perrcentage of mmajority, minority, and woomenowned
connstruction businesses thatt reported biddding on publlic sector worrk as a prime contractor, aa
subbcontractor, oor as both.
Figuure H4.
Perrcent of construction businesses that repported submittting a bid forr any part of aa
pubblic sector prooject in Washiington in the ppast five yearrs
Notee: "WBE" represennts white womenowwned firms.
Sourcce: BBC Research && Consulting from 200122014 Availability Interviews.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAAGE 5
Of MBE connstruction buusinesses thatt reported beiing qualified and interesteed in future
transportattion work, 855 percent saidd that they haad bid on public sector worrk as a primee
contractor or as a subcoontractor in thhe past five yyears (includinng submittingg price quotees).
About 11 ppercent bid onnly as a primee contractor, aand, compareed to WBE annd majority
owned businesses, a larger percentagge (46%) bidd only as a subbcontractor.
A smaller ppercentage of f majorityowwned construcction businessses that reported being
qualified annd interestedd in future traansportation wwork (81%) rreported thatt they had bidd on
public sector work in thhe past five yeears. About 144 percent hadd bid only as aa prime
contractor,, and 40 perceent bid only aas a subcontraactor.
A slightly smaller percenntage of WBEEs that reportted being quaalified and intterested in future
transportattion work (799%) reportedd bidding on ppublic sector work in the ppast five yearrs.
About 12 ppercent had biid only as a prime contracctor, and abouut 36 percent bid only as aa
subcontracctor.
Thee study team also asked buusiness owneers and managgers if their bbusinesses haad bid on a
privvate sector coonstruction pproject in the past five yearrs. Figure H55 presents thee percentage of
minnority, womeen, and majoorityowned cconstruction bbusinesses thhat reported bbidding on
privvate sector wwork as a primme contractorr, a subcontraactor, or as booth.
Figuure H5.
Perrcent of construction businesses that repported submittting a bid forr any part of aa
privvate sector prroject in Washhington in thee past five yeaars
Notee: "WBE" represennts white womenowwned firms.
Sourcce: BBC Research && Consulting from 200122014 Availability Interviews.
Of MBE consstruction bussinesses that rreported beinng qualified aand interestedd in future
transportatiion work, 83 percent said that they hadd bid on privaate sector worrk as a primee
contractor oor as a subconntractor in the past five yeears. About 133 percent repported that they
had bid onlyy as a prime ccontractor, annd about 37 ppercent reportted that they had bid onlyy as a
subcontracttor.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAAGE 6
Compared to MBEs, a sligghtly larger ppercentage of WBEs that reeported beingg qualified annd
interested inn future transsportation woork (85%) reported biddinng on privatee sector
constructionn work, but a smaller perccentage of WBBEs (9%) thann MBEs and mmajorityownned
businesses rreported biddding only as aa prime contraactor. About 42 percent off WBEs said tthat
they had bidd only as a subbcontractor oon private secctor work in tthe past five yyears.
Overall, a sliightly larger ppercentage (887%) of majoorityowned cconstruction bbusinesses thhat
reported being qualified and interesteed in future trransportationn work said thhat they had bid
on private sector work inn the past fivee years. Comppared to MBEEs, about the ssame percenttage
of majorityowned businnesses (14%) reported that they had bidd only as primme contractorr. 40
percent of mmajorityowneed businessess reported thhat they had bbid only as a ssubcontractorr.
Connstructionreelated professsional servicees. Figures H6 and H7 exxamine primee contract verrsus
subbcontract biddding for constructionrelated professioonal services bbusinesses, bbased on dataa
from the availabbility interviews.
Figgure H6 preseents the percentage of majjority, minorrity, and wommenowned cconstruction
relaated professional services businesses inn the relevannt geographic market area that reportedd
biddding on public sector worrk as a prime contractor, a subcontractoor, or as bothh.
Figuure H6.
Perrcent of constructionrelateed professionaal services buusinesses that reported
subbmitting a bid for any part oof a public secctor project inn Washingtonn in the past fiive years
Notee: "WBE" represennts white womenowwned firms.
Sourcce: BBC Research && Consulting from 200122014 Availability Interviews.
Of MBE consstructionrelaated professioonal services businesses tthat reported being qualified
and interestted in future ttransportatioon work, 89 percent said thhat they had bbid on publicc
sector workk as a prime coontractor or aas a subcontrractor in the ppast five yearrs (including
submitting pprice quotes). About 7 perrcent of MBEss reported thaat they had biid only as a
prime contrractor and 29 percent repoorted that theey had bid onlly as a subconntractor.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAAGE 7
A smaller peercentage of WWBEs that repported being qualified andd interested in future
transportatiion work (83%) reported bidding on puublic sector wwork in the paast five yearss, but
a larger perccentage (11%%) that they hhad bid only aas a prime conntractor. About 31 percentt
reported thaat they bid onnly as a subcoontractor.
Compared to MBEs and WWBEs, a smaller percentagge of majorityyowned consstructionrelaated
professional services bussinesses that reported beinng qualified aand interested in future
transportatiion work (81%) said that tthey had bid on public secctor work in tthe past five
years. Comppared to MBEs and WBEs, a smaller perrcentage (22%%) of majorityyowned firmms
reported thaat they had biid only as a suubcontractorr. About 9 perrcent reportedd bidding onlly as
a prime contractor.
Figgure H7 preseents the percentage of majjority, minorrity, and wommenowned coonstruction
relaated professional services businesses inn the relevannt geographic market area that reportedd
biddding on privaate sector work as a primee contractor, aa subcontracttor, or as bothh.
Figuure H7.
Perrcent of constructionrelateed professionaal services buusinesses that reported
subbmitting a bid for any part oof a private seector project in Washingtoon in the past ffive years
Notee: "WBE" represennts white womenowwned firms.
Sourcce: BBC Research && Consulting from 200122014 Availability Interviews.
Of MBE connstructionrelated professional services businesses that reportedd being qualiffied
and interessted in futuree transportation work, aboout 82 percennt said that they had bid onn
private sector work as aa prime contractor or as a subcontractoor in the past five years. Abbout
20 percent said that theey had bid onlly as a prime contractor annd 7 percent said that theyy
had bid onlly as a subconntractor.
Compared to MBEs, a larger percentaage (89%) of f WBEs that reeported beingg qualified annd
interested in future trannsportation wwork said thatt they had bidd on private ssector
professionaal services woork in the passt five years, bbut a much smmaller percenntage (9%) saaid
that they had bid only as a prime conntractor. Commpared to MBEEs and majorrityowned
businesses, a larger perccentage (31%%) said that thhey had bid oonly as a subccontractor.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAAGE 8
Compared to WBEs, about the same percentage (89%) of majorityowned construction
related professional services businesses that reported being qualified and interested in
future transportation work said that they had bid on private sector work in the past five
years. About 16 percent said that they had bid only as a prime contractor and 11 percent
had bid only as a subcontractor.
Largest contract in Washington in the past five years. As part of the availability
interviews, the study team asked businesses to identify the largest contract they were awarded
in Washington in the past five years.
Construction. Among construction businesses, 92 percent of WBEs reported that the largest
contract they received was worth less than $1 million. A smaller percentage of MBEs (71%) and
majorityowned businesses (67%) reported that the largest contract they received was worth
less than $1 million.
About 6 percent of MBEs working in construction said that the largest contract they had received
in the past five years was worth more than $5 million. No WBEs reported that the largest
contract they had received in the past five years was worth more than $5 million. A larger
percentage of majorityowned construction businesses (14%) said that the largest contract they
had received in the past five years was worth more than $5 million.
No MBEs or WBEs said that the largest contract they had received in the past five years was
worth more than $20 million. In contrast, 6 percent of majorityowned construction businesses
said the largest contract they received in the past five years was worth more than $20 million.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 9
Figuure H8.
Largest contract or subcontract that the coompany receivved in Washinngton in the past five yearss,
connstruction
Notee: "WBE" represennts white womenowwned firms.
Total may not aadd to 100 percent due to rounding.
Sourcce: BBC Research && Consulting from 200122014 Availability Interviews.
Connstructionreelated professsional servicees. Among connstructionreelated professsional servicees
bussinesses, 92 ppercent of WBBEs reported that the largeest contract tthey had beenn awarded in the
passt five years wwas worth $1 million or lesss. Comparedd to WBEs, a ssmaller perceentage of MBEEs
(766%) and majoorityowned bbusinesses (74%) said that the largest ccontract that they had beeen
awarded in the ppast five yearrs was worth $1 million orr less.
Onlly about 6 percent of MBEs and 4 perceent of WBEs ssaid that the llargest contraact they had bbeen
awarded in the ppast five yearrs was worth $5 million orr more. Comppared to MBE//WBEs, a largger
perrcent of majorrityowned businesses (111%) said thatt the largest ccontract they had been
awarded in the ppast five yearrs was worth $5 million orr more.
Onlly about 3 percent of MBEs and 4 perceent of WBEs ssaid that the llargest contraact they had bbeen
awarded in the ppast five yearrs was worth $20 million oor more. Commpared to MBEE/WBEs, a
sligghtly larger percent (5%) oof majorityowned businesses said thatt the largest ccontract theyy
havve received inn the past fivee years was wworth $20 milllion or more..
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 10
Figuure H9.
Largest contract or subcontract that the coompany receivved in Washinngton in the past five yearss,
connstructionrelaated professioonal services
Notee: "WBE" represennts white womenowwned firms.
Total may not aadd to 100 percent due to rounding.
Sourcce: BBC Research && Consulting from 200122014 Availability Interviews.
Relative capaccity. Some reecent legal cases regardingg race and geenderconscioous contracting
proograms have cconsidered thhe importance of the "relattive capacity"" of businessees included inn an
avaailability analysis.5 One appproach to acccounting for ddiffering capaacities amongg different typpes
of bbusinesses is to examine relatively smaall contracts, aa technique nnoted in Rothee Developmennt
Corrp. v. U.S. Depaartment of Deefense. In addition to exammining small ccontracts, BBCC directly
measured capaccity in its avaiilability analyysis.6
Meeasurement oof capacity. The availabilitty analysis produced a dattabase of 620 businesses
pottentially availlable for workk with the Port.7 "Relative capacity" forr a business iss measured ass the
larggest contract or subcontraact that the buusiness bid onn or performeed in Washinngton within tthe
fivee years preceding when BBBC intervieweed it. BBC usees relative cappacity as one factor in
dettermining whhether a businness would bee available to bid on speciffic Port primee contracts annd
subbcontracts.
5 For example, see thhe decision of the United States Couurt of appeals forr the Federal Circuuit in Rothe Devellopment Corp. v. UU.S.
Depaartment of Defensse, 545 F.3d 1023 (Fed. Cir. 2008).
6 See Appendix D for details about thee availability interrview process.
7 1553 of those busineesses were not inccluded in the avaiilability marketpllace analysis repoorted in the relatiive capacity section,
becaause they did not provide responses to questions D2 or D4 on the avvailability intervieew.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 11
Assessment of possible disparities in capacity of MBE/WBEs and majorityowned businesses.
One factor that affects capacity is the specializations, or subindustries, of businesses within the
construction and constructionrelated professional services industries. Subindustries, such as
bridge and elevated highway construction, tend to involve relatively large projects. Other
subindustries, such as surveying, typically involve smaller projects. One way of accounting for
variation in capacities among businesses in different subindustries is to assess whether a
business has a capacity above or below the median level of businesses in the same subindustry.
BBC tested whether MBE/WBEs bid on larger or smaller prime contracts or subcontracts
compared with other businesses in the same subindustry. Figure H10 indicates the median bid
capacity among businesses in the relevant geographic market area in each of the 22
subindustries that the study team examined in the availability analysis. Note that the interview
questions regarding the largest project that businesses had bid on or been awarded captured
data in dollar ranges rather than in specific dollar amounts.
Figure H10.
Median relative capacity by subindustry
Subindustry Median Bid Capacity
Construction
Asphalt and concrete supply $100,000 to $500,000
Electrical work $500,000 to $1 million
Excavation and drilling $100,000 to $500,000
Heavy construction $1 million to $2 million
Landscape services $100,000
Marine construction $5 million to $10 million
Other construction services $100,000 to $500,000
Other construction supplies $100,000 to $500,000
Plumbing and HVAC $100,000 to $500,000
Signs, installation, and manufacture $100,000 to $500,000
Steel building materials $100,000 to $500,000
Trucking $100,000 to $500,000
Vertical construction $1 million to $2 million
Vertical construction trades $100,000
Water, sewer, and utility lines $1 million to $2 million
Wrecking and demolition $100,000 to $500,000
Professional Services
Construction management $1 million to $2 million
Engineering $100,000 to $500,000
Environmental research, consulting, and testing $100,000 to $500,000
Landscape architecture $100,000 to $500,000
Surveying and mapmaking $100,000 to $500,000
Transportation consulting $2 million to $5 million
Source: BBC Research & Consulting from 20122014 Availability Interviews.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 12
Construction. An initial question is whether MBE/WBEs are as likely as majorityowned
businesses to have abovemedian capacities within their subindustries. Figure H11 presents
those results for construction businesses. Majorityowned firms were slightly less likely than
MBEs to have abovemedian capacities. WBEs were less likely than both majorityowned
businesses and MBEs to have abovemedian capacities.
About 34 percent of WBE and 38 percent of majorityowned construction businesses had
abovemedian relative capacities.
Compared to WBEs and majorityowned businesses, a slightly larger percentage of MBE
construction businesses (42%) reported relative capacities that were higher than the
median for their subindustries.
Figure H11. Professional
Proportion of firms with above Firm ownership Construction Services Overall
median bid capacity by ownership
Minority 42 % 41 % 42 %
Source:
Female 34 30 32
BBC Research & Consulting from
Majorityowned 38 38 38
20122014 Availability Interviews.
Constructionrelated professional services. Figure H11 also shows the percentage of
constructionrelated professional services businesses that reported relative capacities that
exceeded the median for their subindustries.
About 38 percent of majorityowned constructionrelated professional services businesses
reported that they had relative capacities that were higher than the median for their
subindustries.
Compared to majorityowned businesses, a smaller percentage of WBEs (30%) reported
having abovemedian bid capacities.
Fortyone percent of MBE constructionrelated professional services businesses reported
having abovemedian bid capacities.
Further analysis. BBC considered whether race and genderneutral factors could account for the
disparities in relative capacity that the study team identified for in construction and
constructionrelated professional services. There were several variables from the availability
interviews that may be related to relative capacity for example, annual revenue, number of
employees, and whether a business has multiple establishments in the Seattle Metropolitan Area.
After considering business characteristics from the availability interviews, the study team
determined that age of business was the race and genderneutral neutral factor that might best
explain differences in relative capacity within a subindustry while also being external to capacity
measures. Theoretically, the longer that companies are in business, the larger the contracts or
subcontracts that they might pursue. To test that hypothesis, the study team conducted separate
logistic regression analyses for the construction and constructionrelated professional services
industries to determine whether relative capacity could at least partly be explained by the age of
businesses and whether MBE/WBEs differ from majorityowned businesses of similar ages in
terms of capacity. The results for the Seattle Metropolitan Area construction industry are shown
in Figure H12.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 13
Figure H12.
Variable Coefficient ZStatistic
Seattle Metropolitan Area construction
industry bid capacity model
Constant 0.72 2.86 **
Age of firm 0.01 1.21
Note:
Minority 0.25 0.68
** Denotes statistical significance at the 95% confidence level.
Source: Female 0.11 0.27
BBC Research & Consulting from 20122014 Availability Interviews.
The results of the analysis indicated the following:
Business age was positively related to showing abovemedian capacity, but that effect was
not statistically significant. The older a business, the more likely it was to show above
median capacity.
Minority ownership was also positively related to showing abovemedian capacity, but that
effect was not statistically significant.
Female ownership was negatively related to having abovemedian capacity, but that effect
was not statistically significant.
Results for the Seattle Metropolitan Area constructionrelated professional services industry are
shown in Figure H13. The logistic regression model for the industry indicated:
Business age was a significant predictor of having abovemedian capacity for construction
related professional services businesses. The older a business, the more likely it was to
show abovemedian capacity.
Minority ownership was positively related to showing abovemedian capacity, but that
effect was not statistically significant.
Female ownership was positively related to showing abovemedian capacity, but that effect
was not statistically significant.
Figure H13.
Variable Coefficient ZStatistic
Seattle Metropolitan Area construction
related professional services industry bid
Constant 1.51 5.14 **
capacity model
Age of firm 0.04 4.15 **
Minority 0.33 0.84
Note:
** Denotes statistical significance at the 95% confidence level. Female 0.06 0.14
Source:
BBC Research & Consulting from 20122014 Availability Interviews.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 14
Business Closures, Expansions, and Contractions
BBC used Small Business Administration (SBA) data to examine business outcomesincluding
closures, expansions, and contractionsfor minorityowned businesses in the state of
Washington and in the nation as a whole.8 The SBA analyses compare business outcomes for
minorityowned businesses (by demographic group) to business outcomes for all businesses.
Business closures. High rates of business closures may reflect adverse business conditions for
minority business owners. BBC examined rates of successful and unsuccessful business closures
for minorityowned businesses in the state of Washington and in the nation as a whole.
Overall rates of business closures in Washington. A 2010 SBA report investigated business
dynamics and whether minorityowned businesses were more likely to close than other
businesses. By matching data from business owners who responded to the 2002 U.S. Census
Bureau Survey of Business Owners (SBO) to data from the Census Bureau's 19892006 Business
Information Tracking Series, the SBA reported on business closure rates between 2002 and 2006
across different sectors of the economy.9,10 Figure H14 presents those data for Black American,
Asian American, and Hispanic Americanowned businesses as well as for whiteowned
businesses.
As shown in Figure H14, 38 percent of Black Americanowned businesses that were operating in
Washington in 2002 had closed by the end of 2006, a higher rate than those of other groups,
including whiteowned businesses (30%). Hispanic American (36%) and Asian American
owned businesses (32%) also had closure rates that were higher than that of whiteowned
businesses. Differences in closure rates between minorityowned businesses and whiteowned
businesses were similar in Washington and in the United States during that time period.
8 Data were not available for individual metropolitan areas or counties.
9 Lowrey, Ying. 2010. "Race/Ethnicity and Establishment Dynamics, 20022006." U.S. Small Business Administration Office of
Advocacy. Washington D.C.
10 Businesses classifiable by race/ethnicity exclude publicly traded companies. The study team did not categorize racial groups
by ethnicity. As a result, some Hispanic Americanowned businesses may also be included in statistics for Black American,
Asian American, and whiteowned businesses.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 15
Figuure H14.
Rattes of business closure, 20002 through 20006, Washingtton and the U.S.
Notee: Data refer only to nonpublicly held businesses only. As sample sizes are nott reported, statistical significance of these
results cannot bbe determined. However, statistics are coonsistent with SBA data quality guidelinees.
Sourcce: Lowrey, Ying. 20010. "Race/Ethnicityy and Establishment DDynamics, 200220066." U.S. Small Busineess Administration
Office of Advocacy. Washington D.CC.
Rattes of businesss closures byy industry. Thhe SBA reporrt also examinned business closure ratess by
racce/ethnicity foor 21 differennt industry classifications. Figure H15 compares naational rates oof
bussiness closuree for the two industry classifications most related too constructionn and
proofessional, sciientific, and teechnical servvices (which inncludes enginneering). Figuure H15 alsoo
preesents business closure rattes for all inddustries by racce/ethnicity.
As shown in Figure H15, Blaack Americanowned businnesses that wwere operatingg in the Uniteed
Staates in 2002 hhad the highesst rate of clossure by 2006 among all raccial/ethnic grroups
including whiteowned businnessesin coonstruction (443%); professsional, scientific, and technnical
serrvices (39%); and all indusstries (39%). Hispanic Ammericanowned businesses and Asian
Ammericanowneed businesses that were opperating in 20002 were alsoo more likely to have closeed by
20006 than whiteeowned busiinesses in connstruction; prrofessional, sccientific, and technical
serrvices; and alll industries. TThe study teamm could not eexamine whetther those diffferences alsoo
existed in Washington, becauuse the SBA annalysis by inddustry was noot available foor individual
stattes.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 16
Figuure H15.
Rattes of business closure, 20002 through 20006, construction;
proofessional, scieentific, and teechnical servicces; and all industries in the U.S.
Notee: Data refer only to nonpublicly held businesses. As sampple sizes are not repoorted, statistical signnificance of these ressults
cannot be determined; however, staatistics are consistennt with SBA data quality guidelines.
Sourcce: Lowrey, Ying. 20010. "Race/Ethnicityy and Establishment DDynamics, 200220066." U.S. Small Busineess Administration Offfice
of Advocacy. WWashington D.C.
Unssuccessful cloosures. Not all business cloosures can bee interpreted as "unsuccesssful closuress."
Bussinesses may close when aan owner retiires or a moree profitable bbusiness oppoortunity emerrges,
botth of which reepresent "succcessful closures." The 19992 Characteristics of Businness Owners
(CBBO) Survey is one of the feww Census Burreau sources to classify buusiness closurres into
succcessful and uunsuccessful ssubsets.11 Thee 1992 CBO ccombines data from the 19992 Economicc
Cennsus and a survey of businness owners cconducted in 1996. The survey portion of the 1992 CCBO
askked owners off businesses tthat had closeed between 11992 and 1995, "Which item below
desscribes the staatus of this buusiness at thee time the deccision was maade to cease ooperations?"
Onlly the responses "successfful" and "unsuuccessful" weere permittedd. A firm that rreported beinng
unssuccessful at tthe time of closure was unnderstood to hhave failed.
Figgure H16 presents CBO daata on the prooportion of buusinesses that closed due tto failure
bettween 1992 aand 1995 in coonstruction; pprofessional, scientific, annd technical seervices; and aall
inddustries.12,13 AAccording to CCBO data, Black Americanowned businnesses were tthe most likely to
11 CBO data from thee 1997 and 2002 EEconomic Censusses do not includee statistics on succcessful and unsuuccessful businesss
closures. To date, thee 1992 CBO is the only U.S. Census dataset that incluudes such statistiics.
12 AAll CBO data should be interpretedd with caution as bbusinesses that ddid not respond too the survey cannnot be assumed too have
the ssame characteristtics of ones that ddid. Holmes, Thommas J. and James SSchmitz. 1996. "NNonresponse Biass and Business
Turnnover Rates: The Case of the Charaacteristics of Busiiness Owners Surrvey." Journal of BBusiness & Econommic Statistics. 14(2):
231241. This reportt does not includee CBO data on oveerall business clossure rates, becausse businesses nott responding to thhe
survvey were found too be much more liikely to have closed than ones thatt did.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 17
repport being "unnsuccessful" aat the time at which their bbusinesses closed. About 777 percent off
Blaack Americanowned businnesses in all inndustries repported an unssuccessful bussiness closure
bettween 1992 aand 1995, commpared with oonly 61 perceent of nonHisspanic white maleowned
bussinesses. Unsuuccessful clossure rates weere also relatiively high for Hispanic Ammericanowneed
bussinesses (71%%) and for businesses ownned by "other minority grooups" (73%). The rate of
unssuccessful cloosures for womenowned bbusinesses (661%) was simmilar to that oof nonHispannic
whhite maleownned businessees.
Figuure H16.
Unssuccessful cloosure rates forr businesses that closed beetween 1992 aand 1995 in thhe U.S.
Sourcce: U.S. Census Bureau, 1996 Characcteristics of Business Owners Survey (CBOO).
In tthe constructtion industry, minority annd womenowwned businessses were morre likely to report
unssuccessful business closurres than nonHHispanic whitte maleowneed businessess (58%). Those
trennds were simmilar in the prrofessional services industtry with one eexceptionwwomenownedd
bussinesses (52%%) were less llikely to report unsuccessfful closures thhan nonHisppanic white mmale
owwned businessses (59%).
13 This study includees CBO data on buusiness success beecause there is noo compelling reasson to believe thaat closed businessses
respponding to the surrvey would have reported differennt rates of successs/failure than thoose closed busineesses that did not
resppond to the surveyy. Headd, Brian. UU.S. Small Businesss Administrationn, Office of Advocacy. 2000. Busineess Success: Factorrs
leadding to surviving aand closing successsfully. Washingtoon D.C.: 12.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 18
Reasons for differences in unsuccessful closure rates. Several researchers have offered
explanations for higher rates of unsuccessful closures among minority and womenowned
businesses compared with nonHispanic whiteowned businesses:
Unsuccessful business failures of minorityowned businesses may be due to barriers in
access to capital. Regression analyses have identified initial capitalization as a significant
factor in determining firm viability. Because minorityowned businesses secure smaller
amounts of debt equity in the form of loans, they may be more liable to fail. Difficulty in
accessing capital is found to be particularly acute for minorityowned businesses in the
construction industry.14
Prior work experience in a family member's business or similar experience is found to be
strong determinants of business viability. Because minority business owners are much less
likely to have such experience, their businesses are less likely to survive.15 Similar research
has been conducted for womenowned businesses and found similar genderbased gaps in
the likelihood of business survival.16
Level of education is found to be a strong determinant of business survival. Educational
attainment explains a substantial portion of the gap in business closure rates between Black
Americanowned businesses and nonminorityowned businesses.17
Nonminority business owners have the opportunity to pursue a wider array of business
activities, which increases their likelihood of closing successful businesses to pursue more
profitable business alternatives. Minority business owners, especially those who do not
speak English, have limited employment options and are less likely to close a successful
business.18
The possession of greater initial capital and generally higher levels of education among
Asian Americans are related to the relatively high rate of survival of Asian Americanowned
businesses compared to other minorityowned businesses.19
14 Bates, Timothy and Caren Grown. 1991. "Commercial Lending Practices and the Development of BlackOwned Construction
Companies." Center for Economic Studies, U.S. Census Bureau.
15 Robb, A. and Fairlie, R. 2005. "Why are BlackOwned Businesses Less Successful than WhiteOwned Businesses? The Role of
Families, Inheritances, and Business Human Capital." University of California, Santa Cruz.
16 Fairlie, R. and A. Robb. 2009. "Gender Differences in Business Performance: Evidence from the Characteristics of Business
Owners Survey." University of California, Santa Cruz.
17 Ibid. 24.
18 Bates, Timothy. 2002. "Analysis of Young Small Businesses That Have Closed: Delineating Successful from Unsuccessful
Closures." Center for Economic Studies, U.S. Census Bureau.
19 Bates, Timothy. 1993. "Determinants of Survival and Profitability Among Asian ImmigrantOwned Small Businesses." Center
for Economic Studies, U.S. Census Bureau.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 19
Exppansions annd contractiions. Comparing rates of eexpansion annd contractionn between
minnorityownedd and whiteoowned busineesses is also uuseful in assesssing the succcess of minorrity
owwned businessses. As with cllosure data, oonly some of tthe data on exxpansions and contractionns
thaat were availaable for the naation were alsso available aat the state levvel.
Exppansions. Thee 2010 SBA sttudy of minorrity business dynamics froom 2002 throough 2006
exaamined the nuumber of nonnpubliclyhelld Washington businesses that expandeed and
conntracted betwween 2002 and 2006. Figurre H17 preseents the perceentage of all bbusinesses, byy
racce/ethnicity oof ownership, that increaseed their total employmentt between 20002 and 2006.
Thoose data are ppresented forr Washington and for the nnation as a whhole.
Figuure H17.
Perrcentage of buusinesses thatt expanded, 22002 through 22006
Notee: Data refer only to nonpublicly held businesses. As sampple sizes are not repoorted, statistical signnificance of those ressults
cannot be determined. However, thhe reported statisticss are consistent with SBA data quality guiidelines.
Sourcce: Lowrey, Ying. 20010. "Race/Ethnicityy and Establishment DDynamics, 200220066." U.S. Small Busineess Administration Offfice
of Advocacy. WWashington D.C.
Acccording to thee SBA study, aapproximatelly 31 percent of whiteownned Washinggton businessees
exppanded betweeen 2002 andd 2006, compaared to 24 peercent of Black Americanoowned
bussinesses, 30 ppercent of Asiian Americanowned businnesses, and 32 percent of Hispanic
Ammericanowneed businesses. Expansion rresults were ssimilar for thee nation as a whole.20
Figgure H18 presents the perrcentage of buusinesses thaat expanded inn construction; professionnal,
scieentific, and teechnical serviices; and in alll industries in the United States. The 2010 SBA studdy
didd not report reesults for bussinesses in inddividual induustries at the sstate level. Att the nationall
level, the patternns evident forr construction and professsional, scientiific, and technnical servicess
were similar to tthose observed for all induustries:
Black Ameriicanowned cconstruction aand professioonal, scientificc, and techniccal services
businesses wwere less likeely than whiteeowned busiinesses to havve expanded between 20002
and 2006.
20 Lowrey, Ying. 2010. "Race/Ethnicitty and Establishmment Dynamics, 200022006." U.S. Smmall Business Addministration Office of
Advocacy. Washingtoon D.C.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 20
Hispanic Ammerican and AAsian Americcanowned coompanies in bboth construcction and
professional, scientific, and technical sservices weree slightly morre likely thann whiteownedd
businesses tto have expannded betweenn 2002 and 20006.
Figuure H18.
Perrcentage of buusinesses expaanding, 2002 through 20066, U.S. construuction;
proofessional, scieentific, and teechnical servicces; and all industries
Notee: Data refer only to nonpublicly held businesses. As sampple sizes are not repoorted, statistical signnificance of these ressults
cannot be determined; however, staatistics are consistennt with SBA data quality guidelines.
Sourcce: Lowrey, Ying. 20010. "Race/Ethnicityy and Establishment DDynamics, 200220066." U.S. Small Busineess Administration Offfice
of Advocacy. WWashington D.C.
Conntractions. Fiigure H19 shhows the perccentage of nonnpublicly heeld businessess operating inn
20002 that reducced their empployment (i.e.,, contracted) between 20002 and 2006 iin Washington
andd in the nationn as a whole. At both the sstate level andd the national level, Black American
(200%), Asian Ammerican (20%%), and Hispaanic Americannowned businesses (17%%) were slighttly
lesss likely than wwhiteowned businesses ((22%) to havee contracted bbetween 20002 and 2006.
Thee SBA study ddid not reportt statespecifiic results relaating to contrractions in inddividual
inddustries. Figurre H20 showws the percenttage of busineesses that conntracted in coonstruction;
proofessional, sciientific, and teechnical servvices; and all iindustries at tthe national llevel. Comparred
to wwhiteowned constructionn businesses iin the United States, a slighhtly smaller ppercentage off
Blaack American, Hispanic Ammerican, andd Asian Ameriicanowned cconstruction aand professioonal,
scieentific, and teechnical serviices businessees contractedd between 2002 and 2006.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 21
Figuure H19.
Perrcentage of buusinesses conttracting, 20022 through 20006
Notee: Data refer only to nonpublicly held businesses. As sampple sizes are not repoorted, statistical signnificance of these ressults
cannot be determined; however, staatistics are consistennt with SBA data quality guidelines.
Sourcce: Lowrey, Ying. 20010. "Race/Ethnicityy and Establishment DDynamics, 200220066." U.S. Small Busineess Administration Offfice
of Advocacy. WWashington D.C.
Figuure H20.
Rattes of business contraction,, 2002 througgh 2006, U.S. cconstruction;
proofessional, scieentific and tecchnical services; and all inddustries
Notee: Data refer only to nonpublicly held businesses. As sampple sizes are not repoorted, statistical signnificance of these ressults
cannot be determined; however, staatistics are consistennt with SBA data quality guidelines.
Sourcce: Lowrey, Ying. 20010. "Race/Ethnicityy and Establishment DDynamics, 200220066." U.S. Small Busineess Administration Offfice
of Advocacy. WWashington D.C.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 22
Business Receipts and Earnings
Annual business receipts and earnings for business owners are also indicators of the success of
businesses. The study team examined:
Business receipts data from the 2007 SBO;
Business earnings data for business owners from the 2000 Census and 20092011
American Community Survey (ACS); and
Annual revenue data that the study team collected as part of availability surveys for
Washington and Seattle Metropolitan Area construction and constructionrelated
professional services businesses.
Business receipts. BBC examined receipts for businesses in the Seattle Metropolitan Area,
Washington, and the United States using data from the 2007 SBO, conducted by the U.S. Census
Bureau. BBC also analyzed receipts for businesses in individual industries. The SBO reports
business receipts separately for employer businesses (i.e., those with paid employees other than
the business owner and family members) and for all businesses.21
Receipts for all businesses. Figure H21 presents 2007 mean annual receipts for employer
and nonemployer businesses by race/ethnicity and gender. Racial categories in the Seattle
Metropolitan Area are not available by both race and ethnicity. As such, the racial categories
shown for the Seattle Metropolitan Area may include Hispanic Americans. However, the "race
and ethnicity" categories shown for both Washington and the United States are mutually
exclusive (i.e., Hispanic Americans are presented as a separate group) and are not directly
comparable to the Seattle Metropolitan Area. The SBO data for businesses across all industries in
the Seattle Metropolitan Area indicate that average receipts for minority and womenowned
businesses were much lower than the average for whiteowned (or maleowned) businesses,
with some groups faring worse than others.
Average receipts for Black Americanowned businesses ($98,000) were approximately 17
percent that of whiteowned businesses ($581,000).
Native Hawaiianowned businesses had average receipts ($119,000) that were 20 percent
of the average for whiteowned businesses.
Average receipts for American Indian and Alaska Nativeowned businesses ($248,000)
were less than half the average for whiteowned businesses.
Asian Americanowned businesses also had lower average receipts ($329,000) than white
owned businesses.
Average receipts for womenowned businesses ($169,000) were 20 percent of the average
for maleowned businesses ($844,000).
Hispanic Americanowned businesses had higher average receipts ($937,000) than non
Hispanicowned businesses ($525,000).
21 "All businesses" in the SBO data include incorporated and unincorporated businesses but not publiclytraded companies or
other businesses not classifiable by race/ethnicity or gender.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 23
Figuure H21.
Meean annual recceipts
(thoousands) for aall
bussinesses, by
race/ethnicity annd
gennder of ownerrs, 2007
Notee:
Includes employer and noonemployer
firmss. Does not include publiclytraded
comppanies or other firmss not
classifiable by race/ethnicity and
gendder. Because sample sizes are not
reported, statistical signifficance of
thesee results cannot be ddetermined.
Raciaal categories in the Seeattle
Metrropolitan Area are noot available by
both race and ethnicity. AAs such, the
racial categories shown foor Seattle may
include Hispanic Americans. However,
the "race and ethnicity" ccategories
showwn for both Washingtton and the
Uniteed States are mutually exclusive
(raciaal categories excludee Hispanic
Americans).
Estimmates for Black Amerricanowned
firmss in Washington weree suppressed
by thhe SBO because publication
standdards were not met.
Sourcce:
20077 Survey of Business OOwners, part
of the U.S. Census Bureauu's 2007
Economic Census.
Figgure H22 presents averagee annual receeipts in 2007 for only empployer businessses in the Seeattle
Metropolitan Arrea, Washingtton, and in the United Stattes. Again, minnorityownedd employer
bussinesses, exceept HispanicAAmerican owwned businessses, had substtantially loweer average
bussiness receiptts than whiteowned (or nnonHispanicowned) businesses in thee Seattle
Metropolitan Arrea.
Average annnual receiptss for Black Ammericanowneed employer businesses ($$887,000) in the
Seattle Mettropolitan Areea were 40 peercent of the average for wwhiteowned businesses
($2.2 millioon).
Average annnual receiptss for Native HHawaiian ($9986,000) and Asian Americcanowned
employer bbusinesses ($1.1 million) wwere 45 perceent and 49 peercent of the aaverage for
whiteowned businesses, respectivelly.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 24
Figuure H22.
Meean annual recceipts
(thoousands) for
employer busineesses,
by race/ethnicityy and
gennder of ownerrs, 2007
Notee:
Includes only employer bbusinesses.
Doess not include publiclyytraded
comppanies or other businnesses not
classifiable by race/ethnicity and
gendder. As sample sizes aare not
reported, statistical signifficance of
thesee results cannot be ddetermined.
Raciaal categories in the Seeattle metro
area are not available by both race and
ethnicity. As such, the raccial categories
showwn for Seattle may include Hispanic
Americans. However, thee "race and
ethnicity" categories showwn for both
Washhington and the Unitted States are
mutuually exclusive (raciall categories
excluude Hispanic Americaans).
Estimmates for Black Amerricanowned
businnesses in Washingtonn were
suppressed by the SBO beecause
publiication standards weere not met.
Sourcce:
20077 Survey of Business OOwners,
part of the U.S. Census Buureau's
20077 Economic Census
Average receipts for Ammerican Indiann and Alaska Nativeowneed businessess ($1.6 millionn)
were three quarters thaat of whiteowwned businesses in the Seaattle Metropoolitan Area.
As was the case for all businesses (emmployer and nnonemployeer businesses combined),
Hispanic Ammericanownned employerr businesses hhad higher avverage receiptts than non
Hispanic emmployer businesses in the Seattle Metroopolitan Areaa.
Average receipts for woomenowned employer bussinesses ($9776,000) were about onethhird
that of maleowned businesses in thee Seattle Metrropolitan Areea ($2.9 millioon).
Recceipts by induustry. The stuudy team alsoo analyzed SBBO receipts daata separatelyy for businessses
in cconstruction aand in professsional, scienttific, and techhnical servicess. Figure H23 presents mean
annnual receipts in 2007 for aall (i.e., employer and nonemployer businesses commbined)
connstruction andd professionaal, scientific, aand technical services businesses and ffor just emplooyer
bussinesses by raacial/ethnic aand gender grroup. Results are presenteed for the Seatttle Metropollitan
Areea, Washingtoon, and the naation as a whoole. Again, racial categoriees in the Seatttle Metropolitan
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 25
Area are not available by both race and ethnicity so the racial categories shown for the Seattle
Metropolitan Area may include Hispanic Americans. The "race and ethnicity" categories shown
for both Washington and the United States are mutually exclusive (i.e., Hispanic Americans are
presented as a separate group) and are not directly comparable to the Seattle Metropolitan Area.
Construction. In the Seattle Metropolitan Area construction industry, average 2007 receipts for
most minorityowned businesses were lower than the average for whiteowned (or non
Hispanicowned) businesses. Results for all businesses (i.e., employer and nonemployer
businesses combined) indicated that:
Average receipts for Hispanic Americanowned construction businesses ($264,000) were
30 percent of the average for nonHispanicowned construction businesses ($892,000).
Average receipts for Black Americanowned construction businesses ($246,000) were 27
percent of the average for whiteowned construction businesses ($901,000).
Native Hawaiianowned construction businesses ($169,000) had earnings that were only 19
percent of the average for whiteowned businesses.
Average receipts for Asian Americanowned construction businesses ($410,000) were less
than half that of whiteowned construction businesses in the Seattle Metropolitan Area.
Average receipts for American Indian and Alaska Nativeowned construction businesses
($534,000) were 59 percent of the average for whiteowned construction businesses.
Average receipts for womenowned construction businesses ($625,000) were
approximately twothirds of the average for maleowned businesses ($944,000).
Although SBO data indicated that average receipts were higher for construction employer
businesses than for all construction businesses (i.e., employer and nonemployer businesses
combined), average receipts for Black American, Asian American, American Indian, and Alaska
Native and NativeHawaiianowned construction employer businesses were still substantially
less than that of whiteowned construction employer businesses ($2.1 million) in the Seattle
Metropolitan Area. Average receipts for Hispanicowned construction employer businesses
($783,000) were 37 percent of the average for nonHispanicowned employer businesses ($2.1
million). Average receipts for womenowned construction businesses ($1.8 million) were less
than the average for maleowned employer businesses ($2.4 million).
Professional, scientific, and technical services. In the Seattle Metropolitan Area professional,
scientific, and technical services industry, most minorityowned businesses had lower average
receipts than whiteowned (or nonHispanicowned) businesses. Results for all businesses
(i.e., employer and nonemployer businesses combined) indicate that:
Average receipts for Hispanic Americanowned ($97,000) were less than half that of
nonHispanicowned businesses ($209,000).
Average receipts for Black Americanowned businesses ($63,000) were 29 percent that of
whiteowned businesses ($215,000).
Average receipts for Native Hawaiianowned businesses ($75,000) were about 35 percent
that of whiteowned businesses.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 26
Figure H23.
Mean annual receipts (thousands) for businesses in the construction and professional, scientific
and technical services industries, by race/ethnicity and gender of owners, 2007
All firms Employer firms
Professional, Professional,
Construction scientific & Construction scientific &
technical services technical services
Seattle Metropolitan Area
Ethnicity
Hispanic American $264 $97 $783 $576
NonHispanic American $892 $209 $2,125 $936
Race
Black American $246 $63 $1,082 $475
Asian American $410 $136 $1,203 $625
American Indian and Alaska Native $534 $98 $1,360 $1,029
Native Hawaiian and other Pacific Islander $169 $75 $408 $571
White $901 $215 $2,132 $954
Gender
Female $625 $95 $1,820 $509
Male $944 $304 $2,436 $1,157
Washington
Race and Ethnicity
Black American $207 $71 $908 $489
Asian American $405 $139 $1,103 $637
Hispanic American $251 $85 $644 $466
American Indian and Alaska Native $694 $94 $1,788 $858
Native Hawaiian and other Pacific Islander $153 $77 $364 $576
NonHispanic White $718 $181 $1,674 $772
Gender
Female $556 $80 $1,475 $435
Male $748 $256 $1,911 $957
United States
Race and Ethnicity
Black American $107 $78 $1,069 $717
Asian American $273 $201 $1,533 $950
Hispanic American $167 $121 $1,083 $693
American Indian and Alaska Native $262 $116 $1,390 $630
Native Hawaiian and other Pacific Islander $363 $187 $1,628 $1,148
NonHispanic White $502 $213 $1,850 $869
Gender
Female $361 $98 $1,625 $543
Male $480 $276 $2,008 $1,031
Notes: Does not include publiclytraded companies or other businesses not classifiable by race/ethnicity and gender. As sample sizes are not
reported, statistical significance of these results cannot be determined.
Racial categories in the Seattle metro area are not available by both race and ethnicity. As such, the racial categories shown for Seattle
may include Hispanic Americans. However, the "race and ethnicity" categories shown for both Washington and the United States are
mutually exclusive (racial categories exclude Hispanic Americans).
Source: 2007 Survey of Business Owners, part of the U.S. Census Bureau's 2007 Economic Census.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 27
Average receipts for American Indian and Alaska Nativeowned businesses ($98,000) were
approximately 46 percent that of whiteowned businesses.
Average receipts for Asian Americanowned businesses ($136,000) were substantially less
than that of whiteowned businesses.
Average receipts for womenowned businesses ($95,000) were less than onethird that of
maleowned firms ($304,000).
An examination of only employer businesses in professional, scientific, and technical services
yielded similar results with one key exception: among employer businesses, American Indian
and Alaskan Native owned businesses had higher average receipts (about $1 million) than white
owned employer businesses ($954,000) in professional, scientific, and technical services in 2007.
Business earnings. In order to assess the success of selfemployed minorities and women in
the construction and constructionrelated professional services industries, BBC examined
earnings of business owners using PUMS data from the 2000 U.S. Census and 20092011 ACS.
BBC analyzed earnings of incorporated and unincorporated business owners age 16 and older
who reported positive business earnings.
Construction business owner earnings, 1999. Figure H24 shows average earnings in 1999 for
business owners in the construction industry in the Seattle Metropolitan Area, Washington, and
in the United States. Due to small sample sizes for individual racial/ethnic groups, BBC grouped
all minority business owners except Hispanic Americans together. Business earning results for
1999 were based on the 2000 Census, in which individuals were asked to give their business
income for the previous year. Results indicated that:
On average, Hispanic American business owners in the Seattle Metropolitan Area ($41,758)
earned more than nonHispanic white construction business owners ($37,148), but that
difference was not statistically significant. However, in Washington as a whole, Hispanic
business owners earned less ($33,015) than nonHispanic white business owners ($35,104).
NonHispanic minority construction business owners ($36,964) earned less than non
Hispanic white business owners ($37,148) in the Seattle Metropolitan Area, but that
difference was not statistically significant. However, in Washington as a whole, nonHispanic
minority business owners ($38,876) earned more than nonHispanic white business owners
($35,104).
In the United States as a whole, both Hispanic ($26,022) and nonHispanic minority business
owners ($25,739) earned less than nonHispanic white business owners, and those
differences were statistically significant.
Female construction business owners in the Seattle Metropolitan Area ($26,738) earned
substantially less, on average, than male construction business owners ($38,061), but that
difference was not statistically significant, perhaps due to small sample sizes. Female
construction business owners also earned less than male construction business owners in
the state of Washington ($25,583 vs. $36,021) and the nation as a whole ($21,090 vs.
$30,451), and those differences were statistically significant.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 28
Figuure H24.
Meean annual business
owner earnings iin the
connstruction industry,
19999
Notee:
The ssample universe is buusiness owners
age 116 and over who reported positive
earniings. "NonHispanic mminority"
includes Black Americanss, AsianPacific
Americans, Subcontinentt Asian
Americans, Native Americans and other
minoority groups. Sample sizes for these
race//ethnicity groups were too small to
analyyze individually.
All ammounts in 1999 dollaars.
*,** Denotes statistically significant
differences from nonHispanic whites (for
minoority groups) or from men (for
wommen) at the 90% and 995% confidence
level, respectively.
Sourcce:
BBC Research & Consultinng from 2000
U.S. CCensus 5% sample. TThe raw data
extraact was obtained throough the IPUMS
program of the MN Population Center:
http://usa.ipums.org/usaa/.
Connstruction buusiness owner earnings, 200082011. Thhe 200920111 ACS also repports businesss
owwner earnings. Because of tthe way that tthe U.S. Censuus Bureau connducts each yyear's ACS,
earrnings for bussiness ownerss reported in the 2009 thrrough 2011 saample were ffor the previoous
12 months betwween 2008 and 2011.22 Howwever, all dolllar amounts are presented in 2011 dolllars.
Figgure H25 shoows earnings in 2008 throuugh 2011 for business owners in the coonstruction
inddustry in the SSeattle Metropolitan Area, Washington,, and the natiion as a wholee. Again, due to
sammple sizes forr individual mminority groupps, all minority groups exccept Hispaniccs are combinned
intoo a nonHispaanic minorityy category.
22 For example, if a business owner coompleted the survvey on January 1, 2009, the figuress for the previouss 12 months woulld
reference January 1, 2008 to Decembeer 31, 2008. Simillarly, a business oowner completingg the survey Deceember 31, 2011 wwould
reference amounts siince January 1, 20011.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 29
Figuure H25.
Meean annual business
owner earnings iin the
connstruction industry,
20008 through 20011
Notee:
The ssample universe is buusiness
owneers age 16 and over wwho
reported positive earninggs. "Non
Hispaanic minority" includes Black
Americans, AsianPacific AAmericans,
Subcontinent Asian Amerricans,
Nativve Americans and othher minority
groups. Sample sizes for tthese
race//ethnicity groups were too small
to annalyze individually.
All ammounts in 2011 dollaars.
*,** Denotes statistically significant
differences from nonHispanic
whitees (for minority groups) or from
men (for women) at the 990% and
95% confidence level, resspectively.
Sourcce:
BBC Research & Consultinng from
200992011 ACS. The raw data extract
was oobtained through thee IPUMS
program of the MN Population
Center: http://usa.ipums.org/usa/.
In 22008 throughh 2011, Hispaanic business owners in booth the Seattlee Metropolitaan Area and inn
Waashington earned significanntly less thann nonHispaniic white businness owners. In the Seattlee
Metropolitan Arrea, the averaage Hispanic bbusiness ownner earned $21,890 per yeaar compared to
$344,968 for the average nonHispanic whiite business oowner.
Thee earnings diffference betwween female aand male busiiness ownerss in the constrruction indusstry
perrsisted in 200082011 but wwas not statisstically signifiicant in the Seeattle Metroppolitan Area
($223,845 vs. $333,770) or in WWashington ($$24,047 vs. $32,189). The gender earniings disparityy
was significant iin the nation as a whole ($$24,983 vs. $227,972).
Enggineering bussiness owner earnings, 1999. Figure H26 presents aaverage earnnings in 1999 for
bussiness owners in the enginneering industry in the Uniited States. Those results aare based on the
20000 Census. Duue to very smmall sample sizzes for minorrity business owners in thee Seattle
Metropolitan Arrea and Washhington engineering industtries, only nattional resultss are presenteed in
Figgure H26.23
23 OOnly four minorityy business owners age 16 and overr reported positivve business earnings in Washingtoon in the 2000 Census
5% sample.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 30
Figuure H26.
Meean annual business owner earnings in thhe engineerinng industry, 19999
Notee: The sample univverse is business owners age 16 and over who reported posittive earnings.
All amounts in 11999 dollars.
** Denotes stattistically significant ddifferences from nonHispanic whites (forr minority groups) orr from men (for wommen) at
the 90% and 955% confidence level, respectively.
Sourcce: BBC Research && Consulting from 20000 U.S. Census 5% saample. The raw data extract was obtaineed through the IPUMMS program
of the MN Popuulation Center: http:///usa.ipums.org/usa//.
Black Amerrican engineeering business owners in tthe United Staates had average earnings of
$23,424 in 1999substtantially less than nonHisspanic white eengineering bbusiness ownners
($44,692). That differennce was statisstically signifiicant.
On averagee, Hispanic Ammerican ($36,,911) and Native Americann ($37,778) eengineering
business owwners in the UUnited Statess also earned less than nonnHispanic whhite engineerring
business owwners in 1999, but those ddifferences wwere not statisstically signifiicant.
Both AsianPacific Amerrican ($47,5994) and Subcoontinent Asiann American (($49,598)
business owwners had higgher average earnings thaan nonHispannic whites, buut those
differencess were not staatistically signnificant.
Female enggineering bussiness ownerss in the United States ($288,521) earnedd significantlyy less
than male bbusiness ownners ($47,1433) in 1999. Thhat differencee was statisticcally significant.
Enggineering bussiness owner earnings, 20082011. As wwith earningss data for thee constructionn
inddustry, earninngs for engineeering business owners thaat were reporrted in the 200092011 ACSS
sammple were forr the time perriod between 2008 and 20011. Those ressults are showwn in Figure
H227. All dollar aamounts are presented in 2011 dollarss. Again, due tto small sampple sizes for
minnority busineess owners in the Seattle MMetropolitan AArea and Wasshington engiineering
inddustries, only national earnnings are dispplayed.24
24 OOnly eight minoritty business ownerrs age 16 and older in the engineering industry repported positive buusiness earnings iin
Wasshington in the 200092011 ACS 3 ppercent sample.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 31
Figuure H27.
Meean annual business owner earnings in thhe engineerinng industry, 20008 through 22011
Notee: The sample univverse is business owners age 16 and over who reported posittive earnings. All amounts in 2011 dollarss.
** Denotes stattistically significant ddifferences from nonHispanic whites (forr minority groups) orr from men (for wommen) at the
90% and 95% coonfidence level, resppectively.
Sourcce: BBC Research && Consulting from 200092011 ACS. The raw data extract was oobtained through thee IPUMS program of the MN
Population Center: http://usa.ipums.org/usa/.
As shown in Figure H27, diffferences in buusiness earniings between minority bussiness owners
andd nonHispannic white business owners were evidentt in the enginneering industtry in 2008
through 2011:
The averagge Black Amerrican businesss owner earnned $34,408 aannually, signnificantly lesss
than the avverage nonHiispanic whitee business owwner ($50,1333); and
The averagge annual earnnings for Subcontinent Asiian Americann business owwners were
$34,966, mmuch lower than the averagge for nonHispanic white business owwners.
Thee study team also observed statisticallyy significant ddifferences beetween female ($38,522) aand
maale ($52,611) engineering bbusiness ownners in 2008 tthrough 20111.
Reggression anallyses of businness earningss. Differences in business eearnings amoong different
raccial/ethnic annd gender groups may be aat least partiaally attributabble to race annd gender
neuutral factors ssuch as age, mmarital status,, and educatioonal attainmeent. BBC perfformed
reggression analyyses using 2000 Census annd 200920111 ACS data to examine wheether there wwere
diffferences in buusiness earnings between minorities annd nonHispaanic whites annd between
women and menn after statisttically controllling for certaain race and genderneutrral factors.
BBC applied an oordinary leasst squares (OLLS) regression model to thhe data that wwas very simillar
to mmodels that wwere part of oother disparitty study that ccourts have rreviewed.25 Thhe dependentt
varriable in the mmodel was thee natural logaarithm of business earninggs. Business oowners that
25 For example, Natioonal Economic Reesearch Associatees, Inc. 2000. Disaadvantaged Busineess Enterprise Avaailability Study.
Preppared for the Minnnesota Departmeent of Transportaation; and Nationaal Economic Reseearch Associates, Inc. 2004.
Disaadvantaged Busineess Enterprise Avaailability Study. Prepared for the Illlinois Departmennt of Transportattion.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 32
reported zero or negative business earnings were excluded, as were observations for which the
U.S. Census Bureau had imputed values of business earnings. Along with variables for the
race/ethnicity and gender of business owners, the model also included available measures from
the data considered likely to affect earnings potential, including age, agesquared, marital status,
ability to speak English well, disability condition, and educational attainment.
Construction industry. Figure H28 presents the results of the regression model for 1999
business earnings in the Seattle Metropolitan Area construction industry. For the construction
industry, the study team developed two models:
A model for business owner earnings in 1999 for the Seattle Metropolitan Area construction
industry that included 495 observations; and
A model for business owner earnings in 2008 through 2011 for the Seattle Metropolitan
Area construction industry that included 379 observations.
After accounting for race and gender neutral factors, the model did not indicate statistically
significant effects of race/ethnicity or gender.
Figure H28.
Variable Coefficient
Seattle Metropolitan Area
construction business owner earnings
Constant 9.759 **
model, 1999
Age 0.036
Agesquared 0.001 *
Note:
*,** Denotes statistical significance at the 90% and 95% Married 0.149
confidence level, respectively. Speaks English well 0.040
Disabled 0.275
Source: Less than high school 0.263
BBC Research & Consulting from the 2000 U.S. Census 5% Some college 0.169
sample. The raw data extract was obtained through the
IPUMS program of the MN Population Center: Fouryear degree 0.024
http://usa.ipums.org/usa/. Advanced degree 0.005
Hispanic American 0.217
NonHispanic Minority 0.245
Female 0.133
Figure H29 presents the results of the regression model for 2008 through 2011 business
earnings in the Seattle Metropolitan Area construction industry. The model indicated that
several race and genderneutral factors significantly predicted earnings of business owners in
the Seattle Metropolitan Area construction industry:
Being older was associated with greater business earnings (age had less of an effect for the
oldest individuals);
Being married was associated with greater business earnings;
Having a disability was associated with lower business earnings; and
Having some college education was associated with greater business earnings than having
just a high school degree.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 33
As in the model for 1999 earnings, after statistically controlling for race and genderneutral
factors, the model did not indicate statistically significant effects of race/ethnicity or gender.
Figure H29.
Variable Coefficient
Seattle Metropolitan Area
construction business owner earnings
Constant 4.596 **
model, 20082011
Age 0.180 **
Agesquared 0.002 **
Note:
*,** Denotes statistical significance at the 90% and 95% Married 0.728 **
confidence level, respectively. Speaks English well 0.309
Disabled 0.511 *
Source: Less than high school 0.054
BBC Research & Consulting from 20092011 ACS. The raw Some college 0.352 *
data extract was obtained through the IPUMS program of
the MN Population Center: http://usa.ipums.org/usa/. Fouryear degree 0.398
Advanced degree 0.117
Hispanic American 0.267
NonHispanic Minority 0.027
Female 0.161
Engineering industry. Due to small sample sizes, BBC used a different approach when
examining business owner earnings in the engineering industry. BBC created an engineering
industry model for the United States that included separate terms to account for the effect of
business location in the Seattle Metropolitan Area. Those terms included an indicator variable
for location in the Seattle Metropolitan Area and interaction variables that indicated minority or
female business owners in the Seattle Metropolitan Area. That approach was similar to that used
by other researchers. BBC created the following models for the engineeringrelated industry:
A model for business owner earnings in 1999 for the United States that included 4,123
observations; and
A model for business owner earnings in 2008 through 2011 for the United States that
included 3,286 observations.
Figure H30 presents the results of the regression model of business owner earnings in the
United States engineering industry in 1999. A number of race and genderneutral factors were
statistically significant in explaining business earnings in the engineering industry:
Being older was associated with greater business earnings (age had less of an effect for the
oldest individuals);
Being married was associated with higher business earnings;
Having a disability was associated with lower business earnings ; and
High levels of educational attainment (fouryear or advanced degree) were associated with
greater business earnings.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 34
After statistically controlling for race and genderneutral factors, there were statistically
significant effects of race/ethnicity and gender in the nation as a whole. Specifically, being Black
American, Native American, or female was associated with lower business earnings. Being in the
"other minority" group was associated with higher average business earnings in the engineering
industry. The indicator variable for business owners in the Seattle Metropolitan Area and the
interaction terms for minority and women business owners in the Seattle Metropolitan Area
were not statistically significant. That result indicates that earnings for minority and female
business owners in the Seattle Metropolitan Area are not significantly different from the U.S. as a
whole after controlling for other factors.
Figure H30.
Variable Coefficient
National engineering industry
business owner earnings model, 1999
Constant 7.378 **
Age 0.120 **
Note: Agesquared 0.001 **
*,** Denotes statistical significance at the 90% and 95% Married 0.129 **
confidence level, respectively. Speaks English well 0.088
Disabled 0.514 **
Source: Less than high school 0.171
BBC Research & Consulting from 2000 U.S. Census 5% Some college 0.054
sample. The raw data extract was obtained through the Fouryear degree 0.279 **
IPUMS program of the MN Population Center: Advanced degree 0.341 **
http://usa.ipums.org/usa/.
Hispanic American 0.153
Black American 0.419 **
Native American 0.512 *
AsianPacific American 0.022
Subcontinent Asian American 0.333
Other minority 0.471 **
Female 0.746 **
Seattle Metro Area 0.081
Minority in the Seattle Metro Area 0.397
Female in the Seattle Metro Area 0.342
Figure H31 presents the results of the regression model of business owner earnings specific to
the U.S. engineering industry in 2008 through 2011. As in the model for 1999 earnings, this
model indicates that certain race and gender neutral factors are statistically significant in
predicting the earnings of engineering business owners:
Being older was associated with greater business earnings (age had less of an effect for the
oldest individuals);
Being married was associated with higher business earnings;
Speaking English well was associated with higher business earnings;
Having a disability was associated with lower business earnings; and
High levels of educational attainment (fouryear or advanced degree) were associated with
greater business earnings, compared to having just a high school education.
After accounting for race and gender neutral factors, the study team observed that female
business owners tended to earn less, on average, than similarly situated men in the engineering
industry. The model also indicated that the gender disparity is even more pronounced in the
Seattle Metropolitan Area than in the nation as a whole.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 35
Figure H31.
Variable Coefficient
National engineering industry
business owner earnings model,
Constant 6.230 **
20082011
Age 0.103 **
Agesquared 0.001 **
Note:
*,** Denotes statistical significance at the 90% and Married 0.319 **
95% confidence level, respectively. Speaks English well 1.200 **
Disabled 0.397 **
Source: Less than high school 0.103
BBC Research & Consulting from 20092011 ACS. The Some college 0.073
raw data extract was obtained through the IPUMS
program of the MN Population Center: Fouryear degree 0.347 **
http://usa.ipums.org/usa/. Advanced degree 0.539 **
Hispanic American 0.178
African American 0.264
Native American 0.312
AsianPacific American 0.033
Subcontinent Asian American 0.624
Other minority 0.574
Female 0.533 **
Seattle MSA 0.105
Minority in Seattle MSA 0.032
Female in Seattle MSA 0.758 **
Gross revenue of construction and constructionrelated professional services firms
from availability interviews. In the availability telephone interviews that BBC conducted for
the study, firm owners and managers were asked to identify the size range of their annual gross
revenue across all Seattle Metropolitan Area locations. Within the Seattle Metropolitan Area
construction and constructionrelated professional services industries, BBC separately examined
gross revenue of construction and constructionrelated professional services businesses.
Construction. Figure H32 presents the reported annual revenue for MBEs, WBEs, and majority
owned construction businesses.
A larger percentage of WBEs (62%) and MBEs (55%) than majorityowned businesses
(36%) reported average revenue of less than $1 million per year.
A small proportion of WBEs and MBEs (20% and 19%, respectively) reported average
revenue of $4.6 million or more per year compared with majorityowned businesses (34%).
No WBEs and only 6 percent of MBEs reported average revenue of $22.5 million or more,
whereas 15 percent of majorityowned businesses reported such levels of revenue.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 36
Figuure H32.
Grooss revenue of company for all Seattle MMetropolitan AArea locationss,
connstruction industry
Notee: WBE is white wwomenowned firms.
Total may not aadd to 100 percent due to rounding.
Sourcce: BBC Research && Consulting from 20012 2014 Availabilityy Interviews.
Connstructionreelated professsional servicees. Constructiionrelated professional seervices
bussinesses weree also asked tto report grosss revenue across all Seatttle Metropolittan Area
locations. Figuree H33 presennts those resuults.
Compared to WBEs (53%%) and majorrityowned businesses (488%), a larger percentage oof
MBEs (60%%) reported aaverage revennue of less thaan $1 million per year.
A smaller pproportion of f MBEs (18%)) and WBEs (222%) than mmajorityowneed businessess
(29%) repoorted averagee revenue of $$4.6 million oor more.
A smaller pproportion of f MBEs (7%) aand WBEs (8%%) than majoorityowned bbusinesses (116%)
reported avverage revenuue of $22.5 mmillion or morre.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 37
Figuure H33.
Grooss revenue of company for all Seattle MMetropolitan AArea locationss,
connstructionrelaated professioonal services industry
Notee: WBE is white wwomenowned firms.
Total may not aadd to 100 percent due to rounding.
Sourcce: BBC Research && Consulting from 20012 2014 Availabilityy Interviews.
Pootential Barriers to Sttarting or Expandingg Businesses
As part of availaability interviews with Seaattle Metropollitan Area businesses, the study team
askked firm owneers and manaagers if they hhad experiencced barriers oor difficulties associated wwith
starting or expanding a businness. BBC askked if:
The size of projects had presented a barrier to biddding;
The firm haad experienceed difficultiess learning aboout bid opporrtunities withh the Port;
The firm haad experienceed difficultiess learning aboout bid opporrtunities withh private
companies in the Seattlee Metropolitaan Area; and
The firm haad experienceed difficultiess learning aboout subcontraacting opporttunities in thee
Seattle Mettropolitan Areea.
Figgure H34 presents responses to those qquestions for MBEs, WBEss, and majorittyowned
bussinesses. The study team ccombined thee responses foor constructioon and constrructionrelateed
proofessional serrvices businessses.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 38
Figuure H34.
Ressponses to avaailability interrview questioons from the SSeattle
Meetropolitan Area MBE, WBEE, and majorityowned consstruction and constructionrelated
proofessional servvices firms
Notee: "WBE" represennts white womenowwned firms, "MBE" reepresents minorityoowned firms and "Maajorityowned" repreesents nonHispanic
white maleownned firms.
Sourcce: BBC Research && Consulting.
As shown in Figure H34, MBBEs (33%) weere more likelly than WBEss (18%) and mmajorityownned
bussinesses (22%%) to report tthat the size oof projects had been a barrrier to biddinng. WBEs (21%%)
andd MBEs (22%%) were more likely than mmajorityowneed businessess (12%) to reeport difficulties
learning about bbid opportuniities with the Port. MBEs wwere more likkely than WBEs and majorrity
owwned businessses to report ddifficulties associated withh learning aboout private seector bid
oppportunities annd subcontracting opportuunities.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 39
Thee study team also examineed how barrieers and difficuulties associaated with starrting or
exppanding a bussiness affected young businesses.26 Figuure H35 showws that youngg MBEs weree
moore likely thann majorityowwned businessses to report difficulties asssociated witth the size of
proojects; learninng about privaate bid opporrtunities; andd learning aboout subcontraacting
oppportunities thhan WBEs andd majorityowwned businessses. Difficultiies learning aabout bid
oppportunities wwith the Port wwere not incluuded in the annalysis becauuse of limited responses too
thaat particular qquestion among young firmms.
Figuure H35.
Ressponses to avaailability interrview questioons from the SSeattle Metroopolitan Area
MBBE, WBE, and mmajorityownned construction and constrructionrelateed professionaal services firmms
(young firms)
Notee: "WBE" represennts white womenowwned firms, "MBE" reepresents minorityoowned firms and "Maajorityowned" repreesents nonHispanic
white maleownned firms.
Sourcce: BBC Research && Consulting.
26 For the purpose off this analysis, thee study team idenntified "young bussinesses" as thosee that are ten yeaars old or youngerr.
BBCC RESEARCH & CCONSULTING FINAL REPORTT AAPPENDIX H, PAGGE 40
Summary
BBC used the 2010 SBA study of minority business dynamics to examine business closures,
expansions, and contractions. That study found that, between 2002 and 2006, 29 percent of non
publicly held U.S. businesses had expanded their employment, 24 percent had contracted their
employment, and 30 percent had closed. In the state of Washington:
Black Americanowned businesses were more likely than whiteowned businesses and other
businesses to close. Black Americanowned businesses were less likely than other
businesses to expand.
Hispanic Americanowned businesses were also more likely than whiteowned businesses to
close. However, Hispanic Americanowned businesses were slightly more likely to expand
than whiteowned businesses.
Overall, minorityowned businesses were less likely to contract than whiteowned
businesses.
BBC examined several different datasets to examine business receipts and earnings for
businesses in the Seattle Metropolitan Area.
Analysis of 2007 data indicated that, in the Seattle Metropolitan Area, average receipts for all
minority and womenowned businesses were lower compared to those of majority or
maleowned businesses in the construction industry.
Those data also indicated that, in the Seattle Metropolitan Area, average receipts for all
minority and womenowned businesses were lower compared to those of majority or
maleowned businesses in the professional, scientific, and technical services industry.
Regression analyses using Census data for business owner earnings indicated that there
were not any statistically significant effects of race/ethnicity and gender on business
earnings in the construction industry, after statistically controlling for certain race and
genderneutral factors. In the engineering industry, female business owners had lower
earnings than similarly situated men in the Seattle Metropolitan Area in 2008 through 2011.
BBC also analyzed revenue data for businesses in the Seattle Metropolitan Area construction
and constructionrelated professional services industries collected as part of the disparity
study's availability interviews.
A larger percentage of MBE/WBE construction businesses than majorityowned
construction businesses reported annual revenue of $1 million or less. A larger
percentage of MBE constructionrelated professional services businesses than WBEs and
majority owned businesses reported annual revenue of $1 million or less.
Compared to majorityowned businesses, fewer MBE/WBE businesses earn high levels
of revenue. That result is evident for both the construction and constructionrelated
professional services industries.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX H, PAGE 41
APPENDIX I.
Description of Data Sources for
Marketplace Analyses
To perform the marketplace analyses presented in Appendices E through H, BBC used data from
a range of sources, including:
U.S. Census Bureau Public Use Microdata Samples (PUMS) from the 1980 Census, the 2000
Census, and the 20092011 threeyear American Community Survey (ACS);
The Federal Reserve Board's 1998 and 2003 Survey of Small Business Finances (SSBF);
The 2007 Survey of Business Owners (SBO), conducted by the U.S. Census Bureau; and
Home Mortgage Disclosure Act (HMDA) data provided by the Federal Financial Institutions
Examination Council (FFIEC).
The following sections provide further detail on each data source, including how the study team
used it in its quantitative marketplace analyses.
U.S. Census Bureau PUMS Data
BBC used PUMS data to analyze the following formation about the construction and engineering
related industries:
Demographic characteristics;
Measures of financial resources;
Educational attainment; and
Selfemployment (business ownership).
PUMS data offer several features ideal for the analyses reported in this study, including historical
crosssectional data; stratified national and local samples; and large sample sizes that enable
many estimates to be made with a high level of statistical confidence, even for subsets of the
population (e.g., racial/ethnic and occupational groups). BBC obtained selected Census and ACS
data from the Minnesota Population Center's Integrated Public Use Microdata Series (IPUMS).
The IPUMS program provides online access to customized, accurate datasets.1 For the analyses
contained in this report, BBC used the 1980 and 2000 Census 5 percent samples and the 2009
2011 ACS 1 percent and 3 percent samples.
1 Steven Ruggles, J. Trent Alexander, Katie Genadek, Ronald Goeken, Matthew B. Schroeder, and Matthew Sobek. Integrated
Public Use Microdata Series: Version 5.0 [Machinereadable database]. Minneapolis: University of Minnesota, 2011.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 1
2000 Census and 20092011 ACS. The 2000 U.S. Census 5 percent sample contains
14,081,466 observations. When applying the Census personlevel population weights, the
sample represents 281,421,906 people in the United States. The Seattle Metropolitan Area sub
sample contains 139,550 individual observations, weighted to represent 3,038,785 people.2
BBC also examined 20092011 ACS data from IPUMS. The U.S. Census Bureau conducts the ACS
which uses monthly samples to produce annually updated data for the same small areas as the
2000 Census longform.3 Since 2005, the ACS has expanded to an approximately 1 percent
sample of the population, based on a random sample of housing units in every county in the U.S.
(along with the District of Columbia and Puerto Rico). The 20092011 ACS threeyear estimates
represent the average characteristics over the threeyear period of time.
For national calculations, BBC used a 1 percent ACS sample. For calculations related to the
Seattle Metropolitan Area, BBC used the 3 percent ACS sample. Applying the personlevel
population weights to the 3,068,522 observations included in the data, the 20092011 ACS
dataset represents 309,703,908 people in the U.S. For the Seattle Metropolitan Area, the 2009
2011 ACS dataset includes 99,213 observations representing 3,455,397 individuals. With the
exception of a few minor differences, the variables available for the 20092011 ACS are the same
as those available for the 2000 Census.
Categorizing individual race/ethnicity. To define race/ethnicity, BBC used the IPUMS
race/ethnicity variablesRACED and HISPANto categorize individuals into one of seven
groups:
NonHispanic white;
Hispanic American;
Black American;
AsianPacific American;
Subcontinent Asian American;
Native American; and
Other minority (unspecified).
An individual was considered "nonHispanic white" if they did not report Hispanic ethnicity and
indicated being white only, not in combination with any other race group. All selfidentified
Hispanics (based on the HISPAN variable) were considered Hispanic American, regardless of any
other race or ethnicity identification. For the five other racial groups, an individual's
race/ethnicity was categorized by the first (or only) race group identified in each possible race
type combination. BBC used a rank ordering methodology similar to that used in the 2000
Census data dictionary. An individual who identified multiple races was placed in the reported
race category with the highest ranking in BBC's ordering. Black American is first, followed by
2 The Seattle Metropolitan area refers to Pierce, King, and Snohomish counties.
3 U.S. Census Bureau. Design and Methodology: American Community Survey. Washington D.C.: U.S. Government Printing 2009.
Available at http://www.census.gov/acs/www/SBasics/desgn_meth.htm
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 2
Native American, AsianPacific American, and then Subcontinent Asian American. For example, if
an individual identified himself or herself as "Korean," that person was placed in the Asian
Pacific American category. If the individual identified himself or herself as "Korean" in
combination with "Black," the individual was considered Black American.
The AsianPacific American category included the following race/ethnicity groups:
Cambodian, Chamorro, Chinese, Filipino, Guamanian, Hmong, Indonesian, Japanese, Korean,
Laotian, Malaysian, Native Hawaiian, Samoan, Taiwanese, Thai, Tongan, and Vietnamese.
This category also included other Polynesian, Melanesian, and Micronesian races, as well as
individuals identified as Pacific Islanders.
The Subcontinent Asian American category included the following race groups: Asian
Indian (Hindu), Bangladeshi, Pakistani, and Sri Lankan. Individuals who identified
themselves as "Asian," but were not clearly categorized as Subcontinent Asian were placed
in the AsianPacific American group.
American Indian, Alaska Native, and Latin American Indian groups were considered Native
American.
If an individual was identified with any of the above groups and an "other race" group, the
individual was categorized into the known category. Individuals identified as "other race"
or "white and other race" were categorized as "other minority."
The 2000 Census 5 percent sample and the 20092011 ACS PUMS data use essentially the same
numerical categories for the detailed race variable (RACED). However, in both samples, any
category representing less than 10,000 people was combined with another category. As a result,
some PUMS race/ethnicity categories that occur in one sample may not exist in the other, which
could lead to inconsistencies between the two samples once the detailed race/ethnicity
categories are grouped according to the seven broader categories. That issue is likely to affect
only a very small number of observations. PUMS race/ethnicity categories that were available in
2000 but not in 20092011 (or vice versa) represented a very small percentage of the 2000 and
20092011 populations. Categories for the Hispanic variable (HISPAN) remained consistent
between the two datasets.
Education variables. BBC used the variable indicating respondents' highest level of educational
attainment (EDUCD) to classify individuals into four categories: less than high school; high
school diploma (or equivalent); some college or associate's degree; and bachelor's degree or
higher.4
Home ownership and home value. Rates of home ownership were analyzed using the RELATED
variable to identify heads of household and the OWNERSHPD variable to define tenure. Heads of
household living in dwellings owned free and clear and dwellings owned with a mortgage or
loan (OWNERSHPD codes 12 or 13) were considered homeowners. Median home values are
4 In the 19401980 samples, respondents were classified according to the highest year of school completed (HIGRADE). In the
years after 1980, that method was used only for individuals who did not complete high school, and all high school graduates
were categorized based on the highest degree earned (EDUC99). The EDUCD variable merges two different schemes for
measuring educational attainment by assigning to each degree the typical number of years it takes to earn it.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 3
estimated using the VALUEH variable, which reports the value of housing units in contemporary
dollars. In the 2000 Census, home value is reported in intervals and the median is estimated
using an inferential equation to account for the jump in observations between the values above
and below the midpoint. In the 20092011 ACS home value is a continuous variable (rounded to
the nearest $1,000) and median estimation is straightforward.
Definition of workers. The universe for the class of worker, industry, and occupation variables
includes workers 16 years of age or older who are "gainfully employed" and those who are
unemployed but seeking work. "Gainfully employed" means that the worker reported an
occupation as defined by the Census code OCC.
Business ownership. BBC used the Census detailed "class of worker" variable (CLASSWKD) to
determine selfemployment. The variable classifies individuals into one of eight categories,
shown in Figure I1. BBC counted individuals who reported being selfemployedeither for an
incorporated or a nonincorporated businessas business owners.
Figure I1. 2000 Census and
Class of worker variable
code in the 2000 Census Description 20092011 ACS
and 20092011 ACS CLASSWKRD codes
N/A 0
Source:
BBC Research & Consulting from the Selfemployed, not incorporated 13
IPUMS program:
http://usa.ipums.org/usa/. Selfemployed, incorporated 14
Wage/salary, private 22
Wage/salary at nonprofit 23
Federal government employee 25
State government employee 27
Local government employee 28
Unpaid family worker 29
Business earnings. BBC used the Census "business earnings" variable (INCBUS00) to analyze
business income by race/ethnicity and gender. BBC included business owners aged 16 and over
with positive earnings in the analyses.
Study industries. The marketplace analyses focus on two study industries: construction and
engineeringrelated services. BBC used the IND variable to identify individuals as working in
those industries. That variable includes several hundred industry and subindustry categories.
Figure I2 identifies the IND codes used to define each study area.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 4
Figure I2.
2000 Census industry codes used for construction and engineeringrelated services
2000 20092011
Census ACS
Study industry Description
IND codes IND codes
Construction 77 770 Construction industry
Engineeringrelated services 729 7290 Architectural, engineering and related services
Source: BBC Research & Consulting from the IPUMS program: http://usa.ipums.org/usa/.
Industry occupations. BBC also examined workers by occupation within the construction
industry using the PUMS variable OCC. Figure I3 summarizes the 2000 Census and 20092011
ACS OCC codes used in the study team's analyses.
Figure I3.
2000 Census and 20092011 ACS occupation codes used to examine workers in construction
Census 2000 and 2009
2011 ACS occupational
title and code Job description
Construction managers Plan, direct, coordinate, or budget, usually through subordinate supervisory
2000 Code: 22 personnel, activities concerned with the construction and maintenance of
200911 Code: 220 structures, facilities, and systems. Participate in the conceptual development of a
construction project and oversee its organization, scheduling, and implementation.
Include specialized construction fields, such as carpentry or plumbing. Include
general superintendents, project managers, and constructors who manage,
coordinate, and supervise the construction process.
Firstline supervisors of Directly supervise and coordinate the activities of construction or extraction
construction trades and workers.
extraction workers
2000 Code: 620
200911 Code: 6200
Brickmasons, Blockmasons Lay and bind building materials, such as brick, structural tile, concrete block, cinder
and Stonemasons block, glass block, and terracotta block, Construct or repair walls, partitions,
2000 Code: 622 arches, sewers, and other structures. Build stone structures, such as piers, walls,
200911 Code: 6220 and abutments and lay walks, curbstones, or special types of masonry for vats,
tanks, and floors.
Carpenters Construct, erect, install, or repair structures and fixtures made of wood, such as
2000 Code: 623 concrete forms, building frameworks, including partitions, joists, studding, rafters,
200911 Code: 6230 wood stairways, window and door frames, and hardwood floors.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 5
Figure I3 (continued).
2000 Census and 20092011 ACS occupation codes used to examine workers in construction
Census 2000 and 2009
2011 ACS occupational
title and code Job description
Carpet, floor, and tile Apply shockabsorbing, sounddeadening, or decorative coverings to floors. Lay
installers and finishers carpet on floors and install padding and trim flooring materials. Scrape and sand
2000 Code: 624 wooden floors to smooth surfaces, apply coats of finish. Apply hard tile, marble,
200911 Code: 6240 wood tile, walls, floors, ceilings, and roof decks.
Cement masons, concrete Smooth and finish surfaces of poured concrete, such as floors, walks, sidewalks,
finishers and terrazzo or curbs using a variety of hand and power tools. Align forms for sidewalks,
workers curbs or gutters; patch voids; use saws to cut expansion joints. Terrazzo workers
2000 Code: 625 apply a mixture of cement, sand, pigment or marble chips to floors, stairways,
200911 Code: 6250 and cabinet fixtures.
Construction laborers Perform tasks involving physical labor at building, highway, and heavy
2000 Code: 626 construction projects, tunnel and shaft excavations, and demolition sites. May
200911 Code: 6260 operate hand and power tools of all types: air hammers, earth tampers, cement
mixers, small mechanical hoists, surveying and measuring equipment, and a
variety of other equipment and instruments. May clean and prepare sites, dig
trenches, set braces to support the sides of excavations, erect scaffolding, clean
up rubble and debris, and remove asbestos, lead, and other hazardous waste
materials. May assist other craft workers. Exclude construction laborers who
primarily assist a particular craft worker, and classify them under "Helpers,
Construction Trades."
Paving, surfacing and Operate equipment used for applying concrete, asphalt, or other materials to
tamping equipment road beds, parking lots, or airport runways and taxiways, or equipment used for
operators tamping gravel, dirt, or other materials. Include concrete and asphalt paving
2000 Code: 630 machine operators, form tampers, tamping machine operators, and stone
spreader operators.
200911 Code: 6300
Miscellaneous construction Operate one or several types of power construction equipment, such as motor
equipment operators, graders, bulldozers, scrapers, compressors, pumps, derricks, shovels, tractors, or
including piledriver frontend loaders to excavate, move, and grade earth, erect structures, or pour
operators concrete or other hard surface pavement. Operate pile drivers mounted on
2000 Code: 632 skids, barges, crawler treads, or locomotive cranes to drive pilings for retaining
walls, bulkheads, and foundations of structures, such as buildings, bridges, and
200911 Code: 6320
piers.
Drywall installers, ceiling tile Apply plasterboard or other wallboard to ceilings or interior walls of buildings,
installers and tapers mount acoustical tiles or blocks, strips, or sheets of shockabsorbing materials to
2000 Code: 633 ceilings and walls of buildings to reduce or reflect sound.
200911 Code: 6330
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 6
Figure I3 (continued).
2000 Census and 20092011 ACS occupation codes used to examine workers in construction
Census 2000 and 2009
2011 ACS occupational
title and code Job description
Electricians Install, maintain, and repair electrical wiring, equipment, and fixtures. Ensure
2000 Code: 635 that work is in accordance with relevant codes. May install or service street
lights, intercom systems, or electrical control systems. Exclude "Security and Fire
200911 Code: 6350, 6355
Alarm Systems Installers." The 2000 category includes electrician apprentices.
Glaziers Install glass in windows, skylights, store fronts, display cases, building fronts,
2000 Code: 636 interior walls, ceilings, and tabletops.
200911 Code: 6360
Painters, construction and Paint walls, equipment, buildings, bridges, and other structural surfaces, using
maintenance brushes, rollers, and spray guns. Remove old paint to prepare surfaces prior to
2000 Code: 642 painting and mix colors or oils to obtain desired color or consistency.
200911 Code: 6420
Pipelayers, plumbers, Lay pipe for storm or sanitation sewers, drains, and water mains. Perform any
pipefitters and steamfitters combination of the following tasks: grade trenches or culverts, position pipe, or
2000 Code: 644 seal joints. Excludes "Welders, Cutters, Solderers, and Brazers." Assemble,
200911 Code: 6440 install, alter, and repair pipelines or pipe systems that carry water, steam, air, or
other liquids or gases. May install heating and cooling equipment and
mechanical control systems. Includes sprinklerfitters.
Plasterers and stucco Apply interior or exterior plaster, cement, stucco, or similar materials and set
masons ornamental plaster.
2000 Code: 646
200911 Code: 6460
Roofers Cover roofs of structures with shingles, slate, asphalt, aluminum, and wood.
2000 Code: 651 Spray roofs, sidings, and walls with material to bind, seal, insulate, or
200911 Code: 6510, 6515 soundproof sections of structures
Iron and steel workers, Iron and steel workers raise, place, and unite iron or steel girders, columns, and
including reinforcing iron other structural members to form completed structures or structural
and rebar workers frameworks. May erect metal storage tanks and assemble prefabricated metal
2000 Code: 653 buildings. Reinforcing iron and rebar workers position and secure steel bars or
200911 Code: 6530 mesh in concrete forms in order to reinforce concrete. Use a variety of
fasteners, rodbending machines, blowtorches, and hand tools. Include rod
busters.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 7
Figure I3 (continued).
2000 Census and 20092011 ACS occupation codes used to examine workers in construction
Census 2000 and 2009
2011 ACS occupational
title and code Job description
Helpers, construction trades All construction trades helpers not listed separately.
2000 Code: 660
200911 Code: 6600
Driver/sales workers and Driver/sales workers drive trucks or other vehicles over established routes or
truck drivers within an established territory and sell goods, such as food products, including
2000 Code: 913 restaurant takeout items, or pick up and deliver items, such as laundry. May
200911 Code: 9130 also take orders and collect payments. Include newspaper delivery drivers. Truck
drivers (heavy) drive a tractortrailer combination or a truck with a capacity of at
least 26,000 GVW, to transport and deliver goods, livestock, or materials in
liquid, loose, or packaged form. May be required to unload truck. May require
use of automated routing equipment. Requires commercial drivers' license.
Truck drivers (light) drive a truck or van with a capacity of under 26,000 GVW,
primarily to deliver or pick up merchandise or to deliver packages within a
specified area. May require use of automatic routing or location software. May
load and unload truck. Exclude "Couriers and Messengers."
Crane and tower operators Operate mechanical boom and cable or tower and cable equipment to lift and
2000 Code: 951 move materials, machines, or products in many directions. Exclude "Excavating
200911 Code: 9510 and Loading Machine and Dragline Operators."
Dredge, excavating and Dredge operators operate dredge to remove sand, gravel, or other materials
loading machine operators from lakes, rivers, or streams; and to excavate and maintain navigable channels
2000 Code: 952 in waterways. Excavating and loading machine and dragline operators Operate
200911 Code: 9520 or tend machinery equipped with scoops, shovels, or buckets, to excavate and
load loose materials. Loading machine operators, underground mining, Operate
underground loading machine to load coal, ore, or rock into shuttle or mine car
or onto conveyors. Loading equipment may include power shovels, hoisting
engines equipped with cabledrawn scraper or scoop, or machines equipped
with gathering arms and conveyor.
Source: 2000 Census occupational titles and codes at http://usa.ipums.org/usa/volii/00occup.shtml, 1980, job descriptions from the Bureau of Labor
Statistics www.bls.gov.
1980 Census data. BBC compared 2000 Census data (and 20092011 ACS data) with data for
the 1980 Census to analyze changes in worker demographics, educational attainment, and
business ownership over time. The 1980 Census 5 percent sample includes 11,343,120
observations weighted to represent 226,862,400 people. The sample includes 206,908
observations in Washington, weighted to represent 4,138,160 individuals. The 1980 Seattle
Metropolitan Area subsample contains 104,760 individual observations, weighted to represent
2,095,200 people. Several changes in variables and coding took place between the 1980 and
2000 Censuses.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 8
Changes in race/ethnicity categories between censuses. Figure I4 lists the seven BBCdefined
racial/ethnic categories with the corresponding 1980 and 2000 Census race groups.
Combinations of race types are available in the 2000 Census but not in the 1980 Census. The U.S.
Census Bureau introduced categories in 2000 representing a combination of race types to allow
individuals to select multiple races when responding to the questionnaire.
For example, an individual who is primarily white with Native American ancestry could choose
the "white and American Indian/Alaska Native" race group in 2000. However, if the same
individual received the 1980 Census questionnaire, she would need to choose a single race
groupeither "white" or "American Indian/Alaska Native." Such a choice would ultimately
depend on unknowable factors including how strongly the individual identifies with her Native
American heritage.
In addition, data analysts do not have information about the proportions of individual ancestry
in 2000 and can only know that a particular individual has mixed ancestry. The variability
introduced by allowing multiple race selection complicates direct comparisons between Census
years with respect to race/ethnicity. Despite those issues, 98 percent of survey respondents in
2000 indicated a single race.5
Business ownership. BBC uses the Census "class of worker" variable (CLASSWKD) to determine
selfemployment. That variable was the same for 1980 and 2000 with one exceptionthe 1980
variable did not include a separate category for individuals who work for a wage or salary at a
nonprofit organization.
Changes in industry codes between Censuses. The Census definitions of some industries and
subindustries changed between 1980 and 2000. As a result, the 1980 codes for the industry
variable (IND) were not the same as the 2000 IND codes in all cases. However, for the
construction and engineering industries, the 1980 codes corresponded directly to equivalent
2000 codes.
Geographic variables. For the analyses presented in the marketplace appendices, there were no
substantial changes in geographic variables between the 1980 and 2000 Censuses. BBC used the
same variables available for 2000 Census data to identify Washington (STATEFIP) and the
Seattle Metropolitan Area (COUNTY) as in the 1980 data.
Changes in educational variables between Censuses. The 1980 Census PUMS data included the
same educational variable found in the 2000 Census data, although the questions used for each
Census to capture educational attainment differed between the two surveys.6
5 Grieco, Elizabeth M. & Rachel C. Cassidy. "Overview of Race and Hispanic Origin," Census 2000 Brief, March 2001, page 3.
6 For a more detailed explanation, see footnote 2.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 9
Figure I4.
BBC racial/ethnic categories compared with Census race and Hispanic Origin survey questions
BBC racial/ethnic
categories 2000 Census 1980 Census
Black American Hispanic origin: no Hispanic origin: no
Race: Black/Negro alone or in combination with any other Race: Black/Negro
nonHispanic group
AsianPacific Hispanic origin: no Hispanic origin: no
American Race: Chinese, Taiwanese, Japanese, Filipino, Korean, Race: Chinese, Japanese,
Vietnamese, Cambodian, Hmong, Laotian, Thai, Indonesian, Filipino, Korean, Vietnamese,
Malaysian, Samoan, Tongan, Polynesian, Pacific Islander, Pacific Islander or other
Guamanian/Chamorro, Micronesian, Melanesian, or other Asian
Asian, either alone or in combination with any nonHispanic,
nonBlack, or nonNative American groups
Subcontinent Asian Hispanic origin: no Hispanic origin: no
American Race: Asian Indian, Bangladeshi, Pakistani or Sri Lankan, Race: Asian Indian
alone or in combination with white or other groups only
Hispanic American Hispanic origin: yes Hispanic origin: yes
Race: any race groups, alone or in combination with other Race: any
groups or
Hispanic origin: no
Race: Spanish
Native American Hispanic origin: no Hispanic origin: no
Race: American Indian or Alaskan Native tribe or Native Race: American
Hawaiian, identified alone or in combination with any non Indian/Alaska Native or
Hispanic, nonBlack group Native Hawaiian
Other minority Hispanic origin: no Hispanic origin: no
group Race: other race alone or in combination with white only Race: other race
NonHispanic white Hispanic origin: no Hispanic origin: no
Race: white alone Race: white
Source: BBC Research & Consulting from the IPUMS program: http://usa.ipums.org/usa/.
Survey of Small Business Finances (SSBF)
The study team used the SSBF to analyze the availability and characteristics of small business
loans. The SSBF, which the Federal Reserve Board conducted every five years between 1987 and
2003, collected financial data from nongovernmental forprofit firms with fewer than 500
employees. The survey used a nationally representative sample that is structured to allow for
analysis of specific geographic regions, industry sectors, and racial/ethnic and gender groups.
The SSBF is unique as it provides detailed data on both firm and owner financial characteristics.
The 2003 SSBF is the most recent information available from the SSBF because the survey was
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 10
discontinued after that year. For the purposes of this report, BBC used the surveys from 1998
and 2003, which are available at the Federal Reserve Board website.7
Data for 1998. The 1998 SSBF includes information from 3,561 small businesses. The survey
oversampled minorityowned businesses, allowing for a more precise analysis of how race and
ethnicity may affect loan and financial outcomes.
Categorizing owner race/ethnicity and gender. Definition of racial and ethnic groups in the
1998 SSBF are slightly different than the classifications used in the U.S. Census Bureau PUMS
data. In the SSBF, businesses are classified into the following five groups:
NonHispanic white;
Hispanic American;
Black American;
Asian American;
Native American; and
Other (unspecified).
A business was considered Hispanic Americanowned if more than 50 percent of the business
was owned by Hispanic Americans, regardless of race. All businesses that reported 50 percent or
less Hispanic American ownership were included in the racial/ethnic group that owned more
than half of the company. No firms reported the race/ethnicity of their owners as being "other."
Similar to race, firms were classified as femaleowned if more than 50 percent of the firm was
owned by women. Firms owned half by women and half by men were classified as maleowned.
Defining selected industry sectors. In the 1998 SSBF, each business was classified according to
SIC code and placed into one of eight industry categories:
Construction;
Mining;
Transportation, communications, and utilities;
Finance, insurance, and real estate;
Trade;
Engineering;
Agriculture, forestry, and fishing (no businesses responding to the 1998 SSBF fell into this
category); or
Other industries.
7 The Federal Reserve Board. Survey of Small Business Finances, 1998 and Survey of Small Business Finances, 2003. Available
online at http://www.federalreserve.gov/pubs/.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 11
Region variables. The SSBF divides the United States into nine Census Divisions. Along with
Alaska, California, Oregon, and Hawaii, Washington is included in the Pacific Census Division
(referred to in marketplace appendices as the Pacific region).
Loan denial variables. Firm owners were asked if they have applied for a loan in the last three
years and whether loan applications were always approved, always denied, or sometimes
approved and sometimes denied. For the purposes of this study, only firms that were always
denied were considered when analyzing loan denial.
Data for 2003. The 2003 SSBF differs from previous SSBFs in terms of the population
surveyed, the variables available, and the data reporting methodology.
Population differences. Similar to the 1998 survey, the 2003 survey records data from
businesses with 500 or fewer employees. The sample contains data from 4,240 firms, but in
2003, minorityowned firms were not oversampled. In the 1998 data, 7.3 percent of the
surveyed firms were owned by Hispanic Americans, but that number dropped to 4 percent in the
2003 data. Representation in the sample also dropped for Black Americanowned firms (7.7% to
2.8%) and Asian Americanowned firms (5.7% to 4.2%). The smaller sample sizes for minority
groups in the 2003 SSBF affects the ability to conduct analyses related to differences in loan
application outcomes for specific race/ethnic groups.
Variable differences. In the 2003 SSBF, businesses were able to give responses on owner
characteristics for up to three different owners. The data also included a fourth variable that is a
weighted average of other answers provided for each question. In order to define race/ethnicity
and gender variables consistently for the 1998 to 2003 surveys, BBC used the final weighted
average for variables on owner characteristics. Firms were then divided into race/ethnicity and
gender groups according to the same guidelines used for the 1998 data.
Industry, region, and loan denial variables for the 2003 survey were defined by the study team
using the same guidelines as the 1998 survey, with one exceptionthe 2003 survey did not
include any firms in the agriculture, forestry, and fishing industry.
Data reporting. Due to missing responses to survey questions in both the 1998 and 2003
datasets, data were imputed to fill in missing values. For the 1998 SSBF data, missing values
were imputed using a randomized regression model to estimate values based on responses to
other questions in the survey. A single variable includes both reported and imputed values. A
separate "shadow variable" can be used to identify where missing values have been imputed.
However, the missing values in the 2003 data set were imputed using a different method than in
previous studies. In the 1998 survey data, the number of observations in the data set matches
the number of firms surveyed. However, the 2003 data include five implicates, each with
imputed values that have been filled in using a randomized regression model.8 Thus, there are
21,200 observations in the 2003 data, five for each of the 4,240 firms surveyed. Across the five
implicates, all nonmissing values are identical, whereas imputed values may differ. In both data
8 For a more detailed explanation of imputation methods, see the "Technical Codebook" for the 2003 Survey of Small Business
Finances.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 12
sets, therefore, when a firm answered a survey question, the response was not altered. However,
the method for filling in missing values differed between surveys.
As discussed in a recent paper about the 2003 imputations by the Finance and Economics
Discussion Series, missing survey values can lead to biased estimates and inaccurate variances
and confidence intervals.9 Those problems can be corrected through the use of multiple
implicates. For summary statistics using 2003 SSBF data, BBC utilized all five implicates
provided with the 2003 data. For probit regressions presented in Appendix G, the study team did
not include observations with imputed values for the dependent variables and used only the first
implicate for the analysis.
Multiple implicates were not provided with the 1998 data, making the method of analysis used
for the 2003 data inapplicable. To address that issue, the study team performed analyses in two
different waysfirst, only with observations whose data were not imputed, and second, with all
observations. Differences in results were insignificant. For summary statistics using SSBF data,
BBC included observations with missing values in the analyses. For probit regressions presented
in Appendix G, the study team did not include observations with imputed values for the
dependent variables.
Survey of Business Owners (SBO)
BBC used data from the 2007 SBO to analyze mean annual firm receipts. The SBO is conducted
every five years by the U.S. Census Bureau. Data for the most recent publication of the SBO was
collected in 2007. Response to the survey is mandatory, which ensures comprehensive economic
and demographic information for business and business owners in the U.S. All taxfiling
businesses and nonprofits were eligible to be surveyed, including firms with and without paid
employees. In 2007, almost 8 million firms were surveyed. BBC examined SBO data relating to
the number of firms, number of firms with paid employees, and total receipts. That information
is available by geographic location, industry, gender, race, and ethnicity.
The SBO uses the 2002 North American Industry Classification System (NAICS) to classify
industries. BBC analyzed data for firms in all industries and for firms in selected industries that
corresponded closely to construction and engineeringrelated services.
To categorize the business ownership of firms reported in the SBO, the Census Bureau uses
standard definitions for womenowned and minorityowned businesses. A business is defined as
femaleowned if more than half of the ownership and control is by women. Firms with joint
male/female ownership were tabulated as an independent gender category. A business is
defined as minorityowned if more than half of the ownership and control is by Black Americans,
Asian Americans, Hispanic Americans, Native Americans, or by another minority group.
Respondents had the option of selecting one or more racial groups when reporting business
ownership. BBC reported business receipts for the following racial/ethnic and gender groups:
9 Lieu N. Hazelwood, Traci L. Mach and John D. Wolken. Alternative Methods of Unit Nonresponse Weight Adjustments: An
Application from the 2003 Survey of Small Businesses. Finance and Economics Discussion Series Divisions of Research and
Statistics and Monetary Affairs, Federal Reserve Board. Washington, D.C., 2007.
http://www.federalreserve.gov/pubs/feds/2007/200710/200710pap.pdf.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 13
Black Americans;
Asian Americans;
Hispanic Americans;
American Indian and Alaska Native;
Native Hawaiian or other Pacific Islander; and
Women.
Home Mortgage Disclosure Act (HMDA) Data
BBC analyzed mortgage lending in the Seattle Metropolitan Area, the State of Washington, and in
the nation using HMDA data that the Federal Financial Institutions Examination Council (FFIEC)
provides. HMDA data provide information on mortgage loan applications that financial
institutions, savings banks, credit unions, and some mortgage companies receive. Those data
include information about the location, dollar amount, and types of loans made, as well as
race/ethnicity, income, and credit characteristics of loan applicants. Data are available for home
purchase, home improvement, and refinance loans.
Financial institutions were required to report 2012 HMDA data if they had assets of more than
$41 million ($35 million for 2006 and $39 million for 2009), had a branch office in a
metropolitan area, and originated at least one home purchase or refinance loan in the reporting
calendar year. Mortgage companies were required to report HMDA if they are forprofit
institutions, had home purchase loan originations exceeding 10 percent of all loan obligations in
the past year, were located in an MSA (or originated five or more home purchase loans in an
MSA), and either had more than $10 million in assets or made at least 100 home purchase or
refinance loans in the calendar year.
BBC used those data to examine loan denial rates and subprime lending rates for different racial
and ethnic groups in 2006, 2009, and 2012. Note that the HMDA data represent the entirety of
home mortgage loan applications reported by participating financial institutions in each year
examined. Those data are not a sample. Appendix G provides a detailed explanation of the
methodology that the study team used for measuring loan denial and subprime lending rates.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX I, PAGE 14
APPENDIX J.
Qualitative Information from Personal Interviews,
Public Hearings, and Other Meetings
Appendix J presents qualitative information that BBC Research & Consulting (BBC) collected from in
depth anecdotal interviews and public meetings that the study team conducted as part of the Port of
Seattle (Port) disparity study. Appendix J also includes qualitative information that BBC collected as part
of the 2012 Washington State Department of Transportation (WSDOT) disparity study and the 2013
Sound Transit disparity study. BBC only included information from the WSDOT and Sound Transit
studies that was directly relevant to Port's contracting and to the agency's relevant geographic market
area.
Appendix J is presented in 10 parts:
A. Introduction and Background, which describes with whom the study team met to collect the
information summarized in Appendix J and how that information was collected (page 2).
B. Background on the Contracting Industry in the Seattle Metropolitan Area, which summarizes
information about how businesses become established and how companies change over time. Part
B also presents information about the effects of the economic downturn and business owners'
experiences pursuing public and private sector work (page 3).
C. Doing Business as a Prime Contractor or as a Subcontractor, which summarizes information about
the mix of businesses' prime contract and subcontract work and how they obtain that work (page
19).
D. Keys to Business Success, which summarizes information about certain barriers to doing business
and keys to success, including access to financing, bonding, and insurance (page 33).
E. Potential Barriers to Doing Business with Public Agencies, which presents information about
potential barriers to doing work for public agencies, including the Port (page 44).
F. Allegations of Unfair Treatment, which presents information about experiences of unfair
treatment including bid shopping; treatment during performance of work; and allegations of
unfavorable work environments for minorities and women (page 67).
G. Additional Information Regarding any Race or Genderbased Discrimination, which includes
additional information concerning potential race or genderbased discrimination. Topics include
stereotypical attitudes about minorities and women and allegations of a "good ol' boy" network
that adversely affects opportunities for minority and womenowned businesses (MBE/WBEs)
(page 77).
H. Insights Regarding Race and GenderNeutral Measures, which presents information about
business assistance programs, efforts to open contracting processes, and other measures to remove
barriers that all businesses, or small business, face (page 83).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 1
I. Insights Regarding Race or Genderbased Measures, which presents information about general
comments about the Federal DBE Program, effects of I200, and claims of fraud concerning
Disadvantaged Business Enterprises (DBE) certification (page 106).
J. DBE and other Certification Processes, which presents information about the DBE certification
process. It also presents information about advantages and disadvantages that subcontractors
experience because of their DBE or MBE/WBE certifications. In addition, Part J presents
information about false reporting of DBE/MBE/WBE participation and falsifying good faith efforts
(Page 117).
A. Introduction and Background
The BBC study team conducted indepth personal interviews, public hearings, and other meetings
throughout 2012, 2013 and 2014. During the interviews, hearings, and meetings, participants had the
opportunity to discuss their experiences working in the contracting industry; experiences working with
the Port and other public agencies; and perceptions of the Federal DBE Program.
Indepth personal interviews. As part of the disparity study, the BBC study team conducted indepth
anecdotal interviews with 10 businesses in the Seattle Metropolitan Area1. In addition, Appendix J
includes information from 32 indepth anecdotal interviews that the study team conducted as part of the
2012 WSDOT disparity study and the 2013 Sound Transit disparity study30 with businesses in the
Seattle Metropolitan Area and two with relevant trade association representatives. The interviews
included discussions about interviewees' perceptions and anecdotes regarding the local contracting
industry; the Federal DBE Program; and the Port's contracting policies, practices, and procedures. BBC
and Pacific Communications Consultants conducted all of the interviews.
Interviewees included individuals representing construction businesses, engineering businesses, and
trade associations. The study team identified interview participants primarily from a random sample of
businesses that was stratified by business type, location, and the race/ethnicity and gender of the
business owner. The study team conducted most of the interviews with the owner, president, chief
executive officer, or other officer of the business or association. Of the businesses that the study team
interviewed, some work exclusively or primarily as prime contractors or as subcontractors, and some
work as both. All of the businesses that the study team interviewed are located in the Seattle
Metropolitan Area. All interviewees from the Port disparity study are identified in Appendix J by the
prefix "PS" followed by random interviewee numbers (i.e., #1, #2, #3, etc.). Interviewees from the
WSDOT disparity study are identified by the prefix "WSDOT." Interviewees from the Sound Transit
disparity study are identified by the prefix "ST."
Interviewees were often quite specific in their comments. As a result, in many cases, the study team has
reported the comments in a more general form to minimize the chance that readers could identify
interviewees or other individuals or businesses that were mentioned in the interviews. The study team
reports whether each interviewee represented a DBEcertified business and also reports the
race/ethnicity and gender of the business owner.2
1 For the purposes of this study, the Seattle Metropolitan Area is defined as King, Pierce, and Snohomish counties.
2 Note that "male" or "Caucasian" are sometimes not included as identifiers to simplify the written descriptions of business owners.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 2
Information from public hearings. As part of the Port's disparity study, the study team conducted
two public hearings within the relevant geographic market area:
South Seattle Community College, Georgetown Campus (January 28, 2014); and
The Port of Seattle, Pier 69 (January 29, 2014).
There was no verbal testimony given at either of the public hearings. Therefore, no corresponding
qualitative information appears in Appendix J. However, the study team collected verbal and written
testimony at the Regional Contracting Forum (RCF), which WSDOT hosted at the Washington State
Convention Center on March 26, 2014. Comments that the study team collected at the RCF are identified
with the prefix "RCF".
As part of the 2012 WSDOT disparity study, the study team conducted two public hearings within the
relevant geographic market area:
North Seattle (February 15, 2012; comments identified with the prefix "NSP"); and
South Seattle (February 23, 2012; comments identified with the prefix "SSP").
Appendix J includes relevant information from those public hearings. The numbering of comments for a
particular public hearing (e.g., # NSP 1, # NSP 2) pertains to the order in which participants gave
testimony at the hearing.
Trade association meetings. As part of the 2012 WSDOT disparity study, the study team also
participated in meetings with the Associated General Contractors of America and DBE Practitioners
within the state. Both the Associated General Contractors of America meeting and the DBE Practitioners
meeting provided opportunities for participants to discuss their experiences working in the local
construction and constructionrelated professional services industries; experiences working with public
agencies; and perceptions of the Federal DBE Program. Comments that participants made in those
meetings appear throughout Appendix J and are identified by the prefixes "AGC" and "DBEP" for the
Associated General Contractors of America meeting and the DBE Practitioners meeting, respectively.
Written testimony. The study team and the Port encouraged business owners and others to submit
written comments and testimony throughout the study process. Those comments appear throughout
Appendix J and are identified by the prefix "WT."
B. Background on the Contracting Industry in the Seattle Metropolitan Area
Part B summarizes information related to:
How businesses become established (page 4);
Changes in types of work that businesses perform (page 6);
Fluid employment size of businesses (page 6);
Flexibility of businesses to perform different types and sizes of contracts in different parts of the
state (page 7);
Local effects of the economic downturn (page 9);
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 3
Current economic conditions (page 12); and
Business owners' experiences pursuing public and private sector work (page 12).
How businesses become established. Most interviewees representing construction and
engineering businesses reported that their companies were started (or purchased) by individuals with
connections in their respective industries.
Many firm owners worked in the industry before starting their own businesses. Examples from the in
depth interviews and from written testimony include the following:
The Asian Pacific American owner of a DBEcertified construction company said that he had
worked for many years in the field before starting his company. [WT#2]
The Black American owner of a DBE/MBEcertified concrete firm stated he did concrete work in
the field in 1992. He had a partner and decided to form his own firm. He stated that he was
displeased with his partner at the time and that, "[he] wanted to be [his] own boss." [ST#1]
The Asian Pacific American female owner of an MBE and DBEcertified engineering firm said,
"[The owner] was working for another engineering company and decided to start his own firm. He
thought the idea of be[ing] your own boss would be an interesting endeavor. It is a lot of work."
[WSDOT#1]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said he
had worked for a larger engineering firm, which was majority owned. He had an opportunity to
apply for a job at a local government agency. He wanted to do something more challenging and had
thoughts of starting his own business. [ST#5]
The Black American owner of an MBE/DBEcertified engineering company was an employee of the
company for several years before purchasing the company five years ago. [WSDOT#8]
The Caucasian female manager for an MBE/DBE/SBA certified engineering company said, "The
current owner was with a large engineering firm for perhaps five to ten years before he bought this
company." [WSDOT#9]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated that she worked as an ironworker in the 1980s. In 1988 her mother changed her land
development firm to a reinforcing steel placement firm, and they bid their first job. [ST#6]
The Asian Pacific American owner of a DBE and SBA 8(a)certified professional services firm said
that he worked in the industry for many years before joining the firm that he later purchased.
[WSDOT#37]
The Asian Pacific American owner of a noncertified engineering firm said, "I used to work for other
firms before, and in 1990 I happened to be looking for a position because they just consolidated
their company. So then I decided [I] might as well start on my own. So with two other people, [I]
started [the firm]. Of course, at that time, one of the goals was to also become minority business
enterprise and try to get onto some of the larger projects. Eventually we did land some projects
with Port of Seattle." [PS#3]
The Hispanic owner of an uncertified construction company said that he has worked for some of
the biggest landscaping companies in the area. He said that he realized that he did not want to be a
laborer getting paid $13.50 per hour all his life. He said, "It's very difficult to make more than $15
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 4
per hour at the big companies, even after years." He explained that when his wife became pregnant,
he decided he would start his own business. He began working on his own on the weekends, and
eventually started his business own business. That was 18 years ago. [PS#5]
The Hispanic owner of an MBEcertified engineering firm said that he started his business in 2005.
He explained that he left his old company because he thought he could start a more successful
business on his own. He said, "I felt I had a better business model than the one at the company
where I was working. I was vice president for a large consulting firm. I ran an office of 50 people. I
wanted to be in charge." He explained that some of his clients at the previous firm he worked for
were some of his first clients at his new business. He said, "We had some good clients, and they
were willing to jump ship with us. Then, more [past clients] migrated to us. Those first clients
sustained the startup months of the business." [PS#8]
The Caucasian coowner of a DBEcertified engineering firm said that he has been a structural
engineer for 25 years. He met his partner, who is also a structural engineer, nine years ago at a
large firm where they both worked. The two decided to go into business together in 2005. [PS#9]
The Caucasian owner of a marine engineering firm has worked in the marine industry for more
than 20 years. He moved to Seattle from Eastern Washington in 1989 and saw the need for a
company that serviced yachts. He decided to go into business with a partner over seven years ago.
[PS#10]
Other interviewees also indicated that their companies were started (or purchased) by individuals
with connections in their respective industries. [For example, WSDOT#3, WSDOT#8, WSDOT#17,
and WSDOT#26]
Multiple interviewees indicated that relationships among family members were instrumental in
establishing their construction businesses. Examples of such comments include the following:
The Caucasian general manager of a noncertified womanowned general contracting company
described the company's history, "[The company] started out owned by the grandfather [of the
current owner], and some [of the employees of that company] started a new company owned by
the father [of the current owner]. That [company] has transitioned now to the current owner, who
bought the company from his father. So it is the third generation." [WSDOT#33]
The Caucasian coowner of a noncertified WBE construction company had worked for another
family member in a similar type of business, and when that company failed, the individual formed a
new company with his wife. [WSDOT#17]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated that she owns the company with other family members. The original shareholder was her
mother. She said she started in the company as vice president. [ST#6]
The female manager of a Native Americanowned, DBEcertified construction company said that
her husband, the owner, purchased the company from his father. [WSDOT#32]
The female owner of a DBEcertified specialty construction firm explained, "[Starting the company]
was my husband's idea. He has been in the construction arena since I met him in 1984."
[WSDOT#27]
The Black American owner of a DBEcertified trucking and specialty contracting company said, "My
dad was in the industry and had his own company." He said he "learned to read blueprints and was
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 5
operating all kinds of equipment" in his father's company before starting his own business.
[WSDOT#36]
The BlackAmerican owner of a DBEcertified construction company said that he used to work at
the SeattleTacoma airport, but that his job was causing him too much stress. He decided to start
his own construction company because construction has been in his family since he was a child.
[PS#4]
Other interviewees also indicated that relationships among family members were instrumental in
establishing their construction businesses. [For example, WSDOT#17 and WSDOT#26]
Changes in types of work that businesses perform. Interviewees discussed whether and why
firms over time changed the types of work that they perform.
Some interviewees explained that perceived incentives for MBE/WBEs was one factor that
encouraged starting those businesses. [For example, WSDOT#26] Another example includes a majority
and womanowned noncertified firm that was denied certification. The male Caucasian representative
reported that his wife owned the firm. He says they started the firm because "I was seeing, in my uncle's
business, the subcontracting setasides given to other womanowned businesses. I was seeing the
company we were [working as a subcontractor for] losing business or having to give even some of [the
work our company was going to do] away to meet those goals." [WSDOT#17]
Fluid employment size of businesses. The study team asked business owners about the number of
people that they employed and whether their employment size fluctuated.
A number of companies reported that they expand and contract their employment size depending on
work opportunities, season, or market conditions. Examples of those comments include the following:
The Native American female coowner of a noncertified construction company said, "We hire
employees on a perjob basis. Sometimes we have as many as eight employees. We draw from a
pool of workers we know. The people used don't need much experience. Sometimes day labor is
used." [WSDOT#28]
The Black American owner of a DBE/MBEcertified concrete firm stated that he has five parttime
workers per week. His fulltime employees range from 10 to 30 depending on the project. [ST#1]
The Black American owner of an MBE/DBEcertified engineering company said that his firm brings
on project specific people as needed. [WSDOT#8]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated she employs a total of 11 full time employees and 35 to 45 parttime employees. [ST#6]
The Caucasian general manager of a noncertified womanowned general contracting company
said, "We have 12 to 15 fulltime employees. In the summer, it can range up to 50 to 75 seasonal
employees." [WSDOT#33]
The Asian Pacific American owner of a DBEcertified contracting firm stated that there are four full
time [employees] and about 20 parttime [employees], depending on the season and job. [ST#9]
The Asian Pacific American owner of a DBEcertified engineering and specialty construction
company said, "We have eight full time employees, and two parttime employees. For construction
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 6
[related work, the number of people hired] depends on the projects. Construction employees come
from Task Force (a labor force provider) or the union hall." [WSDOT#37]
The Subcontinent Asian American owner of an MBE and WBEcertified engineering firm said that
she is the company's only employee. She said, "I'm the only one who draws a salary." She said that
sometimes if she needs outside help, she will hire people she knows for specific projects. [PS#1]
Many other business owners and managers explained that number of employees working for their
companies at any one time varied depending on the amount of work the company was performing.
[For example, WSDOT#1, WSDOT#17, WSDOT#26, WSDOT#32]
Some interviewees said that they had reduced permanent staff because of poor market conditions.
For example:
The Asian Pacific American owner of a DBEcertified engineering firm said that he had 18 fulltime
employees a few years ago and now his staff is down to five fulltime and three parttime
employees. He said, "Growth depends on what markets a firm chooses to be in and what markets [it
would] like to be in but can't break in." [WSDOT#3]
The Black American owner of a DBEcertified trucking and specialty contracting company reported,
"We are down to three fulltime employees right now. The most we have ever had is 90 employees."
[WSDOT#36]
The Asian Pacific American owner of a noncertified engineering firm said his firm includes four
fulltime employees. He said the firm used to have seven employees but lost three due to the
recession. [PS#3]
Flexibility of businesses to perform different types and sizes of contracts in different parts
of the state. Interviewees discussed types, locations, and sizes of contracts that their firms perform.
Many firm owners reported flexibility in the locations and sizes of contracts that their firms perform.
Many firm owners reported working statewide. [For example, WSDOT#32, ST#5, and ST#7]
A few firm owners reported working in Washington and other states. [For example, ST#1, ST#8,
ST#10, WSDOT#3, WSDOT#26, PS#3]
A number of firm owners reported working throughout western Washington [For example, ST#3
and WSDOT#27]
Examples of specific comments include the following:
The Asian Pacific American owner of a DBE certified engineering firm said, "There is a saying for
firms like [my firm] that do all types of work. 'We go where the money is.'" [WSDOT#3]
The Caucasian president of a majorityowned surveying company stated that his firm will work in
the Northwest or wherever [a large prime] sends them. [ST#4]
The Native American owner of a DBEcertified electrical contracting firm commented that if his
firm does construction management, he can go anywhere in the United States, but that if he self
performs and does physical work he stays in the Northwest. He said, "We are DBEcertified in
Oregon and Washington, which are the two areas that are of prime importance to us." [ST#2]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 7
The Asian Pacific American owner of a noncertified engineering firm said, "We work everywhere
that they'll hire us. We have licenses in Washington, Oregon, and California, and we have worked in
all three states. If it's site work, we'll send someone by airplane, fly down there with some gear and
hire a local driller [and] take the samples back. We still beat the California consultants." [PS#3]
The BlackAmerican owner of a DBEcertified construction company said that he primarily does
work in the Seattle area. [PS#4]
Other companies said that they prefer to perform projects close to their businesses, but will travel to
worksites when necessary. For example, the female owner of a DBEcertified specialty construction firm
said, "If I had my preference, we would provide services from Federal Way to Olympia. But to get started
and employ the number of people I want to employ, we had to spread our footprint out." She said her
firm works throughout western Washington. [WSDOT#27]
Some firm owners indicated that their companies perform both small and large contracts. For
example:
The female owner of a DBEcertified construction company said that her company works on
contracts anywhere from $50,000 to $8.5 million in value. [WSDOT#40]
The Asian Pacific American owner of a DBEcertified engineering and specialty construction
company reported, "A small contract for me would be $500. A large contract would be $1.5 to $2
million." [WSDOT#37]
The Native American owner of a DBEcertified electrical contracting firm stated the size of his
contracts range from $150,000 to $2.6 million. [ST#2]
The Caucasian vice president of a Hispanic Americanowned and DBE/MBEcertified electrical
contracting firm stated that his contracts range from $200 to $7 million. [ST#3]
Many other interviewees, including minority and female business owners, said they perform
contracts from very small projects up to $1 million or more. [For example, ST#1, ST#4, ST#6,
WSDOT#17, WSDOT#26, WSDOT#27, and WSDOT#36]
Some business owners noted that their financial resources affected how large of contracts on which
they typically bid:
The female manager of a Native Americanowned, DBEcertified construction company said, "We
will take on contracts from $30,000 to $1.5 million. The sweet spot is really about $50,000 to
$80,000. We are more selective today about what we bid on than two or three years ago. We found
it wasn't good to decide to bid a job and think we would find the money to do the job later."
[WSDOT#32]
The Hispanic American owner of a DBEcertified engineering firm reported that his company
pursues contracts from $80,000 to $500,000. He said that the company does not currently have
financial resources or facilities to support larger contracts. [WSDOT#7]
Other business owners reported that they typically only perform small contracts. For example:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 8
The Native American coowner of an uncertified general contracting company said, "Typically, [the
company performs contracts] on the high end of $15,000 to $20,000, and the average is about
$3,000. [WSDOT#16]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company stated
that his contracts range from $250 to $400,000. [ST#5]
Some companies reported that they work in several different fields, or that they had changed primary
lines of work over time. For example:
The Black American owner of a DBEcertified trucking and specialty contracting company said that
he started by doing hauling for a lot of homebuilders. He said, "I added excavation, demolition, and
environmental services to the trucking side of it." [WSDOT#36]
The Hispanic American owner of a DBEcertified engineering firm said that he tries to maintain a
diversified practice across types of work and industry segments. [WSDOT#7]
Local effects of the economic downturn. Interviewees expressed many comments about the
economic downturn.
Most interviewees indicated that market conditions since 2008 have made it difficult to stay in
business. [For example, ST#8] Other examples include:
The female owner of a DBEcertified construction company said that the average DBE does not
have the background and training that she does. She said, "Even with all that I have going for me,
I'm having a hell of a time just making ends meet in this construction economy where it's tough just
getting paid." [WSDOT#40]
The Native American owner of a DBEcertified electrical contracting firm stated that the growth of
his firm was damaged by the 2008 economy collapse. It caused him to close his company and loose
his 8A certification. He stated that that was when he filed bankruptcy and opened the current
business under a new name one year ago. He said that at that time, "Everybody had to start over."
[ST#2]
The Caucasian general manager of a noncertified womanowned general contracting company
said, "[Current market conditions] stink, and I've heard that the private sector is much worse.
There are too many contractors and not enough work." [WSDOT#33]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said that
his company's growth is slow due to the slowed economy. He said that all the public agencies had a
funding crisis. [ST#5]
The Black American owner of an MBE/DBEcertified engineering company said, "A lot of other
small firms have not survived, either going out of business or getting absorbed [by a larger firm]."
[WSDOT#8]
The Asian Pacific American owner of a DBEcertified contracting firm reported, "With the economy,
[our growth] has slowed down. We do all public work, so it is all public money. [Our growth] has
been flat, or a little bit negative, since 2009 because of the economy. I see that there are three or
four megaprojects in the state, and the routine maintenance jobs that the DOT normally puts out
are put off because all of the money is going to the megaprojects." [ST#9]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 9
The president of an engineering industry trade association stated that the "very small and
continuingtodiminish" percentage of his organization's membership which is made up of
minority or womanowned businesses is primarily due to "consolidation" (i.e., small firms are
getting bought out by larger firms). [WSDOT#38]
The Subcontinent Asian American owner of an MBE and WBEcertified engineering firm said that
in 2008 and 2009, the economy was not great. She said, "In 2008 [and] 2009, we had a couple
commercial projects, one huge one, a big ski resort in Steamboat Springs, and overnight, they pulled
the plug on it in the middle of 2009. [They] just said, "Okay, sorry!" [and] stiffed us for $35,000.
That was a rough lesson to learn, but people weren't spending money back then." [PS#1]
The Asian Pacific American owner of a noncertified engineering firm said "It was a very severe
recession for people working in the private sector. That's the only time I wished I was back in the
[MBE] program, because the government kept the larger consultants viable throughout that period.
In the private sector, 50 percent of contractors went out of business. It was a tough recession."
[PS#3]
Many business owners and managers said they have seen much more competition during the
economic downturn. They reported that more competitors are going after a smaller number of
contracts in specific fields, with substantial downward pressure on prices. Larger firms have been
bidding on work that typically went to smaller firms. Both construction and engineering companies have
been affected. For example:
Representatives of a large, majorityowned concrete company said, "When you look at capacity in
this local area, probably any of the companies could supply 100 percent of the capacity." They went
on to explain that this implies a significant decrease in the market's capacity. [WSDOT#15]
The Black American owner of a DBE/MBEcertified concrete firm stated that the market has been
extremely competitive. He said that outofstate firms have entered the market and that growing
his firm has been difficult. [ST#1]
The Caucasian female manager of an MBE/DBE/SBA certified engineering company said, "It has
become much more challenging in the last couple of years for a smaller size firm like [this one]. On
the public side, there's less funding going around. What we see is that [on] small projects, such as
$200,000, the larger firms are going for those projects. We are now competing with those [large
firms] and competing on qualifications. If we have done two jobs like the one advertised, the larger
firm can say [it] has done 200 [similar projects]. There's just more pressure on the market."
[WSDOT#9]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
commented the change in her market place is that there are more rebar placing firms bidding the
work. She said that to remain competitive in the market, "You have to know what you are doing and
be knowledgeable." [ST#6]
The Asian Pacific American female owner of an MBE and DBEcertified engineering company also
sees more competition. She said, "There's a lot more competition. [A company might] apply for
things [it] has no background in. [It is] just throwing [its] hat out there to see if [it] can win
something." [WSDOT#1]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 10
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said,
"The market is very competitive at this time. There are many qualified firms competing for the
same projects." [ST#5]
The Black American owner of an MBE/DBEcertified engineering company said, "The last couple of
years have been really bad. Essentially, there hasn't been a whole lot of work on the municipal side
coming out. People [would] show up to these preproposal meetings and were sitting there [next to
people from] global firms. So the competition for the few projects that have come out has been
fierce." [WSDOT#8]
When asked what it takes to be competitive in this market, the female manager of a Native
Americanowned, DBEcertified construction company said, "The bigger the company, the lower
[its] prices can be. There are some companies that are really hungry, and [some] are ignorant to the
realities of the business. [A company like this might bid very low and] get the job, but [it] is out of
business in a year or two and [can] mess it up for [properly run businesses]." [WSDOT#32]
The Asian Pacific American owner of a DBEcertified engineering company said, "Right now, in the
private sector, it is almost a bidding war for design professionals. That's okay, because that's the
way the economy is right now. Customers are looking for the best bang for the buck. Competition
now [is] not just on qualifications but also on price." [WSDOT#3]
According to interviewees, a few businesses may have survived because they were wellcapitalized
going into the economic downturn. For example:
The female owner of a DBEcertified specialty construction firm said she has a good year in 2008,
which helped her survive the following years. She said, "In 2009, a lot of the equity in the company
was being used to keep the company open. I tried to get help from the banks but they said, 'No,
absolutely not.' [The company] had good income, but it was going right back out the door to pay
employees, debt, and interest." [WSDOT#27]
One business owner, however, pointed out that his firm was not as well capitalized as his larger
competitors. The Black American owner of a noncertified consulting firm said, "I think that
companies that have been established a long time have ways to wait it out with rainy day funds.
They know how to navigate in this economy, unlike smaller companies like mine. How can we
respond to a situation like this without big savings? [Even the big companies have] laid some
people off, too." [WSDOT#4]
A few business owners and managers said that their companies did not see a decline in work due to
the economic downturn. For example:
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"We are pretty diverse, in the sense that we works for contractors and public agencies. We do some
work for transit, some work for the airport, some work for the military, some work for wastewater,
transportation, solid waste, so when the economy plummeted, we did not plummet with them. We
did not have to lay anybody off as a result. And then in 2009, we got to hire some people. I think
part of it was that, one, we didn't do any private development, and two, we didn't have just one
main client, because all of them suffered. Because our work was pretty diverse across many public
agencies, we survived." [WSDOT#1]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 11
A project manager for a majorityowned general contracting firm stated, "We have had steady
growth over the past few years, but like anyone in the construction industry, we are impacted by
the economic times. When the markets are good, we have a smaller year, but we have definitely had
steady growth." [ST#7]
Current economic conditions. Some business owners and managers said that economic conditions
were improving. For example:
According to the female owner of a DBEcertified specialty construction firm, "[Market conditions]
are better today than they were a year or two ago. As with anything, the strongest will prevail and
be there in the end. It's getting better but [it is still] unpredictable." [WSDOT#27]
The Caucasian female manager for an MBE/DBE/SBA certified engineering company said, "We had
good years in 2008 through 2010, but 2011 was tough. Now we are back to a pretty good level, and
I think that is similar to what other firms are seeing." [WSDOT#9]
Based on conditions at the time they were interviewed, many other business owners and managers
said that market conditions were improving. [For example, WSDOT#7, WSDOT#32, WSDOT#35,
and WSDOT#36]
The Subcontinent Asian American owner of an MBE and WBEcertified engineering firm said that
she believes the economy has improved drastically since 2008. She said, "[I] did a lot of university
work, [and] government work until problems with the budget. [I] was working on Department of
Homeland Security, their main campus in D.C. That came to a grinding halt because we had no
budget for the country. And now, [I do] lots of infrastructure [work], which is good." [PS#1]
The Hispanic owner of an uncertified construction company said that the economic downturn
made finding work difficult in his industry until 2012. He said that he thinks the marketplace
conditions are getting better. He explained that people are starting to call him for work, and
realtors have told him that the housing market will get better. He said that he sees them "cleaning
up houses to put on the market." [PS#5]
One interviewee said that current economic conditions are not favorable for his business. The owner
of a certified Black Americanowned construction firm said that the current marketplace conditions are
not favorable for his business. He said that he is "rarely called and usually passed over." [PS#6]
Business owners' experiences pursuing public and private sector work. Interviewees
discussed differences between public and private sector work.
Most interviewees indicated that their firms conduct both public sector and private sector work. [For
example, ST#2, ST#3, ST#4, ST#5, ST#7, ST#8, WSDOT#3, WSDOT#10, and WSDOT#17]
A number of interviewees noted that the slowdown in private sector work resulted in more
companies pursuing public sector work. [For example, ST#8] Other examples of such comments include
the following:
The president of an engineering industry trade association said that his organization's members'
work is "predominantly public sector [work], particularly now since there isn't any private sector
work." He remarked, "The firms that had a diverse portfolio are doing mostly their public side. The
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 12
firms that did nothing but private sector work don't exist anymore." He said that, even in the best of
times, the split among his organization's members between public and private sector work was 75
percent and 25 percent, respectively. [WSDOT#38]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said
that the trend is away from the private sector because the economy dictates it. [ST#6]
The Subcontinent Asian American owner of a DBEcertified engineering firm said that because
private sector has been slow, there is more competition for public sector work. However, he
explained that, "Over the last six to nine months I've seen more projects kicking off in the private
sector." [WSDOT#10]
The Asian Pacific American owner of a DBEcertified contracting firm stated that, "When the
economy is bad, people will seek public work." [ST#9]
The Caucasian coowner of a noncertified WBE construction firm said that the mix of private
sector and public sector work for his firm depended on market conditions. He reported that his
company was trying to phase out of working on public roads based on aggressive competition for
that work. [WSDOT#17]
Business owners and managers generally indicated that opportunities in the private sector are
more dependent on the strength of the economy. [For example, WSDOT#3, WSDOT#10,
WSDOT#17]
The Hispanic American president and coowner of a MBE/DBEcertified electrical contracting firm
said, "The only people that have money are the municipalities, government, and military." He
added, "The Obama stimulus money got things rolling. If it were not for that, there would be no
work." The Caucasian vice president of the firm commented that the changes in market conditions
are those that do private work were hit harder by the economy crash than those that do public
work. [ST#3]
Some interviewees reported that they preferred private sector work over public sector work. Some of
the comments indicated that performing private sector contracts is easier, more profitable, and more
straightforward than performing public sector contacts. For example:
The Hispanic American coowner of a DBEcertified construction company reported that he works
on both private and public sector contracts. He indicated that there is a lot of competition in both
sectors. He also reported, "There's more paperwork on the public side, filling bids out a lot more
work there. And then [the public jobs require] bonding." He went on to say that it is difficult to be
profitable on a public sector project. He said, "There aren't as many avenues for change. It's harder
to prove change in design, and everything trickles downhill. So, [my company], as a subcontractor,
may think something's a change, or the design's been changed, but the [general] contractor may be
tied to the main contract. It seems harder to make money on public works projects. It used to be the
other way around." [WSDOT#26]
The Caucasian owner of a majorityowned surveying company stated that it is easier to get work in
the private sector than it is in the public sector. [ST#4]
The Asian Pacific American owner of a DBEcertified engineering company said, "There are
differences between going for public and private contracts. On public contracts, most of the work is
done on an hourly basis feewise, so [the firm] really has to look at what [the] hours are going to be.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 13
Depending on the agency, there are requirements on the overhead and multiplier. [The firm] has to
be current on [its] financials and sometimes has to be audited. That's totally different on the private
sector where we can respond, '[My firm] can do this job for X amount of money.'" [WSDOT#3]
The Caucasian coowner of a noncertified WBE construction company said, "It's difficult to make
money in the public sector." He reported that this difficulty was due to "dealing with the
personalities that come from the public sector employees." [WSDOT#17]
The Caucasian owner of a majorityowned surveying company stated the mix of private sector and
public sector work varies from year to year. He stated that the substantial difference between
public sector and private sector work is the amount of paperwork in the public sector. He noted
that private sector contracts are a few pages, but that "public sector contracts are many pages and
are not understandable." [ST#4]
When asked if it is easier for his firm to get work in one sector or the other, the Asian Pacific
American owner of a DBEcertified engineering and specialty construction company replied, "It
depends. If you are established in the public sector, you will get a chance. In the private sector, [the
same rule applies]." He said reputation and relationships matter. He continued, "In the private
sector, you can mobilize faster and get the job done faster. In the public sector, there are so many
things you must have just to get started. Most of my scope of work is the same whether [it] is in the
public or private sector. There may be reporting requirements that are different."
Concerning differences in profitability between public and private sector jobs, the same
interviewee replied, "It depends. Profitability is based on performance. There is a problem with
designbuild projects in the public sector where the [agencies] keep on changing the requirements.
This becomes annoying and less profitable. Any public project has a lot of change orders."
[WSDOT#37]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said the
difference in public and private work is the review process is more elaborate when doing public
sector work. In the private sector there is less paperwork and bureaucracy. In the private sector,
"The person he is working with has the authority to make critical decisions on the spot."
The same interviewee said that it is very hard to ask for additional budget on public projects. He
said, "It is a challenge to ask for more money because project managers must get approval from
commissions or boards." [ST#5]
The Hispanic American owner of a DBEcertified engineering firm said that comparing profitability
between the private and public sectors is like comparing apples and oranges. He explained, "In the
public sector, you're lucky if you're hitting 15 percent [profit], and more like 1015 percent [is
normal]. In the private sector, [profit] is more like 60, 70, [or] 80 percent. The private sector is
focused on the company's capabilities to perform, not on certification, size standards, or a check
mark on a form." [WSDOT#7]
When asked whether he prefers to work on public or private contracts, the Caucasian manager of a
WBEcertified construction firm said that they both have their disadvantages. He said, "The private
market seems to be a little bit looser as far as technical documents and things like that. On the other
hand, they can be kind of flimsy when you make a deal with them. Whereas, in the public market,
it's fairly strict and you don't feel much flexibility." [PS#2]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 14
The Black American owner of a DBEcertified construction company said that he prefers working
on private projects because he receives payment more quickly, and there is less bureaucracy that
his business has to navigate through. [PS#4]
The Hispanic owner of an MBEcertified engineering firm said that when he can get private work,
he doesn't go after public projects. He said, "I prefer the private side. It's more dynamic." [PS#8]
The Caucasian coowner of a DBEcertified engineering firm said that most of their work comes
from private sector projects. He said, "If we had to rely on the public sector, we'd starve." [PS#9]
The Caucasian owner of a marine construction firm said that his company does not seek public
contracts because there are "too many hoops" to go through. He said that there were too many
forms and credentials required to win those contracts and his company does not need the
additional business. He said, "We are already very busy." [PS#10]
Several interviewees indicated there was less paperwork in the private sector than in the public
sector, making private sector work more appealing. [For example, ST#1 and ST#6]
Some interviewees said that prevailing wage requirements on public sector work made private sector
contracts more attractive for their companies. For example:
The Native American female coowner of a noncertified construction company reported, "[Our
company] pays [its employees] more than other nonunion contractors, so [it can] attract better
employees on private jobs. With public work, everyone pays the same rate, so [our company] loses
that advantage." She also reported that her company finds the profit margin is higher on private
sector projects. She said, "[In private work, the company] doesn't have the prevailing wage issues."
[WSDOT#28]
When asked what the difference is between public sector work and private sector work, the Black
American owner of a DBEcertified trucking and specialty contracting company said, "Price [is the
big thing]. [The company] has to pay a lot more in the public sector. [It] has to do a lot more
paperwork. With private sector work, [the company] just sends the truck and driver there, pays
him the $20 per hour rate, and finally makes a little money. But with federal jobs, [the company]
goes backwards." [WSDOT#36]
Some interviewees said that current market conditions are such that there are more bidders on
government contracts and that competitors sometimes submit lowball bids on public sector work.
For example, representatives of a large, majorityowned concrete company reported, "Private projects
may only solicit two companies to bid [so there's much less competition]. If it's publicly advertised,
every company that knows about it bids on it. There can also be financial penalties [For late completion,
etc.] on public work where there really isn't on private work." [WSDOT#15]
Other interviewees preferred obtaining public sector contracts because they were more certain that
they would be paid. Certainty of payment on public sector projects was a frequent comment among
those business owners and managers. Examples of those comments include the following:
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said
her firm does virtually no private sector work. She said, "They don't pay." [WSDOT#1]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 15
The Asian Pacific American owner of a DBEcertified contracting firm said that the main difference
between working in the public sector and the private section is the way you get paid. He said, "In
public works, there is a cutoff date for getting your invoicing in, and once it gets approved, you can
calculate when you are going to get paid. In the private market, there is no recourse if you do not
get paid." [ST#9]
The female owner of a DBEcertified construction company reported that her company primarily
works on public roads projects. The firm's customers are public and government agencies. They do
very little work in the private sector. She said that contractors who work in the private sector are
very adept at keeping DBE contractors from participating in that work. She said, "The reality is that
the folks who [work in the private sector] and do that well do a really good job of keeping out DBE
subs." [WSDOT#40]
Some interviewees said that they worked primarily in the public sector because the type of work they
do only exists there. For example:
The Caucasian vice president of a Hispanic Americanowned and MBE/DBEcertified electrical
contracting firm commented, "We have always been public sector, so we do not see a trend toward
or away from public sector work." The Hispanic American president and coowner of the firm said,
"That is because of the type of work we do. We do utilities." [ST#3]
The project manager for a WBE and DBEcertified environmental services firm stated that, "The
environmental [industry] is largely public sector. We are driven by rules and regulations." [ST#10]
Some interviewees said that they preferred public sector work because it is more profitable. For
example:
The Caucasian female manager of an MBE/DBE/SBA certified engineering company reported that,
"Although we do about 80 percent of our work in the public sector, when that work dries up, we
have to look around at the private side. The private side is generally all about money and is mostly
for developers. For us, this is risky, because we sometimes have to do more work for less money.
Although some people say the private side is more profitable than the public side, that's not been
the situation for us. The public side has definitely been more profitable." [WSDOT#9]
The Black American owner of a DBEcertified specialty contracting company said that there is a
difference in profitability between public and private sector work. He said, "In the public sector,
there is a larger range of profitability. In the private sector, there is more competition, and there
are bidding wars, so the profit margin is pretty thin. [With] public work, if [the company] can get
the job, the profit margin is a little bit better than the private sector, but there isn't as much work."
[WSDOT#35]
Some DBEcertified interviewees said that almost all of their work comes from the public sector, and
that it is hard to obtain private sector work. [For example, ST#1, ST#2, and ST#6] Another example is
The Asian Pacific American owner of a DBEcertified contracting firm, who stated that, "[In the private
market, it takes more marketing and relationship building [to find subcontracting opportunities]. If you
do not have those relationships, it is pretty hard to do private work. Private work is definitely harder for
DBEs to break into, because it is more about your relationships." [ST#9]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 16
One interviewee said that pursuing private sector work in addition to her public sector contracts was
difficult because she was a union employer. The female manager of a Native Americanowned, DBE
certified construction company reported that, because she is a union employer, it is more difficult to get
work in the private sector than in the public sector. She explained, "Private work does not usually use
prevailing wages. If it's a prevailing wage job it's going to be union wage rates. [Our company] is
signatory to the union." [WSDOT#32]
Some firms reported that they primarily conduct private sector work and have attempted to obtain
public sector contracts, but without success. For example:
The Black American owner of a noncertified consulting firm stated that he has sought work in the
public sector but with no success. He indicated that, despite having spent many years employed in
the public sector, he still has trouble doing business in the public sector as an outside party. He said
that he thought his experience working in the public sector would have given him enough of an
understanding of public processes to be more successful. So far, this has not been the case.
[WSDOT#4]
The Asian Pacific American owner of a DBEcertified engineering firm said that his firm has tried,
without success, to be a prime consultant on government work. To date, his only success at being a
prime has been on private sector contracts. He attributed his lack of success as a prime with public
sector agencies to limited marketing budget due to his firm's small size. [WSDOT#3]
The Asian Pacific American owner of a noncertified engineering firm said that the firm does not get
much work in the public sector after dropping his MBE certification. He said, "The agencies still
contract with us. City of Bellevue, we still work on their golf courses. City of Seattle, we still work on
some of their other projects. But that's purely based on the roster. Are we working on Sound
Transit? Are we working on 520? Are we working on Alaskan Way Viaduct? No. I wish we were."
[PS#3]
Some interviewees with experience in both the private and public sectors identified advantages and
disadvantages of private sector and public sector work. Examples of those comments include the
following:
The Black American owner of an MBE/DBEcertified engineering company explained that there are
advantages to both public sector and private sector work. He said, "I think that getting work [in
either the private or public sectors] is based on your firm's relationships and experience. On the
private side, if you have the relationships, and you do a good job, the client is going to come back to
you. It's that simple. On the public sector side, the process is long and drawnout, which allows me,
as a small firm, to get my resources lined up, and I can plan for that. On the private side, it's harder
to anticipate, the timeline is shorter, and therefore I am chasing my tail a lot. So working on the
public side allows a small company to anticipate its resources and make sure [it] has good people to
apply to it." [WSDOT#8]
A project manager for a majorityowned general contracting firm stated, "We try to maintain a 50
50 balance [between private and sector work], but it really depends on the market. Based on the
market over the past few years, private developers have dried up, so we have been more heavily
weighted in the public market. We have been about 60 percent in the public sector of the past few
years."
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 17
He said, "In the public sector, it is a little easier to find work, because everything is advertised. You
have a way to find out about what project is coming out by looking at funding sources and through
advertisement. Private side takes a fair amount of more work, because [when] trying to [find]
projects, you need to have a relationship with people who are looking to build."
He continued the comparison by saying, "There is definitely a lot more staff, paperwork, rules, and
regulations in the public sector. Most of that stuff does not faze me anymore, but when I talk to
colleagues in the private sector, they scratch their heads and wonder how we get anything done.
Public sector definitely takes more time and effort because of the various hoops we have to jump
through to get the job done." [ST#7]
When asked to describe differences between private and public sector work, the female owner of a
DBEcertified specialty construction firm said, "One difference between public and private work is
that the public jobs are usually bigger in size and cost. [There is no] private work on the freeways.
[Also], it's easier for me to get the private work because they come to me. I don't [have to] go
looking for [those jobs]. Unfortunately, I have to spend a good amount of my time seeking public
work. I can't hold on to a good group of [employees] if all I'm is going to have is private work
because the pay is not there. It's too expensive to live around here. Financially, it's easier to do
private work, but [in order] to keep a good group of [employees], I can't just do private work."
She added, "There is very little profit, if any, on prevailing wage public work. I have to have my own
equipment out on a public job to make any money. [Employees] are just way too expensive.
[There's also the problem on public jobs] that the prime has trouble making any money so at the
end of the job, they squeeze [the] subs. I have experienced that many, many times and at
inopportune times when I don't get paid thousands and thousands of dollars." [WSDOT#27]
When comparing public and private sector work, the female manager of a Native Americanowned,
DBEcertified construction company said, "It is not necessarily more difficult to do private versus
public work. A lot of our work is the same whether it's a private or public job. Private jobs tend to
pay quicker because [there is] less paperwork involved. Once we get the hang of the public side
paperwork requirements, the process is workable, even if the contractor doesn't ask it of us. It falls
on our shoulders to ensure all the requirements are met." [WSDOT#32]
When asked if there are differences between working in the public and private sectors, a manager
for a majorityowned geosynthetics supply firm said, "There are definitely differences. Public
projects usually have very clear specifications, and there is a submittal and approval process. There
is also a little more confidence that we will get paid in the public sector." He also said, "It is easy to
find jobs [in the public sector], because they are advertised well, but they are also maybe a little
more competitive." He contrasted that with the private sector, saying, "A lot of the private work is
not found in the plan room, so [finding private sector work] is based on relationships with the
contractors." [ST#8]
The Caucasian general manager of a noncertified womanowned general contracting company
said, "In private sector work, there is a lot more room for negotiation and change. Specifications
aren't as rigid. People are always looking for ideas to save money. For us, it's easier to find work in
the public sector, because, for one, we're union, so we can't do the work as cheap as nonunion
companies. [However], I think it is easier to do the work in the private sector, because in the
private sector, people are more open to change [and] to costcutting ideas." [WSDOT#33]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 18
When asked if there was a difference between private sector work and public sector work,
representatives of a large, majorityowned concrete company said, "Yes, [one difference is]
specifications can be totally different. [On] most public work projects, the owners know [precisely
what] the outcome [will be]. [With] private projects, the owner has in mind what the project should
look like when finished, but he may not know how to put that into specification form. [Also] with
private work, credit is always an issue, but [there is] way less paperwork." [WSDOT#15]
When asked if there are differences between working in the public sector versus the private sector,
the Asian Pacific American owner of a DBEcertified engineering and specialty construction
company said, "In the private sector, you can mobilize faster and get the job done faster. In the
public sector, there are so many things you must have just to get started. Most of my scope of work
is the same whether I am in the public or private sector. There may be reporting requirements that
are different. Profitability is based on performance. There is a problem with designbuild projects
in the public sector where the [agencies] keep on changing the requirements. This becomes
annoying and less profitable. Any public project has a lot of change orders." [WSDOT#37]
C. Doing Business as a Prime Contractor or as a Subcontractor
Business owners and managers discussed:
The mix of prime contract and subcontract work (page 19);
Prime contractors' decisions to subcontract work (page 21);
Subcontractors' preferences to do business with certain prime contractors and avoid others (page
27); and
Subcontractors' methods for obtaining work from prime contractors (page 30).
Mix of prime contract and subcontract work. Many firms that the study team interviewed
reported that they work as both prime contractors and as subcontractors.
The president of an engineering industry trade association said that some of his organization's
members do prime contracting work, some do subcontracting work, and some work both as prime
contractors and subcontractors, even some of the larger firms. [WSDOT#38]
The Subcontinent Asian American owner of an MBE and WBEcertified engineering firm said she
tends to be both a prime contractor and a subcontractor on various projects. [PS#1]
The Black American owner of a DBEcertified construction company said that his firm works as
both a prime contractor and a subcontractor. [PS#4]
The Hispanic owner of an uncertified construction company said that his company does both prime
and subcontractor work. He said that 70 percent of the work he performs is as a prime contractor,
and 30 percent is as a subcontractor. [PS#7]
The study team interviewed many firms that primarily work as subcontractors but on occasion also
work as prime contractors. [For example, WSDOT#3, WSDOT#7, and WSDOT#8] Another example is
the Black American owner of a DBE/MBEcertified concrete firm, who reported that the majority of his
work comes from subcontracting. He reported that he bids as a prime contractor approximately once
per year. He said, "It would be nice to be in control of your destiny." [ST#1]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 19
Some firms reported that they primarily work as subcontractors because doing so fits the types of
work that they typically perform. For example:
The Subcontinent Asian American male owner of a DBEcertified engineering firm said that his firm
does 20 to 30 percent of its work as a prime contractor, but his firm's role is typically a
subcontractor. He explained that the type of work that his firm does just lends itself to
subcontracting, and he said he is "okay with that." [WSDOT#10]
The Hispanic American coowner of a DBEcertified construction company said that his firm's type
of work is such that it always works as a subcontractor. [WSDOT#26]
The female owner of a DBEcertified specialty construction firm said, "I have had a few contracts in
which agencies were looking specifically for [the services we provide]. These jobs are done directly
as a prime contractor. I haven't had prime contracts on private projects for [those services]." She
went on to explain that that situation is not the norm for her company. She said, "Dollarwise, 90
percent of our work is as a subcontractor." [WSDOT#27]
Some business owners and managers said that they mostly work as subcontractors because they
cannot bid on the size and scope of the entire project or find it difficult compete with larger firms for
those prime contracts. Examples of comments included:
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"Most projects are just way too big for me to be a prime, because they involve so many aspects."
Later she noted, "I do real specialized areas [of work]." [WSDOT#1]
When asked why his firm always works as a subcontractor, the Black American owner of an
MBE/DBEcertified engineering company said, "[For] most of the projects that are out there, the
environment is so competitive, and I can't compete with the large firms." [WSDOT#8]
The Black American owner of a DBEcertified construction company said that he is usually a
subcontractor on public projects and a prime contractor on private projects. He said that this is
because public projects tend to be larger than private projects. [PS#4]
A few firm owners said that significant barriers to bidding as a prime contractor were the reason their
firms primarily performed as subcontractors. For example:
The female manager of a Native Americanowned, DBEcertified construction company reported,
"We [act] as a prime contractor on less than 1 percent of our work. We have not been able to build
up resources to be able to bid [on even] smaller jobs as a prime." [WSDOT#32]
The Asian Pacific American owner of a DBEcertified contracting firm said that the firm works as a
general contractor but at the moment is mostly doing subcontract work in public works
construction. He explained, "Right now, I don't have the bonding capacity, so we cannot bid as a
prime." He also said, "We have had some financial issues because of a couple of bad jobs we have
had. We are working on getting our bonding back, but that is why, for the last four years, we have
been working as a sub." [ST#9]
The Black American owner of a DBEcertified trucking and specialty contracting company said, "I
have never [worked as a prime contractor]. I don't have the capacity, the money, or the bonding."
[WSDOT#36]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 20
Some business owners and managers said that they mostly work as prime contractors and prefer to
do so. Examples of those comments include the following:
The Caucasian female coowner of a noncertified construction company said the company works
as a prime contractor around 90 percent of the time. She said, "We mostly work as a prime because
then we have more control." [WSDOT#28]
A project manager for a majorityowned general contracting firm said, "We work primarily as a
prime. There are very few cases where we have acted as a sub." [ST#7]
The Caucasian general manager of a noncertified womanowned general contracting company
reported, "We work probably 90 percent as a prime and 10 percent as a sub. We probably did a lot
more subcontracting earlier on in our [history]." She explained that as the firm gained more
experience and obtained more capital, it was able to do more work as a prime contractor.
[WSDOT#33]
The Asian Pacific American owner of a noncertified engineering firm said that his firm always
works as a prime contractor. He added, "That's the only way to do it. If you're part of a team with
your competitor, of course they're not going to treat you nicely. This is business." [PS#3]
A few business owners said that their work is fairly evenly split between prime contracts and
subcontracts. Comments about those experiences included the following:
In deciding whether her company will be a prime contractor or a subcontractor, the Caucasian
female manager for an MBE/DBE/SBAcertified engineering company said, "It depends on the size
of the project, what capacity it would take for the project, and whether another firm has a strong
relationship with the agency or owner sponsoring the project. If another firm has that kind of
relationship, then it would make more sense to join with that firm as a sub for the project. We don't
generally get into joint ventures. Rather, one firm would be the lead, and the other would be a sub."
[WSDOT#9]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said that
60 percent of his revenue is a result of subcontracts, and that 40 percent is from his work as a
prime contractor. [ST#5]
According to the four representatives of a large, majorityowned concrete company, "We are set up
to manage [a project as a prime contractor], but we prefer to subcontract. That way there isn't as
many resources tied up." [WSDOT#15]
The Asian Pacific American owner of a DBEcertified engineering and specialty construction
company said that he works as both a prime contractor and a subcontractor. He said, "I work as a
prime contractor about 50 to 60 percent of the time. I look at the size of the project. If it is [field
work and] more than $1 million, I can't bond that." [WSDOT#37]
Prime contractors' decisions to subcontract work. The study team asked business owners
whether and how they subcontract out work when they are the prime contractor.
Some prime contractors say that they usually perform all of the work or subcontract very little of a
project. For example:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 21
The female manager of a Native Americanowned, DBEcertified construction company reported,
"We very seldom subcontract out any work, and if we do, the subcontracted work is for a very small
amount." [WSDOT#32]
The Hispanic American president and coowner of a MBE/DBEcertified electrical contracting firm
said, "We don't really hire that many subcontractors." [ST#3]
Many interviewees from companies that use subcontractors indicated that they use the firms with
which they have an existing relationship. Both majorityowned and MBE/WBE firms that use
subcontractors made such comments. [For example, ST#3 and ST#6.] Other examples of these
comments include:
The Caucasian coowner of a noncertified WBE construction company said that his firm hires
subcontractors in disciplines such as traffic control, sawcutting, and concrete pumping. He said,
when the company chooses subcontractors, "it's usually a select group of [subcontractors] that
[have] worked with [my company] in the past." His company uses the same subcontractors for both
private and public work. He said, "They're [companies] I can count on." He went on to say that he
does not solicit bids from certified MBE/WBEs. He said, "I don't solicit them, [but] not because of
any other reason [other than] there typically aren't any in the services that I need." [WSDOT#17]
The Native American owner of a DBEcertified electrical contracting firm said that the way he
selects subcontractors is by contacting firms that he knows and trusts. He said, "I have been burned
by subs just like everybody else has." [ST#2]
A Subcontinent Asian American male owner of a DBEcertified engineering firm said, "On projects
where we are [the] prime, we'll have a sub to do [a specific type of work], and there's only one firm
around the area who does [that work]." He explained that his firm tends to use the same
subcontractors repeatedly. He said, "We use [subcontractors] that we've used in the past that we
know [will] do good, quality work." [WSDOT#10]
The Hispanic American owner of a DBEcertified engineering firm said that his firm often uses
subcontractors. He said that his firm does not specifically look for other certified firms to do
subcontracting work for it, and that being qualified to do the work is the important thing. He said
his company has relationships with some subcontractors and will continue to use those firms and
work with those firms. When a subcontractor has poor leadership, lack of expertise, no quality
system, his firm chooses not to continue working with them. He went on to say that his company
has a very specialized niche, and few other certified firms are available in that market. [WSDOT#7]
The Caucasian president of a majorityowned surveying company said that they select
subcontractors based on past relationships. [ST#4]
The Black American owner of a DBEcertified trucking and specialty contracting company said, "[I
select subcontractors by] calling other companies that I know. I've been in the industry for years. I
know who has trucks and who doesn't. If everybody's really busy, I'll go right to the [OMWBE]
directory and call companies in [the area where the job is]."
He continued by explaining that the only difference in hiring subcontractors for a private sector job
versus public sector job has to do with the certification requirement. He said, "Public jobs that are
available generally have a DBE goal and private jobs don't." He continued, "[If my company hires a
subcontractor on a job], the biggest limiting factor is the distance to the jobsite, because
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 22
transportation is one of the highest costs in trucking. The driver makes 40some dollars an hour,
and the cost of a tire alone is $850, and there are 24 of them [on a truck]. The payment on the truck
is $3,000 to $6,000 a month, and fuel runs $400 to $500 per day." [WSDOT#36]
The Asian Pacific American owner of a DBEcertified engineering and specialty construction
company said, "I [like to work] with companies [that] I have worked with before. If it's a new firm, I
will do a vendor verification form that my firm uses. My firm is ISOcertified, and I need to make
sure the sub can qualify."
He went on to explain that there are subcontractors that he will not work with. He said this is
"because of poor performance." He went on to say that there are also subcontractors that he uses
regularly and has a good relationship with. He said, "I can trust [that those subcontractors] will get
the job done. Projects are so competitive. There is little markup for overhead. The team must really
be able to get [the job] done." [WSDOT#37]
The Caucasian manager of a WBEcertified construction firm said that the firm often has
subcontractors working on its projects. He said that the firm finds its subcontractors primarily
through past relationships. He said, "It's kinda nice to work with your friends." He went on to say
that it can be difficult to make sure that the firm that you want to work for you ends up winning the
bid, because the construction industry runs off of a lowbid structure. He said, "A lot of times, even
with people you know, you can get tangled up in this paperwork nightmare. When you [hire]
someone you don't know, it does make it kind of tough." [PS#2]
The Black American owner of a DBEcertified construction company said that, when he is a prime
contractor, he often hires subcontractors. He said that he has a list of subcontractors that he has
worked with in the past that he contacts when he gets a job. He said that he finds subcontractors
solely through past working relationships. [PS#4]
The Caucasian owner of marine construction firm said that his company usually works on its own
but will occasionally hire a subcontractor when it needs additional expertise. He said that when he
hires a subcontractor, he gets them through referrals or word of mouth. He said that he tends to
work with the same people repeatedly. [PS#10]
Some interviewees said there were subcontractors they would not work with. For example:
The Native American owner of a DBEcertified electrical contracting firm stated that there are
subcontractors that he will not work with, because some have caused him problems in the past. He
stated it has a lot to do with bonding. He has experienced subcontractors bailing out on him or not
paying vendors. He said, "Then the money has to come out of my pocket." [ST#2]
The Black American owner of a DBE/MBEcertified concrete firm reported that there are
subcontractors that he will not work with. He stated that he would not work with subcontractors
that do not respect minority contractors. He said those subcontractors do exist, and "some of them
are union subs." [ST#1]
Some interviewees described how there are similarities and differences between considering DBEs
and considering other firms as subcontractors. Examples of those comments include:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 23
Representatives of a large, majorityowned concrete company said, "We will hire subcontractors
for specialty services. We find [those subcontractors] by sending out a request for quotes to a list
that we have of contractors. We have been on projects with MBE/WBE/DBE goals. We [solicit for
certified subcontractors by] going to the OMWBE website and look for new contractors. We also
maintain a database of contractors [that we have solicited before]."
They went on to explain, "Companies that are MBE or DBE are smaller companies, so it's harder to
get information out of them. The smaller the companies, the harder it is. They are also probably
companies that haven't worked in that arena before, or not as often, so specifications requirements
[and] submittal packages are tougher [for them] to get a hold of. They're not as familiar with safety
plans as bigger companies. They do have difficulties filling out paperwork correctly. The timeliness
of it and correctness of it [is a problem]. It's been quite challenging. Especially if there's a language
barrier that makes it tough to communicate."
They added that there are subcontractors that their company will not work with. They said, "[We
will not work with] companies with past history of inability to perform [the work]. There have been
some legal issues with particular companies, or they can't meet the insurance requirements or
bond the work. We have a credit prequalification requirement and a safety requirement [that must
be met by potential subcontractors]. This is the same whether the company is an MWDBE or not."
They went on to say, "[We have] groups of subcontractors that we use frequently. For small
projects, we may send out solicitations to just a small group [of potential subcontractors]."
[WSDOT#15]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company
reported that he does hire DBE/MBE subcontractors when doing work. He noted that lately it has
been more frequent. He said that there is no specific reason why he uses DBE/MBE subcontractors
but also stated, "MBE/DBE firms tend to be smaller in size, which makes them easier to manage."
He also stated that with DBE firms, "You are more likely to be working with the owner of the firm,"
and noted that most DBE subcontractors have worked at midsize or large firms before, so he
considers them to be equal in ability to the employees at large firms. [ST#5]
When asked if his company solicits bids from MBE/WBE/DBEcertified contractors, the Caucasian
general manager of a noncertified womanowned general contracting company said, "It depends
on the project. If there is a large minority goal, then we will actively seek out minority contractors.
We have a list of contractors that are minorityowned. We will call contractors that are minority
owned. Occasionally, we will send out a solicitation notice to contractors for larger projects. [This is
the same process whether the project is private or public], but we do very, very little private work."
He went on to say that, in his experience, some of the MBE, WBE, and DBE subcontractors that he
has worked with are not as capable. However, he also said that some are very capable. He
explained, "If we have an MBE/WBE/DBE subcontractor that we haven't worked with before, we
are very careful that the subcontractor is doing all of the paperwork correctly, and that they have
all their ducks in order before they start on the project. But we would do that with any contractor
that we haven't worked with before." He went on to say that there are subcontractors that his firm
will not work with. He said, "Generally it is because they didn't perform." He explained that there
are also subcontractors that his company works with regularly, because they are easy to work with.
He said that there are MBE/WBE/DBEcertified companies in both categories companies with
which his company won't do business and companies with which it regularly does business.
[WSDOT#33]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 24
When asked if there was any difference between working with a majorityowned firms and
DBE/MBE/WBEs, a manager for a majorityowned geosynthetics supply firm stated that, "It is
harder to get paid from DBE subcontractors. They seem to be less organized. The smaller
companies, from time to time, seem to be more difficult to collect from." He also said, "We have had
some substantial problems getting paid from some subcontractors, and it has typically been when
we are working with MBEs." [ST#8]
A project manager for a majorityowned general contracting firm stated that his firm solicits DBEs
when they have the chance. Often, when working in the private market, clients have certain
subcontractors that they have screened before, so they have a limited pool of subcontractors to
work with. He said, "[We solicit DBEs], because it is the right thing to do. There are projectspecific
goals on some projects, but there is also just value in helping small businesses grow. If we help
small businesses, we can increase our subcontractor pool."
He also indicated that it can be different working with DBE/MBE/WBE subcontractors versus
majorityowned subcontractors and stated that, "In all walks, there can be good subs and bad subs,
and you have to take that with a grain of salt. A lot of times when we are dealing with a DBE, we are
working with a business that does not have the background or resources, so sometimes we do have
to put forth additional effort to ensure that they can be successful."
He also said, "Regardless of whether [the subcontractor] is a DBE, MBE, or WBE, there will be some
additional time that we will have to spend mentoring those businesses. There are a handful of subs
that we have worked for over the past ten years that we have tried to help grow and develop some
capabilities." [ST#7]
A participant representing a construction company in a trade association meeting described how
he chooses a DBE subcontractor. He said, "My basis is twofold when I am looking at a
subcontractor. I need to know that they are responsible enough to do the work. I need to know that
I don't have to overly oversee their work and manage it for them. Obviously, price comes into
everything that happens with what we do in the public market. So, to answer your question, if I
have a responsive lowbid DBE subcontractor on a nongoal job, of course I will use them." [AGC#1]
When asked if the firm ever hires WBEs or MBEs to work as subcontractors on its projects, the
Caucasian manager of a WBEcertified construction firm said that the firm will do this when it is
required for a public project. He said that the large, private firm that his firm often works for will
sometimes require the use of WBEs and MBEs as well. He said, "We had no problem with that.
There's nothing wrong with that at all." He went on to explain that the large, private firm will often
recommend WBEs and MBEs that it feels are qualified for the work. [PS#2]
Some business owners indicated that they based the selection of subcontractors on lowbid or on
qualities that gave a team the best opportunity to win a contract. For example, the Caucasian general
manager of a noncertified womanowned general contracting company said that his company selects
subcontractors based on lowbid "unless the contractor is clearly not capable of doing the work." He
explained that his firm evaluates the potential subcontractor before the bid is awarded to be sure that it
has the capacity and the ability to do the work. [WSDOT#33]
Some owners and managers of MBE/WBE/DBE prime contractors said they seek out other
MBE/WBE/DBE firms or small businesses as subcontractors on their projects. For example:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 25
The Asian Pacific American owner of a DBEcertified engineering firm said that he tries to solicit
small businesses or DBEs when he needs to have subconsultants. He said, "I think small businesses
are capable of joining together to do work." [WSDOT#3]
The Black American owner of a DBE/MBEcertified concrete firm stated that he does hire
subcontractors, and that he tries to find qualified minority subcontractors. He said, "I will reach
into my community of contractors that I am familiar with." He went on to say that prime
contractors only use minority firms for public work. He solicits minority firms at all times, unless it
is a specialized type work, because he feels they are underutilized at all times. [ST#1]
The Caucasian female manager for an MBE/DBE/SBAcertified engineering company said that her
acts as a mentor to other MBEs. She said, "Our company has had MBEs and DBEs that worked for us
as subs. We just finished a job in Oregon that had a team of all MBEs, WBEs, or DBEs and we were
the prime. Being a small business, it's always nice to foster other small businesses to grow and help
[each other]." [WSDOT#9]
The Asian Pacific American owner of a DBEcertified contracting firm said, "I would rather give
work to a DBE if they were in a certain percentage of the low bid." [ST#9]
The Black American owner of a DBEcertified construction company said that, when he hires
subcontractors, he often hires DBEcertified subcontractors. He said, "I hire other DBE firms
because I am a DBE!" [PS#4]
Most interviewees whose firms work as subcontractors reported that they rarely hire secondtier
subcontractors. Most interviewees said that they never or rarely hire secondtier subcontractors when
their firm is working as a subcontractor. Interviewees reported that the nature of the work often
determines whether a subcontractor hires a secondtier subcontractor, and whether they solicit and hire
DBEcertified secondtier subcontractors. Past experiences (good and bad) with subcontractors also
influence who they solicit. Comments about using secondtier subcontractors included the following:
The Black American owner of an MBE/DBEcertified engineering company said, "[When my firm is
hired as a subcontractor] it will hire subcontractors for CAD work." He went on to say that he hires
secondtier subcontractors based on past relationships. He continued by explaining that there are
certain subcontractors that he will not work with. He said, "The main reason is nonperformance."
He went on to say that there are companies that he has worked with multiple times. He said,
"[Those companies] get the job done and have good chemistry [with my firm]. [Companies like this]
are well respected in the industry and give me the opportunity to showcase my abilities to the
larger firms." [WSDOT#8]
The Native American owner of a DBEcertified electrical contracting firm stated that, when a
contract asks for voice data systems and fire alarm systems, he subs that work out. [ST#2]
The Native American female coowner of a noncertified construction company that typically works
as a subcontractor said that her firm hires other businesses as subcontractors. She said that she
chooses subcontractors that have a good reputation and get the job done in a timely manner. She
said, "[It's important that] we know what we are going to get." [WSDOT#28]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company stated,
"Prime firms in most contracts require we do the work ourselves and not have subcontractors."
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 26
The same interviewee also said that the process is different for private sector work compared with
the public sector. In the private sector, lump sum gidding gives him more flexibility as to how he
will manage the project budget. Therefore, it is easier for him to hire subconsultants to do work.
For public sector contracts, there is contract language that says he cannot hire subconsultants
without prior approval. [ST#5]
The Asian Pacific American owner of a DBEcertified engineering and specialty construction
company hires secondtier subcontractors for specialty jobs. [WSDOT#37]
Subcontractors' preferences to do business with certain prime contractors and avoid
others. Many owners and managers of firms that sometimes work as subcontractors indicated that
they preferred to work with certain prime contractors.
Interviewees frequently mentioned speed and reliability of payment as the main consider in
determining their preference for certain prime contractors and their avoidance of others. Examples of
those comments include:
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated there are prime contractors that she will not work with mainly because they are unreliable
in providing consistent and timely payment. [ST#6]
Representatives of a large, majorityowned concrete company said that it is important for them to
work with prime contractors that pay regularly. [WSDOT#15]
The Black American owner of a DBE/MBEcertified concrete firm stated that an example of a good
prime is one that will expedite payments. He said, "Good primes try to be good stewards." He also
said that good primes have good staff to help subcontractors, and they treat subcontractors with
respect. [ST#1]
The Caucasian general manager of a noncertified womanowned general contracting company said
that his company has prime contractors that it prefers to work with. He said, "There's comfort in
working with a company we have worked for before." He said there are also prime contractors that
his company will not work with. He said that this is because of "bad experiences, principally not
getting paid." [WSDOT#33]
The Native American owner of a DBEcertified electrical contracting firm said that there are prime
contractors that he will not work with primarily because they do not make consistent and reliable
payments to his firm. The other reason he would not work with a prime contractor is if they try to
add work to the scope of work and not increase the contract amount. [ST#2]
The Subcontinent Asian American male owner of a DBEcertified engineering firm said that there
were particular prime contractors that his firm likes working for, mainly because of administrative
benefits, such as quick payment. He said that those benefits can make a huge difference for small
businesses. [WSDOT#10]
The Hispanic American president and coowner of a MBE/DBEcertified electrical contracting firm
said that there are prime contractors that he prefers to work with because they are reliable with
payment. He said, "They don't use your money to keep the payroll going." [ST#3]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 27
In addition to prompt payment for their work, many firm owners and managers said that they
preferred prime contractors that are organized and easy to deal with; maintain safe worksites; and
treat them fairly. Examples of those comments include the following:
When asked if there are prime contractors with which his company prefers to work, the Caucasian
coowner of a noncertified WBE construction company said, "There's some [companies] that [are]
just easier to make money with, because [those companies] schedule jobs properly and [are]
organized properly. I don't have to worry about [the job site] not being ready when we go out to
work." [WSDOT#17]
When asked if his company prefers to work with certain prime contractors, the Hispanic American
coowner of a DBEcertified construction company said, "[Yes, if the prime contractor] understands
our business, and understands what I need, and [the prime contractor] knows what it is going to
get when it hires us. We like certain companies because [those companies] pay well [and] pay on
time." He also reported that there are some prime contractors with which he refuses to work
because those prime contractors do not understand the services provided by his company.
[WSDOT#26]
The female owner of a DBEcertified specialty construction firm said, "There are probably a dozen
primes that I would bend over backwards for. First of all, [those companies] are respectful to [our
workers]. [Each of] those companies know me, has my best interests at heart. [Those companies]
communicate and give me feedback on my bids. [Those companies] pay on time."
She went on to say, "There are probably a couple of primes [that I would choose not to work with]. I
don't like to pick and choose but some [companies] are not respectful, not as safe, or refuse to pay."
[WSDOT#27]
Some subcontractors said that they had good experiences working with DBE/MBE/WBE prime
contractors. Examples of such comments include the following:
When asked if his company had any experience working with minority or womenowned prime
contractors, the Hispanic American coowner of a DBEcertified construction company said that
they had worked for a lot of 8(a) companies because of military work, and they had also worked for
a womanowned company. He said, "They worked a lot harder than the [companies owned by]
men. They were great. They knew what they were doing. It was a good experience." He said that his
firm enjoyed working for certified primes because, "They weren't as large [and] not as
sophisticated [as majorityowned prime contractors]. There's an ease about them." He indicated
that the certified prime companies he has worked for did not use their certification as an excuse to
do lower quality work or just get by. He said, "There was no chip on their shoulder." [WSDOT#26]
The Caucasian president of a majorityowned surveying company said that his firm worked for a
DBEcertified prime contractor that was a civil engineering firm about 10 years ago. He said, "It was
a good experience, and we look forward to doing it again." [ST#4]
When asked if her company has worked with any DBE prime contractors, the female owner of a
DBEcertified specialty construction firm said, "Yes, I have worked with a couple of DBE prime
[contractors]. Although I don't have empirical data, I'd say that DBE primes are more aware of how
difficult it is for DBE firms." [WSDOT#27]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 28
The Black American owner of a DBEcertified trucking and specialty contracting company said, "I
have worked for a major Hispanic prime. [It] was excellent to work with." [WSDOT#36]
When asked if his firm has worked with a prime contractor that is MBE/WBE/DBEcertified, the
Asian Pacific American owner of a DBEcertified engineering and specialty construction company
replied, "Yes, but the ones that want to work with me normally don't get the bid." [WSDOT#37]
One firm that had been a subcontractor to a DBE prime contractor said that the prime contractor had
some difficulties with the project. The Asian Pacific American female owner of an MBE and DBE
certified engineering company said that her firm did some work for a minorityowned prime contractor.
Her only comment was that the DBE prime contractor was a small company and had some difficulty with
the project because of its size and because of its inexperience as a prime contractor. [WSDOT#1]
A number of business owners and managers said that certain prime contractors had treated them
unfairly, and they now avoided them. Several minority and female business owners, or managers of
those firms, added that certain prime contractors had listed their firms but not given them any work. For
example [ST#1]. Other examples of perceived unfair treatment included the following:
When asked if his firm has established relationships with some prime contractors that it prefers to
work with, the Black American owner of an MBE/DBEcertified engineering company said,
"Absolutely. There are prime contractors that have used me strictly for my certification and given
me absolutely no work." [WSDOT#8]
The Caucasian female manager for an MBE/DBE/SBAcertified engineering company said there are
prime consultants that the company prefers to do business with because they follow through on
what they promise to do. In contrast, she said that there are prime contractors the company would
prefer not to do business with because the prime contractor will ask the company to make an effort
to be on the team, and then the company gets no work from the contract. She said, "After a time or
two, you learn that lesson, and it's not worth spending the time and resources." [WSDOT#9]
The Hispanic American president and coowner of a MBE/DBEcertified electrical contracting firm
said that he prefers not to work with some contractors because of the way they treat him on the
job. He said, "Some contractors are out to screw you right off the bat, and we only work with them
once, regardless of how much work they have." [ST#3]
When asked if there were prime contractors with which her company preferred to work, the female
manager of a Native Americanowned, DBEcertified construction company said, "Yes, because we
have developed a good relationship with those primes. A good relationship includes getting paid
and having a prime [contractor's] crew that is good to work with by not causing problems for us on
the job. Our work is often in the latter stages of a job, and if the earlier work hasn't been done to be
ready for [our] work, that can cause hardships for us."
She went on to say, "There are primes we won't work with because we've been burned. [There have
been] some situations in which a contractor didn't stand up for us, especially when the design was
faulty. That made it difficult for us. [There have been] situations in which a contractor agreed [that]
we did the work according to requirements, but, for some reason, the work had to be taken out and
redone. [The prime contractor] doesn't pay us for the redo work. Those situations don't happen
very often, but when they do, it really hurts." [WSDOT#32]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 29
When asked if there are prime contractors with which he prefers to work, the Black American
owner of a DBEcertified specialty contracting company said, "Yes. I have a tendency to receive
work from certain contractors. It appears that these contractors [contact me] for one of two
reasons. First, because the prime doesn't have [our skill set] itself, or second, that the prime has
determined that I am number one in the [services needed], and [the prime] doesn't want a second
rate company."
He went on to say that there are some prime contractors that he will not work with. He said that
this is the case if there is "slow pay, or no pay." He said he will also not work for a prime contractor
that only puts his firm on the project team in order to use his DBE status. He said, "Once [the prime
contractor] gets the job, they will keep me for a few weeks, and let mego. [The prime contractor]
will then either selfperform, or the work will go to [its] friend." [WSDOT#35]
When asked if his company preferred certain prime contractors, the Black American owner of a
DBEcertified trucking and specialty contracting company said, "I liked [a prime contractor my
company worked with a few years ago] because they would spend the three seconds [it takes] to
pick up the phone and call us. The communication was there. They did what they said they were
going to do. [That prime contractor] would even help me with prompt payment if asked. They were
there for [my company]. I can't think of any other prime that will do that. I'm working with
[another prime contractor] that is starting to show promise. They knows my financial situation and
are willing to work with [it]."
When asked if there are prime contractors with which his company will not work, he said, "It's hard
to say that because when you need the work, you need the work. Many of these primes are all the
same. A [prime contractor] will tell me they are going to list me [on a bid], but then they don't. They
don't include me [in planning or bidding]. They send their attorneys to lobby against DBEs, because
they don't want the program. They take my bids and tell me the number is too high, but they don't
really communicate." [WSDOT#36]
The Asian Pacific American owner of a DBEcertified engineering and specialty construction
company said that there are prime contractors that his firm will does not like to work for. He said,
"[Those prime contractors] will take a bid, and then never contact you again. A bid can cost me
$10,000 to $20,000 or more." He went on to explain that this cost is not trivial, so when his firm is
not taken seriously, it hurts his business. [WSDOT#37]
Subcontractors' methods for obtaining work from prime contractors. Interviewees who
worked as subcontractors had varying methods of marketing to prime contractors.
Some business owners and managers rely on repeat customers and wordofmouth to obtain work
from prime contractors. [For example, ST#9] Examples of such comments include the following:
The project manager for a WBE and DBEcertified environmental services firm indicated that the
environmental industry goes through cycles and that "there is a lot of competition and some very
powerful companies." She went on to say, "We market ourselves through our experience and word
ofmouth." [ST#10]
The Hispanic American coowner of a DBEcertified construction company said that "Prime
contracts keep coming back to me because I provide a great product, and I'm good at what I does."
[WSDOT#26]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 30
The Black American owner of a DBE/MBEcertified concrete firm stated that he markets his
company by making use of good relationships in the industry, which he has formed during his 21
years in business. He said, "You are only as good as your last job." [ST#1]
The Hispanic American president and coowner of a MBE/DBEcertified electrical contracting firm
said that being known by contractors "has exposed us to a lot of contractors we don't know." He
added that they get on projects as a subcontractor as a result of the good relationships that they
have fostered in the past. He said, "Contractors trust us and want us to come back." [ST#3]
When asked how his firm finds work, a manager for a majorityowned geosynthetics supply firm
stated, "We go through plan services to keep up with projects, and a lot of it is wordofmouth
where we get phone calls from guys about projects that they are looking at." [ST#8]
Similarly, some business owners said that it was very difficult to solicit business from certain prime
contractors because those contractors are going to automatically use the subcontractors they already
know. Those comments included the following examples:
The female owner of a DBEcertified specialty construction firm said, "In the private sector, the
[prime contractor] usually calls [with a job offer]. I don't go looking for that work. It's not
advertised anywhere usually. The [prime contractor] pretty much has the companies [it] is going to
work with, so there is no reason to go out looking for that kind of work." [WSDOT#27]
The Black American owner of a noncertified consulting firm said, "I try to establish some
relationships, but [it is] hard to penetrate, very hard to penetrate, especially with the major firms
around here." He went on to say that some prime contractors know his business and his capabilities
and will call him with subcontract work. [WSDOT#4]
A discussion participant reported that he counsels DBE firms to build relationships with prime
contractors, but representatives from the DBE firms complain that prime contractors do not hire
new subcontractors very often. He said, "The prime contractors consistently use the same firms
over and over again. Those DBE firms that are not being engaged now feel that it is the same firms
being used over and over again, [and that] they are not expanding their pool of available DBE firms.
'How am I even going to break the ice, get into the marketplace, if they keep using the same firms,
over and over again?'" [DBEP#3]
One subcontractor said that the owner of a contract had a lot of influence in getting him work on a
contract. The Black American owner of a DBE/MBEcertified concrete firm said, "It is up to the
owner agency to tell the primes what the agency's wishes are." He continued, "Some public agencies
are better than others at doing this. Prime contractors will do what the owner agencies ask of them
if they want to be on the project." [ST#1]
Some business owners said that they actively market to prime contractors. Those businesses reported
that they sometimes identify prime contractors from bidders' lists, planholders' lists, at prebid or pre
proposal conferences, or through outreach events.
The Subcontinent Asian American male owner of a certified engineering firm said that his company
gets jobs as a subcontractor by introducing itself to potential primes. He said, "The main way to get
on a project is to introduce yourself to the different companies and different project managers." He
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 31
went on to say that, once his firm established a reputation, the word spread to other project
managers and his firm began getting more calls to bid on work.
The business owner also talked about attending outreach meetings to learn about new projects and
to meet primes and project managers. He said, "There [are] a lot of preproposal meetings for these
large projects. That's a lot of the reason that we focus on [a particular public agency's] projects.
They'll advertise [the preproposal meeting]. You hear a little spiel from the owner about the
project and then [you can] identify the primes and go around and talk to these primes." The firm
owner went on to say, "That's one thing I like about the DBE goal percentages. It forces the primes
to allow different firms to come into their radar." [WSDOT#10]
The Asian Pacific American owner of a DBEcertified contracting firm said, "We know when the big
projects are coming out, and we will call to see who is bidding." [ST#9]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated that her firm markets to primes by checking the bidders' list. [ST#6]
The Caucasian female manager of an MBE/DBE/SBAcertified engineering company said that her
firm usually contacts prime contractors to try to participate on their projects as a subcontractor.
She said that sometimes this is successful. She said, "We are usually the one to contact the [prime
contractor]."
She continued, "Sometimes on large projects, if there are four or five large firms going after the job,
[one or more] will contact us about being exclusive to one team. If we agree to that, we are
gambling that we will be on the winning team. If that team is not successful, then we don't get
anything out of it." [WSDOT#9]
The Native American owner of a DBEcertified electrical contracting firm stated that he markets his
firm in an industry publication. He also said, "Most of our marketing is done through the meet and
greets and networking events with contractors." [ST#2]
Representatives of a large, majorityowned concrete company said, "Most private jobs are not
advertised the same way. Generally, [private sector prime contractors or owners] call us.
Sometimes they are on Builder's Exchange Washington." [WSDOT#15].
The Subcontinent Asian American president of a DBE/MBEcertified engineering company stated
that he meets and identifies primes by attending networking and outreach events. He noted that
some private sector firms also have networking events, and he attends those as well. [ST#5]
Some business owners said that they are routinely solicited for bids from prime contractors and do
not need to proactively market to them. Examples of those comments include the following:
The Caucasian coowner of a noncertified WBE construction company said, "All of our work is bid
jobs. We belong to a couple of different plan centers. We don't really market our jobs too much. A
lot of people call us and solicit bids from us, and it's pretty much a lowbid market." [WSDOT#17]
The Asian Pacific American owner of a DBEcertified contracting firm said, "A lot of times the prime
will call and ask for a quote if there is a minority goal on the project." [ST#9]
Representatives of a large, majorityowned concrete company said, "We get [on jobs as a
subcontractor] by responding to RFQs, and there's the MSRC (Municipal Research and Services
Center of Washington), [and] small works rosters. WSDOT sends out bid information and [the]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 32
Internet [has bid information]. We try to get on every small works roster. [Agencies] seem to be
gravitating towards [using those rosters]." [WSDOT#15]
D. Keys to Business Success
The study team asked firm owners and managers about barriers to doing business and about keys to
business success. Topics that interviewers discussed with business owners and managers included:
Employees (page 33);
Equipment (page 37);
Access to materials (page 38);
Financing (page 39); and
Other factors (page 43).
Employees. Business owners and managers shared many comments about the importance of
employees.
Many interviewees indicated that highquality workers are a key to business success. Examples of such
comments include the following:
The Subcontinent Asian American male owner of a DBEcertified engineering firm said that, for a
firm to stay competitive now, it needs quality employees. He went on to say, "On the engineering
side, [success is] purely the qualifications the firm has as long as they can show that they
retained [employees with] a solid knowledge base." [WSDOT#10]
The Hispanic American president and coowner of a MBE/DBEcertified electrical contracting firm
commented his firm is growing because he has goodquality employees. He said, "We have tried to
not grow too fast. We have really good people working for us." He also noted that in the past his
employees would work without pay just to keep the business running. [ST#3]
When asked what it takes to be competitive in the business, The Caucasian coowner of a non
certified WBE construction company said, "A good crew [is needed to be competitive]. Our business
is all about the people that work for us the skilled craftsmen." He went on to explain that "being
prepared for the work [that is] coming up [and] having the right people and right equipment in
place before you start [is critical]." [WSDOT#17]
The Hispanic American coowner of a DBEcertified construction company said that the firm's
success was in part due to hiring "some really good people." When asked what it takes to compete
in the marketplace, he said, "[It takes] guts and trust. You need to trust yourself and your Trust
your men. [Trust] that they can perform the work." [WSDOT#26]
The Hispanic owner of an uncertified construction company said that his company employs four
fulltime and six parttime employees. He said that he offers insurance benefits and a higher salary
than most landscaping companies. He went on to say that his employees do really good work, and
that he doesn't have to worry about issues of quality. He said, "My employees are more like
partners." [PS#5]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 33
Many other business owners and managers made similar comments about the importance of
quality employees. [For example, WSDOT#27, WSDOT#28]
Some business owners and managers said that it was difficult to find and hire skilled employees. They
attributed that difficulty to several factors:
The Caucasian coowner of a noncertified WBE construction firm said that getting skilled
craftsmen is a challenge for his company. [WSDOT#17]
When asked whether attracting personnel or expertise was a potential barrier for small businesses,
a project manager for a majorityowned general contracting firm stated, "It comes down to money,
and it is hard to attract talented people when they do not think they will get paid. I have seen that
firsthand with some smaller contractors who have struggled with payroll or we have had to joint
check with. They cannot build a crew that has 18 members, because those 18 guys are going to
work somewhere where they know they will get paid. Being able to make payroll is critical for
getting the most talented people." [ST#7]
When asked if getting qualified workers is a barrier, The Caucasian general manager of a non
certified womanowned general contracting company said, "Yes. Since [the company] is union, the
union workforce is aging and [the union] has difficulty finding qualified people." [WSDOT#33]
When asked about finding qualified personnel or labor to be a barrier, the Caucasian manager of a
WBEcertified construction firm said that, because many of his projects are at locations with high
levels of security, he often has trouble finding workers who can pass the various security
clearances. He said, "We've got a really good crew. We've got people who have been with us for 15
to 20 years. When we go to hire, we have to wade through a lot of people, and it's mostly due to the
environment we work in. We've made a specialty of working in secured or occupied spaces, and
there's all kinds of clearances [that are required]. You can find qualified people, but then they don't
necessarily meet the [security requirements of the job]." [PS#2]
When asked about finding qualified personnel being a barrier, the Caucasian coowner of a DBE
certified engineering firm said that his company struggles to get top applicants for positions at his
firm. He said that, during the economic downturn, this was less of an issue for his business because
not many companies were hiring, and his business was able to attract top applicants. As the
marketplace has improved, his business is struggling to compete with the larger engineering firms
for the most qualified personnel. [PS#9]
When asked if experience and expertise are barriers to working with public agencies, the Black
American owner of an MBE/DBEcertified engineering company said, "Yes. We submit our SOQ and
try to be as broad as we can with the folks we are looking to bring on. Sometimes I feel that we
don't have that right person. We try to anticipate what [work] is coming up and who we are going
to need for that [work]. But if we haven't done a good enough job at anticipating, there will be work
out there that we just doesn't have the [people] to fit." [WSDOT#8]
Some interviewees reported no barriers related to getting qualified personnel. Examples of those
comments included the following:
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated that she has not had a problem with getting personnel and labor. [ST#6]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 34
When asked whether attracting experience or expertise could be a barrier for small businesses, the
project manager for a WBE and DBEcertified environmental services firm stated, "Not in this
industry. I think in this industry, there is a surplus of people." [ST#10]
The Black American owner of a DBEcertified trucking and specialty contracting company said,
"[Finding personnel] actually boils down to personality and charm. I've always been able to find
educated, smart people." [WSDOT#36]
The Hispanic American president and coowner of an MBE/DBEcertified electrical contracting firm
said that they do not have a problem finding people to work for the company. [ST#3]
Some business owners commented on what they saw as a declining quality of workers. For example,
the Black American owner of a DBEcertified specialty contracting company said, "Finding quality
workers is a problem for every [company]. Everybody wants a job but no one wants to work."
[WSDOT#35]
Some owners and managers said that being union employers helped them find workers. [For example,
ST#9] Another example is the Caucasian coowner of a noncertified WBE construction company who
said that his company is union, and that finding qualified employees is not a barrier. [WSDOT#17]
Some business owners and managers said that they preferred to have control over employee hiring,
or have had negative experiences with unions, and did not want to be union employers. For example,
Interviewees WSDOT#27 and WSDOT#35 said that they preferred to not be union employers. Another
example is the Black American owner of a DBEcertified construction company who said that he feels
that the employees that he gets from unions are generally unqualified. He said, "The challenge that I
have with unions is the quality of people that you get out of the union." He went on to say, "I really don't
understand the union, because if you want me, as a contractor, to be a member of the union, then send
me good help. Don't send me somebody that's going to mess my name up and mess up the project
because they have been trained by the union." He went on to explain that he thinks the union needs to be
more vigilant in training their workers well. He said, "[The union sends] people here who don't know
what they're doing. If I'm lucky, I'll get somebody who does know what they're doing." He said, "I pay the
union dues for unskilled labor." [PS#4]
Other business owners do hire union workers but state that it is more difficult to work with them.
The Native American owner of a DBEcertified electrical contracting firm stated that he hires out of
the union hall. He commented, "Getting workers out of the union hall makes it difficult to cultivate
good field workers." However, he also stated he has no problem working with unions. [ST#2]
The Black American owner of a DBE/MBEcertified concrete firm is a union contractor. He stated
that unions are "good for employees and not so good for the owner." He elaborated, saying that
unions create an additional cost to operate the business. He noted that prompt payment is
important for meeting financial obligations and paying employees. He said that it is also crucial due
to the difficulty in securing bank financing. On occasion, he has been able to work out payment
arrangements with the unions. He noted that due to the cost, fewer minority contractors are union
contractors. [ST#1]
The Black American founder of a construction industry trade association indicated that unions
discriminate against Black Americans working in the local construction industry and prevent them
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 35
from working. He said, "The unions are our main problem here. They get blacks into their halls and
they take their money, but they don't give them jobs. They skip over them. They don't send them
out to work. That's why you don't see any black faces on these construction sites." [WSDOT#39]
Some firm owners and managers indicated that hiring and retaining employees was more difficult for
small businesses than for larger companies. For example:
When asked about whether obtaining personnel was a barrier, the Subcontinent Asian American
male owner of a DBEcertified engineering firm said, "The key [to retaining employees] is
maintaining a good backlog and a good project base, because if you don't have a lot of work out
there, employees get kind of nervous about job security. Then, if they see job openings out there,
they [may] move to get more stable."
He also said that a larger firm may have an advantage in attracting good personnel, because the
employees might have a sense of more job security. In practice, he said that the larger firms are
quick to just cut employees loose if they are not billable. [WSDOT#10]
When asked if finding personnel is a barrier, the Caucasian female manager for an MBE/DBE/SBA
certified engineering company said, "Yes, finding qualified engineers is a challenge on a
compensation level. We can't afford to pay what the larger firms pay. It takes different people to go
into a smaller company [rather than a larger firm]. We don't generally get involved in the large
bridges, so if that's what someone wants, they need to go to the larger firms." [WSDOT#9]
The female manager of a Native Americanowned, DBEcertified construction company said, "It's
hard to find trained workers. We cannot afford to hire a project manager. There's just no way. Our
pricing doesn't allow for that." [WSDOT#32]
The Black American owner of a MBE/DBEcertified engineering company explained that one of the
issues that his company has as a small consulting firm is that it will hire an engineer to fulfill a
specific contract. If the project gets delayed, that engineer may not be available, because he or she
was planning to do the work earlier. [WSDOT#8]
The Asian Pacific American owner of a DBEcertified engineering company reported, "Attracting
personnel could be called a barrier because larger firms are able to give larger financial incentives
for personnel than small businesses. I don't know if this is a barrier or just a competitive thing."
[WSDOT#3]
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"It's really hard to hire people. When the economy was great, in [the] early 2000s, we wish we
could have grown because we had projects, and we could have hired people. No one would even
respond [to our advertisements], because all the big firms were hiring too, and the [job applicants]
would rather go with the big firms. Small firms had great difficulties. When the recession hit, a lot of
people were laid off, [and it was] easier for small firms to get applicants. It is hard to hire and
compete against big firms." [WSDOT#1]
The Black American owner of a noncertified consulting firm said that because he has found it hard
to obtain a loan to help him meet his payroll, finding and keeping qualified personnel is a barrier to
his business. He said, "I don't want to hire someone that I can't pay." [WSDOT#4]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 36
Equipment. Some businesses, especially in construction, require a substantial amount of equipment to
perform their work. Some own their equipment and some rent equipment.
Some businesses reported that they own certain equipment and then rent larger pieces of equipment
that they may need infrequently. For example:
The Black American owner of a DBEcertified trucking and specialty contracting company reported,
"I lease excavating and loading equipment I need on a perjob basis. I own some trucks. I do a lot of
tradeout with other DBE companies." [WSDOT#36]
Other interviewees said that they own all their equipment. For example, the Native American female
coowner of a noncertified construction company said, "We do enough business that we have purchased
our own equipment. Now we don't have to rent equipment, and the work is more profitable."
[WSDOT#28]
Some interviewees stated that acquiring needed equipment is not a barrier. [For example, ST#2, ST#8,
ST#10, WSDOT#27, WSDOT#33, and WSDOT#35] Another example is The Asian Pacific American
owner of a DBEcertified contracting firm, who said, "We are union, so we have not had any difficulty
getting equipment or labor. The unions supply the equipment or labor that we need for each job." [ST#9]
Some companies, especially certain types of engineering firms, indicated that equipment is not a
barrier because they require little equipment for their lines of work. [For example, ST#5, and PS#3]
Other examples include:
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said
that obtaining equipment is not a barrier to success "because we don't do surveying. Most of our
equipment is just computers." [WSDOT#1]
The Black American owner of an MBE/DBEcertified engineering company said, "[My business]
isn't very equipment based. I just go down and buy what I need, although licenses for software can
be a bit expensive." [WSDOT#8]
However, some business owners reported that obtaining expensive equipment is a barrier. They
reported that they did not have the cash to purchase the equipment outright and that financing can be a
barrier. For example:
The female owner of a DBEcertified construction company said that the barriers associated with
obtaining equipment for small businesses are all related to financing. [WSDOT#40]
The Black American owner of a DBE/MBEcertified concrete firm stated that minorityowned firms
typically have to rent or lease equipment due to maintenance and other associated costs. He said,
"There is not enough [manpower] to maintain owned equipment, therefore the costs are higher."
[ST#1]
The Hispanic American coowner of a DBEcertified construction company said that the company
rents most of its equipment. He added, "It was difficult to get a line of credit with the rental
companies. So, our plan was, once we do make some money, we can buy one fork lift so we don't
always have to rely on the rental company. So [that is what happened]. We still own our first fork
lift. It's falling apart, but [it is] just used here." [WSDOT#26]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 37
A project manager for a majorityowned general contracting firm said, "[Finding equipment] can be
challenging depending on the financial strength of a firm. We have worked with some small
businesses where we have had to pay for the concrete supplier, for example. If a supplier wants
some security that they will get paid, we will write a joint check [with a subcontractor]." [ST#7]
When asked if obtaining equipment is a barrier, the Black American owner of a noncertified
consulting firm said, "Yes, it is a barrier sometimes, especially the pricey [items like] measuring
equipment [and] generators. [As owner of the company I] put up my own personal money to get it."
[WSDOT#4]
When asked if obtaining equipment is a barrier, the Black American owner of a DBEcertified
trucking and specialty contracting company said, "This has become a barrier because of financing."
[WSDOT#36]
When asked about equipment being a barrier, the Hispanic owner of an uncertified construction
company said that if his company had a line of credit, he could get needed equipment. [PS#7]
Access to materials. As with other potential barriers, interviewees reported a range of experiences
with access to materials.
Some business owners and managers said that their ability to obtain credit or having sufficient cash
on hand were factors in accessing materials and supplies, especially if they were not receiving timely
payment from customers or prime contractors. For example:
When asked if obtaining inventory or supplies is a barrier, the Black American owner of a DBE
certified trucking and specialty contracting company said, "Yes, it takes credit." [WSDOT#36]
The Caucasian vice president of a Hispanic Americanowned MBE/DBEcertified electrical
contracting firm commented that they have no problem obtaining materials and supplies,
specifically because they have good credit. He said, "If you have good credit, you can get whatever
you want." [ST#3]
The female manager of a Native Americanowned, DBEcertified construction company stated,
"Getting inventory and supplies is a problem for small businesses, especially if the prompt payment
law is not followed." She added that she did not see a difference for minorityowned businesses in
obtaining supplies beyond size of business. [WSDOT#32]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated that she thinks that in the past there was a barrier getting inventory and supplies. She said,
"Now we have proven ourselves and can get a line of credit with all of our suppliers." [ST#6]
Regarding obtaining inventory or supplies, the Black American owner of a noncertified consulting
firm said, "[This is] not a barrier yet. We have a private equity company that helps with that. But
across the board it can be a barrier [to some other small firms]." [WSDOT#4]
In general, minority and female business owners did not report instances of racial or gender
discrimination by suppliers. Anecdotal evidence of disadvantages for minority and womenowned
business in obtaining materials and supplies in many cases related to the size, credit, and capitalization
of those firms.
Some interviewees discussed small businesses being charged more for supplies. For example:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 38
A project manager for a majorityowned general contracting firm said, "I have seen instances where
small businesses have gotten commodity pricing that is a little higher than we would buy, but I
think that has to do with the quantity that we are buying versus what a small business is buying."
[ST#7]
The Black American owner of a DBE/MBEcertified concrete firm reported that he has had
experience with distributors charging him more for supplies. There have been occasions where his
price is the same as the larger majority prime contractors. He expects to get the same price as
prime contractors, but it does not happen all the time. He also reported that prime contractors
could get the volume price break. [ST#1]
Interviewees also mentioned the variability of materials prices as a barrier. For example, the Caucasian
general manager of a noncertified womanowned general contracting company reported, "It's more
difficult now than it has been in the past. There are so many fluctuations in pricing right now. [Suppliers]
will not hold the price very long anymore." [WSDOT#33]
Obtaining inventory or other materials or supplies was not seen as a barrier to success by several
interviewees. [For example, ST#2, ST#8, ST#10, WSDOT#1, WSDOT#15, WSDOT#35, and PS#6]
Financing. As with other issues, interviewees' perceptions of financing as a barrier depended on their
experiences. To some it was a barrier, and to others it was not.
Many firm owners reported that obtaining financing was important in establishing and growing their
businesses (including financing for working capital and for equipment), and surviving poor market
conditions. For example:
The Asian Pacific American owner of a DBEcertified engineering firm said that having a line of
credit was important to his company remaining in business. He said, "When we needed to have
money to keep going because of no pay or slow pay, we had a line of credit. We just renewed it this
year. In the last two years or so, we had to write off more than $100,000 in bad debt because clients
went bankrupt, and we did not get paid for work completed." He went on to say, "If it weren't for
the line of credit and personal financing, I think we would have had to close the doors." [WSDOT#3]
The Asian Pacific American owner of a DBEcertified contracting firm stated, "[Obtaining financing]
is definitely a potential barrier. In construction, you have to have a fair amount of money to start,
and it can be hard to get a startup loan and get into public works. I think that it is generational. If
you were around 50 years ago, then you have more money and capacity than a startup, so you can
get the work. If you are a DBE, 50 years ago you were not getting jobs, and that is why 90 percent of
the [construction] firms now are white, maleowned firms." [ST#9]
The Hispanic American coowner of a DBEcertified construction company said that it is difficult to
obtain appropriate funding because of smaller levels of cash flow. He said, "Luckily, my company
has a good bank who we are still with, and they loaned us some more money." [WSDOT#26]
The vice president of a small DBEcertified construction firm wrote that their bank froze their
company's line of credit in July 2011, and that banks are not loaning to small businesses. She said,
"We have contacted over a dozen banks and financing companies since last November and still
cannot find one that is willing to help us stay in business." She said that, as a result, "The bigger DBE
contractors are taking over the projects, because they have the money to do so. They are growing
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 39
exponentially! Meanwhile, the smaller DBE businesses are going bankrupt or calling it quits." She
urged the state to focus its assistance on small DBEs. [WT#6]
Some firm owners and managers reported that obtaining financing was not a barrier, and some said
that it was. Differences in answers were in part attributable to whether firms were construction or
engineering companies, and whether the businesses were wellestablished. For example:
The Hispanic American owner of a DBEcertified engineering firm said that obtaining financing was
not a barrier for his firm. However, he said that it is different when a company is growing. He said
"[A company] has to establish a relationship with a financial group so that, when they gets there,
the [financial group] will help them." [WSDOT#7]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said that
he has not experienced barriers related to obtaining financing. [ST#5]
The Asian Pacific American owner of a DBEcertified engineering company reported that he has not
had any problems getting a line of credit, but acknowledged that if he "had to borrow a half million
dollars, [he] probably couldn't because [he] doesn't have enough collateral for that." [WSDOT#3].
A project manager for a majorityowned general contracting firm stated, "I have heard that for
some subcontractor, financing can be an issue, and it definitely is for small businesses. I believe that
it has to do with the strength of your firm, not whether you are [a] minority or womanowned
firm." [ST#7]
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"We have not had problems with financing. Our balance sheet is strong. I can see where a brand
new firm would find getting financing almost impossible." [WSDOT#1]
A manager for a majorityowned geosynthetics supply firm indicated that obtaining financing could
be a market barrier for small businesses but stated that, "For all I know, [obtaining financing] is
easier for MBEs and WBEs because of all of the DBE programs." [ST#8]
The Black American owner of a DBE/MBEcertified concrete firm said that financing seems very
difficult to get. He stated that it is much harder for minority and womanowned businesses. [ST#1]
The Caucasian manager of a WBEcertified construction firm said that obtaining financing has
become more difficult since the economic downturn. [PS#2]
The Asian Pacific American owner of a noncertified engineering firm said, "We never went for
financing. And the reason is very simple. The banks will lend you money if you have money. If you
don't have money, they won't lend it to you. If I have the money, why should I go to the bank to get
a loan?" [PS#3]
When asked about obtaining financing being a barrier, the Black American owner of a DBEcertified
construction company said that obtaining necessary financing was not a problem for him. [PS#4]
The Caucasian coowner of a DBEcertified engineering firm said that he feels that his company has
had significant issues obtaining financing. He explained that a large private bank cancelled their
line of credit and turned it into a loan. He said, "Now we have a line of credit with a small bank in
our building." He said that he did not believe this was racial discrimination. [PS#9]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 40
When asked about obtaining financing being a barrier, the Caucasian owner of a marine
construction firm said that obtaining financing can be difficult for a small business that is trying to
get started. [PS#10]
Some of the other owners and managers of minority and womenowned construction and
engineering firms indicated that obtaining financing is not a barrier. [For example, # WSDOT9,
WSDOT#10, and WSDOT#35]
Some interviewees said that they had difficulty obtaining financing when starting their companies,
but that financing was no longer a barrier for them. For example:
The Caucasian coowner of a noncertified WBE construction company reported that financing was
a barrier when he and his wife first started their firm. He said, "It was challenging in the early days."
He said that his company, which is now more than 10 years old, has a good relationship with a
bank, and that he is comfortable with his financing now. [WSDOT#17]
The Hispanic American president and coowner of an MBE/DBEcertified electrical contracting firm
stated that, in the beginning, financing was difficult to get. He said, "The banks won't lend you
money if you don't have money. As a Hispanic, [I] had no money. Every time we made money I paid
for everything, and I saved money. What you put in is what you get out of it. Over the years, I
developed good credit and can get bonding. It took 20 years." [ST#3]
A number of business owners and managers said that obtaining financing continued to be a barrier for
their companies. For example:
The female owner of a DBEcertified construction company reported that she has significant
personal assets, including her house, but banks will not loan her money. She said, "Therefore, I'm
completely reliant on general contractors to pay me right, and to pay me on time." She went on to
say that obtaining financing is a huge barrier for small businesses. She said, "Even if my credit
wasn't trashed, I still wouldn't be able to get a loan because construction's risky, because startups
are risky, and [because] the real estate market has declined." [WSDOT#40]
The Black American owner of a DBE/MBEcertified concrete firm stated that financing is hard to
get, and the market is very competitive. He said, "Out of state firms are entering the local market.
Competition has lowered price, which makes it difficult to do business and stay competitive. With
insurance, taxes, etc., it does not leave much of a margin." He added, "Banks will not give a line of
credit. [They] are not interested in construction companies." [ST#1]
The female owner of a DBEcertified specialty construction firm said that obtaining can be a barrier
for small businesses. She said, "Depending on where the company is financially, financing is
unattainable for one reason or another. If [the company] is able to attain it, it's very expensive,
especially if [the company] really needs it." [WSDOT#27]
According to the female manager of a Native Americanowned, DBEcertified construction
company, obtaining financing can be a major problem for small businesses. She said, "It doesn't
matter if your [company] is a minoritycertified company or not. As a small business, banks are not
loaning to [your company] if [it] does not [already] have money. I've been working on [getting
financing] since last July." [WSDOT#32]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 41
When asked if obtaining financing is a barrier, the Caucasian general manager of a noncertified
womanowned general contracting company said, "Yes, it has been. It's all market driven, it seems."
[WSDOT#33]
When asked if obtaining financing is a barrier, the Black American owner of a DBEcertified
trucking and specialty contracting company said, "Yes, for everyone. [My company has been]
denied." He went on to say that he believes that this is indirect discrimination against DBEcertified
businesses. He explained, "If [small DBE firms] don't get work and are underutilized year after year
after year and can't be consistent with sales, how are the banks going to be paid back?"
[WSDOT#36]
When asked about obtaining financing being a barrier, the owner of a certified Black American
owned construction company said that obtaining credit is very difficult. He said that he has tried to
get needed financing from local banks to grow his business but has been continuously turned
down. He said, "We have no lines of credit." [PS#6]
When asked about obtaining financing being a barrier, the Hispanic owner of an uncertified
construction company said that his personal credit was compromised when he was struggling to
keep the company open in the economic downturn. He said that because of his poor credit score, he
cannot apply for loans. He said that as business is improving, he is "starting to come out of the
hole." [PS#7]
Some business owners explained the connection between personal assets and the ability to obtain
financing. For example:
The Black American owner of a noncertified consulting firm said "[Obtaining financing is] a big
[barrier]. Banks are very reluctant. They think [that small business] is [a] big risk for them, even
though we may demonstrate to them what we are capable of doing. Also, with a lot of real estate
underwater, it's hard even [for the business owner] to use [his or her] personal home as equity to
obtain a loan. The only equity that a small company can have is the power of its [personnel's]
knowledge and experience, but banks don't consider that as collateral." [WSDOT#4]
The Black American owner of an MBE/DBEcertified engineering company said, "I have been lucky
in that I haven't had to try to find financing. When I opened the business, I had a term loan through
[a private bank]. Fortunately, before the 'crash,' I changed that to a line of credit on my house. I had
my financing in place before the crash. I have been able to use [that] line of credit as I have needed
to. It hasn't been that big of a problem for me. I know other folks in the industry for which this is a
huge problem, because if your company didn't have [its] financing lined up before the crash, [it]
couldn't get it afterwards." [WSDOT#8]
Some minority and female business owners reported no instances of discrimination in obtaining
financing. Many business owners indicated that it was difficult for small businesses to obtain financing,
and that the ability to access business loans was affected by personal wealth.
However, some minority and female business owners indicated that race and gender discrimination
affects financing. For example:
A discussion participant at an association meeting said, "Certainly, access to capital, bonding, and
insurance is something that everybody in the industry is struggling with now, but definitely
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 42
research has shown on a national level that minorities in particular are discriminated against often
times more so than white business owners in obtaining financing." [DBEP#1]
The Black American owner of a DBEcertified specialty contracting company reported
discrimination in financial markets. He said that he has seen minorities who have needed a loan get
turned down, but nonminorities in the same financial situation will get approved. He said, "I ran
into this with my first company when my financial position wasn't as strong. I saw this and worked
hard to get my financial position in order and have had no problem getting financing since."
[WSDOT#35]
The Black American owner of a DBEcertified trucking and specialty contracting company said that
discrimination affects companies, which then affects their ability to obtain financing. He said, "If the
company doesn't have work and can't keep money in the bank, [it] loses [its] credit rating." He said
that the result is that generally, that company cannot get the financing that it needs. [WSDOT#36]
The Black American owner of a noncertified consulting firm said, "It's also hard to get lenders to
loan money to small businesses. [It's] a real problem. Loan companies are less likely to approve
loans to small minority companies, even more so now than before [the economic downturn]."
[WSDOT#4]
The Native American owner of a DBEcertified construction company wrote about the forms of
discrimination he has experienced as a business owner. He said, "Many businesses are often turned
down for credit or have difficulty obtaining lines of credit." He indicated that he has no direct ability
to prove that his difficulties were tied to his status as a minority. He said, "I firmly believe that as [a]
minority, I have had to work harder to prove I am capable of performing the work in order to
obtain necessary credit." [WT#5]
Other firms said they weren't sure if they had faced discrimination in obtaining financing. For
example, the Native American owner of a DBEcertified electrical contracting firm commented that
finance discrimination is to connect to race or genderrelated discrimination, because "we would never
know." [ST#2]
Other factors. In addition to the factors identified above, many business owners brought up reasons
for business success that relate to the overall management and reputation of the firm.
A few business owners specifically mentioned the importance of a good reputation and strong
relationships with customers and other firms as factors that are essential for continued success.
Examples included:
When asked what it takes to be competitive in today's marketplace, the Asian Pacific American
female owner of an MBE and DBEcertified engineering company said, "It's all about relationships.
To try and unseat [a company with an established relationship with the prime contractor] off an
engineering job is nearly impossible, so you have to keep the clients you have." She went on to say,
"Most of our work is for repeat clients, because we do good work. We get invited to be on the team
again." [WSDOT#1]
The Native American female coowner of a noncertified construction company reported, "We have
built a good reputation and can perform the work costeffectively. The key is to clean up the
[demolition] space, not just how fast it can be torn down. We have a good system for separating the
demolished materials and using our machines effectively." [WSDOT#28]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 43
When asked what it takes to be competitive in the current market, the Native American female co
owner of a noncertified construction firm said, "We provide great customer service. We get repeat
business and good referrals." [WSDOT#28]
The Caucasian general manager of a noncertified womanowned general contracting company
said, "[To be competitive, a company must have] diverse business lines, be innovative, and have a
good reputation. Good relationships [are important too.]" [WSDOT#33]
Related factors discipline, perseverance, and attention to detail were also mentioned by firm
owners as keys to success. Examples of those comments include:
The Hispanic American coowner of a DBEcertified construction company spoke about what it
takes to compete in the marketplace. He said, "It takes discipline to not spend your money, to live
within your means, and know that you won't have constant cash flow." He went on to say, "If you
can get [your company] prepared, and go to a general contractor who's a global contractor, and say
'Here's my [company's] safety plan. Here's my [company's] work plan. This is what [my company
is] going to do for you,' it shows the prime that you are willing to step up to their court."
[WSDOT#26]
The Native American owner of a DBEcertified electrical contracting firm attention to detail is key
to business success. He said, "I think there is a lot of opportunity for capable contractors or DBEs
that are capable prime or subcontractors. You have to know your stuff. You can't depend on
anybody else to do your stuff for you. You have to know the back office, your schedule, your
product, be technically sound, and read and understand your contract." [ST#2]
The Caucasian female manager for an MBE/DBE/SBA certified engineering company said to be
competitive and to survive in this market "takes perseverance and dedication." [WSDOT#9]
E. Potential Barriers to Doing Business with Public Agencies
The study team asked interviewees about potential barriers to doing work for public agencies, including
work with the Port. Topics included:
Learning about work and marketing (page 45);
Bonding requirements and obtaining bonds (page 47);
Insurance requirements and obtaining insurance (page 51);
Prevailing wage requirements (page 53);
Licenses and permits (page 54);
Other unnecessarily restrictive contract specifications (page 55);
Bidding processes (page 56);
Nonprice factors public agencies or others use to make contract awards (page 58);
Timely payment by the customer or prime (page 59);
Taxes (page 64); and
Experience with Port processes (page 64).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 44
Learning about work and marketing. Interviewees discussed opportunities for firm owners and
managers to identify public sector work and other contract opportunities, and to market themselves in
the indepth anecdotal interviews.
Many business owners and managers reported that it is easy to market in general and, specifically, to
learn about public sector work. [For example, WSDOT#15 and WSDOT#40] Examples of those
comments included the following:
When asked if learning of public jobs was a barrier, the Hispanic American coowner of a DBE
certified construction company said, "Public jobs we hear about much sooner [than private jobs].
We know that there's always a notice that comes out. The private jobs happen a lot quicker than
that with not as much notice." [WSDOT#26]
The Caucasian vice president of a Hispanic Americanowned MBE/DBEcertified electrical
contracting firm stated his firm has no problem learning about work. They have registered on
agency rosters, read industry periodicals, and get calls from prime contractors they have good
relationships with. [ST#3]
According to the representatives of a large, majorityowned concrete company, it is easier to find
out about jobs from some agencies than from others. For example, they identified WSDOT as easy
to find out about work, but said, "Some agencies advertise in [their] local paper only. City of Seattle
and transit [agencies] advertises only on [their] own websites." [WSDOT#15]
The Asian Pacific American owner of a DBEcertified contracting firm stated the firm has no
problem learning about work. He said, "We are registered on agency rosters, read industry
periodicals, and get calls from prime contractors that we have good relationships with." [ST#9]
The Caucasian female manager for an MBE/DBE/SBAcertified engineering company has not found
finding out about potential work to be a problem. She said, "[Our company] is pretty connected in
the market and knows what projects are coming out in the future. We know the 'big boys' and if
[one] will bring [our firm] on [its] team, [our company] will go after the job." [WSDOT#9]
Representatives of a large, majorityowned concrete company explained, "For projects in [this]
division, we pursue them through Builder's Exchange, and the Daily Journal of Commerce."
[WSDOT#15]
The female manager of a Native Americanowned, DBEcertified construction company explained,
"We seek work by using websites and plan centers that advertise the bids. We present our
proposals on to primes that are bidding the jobs. We identify the bidders from the planholders' lists
at the plan centers. There are three or four online plan centers we go to, and [there is] a local plan
center. The job starts off calling every one of those planholders to ask [each one] if they will be
bidding as a prime. That way, we know [which prime contractors] to send our proposals to."
[WSDOT#32]
When asked if learning about available work is a barrier, the Caucasian general manager of a non
certified womanowned general contracting company said, "No, I don't think so. We find out about
upcoming projects by public bid notices, because we do mostly public work. Generally, the prime
contractors that call us know us because of our reputation. We have working relationships with
[those contractors] from work done in the past." [WSDOT#33]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 45
A manager for a majorityowned geosynthetics supply firm said, "Aren't there agencies set up to
help [small businesses learn about bid opportunities]? I would think that if those [small firms]
where aware of those programs then it would actually be an advantage to those businesses."
[ST#8]
The Black American owner of a DBEcertified trucking and specialty contracting company said,
"[My company markets to prime contractors] by being on the Internet constantly, going to the state
websites, Blue Book, and some eBid systems. It is not a barrier." [WSDOT#36]
When asked how she finds new projects, the female owner of a DBEcertified specialty construction
firm said, "I look through the Daily Journal of Commerce. As a DBE firm, we are allowed to use the
subscription at no cost, and that is phenomenal. Also, anyone can access the Builders Exchange of
Washington for a listing of projects. Through those two [resources], I identify projects that have
been advertised. I contact [each] planholder to find out if they are going to bid and if they are, [I
find out if] they are union or nonunion. If they are nonunion, I ask if they are looking for
estimates. If they are, I put them on the list and send them our best estimate. But, the response
usually isn't that good. I get calls from previous customers, and I contact previous customers to see
if they are going to bid." [WSDOT#27]
The Black American owner of a DBEcertified specialty contracting company reported, "I use the
Daily Journal of Commerce, and we bid every job that is in it [that might be appropriate to the
services we offer]. Our success rate is probably around 1 percent." He said that sometimes a prime
contractor will email or fax him a job description. [WSDOT#35]
Some small business owners said that it was more difficult for smaller firms to market and identify
contract opportunities. For example:
The Asian Pacific American owner of a DBEcertified engineering firm said, "One barrier is not
having sufficient staff to find the work. We're competing with firms that have one, maybe two full
time marketers who are devoted to looking for work. Firms with such marketers are able to submit
on more jobs. I sometimes find out about projects too late to respond to, and the more projects I
propose on, the more work the firm is likely to have." [WSDOT#3]
The project manager for a WBE and DBEcertified environmental services firm indicated that
learning about work, "can be really expensive because of all the subscription fees. It can be
expensive to use Onvia and some of the other sites." [ST#10]
When asked if learning about work is a barrier, the Asian Pacific American female owner of an
MBE and DBEcertified engineering company said, "It's extremely hard for a firm just starting out.
It's all about relationships and relevant experience. I don't know how you would do it right now."
She continued, "For small firms, you're so busy trying to get your work done that it's hard to spend
time marketing. We don't spend much time doing marketing. We don't have time to do that. We
have a marketing assistant, but mostly she puts materials together to respond to requests, not
marketing to new clients."
She went on to say that her firm is on city rosters, and they get invited to bid against just a few
other small firms or just directly awarded some jobs through that program. She added, "We get
work [as a subconsultant] through the relationships [of our personnel with other firms] and
sometimes cold calling. We also [commit personnel to] attend preproposal meetings." [WSDOT#1]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 46
The Black American owner of a noncertified consulting firm said, "This is a big challenge. One
strategy in my plan is to reach out to find people who can help in that area. Small companies need
to know who, within the public agencies, to go to and find out about work." [WSDOT#4]
The Black American owner of an MBE/DBEcertified engineering company said, "My marketing is
typically relationship based. I try to anticipate what's coming down the line, looking at [agency
capital improvement programs], discussions with people in the agencies, and spending time with
my larger clients. We work at trying to get on teams that are going after some projects."
He went on to say, "[To get jobs as a subcontractor] I try to identify projects early, and identify who,
within that large [prime contractor] organization, is managing the chase for that project. I try to
send out my SOQ to that organization to show what I can provide for the type of roles that are
coming out of that project. I try to sit down and strategize with the [prime contractor], what
[people at my firm] think, from [personal] knowledge of the client, what would be important on the
proposals, and things like that."
He added, "We have a small marketing department. It's hard for us to go out and reach further and
further and make those relationships. Those are some of the distinct challenges for a small firm.
Yes, [learning about the available work] is always a barrier. Information is currency. We are
constantly trying to find out what's out there. We have one employee that I almost never see,
because he's out trying to make the relationships and 'look through the bushes'. It's constantly a
barrier for small firms." [WSDOT#8]
A representative for a womanowned DBEcertified construction company said, "We don't have the
same type of marketing dollars that our primary competitors have. As a consequence, we have to
work extra hard to get our name in front of buyers and purchasers just to get us considered. The
biggest barrier I guess is just not having the marketing dollars. I don't really think that's financing. I
think it's more of competing against these huge marketing machines. It's really the barrier to entry
into the marketplace that we've been facing." [RCF#1]
A representative of a womanowned DBEcertified firm said that when her firm is not awarded a
contract, she asks for an explanation. She said, "A couple of times it's come back that our submittal
and our statement of qualifications, our paperwork, is unsophisticated. Again, [as a] small business,
we don't have the big marketing section in our firm. It's us, and we print our own things, and we
utilized FedEx or whatever companies that we need to. It's never going to look like a huge
conglomerate company's paperwork. I think that they have to take that into account. It's not going
to look the same at the end of the day. It can't. We don't have hundreds of dollars for programs and
people just sitting there working on the SOQ, and that's all they do. It's not going to be the same as
big business." [RCF#5]
Bonding requirements and obtaining bonds. Public agencies in Washington typically require
firms working as prime contractors to provide bid, payment, and performance bonds on public
construction contracts.
Several interviewees reported little or no problem obtaining bonds, or that bonding was not an issue.
For example:
The Black American owner of a DBEcertified specialty contracting company reported that bonding
was not an issue for his business. [WSDOT#35]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 47
When asked about bonding requirements being a barrier, the Caucasian manager of a WBE
certified construction firm said that it has only been a challenge for his firm a few times in the last
20 years. He said, "Once or twice, there was a project that we would have liked to have gone for that
would have eaten up most or all of our bonding capacity. In general, it's not a problem." [PS#2]
Some subcontractors said that prime contractors do not require them to provide bonding. For
example:
The Caucasian coowner of a noncertified WBE construction company that the firm usually works
as a subcontractor, and that his company is rarely required to supply a bond. He said, "[There are]
probably three general contractors that ask us to bond work." He said that the rest of them trust his
company's reputation and do not require bonds. When he does need to get bonds, he said that he
does not have any problem obtaining them. [WSDOT#17]
The Hispanic American president and coowner of an MBE/DBEcertified electrical contracting firm
stated that in the beginning, bonding was difficult to get, but that in the last few years, the general
contractors do not ask for a bond because they know his company. He said, "It saves them money,
because they [do not have] to pay for my bonding." [ST#3]
One subcontractor said that prime contractors sometimes covered the bonds for his firm when it
subcontracts. The Black American male owner of DBE/MBEcertified concrete firm said, "Prime
contractors have covered the bond because they know we cannot get bonding. The prime
contractor will place you under their bond." [ST#1]
Engineeringrelated companies reported that they are not affected by bonding requirements. [For
example, ST#5] Other examples include:
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said
that her firm has no bonding requirements, so it is not a barrier for her business. [WSDOT#1]
The Asian Pacific American owner of a noncertified engineering firm said that bonding is not an
issue. He said, "We're not contractors we're consultants. Therefore bonding is not an issue."
[PS#3]
When asked about bonding requirements being a barrier, the Caucasian coowner of a DBE
certified engineering firm said that his company has no problems obtaining bonds. He explained
that bonds are an issue for contractors, not for engineers. [PS#9]
Some business owners and managers indicated that bonding requirements had adversely affected
their growth and opportunities to bid on public contracts. For example:
A participant at a trade association meeting shared feedback from the local construction
contracting community. He said that the bonding requirements that small businesses are asked to
meet are excessive and inhibitive. He said, "[The] scope of work may be $500,000, but they are
asked to provide a $1 million bond. It just goes back to financial issues that exist." [DBEP#1]
The Black American male owner of DBE/MBEcertified concrete firm finds getting bonding is
difficult when he has a lot of work. He said that when this is the case, bonding companies feel he has
too much work. He says that the bonding companies want to know how well you have done on past
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 48
projects, and surety companies want to see good margins on past projects. He said that it is good to
stay away from bonding, if possible. [ST#1]
The same contractor also said that he feels bonding requirements "kill the spirit of many
contractors."
A participant at a trade association meeting representing an educational institution that hires
contractors for statefunded (and sometimes federallyfunded) projects said that, when they asked
the prime contractors about utilizing certified firms, their response is that certified firms cannot
meet bonding requirements. He went on to say that "[There are] small contractors that are electing
not to bid on some of the projects at all." He went on to explain that "from the small contractor's
point of view, it is too risky to do some of these projects. They don't want to put their homes or
other assets on the line." [DBEP#2]
The Native American owner of a DBEcertified electrical contracting firm said, "Before the economy
crashed, we were not asked to bond that much. The prime contractor usually picked up the bond
for us. But after the economy crashed, the surety companies would not bond us because we have
never bonded before. It may be a year to two years before we can bond if we can show good
income, and we are making money." [ST#2]
The female owner of a DBEcertified construction company said that her firm has been unable to
obtain bonding. She said, "It's a chicken and egg thing. If you don't have a line of credit, it's really
hard to get bonding." [WSDOT#40]
The Caucasian vice president of a Hispanic Americanowned MBE/DBEcertified electrical
contracting firm said, "It is standard to request a bond. But the general contractor can check you
out to see if you are financially strong. It is up to the general to make the decision. It is always a
sense of uneasiness when we have to bond a project. You never know what the bonding company
will cover." [ST#3]
When asked if bonding is a barrier, the Hispanic American coowner of a DBEcertified construction
company said, "Until we went over the $10 million revenue mark, our bonding limit was pretty low.
Bonding was difficult. We needed a track record to be able to bond $8 million and even larger. We
needed to show we were profitable, that we had a good track record, [and] didn't have any claims.
That took quite a while. [That took] probably five years." [WSDOT#26]
The project manager for a WBE and DBEcertified environmental services firm stated, "There have
been bonding issues, but I do not know if it has to do with being a WBE." [ST#10]
The Native American female coowner of a noncertified construction company reported, "It's
harder for small companies to get bonds. It costs money to get a large bond if the return on
investment isn't there." [WSDOT#28]
A manager for a majorityowned geosynthetics supply firm stated, "It is my perception that
[obtaining bonding] is just difficult right now because it is difficult to work with banks right now."
[ST#7]
The Black American owner of a noncertified consulting firm said, "[Bonding requirements] are
problematic on public contracts. We had to give up pursuing some public projects where the
required bond values were high [and my firm could not obtain the bond]." [WSDOT#4]
The female owner of a DBEcertified specialty construction firm had several comments regarding
bonding requirements and obtaining bonds. She described an experience where she had not gotten
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 49
the necessary bonding for a project, and the prime contractor made her pay for the cost of getter
her firm bonded. She said, "We had a public project that required us to be bonded, and I had missed
that in the contract. [On that project], the prime held back the cost that the prime claimed it cost to
bond my company. I had to roll with the prime's claim because we had to [be paid], and I didn't
have the time to deal with it."
Another incident she related involved an experience she had as a prime contract. She said, "When
we are a prime and have to bond on a public contract, that is very expensive. With the current
economy and my company's financials, our current bonding company was unwilling to renew the
bond."
The third experience she described involved bonding for city contracts. She said that, although
some cities try to reduce the bonding requirement for small businesses, often the bonding
companies are not willing to participate. She said, "Although some cities have tried a very
commendable approach to reduce the bonding requirements for small businesses to 25 percent,
the bonding companies do not go for that. A city might call for a bond of 25 percent of the contract
amount, but the bonding company, based on rules created in the early 1900s, will not issue any
bond less than 100 percent of the contract amount. That decision by the bonding company makes
the bond expensive." [WSDOT#27]
The Black American owner of a DBEcertified trucking and specialty contracting company said, "It's
been a major problem, because it's based on a company's finances." He went on to explain that
small businesses, including DBEs, often have less stable finances because work is inconsistent.
[WSDOT#36]
When asked if bonding requirements are a barrier, the Caucasian general manager of a non
certified womanowned general contracting company said, "Yes. Again, it's all market driven. Right
now it's difficult because of the market." [WSDOT#33]
When asked about bonding requirements being a barrier, the owner of a certified Black American
owned construction company said that bonding requirements can be a problem for his business. He
said that he did not bid on a few contracts that he was interested in working on because the
bonding requirements were too high. [PS#4]
Potential for discrimination against MBE/WBEs. Minority and female business owners, in general, said
that they did not perceive overt racial or gender discrimination in obtaining bonding. However, size and
capitalization of firms appears to have an effect on the ability to obtain bonding. Examples include:
The Black American owner of a DBEcertified trucking and specialty contracting company said, "If
the company doesn't have work and can't keep money in the bank, [it] loses [its] credit rating." He
went on to explain that if a company loses its credit rating, it cannot get the financing or bonding
that it needs. [WSDOT#36]
A project manager for a majorityowned general contracting firm said, "I often hear that [bonding
requirements] are an issue, but I have not heard that a subcontractor could not get bonding
because they were a MBE or WBE. I have definitely heard that subs could not get bonding because
of financing." [ST#7]
One interviewee attributed some of his difficulty obtaining bonding to discrimination. The Native
American owner of a DBEcertified construction company wrote that he believes that racial
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 50
discrimination has affected his firm's ability to obtain bid, payment, and performance bonds. He
also wrote, "I have certainly struggled with those issues in the past, and while I have no direct
ability to prove it was tied to my status as a minority, I firmly believe that as [a] minority, I have
had to work harder to prove I am capable of performing the work in order to obtain bonding."
[WT#5]
The Asian Pacific American owner of a DBEcertified contracting firm said, "If you do not have a
relationship with your bonding company, then it can be hard [to obtain bonding]. A lot of DBEs,
because of historical reasons, do not have those relationships, so it is hard for them to get bonding."
[ST#9]
Insurance requirements and obtaining insurance. The study team asked business owners and
managers whether insurance requirements and obtaining insurance presented barriers to business
success.
Many interviewees reported no instances in which insurance requirements and obtaining insurance
were barriers. [For example, ST#2, ST#10, WSDOT#27, WSDOT#33, and WSDOT#35]
Many interviewees said that they could obtain insurance, but that the cost of obtaining it, especially
for small businesses, was a barrier. [For example, ST#1 and WSDOT#17] For example:
The female owner of a DBEcertified construction company said that her firm has to pay more for
insurance requirements because it is a relatively new business, but she accepts that additional cost
as part of the industry. She said, "I would say that [insurance requirements] are equal [between
large businesses and small businesses] as far as what the requirements are. I just pay more for it
because I'm a newer business, but that's just business. Eventually that will get better." She did say
that the standard limits that public agencies set can be particularly difficult for small businesses to
meet. [WSDOT#40]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company has
insurance, and does not find it difficult to obtain. However, he also said that insurance companies
do not want to insure them for the large amounts of money. Insurance companies would not insure
for larger amounts because he does not have enough revenue. The firm can only get $2 million
insurance, therefore they are unable to propose or bid on the larger projects unless the prime can
waive the requirement. [ST#5]
The Caucasian female manager for an MBE/DBE/SBAcertified engineering company said,
"[Insurance issues] are twofold. [Insurance is] one of the biggest expenses we have, but we need to
have insurance to protect us. It's a challenge to be sure we have enough insurance to cover
ourselves but be able to afford it at the same time. We haven't had a problem getting insurance at
the usual $1 million level. However, some agencies seem to be going toward higher levels of
insurance." [WSDOT#9]
The Black American owner of a DBEcertified trucking and specialty contracting company said, "It's
a barrier because of the price." [WSDOT#36]
When asked if insurance requirements are a barrier, the Black American owner of a noncertified
consulting firm said, "Yes, it is. When the governor came to speak to the Chamber of Commerce
about two years ago, I told her that bonding and insurance has become an issue for small
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 51
businesses, but I don't know if anything was ever done. In the private sector, sometimes insurance
can be an issue but not like the public sector." [WSDOT#4]
The Asian Pacific American owner of a noncertified engineering firm said that he believes
insurance requirements impact small businesses. He said, "That is expensive. Professional liability
insurance is expensive. General liability insurance is much more affordable, but yeah, that is an
added cost to do business." [PS#3]
When asked about insurance requirements being a barrier, the owner of a certified Black
Americanowned trucking company said that the cost of insurance has gone up. He said that,
"Sometimes [Blackowned firms] are told very high prices for insurance to keep us from wanting
the job. There is not a set standard. It can vary depending on who you are." [PS#6]
Some interviewees indicated that the cost of obtaining insurance was so high as to affect the
contracts that they pursued. For example:
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"I have $1 million in professional liability insurance that costs about $40,000 [annually]. Lately,
some agencies have increased [the] liability insurance requirement to $2 million, and that has
significant impact on costs to do business. For me to get a $1 million increase in coverage might
cost another $15,000 [annually]. It's definitely a barrier because the insurance is not cheap." She
added, "When they ask for high [insurance] requirements, sometimes I can't even go after a
project." [WSDOT#1]
A few business owners noted that insurance requirements affected opportunities on subcontracts as
well as prime contracts. For example:
Although they did not report problems with insurance requirements for their company,
representatives of a large, majorityowned concrete company said, "There are a lot of
subcontractors that can't meet certain insurance requirements." [WSDOT#15]
The president of an engineering industry trade association indicated that there are a lot of "pass
through issues" that affect small businesses when dealing with insurance requirements. He said
that the problem lies in the fact that, in most circumstances, subconsultants cannot piggyback on
the prime consultant's insurance policy, which in turn makes it difficult for subconsultants to afford
required insurance. In addition, he said, "Some agencies are asking for insurance on things that are
uninsurable." [WSDOT#38]
One owner of a DBEcertified business stated that insurance was more difficult for DBE firms because
of a lack of history in the industry. The Asian Pacific American owner of a DBEcertified contracting firm
said, "To get insurance, you have to build a reputation for your firm to show that you are a stable firm
and that you know the work. Just historically, there have not been a lot of DBEs like that, because they
have not been around as long [as majorityowned firms]." [ST#9]
One manager of a WBEcertified business stated that the crash of the market had made it more
difficult to obtain insurance. The Caucasian manager of a WBEcertified construction firm said that the
crash of the market made it more difficult for his firm to obtain insurance. He said that this is the case in
the construction industry in general.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 52
He went on to say, "It's gotten tougher in the insurance business by far. Insurance is just suffocating." He
explained that this is a big problem in the construction industry, because liability insurance
requirements are very large. He explained, "I think it would be good for smaller businesses to have a
little bit of a break or subsidy for a certain period of time [to get started]." [PS#2]
Prevailing wage requirements. Contractors discussed prevailing wage requirements that
government agencies place on certain public contracts.
Some DBEcertified firms said that project labor agreements on certain jobs presented a disadvantage
for DBEs and other small businesses that are not union employers. For example:
When asked if working with unions is a barrier, the Black American owner of a DBEcertified
trucking and specialty contracting company said, "This is a very big barrier. There is billions of
dollars of state work going on that require DBE participation, and some of these jobs require a
project labor agreement. It requires small businesses to sign a contract [with a union] that is not
required on a federallyfunded job. When the union is involved, the dues just destroy the small
businesses." [WSDOT#36]
The Asian Pacific American owner of a DBEcertified contracting firm stated that, "[Unions] pay
prevailing wages, and many DBEs are not familiar with having to pay that high wage weekly. Some
DBEs are not experienced enough to understand the costs of working with unions, and for a lot of
public works jobs, you have to pay those costs. A lot of [DBEs] do not have the funding for it."
[ST#9]
The female owner of a WBE/DBE specialty construction firm wrote, "We really have to do
something about the project labor agreement situation. It is clearly discriminatory. It should be free
choice, and it is not. Washington State wage rates are already established, and both union and open
shops are responsible to pay the same amount." [WT#4]
The Black American owner of DBE/MBEcertified concrete firm stated that nonunion contractors
feel that "unions have overstepped their bounds with project labor agreements. Other contractors
have told me that they don't like certain components of the [project labor agreements], such as
hiring workers from the unions that don't have a vested interest in their business." He continued by
saying that he thinks it is possible to have a project labor agreement that does not negatively
impact nonunion contractors. He said, "Unions do not have any vested interest in minority
contractors." He stated that the unions do not have to negotiate with nonunion contractors. He
said, "Unions sit down with the owners and tell the owners, 'This is what we can do.' The agencies
come to us and tell us, 'This is the best we can do.' We have not had the chance to sit down with the
unions." He stated that unions are unwilling to create project labor agreements that do not have a
negative impact on minority owned firms.
The same interviewee said that he would like to see more people of color in the unions and a way to
work with contractors that are late paying in paying their trust payments. He said, "There must be a
way to work out the liquidated damages, interest, and lawyer fees that have to come out of our
pockets." He stated that if more minority contractors were at the table when those discussions take
place, "our contracting experience could be better." [ST#1]
The Black American owner of a DBEcertified specialty contracting company said, "We are non
union. If we have a job that requires union [affiliation], we sign up with that union for that one job,
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 53
and it hurts to send that money in. It's kind of like the mafia making a restaurant pay for
protection." [WSDOT#35]
When asked if working with unions can be a barrier, the Subcontinent Asian American male owner
of a DBEcertified engineering firm said he has heard of a lot of engineering companies that have
had to pay higher rates for surveyors on constructionrelated work. He said that although this
situation has not affected his business, it is a concern in the survey industry. [WSDOT#10]
A few interviewees explained other barriers concerning union requirements, and other negative
experiences. Examples of those comments include the following:
Representatives of a large, majorityowned concrete company said, "One of the obstacles for us is
the apprentice requirements [the union] has on some projects. That is also a problem with the
subcontractors, [who are not] able to supply apprentice hours on a project. Not only can they not
supply the hours, but they don't know how to do 'good faith efforts'. So, that's an issue dealing with
subcontractors. In our [company's] solicitations to subcontractors, [it] specifically says that you
have to meet apprenticeship goals of the contract. That could be 'good faith efforts.'" [WSDOT#15]
A project manager for a majorityowned general contracting firm said, "In unions, there are so
many other variables and politics going on, and it can be hard to understand some of the underlying
issues for [union] disputes. Some MBEs and WBEs can get sideways at times, and relations can go
sideways. If you have a subcontractor that is having a hard time paying bills, then the union guys
get frustrated with that subcontractor for not getting checks out timely or correctly or for not
paying benefits. Those things can get blown out of proportion, and it can add another challenge to
being profitable while you are doing your work." [ST#7]
The Black American owner of a DBEcertified trucking and specialty contracting company said that
he signed up with the union in his previous company because of assurances from the union officials
that there was constant unionaffiliated trucking work. It worked well for the first month, but then
things slowed down. He went to the union officials, who told him that the union could not interfere.
He said, "I ended up shutting that company down because of that." [WSDOT#36]
The Asian Pacific American owner of a DBEcertified contracting firm said, "[Unions] add another
layer of administrative issues that you have to go through." [ST#9]
Some business owners and managers said that being a nonunion company had not been a barrier to
obtaining public sector projects. For example, the project manager for a WBE and DBEcertified
environmental services firm stated, "In my experience, [working with unions] has been a really good
experience. Teamsters seem like they are a little bit harder to work with." He indicated that he did not
believe working with unions was a barrier for small businesses. [ST#10]
Licenses and permits. Certain licenses, permits, and certifications are required for both public and
private sector projects. The study team discussed whether licenses, permits, and certifications
presented barriers to doing business for firms in the construction and constructionrelated professional
services industries.
Many business owners and managers reported that obtaining licenses and permits was not a barrier
to doing business. [For example, ST#3, ST#6, WSDOT#4, WSDOT#15, WSDOT#27, WSDOT#33,
WSDOT#35, and WSDOT#36]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 54
Some interviewees indicated that sometimes subcontractors can rely on prime contractors to obtain
necessary permits. For example, the Caucasian coowner of a noncertified WBE construction company
that primarily works as a subcontractor did not report licenses and permits as a barrier. He said that the
work is permitted by the owner or general contractor, and that his company does not have to deal with
those issues. [WSDOT#17]
Some interviewees said that obtaining permits can be a barrier. For example:
The project manager for a WBE and DBEcertified environmental services firm stated that
"[Obtaining licenses and permits] is a pain, and if it is part of [the small business'] obligation and
not the owner's, it could definitely be a barrier. They probably do not have the experience obtaining
[licenses and permits]." [ST#10]
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"Being a minority doesn't contribute to any issues about licenses and permits. Getting a permit
from local agencies is very onerous for small projects. That is for everyone, not just small
businesses." [WSDOT#1]
The Black American owner of a DBE/MBEcertified concrete firm said that some licenses are
difficult to obtain due to a lack of good credit scores. [ST#1]
Other unnecessarily restrictive contract specifications. The study team asked business owners
and managers if contract specifications, particularly on public sector contracts, restrict opportunities to
obtaining work.
Many owners and managers indicated that some specifications are overly restrictive and present
barriers. [For example, ST#10 and WSDOT#36] It appears that some businesses choose not to bid or are
precluded from bidding due to what business owners and managers perceive to be overly restrictive
contract requirements. Examples of those comments include the following:
A project manager for a majorityowned general contracting firm said, "I have seen [projects] that
are cumbersome to bid [on] because of the amount of paper work that you have to put together or
the hoops that you have to jump through to figure out what you are bidding on. I have seen that,
and I think that it takes a lot more time [for a small business] to get through some of the things that
we have to do on the public side. If [an agency] project has 1,000 drawings and couple of spec
books that are four inches thick, it can definitely be a challenge for a small business to understand
what is covered in there." [ST#7]
The Hispanic American coowner of a DBEcertified construction company said that restrictive
contract specifications are a barrier. He said that there is a certain certification that has been
required for a number of projects, and that only one construction firm has that certification in the
State of Washington. He said that this makes it impossible for his firm to obtain the work.
[WSDOT#26]
The Native American owner of a DBEcertified electrical contracting firm said that he has
experienced unnecessary and restrictive contract specifications when performing military
contracts. [ST#2]
The Black American owner of a noncertified consulting firm said that contract specifications can
be a barrier in the public sector. He said contract specifications "can be complex and convoluting
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 55
and confusing. Small companies, like mine, need to know who to reach out and know who is the 'go
to' person." [WSDOT#4]
The Asian Pacific American owner of a DBEcertified contracting firm stated, "Sometimes jobs have
unrealistic personnel or experience requirements. Some projects will say that, 'You have to have
experience working on five jobs of a similar size and scope, and your project manager has to have
ten years of experience.' It is like those jobs are tailored to just the companies that [the agency]
wants to bid on the project. I have experienced that on [Sound Transit's] tunnel jobs." [ST#9]
When asked about unnecessarily restrictive contract specifications being a barrier, the Caucasian
general manager of a noncertified womanowned general contracting company said, "Yes, [that is a
barrier], particularly with federal agencies." [WSDOT#33]
When asked whether unnecessarily restrictive contract specifications and bidding procedures
could be a barrier for small businesses, a manager for a majorityowned geosynthetics supply firm
said, "If there are requirements for a certain amount of experience, that could be somewhat
restrictive, but I think it would just depend on how long [the firm] was in business and what kind of
work they have been doing." [ST#8]
Although also examined separately in Appendix J, indemnification and insurance requirements on
public sector contracts were frequently mentioned as contract specifications that restricted access to
public work. For example:
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"Indemnification and insurance specifications [are unnecessarily restrictive and are a barrier to
small business]. In addition, it's a common requirement on the big projects to demonstrate that the
prime contractor and subconsultant have teamed together before, and that makes it difficult for
'fresh blood' to come in." [WSDOT#1]
The Black American owner of an MBE/DBEcertified engineering company said, "I find myself, at
times, in a position where [the agencies] are asking for insurance limits that far exceed what a small
business can provide. I have to negotiate with the prime contractor and ultimately with the agency
to reduce that requirement so that I can do the work. It's a lot of work, but I am generally able to get
it done." [WSDOT#8]
Some business owners and managers did not identify restrictive contract specifications as a barrier to
doing business. [For example, WSDOT#35] Some examples of those comments include the following:
The female owner of a DBEcertified specialty construction firm said, "I can't think of any
restrictions that affect my company. I think most of the restrictive specifications and procedures
affect primes more than subs. I think the more restrictions [concerning] quality there are, the
better the performance [the agency] will receive." [WSDOT#27]
The Caucasian vice president of a Hispanic Americanowned MBE/DBEcertified electrical
contracting firm commented, "That's a matter of opinion, but generally no." [ST#3]
Bidding processes. Interviewees shared a number of comments about bidding processes.
Many business owners said that bidding procedures presented a barrier to obtaining work. Examples
of those comments include the following:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 56
The Black American owner of an MBE/DBEcertified engineering company said, "Filling out all the
small works rosters is redundant and can be a barrier." [WSDOT#8]
The Asian Pacific American owner of a DBEcertified contracting firm stated that, "The [bidding
process] requires a lot of overhead. If you are a sole proprietor, like I am, you are trying to run your
business, run your crew, trying to bid work, and trying to find work. There is no way you can
compete with larger firms if you are trying to run your business and find work. That is why big
business keeping getting all of the work, and the small businesses get none." [ST#9]
The Black American owner of a noncertified consulting firm said, "Yes, [the bidding process] is a
barrier because the volume of requirements is a problem for small businesses. Even when [public
owners] say, 'Find a prime contractor to partner with,' we need to know the mechanism to do that."
[WSDOT#4]
The Asian Pacific American owner of a certified engineering firm said, "I have given up on trying to
obtain work with King County. [King County has] processes and paperwork [that] are costly, and
my firm can't get that back in profit, because the profit margins are very low." He went on to
explain that profit margins tend to be higher in the private sector. [WSDOT#3]
The president of an engineering industry trade association indicated that the contracting process in
the public sector takes much more time than it should. He said, "Why should it take a year to
negotiate a contract? It wouldn't seem to me to be in anyone's best interests to spend that level of
resources on negotiating. A lot of what we do as an organization is to put into place both best
practices and laws to make that process go more smoothly for everybody."
He also indicated that public agencies are becoming more risk averse, which further slows down
the contracting process. He said, "Public agencies have been gradually getting more and more risk
averse to the point where they've been asking consultants to indemnify them against anything that
happens, whether or not it was [due to] the negligence of the contractor. That negotiation would
add months to the [process]. In many cases, firms would walk away from the contract, and then you
would start the negotiation process all over again." [WSDOT#38]
When asked about the bidding process being a barrier, the Black American owner of a DBE
certified construction company said that the bidding process is a barrier for his business, because
he invests significant resources in submitting bids to prime contractors, and he rarely hears back
from them. He said, "[Prime contractors] always ask for your [certification] numbers, and then they
never give you the job. That happens on a regular basis." He went on to say, "You do all your bids.
You pay your estimator. You go through the process of putting [the bids] together in the packet.
You submit it to them, and that's it! You don't know who got the job. You don't know if they're [self
performing on] the job. You don't know anything." [PS#4]
When asked about the bidding process being a barrier, the owner of a certified Black American
owned trucking company said that often, prime contractors are not responsive to bids submitted
by subcontractors. He said, "[Prime contractors] take your bid and don't respond to it. If they put
something out to bid on, and you respond as a sub, they should be required to respond back to you.
Right now they just take your bid and don't bother responding." He went on to suggest that, "The
bidding process should be monitored more closely." He then said that prime contractors should be
required to use the subcontractor that they had on their proposed project team. [PS#6]
When asked about the bidding process being a barrier, the Hispanic owner of an uncertified
construction company said that the bidding process is more difficult in construction than in other
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 57
industries. He said, "[Bidding is] easy with the fishing and boating industry but difficult on the
construction side." [PS#7]
Several interviewees reported no problems with the bidding process. [For example, WSDOT#32,
WSDOT#33, WSDOT#35, and PS#2]
Nonprice factors public agencies or others use to make contract awards. Public agencies
select firms for some constructionrelated contracts and most professional services contracts based on
factors other than price. Many firm owners and managers made observations about those nonprice
factors.
Many business owners and managers had complaints about factors that public agencies use to make
awards. For example:
The Asian Pacific American owner of a DBEcertified mechanical engineering consulting firm said,
"I have gone after [an] indefinite quantity [of] contracts with the State of Washington and King
County, but that work always goes to firms that have previously worked there. Even though there
are aspirational goals, it always comes down to the project managers selecting the consultant. If
[project managers] don't know you, they're not going to [choose] you." He continued by saying,
"Going through King County, trying to get work has been really tough and not successful."
[WSDOT#3]
The Black American owner of an MBE/DBEcertified engineering company said, "That's kind of a
hard one. It always seems like the bids you feel most confident about are the ones that you lose. I
think the agencies do a decent job of telling us where to focus, giving [bidders] questions to prepare
for interviews. I think the agencies have been doing a better job of trying to make the judging a little
more standardized." [WSDOT#8]
The Asian Pacific American owner of a noncertified engineering firm said, "Consultants don't bid.
On public sector projects, there's no bidding. It's supposed to be qualificationsbased. I explained
that qualificationsbased means size. It's impossible for small firms. If you are competing with large
firms, right off the bat, you're disqualified." He said it's an issue for all small businesses, not just
MWBEs. [PS#3]
A representative of a DBE/WBEcertified consulting firm said, "Although we employ very capable
staff, we can't compete against large firms because they have larger staff with more depth. There
was solicitation recently by the Port of Tacoma for oncall environmental services for 2014 through
2016. Twentythree companies responded to the solicitation. The Port selected the top four firms.
All of the top four firms were large, multimillion dollar companies. Even though we have performed
oncall services in the past, our firm ranked ninth out of the 23 firms. There was only one other
small business that ranked in the top 10, but they did not make it to the top four. So, even with four
years of oncall experience with the Port of Tacoma, and numerous years of oncall experience with
other clients, our firm was not ranked in the top four because we don't have as many staff, and we
don't have the depth of the large firms that responded to the Request for Qualifications (RFQ)." She
went on to say, "We can compete against large firms if selection is based on cost." [WT#14]
Some business owners said that experience requirements were a barrier to doing business with public
agencies. [For example, ST#1] Other examples include:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 58
The Subcontinent Asian American male owner of a DBEcertified engineering firm said that he finds
it difficult to compete in the structural engineering field. He said, "A lot of these proposals are
qualificationbased selection process. We are a small firm. It's hard to go in and compete with the
huge backlog and experience that these other firms can show as their skillsets." [WSDOT#10]
The Asian Pacific American owner of a DBEcertified engineering consulting firm said, "My firm has
experience dealing with various public agencies. I have been told that a reason I was not selected
[for a project] is that I lacked familiarity with the client. [Because of] a lack of familiarity with some
of the project managers, such as at King County, I probably don't get selected. If you look at who
keeps winning, it's only a few firms, and [those firms are] seen all over again." [WSDOT#3]
The Caucasian general manager of a noncertified womanowned general contracting company said
that prequalification requirements can be barrier. She said, "[They can be] on some projects that
require different kinds of prequalifications, like working at Fairchild Air Force base." [WSDOT#33]
The Asian Pacific American owner of a noncertified engineering firm said that prequalification
requirements can be a challenge for small firms. He said that, often, the prequalification
requirements are not relevant or necessary to the type of work being done. He said, "[For example,
an agency will] ask you, 'Have you worked in hospitals before?' If your answer is no, [the agency
says,] 'Ok, then you're not qualified.' Then my retort to that is, 'What is the difference between
foundations to hospitals and office towers? There's no difference.' Yet, they pose the question to
you as, 'Do you have hospital experience?' I try to explain to them that, in geotechnical engineering,
it is applicable to everything. If you know the theory you can apply it to all sorts of foundations. It's
not specific to a port facility or specific to a hospital facility." [PS#3]
Some interviewees reported no barriers related to experience and expertise. [For example,
WSDOT#33]
Timely payment by the customer or prime. Slow payment or nonpayment by the customer or
prime contractor was often mentioned by interviewees as a barrier to success in both public and private
sector work.
Most interviewees said that slow payment by the customer or a prime contractor is an issue and can
be damaging to companies in construction and constructionrelated professional services industries.
Interviewees reported that payment issues may have a greater effect on small or poorlycapitalized
businesses. [For example, WSDOT#28] Examples of such comments include the following:
The president of an engineering industry trade association said, "Timely payment is probably the
biggest barrier, both for design work as well as for construction. Payment from the main client
holds up and trickles down slowly to all the designers and subs. In some cases, financing from the
client does not allow for payment until completion. This has forced private companies to, in
essence, be the bank and carry A/R (Accounts Receivable) for way too long." [WSDOT#38]
The Black American owner of a DBE/MBEcertified concrete firm tries to work for contractors that
care about prompt payment. He said, "I don't think prompt pay really exists because I have not seen
it." He also stated that subcontractors do not get paid until the prime contractor is paid by the
agency. He said, "This behavior destroys the subcontractor's spirit." [ST#1]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 59
A participant at an association meeting shared feedback from the local construction contracting
community on payment issues. He said, "Excessive slow pay continues to be an issue. It seems that
DBE contractors are put into a position where they are told and taught you need to develop
relationships with prime contractors in order to be more successful, but oftentimes they are put in
a position of excessive slow pay where they are having to go and [try] to maintain a relationship
but also being asked to get paid."
The participant continued, "Tied to that is being asked to perform work without receiving change
orders and [the prime contractor says], 'Here is my hand shake. Trust me, do the work, and you'll
get paid on it.' Of course, down the road it becomes a long arduous process. [Another discussion
participant] mentioned earlier where companies two years later are still trying to get paid on work
that they have done to the satisfaction of everyone, but the money is being held by the primes. Tied
to that too is the cost of legal fees. Small contractors can't go out and hire attorneys." [DBEP#1]
A project manager for a majorityowned general contracting firm stated that "[Untimely payments]
are absolutely a barrier for small businesses. Money is king. We are in a paywhenpaid business,
and the owner holds the keys to that. There might be four or five tiers of subcontractors, so it can
be a long cycle, two months maybe, before a sub tier gets paid. If a sub tier has extended labor or
bills to pay, that can be a stretch for them, so we have stepped in when an owner has not paid on
time, or when they need to make payroll." [ST#7]
The female owner of a DBEcertified construction company indicated that, in general, prime
contractors are not concerned with paying subcontractors on time, and the protections that are in
place for subcontractors are ineffective. She said, "[General contractors] will back charge you, they
will short pay you, they will delaypay you, and these are on [DBE condition of award contracts.]
There're no teeth to the protections for the DBE subs to actually get paid."
She described a situation on a recent contract where the prime contractor was not only paying her
late but was also not paying her the correct amounts. She said, "Just by looking at some of the bid
items, I saw that they shortpaid me $46,000 just in looking at two months." [WSDOT#40]
When asked whether slow and nonpayments were a barrier for small businesses, a manager for a
majorityowned geosynthetics supply firm stated, "I would think so. [Small businesses] are less
able to take on that burden." [ST#8]
The Hispanic American owner of a DBEcertified engineering firm said that timely payment was not
a barrier, but that it takes work to get ontime payments. He said, "It has to be part of your
foundation. You have to hire someone who's good at [encouraging timely payments]. I'm not going
to do it. Bring someone on the team, or hire a firm to do that." [WSDOT#7]
When asked about timely payment being a barrier, the Caucasian manager of a WBEcertified
construction firm said that he has had issues getting paid on time, and that it is a hassle, but not a
barrier for the business. [PS#2]
When asked if he has experienced issues in being paid in a timely manner, the Asian Pacific
American owner of a noncertified engineering firm said, "Yes. It's always an issue on public sector
work, of course it's always the layers are you first tier, second tier, third tier. And if the first tier
contractor gets paid, then they pay within 30 days. The next one pays within 30 days. If you're
number four down the list, it could be months before you get paid. That can happen. I think the
agencies are cognizant of that and have gotten better, but we're not part of the process on that
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 60
anymore. Just dealing on the private side then, there [are] clients that pay and clients that don't
pay. And clients that don't pay, we'll never work for them again." [PS#3]
When asked about timely payment being a barrier, the owner of a certified Black Americanowned
construction company said that this has been a major issue for his business. He said, "We have gone
100 days without payment. The City has said they would do something about this, but we are
waiting to see it in action, because with the cost of living going up the way it is, we can't keep these
businesses going." [PS#6]
A few interviewees identified problems with agencies, not prime contractors, paying on time. For
example:
The Black American owner of an MBE/DBEcertified engineering company said, "Typically, working
on the municipal side, getting paid by the prime is generally not that big of a deal. There might be a
hiccup here and there. Getting paid from the agencies, that can sometimes be more difficult. If I am
a prime, I can sometimes expect payment to take 90 days." [WSDOT#8]
The Native American owner of a DBEcertified electrical contracting firm stated, "At Sound Transit,
we have had good luck with payment, but at Port of Seattle we have been treated horribly. Overall,
it has been pretty good." [ST#2]
Interviewees were also concerned about timely payment for change orders on contracts. For example:
A participant in a trade association meeting representing an educational institution that hires
contractors for statefunded and federallyfunded projects reported, "I did have an example last
year of a subcontractor who had lots of issues with change orders. The prime would [cite] the
University as doing the change order, and the University [would] say, 'That doesn't sound right.'
Then it went back to the subcontractor, and then her portion was even smaller. She felt like she was
doing the work for almost free. There was a lot of confusion in terms of [where] the change orders
came from. Was it the University, or was it the prime? But her contract was with the prime versus
the State, so there are all of these issues going back and forth. She just said it's not worth her time
and energy, and she will try not to work with that prime again." [DBEP#2]
The Caucasian coowner of a noncertified WBE construction company said, "The biggest problem
is change orders and making sure that the extra work gets processed, whether it's a state or private
agency, so that [the payment is not delayed]." [WSDOT#17]
Representatives of a large, majorityowned concrete company said, "We don't get timely payment
because of all the paperwork requirements, which then affects the subcontractors that work for us.
A lot of smaller contractors rely on that cash flow to basically continue to operate the business. The
agencies will let companies bid the job and not supply training needed to do the paperwork that the
agency needs [for timely payment]. It seems that DBE companies should be required to learn how
to fill out the required paperwork before being allowed to bid on some of this stuff. So we end up
being the trainer just so we can get paid." [WSDOT#15]
A few business owners and managers said that payment was sometimes more difficult on private
sector contracts than public sector work. Examples of such comments include the following:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 61
The Caucasian female manager for an MBE/DBE/SBAcertified engineering company said, "On the
private side, we deal with slow payment a lot more, especially when the economy is not good. On
the public side, where most of the work is, when we are the prime, things are much better. When
we are a sub, we just need to get the paperwork in on time to the prime. We have not had issues
about nonpayment." [WSDOT#9]
When asked if timely payments are a barrier, the Caucasian general manager of a noncertified
womanowned general contracting company said, "For the most part, public works do not have a
problem with that. There are legal requirements. That's the reason we do public work."
[WSDOT#33]
However, some other interviewees indicated that slow payment was much more of an issue on public
sector contracts. Examples of comments concerning timely payment on public sector work include the
following:
The Black American owner of a noncertified consulting firm said, "This is not a problem in [the]
private sector. Payment is prompt and in accordance with the contract terms, because primes
follow the contract." [WSDOT#4]
When asked about timely payment being a barrier, the Hispanic owner of an uncertified
construction company said he typically receives payment between 10 and 21 days after the job is
completed. He said that he used to get paid more quickly on State jobs, but now, due to a new
billing system with the State, payment has slowed considerably. When giving an example, he said,
"[The company we were working for] could pay quicker before, but now the State wants to be
billed just once a month. This new system allows the State to better control its cash flow." [PS#7]
A number of interviewees specifically mentioned "dishonesty" or unethical practices of prime
contractors when discussing difficulty of being paid as a subcontractor. Some interviewees pointed out
how prime contractors could unfairly take advantage of subcontractors:
A female manager of a Native Americanowned, DBEcertified construction company said, "Prime
contractors include a provision in the subcontract that the prime isn't obligated to pay until it is
paid by the owner. The prime contractor can always find something to claim the subcontractor
didn't do or they say they can't find documentation." [WSDOT#32]
The Black American owner of a DBEcertified trucking and specialty contracting company said, "[A
major prime contractor] took me for half a million dollars. [The prime contractor] knows I am a
small business, and [it] took advantage of [that]. I worked hard to do that work. I did it on time, on
spec, got the paperwork signed, and [the prime contractor] deliberately knew that [it] was not
going to pay me. A small firm doesn't have access to attorneys to protect [its] interests, and the [big
prime contractors] know that I doesn't have that capacity. When it comes to that, the prime
contractors take advantage of [the small firm]. I didn't have the capacity to take legal action."
[WSDOT#36]
The Asian Pacific American owner of a DBEcertified engineering firm reported that he had trouble
getting paid on a particular government contract. He said, "Our work has been done but [it has
been] over 120 days without payment. What I understand from the agency is that they have paid
everything to the prime. [The agency representative said], '[The agency] doesn't deal with subs
because [the] contract is with the prime.'" He lamented, "I have no power to go to the agency and
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 62
say we're not getting paid." He went on to say, "Not getting paid in a timely manner is a problem for
all subs, not just woman and minorityowned businesses. It's a function of the status of the prime.
If [the prime contractor] is having financial issues, they don't pay [the] subs."
The same interviewee went on to say that interest penalties on prime contractors who do not
promptly pay their subcontractors are not effective. He said, "[The prime contractors] say, 'If you
want your money, you have to waive that interest percentage.' What can I say at that point? I just
have to wait." He said that generally, that practice has been occurring with both public and private
work. [WSDOT#3]
One interviewee explained the connection between slow payments and the ability to obtain financing.
The female owner of a DBEcertified specialty construction firm said, "It's so hard to explain to a bank
when you're trying to get a loan the reasons for [uncollected receivables] during a year. I'm not perfect
[in understanding or seeing all requirements in a contract], but I've learned from every one of them.
There are just as many opportunities for a general contractor that wants to make some or more money
on the contract to find a reason to squeeze [its] subcontractors. I've talked to subcontractors who have
just rolled over when this happens. I've gone to extremes of seeking attorneys and DBE support services
[to protect my company in that situation]. In tough economic times, prime contractors know that a
subcontractor will pretty much take what [it] can get in order to meet payroll. There are [some prime
contractors] that wait until the end of the contract to squeeze subs." [WSDOT#27]
Potential for discrimination against MBE/WBEs. The study team asked minority and female business
owners whether their firms were affected by slow payment or nonpayment because of discrimination.
Although some said that slow payment was due, at least in part, to race or genderbased discrimination,
most did not think that it was due to discrimination. Examples of those comments include the following:
When asked whether any race or genderbased discrimination affects the timeliness of payments,
the female owner of a DBEcertified construction company replied, "Oh yeah, because [general
contractors] know that's how they can hurt you. If you're a DBE, there's a perception, and it's
probably justified, that you don't have the financial wherewithal to do the job. The best way you kill
off a sub of any kind, let alone a DBE sub, is you don't pay them." [WSDOT#40]
The Hispanic American coowner of a DBEcertified construction business said that his firm is
sometimes targeted for slow payment by a prime contractor, but that he does not think it is
because his firm is minorityowned. [WSDOT#26]
The female owner of a DBEcertified specialty construction firm said, "I don't think contractors
squeeze more money from small businesses based on race or gender. [It is done] to all small
businesses, but not all contractors are that way." [WSDOT#27]
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"I don't think that it's directed to us being a minority firm, I think it's directed at us being a
subconsultant. [Unfortunately, small firms] don't have any recourse. We just have to wait [for
payment]." [WSDOT#1]
The owner of a certified Black Americanowned construction company said that a colleague of his,
who offers drywall services as a subcontractor, has experienced discrimination in payments for her
work for a large private construction company. He explained that the standard process for
receiving payment for construction jobs is for the subcontractor to submit a payment request form
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 63
to the prime that describes the work that is completed. He said, "The prime is supposed to walk the
job with you to verify what you're saying is done, and they check it off. They pay you according to
what you've done." He said that the prime contractor that his colleague is working for is not
following this procedure. He said, "[The large private construction firm] gave her the [payment
request form] and told her what they're going to pay her." He said that the private construction
firm "didn't do walkthroughs with her when she submitted her [payment request form]." He said
that, instead of the subcontractor selfreporting the work that is finished and requesting payment
for that work, the prime contractor told his colleague how much they would pay her. The amount
they offered was much less than the amount of work her firm had completed. He said that this is
blatant discrimination on the part of the prime contractor. He said that the discrimination could be
related to race, gender, or ignorance, but that he has no way of proving which it is related to. He
said, "It's happening, but I don't know why." [PS#4]
Some interviewees said that prime contractors did discriminate against minorityowned firms. For
example, when asked if his company had experienced discrimination in payments the Black American
owner of a DBEcertified trucking and specialty contracting company said that he sees discrimination
when a prime contractor refuses to pay invoices, and the small subcontractor is forced to accept a
smaller amount or get nothing at all. He said that he believes that this is blatant discrimination against
MBEs. [WSDOT#36]
One firm indicated timely payment was not an issue.
Taxes. Interviewees discussed how taxes can influence business.
One interviewee indicated new taxes could present a barrier to subcontractors. The president of an
engineering industry trade association explained how a new tax is a barrier to subcontractors. He said
subcontractor markups and DBE goals make it more difficult for firms to be profitable, because of the
local Business & Occupation (B&O) tax. He said, "A firm that subcontracts out work has more costs than
it would if it didn't, [because of the B&O tax]. We have a gross receipts tax called the Business &
Occupation tax. If I got a $100 contract, and I get $100 in revenue, I pay the gross receipts tax on that
$100. If got a $100 contract, and I perform $20 of it, and I subcontract out [$80 of it], I still pay tax on the
$100. It's a huge disincentive to subcontract." He went on to say that unless there is some way to
recapture those costs and the additional risk of subcontracting out work, there just is not any incentive
to subcontract out work. [WSDOT#38]
Experience with Port Processes. In addition to factors common to contracting among public
agencies in Washington, interviewees had comments specific to Port processes.
A few firms commented that the Port's bidding process was complicated and difficult. For example:
The owner of a certified Black Americanowned construction firm said that he made a few attempts
to work with the Port, but that the process is too complicated. He said, "It was so complicated the
few times we tried. We decided to spend our time going to other places doing other things." [PS#6]
The Caucasian coowner of a DBEcertified engineering firm said that his firm recently bid on a
project with the Port. He said that the bidding process was a difficult one. He said, "We put together
an SOQ and RFQ for the Port. It was a horrible, long process. We got interviewed but did not get the
job." [PS#9]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 64
One firm noted it was harder to work with the Port compared to other public agencies. When asked
what he thought about working with the Port as compared to other public agencies, the Caucasian
manager of a WBEcertified construction firm said that he found the Port to be one of the most difficult
public agencies to work with. He said that his firm has worked for the military, the FBI, the Department
of Defense, on a nuclear submarine base, a naval ship yard, the park zoo, and school districts. He said,
"The only place I've ever worked that is anywhere near as complicated or difficult to work with was the
Woodland Park Zoo. The Port of Seattle is the most byzantine, most difficult, most overly complicated
place to work of anything that I've ever done." When asked why he thought this was the case, he
explained, "They have an engineering staff, a maintenance staff, and something called Facilities and
Infrastructure that is sort of a mongrel of a building department, construction management, and
engineering."
He went on to explain that, "Any one of those groups that I just named can stop your construction at any
time for any reason or none. It happens all the time. You have to build it into your pricing." He said that,
because of this, it is very difficult to find subcontractors who want to work at the Port. He said, "Most
guys have tried it once, and they say, 'Never again.' I went to go get a flooring subcontractor, and he said,
'I already paid to put new floors in the C Concourse. I'm not paying for them to get another.' He wouldn't
even bid the job." When asked if he has heard of other contractors having this experience, he said that
that he has heard of it happening many times. He explained that it keeps many small businesses from
working at the airport, but it doesn't affect large businesses as much. He said, "The big multimillion
dollar guys will come in, and they'll work in this kind of environment and fight it. We're too small. We
can't fight. The only thing we can do is try to learn how to get along with it. So there are only a few small
contractors who work specifically at the airport. It keeps other people out." [PS#2]
One interviewee had mixed experiences working with the Port. The Asian Pacific American owner of a
noncertified engineering firm said that he had mixed experiences in working with the Port. He said
some people were very eager to try new things and improve processes, while others were very guarded
about their positions. He went on to say that he attended a teambuilding event that included a retreat to
eastern Washington where they went crosscountry skiing, soaked in the hot tub, drank wine, and built
the team that way. He added that the Port wanted input, but his "direct team leader at the Port tried to
control the entire process. It was supposed to be an independent input, but our team leader wanted
everything to be run through her. Then, of course, you were very guarded and [could make] no negative
comments toward her." He added, "I didn't like that process because it was so controlled. This person
had control issues." [PS#3]
A few business owners felt that the Port continually awards contracts to the same firms. For example:
The Caucasian coowner of a DBEcertified engineering firm said that the Port tends to hire the
same engineers for every project. He went on to say that most engineers are eager to work for the
Port so that they can list those projects on their resumes. [PS#9]
A representative for an environmental consulting firm said that he feels that the Port uses the same
contractors repeatedly, and that many small businesses are not given opportunities to work with it.
He said, "In the community, the perception is that [the Port goes] back to the same [businesses]
every time. That's one of the big concerns I have as a small business. I have limited resources on
business development and things like that, so where do I want to spend my funds? Clearly, I think
the services that we provide, which are environmental, quality assurance, and quality control, align
well with the Port's contracts. I feel like I'm mature enough to step back and say 'Do I really have a
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 65
chance at winning any of this work when these guys go back to the same companies time and time
and time again?' I think they're aware of it more now than they have been in the past so there's a lot
of lip service, for lack of a better term. I hear a lot of chatter 'Oh yeah, we know that, we're changing
it'. But in reality they always go back to the same contractors. As an independent small business
owner I typically get to that point when it's a go/nogo decision on 'Okay, how much resources are
we going to spend on going after this contract?' That's usually the first fork in the road that we hit.
And I have to try and convince the upper management that, 'Hey we want to do work with the Port,'
and I get a lot of push back from the project managers and the tech guys that say, 'Yeah, we do too
but we do this exercise every time and it's the same result.'"
He added, "[The Port does] a pretty good job with outreach. Again, there doesn't seem to be a
connection between the outreach programs and then when the contracts are actually awarded or
who's shortlisted. I'm mature enough to understand that, just because you're a small business,
you're not going to win the work. You still have to demonstrate that you have the skills, and you
understand the scope of work." [RCF#2]
Several interviewees had comments about how small businesses are treated by the Port. For example:
When asked if he had any suggestions for how the Port should manage its DBE program or the way
it works with small businesses in general, the Caucasian manager of a WBEcertified construction
firm said that the whole system would be easier for small businesses to navigate successfully if it
were simplified. He said, "I think that everybody who's down on the smaller end of things, whether
[they are] disadvantaged, women, or just small, could use some simplifications. We just don't have
the overhead [or] the manpower, to deal with [a lot of bureaucracy]. That would help all the small
businesses." [PS#2]
The Asian Pacific American owner of a noncertified engineering firm said the Port should use small
business rosters and contract with small businesses directly. He said, "Instead of making this
inherently unstable and unfair, why not just have a small business roster that they deal directly
with, without having to have a small consultant go through a large consultant, especially in the
same discipline. If it's a large civil firm that hires a geotechnical [firm], there's no conflict. But if it's
a large geotechnical [firm] that has to hire a small geotechnical [firm], there's an inherent problem
right there. You're growing your competition."
He added, "My suggestion is very radical. Give 50 percent of all business to small and very small
businesses [where] large firms cannot participate." [PS#3]
The Caucasian coowner of a DBEcertified engineering firm said that he believes that the Port of
Seattle and the Port of Tacoma only want to hire large firms. He said, "They won't tell you why you
don't get hired." He said that he feels like the City of Seattle is the same way. [PS#9]
A representative of a DBE/WBEcertified consulting firm said, "I've attended several outreach
meetings held by the Port of Seattle for small businesses. What has surprised me every time I
attend is the number of really large firms also attending. Even though the meetings are supposed to
focus on small businesses, individuals from large firms seem to dominate the meetings. In the
future, I believe the outreach meetings should ensure that only small businesses attend." [WT#14]
A few interviewees criticized the Port's insurance requirements. For example:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 66
When asked about insurance requirements being a barrier, the Caucasian manager of a WBE
certified construction firm said that the Port's insurance certificate requirements are frustrating for
him. He said that he has filed the required insurance certificate with the Port every year. He said
that, even though he has already submitted this certificate, he is asked for a new one whenever he
is awarded a job at the Port. He explained that this is frustrating because it costs him money to
provide the form, and it takes more of his time than is necessary. [PS#2]
A business owner who submitted written testimony said, "The Port continues to push down on
minority small business consultant hourly rates and expects these small firms to pay for extraneous
Port insurance requirements for Professional Liability and Auto Liability. They think all consultants
can absorb these extra insurance costs without allowing for reimbursements or hourly rates
adjustments to pay for it. As a small firm, we do not have the huge revenue or resources to maintain
high insurance coverage. They need to allow MBE firms to only have $1 million liability coverage
for both PL and Auto/General Liability. If they want a firm to have higher insurance coverage, then
the Port is expected to pay for it. No exceptions." [WT#12]
One interviewee had several suggestions for how the Port can improve and simplify their operations.
When asked if he had any ideas for improving and simplifying operations at the Port, the Caucasian
manager of a WBEcertified construction firm said that the Port should eliminate the Facilities and
Infrastructure department. He said, "They have no reason to exist." He also suggested that the Port allow
construction managers to have more control over construction projects. He said, "Make [the
construction manager] the single point of contact and don't allow anybody else on the job site. If they've
got a problem going on, they don't come and talk to the contractor or the subcontractors. They go
directly to the construction manager, who is a Port employee. All the decisions [and] all responsibilities
flow from one source. That's how the rest of the world does construction." [PS#2]
One interviewee felt the Port's website was difficult to navigate. The Caucasian manager of a WBE
certified construction firm said that the Port's website is difficult to navigate. He said, "They use one
website for all of the Port. So travelers and people who are trying to find a job all go to the same website
to start with. Trying to get into the contracting section of it is not very well designed and people get
lost." He went on to say that a better website design would enable easier access for the useful resources
that the Port already offers. [PS#2]
One interviewee praised the outreach efforts of the Port's staff. A representative from an SCScertified
firm said, "In terms of reaching out to small businesses, Mian Rice is doing an outstanding job of being
where he needs to be. I go to five, maybe six meetings a month of different organizations, oriented to
being minority sensitive or womanowned sensitive. Mian is at every one of those meetings. He's writing
notes. He's taking down information. He's speaking with people. He's challenging people's thoughts on
the Port of Seattle. In that regard, as a positive, Mian's position is one that all of us know about. If we
have a question [or] if we've got a complaint, we go to him, even if he's not the right person. We know
that if we give it to him, it's going to go somewhere. That didn't always happen. That's probably been in
the last three years that Mian has taken that position and is looked to as the goto person at the Port of
Seattle." [RCF#3]
F. Allegations of Unfair Treatment
Interviewees discussed potential areas of unfair treatment, including:
Bid shopping (page 68);
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 67
Bid manipulation (page 70);
Potential for discrimination against minority and womenowned subcontractors (page 72);
Treatment by prime contractors and customers during performance of the work (page 73);
Unfavorable work environment for minorities or women (page 76); and
Approval of work by prime contractors and customers (page 77).
Bid shopping. Business owners and managers often reported being concerned about bid shopping and
the opportunity for unfair denial of contracts and subcontracts through that practice.
Many interviewees indicated that bid shopping was prevalent in the local construction industry. [For
example, WSDOT#28] Examples of those comments include the following:
When asked if bid shopping was a barrier to doing business, the Caucasian coowner of a non
certified WBE construction company said, "That's always present. It'd be really nice to figure out
how to isolate where it comes from. I mean, I have lost work [because of bid shopping]. [Other
companies' representatives have] come in five minutes before the bid opening and obviously cut
my price by just enough to get underneath [the bid submitted by my company], and work [has
been] lost that way." [WSDOT#17]
The male Black American owner of a DBE/MBEcertified concrete firm said, "Bid shopping happens
daily. This is a real barrier and is just part of the industry." He added, "Turning in numbers too early
gives primes time to shop your bid." [ST#1]
The female owner of a DBEcertified construction company said that she is aware of issues of bid
shopping and bid manipulation but that they are "very difficult, if not impossible to prove." She said
that she brought a legal case with her prior company in which they felt that they were the victims of
bid shopping, and they ended up settling out of court. [WSDOT#40]
The Native American owner of a DBEcertified electrical contracting firm stated that bid shopping
still goes on. He said, "If I suspect somebody is doing it, [then] I don't talk to them anymore.
Contracting is a people thing. It is all relationshipdriven and built. Bid shopping is a consequence
of the industry. Everybody does it." [ST#2]
The Hispanic American coowner of a DBEcertified construction company said, "We will get the
feeling from two or three contractors that we were low on a job, and [later] when we talk to the
general contractor's [project manager] he'll say, 'You're not low anymore.' Well, that word,
'anymore,' it's like, 'How'd that happen?' [The prime contractors] do it sneakily. It's done by talking
about scope. 'The other guy [included more work].'" [WSDOT#26]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said,
"Yes! Definitely bid shopping does exist, and it is frustrating." [ST#6]
The Native American owner of a DBEcertified construction company wrote, "We have also
experienced the situation where our bids have been solicited by general contractors, but solely so
the general contractor could use our price as leverage to obtain a lower price from the general
contractor's 'preferred subcontractor.' In fact, there is one company we no longer bid to because of
this sort of bid shopping." [WT#5]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 68
The Asian Pacific American owner of a DBEcertified contracting firm stated, "I think that [bid
shopping] goes on, but it is hard to prove it. [Bid shopping] can be as simple as a phone call where
an estimator asks, 'How does my bid look?' and the prime will tell him that he needs to come in five
percent cheaper. That happens quite a bit." [ST#9]
When asked about bid shopping, representatives of a large, majorityowned concrete company
stated, "That's a concern, and more so over the last few years. We might hear from one contractor
that they used the [bid] number [received from our company], and then when the job goes to work
some [other company] has a lower number, or the [agency] somehow got a revised quote five
minutes prior to bid, so now [it] has to use that lower number." [WSDOT#15]
A manager for a majorityowned geosynthetics supply firm stated that, "If [bid shopping is
happening], then that is a barrier for anybody. The world we live in is a lowbid environment, so if
they do bid shop, then that is a barrier for whoever is getting shopped. I guess it would be a barrier
[for small businesses]." [ST#8]
The female manager of a Native Americanowned, DBEcertified construction company said, "WE
have been told by prime [contractors] that we provided bids way too late and, 'Don't bother
sending us bids anymore.' It's hard to know the right time to submit bids to primes, because if the
primes [receive the] bids too early, some will shop the bids around. [For example], I have checked
around with prime contractors on a project and found that our concrete bid was low, but the prime
contractor that actually won the bid for the contract used another concrete company, saying that
they had received a lower bid, even though none of the other prime contractors received that bid.
And, being in a small community, we just can't do that kind of stuff. We don't work with prime
contractors that work that way." [WSDOT#32]
The female manager of a Native Americanowned, DBEcertified construction company said, "Bid
shopping is out there. You can't prove it though. Bid shopping has gone on for years and years. Bid
shopping is more prevalent in the public sector than the private sector. Money talks and the prime
contractors want to make as much as [possible]." [WSDOT#32]
When asked if the bidding process can be a barrier, the Black American owner of a DBEcertified
trucking and specialty contracting company said, "Yes. Primes are shopping bids and are
intertwined with DBE fronts, so what is done is the [prime contractor] takes the bids in, and that
shows [the front company] where the price is. Then [it] gives the job to [its] favorite DBE front
[company]." [WSDOT#36]
When asked about bid shopping being a barrier, the Caucasian manager of a WBEcertified
construction firm said that bid shopping is a frequent occurrence in the construction industry. He
said, "It's a real problem. It happens all the time. [There are] general contractors who will go get a
job and then come back to the subs and say, 'I've got this guy over here that nobody's ever heard of,
working out of the back of his truck. Can you do it for the same price as him?' If you get a reputation
as a bid shopper, then we're not going to work with you anymore." He went on to explain that he
has not experienced or heard of bid shopping happening on Port contracts. He said, "They've got a
pretty ironclad system." [PS#2]
When asked if he has experience with bid shopping, the Asian Pacific American owner of a non
certified engineering firm said, "There always is! The process that is supposed to happen is that
they select a company based on the qualifications or a team based on the qualifications, and then
they hammer out the details of cost." He went on to explain that this is not what tends to happen in
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 69
the engineering industry. He said, that instead, "The company says, 'Well it costs us this much we
cannot do it any cheaper.'" [PS#3]
When asked about bid shopping being a barrier, the owner of a certified Black Americanowned
construction company said that this is a problem in the industry. He said, "[Prime contractors] do
bid shop. They can share your numbers with anyone once they have them." [PS#6]
One interviewee reported that bid shopping occurs on public as well as private sector contracts. The
Asian Pacific American owner of a DBEcertified engineering firm said "Yeah, I'd call that a barrier. This
comes up in my industry." In the private sector, his firm is told that its bid is higher than another bid.
[WSDOT#3]
Some owners of DBEcertified firms said that prime contractors sometimes target DBEs for bid
shopping. Examples of those comments include the following:
The female owner of a DBEcertified specialty construction firm said, "I hate that. It does occur. No
one will ever be able to prove it. When a general contractor calls because it has to have DBE
participation and meet good faith efforts, [it then asks for a bid that it uses to shop for other bids].
This has compounded the bid shopping problems." [WSDOT#27]
When asked if bid shopping is a barrier, the Black American owner of a DBEcertified trucking and
specialty contracting company said, "Yes, [bid shopping is a barrier] in every job that requires DBE
participation." [WSDOT#36]
The Black American owner of a DBEcertified specialty contracting company, "Yes. It has been a
barrier. There's no way to prove the prime is doing it. We have been on three jobs recently where I
know the prime shopped our bids. We were working on a job and got removed, and the next DBE
showed up with a lower price." [WSDOT#35]
No prime contractors reported that they practice bid shopping.
Some owners and managers reported that they do not see bid shopping, or that it is not a big issue.
[For example, ST#5 and ST#10] Other examples include:
The president of an engineering industry trade association stated, "I haven't seen too much of that."
He said that this is because most professional services contracts are subject to qualificationsbased
awards, where price plays a limited role. He did say that that sometimes public agencies go through
the "ghost solicitation process" where they already know who they want to hire for the contract,
but they go through the formal solicitation process anyway. [WSDOT#38]
The Caucasian vice president of a Hispanic Americanowned MBE/DBEcertified electrical
contracting firm said they have no experience with bid shopping. [ST#3]
When asked if bid shopping is a barrier, the Caucasian general manager of a noncertified woman
owned general contracting company said, "No, I haven't seen much of that." [WSDOT#33]
Bid manipulation. Beyond bid shopping, a number of interviewees discussed bid manipulation.
Many interviewees said that bid manipulation affected their industry, and that it was common. For
example:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 70
Concerning bid manipulation, representatives of a large, majorityowned concrete company said,
"It's constant." [WSDOT#15]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated that she has experience with bid manipulation. She said, "The contractor uses [bid
manipulation] so they don't have to use me. There are jobs that I know this has happened. There
have been jobs where I am told I am the low bidder, and I never hear from the prime." [ST#6]
The Black American owner of a DBEcertified specialty contracting company said, "Yes, this has
happened." He gave a specific instance involving a prime contractor that had used his company to
meet a DBE percentage on a WSDOT project. [WSDOT#35]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said that
he has not been denied the opportunity to bid, but he has not been included on a team because it
was not a "good fit." [ST#5]
The Black American owner of a DBEcertified trucking and specialty contracting company said,
"Yes, that's a big problem." [WSDOT#36]
The Asian Pacific American owner of a DBEcertified contracting firm stated, "I have been low bid
before, but then they wanted me to provide more detailed information about the type of equipment
I was going to use, right down the VIN number [for that equipment]. I do not think a larger firm
would be put through that." [ST#9]
The owner of a certified Black Americanowned construction company said that he believes bid
manipulation occurs in the construction contracting industry. He said that the same businesses get
all of the contracts. [PS#6]
Some interviewees reported no experiences with bidmanipulation. [For example, ST#7, ST#8, ST#10,
and WSDOT#27] A number of business owners and managers said that they were not affected by bid
manipulation:
When asked if bid manipulation is a barrier, the Caucasian general manager of a noncertified
womanowned general contracting company, "No, I see this very rarely." [WSDOT#33]
The female owner of a DBEcertified specialty construction firm reported, "No, I haven't had any of
that," she also stated, "[I] also have to be careful about asking for feedback from [contractors] if [my
company's bid isn't chosen]. [I] can't ask about other [company's] bids and don't want [any
questions to be interpreted that way]. [The prime contractor] won't even tell me what the low bid
was. The only information [I] can get is what is posted by the agency or [received] through public
disclosure requests." [WSDOT#27]
Some interviewees indicated that they had been denied prime contracts or subcontracts, and that
they thought it was due to discrimination or their DBE status. [For example, ST#1] Other examples
include:
The Black American owner of an MBE/DBEcertified engineering company told a story of being one
of two firms that submitted proposals to be prime contractors on a public sector project, and the
agency had said that the work would be split between two companies. He indicated that his firm
submitted a proposal with 22 highly qualified professional engineers, and yet it was denied the bid.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 71
He said, "I was snubbed. I have to believe that it was racially motivated because I don't know what
other reason [would have prevented my firm from getting a contract]." [WSDOT#8]
The Black American owner of a DBEcertified specialty contracting company said contract denial is
a constant problem. He said that his company has been awarded a project and then only used for a
small percentage of the work. Other times his company has been listed as a DBE company by the
prime contractor who wins a bid on a public project, but his company has not actually gotten any
work on the job. The prime contractor subcontracted the job to a different company or self
performed the work. [WSDOT#35]
The Black American owner of a DBEcertified trucking and specialty contracting company said that
prime contractors engage in contract denial all the time. A minority business will be awarded the
bid by the prime contractor, and then the prime does not use the minority business at all.
[WSDOT#36]
The Black American owner of a noncertified consulting firm said that he had no direct experience
with contract denial, but is aware of it happening to others. He explained, "During the bidding
process there is an agreement on the scope of work that the minority company will do, then later
the scope for the minority company shrinks. It is hard for minority firms to raise their voice about
those situations." [WSDOT#4]
The Caucasian female manager for an MBE/DBE/SBA certified engineering company said that she
doesn't believe that reduction in a subcontractor's scope of work is related to race or gender
discrimination. She said, "I don't think that has anything to do with race. I think it is the prime
looking out for himself. This is a problem for small businesses. The prime can take advantage of
something, and so they do. If the [prime contractor] isn't held accountable, they will keep the work
for [itself]." [WSDOT#9]
Potential for discrimination against minority and womenowned subcontractors.
Interviewees discussed whether prime contractors might discriminate against MBE/WBEs in their
selection of subcontractors.
Some minority and female business owners indicated that prime contractors do discriminate against
MBE/WBES in their selection of subcontractors. [For example, ST#6] Other examples include:
The Black American owner of a noncertified consulting firm said, "Oh, yes. Maybe [the prime
contractors] have competitive pricing. Sometimes there are some other subtle reasons why prime
contractors just bypass you, because maybe they don't feel comfortable dealing with a minority
company. Sometimes [the prime contractors] just say blatantly that they don't want to work with a
small company, minority company, black company, or Hispanic company. [They say it] blatantly!"
[WSDOT#4]
The partner in a DBEcertified professional services firm wrote that prime consultants hold
negative stereotypes toward DBEs, and that after using his company to win a contract they will
resist giving any work to his firm or paying for the work. [WT#9]
Some minority and female interviewees report that there may be discrimination, but that prime
contractors would not be blatant in any discrimination. Examples of such comments include the
following:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 72
When asked about being denied the opportunity to bid, the Asian Pacific American female owner of
an MBE and DBEcertified engineering company said, "No, [that doesn't happen], because people
are smarter than that. If primes don't want to work with you, there is always a reason other than
race or gender nothing blatant." She went on to say, "It's hard to know if [the firm] doesn't get on
a prime's team because of no relationship, or because they are a minority or woman [owned
firm]." [WSDOT#1]
When asked about denial of the opportunity to bid being a problem, the Black American owner of a
DBEcertified specialty contracting company said, "Yes, that exists. But, [the DBEs] don't know
exactly how [the prime contractors] are processing the bids. Companies who feel this way will ask
for the bid, but [then not award the job to the DBE companies]." [WSDOT#35]
When asked if he has experienced racial discrimination, the Asian Pacific American owner of a non
certified engineering firm said, "There always is, it's just that with regulation, there's no overt signs
of discrimination. But there can be subtle signs of discrimination, where it's very hard to accuse
someone of racial discrimination because it's more subtle."
He added, "It's a large problem. It can be languagebased, it can be ethnicitybased, [or] it can be
culturebased. And they simply can say, 'Well, we don't communicate well.' But it's usually fairly
subtle because they know that if they are very overt about it, they can be subjected to lawsuits and
things of that sort." [PS#3]
Some business owners reported that they have been unfairly treated by prime contractors, but noted
that it would be hard to know if it was due to discrimination. For example, the female owner of a DBE
certified specialty construction firm said, "There are a lot of jobs I think [my company] was more than
qualified for, but [it] didn't get [the job]. But I'll never know why." [WSDOT#27]
Treatment by prime contractors and customers during performance of the work. Many
business owners and managers discussed unfair treatment by a prime contractor or customer.
Some business owners indicated that unfair treatment during performance of work had affected their
businesses. Examples of those comments include the following:
When asked if treatment by the prime or customers during performance of the work is a barrier,
the Caucasian general manager of a noncertified womanowned general contracting company said,
"Yes, I see changes in the project, and asking [the company] to do things that aren't in the contract.
Also the inability to keep to the schedule." [WSDOT#33]
The Black American owner of a DBE/MBEcertified concrete firm stated, "Some majority
contractors will try to sabotage your work." [ST#1]
The female owner of a DBEcertified construction company said that her firm has had good
experiences working with most prime contractors, but some prime contractors make it clear that
they prefer not to work with minority and womenowned businesses. She said, "Most of [the prime
contractors] have been good. If they have any ill feelings toward DBE contractors, I wouldn't say
I've experienced any of that. But it's the small minority [of prime contractors] that doesn't even try
to hide their disdain for the minority contractor or the DBE contractor, or in some cases it's been
because I'm female." [WSDOT#40]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 73
The Asian Pacific American owner of a DBEcertified contracting firm stated, "I only know how we
get treated, and we have never had any outward discrimination because of being a DBE. I have had
an agency do it because we are a small business though. I have had an agency tell us that they were
not going to pay us right away, because [as a small business] they thought we would take the
money and run." [ST#9]
The female owner of a DBEcertified construction company described a situation where a prime
contractor was trying to have her firm removed from a project because she challenged some of the
prime contractor's decisions, and because she asked for payment. She explained, "Unbeknownst to
me, [the prime contractor] is trying to have me thrown off the job, because I was so bold as to
challenge their schedule and to ask for payment. They're trying to remove me without cause."
[WSDOT#40]
When asked about treatment by the prime or the customer being a barrier, the Hispanic owner of
an uncertified construction company said that the treatment he receives from prime contractors is
"a nightmare." He said that large companies often bully small businesses, and that his company had
lost tens of thousands of dollars working for a large company in the past. He said that because of
that treatment, his company rarely works as a subcontractor anymore. He said, "The only positive
experience was when we worked for the State on the ferries." [PS#7]
Some business owners and managers, including owners of DBEcertified firms, said that demeaning
behavior and other unfair treatment precluded working for certain prime contractors. For example:
The Black American owner of an MBE/DBEcertified engineering company stated, "There are
certain prime contractors out there that I will not work with or try to work with. An example is
when I was working out at the airport, and I had a great relationship with these folks, and a larger
national firm did not [have a great relationship]. So, this large firm wanted me on their team. I was
involved in the proposal process and the interview. The interview was going poorly, and my
answers to some questions helped the team win the bid. Afterwards, I got to design some standard
drawings, and that's it. So, I was relegated to nothing after helping the [prime contractor] win the
job." In referencing other instances, he said, "Sometimes it seems like [the prime contractor] is
setting [my firm] up to fail." [WSDOT#8]
When asked if treatment by the prime contractor is a barrier, the female owner of a DBEcertified
specialty construction firm said, "Occasionally, I have difficulty getting some primes to create a
relationship [of respect]. [My company] has had good prime [contractors] and bad ones."
[WSDOT#27]
Some interviewees indicated that unfair treatment was connected with their race/ethnicity or gender.
Examples of those comments included the following:
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"When the firm started, people were mean and questioned competency. Another factor for us, as
Asians, [is that] we are of smaller stature than Caucasians. For [the firm's owner], I think it really
hurts him. He is 5'3" and 110 pounds. It doesn't bother him, but for a male, to be that small is
challenging [in this society]. Sometimes he talks to customers on the phone, and then when they
meet, the customer is surprised and reacts to his [stature and youthful appearance]. He gets
remarks like, 'You look a lot younger that I thought you'd be.' [The firm] didn't get a lot of respect at
first. But now it's better." [WSDOT#1]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 74
When asked if treatment by prime contractors or customers during the performance of work is a
barrier, the Black American owner of a DBEcertified trucking and specialty contracting company
said, "It has been a problem. On one project, the prime gave me 110 change orders, but at the end of
the job, the [prime contractor] failed to pay me. [There are] quite a few major primes that broke a
lot of local companies. The [subcontractor] does the work and the [prime contractor] wouldn't pay
[the subcontractor]. Probably 80 percent of the companies broken were owned by people of color."
He went on to say that he thinks those situations are related to discrimination. He said that his
father had experience a significant amount of discrimination in the construction industry in
Washington. He said that he believes the discrimination is still happening. He said, "I look at the
utilization of racespecific firms [now], and I see the same thing happening. What's happening now
concerning discrimination looks the same as it did back then noninclusion of people of color."
[WSDOT#36]
The owner of a certified Black Americanowned construction company said that mistreatment on
the job is a major problem. He said, "It's not necessarily the owner of the company. It's the people
on the ground, the ones responsible for the daytoday job, who treat black people unfairly." He
went on to say that, "[The supervisors] look for any excuse to say, 'We have a problem with them.
Let's not have them back.' They don't want you on the job. They can get you off the job by saying
anything they want to say because their word has lots of power. The unions or the City should
monitor [the supervisors]." [PS#6]
Some owners and managers of MBE/WBEs reported that there were double standards for
performance of work that adversely affected their companies. Some individuals attributed the double
standards to discrimination:
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"When a firm is new, [it] has to prove [itself] and [it's] probably held to a higher standard. A
minority or woman [owned firm] probably has to be even better. Sometimes a firm has to
overcome the perception that the firm only got a job because of being minority or woman owned."
[WSDOT#1]
The Native American owner of a DBEcertified electrical contracting firm stated it is looked at
differently when a minority contractor makes a mistake. [ST#2]
The Black American owner of a noncertified consulting firm said, "There could be [double
standards in performance], yes. In terms of perception of personality and race, those things are
always there. It takes a person of courage to challenge the process and bear the consequences of
getting in trouble." He indicated that he has been in trouble a number of times. [WSDOT#4]
When asked if double standards in performance affect business opportunities, the owner of a
certified Black Americanowned construction company said that he has experienced unfair
treatment, harassment, and disrespect on the job. He said that supervisors are stricter on Blacks.
[PS#6]
Some minority and female business owners reported that they were held to higher standards, but did
not attribute the cause to discrimination:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 75
The Hispanic American coowner of a DBEcertified construction company said, "[Double standards
in performance] happens a lot. The prime contractor will hold us to a certain level, and yet [the
prime contractor's] own crew will do mediocre work." [WSDOT#26]
One firm that works mostly as a prime discussed the issue. When asked whether treatment by prime or
customer during performance of work could be a potential barrier for small businesses, a project
manager for a majorityowned general contracting firm said, "I can see that being an issue. We try to
help folks out and help them be successful when they get onsite. That can take more handholding with a
small business or a DBE, and it can be a selffulfilling prophecy. If a sub is struggling or does not get the
support they need, I could see them feeling picked on, and once they start struggling, it can be hard to
see the light of day and how we are going to get out of that. I have heard from some of my smaller subs
about issues they have had from different owners and projects." [ST#7]
Some interviewees did not think that treatment by prime contractors was a barrier for their firms.
[For example, ST#10]
Unfavorable work environment for minorities or women. The study team asked business
owners if there was an unfavorable work environment for minorities or women, such as any harassment
on jobsites. Some interviewees, including Caucasian men, said that there was. [For instance, Interviewee
WSDOT#33]
Some interviewees reported differential treatment of women on worksites. Comments included:
The female owner of a DBEcertified construction company indicated that prime contractors are
not necessarily welcoming of the idea of working with DBEs. She said, "I think that there's a
prevalent attitude out there that [DBEs are an inconvenience]. It's a lovehate thing. They want you.
They need you. But they really wish that they didn't have to deal with you." She added, "When you
do butt heads with these general [contractors], it's like they want to push your buttons to make you
quit so that they can put somebody else in there [that is not a DBE]."
She also described another scenario in which her foreman, who is also a woman, has difficulty
commanding respect from subordinates on the job site because of her gender. [WSDOT#40]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said,
"I sat across the table from another contractor and he called me a derogatory name in front of the
room. If I were a man, he would not do that." [ST#6]
Some interviewees indicated that there was harassment of minorities on jobsites. For example:
When asked if he had experienced discrimination on the job, the Hispanic American coowner of a
DBEcertified construction company said that, in the early days of the company, he experienced
discrimination. He said, "'Stupid Mexican' was a statement heard at times. We say we're not
Mexican, and they say, 'Whatever, you're brown skinned.'" [WSDOT#26]
The Black American owner of an MBE/DBEcertified engineering company said, "Yes, I have heard
comments. I've been working on construction projects for a lot of years, and I'm pretty thick
skinned. When I hear something I just check it. I say something like 'Hey, don't go there.'"
[WSDOT#8]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 76
The Black American owner of a DBEcertified specialty contracting company said, "Some of my
workers will complain about harassment on the jobsite and I've experienced it. It comes from the
[prime contractor's] supervisor. [The supervisor] will talk down to [subordinates]. [Some]
supervisors treat [my employees] in a manner that doesn't respect the skills and experience [my
employees have]." He said that this is a common problem, and he thinks it is the result of racial
discrimination. [WSDOT#35]
Some interviewees said that they that had not experienced unfavorable work environments. [For
instance, ST#3, ST#5, ST#7, ST#8, ST#9, and WSDOT#9] For example, the president of an engineering
industry trade association indicated that he does not think that race or genderbased discrimination
affects any of the barriers that he identified in the local marketplace. He said, "I didn't even get a hint of
that in asking that question [to the organization's members]. Nobody cares [about race or gender]
anymore." [WSDOT#38]
Approval of work by prime contractors and customers. Interviewees discussed whether
approval of work by prime contractors or customers presented a barrier for businesses.
Some interviewees identify difficulty with approval of work by prime contractors or customers. For
example:
The Native American female coowner of a noncertified construction company said that approval
by prime contractors can be an issue. For example, she said, "We did a job where the project
manager wanted us [to do certain work] that wasn't part of the deal. It was an unforeseen
condition. We did the job, but didn't get paid for it. [That situation is] not usually a problem. [It was]
still profitable." [WSDOT#28]
In reference to approval of work by prime contractors or customers, representatives of a large,
majorityowned concrete company said, "If that's a problem, it is usually because of our own error.
[Other times], smaller agencies, or especially on private work, the project owner may have
unrealistic expectations because it doesn't do this frequently, whereas the larger agencies
understand [the realities of the project better and] know what to expect. [Our company] also runs
into contract language that basically makes the prime contractor responsible for everything that
the owner didn't think of and that isn't in the contract. [It is called] the 'catchall' phrase."
[WSDOT#15]
Some interviewees did not indicate that the approval of work by prime contractors or customers
during performance of work is a barrier. [For example, ST#5, ST#6, ST#9, ST#10, WSDOT#8,
WSDOT#27, WSDOT#33, WSDOT#35, and WSDOT#36]
G. Additional Information Regarding any Racial/ethnic or Genderbased
Discrimination
Interviewees discussed additional potential areas of any racial, ethnic or genderbased discrimination,
including:
Stereotypical attitudes about minorities and women (or MBEs, WBEs, and DBEs) (page 77);
The "good ol' boy" network or other closed networks (page 80); and
Other allegations of discriminatory treatment (page 82).
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 77
Stereotypical attitudes about minorities and women (or MBE/WBE/DBEs). Several
interviewees indicated that minorities, women, or MBE/WBE/DBEs are the subject of stereotypical
attitudes. For example:
The female owner of a DBEcertified construction company indicated that DBEs are treated and
thought of differently than other firms in the construction industry. Specifically, she cited examples
where contractors did not think she was in charge because she was a woman. She said, "There is
definitely a difference perceptionwise of DBEs in the general contractor community. I've had some
things where I've had to fight for what's right [and] where I have had to assert my position to
protect my company. It's interesting, because there's a bit of a perception on the part of some of the
contractors that I've worked with that they thought that I wasn't really in charge. I think they just
thought I was the dumb blonde, and I surrounded myself with these smart guys to run the work."
She indicated that she has encountered such attitudes from both competitors and prime
contractors with which she was working.
She described a situation in which she was trying to resolve a scope dispute with a prime
contractor. During a meeting to resolve the issues, she approached a representative from the prime
contracting firm to shake his hand and he made what she interpreted as an offensive remark
relating to her gender. She explained, "I go to the meeting, and I [approach the individual who is
running the company]. I've known this guy for 15 years. I reach out to shake the guy's hand, and he
doesn't take my hand. He just looks at me and goes, 'Oh, that's right. You're the one who used to
carry [your exhusband's] bids.'" [WSDOT#40]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said,
"Yes, there is a barrier for women in this line of work. They just assume it easier to talk to men.
When I first went into business, I was convinced a lot of contracts got awarded in a bar." [ST#6]
The Hispanic American coowner of a DBEcertified construction company reported stereotypical
attitudes that affected his business. He referred to comments made such as "stupid Mexican" in his
work. [WSDOT#26]
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"[The firm's owner and I] have had experiences related to being Asian and of small size and with
slight accent, especially the firm's owner. Now construction contractors love to work with him.
Primes don't deny [an MBE firm] an opportunity, [but the prime contractor] just might give
[majority or larger firms] more of an opportunity." [WSDOT#1]
The Asian Pacific American owner of a DBEcertified contracting firm said, "I do not know that I
have experienced any [stereotypical attitudes], but it is construction, and there are still 'oldschool'
guys that will try to intimidate you. They are smart enough to not outright use a slur, but they will
[say] more subtle comments about your equipment being 'raggedy' or outdated, or something else
like that. You have to have thick skin to be in this industry, and sometimes you have to look the
other way." [ST#9]
The Black American owner of an MBE/DBEcertified engineering company said, "I've been brought
into interviews where I didn't know anything about the topic, [and I felt that I was brought in]
because the [prime contractor] didn't have a lot folks of color [on the team]." He said that such
situations have occurred several times, where he is present to be a black face with no role
whatsoever in the interview itself. He went on to say that DBE certification "does carry a bit of a
stigma." [WSDOT#8]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 78
The Caucasian vice president of a Hispanic Americanowned MBE/DBEcertified electrical
contracting firm said that the firm does not experience stereotypical attitudes. He said, "We do not,
but I guarantee you it exists, and it is out there." [ST#3]
The Black American owner of a DBEcertified specialty contracting company said that stereotypical
attitudes are a common problem, and he thinks it is the result of racial discrimination. He said,
"Sometimes I'll take a driver, a white guy, with me to the jobsite. I will talk to the job supervisor,
and the supervisor acknowledges the question from me and then [directs his answer] to the white
guy [rather than to me]. This happens over and over." [WSDOT#35]
A partner in a DBEcertified professional services firm reported that his firm is affected by negative
stereotypes concerning DBEs. He said, "We find that, very often, we are thought of as second class
citizens or subpar. The knowledge and skill that we have in the area of service required is
discounted by the prime not because of reality but instead because of stereotypes and perceptions."
He went on to indicate that prime contractors that use his firm to win contracts may then resist
giving his company any work on the contract. [WT#9]
The Black American owner of a DBE/MBEcertified concrete firm said that the prime contractors
feel minority contractors are more expensive. [ST#1]
When asked if he has experienced discrimination or any stereotypical attitudes on the part of his
clients, the Asian Pacific American owner of a noncertified engineering firm said, "Not that much,
because I don't think I have a language barrier. But other consultants that have had a language
barrier, because they were not so fluent in the language or their pronunciation was not exactly the
standard, they do feel that." [PS#3]
When asked if stereotypical attitudes affect business opportunities, the owner of a certified Black
Americanowned construction firm said that often, supervisors on projects are disrespectful
towards minority workers. He said that stereotypes and disrespect are inbred. He said, "[The
supervisors] feel they have their honor and their jobs to protect, so anything they can do to get you
off the job, and they're going to be doing it." [PS#6]
Some interviewees indicated that negative stereotypes had to do with being a small business. For
example:
Concerning disadvantages of certification, the Caucasian female manager for an MBE/DBE/SBA
certified engineering company said, "The only disadvantage [to being a certified firm] is that
sometimes [it] is viewed as being a small firm until [it] has the capacity to do projects, whether
that's true or not. People may have some thoughts about what a small business is, and what a small
business can do." [WSDOT#9]
A project manager for a majorityowned general contracting firm said, "There can be [stereotypical
attitudes]. I have heard stuff before, but stereotypes can have some truth to them too. When you
are talking about small businesses or DBEs, there can be more work involved working with them
because of their level of staff or the support that they need. So, I hazard against calling it
stereotyping, because it is true that a small firm might need more support than a more established
firm." [ST#7]
The Black American owner of a noncertified consulting firm said, "Yes, [stereotypical attitudes] are
always there. [Primes contractors and public owners] always want small businesses to prove that
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 79
they can do things despite having the qualifications and documentation of past performance. [The
prime contractors and public owners] want proof of ability to do work four or five times. This
occurs with the prime contractors and public agency personnel. This is a very pervasive problem."
[WSDOT#4]
Some interviewees reported no instances of stereotypical attitudes on the part of customers or
buyers. [For example, ST#5, ST#10, WSDOT#9, WSDOT#27, and WSDOT#32]
"Good ol' boy" network or other closed networks. Many interviewees had comments concerning
the existence of a "good ol' boy" network that affects business opportunities.
Those who reported the existence of a good ol' boy network included minority, female, and Caucasian
male interviewees. For example:
The female owner of a DBEcertified construction company indicated that the good ol' boy network
operates in the local construction industry and makes it more difficult for DBEs to succeed. She
said, "[The good ol' boy network] happens in situations where people use their influence to limit
competition or allow you to not have access to the same vendors or suppliers." [WSDOT#40]
The Native American owner of a DBEcertified electrical contracting firm commented that the good
ol' boy network does exist. He said, "It's just the way it is, and I200 drove that point home." [ST#2]
When asked if the good ol' boy network affects business opportunities, the Hispanic American
owner of a DBEcertified engineering firm said, "Absolutely, it's part of any industry. Anyone who
doesn't see it there [is blind] it's there." [WSDOT#7]
The project manager for a WBE and DBEcertified environmental services firm said, "The good ol'
boy network is just like any other kind of networking. I cannot say that we are not part of it. If a
minority or womanowned business is not part of that network, then they have to get into it. I
really think that is has to do with the reputation of the company." [ST#10]
Some minority and female interviewees indicated that the good ol' boy network adversely affects
their businesses. For example:
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"Oh, yeah, there is a good ol' boy network." She said that it is harder to get opportunity when you
are an MBE or WBE. [WSDOT#1]
When asked if the good ol' boy network affects business opportunities, the Black American owner
of a noncertified consulting firm said, "Oh yeah, big time, big time. There might be some cultural
differences where you go, what you do with your spare time. But in the good ol' boy network, if
you belong to the same club, [go] golfing, or climb some mountain together, then you're in their
good book. [However], a lot of minority companies may just want to do [the] work and might not be
tuned to other social things like golfing and mountain climbing. But even if you reach out to them,
and they don't want to do that with you, what can you do?" He said that the good ol' boy network
exists in both the private and public sectors. [WSDOT#4]
The Black American owner of an MBE/DBEcertified engineering company said, "Yes, it is there. We
spend a lot of time marketing, and there's no reason why we shouldn't get the opportunity, but you
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 80
know that we won't get the opportunity. I've seen it with companies, and then years later the
environment changes, and you may get an opportunity." [WSDOT#8]
When asked if the good ol' boy network exists, the Black American owner of a DBEcertified
specialty contracting company said, "Yes, most definitely. That's where my [company's] job went to.
The [prime contractor] let [my company] stay on [the job] until the DBE dollars were accomplished.
The job was two and a half years [in duration. My company] stayed seven months. Then the good ol'
boys got it. The [new company] is out there now." [WSDOT#35]
The female owner of a DBEcertified specialty construction firm said, "I'm sure [the network] is in
existence." She said that she has tried to break in with certain prime contractors and then has been
told by their staff that she will only be contacted by them to meet good faith efforts requirements.
[WSDOT#27]
The Native American owner of a DBEcertified construction company wrote, "Over the years I have
also struggled to break into the good ol' boy network that exists in the construction industry. Even
after [many] years in business, there are some companies that I submit sub bids to that have never
subcontracted with me, even when my pricing was lower than my competitors." [WT#5]
The Hispanic American coowner of a DBEcertified construction company said that the good ol'
boy network was an issue when he was starting his business. He said that this was because his firm
"didn't have the track record." [WSDOT#26]
The Asian Pacific American owner of a noncertified engineering firm said, "I'm pretty sure the
good ol' boy network still works out there. When you see a pattern, the primes always hiring
someone else as someone that they associate with that is of the same ethnic group as they are, and
never hiring someone from outside their group, it's the good ol' boy network. Or when you see that,
in the industry, there's 10 percent minorities, and this firm has never had a minority work for them.
There are cases like that. It's just wordofmouth. Don't bother with them, because they won't hire a
minority, period. And then you look at their roster, and yeah, it is all white. What can you say?"
He added, "It's not that I avoid them. We don't have relationships with them. They're just our
competitors. I have not experienced overt discrimination directly. But I have heard many anecdotal
things about some firms. Like 'Look at them, they don't have a single person that is ethnic of some
sort.' And then you look at it, [and] it becomes apparent." [PS#3]
The owner of a certified Black Americanowned construction company said that he is aware of the
good ol' boy network. He said that he believes that it is discriminatory against small businesses. He
said that the DBE program exists to mitigate the effects of the network. He said that if government
agencies did not have the DBE program, prime contractors would not give minority contractors any
work. He said, "The government is probably better at controlling that than anybody." He went on to
say that he feels like minorities would get pushed out of the industry without any help in the public
sector. He said that he feels like the good ol' boy network is more prevalent in the public sector
than in the private sector. [PS#4]
Some minority and female business owners and managers said that there was a good ol' boy network,
but they have, over time, been able to enter the group or form their own groups. For example:
The Caucasian female manager for an MBE/DBE/SBAcertified engineering company said, "Yes,
[the good ol' boy network] exists in [the] industry. But on the flip side, there are small businesses
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 81
and cultures that network together too. There are definitely still some of [the closed networks] out
there." [WSDOT#9]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said,
"There really was that good ol' boy network that I had to break into." [ST#6]
When asked if he had experienced the good ol' boy network, the Hispanic owner of an uncertified
construction company said that he has, but that it is just part of the business. He said, "People hire
who they know, even if they are more expensive." He said that this network can work in his favor. If
people know his company, they stick with him even if he is a little more expensive, because they
know him and know his work. [PS#7]
The Hispanic owner of an MBEcertified engineering firm said that the good ol' boy network exists
in the Seattle area, and that he wanted to a part of it. He said, "I like to think I am in that network. I
spent 38 years trying to get a good reputation." [PS#8]
Some interviewees reported they were not affected by any good ol' boy network or other closed
networks or that the good ol' boy network no longer exists. For example:
The female manager of a Native Americanowned, DBEcertified construction company said,
"Because of the fact that we had a history of 30 years in business here prior to becoming a certified
minority firm, [the good ol' boy network] has not had an [adverse] effect on us." [WSDOT#32]
A project manager for a majorityowned general contracting firm said, "I really have not seen a
closed network in my day. In the private side, it does take more time to get worked in and to figure
out who is working on projects, but in the public side, I have not seen that." [ST#7]
The president of an engineering industry trade association indicated that he was aware of the
existence of a good ol' boy network "way back when," but that it does not exist anymore. He said,
"This industry was a good ol' boy network 20 or 25 years ago. It isn't anymore you just can't
operate on that basis. That is the old way of doing things, and it just doesn't exist anymore. There
are firms that have trouble breaking in [to the industry], but [it's] because of a lack of relationships
and resources. I think you measure [success of small business and MBE/WBE programs] on
[whether there] is an opportunity there, not [whether there] is an equal outcome." [WSDOT#38]
A manager for a majorityowned geosynthetics supply firm said, "I suppose there are some [closed
networks] that go on, but when it comes to what we are talking about, people go with the low
bidder." [ST#8]
Other allegations of discriminatory treatment. The study team also examined other comments
about discriminatory treatment.
Some interviewees had other comments about what they perceived as discrimination against
minorities or women. For example:
The Native American owner of a DBEcertified construction company indicated that he has "worked
hard to make [his company] a successful business. To do so, I have been required to overcome and
am still working to overcome many obstacles, including the discrimination that has resulted from
the fact that I am a minority contractor. Much of the discrimination and poor treatment I have
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 82
experienced is hard to document or to tie directly to my heritage, but I am certain that it is."
[WT#5]
The Native American owner of a DBEcertified electrical contracting firm said that "the tribes
usually do not hire Indian contractors." He said, "It has been that way since I started. It goes to the
core of learning how to be good at racism. The oppressed get good at oppression. The only way for
us to get into the casino work is if the majorityowned prime brings us in to do some of the work."
[ST#2]
The Black American founder of a construction industry trade association said, "In 1965, [Black
Americanowned businesses] got more work than [Black Americanowned businesses are] getting
in 2012." [WSDOT#39]
The Black American owner of a DBE/MBEcertified concrete firm said that he is uncomfortable
with majority contractors contacting him for his opinions about other DBE contractors. [ST#1]
When asked if he had experienced prime contractors or customers who would not work with
minorities, the owner of a certified Black Americanowned construction firm said that everyone
says they will work with minorities, but that often, prime contractors will find ways to limit
minority participation. He said, "[Prime contractors] know how to get rid of you in one or two days.
They might let one Black person work, but if there are two or three, they're going to send those
people back. It's the same in the trucking industry." [PS#6]
H. Insights Regarding Race and GenderNeutral Measures
The study team asked business owners and managers about their views of potential race and gender
neutral measures that might help all small businesses, or all businesses, obtain work in construction and
constructionrelated professional services industries. Interviewees discussed various types of potential
measures and, in many cases, made recommendations for specific programs and program topics. The
following pages of this Appendix review comments pertaining to:
Technical assistance and support services (page 84);
Onthejob training programs (page 86);
Mentorprotg relationships (page 86);
Joint venture relationships (page 88);
Financing assistance (page 89);
Bonding assistance (page 90);
Assistance in obtaining business insurance (page 92);
Assistance in using emerging technology (page 92);
Other small business startup assistance (page 93);
Information on public agency contracting procedures and bidding opportunities (page 94);
Online registration with a public agency as a potential bidder (page 95);
Hard copy or electronic directory of potential subcontractors (page 95);
Prebid conferences where subcontractors can meet prime contractors (page 96);
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 83
Distribution of lists of planholders or other lists of possible prime bidders to potential
subcontractors (page 97);
Other agency outreach such as vendor fairs and events (page 98);
Streamlining or simplification of bidding procedures (page 99);
Breaking up large contracts into smaller pieces (page 100);
Price or evaluation preferences for small businesses (page 101);
Small business setasides (page 102);
Mandatory subcontracting minimums (page 103);
Small business subcontracting goals (page 104);
Formal complaint and grievance procedures (page 105); and
Other measures (page 105).
Technical assistance and support services. The study team discussed different types of technical
assistance and other business support programs.
Some business owners and managers thought technical assistance and support services would be
helpful. Business owners and managers in support of such programs included ST#2, ST#3, ST#4, ST#6,
ST#5, ST#8, ST#10, WSDOT#4, WSDOT#33, WSDOT#35, and WSDOT#36.
Some business owners and managers reported being aware of technical assistance and support
services programs and having used them. Examples of such comments include the following:
The female owner of a DBEcertified specialty contracting firm said that, when she started her
business, she went to the William Factory Small Business Incubator program for the assistance that
they provide. [WSDOT#27]
The Hispanic American owner of a DBEcertified engineering company was supportive of technical
assistance services. He said, "Probably the two best programs we have in the State right now for
support of small businesses are the Business Economic Development Committee at the University
of Washington and the PTAC program, the Procurement Technical Assistance Centers. [Those
agencies] teach [participants] infrastructure [and give the participants] an education on how to
create some kind of foundation for your company. That's what their job is to help you do that."
[WSDOT#7]
When asked if technical assistance or support services would be helpful for small, minority, or
womenowned businesses, the Caucasian manager of a WBEcertified construction firm said that
more technical help programs would be helpful. He said, "The Port construction manual is available
electronically, so that's one thing they already instituted. Some more [services like] that would be
helpful, especially if you have techsavvy contractors." [PS#2]
Some interviewees recommended specific technical assistance topics. For example:
The Black American owner of a DBEcertified engineering company said, "There's a lot of firms that
are good at doing what they do in the field but not necessarily good at the office work." [WSDOT#8]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 84
The Asian Pacific American owner of a DBEcertified contracting firm said, "If someone would set
up my network, that would be an assistance. Services would have to be free, though." [ST#9]
Although she said that the firm where she works did not need these services, The Caucasian female
manager of a large DBEcertified engineering company said, "I think services could be beneficial to
startup businesses, especially regulations that govern how overhead is calculated. It would also be
beneficial to a startup business to know how to find out about jobs, how to put proposals together,
where to meet prime [contractors], and so on." [WSDOT#9]
The female manager of a Native Americanowned, DBEcertified construction company said, "I
know about technical assistance programs, and that some firms have used them. The services we
used when [our company] first signed up were substandard. The people putting on the training
classes were substandard. We were encouraged to use the programs but there wasn't a lot of follow
through." [WSDOT#32]
A discussion participant representing a diversity program office said, "For me, the big issue is
making sure we have support for technical assistance. I hate to see when [DBEs] stumble and fall,
and there is nowhere for them to go. They do everything themselves as a small business person and
there might be one thing about their business that they don't really understand. We partner with
the University, with their law school, and their business program to get some of our firms through
their program that they've got around business development." [DBEP#5]
When asked if technical assistance or support services would be helpful for small, minority, or
womenowned businesses, the owner of a certified Black Americanowned construction company
said that he would find bidding assistance helpful for his business. He said, "I don't know how to
bid. I have to pay somebody to bid my projects." He went on to say that he understands how to bid
on private projects, because he has been doing it for years, but that he still struggles to understand
how bidding in the public sector works. [PS#4]
Some firm owners and managers recommended against such programs because they thought that
small businesses should access any assistance on their own. For example:
When asked if technical assistance would be helpful, the Subcontinent Asian American male owner
of a DBEcertified engineering firm said, "I don't think [efforts to increase technical assistance and
support services] should be done. To me the business should have that understanding [and] that
capability on its own." [WSDOT#10]
The Caucasian coowner of a noncertified WBE construction company made a similar observation.
He said, "It would certainly [be helpful], but I don't feel that the government needs to provide it. I
think [a company] ought to be able to take care of itself." [WSDOT#17]
The Asian Pacific American owner of a noncertified engineering firm said, "I think small firms need
to be able to stand on their own without training [and] without mentoring. If you're a professional
in this field, you need to be able to perform like a professional. If a big firm wants to integrate you
into their way of doing things, that's fine. But that's not training or mentoring. It's just that your
forms all match, your report looks very smooth, [and] it looks very well integrated. If you're not
competent you don't belong in this field." [PS#3]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 85
One business owner thought the usefulness would depend on what the contractor received the
assistance for. The project manager for a WBE and DBEcertified environmental services firm asked, "Is
it for you completing a project or is it areas where you may be deficient on?" He noted that the prime
contractor has people that can help you. He said, "Sometimes issues come up. Sometimes you need help
to sort things out." He stated technical assistance does have value. [ST#1]
Some business owners and managers said that generalized technical assistance would help firms, but
others said that it could actually be harmful. For example:
The Asian Pacific American female owner of an MBE and DBEcertified engineering firm said,
"Technical assistance is only helpful for brand new firms. We went through some training sessions,
small business seminars, and presentation sessions put on by nonprofits but did not find them
helpful because they don't have any new information." [WSDOT#1]
A project manager for a majorityowned general contracting firm said, "[Technical assistance and
support services] are difficult to tailor to each subcontractor but could definitely be useful." [ST#7]
The Asian Pacific American owner of a DBEcertified engineering firm cautioned against providing
technical assistance. He said, "[It is] not a good idea, depending on the trade. If the assistance
doesn't know the trade, it can take [the business] in the wrong direction." [WSDOT#37]
Onthejob training programs. Nearly all business owners and managers interviewed were
supportive of onthejob training programs, although many limited their comments to apprenticeship
programs.
Some interviewees said that onthejob training would be useful in certain settings. For example:
A project manager for a majorityowned general contracting firm said, "When we are talking about
a craft or field working, I do not think that [onthejob training] is a particularly useful thing. When
we are talking about an in the office job, or trying to help someone run their business, maybe [on
thejob training] is a reasonable thing." [ST#7]
When asked what measures or programs he thought would be helpful for small businesses working
with the Port, the Caucasian manager of a WBEcertified construction firm said that he thinks there
should be a class that teaches small contractors how to navigate the bureaucracy at the Port. He
said, "I think somebody who has a ton of experience up [at the airport] could possibly give people a
two to threehour class. [It should be] specific to how [construction at the Port] is different from
regular construction." [PS#2]
When asked if onthejob training programs would be helpful for small, minority, or womenowned
businesses, the owner of a certified African Americanowned construction company said that he
thought such programs would be helpful for new businesses, but not for his business. He said he
has been in the industry for a long time, so he does not need the help. He said, "I can see it helping
someone who hasn't been doing it that long." [PS#4]
Mentorprotg relationships. Many interviewees commented on mentorprotg programs. A
number of business owners said that they had informal mentor relationships.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 86
There were many comments from interviewees in support of mentorprotg programs. [For example,
ST#1, ST#2, ST#3, ST#4, ST#5, WSDOT#4, WSDOT#9, WSDOT#15, WSDOT#17, and WSDOT#27]
Examples of those comments include the following:
The Subcontinent Asian American male owner of a DBEcertified engineering firm said, "The
mentorprotg thing of having somebody who has larger exposure and experience would be
definitely beneficial." [WSDOT#10]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said
that the mentor/protg relationships are very good, and she believes in mentor/protg
relationships. She said, "If I had the opportunity to mentor, I would." [ST#6]
The Caucasian general manager of a noncertified womanowned construction company supported
mentorprotg programs. He said, "We have been both the mentor and the protg a long time
ago. It's a great way to pass on knowledge." [WSDOT#33]
The Asian Pacific American owner of a DBEcertified contracting firm said, "It would be useful to
have a mentor program where someone, like a retired construction firm owner, came in once a
week to help you put together bids." [ST#9]
The Asian Pacific American owner of a DBEcertified engineering and specialty construction
company related how his company has grown in recent years. He said, "For several years the firm
struggled. The mentorprotg relationships have helped us grow from a $1 million company to a
$5 million company last year." [WSDOT#37]
A project manager for a majorityowned general contracting firm said, "[Mentorprotg
relationships] can be helpful. We have some informal programs, and I have heard of some formal
programs." [ST#7]
The Black American owner of a DBEcertified engineering company reported a favorable mentor
protg experience. [WSDOT#8]
The project manager for a WBE and DBEcertified environmental services firm said,
"[Mentor/protg relationships] are great ideas, but it is up to you to go do it. I have coworkers
who still have mentors." [ST#10]
Other business owners and managers had criticisms of mentorprotg programs. For example:
The Asian Pacific American owner of a DBEcertified engineering firm said, "I have tried to [involve
my company in] mentoring but never found a longterm mentor. I [have] found shortterm
mentors, but once the mentor fulfilled whatever requirement it had, that was pretty much the end.
For me, unless I could get paid, I think it's a waste of time. It would be like getting a third party to
learn something [that could be learned] on the Internet." [WSDOT#3]
A manager for a majorityowned geosynthetics supply firm said, "[Mentor/protg relationships]
could be a twoedged sword. If a large business was mentoring a small business and another large
business knew that was going on, then they would not use the small business. The small business'
horizons would be limited by what their mentor had going on." [ST#8]
The Black American owner of a DBEcertified specialty contracting company said, "Some of the
larger companies have [mentorprotg programs], but it is window dressing. It really doesn't do
anything." [WSDOT#35]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 87
The Black American owner of a DBEcertified trucking and specialty contracting company said, "[A
mentorprotg relationship] is very dangerous between subs and primes. There are a lot of
problems with control. It would be helpful under strict supervision." [WSDOT#36]
The Asian Pacific American owner of a DBEcertified engineering firm had participated in mentor
protg programs. He said, "We are in one now and were in one before. These can be good if there
are good understandings between the mentor and protg about what to do. The first one we had
under the 8(a) program did not work out, and, after two years, I let it go. The one we are in now is
working out better, but there are still flaws." [WSDOT#37]
Joint venture relationships. Interviewees also discussed joint venture relationships.
Some of the business owners and managers interviewed had favorable comments about joint venture
programs. [WSDOT#17] Examples of those comments include the following:
The Subcontinent Asian American male owner of a DBEcertified engineering firm said, "I have seen
some instances where a couple small businesses will get together and propose a joint venture for
some project. An ability to do that I think is great." [WSDOT#10]
The Black American owner of DBE/MBEcertified concrete firm said, "Joint ventures between
minority firms would be good if you can find surety companies to bond them." He also said, "Maybe
we can get DBE contractors from out of state and create a partnership." He added that, in Oregon,
he thinks the government agency stakeholders met with majority primes and discussed their
minority participation goals. He mentioned that Black American contractors did over $300 million
in contracting volume in Oregon.
He said that he would also like to see joint ventures between minority firms and majorityowned
firms. He feels this would create capacity and value. He said, "Since it is so hard to bond,
partnerships would ease the burden of bonding." [ST#1]
The Hispanic American coowner of a DBEcertified construction business said that he had done
joint ventures a few times, and that they had gone very well. He was supportive of this opportunity.
[WSDOT#26]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said
that she would prefer to joint venture with another DBE. [ST#6]
The Asian Pacific American owner of a DBEcertified engineering firm said, "I love joint venture
relationships. Joint venture relationships would allow me to deal directly with the owner or agency.
I have not been in a joint venture relationship before." [WSDOT#3]
The Asian Pacific American owner of a DBEcertified contracting firm said, "[Joint venture
relationships] would be useful, but that is a financial relationship. You have to put up your $50
million and [the other firm] has to put up their $50 million. If you can only put up $50,000, then
that probably will not work for the other firm." [ST#9]
The Black American owner of a DBEcertified engineering company indicated support for a joint
venture program. He said that his company "often tries to work with other companies to build
capacity but hasn't done a formal joint venture." [WSDOT#8]
A manager for a majorityowned geosynthetics supply firm stated that "[Joint venture
relationships] would be good. Joint venture relationships seem to happen quite often. It seems to
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 88
me, on the surface, that joint ventures are more acceptable [than mentor/protg programs]."
[ST#8]
The Caucasian general manager of a noncertified womanowned construction company said that
jointventures have worked well for his company and supported providing that assistance.
[WSDOT#33]
The project manager for a WBE and DBEcertified environmental services firm stated, "[Joint
venture relationships] seem great. I do not know how they divide the project or the money, but
from what I have seen, they seem great." [ST#10]
When asked if joint venture relationships would be helpful for small, minority, or womenowned
businesses, the owner of a certified Black Americanowned construction firm said that he believes
there should be more joint venture opportunities available to DBEs. He said that his company is
starting to get into joint ventures. [PS#6]
Some interviewees expressed negative comments and anecdotes about joint venture programs. For
example:
The Asian Pacific American female owner of an MBE and DBEcertified engineering firm said, "I
think it's a little over [the head of the small business owner]. I don't think it even makes sense."
[WSDOT#1]
A project manager for a majorityowned general contracting firm said, "[Joint venture
relationships] can get complicated. We do not joint venture much, and some of that has to do with
culture. It can be difficult trying to assimilate two firms' cultures. I do not see a lot of value to joint
ventures." [ST#7]
Representatives of a large, majorityowned concrete company cautioned that legal issues can limit
opportunities for joint venture agreements. [WSDOT#15]
When discussing joint venture relationships, the Asian Pacific American owner of a DBEcertified
engineering firm said, "I have been in some joint ventures, and it is hard to make it work."
[WSDOT#37]
Financing assistance. Many business owners and managers had comments about assistance obtaining
business financing.
Many business owners and managers indicated that financing assistance would be helpful. [For
example, ST#2, ST#6, ST#8, WSDOT#15, and WSDOT#33] Comments in favor of financing assistance
programs included the following:
The Subcontinent Asian American male owner of a DBEcertified engineering firm said that he had
some knowledge of a WSDOT program that lowers interest rates on loans for firms working on
their projects. He commented, "I think it's a great endeavor. It helps to make businesses a little
more financially viable." [WSDOT#10]
The Caucasian president of a majorityowned surveying company said that financial assistance is
definitely good for small businesses. [ST#4]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 89
The Black American owner of a DBEcertified trucking and specialty contracting company said, "I
know of programs that are out there. It's a huge challenge, a huge barrier, for startups to get
money and to meet the underwriting criteria. This is what keeps 90 percent of the DBEs down."
[WSDOT#36]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said,
"Loan guarantees would be helpful as a line of credit." [ST#5]
The Caucasian coowner of a noncertified WBE construction company said loan guarantees would
"certainly be helpful. Any time you can make getting through the financing process easier [would be
helpful]. It's been quite a learning experience for me." [WSDOT#17]
A project manager for a majorityowned general contracting firm said, "[Financing assistance]
would definitely be helpful. That is one of the struggles that I hear about a lot from the smaller guys.
Ninetyeight percent of the problems I see stem from access to cash and financing or making
payments. If there was more access to [financing], a lot of those problems could be solved." [ST#7]
The Black American owner of a DBEcertified engineering company supported the idea of financing
assistance. He said, "It's absolutely crucial. I wouldn't be in business today if it wasn't for [my
lending company]." [WSDOT#8]
The Black American owner of a noncertified consulting firm said that financing is such a huge
issue, especially now with the economic downturn, that any financing assistance would be helpful.
He said, "Banks are very reluctant. They think [that small business] is [a] big risk for them, even
though we may demonstrate to them what we are capable of doing." [WSDOT#4]
Some business owners and managers had attempted to use or were aware of financing assistance
programs and had negative comments. For example:
The female owner of a DBEcertified specialty contracting firm said, "Just because I owe money like
every other firm, why can't I qualify for financing? My company is viable, has had some good years
revenuewise. I'm discouraged [because] it is so hard to find financing assistance." [WSDOT#27]
The female manager of a Native Americanowned, DBEcertified construction company said, "Our
bank cut off [its] line of credit in November of last year, and that put us out on our own. OMWBE
said there are financial assistance programs, but so far, I have only heard that things are being
looked into. There has been nothing helpful so far. When a small business needs help, [it] needs
help [now]. It is devastating to us." She went on to say, "I have actually gone to the Department of
Commerce. [That agency] has a program called 'Craft Three,' and [it is] looking at [our company].
You would think that the federal department of transportation would be in the frontrunner of
helping small businesses, especially the DBE businesses, [but that hasn't been my experience]."
[WSDOT#32]
The Black American owner of a DBEcertified specialty contracting company said, "It's a problem
because the average small business can't qualify for the loan." [WSDOT#35]
The Asian Pacific American owner of a DBEcertified engineering firm said, "I have tried to use
[financing programs] but never got it because I'm too small. I couldn't [satisfy] the underwriting
criteria." [WSDOT#37]
Bonding assistance. The study team asked business owners and managers about bonding assistance.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 90
Many business owners and managers indicated that bonding assistance would be helpful. [For
example, ST#8, WSDOT#8, WSDOT#15, WSDOT#33, and WSDOT#17] Examples of such comments
include the following:
The Black American owner of a DBEcertified specialty contracting company supporting bonding
assistance. He said, "It's a good idea, because most of the DBEs can't get bonding." [WSDOT#35]
The Black American owner of DBE/MBEcertified concrete firm said he has had two Sound Transit
contractors that have waived the bonding requirement and placed him under the prime
contractor's bond. He said that bonding impacts minority contractor's ability to bid as a prime
contractor. He said, "We can't control our destiny, because we can't get the bonding." [ST#1]
The female owner of a DBEcertified specialty contracting firm said, "If there is an agency that's
willing to waive the bond requirement, I might make money on public contracts. But, bonds are
required." [WSDOT#27]
The Native American owner of a DBEcertified electrical contracting firm said bonding programs
are okay, but she explained that "you have to be bondable first." She went on to say, "Surety and
underwriters will not let us through the gate. We are effectively locked out. NonDBE firms are
experiencing the same thing. What it is doing for the market is [that] the big guys get bigger, and
little guys get smaller or disappear." [ST#2]
When asked about bonding assistance, the Subcontinent Asian American male owner of a DBE
certified engineering firm said, "I would think [bonding assistance] would be a good thing to help
out." [WSDOT#10]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated that bonding assistance would be "huge," and she supports it because it is really needed.
[ST#6]
The female manager of a Native Americanowned, DBEcertified construction company said,
"Bonding is usually through each company's insurance agency. Only occasionally does a prime
contractor require bonds from us. Financial institutions don't consider work on the books to be an
asset and don't [really] look at receivables anymore." [WSDOT#32]
The Asian Pacific American owner of a DBEcertified contracting firm said, "If a job came out, it
would be helpful if the bonding requirements for a certified DBE were less. It would also be helpful
if Sound Transit could ensure prompter payment." [ST#9]
The Black American owner of a DBEcertified engineering company was supportive of bonding
assistance. He explained, "A lot of times the bonds are being held on pieces of work that have been
completed for a very long time. The [small companies] don't have a lot of bonding capacity so the
large companies are basically putting them out of business." [WSDOT#8]
A project manager for a majorityowned general contracting firm said, "[Bonding assistance] would
be useful. We have done that with some smaller guys when we can based on statutes." [ST#7]
The Asian Pacific American owner of a DBEcertified engineering firm, which also performs
construction, said "I have applied and haven't been able to get [bonding]. I couldn't meet the
underwriting criteria." [WSDOT#37]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 91
Some business owners said that they did not have difficulties dealing with bonding. For example, the
Black American owner of a DBEcertified trucking and specialty contracting company said, "What I do
doesn't require bonding. I know of other DBEs who are intertwined with primes and get around the
bonding issue." [WSDOT#36]
Assistance in obtaining business insurance. Some business owners and managers interviewed
said that assistance obtaining business insurance was a need; others did not.
Some business owners and managers recommended assistance in obtaining business insurance. [For
example, ST#5, ST#8, WSDOT#4, WSDOT#15, WSDOT#33, WSDOT#35, WSDOT#36, and WSDOT#37]
Some interviewees indicated that assistance in obtaining business insurance was not needed. A
number of other business owners indicated that business insurance was readily available, even when
they started their companies. For example, the Caucasian female manager of a large DBEcertified
engineering firm said, "Our industry professional organization has been very helpful in offering
insurance programs, sort of as a broker with the insurance provided by insurance companies." She also
said, "I'm aware that the State Legislature just passed a law about indemnification in contracts. I haven't
seen exactly what the new law will do but I think the change will make things more insurable. This could
benefit the entire industry but especially small businesses." [WSDOT#9]
Assistance in using emerging technology. Interviewees discussed assistance in the emerging
technology.
Many business owners said that assistance using emerging technology would be helpful. [For example,
WSDOT#26, WSDOT#8, WSDOT#15, WSDOT#35, and WSDOT#37] Examples of those comments include
the following:
The Black American owner of a DBEcertified trucking and specialty contracting company said,
"That would be phenomenal." [WSDOT#36]
The Black American owner of a DBE/MBEcertified concrete firm said, "Not all minority firms are
proficient with the latest technology. There are contractors that are not savvy on technology." He
said, "Many minority contractors do not want to change the old ways of doing things." [ST#1]
The Caucasian coowner of a noncertified WBE construction company said, "[Assistance with
emerging technology] would be wonderful. I have fought way through it. I started with a fax
machine. That was pretty much it." [WSDOT#17]
When talking about emerging technology, the Caucasian general manager of a noncertified
womanowned construction company said, "It's kind of changed the game for us." He was
supportive of assistance in using emerging technology. [WSDOT#33]
The Caucasian female manager of a large DBEcertified engineering firm said that assistance in
using social media would be helpful. [WSDOT#9]
When asked if assistance in using emerging technology would be helpful for small, minority, or
womenowned businesses, the owner of a certified Black Americanowned construction firm said
that sometimes new technologies are very complicated. Therefore, assistance would be helpful.
[PS#6]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 92
One interviewee had accessed available training and was critical of the service. The female manager of
a Native Americanowned, DBEcertified construction company said, "At the very beginning, we had
some people come in [from the State], and we knew more than [the trainers] did. WSDOT has helped by
paying for a subscription to the Daily Journal of Commerce plan center and allowing DBEs to use the
subscriptions. That has helped us immensely. It would be nice if all the plan centers in the state were
accessible to DBEs without charge." [WSDOT#32]
Other small business startup assistance. When asked about other small business startup
assistance, many businesses were in favor of such assistance and often identified specific needs or
approaches.
Some business owners and managers specifically mentioned marketing assistance. For example:
When asked about any other startup assistance, the Hispanic American coowner of a DBE
certified construction company indicated that some kind of network would have been helpful to
market his company. [WSDOT#26]
The Black American owner of a consulting firm said, "Startup assistance would be good. There
should be help as far as putting marketing plans together, outreach, learning about joint ventures,
etc." [WSDOT#4]
Other business owners and managers said that assistance with regulations and paperwork was
needed for startups. For example, the Caucasian general manager of a noncertified womanowned
construction company recommended training concerning proper billing and other paperwork such as
certified payroll. [WSDOT#33]
In response to the question concerning startup assistance, some business owners pointed to services
that are now offered. For example:
The Black American owner of a DBEcertified trucking and specialty contracting company
recommended that new companies go through the SBA for startup assistance. [WSDOT#36]
The Hispanic American owner of a DBEcertified engineering company said, "Washington CASH
(Washington Community Alliance for SelfHelp) can provide startup assistance. He said that the
SBA provides assistance as well, and that the local office does a great job. [WSDOT#7]
The female owner of a DBEcertified specialty contracting firm said, "Small business incubators are
really a good thing. The [incubator] is able to take a building and spread the costs out by having a
number of startup businesses in the building. All the costs of operating a business, such as phones,
electricity, and so on, are shared. Banks, contractors, and unions come to the incubator to provide
information." [WSDOT#27]
However, some business owners expressed some cautions about business assistance. For example, the
Asian Pacific American owner of a DBEcertified engineering firm said, "There are a lot of businesses
that want to start up that aren't qualified. There should be a screening process to help businesses that
are qualified and really want to do it. Particularly needed is help getting working capital." [WSDOT#37]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 93
Information on public agency contracting procedures and bidding opportunities. Most
interviewees indicated that more information on public agency contracting procedures and bidding
opportunities would be helpful.
Many business owners and managers reported that they were already receiving information on
bidding opportunities or knew how to search for them. For example:
A manager for a majorityowned geosynthetics supply firm indicated that there did not need to be
more information on public agency contracting procedures and bidding opportunities. [ST#8]
The Caucasian coowner of a noncertified WBE construction company indicated that information
on public agency contracting procedures and bidding opportunities was already available. He said,
"If you want to look for it, it's there." [WSDOT#17]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said
that she is signed up on many rosters, and online registration is very good. [ST#6]
The Black American owner of a DBEcertified trucking and specialty contracting company said that
this assistance is needed, but "a lot of us are seasoned [and know what to do]." [WSDOT#36]
A number of interviewees suggested that public agencies better coordinate how they provide
information about contract opportunities. For example:
The Black American owner of a DBEcertified specialty contracting company recommended putting
all public agency bidding information "in one spot." [WSDOT#35]
A project manager for a majorityowned general contracting firm said, "[Information on public
agency contracting procedures and bidding opportunities] would be useful. I have been involved in
a few outreach and networking events for public agencies, and one of the things that I have heard is
that all [public agencies] have different procurement procedures and ways to find out about
projects. It can be difficult for subs to figure out which game they are playing for each public
agency. The inconsistencies can make it challenging for subs to follow." [ST#7]
The Black American owner of a DBEcertified engineering company said that more information on
public agency contracting procedures and bidding opportunities would be helpful. He said, "Every
agency is a different situation. [It is a challenge] to learn how [each one] works. [In] some areas [my
firm] just doesn't have the experience, especially for federal work. [Seattle Public Utilities] has
forums on how to do business with the agency, which are great." He said it would be helpful if other
agencies followed suit. [WSDOT#8]
The female manager of a Native Americanowned, DBEcertified construction company made a
similar comment. She said, "It's not easy finding out about what's being bid [out] by some local
agencies because [some] are not on the Internet. I think all local agencies should be required to be
on the Internet." [WSDOT#32]
The Black American owner of a consulting firm said that information about public agency bidding
and contracting should be placed on websites and the Internet. [WSDOT#4]
One interviewee cautioned that obtaining information when public agencies publicly announce
bidding opportunities may not be helpful because it is then too late in the process. The Subcontinent
Asian American male owner of a certified engineering firm said, "With projects that are out there, when
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 94
they actually get advertised, a lot of these big companies know about this ahead of time and have already
built their team so that when it's actually advertised, it's actually too late for smaller firms to be able to
go through and get onboard." [WSDOT#10]
Online registration with a public agency as a potential bidder. Most owners and managers of
construction companies said that online registration with public agencies would be helpful.
A number of interviewees said their companies were already participating in online bidder
registration systems. [For example, ST#2, ST#6, ST#8, ST#9, and PS#6]
Related to online registration, some business owners and managers discussed their experience
concerning electronic rosters for small public agency projects. For example:
The Caucasian coowner of a noncertified WBE construction company spoke about small works
rosters. He said that they are good for small general contractors, but that the jobs that come up do
not fit his company very well. His firm primarily works as a subcontractor. [WSDOT#17]
The Black American owner of a DBEcertified specialty contracting company reported, "[My
company] was on the City of Seattle's small works roster, but [that roster] has been eliminated
because it didn't work. I don't think [the rosters] work, so I don't care about that anymore."
[WSDOT#35]
Several interviewees said they preferred centralized, online registration systems for public projects.
For example:
The female owner of a DBEcertified specialty contracting firm said, "I think some agencies do [use
online registration systems]. Generally, projects can be found online and then [the searcher] is
directed to the Daily Journal of Commerce and Business Exchange Washington. Otherwise, many,
many web sites would have to be searched to find the jobs." [WSDOT#27]
When asked whether online registration with a public agency as a potential bidder was useful, a
project manager for a majorityowned general contracting firm said, "Every public agency has
something different that you have to sign up for, and that can be frustrating for some of the DBEs
that I have worked with. Chasing every agency and trying to figure out how they work can be
difficult when you do not have a lot of time. The concept [of online registrations] is good, but when
you have a dozen to go through, that can be a challenge." [ST#7]
Hard copy or electronic directory of potential subcontractors. Most interviewees said that hard
copy or electronic lists of potential subcontractors would be helpful.
Some business owners pointed out existing resources. Examples of such comments included the
following:
The Black American owner of a DBEcertified specialty contracting company said, "[A directory of
subcontractors] already exists. It puts me in front of the prime." [WSDOT#35]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
commented that the electronic copy of a directory of potential subcontractors is good. [ST#6]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 95
The Black American owner of a DBEcertified engineering company said, "I use directories to look
for other small firms, and I think larger firms do that as well." [WSDOT#8]
The Caucasian general manager of a noncertified womanowned construction company said that
his company uses the OMWBE directory. [WSDOT#33]
When asked if a directory of potential subcontractors would be helpful, the female owner of a DBE
certified specialty contracting said, "I think there are quite a few of those out there." [WSDOT#27]
When asked about hard copies or electronic directories of potential subcontractors, the owner of a
certified Black Americanowned construction firm said that he is on subcontractor lists and gets
copies of subcontractor directories. [PS#6]
A few business owners strongly recommended electronic directories. For example:
The Asian Pacific American owner of a DBEcertified engineering firm said, "The electronic
directory is the way to go." [WSDOT#37]
The Asian Pacific American owner of a DBEcertified contracting firm stated that, "[Hard copy
directories of potential subcontractors] are kind of going the way of the newspaper. Everything is
going electronic. But I still get the Daily Journal of Commerce, so they are still good for small
businesses." [ST#9]
Prebid conferences where subs can meet primes. Many business owners and managers
supported holding prebid conferences. [For example, ST#5, ST#6, ST#8, ST#10, WSDOT#8, and
WSDOT#37]. For example:
The Caucasian general manager of a noncertified womanowned construction company said that
his firm goes to prebid conferences and can identify subcontractors at these meetings.
[WSDOT#33]
The Subcontinent Asian American male owner of a DBEcertified engineering firm said that he feels
strongly that prebid conferences are vitally important. He said, "I think that some kind of meeting
or preproposal thing that allows different primes and subs to come together and see who can
share projects that's the biggest thing that helps bring partnerships together." He went on to say,
"That, and having some kind of participation requirements for small firms on contracts from public
agencies that don't always require that [would be helpful]." [WSDOT#10]
The Hispanic American owner of a DBEcertified engineering company said, "[Prebid conferences]
are good because you get to meet the primes and have face time." [WSDOT#7]
The Black American owner of a DBEcertified trucking and specialty contracting company made a
similar comment. He said, "Round table meetings [are good]. Facetoface is super important."
[WSDOT#36]
The Caucasian female manager of a large DBEcertified engineering firm reported that preproposal
conferences are helpful. She said, "You get to meet the client and the prime as well as other firms
that are there. It's good to know who your [company] might team with and who is competition."
[WSDOT#9]
Some business owners and managers said that they did not have time to attend the meetings or that
the meetings needed better scheduling. For example:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 96
Representatives of a large, majorityowned concrete company said, "Yes, [prebid conferences are
helpful]. It sounds good in theory, but we don't have time to do that either." [WSDOT#15]
The female manager of a Native Americanowned, DBEcertified construction company said, "The
outreach meetings for those projects are usually held during working hours. Small businesses like
ours don't have the personnel to send. Having sessions later in the afternoon or in the evening
would be better than mornings, especially Monday mornings." [WSDOT#32]
A few interviewees had mixed feelings about prebid conferences. For example:
A project manager for a majorityowned general contracting firm said, "[Prebid conferences] can
be useful depending on the project, agency, and the attendance. I have been to some that are really
a nonevent, and I have been to some where there are 100 people there, which is a good
networking opportunity." [ST#7]
When asked if prebid conferences are helpful for small, minority, or womenowned businesses, the
owner of a certified Black Americanowned construction firm said that sometimes prebid
conferences are helpful, but they are often a lot of work for little gain. He went on to explain that
prebid conferences require small businesses to jump through hoops. He said that this is
frustrating, because often his business doesn't end up with a contract. [PS#6]
A few interviewees did not think that prebid meetings were useful. For example:
The Black American owner of a DBEcertified specialty contracting company said, "That's not going
to do any good. It's [the company that] is the cheapest [that will get the job]." [WSDOT#35]
The Native American owner of a DBEcertified electrical contracting firm said that he goes to the
prebid meetings. He said, "We get together, shake hands, and I never get a call from them. What I
try to do is reach out and follow up." [ST#2]
The Caucasian coowner of a noncertified WBE construction company reported that he does not
have any difficulty marketing to prime contractors. When asked about prebid conferences, he said
that those meetings are "typically a waste of my time. They just never seem to be too productive."
He explained, "I can find out everything I need to know from the bid documents, if they are
properly put together." [WSDOT#17]
The Hispanic American president and coowner of an MBE/DBEcertified electrical contracting firm
commented on attending prebid meetings where subs can meet primes. He said, "There is a lot of
talk but nothing happens." The vice president concurred, saying, "Nothing comes out of those
things." [ST#3]
The Asian Pacific American owner of a DBEcertified contracting firm sais, "If you are not a prime,
the only thing the prebid conferences are good for is getting to know who will be bidding a job.
Unless you are looking for something specific in it, it is more just to get to know who is bidding. You
get on the phone afterwards." [ST#9]
Distribution of lists of planholders or other lists of possible prime bidders to potential
subcontractors. Most of the business owners and managers interviewed supported the distribution of
planholders lists.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 97
Some interviewee discussed the services that were already available. For example:
When asked if distributing lists of planholders or other lists to potential subcontractors would be
helpful, The Caucasian coowner of a noncertified WBE construction company said that his
company had never had any problem obtaining that information, and that it usually was online.
[WSDOT#17]
The Black American owner of DBE/MBEcertified concrete firm reported that he finds out about
opportunities by registering on agency rosters to receive email notification. He stated that he
views the planholder list to find prime contractors that may bid. [ST#1]
The Asian Pacific American owner of a DBEcertified engineering firm said, "The private
planholders are charging $500 a month for [lists of potential prime contractors]. government
agencies should subsidize these [costs] for small businesses." [WSDOT#37]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said that
he uses planholders lists to seek out the primes that are proposing on a project. [ST#5]
The Subcontinent Asian American male owner of a DBEcertified engineering firm said that public
agencies should distribute lists of planholders or potential prime bidders to potential
subcontractors. He continued, "OMWBE has a list like that. Further segregation or further
separation would be beneficial." [WSDOT#10]
Other agency outreach, such as vendor fairs and events. Some business owners and managers
reported that outreach such as vendor fairs and events were useful. Others no longer regularly attend
those events.
Examples of positive comments about agency outreach events include the following:
The Subcontinent Asian American male owner of a DBEcertified engineering firm indicated that
agency outreach, such as vendor fairs, are helpful. He said, "Yes, that's the huge thing. That's the
key." [WSDOT#10]
The Native American owner of a DBEcertified electrical contracting firm said that his main focus is
transportation projects. He goes to the open house events and builds on good relationships to get
on various projects. [ST#2]
The Caucasian general manager of a noncertified womanowned construction company said that
his company attends outreach events that the AGC holds. [WSDOT#33]
The Black American owner of a DBE/MBEcertified concrete firm noted that outreach events do
help a small amount. He said, "The best way is to get out and create good relationships and
references." [ST#1]
A discussion participant representing a diversity program office recalled that a number of DBE
firms have said, "We've been very successful. We never would have met these people had you not
had this level of outreach events." The participant went on to say that their office needed to follow
up with the prime contractors and ask them how many new DBEs they are bringing in as
subcontractors. [DBEP#5]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 98
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said
that she really likes agency outreach events. She said, "I have met people that I otherwise would not
have met. I have not gotten a job out of it, but jobs come 'down the road.'" [ST#6]
A number of business owners and managers indicated that outreach events were not useful. For
example:
The Caucasian coowner of a noncertified WBE construction company reported that he does not
have any difficulty marketing to prime contractors. When asked about agency outreach, he did not
think it was beneficial to his firm. [WSDOT#17]
The Hispanic American coowner of a DBEcertified construction company had a similar opinion.
He said, "It's a waste of time for me. The general contractors know me, and we know them."
[WSDOT#26]
The Hispanic American owner of a DBEcertified engineering company was critical of "generic
outreach sessions." He said, "You want to go to the ones that are more specific." [WSDOT#7]
Representatives of a large, majorityowned concrete company had a negative experience with a
vendor fair they had recently attended. They said that the vendor fair was in an inconvenient
location with no parking and was not sufficiently industryspecific. He commented that the fair
"really wasn't worth it for us." [WSDOT#15]
The Asian Pacific American owner of a DBEcertified engineering firm said, "[I have been to] many,
many [outreach events]. [Probably] 90 percent of the agencies that show up are only doing lip
service. Often [the meetings] are a waste of time." [WSDOT#37]
Streamlining/simplification of bidding procedures. Most business owners said that streamlining
or simplifying bidding procedures would be helpful. For example, the Caucasian coowner of a non
certified WBE construction company said, "Anything [that] can make [the process] quicker or simpler
would be great." [WSDOT#17]
One business owner made specific comments about streamlined reporting requirements or reduced
paperwork. For example, the Hispanic American coowner of a DBEcertified construction company said,
"Yes, [streamlining would be good]. If I could sign up one time a year instead of every time filling it out.
It's just another hour's worth of work for everybody to do that [each time]." [WSDOT#26]
Some interviewees indicated that they thought that bidding procedures were already streamlined, or
that further streamlining was not needed. [For example, ST#5 and ST#6] Other examples include:
The Caucasian general manager of a noncertified womanowned construction company also said
that he did not think that bidding procedures were overly complicated. [WSDOT#33]
The Black American owner of a DBEcertified specialty contracting company reported that "bidding
is already pretty simple." [WSDOT#35]
The Black American owner of a DBEcertified engineering company said that he supported
simplified bidding procedures but cautioned against "going overboard." He said, "There was a
period of time where you'd go after an agency RFP, and they would say 'Okay, you've got seven
pages to do your proposal, and here are two preprinted forms that must be in that seven pages, so
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 99
you only get five pages to tell your story.' That's just ridiculous. You've got to give people enough
room to tell their stories." [WSDOT#8]
The Subcontinent Asian American male owner of a DBEcertified engineering firm said, "I don't
think [public agencies] need to streamline bidding procedures. The bidding procedure is not the
problem." [WSDOT#10]
Breaking up large contracts into smaller pieces. The size of contracts and unbundling of contracts
were topics of interest to many interviewees.
Most business owners and managers interviewed indicated that breaking up large contracts into
smaller components would be helpful. [For example, ST#1, ST#2, and ST#5]. Other examples of those
comments include the following:
The Subcontinent Asian American male owner of a DBEcertified engineering firm said, "I would
definitely say that [breaking up contracts into smaller pieces] would be good." He went on to say,
"That allows more avenues for small firms to go through and get their foot in the door."
[WSDOT#10]
A manager for a majorityowned geosynthetics supply firm stated that, "It does make sense that
[breaking up large contracts into smaller pieces] does allow for greater diversity or for a greater
number of small businesses to participate." [ST#8]
The Hispanic American coowner of a DBEcertified construction company made similar comments.
He said that breaking up large contracts works really well. [WSDOT#26]
The Caucasian general manager of a noncertified womanowned construction company said,
"Please do this! The tendency has been to go to larger contracts. It eliminates the opportunity for
smaller companies. Contracts should be less than $10 million. Less than $5 million would [give
small contractors] a lot more opportunity." [WSDOT#33]
The project manager for a WBE and DBEcertified environmental services firm stated, "Projects
should not be too massive, and some unbundling [of large contracts] would help." [ST#10]
The Caucasian manager of a WBEcertified construction firm said that he has heard of the Port
breaking up large contracts into smaller ones. He said, "I think that's a good thing and should
continue." [PS#2]
The Asian Pacific American owner of a noncertified engineering firm said he would suggest
breaking contracts up into smaller pieces and simplifying the contracting process. He suggested
giving the work to many more companies rather than only the top three or five companies. [PS#3]
The owner of a certified Black Americanowned construction company said that breaking up
contracts into smaller pieces is beneficial for small businesses. He said that more unbundling is
necessary. [PS#6]
A few business owners saw both positive and negative aspects of unbundling contracts. For example:
The female manager of a Native Americanowned, DBEcertified construction company said,
"Breaking up large contracts could possibly be a plus." However, she went on to indicate that larger
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 100
contractors tend to win the smaller projects anyway. She said, "Municipalities try to keep contracts
under $250,000 for small businesses to compete on. We're listed on small works rosters but very
seldom get calls. The bigger contractors get the calls." [WSDOT#32]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said,
"Breaking up larger contracts is a bad idea, because it is much more difficult to break up the work.
For some trades it may be okay, but for rebar it is not. I think that breaking up a job is going to cost
you more." [ST#6]
The Caucasian coowner of a noncertified WBE construction company, who typically works as a
subcontractor, said, "It doesn't make any sense to me. It costs me more money to go do four small
jobs than it would to set down on one big one, and make it go all together." [WSDOT#17]
The Asian Pacific American owner of a DBEcertified contracting firm said, "[Breaking up large
contracts into smaller pieces] is useful, but it is not practical. It is hard to unbundle contracts,
because it means more administrative costs and efforts. I think it is up to the primes to identify the
work and unbundle that contract. It is also up to the subcontractor to bundle contract pieces that it
can work on and submit a quote for that bundle. For the agency to do it is probably not efficient and
probably costs more money." [ST#9]
Representatives of a large, majorityowned concrete company saw positives and negatives for
breaking up large contracts. They pointed out that there is better pricing for bigger contracts and
that the public owner manages a big contract better than many smaller contracts. [WSDOT#15]
A project manager for a majorityowned general contracting firm said, "I think that with the right
circumstances, it could help to break some of those [large] projects up. But the [bid] process has to
be simplified, and [subcontractors] have to be aware of and capable of going through that process. I
have some smaller DBE subs that would prefer to not bid publically, because when they bid
publically, they have to provide bonding and have all of these hoops that they have to jump
through. As a sub, they do not have to jump through all of those hoops." [ST#7]
One business owner said unbundling would not impact his business. The Caucasian president of a
majorityowned surveying company stated that he would just hire more staff for larger projects, or bring
on another firm. [ST#4]
Price or evaluation preferences for small businesses. Interviewees also discussed bid
preferences for small businesses.
Many interviewees said that price or evaluation preferences for small business would be helpful. [For
example, ST#1, ST#5, ST#9, ST#10, WSDOT#8, WSDOT#35, and WSDOT#36]
Some interviewees identified advantages and disadvantages with preferences for small businesses.
For example:
The Asian Pacific American owner of a DBEcertified engineering firm was supportive of a
preference for small businesses, but said, "I think going to 'best value' is a better way to select
vendors so businesses can't buy a bid by bidding too low." [WSDOT#37]
The Subcontinent Asian American male owner of a DBEcertified engineering firm said, "No, I'm not
a big proponent of [price or evaluation preferences for small business]." He went on to say, "I think
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 101
that small businesses should be able to prove that they are just as good as another firm. I think
there'd be a lot of animosity in the industry." [WSDOT#10]
When asked if price or evaluation preferences are helpful for small, minority, or womenowned
businesses, the owner of a certified Black Americanowned construction company said that he
believes they are a good idea, but that evaluation preferences do not offer prime contractors
enough motivation to help minorityowned businesses get more work. [PS#6]
A few business owners did not support price or evaluation preferences for small business. For
example:
When asked if small businesses should get price or evaluation preferences, the Caucasian coowner
of a noncertified WBE construction company said, "I think [government] ought to let the market
dictate things, instead of trying to fix prices for people." [WSDOT#17]
The Caucasian general manager of a noncertified womanowned construction company said, "I
guess I'd prefer not to do that. There's already some of that like HUB zones, 8(a) setasides, and the
like." [WSDOT#33]
Small business setasides. The study team discussed the concept of small business setasides with
business owners and managers. That type of program would limit bidding for certain contracts to firms
qualifying as small businesses.
Most business owners and managers supported small business setasides. [For examples ST#1, ST#3,
ST#4, ST#5, ST#6, ST#9]. Other examples of those comments include the following:
The Subcontinent Asian American male owner of a DBEcertified engineering firm said, "In some
industries they kind of [use small business setasides] for some small projects." He continued, "It's a
good way for them to build up." [WSDOT#10]
The Native American owner of a DBEcertified electrical contracting firm commented that setaside
programs would be helpful. He said, "If I see the same guys winding up with the contracts all the
time, I am not going to bid." [ST#2]
The Asian Pacific American owner of a DBEcertified engineering firm said, "I don't think we will
ever achieve a level playing field. There will always be small businesses and large businesses, and
large businesses have advantages and will get the large contracts. They have more expensive
lawyers and lobbyists than [small firms] do. I think, to make a level playing field, an agency has to
make it sizeoriented. They could choose $1 million or $5 million or some other size standard.
Small businesses in that category could compete against each other and not have to compete
against larger firms." [WSDOT#3]
A manager for a majorityowned geosynthetics supply firm said, "It seems like, in one way, [small
businesses should be more competitive]. But, without [small business setasides], it seems like if
large businesses just wanted to squash the small guys, they could just gobble up jobs." [ST#8]
The Caucasian female manager of a large DBEcertified engineering firm said, "Yes, having
contracts that only have competition by small businesses would be great. I know some federal
agencies do that." [WSDOT#9]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 102
The Asian Pacific American female owner of an MBE and DBEcertified engineering firm reported
that some local agencies, such as the City of Seattle, do a good job with their small business roster.
She said that, while it is not the same as a setaside, it does work for her business. [WSDOT#1]
Some business owners and managers generally supported small business setasides but expressed
some reservations about the concept. For example:
The Hispanic American owner of a DBEcertified engineering company with experience in the 8(a)
program said that setasides are helpful but "relationships need to be built months in advance." He
said that a company needs to be prepared to submit a good proposal once the setaside opportunity
arises. [WSDOT#7]
A project manager for a majorityowned general contracting firm said, "We do not have a lot of set
aside programs in Washington, and I have mixed feelings about them. I would rather that people
are [hiring DBEs and small businesses] for the right reasons instead of being forced to." [ST#7]
The Black American owner of a DBEcertified trucking and specialty contracting company was also
supportive of small business setasides, but cautioned about how small businesses are defined.
[WSDOT#36]
Mandatory subcontracting minimums. Some business owners and managers supported requiring
a minimum level of subcontracting on projects. Some interviewees did not.
Some firms thought a mandatory subcontracting minimum program would be useful. [For example,
ST#7, ST#8, ST#9, ST#10, PS#6] The Asian Pacific American female owner of an MBE and DBEcertified
engineering firm said, "[A mandatory subcontracting minimum program] would be great. The big firms
already have a firm footing and have a lot more resources available to get large projects. The big firms
will bring staff in from all over country instead using local small businesses." [WSDOT#1]
Some business owners and managers had reservations concerning a mandatory subcontracting
minimum program. For example:
The Subcontinent Asian American male owner of a DBEcertified engineering firm said, "I don't
know if I agree with [mandatory subcontracting minimums] across the board, but I definitely agree
with that on a multidisciplinary project." [WSDOT#10]
The Black American owner of a consulting firm was supportive of mandatory subcontracting
minimums, "but not if the same subcontractors are used all time. If they can diversify with the
subcontractors, that's good." [WSDOT#4]
The Hispanic American owner of a DBEcertified engineering company cautioned that the
mandatory subcontracting minimum would need to be designed to make sure a prime contractor
"spreads the work around to all businesses, not just the ones that [it has already] been doing
business with." [WSDOT#7]
Some interviewees did not like the idea of mandatory subcontracting minimums or did not think it
would be effective. For example, the Caucasian female manager of a DBEcertified engineering firm said,
"Yes, requiring primes to sub out work would be good as long as [the prime contractor] is held
accountable. This is what some primes are supposed to do now, but [our company] hasn't had work
even though [it] was included in the proposal." [WSDOT#9]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 103
Small business subcontracting goals. Interviewees discussed the concept of setting contract goals
for small business participation.
Many business owners and managers indicated that small business subcontracting goals would be
helpful. [For example, PS#6, ST#6, ST#9, WSDOT#10, and WSDOT#27] Examples of such comments
include the following:
The Black American owner of a DBEcertified trucking and specialty contracting company was
supportive of small business subcontracting goals "because there are a lot of nonminority owned
small businesses that need a leg up also." [WSDOT#36]
The Black American owner of a DBEcertified engineering company supported small business
subcontracting goals. He said, "The big businesses that the agencies are working with now were
small businesses once. Unless the agencies open up some of these doors so that small business can
grow and develop, the agency is limiting their options for the competitive process. So all of these
[suggestions for increasing small business participation] open opportunities for the agencies as
well as for the small businesses." [WSDOT#8]
Some business owners had concerns about the effectiveness of a small business goals program. For
example:
The Asian Pacific American owner of a DBEcertified engineering firm was critical of how prime
contractors react to small business goals. He said, "It's always at the tail end, in my opinion, that
[the prime contractors] notice there are small business requirements that need to be met." He also
said, "If there is a portion of the work to go to small businesses, competition should be limited to
just small businesses. A lower size standard than the SBA standard of $30 million should be used. I
think $30 million is too large. If a firm does $5 million or less a year, those firms should be in a
separate category and compete for portions of the work." [WSDOT#3]
The Hispanic American coowner of a DBEcertified construction company indicated that voluntary
goals do not seem to work, because they are not a requirement. [WSDOT#26]
Other business owners recommended against a small business subcontracting goals programs. For
example:
When asked about having small business subcontracting goals, the Caucasian coowner of a non
certified WBE construction company said he disagrees with the measure. He said, "I think that a
construction company should be able to do the work [it] wants to do. I just don't care for the
government telling contractors how to do business." [WSDOT#17]
Representatives of a large, majorityowned concrete company advised against a small business
subcontracting goals program. They said, "The hardest thing to do is figure out the percentage
needed on projects to satisfy DBE goals. It takes hours. And there is some other company [who is]
low, and [our company] can't use it." They described the process as very challenging and time
consuming. [WSDOT#15]
Formal complaint/grievance procedures. The study team discussed procedures for making
complaints or outlining grievances.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 104
Many business owners and managers said the formal complaint and grievance procedures would be a
benefit. [For example, ST#8 and WSDOT#17] Another example is the Asian Pacific American owner of a
DBEcertified engineering firm, who said, "It is necessary. Right now, [a firm] is going to end up hiring a
lawyer. [The industry] needs an ombudsman." [WSDOT#37]
Some business owners and managers did not believe complaint or grievance processes were available,
or they believed that existing processes could be improved. For example:
The Black American owner of a DBEcertified trucking and specialty contracting company said that
formal complaint and grievance procedures were needed. He said, "The existing procedures are not
sufficient, so as a practical matter, this means there is no enforcement or monitoring. It takes so
long for any of the federal agencies to do anything about it. It seems like it's not important enough.
There is no accountability." [WSDOT#36]
The Black American owner of a DBEcertified specialty contracting company said, "There should be
[availability to formal grievance procedures]. There is not one that I know of right now. I should
have been able to go to the small contract department and tell them what [the prime contractor]
was getting ready to do to [my company]. There's nowhere to go." [WSDOT#35]
The Black American owner of a DBE/MBEcertified concrete firm stated that grievance procedures
do exist, but [the effectiveness] depends on the agency commitment to resolving the issues. [ST#1]
Other business owners reported that they had used existing processes and did not find them to be
helpful. For example:
The Black American owner of a DBEcertified engineering company said that his firm had used
formal grievance procedures. He said, "This is important, and yes, I have used it. Was it helpful?
No." [WSDOT#8]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said
that she would like to see better complaint and grievance procedures. [ST#6]
One interviewee commented that processes had not worked in the past but they were improving.
When asked about complaint and grievance procedures, the owner of a certified Black Americanowned
construction company said, "These have not been working." He went on to explain that things are
changing, and that there is potential for the procedures to improve. He said, "Now, it's beginning to take
shape. I am waiting to see." [PS#6]
Other measures. Some business owners identified other neutral measures for consideration. For
example:
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said that
King County and the Port have The Small Contractor and Supplier Program (SCS). He noted that
there are contracts that have SCS requirements, which is good for small firms. He thought it is good
that the SCS size standard is 50 percent of the SBA Size Standard. [ST#5]
The Asian Pacific American owner of a DBEcertified engineering firm offered a suggestion for
addressing nonpayment of subcontractors. He said, "Public agencies should pay subcontractors
directly. The prime [would] have to verify all the hours and billing and say [that] everything is okay,
but then the public agency would pay the sub directly."
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 105
He continued, "In Washington State, this approach would reduce the payment of business and
occupation (B&O) taxes which now the prime contractor has to pay and then so does the
subcontractor. There's a lot of payment of B&O taxes all along the way. I have seen this work in the
private sector, and it works beautifully. I have seen this work on a job [outside Washington] where
the owner put funds in a trust. As billings were approved, the trustee paid money from the trust to
the consultants within 30 days tops, and sometimes it was 15 to 20 days. I thought, 'Why can't
everyone do that?'" [WSDOT#3]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said
that small business programs are good and are probably better than the DBE program. [ST#6]
I. Insights Regarding Race or Genderbased Measures
Interviewees, participants in public hearings, and other individuals made a number of comments about
race and genderbased measures that public agencies use, including DBE contract goals, including
comments regarding:
Support for race/ethnicity or genderbased measures (page 106);
Negativity towards race/ethnicity or genderbased measures (page 108);
Criticism for aspects of the Implementation of the Federal DBE Program (page 108);
Effects of Initiative 200 (page 110);
MBE/WBE/DBE fronts or fraud (page 111);
False reporting of DBE participation of falsifying good faith efforts (page 114); and
Effects of DBE project goals on other businesses (page 116).
Support for race/ethnicity or genderbased measures. There were many comments in favor of
the Federal DBE Program, including DBE contract goals.
Some individuals had positive comments about DBE contract goals and the Federal DBE Program
overall. Examples of such comments include the following:
The president of an engineering industry trade association said that he asked his organization's
members if there were any program measures that were effective in encouraging the participation
of MBE/WBE/DBE and other small businesses in public sector contracting. He indicated that the
responses included:
"Participation [in such programs] by large firms is generally more effective when mandated.
Contracts with federal money still require participation."
"Setting MBE/WBE goals for solicitation, selection, and scoring seems effective." [WSDOT#38]
The Native American owner of a DBEcertified electrical contracting firm said that, overall, the DBE
Program has been good for his firm. [ST#2]
The Subcontinent Asian American male owner of a DBEcertified engineering firm said, "I think the
program is a good thing. It allows you to get through and prove yourself." [WSDOT#10]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 106
The Black American owner of a DBE/MBEcertified concrete firm stated that he wishes
DBE/WBE/MBE goals were not necessary, but he would not have been able to stay in business
without them. [ST#1]
Concerning the difference between getting on public jobs with DBE goals versus public jobs without
DBE goals, the Black American owner of a DBEcertified specialty contracting company said, "[The
difference is that] without DBE goals I don't get on [the job]." He added, "In the public sector, the
only way I can get work is by being a DBE." [WSDOT#35]
The Hispanic American president and coowner of an MBE/DBEcertified electrical contracting firm
commented that the DBE program got the firm's "foot in the door." [ST#3]
The Black American owner of a DBEcertified trucking and specialty contracting company said,
"The only reason why I am getting any work on the state level is because of the Federal DBE
Program." [WSDOT#36]
The Caucasian president of a majorityowned surveying company stated that programs for
minority and womanowned businesses are good. He said, "It gives them an opportunity to meet
the primes and gives an opportunity to attach themselves to real work." [ST#4]
The Subcontinent Asian American male owner of a DBEcertified engineering firm said, "The
biggest barrier for work is just having the work available out there for us. The DBE goals help open
the door and allow firms like myself to make contact with some of these larger firms. I think if it
wasn't for the DBE goals, a lot of these [larger] companies would just have a small, narrowly
confined window of [firms] they use, and the [larger firms] wouldn't need to or want to look
outside that window." [WSDOT#10]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said
that race/gender neutral programs may be good, but that there are added challenges for minority
and womanowned businesses that are not addressed by the programs. [ST#6]
The female manager of a Native Americanowned, DBEcertified construction company said, "We
tend to bid on more [contracts] with DBE goals rather than those without goals. We just can't
compete [for work without the goals], and sometimes I don't understand why. It takes so [many
materials], and the wages are set on these projects, and our overhead is not high. Yet there are
companies that will come in maybe about onehalf of our bid. It's real dogeatdog out there still."
[WSDOT#32]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said,
"Having a goal or requirement gives greater incentive for the primes to include DBE/MBE and small
business." He also said, "Having a program is one thing, but not requiring contracts to meet the
minimum is a problem. There is a difference between a goal and a requirement." He said that points
should be given for meeting the goal and additional points given for exceeding the goal on a project.
[ST#5]
Several owners of DBEcertified companies said that participation in the DBE Program helped their
business become established and grow. [For example, WSDOT#26]
A project manager for a majorityowned general contracting firm said, "The most successful
relationships that I have had with DBEs and small businesses have been through secondtier
subcontracting. It is difficult to get MBEs and WBEs to bid as primes on public contracts because of
all the paperwork and procedures. But if you can get subcontractors matched up with primes, then
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 107
you can help build relationships, and the small guys do not have to waste time chasing bid and
contracts." [ST#7]
Negativity towards race/ethnicity or genderbased measures. Some interviewees said that
they did not support programs that gave advantages to MBE/WBEs.
Some interviewees said that race and genderbased programs should be discontinued or substantially
changed. For example, when asked what could be done to improve the DBE program, the Caucasian co
owner of a noncertified WBE construction company suggested that the program be cancelled. He said,
"Get rid of it all together. That's the only way to improve it, in my opinion." The interviewee indicated
that he had started a business with his wife, and had applied for WBE certification but had the
application denied. He reported, "I just don't really agree with the whole process of minority and
disadvantaged business." [WSDOT#17]
Criticism for aspects of the Implementation of the Federal DBE Program. There were several
comments criticizing how public agencies implement particular aspects of the Federal DBE Program.
Some interviewees had negative comments about how the Federal DBE Program functioned in
general. For example:
The Native American owner of a DBEcertified electrical contracting firm stated said he selects
DBE/MBE subs if they are available. He said, "If they know what they are doing and are good, I will
hire them, but if they are just out there with their hand out or saying, 'You owe me,' I don't want
them around. That in essence is what is wrong with the DBE Program. There are sins on both sides.
[The minority subcontractors] stand with their hands out, the primes get cynical about it, and you
get the nasty treatment by primes because they have to use you as condition of award." [ST#2]
The Hispanic American president and coowner of an MBE/DBEcertified electrical contracting firm
said, "Some people take advantage of the programs, make a lot of money, and never learn anything
from them." [ST#3]
Some interviewees were critical about key aspects of the implementation of the Federal DBE Program.
For example:
The Black American founder of a construction industry trade association indicated that WBEs
should not be included as a disadvantaged group in the Federal DBE Program. He said, "I'm not too
sure that we shouldn't try to [ban] these women's organizations [from the DBE Program]. It doesn't
turn me on that these white girls come in here and rip us off with their husbands or whatever.
They've been doing it for years." He went on to say, "In my opinion, they should get rid of [WBEs].
There's no need for those [businesses]. They need to throw [the whole program] out. These women
have taken over."
He suggested that it is necessary for Black Americanowned businesses to collaborate to find a
solution to the barriers that they collectively face. He said, "They need to learn to work together
and put their heads together to come up with [a solution]. It seems like they're working against
each other." He said that Black Americanowned businesses should work together to take a more
active role in shutting jobs down if Black Americanowned businesses continue to not get work.
[WSDOT#39]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 108
A project manager for a majorityowned general contracting firm said, "Every agency has a
different way that they count and track small business and DBE participation. Each agency has a
different set of rules, and having some sort of consistency would definitely help the smaller guys
out." [ST#7]
The Black American owner of a DBEcertified trucking and specialty contracting company said that
the DBE evaluation part of the contract award is a major issue. He feels that the prime contractor
gets to take its time and find its favorite DBE to find a special place for it. In other words, the prime
contractor doesn't have to list the DBE firms to be used at the time of bidding so it can pick favorite
DBEs and suggest to those firms where the price needs to be to get the work. He says that nothing
stops the prime contractors from doing this, and it is done all the time. [WSDOT#36]
The Black American owner of a DBE/MBEcertified concrete firm said that he feels that there are
certain groups that should be excluded from the DBE program. He said, "There should be better
enforcement and monitoring." [ST#1]
When asked if there are any measures limited to certified MBE/WBEs or DBEs that would be useful,
the owner of a certified Black Americanowned construction firm said that race and gender should
be considered separately. He said, "Now we have a problem separating white women from the
goals. When they put white women with minorities, [white women] always get the advantage."
[PS#6]
Several interviewees expressed the opinion that the definition of "small business" had grown to
include multimillion dollar companies who received DBE certification and then had an unfair
advantage over the truly small DBE businesses. Examples of such comments included the following:
The female manager of a Native Americanowned, DBEcertified construction company said, "In
2005, WSDOT told us [that our company] was the only certified company in the state. Now there
are at least a dozen DBE companies in the state. The majority of [those companies] are multi
million dollar companies. I question that. I don't see a lot of disadvantage [in a multimillion dollar
company]. We cannot compete as a small business DBE in the field that [it is] in because there are
DBE contractors out there that are multimillion dollar companies, and [each of those companies]
can afford to drop [its] wages and have lower bids than us. The size standards are critical. The
current size standards for small businesses are too high." [WSDOT#32]
The president of an engineering industry trade association reported, "Now that the small business
standards have changed, I hear complaining from everybody about the new size standards." He
said, "Size standards based on revenues isn't always applicable, and that there are a lot of firms
with that level of revenues that no one would consider small firms because of the types of work
that they do." [WSDOT#38]
However, one interviewee appears to have benefitted from the new size standards. The Caucasian
female manager for an MBE/DBE/SBA certified engineering company said, "We had outgrown the
size standard of $4.5 million for engineering and therefore graduated and could not be a small
business or DBE for that kind of work. We had other NAICS code work, but engineering was our
breadandbutter. The size standard of the Small Business Administration was just increased a few
months ago, and that is used by OMWBE. That will be a good opportunity for us." [WSDOT#9]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 109
Effect of Initiative 200. Interviewees discussed the impact of the passage of Initiative 200 on
MBE/WBEs. In 1998, Initiative 200 amended state law to prohibit discrimination and the use of race
and genderbased preferences in public contracting, public employment, and public education, unless
required by federal law. With regard to public contracting, Initiative 200 prohibited government
agencies in Washington from applying race and genderconscious programs (e.g., DBE contract goals)
to nonfederallyfunded contracts.
A number of owners and managers of MBE/WBEs reported that the implementation of Initiative 200
had an adverse effect on their businesses. For example:
A discussion participant representing a county provided statistics indicating that Initiative 200 had
negatively impacted MBE/WBE/DBE utilization. She said that, in the years before I200, the overall
MBE/WBE/DBE utilization rates was much higher than in the years after the passage of Initiative
200. [DBEP#4]
The Black American owner of a DBE/MBEcertified concrete firm stated that there is a benefit to
DBE certification on federallyassisted projects. He reported that he sees little benefit to state MBE
certification due to the passage of I200, and that many businesses have been lost since its passage.
He said, "Our numbers have dwindled." [ST#1]
A public hearing participant representing a professional association said, "We have talked a lot
about I200, and I think it's time we stopped running from I200 and start using I200. There is no
question about the impact of I200. Let's remember, though, that people have said it overturned
affirmative action it did not. In fact, the proponent in the voting effort wrote, 'This does not
repeal affirmative action.' The only thing it did was get [rid of] the mandatory goals. That was it.
Let's remember the initiative says it is a Washington State civil rights initiative and prohibits
discrimination." [NSP#9]
The Native American owner of a DBEcertified electrical contracting firm commented that prior to
Initiative 200, there were firms that used the MBE/WBE Programs to their benefit and grew.
[ST#2]
A public hearing participant representing a professional association said, "Again, I think [another
participant] made the point that pre I200 [MBE/WBEs] were at 10 percent as far as the goals that
were met, and after the I200, we were down to 2 percent in terms of participation on that. So
again, I feel that we need to go back to that." [NSP#11]
One of the participants in the North Seattle public hearing wrote a comment indicating that the
State should go back to how it awarded contracts pre Initiative 200. [WT#8]
The Subcontinent Asian American owner of a DBEcertified engineering firm said, "So, when I200
went through about 10 years ago, there was a definite drop for the company." He went on to say,
"The big companies just started doing [the previously subcontracted work] inhouse. I think it hurt
[DBE firms] substantially." He continued, "Now, it doesn't provide an avenue for small and minority
firms to prove themselves." [WSDOT#10]
The Hispanic American coowner of a DBEcertified construction firm said, "In the 1990s, it was
great [to be a certified minority company]. It meant something to have that. Around 2000, it
definitely changed. It didn't mean as much." When specifically asked about Initiative 200, he said,
"It took away all our state jobs, for a while, and we had to shift to the private sector. I didn't need
the extra help just to survive, but did it affect our business? Yes, it did." [WSDOT#26]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 110
The Asian Pacific American owner of a DBEcertified engineering firm said that his firm was
negatively impacted by the passage of Initiative 200. He said, "Before I200, my firm received a lot
of calls and performed a lot of work. I would get phone calls asking, first, 'Are you certified?' and
second, 'Can you perform 10 percent of the work?'" He noted that most of [those] phone calls
stopped after the passage of Initiative 200. HE said, "After passage of I200, I had to reinvent my
firm and even consider whether to identify my firm as MBE or DBEcertified." [WSDOT#3]
When asked about the effects of Initiative 200 on his business, the Hispanic American owner of a
DBEcertified engineering firm said, "Before that was implemented, I didn't have to be certified [as
a DBE]. It was doing projects without certification. Once [the law] all went through, I had to get
certified, because the [prime contractor or public owner] had to account for me [as a certified firm].
I was [forced] to bid on projects that [previously my firm] had been receiving based on my
expertise. Because of the fact that [the company now] has to be certified the footprint has gotten
smaller." [WSDOT#7]
The Asian Pacific American owner of a noncertified engineering firm said, "The process is so
political, especially after I200 passed in the state, and there's no consideration for MBEs for state
projects anymore. Then everything depended on whether it was federallyfunded or not." [PS#3]
The owner of a certified Black Americanowned construction firm said that the current
marketplace conditions are not favorable for his business. He said that he is "rarely called and
usually passed over." He went on to say that, "The market right now is very bad since affirmative
action went away. Since I200, it has been very bad for Black businesses." [PS#6]
Some firm owners and managers did not think I200 had adversely affected their firms. For example,
the president of an engineering industry trade association indicated that MBE/WBE engineering
companies have not been substantially affected by the passing of Initiative 200. [WSDOT#38]
MBE/WBE/DBE fronts or fraud. Many interviewees with a diverse range of experiences and
opinions commented on the existence of fronts or fraud.
Several interviewees reported knowledge of examples of fronts or fraud. Some gave firstperson
accounts of instances they witnessed, whereas others spoke of lessspecific instances or those of which
they had no firsthand knowledge. For example:
The president of an engineering industry trade association said that he is aware of MBE/WBE/DBE
frauds and fronts coming out of the public sector, but he is not aware of much of that taking place in
the engineering industry. He explained, "Engineers are, by nature, pretty straightforward and
pretty risk averse." [WSDOT#38]
In reference to the subject of DBE fronts, a discussion participant representing a diversity program
office said, "I think that is bigger than we all really realize." [DBEP#5]
The Native American owner of a DBEcertified electrical contracting firm said, "There is a slug of
fraudulent firms and fronts. The system is forcing primes to do this stuff. The primes feel they are
being forced to do something they don't want to do, or the rules and regulations cost them too
much money. So the primes figure a way around it." [ST#2]
The Caucasian coowner of a noncertified WBE construction company said, "There [are] questions
in my mind [about] how some [companies] obtain DBE status. I know some contractors who have a
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 111
DBE status, and I don't know how they got it. So I've had questions, but it's not worth my time to
pursue it." [WSDOT#17]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm said,
"Yes, I am aware of it. We get accused of it. There needs to be an educated view of the process. I
have also met and know people in the program that are definitely fronts." [ST#6]
The Black American owner of an MBE/DBEcertified engineering company said, "Yes, I've seen this.
It was in some classes [for small minority businesses] and some of the companies, particularly
trucking companies, had that situation. I remember one particular woman [who owned a trucking
company] who had no experience at all [in that business]." [WSDOT#8]
The Asian Pacific American owner of a DBEcertified contracting firm stated, "There was one that
just got decertified. There have been a few that have been called out." [ST#9]
The Caucasian female manager of an MBE/DBE/SBAcertified engineering company said, "I've
heard of a company that hired a drafter who was a woman. The company then suggested that she
start her own company and the company would use her to meet goals. The company was trying to
craftily get around requirements and retain more of the money for [itself]." [WSDOT#9]
The project manager for a WBE and DBEcertified environmental services firm stated, "There are
some [MBE/WBE/DBE fronts or fraud], but it is just like paying your taxes. If the rules are there,
use them." [ST#10]
The female manager of a Native Americanowned, DBEcertified construction company said, "It has
come up in recent conversations, more now than it ever has. I think there are prime contractors
fraudulently opening businesses just because the [company] wants to keep that money in [its] own
pockets in a roundabout way, [and these companies] all have good lawyers. It has come to light
that there are prime contractors that are able to figure out that [it] can start a business over here
with [the owner's] daughter, or another member of the [owner's] family can start a business and
become DBE certified. There's not a whole lot of scrutiny [by the certifying agencies]."
[WSDOT#32]
The owner of a certified Black Americanowned construction company said that he has heard of
owners of majorityowned firms transferring ownership to their wives in order to get DBE
certified. He said that that WBE fronts are common in the construction industry. [PS#4]
When asked if MBE/WBE/DBE fronts or fraud affect business opportunities, the owner of a
certified Black Americanowned construction company said that this was a problem in the
marketplace. He said, "[The certification agencies] let people come into the DBE program that really
aren't eligible. [Those fraudulent DBEs] got millions of dollars off of this program, and they should
not have been in the program. Those contracts should have gone to people like me." He went on to
say that fraudulent DBE firms were used in previous disparity studies. He said, "If they had not
used the front company's numbers, it would look so bad. It would be obvious what's going on."
[PS#6]
Some interviewees explained the impact of alleged DBE fronts on their companies. Examples of such
comments included the following:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 112
The Black American owner of a DBEcertified specialty contracting company said, "Yes. You can see
all of that on Channel Five TV. The fraud is that companies that are being certified as DBEs don't
qualify because the net worth of the individuals filing the applications for certification are more
than what the program allows. The DBE fronts are under investigation also. That would affect other
DBEs, because if you are using a DBE front to obtain a major project, then the front that you're
using would block all of the DBE points [from being available to] any other DBE." [WSDOT#35]
The owner of a minorityowned, DBEcertified trucking company wrote that he and other firm
owners experience discrimination against minorityowned companies. He indicated that assistance
favors WBEs, and that some (but not all) womanowned, DBEcertified companies have been set up
"by using wives and daughters." He went on to write that, as a result, Black American and other
MBEs are underutilized. He wrote, "The programs that Washington has set forth do not and will
never work for the people it is supposed to work for because of discrimination and loopholes." He
recommended that the overall goals for DBE participation be divided into individual goals for
womanowned firms, Black Americanowned firms, and other minorityowned firms. [WT#7]
A project manager for a majorityowned general contracting firm said, "I would not say that I have
seen any [MBE/WBE/DBE] fronts or frauds. However, [I] have seen people trying to get as much
advantage as they can from the system. For every rule, there is a way to try to push it to your best
advantage, and I have seen people try to push things into the grey area. I have seen people push the
services that are to be provided by DBEs that are considered to be a commercially useful function."
[ST#7]
The Black American owner of a DBEcertified trucking and specialty contracting company gave an
example of how front companies affect other companies. He said, "There are two major trucking
companies in this area that have a total of about 150 trucks. For this industry, in this area, that
constitutes a monopoly. They keep the rates low. [I've heard that those companies say], 'Rent two
of my trucks, and [you can] get the third one free.' So, [the other small truckers] are dealing with
that."
He went on to say that bidding on projects with DBE goals is different, because the big DBE trucking
companies get all of the work. He said that those large DBE trucking companies are intertwined
with the large prime contractors. He also mentioned that the DBE firm's spouse may be employed
at the large prime contractor's firm. He said, "[This is a] very big problem. I know what you have to
go through to get the certification. So, when other companies show up out of the blue that are new
to the industry and that are intertwined with a prime contractor, [it is obvious that there is fraud
going on]." [WSDOT#36]
The female owner of a DBEcertified construction company said that DBE frauds and fronts used to
be a much bigger issue than they are now. She said, "I know [fronts and frauds] used to be more
prevalent, but I think that the pendulum has swung in the other way. I've found that I didn't have
any resistance through OMWBE getting certified. It just took a long time to get certified. I think
there was just so much fraudulent certification [attempts] that it clogged up the system for
legitimate DBEs." She went on to say that several firms have approached her to try to figure out
how to set up a WBE front despite her insistence that she is not a fraudulent WBE. [WSDOT#40]
A few firms indicated that they had not experienced front companies. [For example, ST#5 and ST#8]
False reporting of DBE participation or falsifying good faith efforts. Some public agencies in
Washington set DBE contract goals on certain projects. Prime contractors can meet the requirements
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 113
through subcontracting commitments or by showing good faith efforts to meet the goals. The study team
asked business owners and managers if they know of any false reporting of DBE participation or
whether prime contractors falsify good faith efforts submissions.
Some business owners reported widespread abuse of the DBE Program through false reporting of DBE
participation or falsifying good faith efforts. For example:
When asked if false reporting of DBE participation or falsifying good faith efforts is a problem, the
Black American owner of a DBEcertified specialty contracting company said, "Yes. All of the prime
[contractors] are doing that." [WSDOT#35]
A public hearing participant representing a professional association said, "A lot of these contractors
will call us the day before a bid just to check the box [for good faith efforts]. That happens way too
often, all the time, where you will get a phone call, they won't tell you who they are because I am
trying to write down who they are, and they won't tell you who they are." [NSP#8]
The male Black American owner of a DBE/MBEcertified concrete firm said that contractors do not
give minority firms enough time to prepare a bid for various projects. He stated, "Contractors will
call you at the last nanosecond because they want to hear you say you are not bidding." He said that
those last minute calls make it hard to bid. He feels they are just attempting to meet good faith
effort requirements with no intention to hire the minority firm. He said prime contractors would
find ways not to work with minority firms, and stated the primes would prefer for him to say he is
not going to bid. He felt that agencies could do more to follow up and monitor primes' good faith
efforts, and that he has never received a call from an agency to verify the good faith efforts of prime
contractors. [ST#1]
A discussion participant representing an educational institution that hires contractors for state
funded and federallyfunded projects said, "What I hear frequently is that primes are using [DBE
certified companies] to win bids like when they need to submit their outreach plans, primes are
coming to them or talking with them so that by the time we see the response, it is a great outreach
plan that says that they have already made contact with these minority and woman[owned] firms.
When it actually comes down to that part of the project, these same [DBE] contractors are not being
contacted and are not being allowed to submit." [DBEP#2]
The Native American owner of a DBEcertified electrical contracting firm stated that DBEcertified
electrical firms get calls from primes when they know the firm can't give them a number because
the project is too large. He continued, saying that they only call so that they can check the good faith
effort box. [ST#2]
The Black American owner of an MBE/DBEcertified engineering company said, "As far as outreach
goes, I have gotten phone calls, [and] you know that the contractor was just putting my name down
on a list. It's evidence that insincere outreach efforts had been made." [WSDOT#8]
The Asian Pacific American owner of a DBEcertified contracting firm said that, "I have been used
for good faith efforts before, and [the prime] will lead us along. [The prime] will already have a
subcontractor in mind, and they will not tell you that your bid needs to be below a certain amount.
After weeks without hearing back, we will find out that the subcontractor that [the prime] ends up
using is not a DBE, and they were just using us for good faith efforts. That happens quite a bit."
[ST#9]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 114
The Native American owner of a DBEcertified construction company wrote, "I have also recently
observed general contractors failing to meet established DBE participation goals at the time of bid
and relying instead upon alleged 'good faith efforts.' While I firmly believe in the requirement for
good faith effort, I do not believe enough emphasis is placed on requiring prime contractors to
separate the available work into commercially feasible units that DBE subcontractors would be
capable of performing." He went on to provide specific examples for a large project in which prime
contractors required subcontractors to submit a bid for all of the designated work with no effort
made to create bid packages by trade. He said, "It appeared to me there was almost no effort to
separate the work by trade so that relevant and capable DBE subcontractors could actually submit
a bid for the type of work they were capable and approved to perform, instead of requiring them to
bid a complete package." [WT#5]
Some interviewees representing MBE/WBEs said that prime contractors would list them on a contract
to comply with the program, and then reduce or eliminate their work without informing the public
agency. For example:
The Hispanic American coowner of a DBEcertified construction company said that a disadvantage
to being certified is that the prime contractor would report to the owner that they would use his
company for a certain dollar amount for the contract, and then reduce the work significantly
without reporting that to the owner. What interviewee thought was a $200,000 contract might only
end up being $50,000 of actual work.
When his construction company was certified, the Hispanic American coowner reported that the
general contractor would say something like, "'We don't really need you to perform any work. We
just need your minority status.'" He went on to say that this general contractor was using his
company's minority status, but not actually using his company to do any work. [WSDOT#26]
The Asian Pacific American owner of a DBEcertified engineering firm said, "I don't know if the
following situation constitutes fraud, false advertising, or something else but I am concerned about
it." He went on to say, "I recall a situation with [a county in Washington] in which my firm was a
subcontractor on a team to fulfill a scope of work of more than 1,000 hours, which is a substantial
amount of work. We only got 40 hours, and the contract was done. The reason was that the contract
scope got reduced according to [the client]. I don't know what you call that. I'm not aware of any
communication or inquiry from [the] county regarding how much work his firm performed or how
much it was paid by the prime or when. I'm also not aware of what my client told the county or was
told by the county." He continued, "I have heard from other firms that a similar reduction in scope
happened to them. I am concerned that a public agency would identify a need, seek firms to fill that
need, award a contract that included small and minority business participation, and then reduce
the scope deciding it no longer had the need and reducing participation by small and minority
businesses." [WSDOT#3]
A public hearing participant representing a professional association reported a difference in
MBE/WBE/DBE utilization when the prime is outofstate versus local. He said, "What we have
found [is], when you have prime contractors who are outofstate contractors or out of the country
contractors who do work in the state of Washington, they tend to sign contracts with DBE firms and
utilize those DBE firms through the extent of those contracts. What we have found is, when you
have local prime contractors, you get a little more game play and manipulation. We find instead of
getting contracts, now we are getting work orders." [NSP#10]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 115
Some interviewees said that they have not experience falsification of good faith efforts or false
reporting of DBE participation. [For example, ST#5, ST#6, ST#7, ST#8, and ST#10]. The Asian
Pacific American female owner of an MBE and DBEcertified engineering company said she didn't
know of any false reporting of DBE participation and did not quite know how that would work,
because everything is invoiced and scrutinized all the time. [WSDOT#1]
Effects of DBE project goals on other businesses. Some business owners and managers provided
insights on the impact of DBE project goals on noncertified firms. For example:
The Caucasian male owner of a construction firm wrote that his firm is adversely affected by the
Federal DBE Program. He indicated that DBEcertified companies have been selected over his
company for many years, even though those companies have higher prices. He wrote that DBE
goals of 16 percent and 15 percent on contracts "leave no room for nonminority subs of any kind
at all to be considered. Nonminority firms such as mine are simply locked out. Locked out period."
The business owner attached letters from prime contractors rejecting his company's bids for
subcontracts with his written statement. The letters indicated that his company was rejected for
subcontracts because prime contractors chose bids from DBEs in order to meet DBE contract goals.
One letter indicated that his company had submitted the low bid for the work to be subcontracted.
[WT#11]
The Caucasian general manager of a noncertified womanowned general contracting company
noted, "I've seen some subcontractors not get selected for jobs that have DBE goals, companies that
do what is called incidental construction. Often, the low bidder is not selected [in an effort to meet
DBE goals for the project]." [WSDOT#33]
The Caucasian coowner of a noncertified WBE construction company indicated that projects that
have DBE or MBE/WBE goals still account for 25 percent of his company's work. [WSDOT#17]
Some business owners and other individuals indicated that DBE firms submit inflated bids to primes
when there are DBE contract goals on a project. For example, a public hearing participant representing
a construction company reported that, "[DBEs] know they have an advantage when a goal is set. Any
business person would understand that. They would understand that they can be 5 or 10 percent above
and beyond [their competitors] and still potentially get the work. You see that when they bid. When they
are in an open competitive market, their pricing is not the same. We will look at a subcontractor that we
are very comfortable working with, and they may be a couple percent[age] [points] higher in price than
what the low subcontractor is, and, of course, because of ease of operations, we will deal with them
rather than someone else." [AGC#1]
J. DBE and other Certification Processes
Business owners and managers discussed the process for DBE certification and other certifications,
including comments related to:
Ease or difficulty of becoming certified (page 117); and
Advantages and disadvantages of DBE certification (page 121);
Ease or difficulty of becoming certified. Many interviewees commented on how easy or difficult it
was to become certified.
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 116
A number of interviewees said that the DBE certification process was reasonable and some reported
that it was relatively easy. For example:
The Subcontinent Asian American male owner of a DBEcertified engineering firm characterized
the certification process as pretty comprehensive. He described an initial interview when they
became certified. He said, "I thought it was a very easy process," and added that the annual re
certification was "real painless." [WSDOT#10]
The Black American owner of a DBE/MBEcertified concrete firm said the certification process was
not difficult for him. He reported that some contractors do not want to file the personal information
required for certification. He also stated that he thinks it is good that the certification agency is
attempting to make it more difficult for front companies to get certified. [ST#1]
The Asian Pacific American owner of a DBEcertified engineering consulting firm said, "The
certification and renewal processes takes about two or three days to get the forms prepared and go
through [the firm's] finances to make sure the information is correct on the forms. I can understand
that agencies have to make sure firms meet the criteria." [WSDOT#3]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated that the certification process is easy. [ST#6]
The Caucasian female manager for an MBE/DBE/SBAcertified engineering company said, "I have
been involved in the [annual] renewal [process] and adding to our certification because of our
diversified services, and that's been pretty easy. OMWBE has been good to work with. Sometimes
there have been challenges in determining what NAICS codes our work fits into. The actual
certification process has been pretty straightforward. Once we knows what we need to do, like for
renewal every couple of years, it just is what it is." [WSDOT#9]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company stated
that the certification process was easy for him. [ST#5]
The female manager of a Native Americanowned, DBEcertified construction company said, "We
had to demonstrate we were capable of and had experience in doing [the company's type of] jobs.
So we had to come up with prior subcontracts. OMWBE wants to know for sure that companies
listed as DBEs are able to complete the job." [WSDOT#32]
The Black American owner of a DBEcertified trucking and specialty contracting company said,
"[The certification process was] really easy in the beginning. [It was mostly] showing my
credentials, pay stubs, taxes, and proof of ownership. It was pretty simple then."
However, he reported that the DBE certification process lets in front companies. He said, "The DBE
certification process allows unqualified firms to get DBEcertified and thereby get competitive
advantages that shouldn't be available." [WSDOT#36]
Many interviewees reported difficulties with the DBE certification process. Several interviewees
reported incidents in which state officials seemed too quick to make a judgment that the company
applying for certification was a front. Other interviewees indicated that the certification process was
difficult. Examples of such comments included the following.
The female owner of a DBEcertified construction company commented, "It took a long time [to
become certified], even though my application was perfect. I know they're backlogged. I think it
took like 91 days or something like that." [WSDOT#40]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 117
The Native American owner of a DBEcertified electrical contracting firm commented that the
certification process was more difficult than it should have been. He said, "It was a pile of paper,
email, and suspicion because of the intense scrutiny the certifying agency was under." He added,
"What hurts OMWBE is that the folks doing it do not understand construction that well. They don't
understand the dynamic that exists between prime contractor and subcontractor." [ST#2]
The president of an engineering industry trade association reported that both MBE/WBEs and even
some larger, majorityowned firms that have talked to those firms have critical things to say about
the DBE certification process. He said they describe the process as, "cumbersome, costly, and time
consuming." He added, "Overall, I'd characterize [the DBE certification process], as [with] most of
the regulations, make it harder as opposed to make it easier." [WSDOT#38]
The Hispanic American president and coowner of an MBE/DBEcertified electrical contracting firm
said, "We have been certified for many years. The process of certification was kind of difficult." He
said that the paperwork was difficult but that being an 8A contractor made the process easier.
[ST#3]
The Caucasian coowner of a noncertified WBE construction company reported that he and his
wife had applied for WBE certification but were denied. He indicated that the denial was based on
his previous construction experience and the fact that the company's original financing came from
his family who had a construction background. They appealed the denial but were unsuccessful.
[WSDOT#17]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm
stated the certification is hard to keep and it is hard to meet the requirements. She said, "The State
and Federal Government are constantly trying to take it away. They question size, control, and
personal net worth. The Federal Government tells me, 'That is the price of being in the program.' I
don't know whether the price is worth it. I think it is to a level of harassment."
The same interviewee said, "I think it is good that we have an agency like that, and they are
supposed to ensure there is no fraud, but I don't think they should be able to harass. They are
supposed to support us, but I have not received any support." [ST#6]
The Hispanic American coowner of a DBEcertified construction company was interested in
applying for certification for his new company but was told that the certification would be denied.
[WSDOT#26]
The Native American female coowner of a noncertified construction company said, "I looked into
getting certified as a womanowned company at one time. I was told that certification might get the
company larger contracts. So I contacted the Small Business Administration and worked through
them and seemed to hit a brick wall. I tried again a year later with the same results and haven't
tried again since then." [WSDOT#28]
The Asian Pacific American owner of a DBEcertified contracting firm stated, "I got certified in
2000. I think that it is still the same application, and there is a lot of financial information that you
need to give them. [The application] is not that long, but then it is a long process, because they are
back logged, and then there is scrutiny and an interview process. That can really test your
patience."
The same interviewee also said, "At the OMWBE, they certify everyone suppliers, construction,
everyone. They do not really know what questions to ask, because they are certifying all these
different types of companies. They are not really experts in any one. I would be helpful if they had
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 118
an expert in each industry so that they could steer applicants to that specific industry expert."
[ST#9]
The Hispanic American owner of a DBEcertified engineering firm said, "The certification [process]
was long and arduous. It's a system that needs to be reformed. It's a system that should be run as
checks and balances, not as factfinding, because the people doing factfinding now don't have a
clue. For example, when a person goes to the bank looking for a loan, the [loan officer] can tell him
what he is missing, what he needs, and within a week or even a couple of days he should be able to
have his loan approved or not approved. Right now, when [a company] submits [its] application [to
OMWBE], it should not take eight months to get a response back."
He went on to say that each government agency requires its own certification. He said, "[The
company] has to prove itself to King County, [it] has to prove itself to WSDOT, [it] has to prove itself
with the City of Seattle, and City Light. Every single [agency needs] its own proof, because the
[agencies] do not use the same system. [The company] has to be on the City of Seattle roster, [it]
has to be on the City Light roster, [it] has to be on the King County roster, [it] has to be on the GSA
roster, [and it] has to be on the Port of Seattle roster." He went on to say that it is not enough to be
certified. [WSDOT#7]
The Black American owner of an MBE/DBEcertified engineering company said, "[The certification
process can be improved by] simplifying and standardizing [it]. [The process for becoming a
certified MBE/DBE business] was long, arduous, invasive, and oftentimes I've found that the rosters
and things like that are used to keep me at arm's length. I've often thought that since most of these
agencies ask the same questions, why don't they have just one standard certification?"
He continued, "Particularly when I had just started the company, I'd go to [different agencies] and
meet with people, and almost the first [question asked] was 'Is your company on our roster?' In
other words, 'I'm not going to talk to you until your company is on my roster.' It's a reason for not
talking [to your company], a way to keep your company at bay." [WSDOT#8]
The Black American owner of a DBEcertified specialty contracting company explained, "[The
process of getting certified] is discouraging from the beginning. As I recall, both times that I did it,
[once] in 1985 and then again in 1996, that the certification process was about 50 pages long. A
small business owner isn't just going to pick this up and complete it easily. It would take quite a
while to complete that package. It is depressing to look through it, but it really isn't difficult."
[WSDOT#35]
When asked if he had any suggestions for improving the certification process, the Black American
owner of a DBEcertified trucking and specialty contracting company said, "[OMWBE's employees]
call themselves 'analysts'. [An analyst] needs to have a background in the industry [that is being]
analyzed as well as in contracting so they will know what they are talking about. [The OMWBE
employees] have a responsibility to the public and the agency. They need to know the firm has the
credentials and history to perform the work. When they do the onsite evaluations, they should go
on a ride so they can go the extra step to make sure the applicant is qualified."
He went on to say, "The DBE application [process] needs to be revamped. The CFR [that governs
the DBE process] needs to be revamped. There are so many loopholes that allow you to cheat the
system. Currently, if you get decertified, you still get to keep your contracts. There are a lot of
questions that need to be asked. When I go to the Department of Licensing to get a commercial
license, I have to take a skill test. The DBE application should [also] have a skill test."
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 119
He continued by saying, "[The State] has no enforcement. I sent an email to the Federal Highway
Administration identifying some bullet points about how the application process should be
changed. I've got a lot of good bullet points. It would stop the fraud. This program has been around
[for decades] and there's never been an African American graduate from the DBE program. What
does that tell you? The federal government and the State aren't learning from the past."
The same interviewee asked for more transparency in the certification process. He said, "There
needs to be public notification on who is seeking certification to give the public a 30day
opportunity to comment. Right now, companies are secretly being certified. I am the only one that
seeks information on what companies are seeking certification. Once or twice a month, I ask
OMWBE for information on the companies seeking certification. I pull information on [the
companies] to the best of my ability and turn in a formal complaint with this information to
OMWBE. Six companies have been denied certification because of this. I'm doing the best I can to
keep the program as clean as possible." [WSDOT#36]
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said,
"We learned the hard way that the DBE certification is federal. I thought that once we were certified
in the home state, that we were a DBE everywhere, and we just needed to apply for the MBE
designation in each state. I found out later that the DBE designation also needs to be applied for and
verified in each state that we intend to use it. I think that is ridiculous!"
She added, "[The certification process] is annoying but not difficult. It's long and tedious.
Sometimes I don't think they are necessarily clear in what they are asking for. I have put together
and submitted pretty comprehensive packages and then been told to submit more." She said
OMWBE and certifying agencies in other states have asked for copies of documents that she has
been told by the bank are illegal to copy (e.g., signatory cards on bank accounts). She continued,
"We were banking at a [private bank] in our building, and they refused to give us a copy of our
signatory card for the DBE application. So, [to comply with the certification application request], we
closed out that account and opened an account at another bank, just to get a copy of the signatory
card." She said after submitting all of the requested documentation to OMWBE, the agency asked
for all the same documents from her and the spouse of the owner as well. The added
documentation caused the certification process to take much longer than necessary. [WSDOT#1]
The Asian Pacific American owner of a noncertified engineering firm said that there are no
benefits to being MBE or DBEcertified. He said, "There's no penalty for the larger firms not
adhering to their commitments [to hire MBEs or DBEs]. The certification process and paperwork
involved [are] costly, both in time and money. It takes time to get everything current. It takes time
to get an accountant on board, [to look] at all of your overhead, and [to go] back and forth with
agencies as to what is allowed and what is not allowed. It's a costly process. Everything is on the
cost side. There's no benefit side." [PS#3]
Advantages and disadvantages of DBE certification. Interviews and public hearings included
broad discussion of whether and how DBE certification helped subcontractors obtain work from prime
contractors.
Many of the owners and managers of DBEcertified firms interviewed indicated that certification
helped their business get an initial opportunity to work with a prime contractor. For example:
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 120
The president of an engineering industry trade association said, "The advantage of being certified is
that if Firm A is certified and Firm B isn't, and they both do the same work, and they're going to
subconsult to a firm that needs to [meet a DBE] goal, then the certified firm is going to get the work
more often than not." He said that he does not know whether there are any disadvantages
associated with DBE certification. [WSDOT#38]
The Native American owner of a DBEcertified electrical contracting firm commented about the
benefits of certification and said, "It gives us access." He added that 95 percent of his contracts are a
result of DBE certification. [ST#2]
The female owner of a DBEcertified construction company said, "[It] definitely gives you
opportunities that you perhaps wouldn't normally have exposure to. I'm extremely fortunate that
some of the biggest public works projects that will ever been done in our region during my working
life are being done right now. I wouldn't have been [exposed to those projects] if I wasn't DBE
certified." [WSDOT#40]
The Hispanic American president and coowner of an MBE/DBEcertified electrical contracting firm
said that he sees benefits in being certified. He said, "Absolutely, we have gotten a lot of work from
that." The Caucasian vice president of the firm stated, "It got our foot in the door where other times
we would not have the opportunity to get a number out there and build a reputation. Certification
got people to take us seriously." [ST#3]
The Subcontinent Asian American male owner of a DBEcertified engineering firm said that he finds
that there are advantages of certification for federal projects. He said, "For those projects,
[certification has] been a real great asset. It's not that they're using us just because of our status,
but our status helps them with the larger picture [of meeting the requirements]." As an example, he
spoke about a large engineering firm that used his company initially because his company was
certified, but the larger firm was pleased with the work and continued to use his firm even when
the DBE participation wasn't needed. He went on to say, "[The MBE/DBE certifications have been] a
good springboard to show and prove ourselves."
The business owner went on to say that "at least 70 to 80 percent of our projects are projects that
have DBE goals." He said that his firm would suffer a 20 to 30 percent decrease in revenue if it lost
its DBE status. [WSDOT#10]
The Caucasian female vice president of a DBE/WBEcertified rebar installer and supplier firm saidd
that her firm is very small compared to other firms. She said, "This program has afforded me an
opportunity to play in an arena that I never would have gotten, so that is a benefit of the program."
The same interviewee also said, "The benefit of certification is not to me at all. The benefit is to the
general contractor. We bid jobs without consideration of our certification. If they take our price,
they receive the benefit of meeting the goal." [ST#6]
The Hispanic American coowner of a DBEcertified construction company said that certification as
a minorityowned firm was important to the growth of their business. [WSDOT#26]
The Subcontinent Asian American president of a DBE/MBEcertified engineering company said that
when projects have a goal or requirement, it helps his firm be considered for the project. He said,
"[It] gets us into the pool of firms which are competing for the quota. Without certification we
would not be considered." [ST#5]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 121
The Asian Pacific American owner of a DBEcertified engineering firm said that he uses his
certification status to market the firm. He said, "I say first, [the firm] is a great engineering firm and
second, [the firm] is certified. I decided to get certified because I thought it would give it an
opportunity to get work." He went on to say that he tried to get on Department of Defense contracts
as a subconsultant. Even though prime contractors were supposed to subcontract out a large
portion of the contracts to small businesses, and expressed interest in his firm, he said that
"nothing ever came of it."
In response to a question about whether his firm works for the same contractors on public and
private contracts, the Asian Pacific American owner of a DBEcertified engineering firm said, I will
be contacted by primes if public contracts have goals, but not very often if public contracts don't
have goals." He went on to say, "I have known a [prime] contractor for over ten years now, but the
only time he contacts me is if there is a contract with goals on the project." [WSDOT#3]
The project manager for a WBE and DBEcertified environmental services firm said, "Yes, to some
degree, being a WBE has been advantageous. But on the other hand, our reputation and the ability
of our people have sold all of our jobs here to the public sector. We are in the door before we are
ever asked if we are a DBE." [ST#10]
The Asian Pacific American female owner of an MBE and DBEcertified engineering company said
that the firm is certified as an MBE and DBE in Washington State and other states. When asked why
the firm was certified in a number of states, she said that it applied for certification because prime
contractors gave them the opportunity to do the job if they could be certified.
When asked if there are benefits to being a certified MBE/DBE firm, she answered, "Definitely, yes
[there are advantages to being certified]. [Firms like ours] benefit when [the public owner] puts in
goals for MBE or DBE or WBE, [which] encourages the bigger firms, that 800 pound gorilla, to
include the smaller firms. That's why we go to all the trouble."
However, she went on to report that the work her firm does as professional engineers is a tiny drop
in the bucket on large public projects and does not really help with meeting MBE/DBE goals in any
meaningful way. She said, "The contracts are for millions and millions of dollars. [The prime
contractor] will include us [to meet goals], but since [our] design services only amount to $50,000
to $100,000, it's a drop in the bucket, point something percent. [Then] [the prime contractor] will
use a [certified] excavator or hauler for $12 million or something. We are used just because we
always does [the] work for them." [WSDOT#1]
The Asian Pacific American owner of a DBEcertified contracting firm said, "There are definitely
benefits [to certification]. On federallyfunded jobs, there are normally goals that the general
contractor has to meet with DBE participation. We have definitely benefited from that." [ST#9]
The Caucasian female manager of an MBE/DBE/SBAcertified engineering company sees
certification as a benefit. She said, "[Certification] provides opportunities to work on projects that
we probably couldn't otherwise work on. The larger projects we couldn't go after on our own, but
we could get parts of [the contract] by fulfilling the small business or DBE goals. That's the real
advantage [of being certified]." She went on to say that the company sometimes meets the DBE goal
as a prime contractor. [WSDOT#9]
The female owner of a DBEcertified specialty construction firm reported advantages to
certification. She said, "Having DBE certification has absolutely been a benefit because it did not
just open doors, it opened double doors." She continued, "Typically, a contractor is pretty much set
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 122
on who he is going to use on whatever he is going to sub out, but I was told it would be a good thing
to be DBEcertified because the WBE certification wasn't doing anything for me because the WBE
goals are voluntary. With DBE goals being required goals, there would be opportunities for me. I
was told to seek out as many certifications as I could and use them to my advantage to get
customers."
She added, "Most of the time when [my company] is called it [is by] a contractor [who] is in need of
fulfilling a required goal. It gives me the double door a fantastic opportunity to show a
contractor what I am capable of where I might not have had the chance [if there were no] goals.
With the WBE certification, unless [there is] a contractor that is interested in fulfilling voluntary
goals, I don't get a call." She reported that contractors who have used her company on public
contracts that had goals will also call her to work on private contracts. She said, "I was given an
opportunity to show the [contractor] what I can do, and, when I do that, I get [more] work. I have to
provide the best service." [WSDOT#27]
The Black American owner of a DBEcertified specialty contracting company said, "I got certified to
get access to government jobs. Without that DBE certification I probably wouldn't be working on
any government jobs, period. The benefit of certification is getting access to government highway
projects. That is the only thing that it has done. There's nothing else." He said that he doesn't know
of any disadvantages related to DBE certification. He said that about 60 percent of his business is
on projects with DBE participation goals. [WSDOT#35]
The Black American owner of a DBEcertified trucking and specialty contracting company said, "We
do 98 percent of our work now on projects that have [DBE goals]. We are getting very few calls
from the private side now." [WSDOT#36]
The Black American owner of an MBE/DBEcertified trucking company said that he often talked
with prime contractors about trucking assignments before his firm was DBEcertified. He wrote,
"All they tell me [is], 'When you get your certification, send it to us, and we will talk.'" He indicated
that even though his firm has wellmaintained trucks and competitive rates, "The [primes] do not
even want to hear that." He reported that it is very difficult for minority business owners to obtain
work. He concluded, "We need the DBE Program because that is the only way to get in the door. It
also ensures a level playing field in which DBEs can compete fairly for DOT assisted contracts."
[WT#3]
The Caucasian manager of a WBEcertified construction firm said that he believes that DBE
certification can be an asset to a hardworking firm. He said, "If you have a disadvantaged business
that you've worked with before, and you trust them, then [certification] is a good thing. A really
good thing." [PS#2]
The Caucasian coowner of a DBEcertified engineering firm said that, because of their MBE
certification with the State, they were able to work on building design projects near the Seattle
tunnel. He said, "It's the only time our minority status helped us." [PS#9]
When asked if her firm has seen benefits from their certification, a representative for a woman
owned, DBEcertified construction company said, "Most definitely. Like I said, we didn't get
certified DBE until 2011. Prior to that, we didn't get any callbacks, nothing really. There was no real
level of interest. When we got that certification, it took about six months to see a little bit of a
benefit to that. What we saw was that we had several prime contractors that are on the mega
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 123
contracts here that actually took the time to drive up to our main facility and take tours. That was
unheard of before. When they got there, they were impressed. They saw that we walked the walk
and had everything that our competitors had. They definitely didn't expect us to have operations
organized the way that we did and set up with the amount of equipment that we do. It has allowed
us to have these discussions with people and have them take us a little more seriously. None of
those discussions were happening in the past until we got certified. We've seen a direct impact."
[RCF#12]
Some interviews indicated that there are limited advantages, or even disadvantages, to being DBE
certified. For example:
The Hispanic American owner of a DBEcertified engineering firm said that certification has limited
associated benefits. He said, "There are benefits to being certified if you knock on doors and attend
outreach meetings, but if I attend maybe 50 [civil engineeringrelated outreach] meetings in
Washington State, I may get one opportunity. If I attend five meetings in aerospace, I get five
opportunities." [WSDOT#7]
The Black American owner of a DBE/MBEcertified concrete firm said that there are disadvantages
to certification. He said, "A lot of contractors call you only when there is a goal, no matter how good
your work is. If I were a majority firm, I would be over the hump now." He said that the last time he
did nonDBE work was in 2009. [ST#1]
The Native American owner of a DBEcertified electrical contracting firm stated that the main
disadvantage of certification has to do with discriminatory attitudes on the part of prime
contractors towards DBEcertified firms. He said, "While we are all on a list, the cynical view of the
contractors is to get somebody off the list that will do us the most damage. In their minds is the
attitude of 'Oh, we have to put up with another one.'" [ST#2]
The Asian Pacific American owner of a DBEcertified contracting firm said, "Sometimes there is a
stigma with the DBE [certification], because some firms will only call us because we are a DBE.
They otherwise would not call us, but that is not really a disadvantage [of DBE certification],
because we are still getting work." [ST#9]
When asked if there were any disadvantages to being a certified firm, the female manager of a
Native Americanowned, DBEcertified construction company replied, "The prime contractors don't
like to have to pick us. Contractors may show that on the job site. Not as much in the last year or so
as we saw at the very beginning in 2006." [WSDOT#32]
The Caucasian vice president of a Hispanic Americanowned and MBE/DBEcertified electrical
contracting firm said, "Sometimes you are looked at as being only a minority contractor. There was
a time when firms would use us when they needed a minority but did not use us when they did not.
That is not the case as much these days." [ST#3]
The Asian Pacific American owner of a DBEcertified engineering and specialty construction
company said, "Being certified got me recognition that I'm here doing business, but it doesn't
necessarily mean the government would give me business. For a small, minority business, it is
really hard to get into the market and prevail. The idea was to ramp up the business by getting
some help from the federal and state governments."
He continued, "At the end of this year, I'm done with the 8(a) program. It takes about five years to
get recognized [as a quality firm]. There's not enough time to really build the business. Another
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 124
four or five years would be really helpful." He went on to say, "In some cases, it could be said that
there are disadvantages. I am running out of time [with my 8(a) certification]. The benefits of the
program haven't been [realized as I expected]. When I realized this, I held back on [company]
financing. [A business] that doesn't do this would find [it]self in trouble." [WSDOT#37]
The Subcontinent Asian American owner of an MBE and WBEcertified engineering firm said that
being certified has not helped her find work in the past. She said, "I've been certified [in
Washington] for about three years now, [and in] Oregon for about one year. It has helped in
Oregon, but not here in Washington." [PS#1]
When asked why he dropped his firm's certification, the Asian Pacific American owner of a non
certified engineering firm said, "There is no enforcement of it. We participated in three teams vying
for Sound Transit work, [and] we got onto two. I was supposed to be the Foundations Manager,
because I had experiences with elevated structures and the analysis. What happened is the lead
company that got the project then kept us out of communication, and when I called them about [it
and said], 'What about the 20 percent amount of work I was promised?' they really said they felt
very bad that they haven't called us, but it was either laying off their own people or cutting us out of
the contract. [They said] that they would find other work for us, just some menial work. And I was
thinking, by contract, I could have sued them. The agencies were not enforcing it anyways. You can
be part of the team, you can get promised on paper 20 percent, and they renege on the promise.
The agency doesn't have anything to hold the larger firm accountable."
He went on to say that on another project, "[The firm] teamed up with another large technical firm,
and then the agency told them, 'No, you cannot be on the team. You cannot get this contract
anymore although you won every step of it. Your team was excellent, [and] the presentation was
excellent. We cannot award it to you because we already awarded to you 50 percent of the contract,
and that's too much.' So they dropped them out, and then they gave it to another firm. After their
interview process, then they said, 'You don't have the experience, but you're still the lead team.
We're going to bring back the other large technical firm to help you, because they have all of the
tunneling experience." [PS#3]
The Black American owner of a DBEcertified construction company said that he doesn't see any
benefits of DBE certification. He said that he has been contacted for jobs because of his certification,
but that he never hears back from prime contractors after he has given them his information and
his bid. He said, "I don't know who gets the jobs. I know that it's not me." He went on to say that
because of this, it is actually a disadvantage to be certified. He explained that he has to pay his
estimator, and that he has to spend time responding to the prime contractor, both of which cost
him money.
He added that although he has heard of minority subcontractors getting work because of the DBE
program, the contracts that they are awarded are very limited in size. He said, "I know some
[minority] subcontractors who are working on government projects, but the scope of work is very
small." [PS#4]
The Caucasian coowner of a DBEcertified engineering firm said that his business was originally
DBEcertified, but that the certification expired. He and his partner decided to recertify their
business in 2011. He said that the certification has not brought his company any work.
He went on to say that when he and his partner certified their business, they did not make it well
known. He said that WBEs and MBEs have a reputation for being unqualified in the engineering
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 125
industry. He said that they did not "want to be linked" to this reputation. The interviewee explained
that, on a few large projects that he worked on with his old company, the minority subcontractors
were not qualified. He said, "The results weren't very good." [PS#9]
When asked if his firm saw any benefits from their certification, a representative for a DBEcertified
consulting firm said "Zero." [RCF#4]
BBC RESEARCH & CONSULTING FINAL REPORT APPENDIX J, PAGE 126
APPENDIX K.
Detailed Disparity Results
APPENDIX K.
Detailed Disparity Results
Figure K-1
Figure K- : 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Funding
FAA- and Locally-funded X X X X X X X X X X X X X
FAA-funded X X X X
Locally-funded X
Time period
2010-2013 X X X X X X X X X X X X X X X X
2010-2011 X
2012-2013 X
Type
Construction and construction-related
professional services X X X X X X X X X X
Construction X X X X
Construction-related professional services X X X X
Contract role
Prime/Sub X X X X X X X X X X
Prime X X X X X
Sub X X X
Contract size
All X X X X X X X X X X X X X X X X
Small prime contracts* X
Large prime contracts** X
Components of DBE goal
Analysis of potential DBEs X X X
* $2M and under for construction, $500K and under for construction-related professional services
** Greater than $2M for construction, greater than $500K for construction-related professional services
Figure K-2.
Funding source: FAA- and Locally-funded
Time period: 2010-2013
Type: Construction and construction-related professional services
Role: Prime Contractors and Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 1,048 $228,225 $242,315
(2) MBE/WBE 198 $24,155 $24,631 10.2 18.2 -8.0 56.0
(3) WBE 104 $11,801 $12,182 5.0 4.5 0.6 112.7
(4) MBE 94 $12,354 $12,449 5.1 13.7 -8.6 37.5
(5) Black American-owned 31 $5,605 $5,606 2.3 2.4 -0.1 95.6
(6) Asian-Pacific American-owned 21 $1,482 $1,556 0.6 2.2 -1.6 28.8
(7) Subcontinent Asian American-owned 13 $350 $371 0.2 1.8 -1.7 8.4
(8) Hispanic American-owned 20 $2,417 $2,417 1.0 4.8 -3.8 20.8
(9) Native American-owned 9 $2,499 $2,499 1.0 2.4 -1.4 42.3
(10) Unknown MBE 0 $0
(11) DBE-certified 97 $8,035 $8,319 3.4
(12) Woman-owned DBE 36 $2,233 $2,453 1.0
(13) Minority-owned DBE 61 $5,802 $5,866 2.4
(14) Black American-owned DBE 16 $781 $782 0.3
(15) Asian-Pacific American-owned DBE 14 $848 $910 0.4
(16) Subcontinent Asian American-owned DBE 10 $301 $301 0.1
(17) Hispanic American-owned DBE 15 $1,791 $1,791 0.7
(18) Native American-owned DBE 6 $2,081 $2,081 0.9
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-3.
Funding source: FAA- and Locally-funded
Time period: 2010-2013
Type: Construction
Role: Prime Contractors and Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 681 $190,186 $190,186
(2) MBE/WBE 142 $22,110 $22,110 11.6 18.5 -6.8 63.0
(3) WBE 77 $10,960 $10,960 5.8 4.3 1.4 133.5
(4) MBE 65 $11,150 $11,150 5.9 14.1 -8.3 41.5
(5) Black American-owned 29 $5,551 $5,551 2.9 2.6 0.3 113.3
(6) Asian-Pacific American-owned 7 $961 $961 0.5 2.0 -1.5 24.9
(7) Subcontinent Asian American-owned 6 $241 $241 0.1 1.1 -1.0 11.3
(8) Hispanic American-owned 15 $2,289 $2,289 1.2 5.5 -4.3 22.0
(9) Native American-owned 8 $2,108 $2,108 1.1 2.9 -1.8 37.7
(10) Unknown MBE 0 $0
(11) DBE-certified 61 $7,039 $7,039 3.7
(12) Woman-owned DBE 19 $1,594 $1,594 0.8
(13) Minority-owned DBE 42 $5,444 $5,444 2.9
(14) Black American-owned DBE 14 $727 $727 0.4
(15) Asian-Pacific American-owned DBE 3 $622 $622 0.3
(16) Subcontinent Asian American-owned DBE 6 $241 $241 0.1
(17) Hispanic American-owned DBE 13 $1,773 $1,773 0.9
(18) Native American-owned DBE 6 $2,081 $2,081 1.1
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-4.
Funding source: FAA- and Locally-funded
Time period: 2010-2013
Type: Professional Services
Role: Prime Contractors and Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 367 $38,039 $52,129
(2) MBE/WBE 56 $2,045 $2,521 4.8 17.1 -12.3 28.3
(3) WBE 27 $841 $1,221 2.3 5.0 -2.7 46.9
(4) MBE 29 $1,204 $1,299 2.5 12.1 -9.6 20.6
(5) Black American-owned 2 $54 $55 0.1 1.9 -1.7 5.7
(6) Asian-Pacific American-owned 14 $521 $595 1.1 3.0 -1.8 38.5
(7) Subcontinent Asian American-owned 7 $109 $129 0.2 4.4 -4.1 5.6
(8) Hispanic American-owned 5 $129 $129 0.2 2.3 -2.0 10.8
(9) Native American-owned 1 $391 $391 0.8 0.6 0.1 124.0
(10) Unknown MBE 0 $0
(11) DBE-certified 36 $997 $1,281 2.5
(12) Woman-owned DBE 17 $639 $859 1.6
(13) Minority-owned DBE 19 $358 $421 0.8
(14) Black American-owned DBE 2 $54 $55 0.1
(15) Asian-Pacific American-owned DBE 11 $226 $289 0.6
(16) Subcontinent Asian American-owned DBE 4 $60 $60 0.1
(17) Hispanic American-owned DBE 2 $18 $18 0.0
(18) Native American-owned DBE 0 $0 $0 0.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-5.
Funding source: FAA- and Locally-funded
Time period: 2010-2011
Type: Construction and construction-related professional services
Role: Prime Contractors and Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 629 $154,223 $159,549
(2) MBE/WBE 113 $10,046 $10,350 6.5 18.3 -11.8 35.5
(3) WBE 55 $3,701 $3,963 2.5 4.2 -1.8 58.6
(4) MBE 58 $6,345 $6,387 4.0 14.0 -10.0 28.6
(5) Black American-owned 16 $1,192 $1,192 0.7 2.5 -1.7 30.0
(6) Asian-Pacific American-owned 12 $668 $710 0.4 2.1 -1.7 20.8
(7) Subcontinent Asian American-owned 9 $215 $215 0.1 1.7 -1.6 8.0
(8) Hispanic American-owned 12 $1,771 $1,771 1.1 4.9 -3.8 22.5
(9) Native American-owned 9 $2,499 $2,499 1.6 2.8 -1.2 56.8
(10) Unknown MBE 0 $0
(11) DBE-certified 68 $6,523 $6,662 4.2
(12) Woman-owned DBE 25 $1,609 $1,718 1.1
(13) Minority-owned DBE 43 $4,913 $4,944 3.1
(14) Black American-owned DBE 9 $248 $248 0.2
(15) Asian-Pacific American-owned DBE 9 $646 $677 0.4
(16) Subcontinent Asian American-owned DBE 8 $190 $190 0.1
(17) Hispanic American-owned DBE 11 $1,747 $1,747 1.1
(18) Native American-owned DBE 6 $2,081 $2,081 1.3
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-6.
Funding source: FAA- and Locally-funded
Time period: 2012-2013
Type: Construction and construction-related professional services
Role: Prime Contractors and Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 419 $74,002 $82,765
(2) MBE/WBE 85 $14,109 $14,280 17.3 18.0 -0.7 95.9
(3) WBE 49 $8,100 $8,218 9.9 4.9 5.0 200+
(4) MBE 36 $6,009 $6,062 7.3 13.1 -5.8 55.9
(5) Black American-owned 15 $4,413 $4,414 5.3 2.3 3.1 200+
(6) Asian-Pacific American-owned 9 $814 $846 1.0 2.4 -1.4 42.8
(7) Subcontinent Asian American-owned 4 $135 $155 0.2 2.1 -1.9 9.0
(8) Hispanic American-owned 8 $647 $647 0.8 4.5 -3.7 17.3
(9) Native American-owned 0 $0 $0 0.0 1.8 -1.8 0.0
(10) Unknown MBE 0 $0
(11) DBE-certified 29 $1,513 $1,657 2.0
(12) Woman-owned DBE 11 $623 $735 0.9
(13) Minority-owned DBE 18 $889 $922 1.1
(14) Black American-owned DBE 7 $533 $534 0.6
(15) Asian-Pacific American-owned DBE 5 $202 $233 0.3
(16) Subcontinent Asian American-owned DBE 2 $111 $111 0.1
(17) Hispanic American-owned DBE 4 $43 $43 0.1
(18) Native American-owned DBE 0 $0 $0 0.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-7.
Funding source: FAA-funded
Time period: 2010-2013
Type: Construction and construction-related professional services
Role: Prime Contractors and Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 25 $27,233 $27,233
(2) MBE/WBE 1 $6 $6 0.0 19.4 -19.4 0.1
(3) WBE 1 $6 $6 0.0 1.5 -1.5 1.4
(4) MBE 0 $0 $0 0.0 17.9 -17.9 0.0
(5) Black American-owned 0 $0 $0 0.0 5.4 -5.4 0.0
(6) Asian-Pacific American-owned 0 $0 $0 0.0 0.1 -0.1 0.0
(7) Subcontinent Asian American-owned 0 $0 $0 0.0 0.0 0.0 0.0
(8) Hispanic American-owned 0 $0 $0 0.0 6.9 -6.9 0.0
(9) Native American-owned 0 $0 $0 0.0 5.5 -5.5 0.0
(10) Unknown MBE 0 $0
(11) DBE-certified 0 $0 $0 0.0
(12) Woman-owned DBE 0 $0 $0 0.0
(13) Minority-owned DBE 0 $0 $0 0.0
(14) Black American-owned DBE 0 $0 $0 0.0
(15) Asian-Pacific American-owned DBE 0 $0 $0 0.0
(16) Subcontinent Asian American-owned DBE 0 $0 $0 0.0
(17) Hispanic American-owned DBE 0 $0 $0 0.0
(18) Native American-owned DBE 0 $0 $0 0.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-8.
Funding source: Locally-funded
Time period: 2010-2013
Type: Construction and construction-related professional services
Role: Prime Contractors and Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 1,023 $200,992 $215,082
(2) MBE/WBE 197 $24,149 $24,625 11.4 18.0 -6.6 63.6
(3) WBE 103 $11,795 $12,176 5.7 4.8 0.8 117.2
(4) MBE 94 $12,354 $12,449 5.8 13.2 -7.4 43.9
(5) Black American-owned 31 $5,605 $5,606 2.6 2.0 0.6 127.6
(6) Asian-Pacific American-owned 21 $1,482 $1,556 0.7 2.5 -1.8 29.0
(7) Subcontinent Asian American-owned 13 $350 $371 0.2 2.1 -1.9 8.4
(8) Hispanic American-owned 20 $2,417 $2,417 1.1 4.5 -3.4 24.8
(9) Native American-owned 9 $2,499 $2,499 1.2 2.1 -0.9 56.5
(10) Unknown MBE 0 $0
(11) DBE-certified 97 $8,035 $8,319 3.9
(12) Woman-owned DBE 36 $2,233 $2,453 1.1
(13) Minority-owned DBE 61 $5,802 $5,866 2.7
(14) Black American-owned DBE 16 $781 $782 0.4
(15) Asian-Pacific American-owned DBE 14 $848 $910 0.4
(16) Subcontinent Asian American-owned DBE 10 $301 $301 0.1
(17) Hispanic American-owned DBE 15 $1,791 $1,791 0.8
(18) Native American-owned DBE 6 $2,081 $2,081 1.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-9.
Funding source: FAA- and Locally-funded
Time period: 2010-2013
Type: Construction and construction-related professional services
Role: Prime Contractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 344 $131,177 $142,426
(2) MBE/WBE 47 $11,825 $12,028 8.4 15.1 -6.6 56.1
(3) WBE 24 $5,114 $5,308 3.7 3.2 0.5 117.2
(4) MBE 23 $6,710 $6,720 4.7 11.9 -7.2 39.7
(5) Black American-owned 9 $3,888 $3,888 2.7 1.2 1.5 200+
(6) Asian-Pacific American-owned 4 $354 $364 0.3 2.4 -2.2 10.6
(7) Subcontinent Asian American-owned 2 $29 $29 0.0 2.3 -2.3 0.9
(8) Hispanic American-owned 3 $45 $45 0.0 3.9 -3.9 0.8
(9) Native American-owned 5 $2,394 $2,394 1.7 2.0 -0.3 83.3
(10) Unknown MBE 0 $0
(11) DBE-certified 24 $3,678 $3,752 2.6
(12) Woman-owned DBE 10 $980 $1,045 0.7
(13) Minority-owned DBE 14 $2,698 $2,707 1.9
(14) Black American-owned DBE 5 $627 $627 0.4
(15) Asian-Pacific American-owned DBE 2 $23 $33 0.0
(16) Subcontinent Asian American-owned DBE 1 $27 $27 0.0
(17) Hispanic American-owned DBE 2 $18 $18 0.0
(18) Native American-owned DBE 4 $2,003 $2,003 1.4
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-10.
Funding source: FAA- and Locally-funded
Time period: 2010-2013
Type: Construction
Role: Prime Contractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 168 $101,670 $101,670
(2) MBE/WBE 31 $10,943 $10,943 10.8 14.9 -4.1 72.4
(3) WBE 17 $4,775 $4,775 4.7 2.9 1.8 160.2
(4) MBE 14 $6,168 $6,168 6.1 11.9 -5.9 50.8
(5) Black American-owned 8 $3,834 $3,834 3.8 1.0 2.7 200+
(6) Asian-Pacific American-owned 2 $331 $331 0.3 2.3 -2.0 14.2
(7) Subcontinent Asian American-owned 0 $0 $0 0.0 1.4 -1.4 0.0
(8) Hispanic American-owned 0 $0 $0 0.0 4.6 -4.6 0.0
(9) Native American-owned 4 $2,003 $2,003 2.0 2.6 -0.6 76.1
(10) Unknown MBE 0 $0
(11) DBE-certified 13 $3,351 $3,351 3.3
(12) Woman-owned DBE 5 $775 $775 0.8
(13) Minority-owned DBE 8 $2,576 $2,576 2.5
(14) Black American-owned DBE 4 $573 $573 0.6
(15) Asian-Pacific American-owned DBE 0 $0 $0 0.0
(16) Subcontinent Asian American-owned DBE 0 $0 $0 0.0
(17) Hispanic American-owned DBE 0 $0 $0 0.0
(18) Native American-owned DBE 4 $2,003 $2,003 2.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-11.
Funding source: FAA- and Locally-funded
Time period: 2010-2013
Type: Construction-related professional services
Role: Prime Contractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 176 $29,508 $40,756
(2) MBE/WBE 16 $881 $1,085 2.7 15.5 -12.9 17.1
(3) WBE 7 $339 $532 1.3 3.8 -2.5 34.4
(4) MBE 9 $543 $552 1.4 11.7 -10.4 11.5
(5) Black American-owned 1 $54 $54 0.1 1.7 -1.6 7.7
(6) Asian-Pacific American-owned 2 $23 $33 0.1 2.7 -2.6 3.0
(7) Subcontinent Asian American-owned 2 $29 $29 0.1 4.7 -4.6 1.5
(8) Hispanic American-owned 3 $45 $45 0.1 2.1 -1.9 5.4
(9) Native American-owned 1 $391 $391 1.0 0.6 0.4 160.5
(10) Unknown MBE 0 $0
(11) DBE-certified 11 $326 $401 1.0
(12) Woman-owned DBE 5 $205 $270 0.7
(13) Minority-owned DBE 6 $122 $131 0.3
(14) Black American-owned DBE 1 $54 $54 0.1
(15) Asian-Pacific American-owned DBE 2 $23 $33 0.1
(16) Subcontinent Asian American-owned DBE 1 $27 $27 0.1
(17) Hispanic American-owned DBE 2 $18 $18 0.0
(18) Native American-owned DBE 0 $0 $0 0.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-12.
Funding source: FAA- and Locally-funded
Time period: 2010-2013
Type: Construction and construction-related professional services
Role: Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 704 $97,048 $99,889
(2) MBE/WBE 151 $12,330 $12,603 12.6 22.6 -10.0 55.9
(3) WBE 80 $6,687 $6,874 6.9 6.3 0.6 109.5
(4) MBE 71 $5,644 $5,729 5.7 16.3 -10.6 35.2
(5) Black American-owned 22 $1,718 $1,718 1.7 4.1 -2.4 41.9
(6) Asian-Pacific American-owned 17 $1,128 $1,192 1.2 2.0 -0.8 60.6
(7) Subcontinent Asian American-owned 11 $321 $342 0.3 1.1 -0.8 30.3
(8) Hispanic American-owned 17 $2,372 $2,372 2.4 6.1 -3.7 39.2
(9) Native American-owned 4 $105 $105 0.1 3.0 -2.9 3.5
(10) Unknown MBE 0 $0
(11) DBE-certified 73 $4,357 $4,567 4.6
(12) Woman-owned DBE 26 $1,253 $1,409 1.4
(13) Minority-owned DBE 47 $3,105 $3,158 3.2
(14) Black American-owned DBE 11 $154 $155 0.2
(15) Asian-Pacific American-owned DBE 12 $824 $878 0.9
(16) Subcontinent Asian American-owned DBE 9 $274 $274 0.3
(17) Hispanic American-owned DBE 13 $1,773 $1,773 1.8
(18) Native American-owned DBE 2 $78 $78 0.1
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-13.
Funding source: FAA- and Locally-funded
Time period: 2010-2013
Type: Construction
Role: Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 513 $88,516 $88,516
(2) MBE/WBE 111 $11,167 $11,167 12.6 22.6 -10.0 55.9
(3) WBE 60 $6,185 $6,185 7.0 5.9 1.1 118.4
(4) MBE 51 $4,982 $4,982 5.6 16.7 -11.0 33.8
(5) Black American-owned 21 $1,717 $1,717 1.9 4.3 -2.4 44.7
(6) Asian-Pacific American-owned 5 $630 $630 0.7 1.7 -1.0 41.6
(7) Subcontinent Asian American-owned 6 $241 $241 0.3 0.8 -0.6 32.6
(8) Hispanic American-owned 15 $2,289 $2,289 2.6 6.4 -3.9 40.1
(9) Native American-owned 4 $105 $105 0.1 3.3 -3.2 3.6
(10) Unknown MBE 0 $0
(11) DBE-certified 48 $3,687 $3,687 4.2
(12) Woman-owned DBE 14 $819 $819 0.9
(13) Minority-owned DBE 34 $2,868 $2,868 3.2
(14) Black American-owned DBE 10 $154 $154 0.2
(15) Asian-Pacific American-owned DBE 3 $622 $622 0.7
(16) Subcontinent Asian American-owned DBE 6 $241 $241 0.3
(17) Hispanic American-owned DBE 13 $1,773 $1,773 2.0
(18) Native American-owned DBE 2 $78 $78 0.1
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-14.
Funding source: FAA- and Locally-funded
Time period: 2010-2013
Type: Construction-related professional services
Role: Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 191 $8,531 $11,372
(2) MBE/WBE 40 $1,163 $1,436 12.6 22.7 -10.1 55.6
(3) WBE 20 $502 $689 6.1 9.3 -3.2 65.3
(4) MBE 20 $661 $747 6.6 13.4 -6.9 48.9
(5) Black American-owned 1 $1 $1 0.0 2.3 -2.3 0.5
(6) Asian-Pacific American-owned 12 $498 $562 4.9 3.9 1.0 125.2
(7) Subcontinent Asian American-owned 5 $80 $100 0.9 3.4 -2.5 25.9
(8) Hispanic American-owned 2 $83 $83 0.7 3.1 -2.4 23.6
(9) Native American-owned 0 $0 $0 0.0 0.6 -0.6 0.0
(10) Unknown MBE 0 $0
(11) DBE-certified 25 $670 $880 7.7
(12) Woman-owned DBE 12 $434 $590 5.2
(13) Minority-owned DBE 13 $236 $290 2.6
(14) Black American-owned DBE 1 $1 $1 0.0
(15) Asian-Pacific American-owned DBE 9 $203 $256 2.2
(16) Subcontinent Asian American-owned DBE 3 $33 $33 0.3
(17) Hispanic American-owned DBE 0 $0 $0 0.0
(18) Native American-owned DBE 0 $0 $0 0.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-15.
Funding source: FAA- and Locally-funded Small Prime Contracts
Time period: 2010-2013
Type: Construction and construction-related professional services
Role: Prime Contractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 305 $56,832 $61,529
(2) MBE/WBE 45 $8,122 $8,325 13.5 17.5 -4.0 77.1
(3) WBE 23 $3,897 $4,090 6.6 5.0 1.6 133.0
(4) MBE 22 $4,225 $4,235 6.9 12.5 -5.7 54.9
(5) Black American-owned 8 $1,402 $1,402 2.3 2.4 -0.1 96.6
(6) Asian-Pacific American-owned 4 $354 $364 0.6 2.5 -1.9 23.7
(7) Subcontinent Asian American-owned 2 $29 $29 0.0 2.2 -2.2 2.1
(8) Hispanic American-owned 3 $45 $45 0.1 4.1 -4.0 1.8
(9) Native American-owned 5 $2,394 $2,394 3.9 1.4 2.5 200+
(10) Unknown MBE 0 $0
(11) DBE-certified 24 $3,678 $3,752 6.1
(12) Woman-owned DBE 10 $980 $1,045 1.7
(13) Minority-owned DBE 14 $2,698 $2,707 4.4
(14) Black American-owned DBE 5 $627 $627 1.0
(15) Asian-Pacific American-owned DBE 2 $23 $33 0.1
(16) Subcontinent Asian American-owned DBE 1 $27 $27 0.0
(17) Hispanic American-owned DBE 2 $18 $18 0.0
(18) Native American-owned DBE 4 $2,003 $2,003 3.3
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-16.
Funding source: FAA- and Locally-funded Large prime contracts
Time period: 2010-2013
Type: Construction and construction-related professional services
Role: Prime Contractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 39 $74,346 $80,897
(2) MBE/WBE 2 $3,703 $3,703 4.6 13.2 -8.6 34.7
(3) WBE 1 $1,218 $1,218 1.5 1.8 -0.3 83.8
(4) MBE 1 $2,485 $2,485 3.1 11.4 -8.3 27.0
(5) Black American-owned 1 $2,485 $2,485 3.1 0.4 2.7 200+
(6) Asian-Pacific American-owned 0 $0 $0 0.0 2.3 -2.3 0.0
(7) Subcontinent Asian American-owned 0 $0 $0 0.0 2.4 -2.4 0.0
(8) Hispanic American-owned 0 $0 $0 0.0 3.8 -3.8 0.0
(9) Native American-owned 0 $0 $0 0.0 2.5 -2.5 0.0
(10) Unknown MBE 0 $0
(11) DBE-certified 0 $0 $0 0.0
(12) Woman-owned DBE 0 $0 $0 0.0
(13) Minority-owned DBE 0 $0 $0 0.0
(14) Black American-owned DBE 0 $0 $0 0.0
(15) Asian-Pacific American-owned DBE 0 $0 $0 0.0
(16) Subcontinent Asian American-owned DBE 0 $0 $0 0.0
(17) Hispanic American-owned DBE 0 $0 $0 0.0
(18) Native American-owned DBE 0 $0 $0 0.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-17.
Funding source: FAA-funded Analysis of potential DBEs
Time period: 2010-2013
Type: Construction and construction-related professional services
Role: Prime Contractors and Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 25 $27,233 $27,233
(2) MBE/WBE 1 $6 $6 0.0 19.4 -19.3 0.1
(3) WBE 1 $6 $6 0.0 1.5 -1.5 1.4
(4) MBE 0 $0 $0 0.0 17.8 -17.8 0.0
(5) Black American-owned 0 $0 $0 0.0 5.4 -5.4 0.0
(6) Asian-Pacific American-owned 0 $0 $0 0.0 0.1 -0.1 0.0
(7) Subcontinent Asian American-owned 0 $0 $0 0.0 0.0 0.0 0.0
(8) Hispanic American-owned 0 $0 $0 0.0 6.9 -6.9 0.0
(9) Native American-owned 0 $0 $0 0.0 5.4 -5.4 0.0
(10) Unknown MBE 0 $0
(11) DBE-certified 0 $0 $0 0.0
(12) Woman-owned DBE 0 $0 $0 0.0
(13) Minority-owned DBE 0 $0 $0 0.0
(14) Black American-owned DBE 0 $0 $0 0.0
(15) Asian-Pacific American-owned DBE 0 $0 $0 0.0
(16) Subcontinent Asian American-owned DBE 0 $0 $0 0.0
(17) Hispanic American-owned DBE 0 $0 $0 0.0
(18) Native American-owned DBE 0 $0 $0 0.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-18.
Funding source: FAA-funded Analysis of potential DBEs
Time period: 2010-2013
Type: Construction
Role: Prime Contractors and Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 25 $27,233 $27,233
(2) MBE/WBE 1 $6 $6 0.0 19.4 -19.3 0.1
(3) WBE 1 $6 $6 0.0 1.5 -1.5 1.4
(4) MBE 0 $0 $0 0.0 17.8 -17.8 0.0
(5) Black American-owned 0 $0 $0 0.0 5.4 -5.4 0.0
(6) Asian-Pacific American-owned 0 $0 $0 0.0 0.1 -0.1 0.0
(7) Subcontinent Asian American-owned 0 $0 $0 0.0 0.0 0.0 0.0
(8) Hispanic American-owned 0 $0 $0 0.0 6.9 -6.9 0.0
(9) Native American-owned 0 $0 $0 0.0 5.4 -5.4 0.0
(10) Unknown MBE 0 $0
(11) DBE-certified 0 $0 $0 0.0
(12) Woman-owned DBE 0 $0 $0 0.0
(13) Minority-owned DBE 0 $0 $0 0.0
(14) Black American-owned DBE 0 $0 $0 0.0
(15) Asian-Pacific American-owned DBE 0 $0 $0 0.0
(16) Subcontinent Asian American-owned DBE 0 $0 $0 0.0
(17) Hispanic American-owned DBE 0 $0 $0 0.0
(18) Native American-owned DBE 0 $0 $0 0.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
Figure K-19.
Funding source: FAA-funded Analysis of potential DBEs
Time period: 2010-2013
Type: Construction-related professional services
Role: Prime Contractors and Subcontractors
(a) (b) (c) (d) (e) (f) (g)
Number of Actual utilization Utilization Difference
contracts Dollars Estimated (column c / benchmark (column d -
(subcontracts) in sample total dollars column c, row1) (availability) column e) Disparity index
Firm Type in sample (thousands) (thousands)* % % % (d / e) x 100
(1) All firms 0 $0 $0
(2) MBE/WBE 0 $0 $0 0.0 0.0 0.0 0.0
(3) WBE 0 $0 $0 0.0 0.0 0.0 0.0
(4) MBE 0 $0 $0 0.0 0.0 0.0 0.0
(5) Black American-owned 0 $0 $0 0.0 0.0 0.0 0.0
(6) Asian-Pacific American-owned 0 $0 $0 0.0 0.0 0.0 0.0
(7) Subcontinent Asian American-owned 0 $0 $0 0.0 0.0 0.0 0.0
(8) Hispanic American-owned 0 $0 $0 0.0 0.0 0.0 0.0
(9) Native American-owned 0 $0 $0 0.0 0.0 0.0 0.0
(10) Unknown MBE 0 $0
(11) DBE-certified 0 $0 $0 0.0
(12) Woman-owned DBE 0 $0 $0 0.0
(13) Minority-owned DBE 0 $0 $0 0.0
(14) Black American-owned DBE 0 $0 $0 0.0
(15) Asian-Pacific American-owned DBE 0 $0 $0 0.0
(16) Subcontinent Asian American-owned DBE 0 $0 $0 0.0
(17) Hispanic American-owned DBE 0 $0 $0 0.0
(18) Native American-owned DBE 0 $0 $0 0.0
(19) Unknown DBE-MBE 0 $0
(20) White male-owned DBE 0 $0 $0 0.0
(21) Unknown DBE 0 $0
Note: Spreadsheet rounds numbers to nearest thousand dollars or tenth of one percent. WBE is white women-owned firms.
* Unknown MBE, Unknown DBE-MBE, and Unknown DBE dollars were allocated to MBE subgroups proportional to the known total dollars of those groups. For example, if total
dollars of Black American-owned firms (column b, row 5) accounted for 25 percent of total MBE dollars (column b, row 4), then 25 percent of column b, row 10 would be added
to column b, row 5 and the sum would be shown in column c, row 5.
Source: BBC Research & Consulting Disparity Analysis.
U.S. Department of Justice
Civil Rights Division
P.O. Box 66560
Washington, D.C. 20035-6560
January 11, 2001
TITLE VI LEGAL MANUAL TABLE OF CONTENTS
Introduction
Table of Authorities
I. Overview: Interplay of Title VI with Title IX, Section 504, the Fourteenth
Amendment, and Title VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. Synopsis of Legislative History and Purpose of Title VI . . . . . . . . . . . . . 3
III. Title VI Applies to "Persons" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
IV. "In the United States" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
V. Federal Financial Assistance Includes More Than Money . . . . . . . . . . 10
A. Examples of Federal Financial Assistance . . . . . . . . . . . . . . . . . 11
B. Direct and Indirect Receipt of Federal Assistance . . . . . . . . . . . 14
C. Federal Action That Is Not Federal Financial Assistance . . . . . . 15
VI. What is a Recipient? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
A. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
B. Direct Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
C. Indirect Recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
D. Transferees and Assignees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
E. Primary/Subrecipient Programs . . . . . . . . . . . . . . . . . . . . . . . . . 25
F. Contractor and Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
G. Recipient v. Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
VII. "Program or Activity" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
A. Initial Passage and Judicial Interpretations . . . . . . . . . . . . . . . . 29
B. Grove City College . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
C. Civil Rights Restoration Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
D. State and Local Governments . . . . . . . . . . . . . . . . . . . . . . . . . . 32
E. Educational Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
F. Corporations and Private Entities . . . . . . . . . . . . . . . . . . . . . . . . 37
G. Catch-All/Combinations of Entities . . . . . . . . . . . . . . . . . . . . . . . 40
VIII. What Constitutes Discriminatory Conduct? . . . . . . . . . . . . . . . . . . . . . . 42
A. Intentional Discrimination/Disparate Treatment . . . . . . . . . . . . . 43
B. Disparate Impact/Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
C. National Origin Discrimination and Services in Languages Other
than English . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
1. Presidential Reaffirmance and Clarification of Lau
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
2. The Four Factor Analysis: Reasonable Steps Toward
Reasonable Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
D. Environmental Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
1. Executive Order 12898: The Duty to Collect, Disseminate,
and Think . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
2. EPA Guidance on Environmental Justice . . . . . . . . . . . . 61
3. An Analytical Approach and Its Attendant Problems of
Timing and Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
E. Retaliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
IX. Employment Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
A. Scope of Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
B. Regulatory Referral of Employment Complaints to the EEOC . . 70
X. Federal Funding Agency Methods to Evaluate Compliance . . . . . . . . . 72
A. Pre-Award Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
1. Assurances of Compliance . . . . . . . . . . . . . . . . . . . . . . . 72
2. Deferral of the Decision Whether to Grant Assistance . . 73
3. Pre-Award Authority of Recipients vis-a-vis
Subrecipients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
4. Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
5. Recommendations Concerning Pre-award Reviews . . . . 77
B. Post-Award Compliance Reviews . . . . . . . . . . . . . . . . . . . . . . . . 78
1. Selection of Targets and Scope of Compliance Review . 78
2. Procedures for Compliance Reviews . . . . . . . . . . . . . . . . 81
C. Complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
XI. Federal Funding Agency Methods to Enforce Compliance . . . . . . . . . . 84
A. Efforts to Achieve Voluntary Compliance . . . . . . . . . . . . . . . . . . 85
1. Voluntary Compliance at the Pre-Award Stage . . . 86
a. Special Conditions . . . . . . . . . . . . . . . . . . . 86
b. Use of Cautionary Language . . . . . . . . . . . 88
2. Other Nonlitigation Alternatives . . . . . . . . . . . . . . . 89
B. "Any Other Means Authorized by Law:" Judicial
Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
C. Fund Suspension and Termination . . . . . . . . . . . . . . . . . . . . . . 92
1. Fund Termination Hearings . . . . . . . . . . . . . . . . . . . . . . . 92
2. Agency Fund Termination is Limited to the Particular
Political Entity, or Part Thereof, that Discriminated . . . . . 93
XII. Private Right of Action and Individual Relief through Agency
Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
A. Entitlement to Damages for Intentional Violations . . . . . . . . . . 102
B. Availability of Monetary Damages in Other
Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
C. Recommendations for Agency Action . . . . . . . . . . . . . . . . . . . 104
D. States Do Not Have Eleventh Amendment Immunity
Under Title VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
XIII. Department of Justice Role Under Title VI . . . . . . . . . . . . . . . . . . . . . 108
Index
Editor's Note: In Chapter XII of this Manual, entitled "Private Right of Action and Individual
Relief through Agency Action," the text notes that there was a split among the federal Circuits
as to whether plaintiffs had a private right of action to enforce disparate impact regulations
implementing section 602 of Title VI. The text further notes that the Supreme Court had
granted certiorari in one of these cases, Sandoval v. Hagan, 197 F.3d 484 (11th Cir. 1999), and
that the Court would "likely definitively decide the issue when it hears Sandoval."
In 2001, the Supreme Court decided the issue. In Alexander v. Sandoval, 532 U.S. 275 (2001),
the Court held that there is no private right of action to enforce Title VI disparate impact
regulations; that only the funding agency issuing the disparate impact regulation has the
authority to challenge a recipient's actions under this theory of discrimination. The Court held
that although Congress clearly intended to create a private cause of action to enforce section 601
of Title VI, id. at 279-280, 283, the question before the Court was whether Congress had also
intended these particular regulations to be privately enforced. The Court noted that there were
two types of regulations. Regulations that simply "apply," "construe," or "clarify[]" a statute
can be privately enforced through the existing cause of action to enforce the statute because a
"Congress that intends the statute to be enforced through a private cause of action intends the
authoritative interpretation of a statute to be so enforced as well." Id. at 283-85. But regulations
that go beyond the statute require a separate cause of action, even if those regulations were a
valid exercise of Congress's grant of rulemaking authority. Id. at 285-86.
In applying this dichotomy, the Court relied on its uncontested holding in prior cases that
section 601 prohibits only disparate treatment (i.e., intentional discrimination). Id. at 280. Since
the Title VI regulations expanded the section 601 definition of discrimination to include effects,
the disparate impact regulations could not be viewed merely as an interpretation or application
of section 601. Id. at 285-86. Accordingly, the Court concluded that Congress would have had
to create (either explicitly or implicitly) a separate private cause of action to enforce such
regulations. Id. at 285-87. Assessing the text and structure of the statute, the Court concluded
that Congress had intended only agency enforcement of disparate impact regulations and had
not intended to create a private right of action to enforce those regulations that went beyond the
statute. Id. at 290-93.
On October 26, 2001, the Assistant Attorney General for the Civil Rights Division issued a
memorandum for "Heads of Departments and Agencies, General Counsels and Civil Rights
Directors" that clarified and reaffirmed the vitality of the disparate impact regulations in light
of Sandoval. The memorandum noted that although Sandoval foreclosed private judicial
enforcement of Title VI disparate impact regulations, it did not undermine the validity of those
regulations or otherwise limit the authority and responsibility of Federal grant agencies to
enforce their own implementing regulations. Therefore, the agencies' disparate impact
regulations continue to be a vital administrative enforcement mechanism.
Introduction
This manual provides an overview of the legal principles of Title VI of the Civil
Rights Act of 1964, as amended, 42 U.S.C. 2000d, et seq. This document is intended
to be an abstract of the general principles and issues that concern Federal agency
enforcement, and is not intended to provide a complete, comprehensive directory of all
cases or issues related to Title VI. For example, this manual does not address all
issues associated with private enforcement. In addition, this manual has cited cases
interpreting Title VI to the fullest extent possible, although cases interpreting both Title
IX and Section 504 also are included. While statutory interpretation of these laws
overlap, they are not fully consistent, and this manual should not be considered to be
an overview of any statute other than Title VI.
It is intended that this manual will be updated periodically to reflect significant
changes in the law. In addition, policy guidance or other memoranda distributed by the
Civil Rights Division to Federal agencies that modify or amplify principles discussed in
the manual will be referenced, as appropriate. Comments on this publication, and
suggestions as to future updates, including published and unpublished cases, may be
addressed to:
Coordination and Review Section
Civil Rights Division
U.S. Department of Justice
Attention: Legal Manual Coordinator
P.O. Box 66560
Washington, D.C. 20035-6560
Telephone and TDD (202) 307-2222
FAX (202) 307-0595
E-mail COR.CRT@USDOJ.GOV
This manual is intended only to provide guidance to Federal agencies and other
interested entities, and is not intended to, does not, and may not be relied upon to
create any right or benefit, substantive or procedural, enforceable at law by a party
against the United States.
TABLE OF AUTHORITIES
FEDERAL CASES
Adams v. Richardson, 356 F. Supp. 92 (D.D.C. 1973) . . . . . . . . . . . . . . . . . . . . . . . 100
Adarand Constructors, Inc. v. Pea, 515 U.S. 200 (1995) . . . . . . . . . . . . . . . . . . . . . 6
Ahern v. Board of Educ., 133 F.3d 975 (7th Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . 69
Alabama NAACP State Conference of Branches v. Wallace, 269 F. Supp. 346
(M.D. Ala. 1967) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Alexander v. Choate, 469 U.S. 287 (1985) . . . . . . . . . . . . . . . . . . . . . 32, 42, 43, 47, 99
Arlington Heights v. Metropolitan Hous. Redevelopment Corp., 429 U.S. 252 (1977). 44
Association Against Discrimination in Employment v. City of Bridgeport,
647 F.2d 256 (2d Cir. 1981), cert. denied, 455 U.S. 988 (1982) . . . . . . . . . . . . . . . . 68
Ayers v. Allain, 674 F. Supp. 1523 (N.D. Miss. 1987) . . . . . . . . . . . . . . . . . . . . . . . . 90
Baldwin v. University of Texas Med. Branch at Galveston, 945 F. Supp. 1022
(S.D.Tex. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Balzac v. Puerto Rico, 258 U.S. 298 (1922) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Bass v. Board of County Comm'rs , 38 F. Supp. 2d 1001 (M.D. Fla. 1999) . . . . . . . . 68
Bentley v. Cleveland County Bd. of County Comm'rs, 41 F.3d 600 (10th Cir.
1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 33
Board of Pub. Instruction v. Cohen, 413 F.2d 1201 (5th Cir. 1969) . . . . . . . . . . . . . . 74
Board of Pub. Instruction v. Finch, 414 F.2d 1068 (5th Cir.
1969) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84, 94-95, 97-98
Bob Jones Univ. v. Johnson, 396 F. Supp. 597 (D. S.C. 1974),
aff'd, 529 F.2d 514 (4th Cir. 1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 18, 22, 29
Brantley v. Independent Sch. Dist. No. 625, St. Paul Public Schools, 936 F. Supp. 649
(D. Minn. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Brown v. Board of Educ., 347 U.S. 483 (1954) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-i-
Bryant v. New Jersey Dep;t of Transp., 998 F. Supp. 438 (D.N.J. 1998) . . . . . . . . . . . 6
Caddo Parish Sch. Bd. v. United States, 389 U.S. 840 (1967) . . . . . . . . . . . . . . . . . . 69
California Ass'n of the Physically Handicapped v. FCC, 840 F.2d 88 (D.C. Cir.
1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Cannon v. University of Chicago, 441 U.S. 677 (1979) . . . . . . . . . . . . . . 7, 99,100-103
Caulfield v. Board of Educ., 486 F. Supp. 862 (E.D.N.Y. 1979) . . . . . . . . . . . . . . . 69
Chevron U.S.A. v. Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Chicago v. Lindley, 66 F.3d 819 (7th Cir. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . 25, 48
City of Los Angeles, Dep't of Water and Power v. Manhart, 435 U.S. 702 (1978) . 46
Coalition of Bedford-Stuyvesant Block Ass'n. v. Cuomo, 651 F. Supp. 1202 (E.D.N.Y.
1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Community Television of S. Cal. v. Gottfried, 459 U.S. 498 (1983) . . . . . . . . . . . . . . 15
Consolidated Rail Corp. v. Darrone, 465 U.S. 624 (1984) . . . . . . . . . . . . . . . . . . 1, 102
Contractors Ass'n of E. Pa. v. Secretary of Labor, 442 F.2d 159 (3d. Cir. 1971),
cert. denied., 404 U.S. 854 (1971) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Cooper v. Aaron, 358 U.S. 1 (1958) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cuffley v. Mickes, 208 F.3d 702 (8th Cir. 2000.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Cureton v. NCAA, 198 F.3d 107 (3d Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
David K. v. Lane, 839 F.2d 1265 (7th Cir. 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Davis v. Halpern, 768 F. Supp. 968 (E.D.N.Y. 1991) . . . . . . . . . . . . . . . . . . . . . . . . . 66
DeLeo v. City of Stamford, 919 F. Supp. 70 (D. Conn. 1995) . . . . . . . . . . . . . . . . . 103
DeVargas v. Mason & Hanger-Silas Mason Co., 911 F.2d 1377 (10th Cir.
1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17-18
Dekalb County Sch. Dist. v. Schrenko, 109 F.3d 680 (11th Cir. 1997) . . . . . . . . . . . . . 7
-ii-
Delmonte v. Department of Bus. Prof'l Regulation, 877 F. Supp. 1563
(S.D. Fla. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 14
District of Columbia v. Carter, 409 U.S. 418 (1973) . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Doe v. District of Columbia, 796 F. Supp. 559 (D.D.C. 1992) . . . . . . . . . . . . . . . . . 103
Downes v. Bidwell, 182 U.S. 244 (1901) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Elston v. Talladega County Bd. of Educ., 997 F.2d 1394 (11th Cir.), reh'g denied,
7 F.3d 242 (11th Cir. 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 42-44, 49-53
First Ala. Bank of Montgomery, N.A., v. Donovan, 692 F.2d 714 (11th Cir. 1982) . . . 78
Franklin v. Gwinett City Pub. Sch., 503 U.S. 60 (1990) . . . . . . . . . . . . . . . . . . .101-104
Furnco Const. Corp. v. Waters, 438 U.S. 567 (1978) . . . . . . . . . . . . . . . . . . . . . . . . 45
Gallagher v. Croghan Colonial Bank, 89 F.3d 275 (6th Cir. 1996) . . . . . . . . . . . . . . 16
Gardner v. Alabama, 385 F.2d 804 (5th Cir. 1967), cert. denied, 389 U.S. 1046
(1968). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Gautreaux v. Romney, 457 F.2d 124 (7th Cir. 1972) . . . . . . . . . . . . . . . . . . . . . . . 97-98
Georgia State Conference of Branches of NAACP v. Georgia, 775 F.2d 1403 (11th Cir.
1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42, 48, 50-51
Godby v. Montgomery County Bd. of Educ., 996 F. Supp. 1390 (M.D.Ala. 1998). . . 44
Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030 (7th Cir. 1987) . . . . . . . . . . . . . 48
Graves v. Methodist Youth Servs., Inc., 624 F. Supp. 429 (N.D. Ill. 1985) . . . . . . . . 25
Griggs v. Duke Power, 401 U.S. 424 (1971) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Grove City College v. Bell, 465 U.S. 555 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 12, 14, 22-23, 25, 27, 29-33, 36, 72-73
Guardians Ass'n v. Civil Serv. Comm'n, 463 U.S. 582
(1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 32, 42, 47, 99,101-102, 104
Hamilton v. Illinois Ctr. R.R. Co., 894 F. Supp. 1014 (S.D. Miss. 1995) . . . . . . . . . . 17
Hans v. Louisiana, 134 U.S. 1 (1890) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
-iii-
Herman v. United Bhd. of Carpenters, 60 F.3d 1375 (9th Cir. 1995) . . . . . . . . . . . 15-16
Hodges by Hodges v. Public Bldg. Comm'n of Chicago (I), 864 F. Supp. 1493
(N.D. Ill. 1994), reconsideration denied, 873 F. Supp. 128 (N.D. Ill. 1995) . . . . . . . . . 34
Horner v. Kentucky High School Athletic Ass'n, 43 F.3d 265 (6th Cir.
1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Huber v. Howard County, Md., 849 F. Supp. 407 (D. Md.1994), aff'd without opinion, 56
F.3d 61 (4th Cir. 1995), cert. denied, 516 U.S. 916 . . . . . . . . . . . . . . . . . . . . . . . 10, 33
In re Naturalization of 68 Filipino War Veterans, 406 F. Supp. 931
N.D. Cal. 1975), . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Independent Hous. Servs. of San Francisco (IHS) v. Fillmore Ctr. Assoc., 840 F. Supp.
1328 (N.D. Cal. 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
International Bhd. of Teamsters v. United States, 431 U.S. 324 (1977) . . . . . . . . . . 46
Jacobson v. Delta Airlines, 742 F.2d 1202 (9th Cir. 1984) . . . . . . . . . . . . . . . . . . 16-18
Jersey Heights Neighborhood Ass'n v. Glendening, 174 F.3d 180 (4th Cir. 1999) . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58, 62-64, 99-100
Knight v. Alabama, 787 F. Supp. 1030 (N.D. Ala. 1991), aff'd in part, rev'd in part, and
vacated in part, 14 F.3d 1534 (11th Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Lane v. Pea, 518 U.S. 187 (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102, 106
Larry P. v. Riles, 793 F.2d 969 (9th Cir. 1984) . . . . . . . . . . . . . . . . . . . . . 43, 48-49, 51
Lau v. Nichols, 414 U.S. 563 (1974) . . . . . . . . . . . . . . . . . . . . . . . . . 48, 54-55, 99, 102
Leija v. Canutillo Indep. Sch. Dist., 887 F. Supp. 947 (W.D. Tex. 1995), rev'd on other
grounds, 101 F.3d 393 (5th Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Marable v. Alabama Mental Health Bd., 297 F. Supp. 291 (M.D. Ala. 1969) . . . . . . . 69
Marshall v. Barlow's Inc., 436 U.S. 307 (1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Mass v. Martin Marietta Corp., 805 F. Supp. 1530 (D. Colo. 1992) . . . . . . . . . . . . . . 17
Mathews v. Diaz, 426 U.S. 67 (1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973) . . . . . . . . . . . . . . . . 44-45, 51
-iv-
Meek v. Martinez, 724 F. Supp. 888 (S.D.Fla. 1987) . . . . . . . . . . . . . . . . . . . . . . . . 52
Meyers by and through Meyers v. Board of Educ. of the San Juan Sch. Dist.,
905 F. Supp. 1544 (D. Utah 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Moore v. Sun Bank, 923 F.2d 1423 (11th Cir. 1991) . . . . . . . . . . . . . . . . . . . . . . . . . 17
Muller v. Hotsy Corp., 917 F. Supp. 1389 (N.D. Iowa 1996) . . . . . . . . . . . . . . . . . . . 17
NCAA v. Smith, 525 U.S. 459 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23-24
New York City Envtl. Justice Alliance v. Giuliani, 214 F.3d 65 (2d Cir.
2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50, 62, 64-65, 99
New York Urban League v. Metropolitan Transp. Auth., 905 F. Supp. 1266 (S.D.N.Y.
1995), vacated on other grounds, 71 F.3d 1031 (2d Cir. 1995) . . . . . . . . . . . . . . . . . 35
New York Urban League v. New York, 71 F.3d 1031 (2d Cir.
1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43, 48, 50, 52, 53
North Haven v. Bell, 456 U.S. 512 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 98
Pabon v. Levine, 70 F.R.D. 674 (S.D.N.Y. 1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Pandazides v. Virginia Bd. of Educ., 13 F.3d 823 (4th Cir. 1994) . . . . . . . . . . . . . . 101
Pennhurst State Sch. and Hosp. v. Halderman, 451 U.S. 1 (1981) . . . . . . . . . . . . . 104
Plyler v. Doe, 457 U.S. 202 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Powell v. Ridge, 189 F.3d 387 (3d Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Rannels v. Hargrove, 731 F. Supp. 1214 (E.D. Pa. 1990) . . . . . . . . . . . . . . . . . . . . . 16
Regents of the Univ. of Cal. v. Bakke, 438 U.S. 265 (1978) . . . . . . . . . . . . . . . . 6, 102
Reynolds v. School Dist. No. 1, Denver, Colo., 69 F.3d 1523 (10th Cir. 1995) . . . . . 68
Rodgers v. Magnet Cove Pub. Sch., 34 F.3d 642 (8th Cir. 1994) . . . . . . . . . . . . . . 101
Sandoval v. Hagan, 7 F. Supp. 2d 1234 (M.D. Ala. 1998) . . . . . . . . . . . . . . . . 51-52, 55
Sandoval v. Hagan, 197 F.3d 484 (11th Cir. 1999), cert. granted sub. nom. Alexander v.
Sandoval, __ U.S. __, 121 S.Ct. 28, 68 U.S.L.W. 3749 (U.S. Sept. 26, 2000) (No. 99-
1908) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48-49, 99
-v-
Schroeder v. City of Chicago, 927 F.2d 957 (7th Cir. 1991) . . . . . . . . . . . . . . . . . . . 34
Seminole Tribe of Fla. v. Florida, 517 U.S. 44 (1996) . . . . . . . . . . . . . . . . . . . . . . . 106
Simkins v. Moses H. Cone Memorial Hosp., 323 F.2d 959 (5th Cir. 1963), cert.
denied, 376 U.S. 938 (1964) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Soberal-Perez v. Heckler, 717 F.2d 36 (2d Cir. 1983), cert. denied, 466 U.S. 929
(1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 21
Stanley v. Darlington County Sch. Dist., 84 F.3d 707 (4th Cir. 1995) . . . . . . . . . . . . . . 7
Steptoe v. Savings of America, 800 F. Supp. 1542 (N.D. Ohio 1992) . . . . . . . . . . . . 16
Thornton v. National R.R. Passenger Corp., 16 F.Supp. 2d 5 (D.D.C. 1998) . . . . . . . 68
United States by Clark v. Frazer, 297 F. Supp. 319 (M.D. Ala. 1968) . . . . . . . . . . . . 70
United States Dep't of Transp. v. Paralyzed Veterans, 477 U.S. 597 (1986) . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 10, 11, 13, 16, 21, 23, 26-27
United States v. Alabama, 791 F.2d 1450 (11th Cir. 1986) . . . . . . . . . . . . . . . . . . . . . . 7
United States v. Baylor Univ. Med. Ctr., 736 F.2d 1039 (5th Cir. 1984),
cert. denied, 469 U.S. 1189 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 91, 101
United States v. City and County of Denver, 927 F. Supp. 1396 (D. Colo.
1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
United States v. City of Yonkers, 880 F. Supp. 212 (S.D.N.Y. 1995), vacated
and remanded on other grounds, 96 F.3d 600 (2d Cir. 1996) . . . . . . . . . . . . . . . . . . 35
United States v. Harris Methodist Fort Worth, 970 F.2d 94 (5th Cir. 1992) . . . . . . 78-79
United States v. Jefferson County Bd. of Educ., 372 F.2d 836 (5th Cir. 1966) . . . . . .69
United States v. Marion County Sch. Dist., 625 F.2d 607 (5th Cir.), reh'g denied,
629 F.2d 1350 (5th Cir. 1980), cert. denied, 451 U.S. 910 (1981) . . . . . . . . . . . . 73, 90
United States v. Mississippi Power & Light Co., 638 F.2d 899 (5th Cir. 1981) . . . . . . 78
United States v. New Orleans Pub. Serv., 723 F.2d 422 (5th Cir.) reh'g en
banc denied, 734 F.2d 226 (5th Cir. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . 78-79, 81
-vi-
United States Postal Serv. Bd. of Governors v. Aikens, 460 U.S. 715 (1982) . . . . . . .45
Villanueva v. Carere, 85 F.3d 481 (10th Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . 48
W.B. v. Matula, 67 F.3d 484 (3d Cir. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Williams v. City of Dothan, 745 F.2d 1406 (11th Cir. 1984) . . . . . . . . . . . . . . . . . . . . 43
Waldrop v. Southern Co. Servs., 24 F.3d 152 (11th Cir. 1994) . . . . . . . . . . . . . . . . 101
Washington Legal Found. v. Alexander, 984 F.2d 483 (D.C. Cir. 1993) . . . . . .100-101
Women's Equity Action League v. Cavazos, 906 F.2d 742 (D.C. Cir. 1990) . . . . . . 100
Young by and through Young v. Montgomery County (Ala.) Bd. of Educ.,
922 F. Supp. 544 (M.D. Ala. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37, 43, 53
STATE CASES
Campaign for Fiscal Equity, Inc. v. State, 86 N.Y.2d 307, 655 N.E.2d 1178 (N.Y. Ct.
App. Jun 15, 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
CONSTITUTION
U.S. Const. amend. XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
FEDERAL STATUTES
5 U.S.C. 571 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
5 U.S.C. 3372 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
20 U.S.C. 1070(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
20 U.S.C. 1232i(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
20 U.S.C. 1681 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
29 U.S.C. 794 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
42 U.S.C. 2000d . . . . . . . . . . . . . . . . 1, 12, 16, 29, 33, 36, 39, 40, 42, 67, 72,passim
-vii-
42 U.S.C. 6101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
42 U.S.C. 12131 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
REGULATIONS
3 C.F.R. 859 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5 C.F.R. 900.403(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
15 C.F.R. 8.4(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
24 C.F.R. 1.2(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
24 C.F.R. 1.8(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
28 C.F.R. 42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 24-26, 30, 65, 69-72,passim
28 C.F.R. 50.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72-73, 75, 84-85, 90, 109
29 C.F.R. 31.8(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
29 C.F.R. 31.8(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
29 C.F.R. 1691.1 - 1691.13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
32 C.F.R. 195.6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
32 C.F.R. 195.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
34 C.F.R. 100.3(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
34 C.F.R. 100.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
38 C.F.R. 18.13(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
45 C.F.R. 80.8(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
45 C.F.R. 80.8(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
49 C.F.R. 21.23(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
48 Fed. Reg. 3570 (1983). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
59 Fed. Reg. 7629 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59-60
-viii-
65 Fed. Reg. 26464 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
65 Fed. Reg. 50121 (2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54-55
65 Fed. Reg. 50123 (2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54, 56, 58
MISCELLANEOUS
Rehabilitation Act Amendments of 1986, Pub. L. No. 99-506, Tit. X, 1003, 100 Stat.
1845 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103, 106
Civil Rights Restoration Act of 1987, Pub. L. No. 100-259, 102 Stat. 28
(1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 29-33, 35, 37, 40, 94, 98, 103
6 Op. Off. Legal Counsel 83 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exec. Order No. 9981, 3 C.F.R. 722 (1943-1948) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exec. Order No. 10479, 3 C.F.R. 61 (1949-1953), as amended by Exec. Order No.
10482, 3 C.F.R. 968 (1949-1953) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exec. Order No. 11063, 3 C.F.R. 652-656 (1959-1963) , as amended by Exec. Order
No. 12259, 3 C.F.R. 307 (1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exec. Order No. 11197, 3 C.F.R. 1964-1965 Comp. 278. . . . . . . . . . . . . . . . . . . . . 108
Exec. Order No. 11246 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70, 78, 79
Exec. Order No. 11247, 3 C.F.R. 1964-1965 Comp. 348 . . . . . . . . . . . . . . . . . . . . . 108
Exec. Order No. 11764, 3A C.F.R. 124 (1974 Comp.) . . . . . . . . . . . . . . . . . . . . . 109
Exec. Order No. 12250, 28 C.F.R. Pt. 41, App. A . . . . . . . . . . . . . . . . . . . . . . .108-109
Exec. Order No. 12898 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59, 60-61, 64
Exec. Order No. 12988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Exec. Order No. 13166 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55-56, 61
Memorandum on Environmental Justice for the Heads of All Departments and
Agencies, 30 Weekly Comp. Pres. Doc. 279 (Feb. 11, 1994) . . . . . . . . . . . . . . . . 60-61
-ix-
I. Overview: Interplay of Title VI with Title IX, Section 504, the
Fourteenth Amendment, and Title VII
Title VI prohibits discrimination on the basis of race, color, or national origin in
programs and activities receiving Federal financial assistance. Specifically, Title VI
provides that
[n]o person in the United States shall, on the ground of race, color, or national
origin, be excluded from participation in, be denied the benefits of, or be
subjected to discrimination under any program or activity receiving Federal
financial assistance.
42 U.S.C. 2000d. Title VI is the model for several subsequent statutes that prohibit
discrimination on other grounds in federally assisted programs or activities, including
Title IX (discrimination in education programs prohibited on the basis of sex) and
Section 504 (discrimination prohibited on the basis of disability). See United States
Dep't. of Transp. v. Paralyzed Veterans, 477 U.S. 597, 600 n.4 (1986); Grove City
College v. Bell, 465 U.S. 555, 566 (1984) (Title IX was patterned after Title VI);
Consolidated Rail Corp. v. Darrone, 465 U.S. 624 (1984) (Section 504 patterned after
Titles VI and IX).1/ Accordingly, courts have "relied on case law interpreting Title VI as
generally applicable to later statutes," Paralyzed Veterans, 477 U.S. at 600 n.4.
It is important to note, however, that not all issues are treated identically in the
three statutes. For example, Title VI statutorily restricts claims of employment
discrimination to instances where the "primary objective" of the financial assistance is to
provide employment. 42 U.S.C. 2000d-3. No such restriction applies to Title IX or
Section 504. See North Haven v. Bell, 456 U.S. 512, 529-30 (1982) ("The meaning and
applicability of Title VI are useful guides in construing Title IX, therefore, only to the
1 In addition, Title II of the Americans with Disabilities Act of 1990, as amended, is
patterned after Section 504. 42 U.S.C. 12131.
extent that the language and history of Title IX do not suggest a contrary
interpretation."); Bentley v. Cleveland County Bd. of County Comm'rs, 41 F.3d 600 (10th
Cir. 1994) (Section 504 claim alleging discriminatory termination of former employee).
Apart from the provisions common to Title VI, Title IX, and Section 504, courts
also have held that Title VI adopts or follows the Fourteenth Amendment's standard of
proof for intentional discrimination, and Title VII's standard of proof for disparate impact.
See Elston v. Talladega County Bd. of Educ., 997 F.2d 1394, 1405 n.11, 1407 n.14
(11th Cir.), reh'g denied, 7 F.3d 242 (11th Cir. 1993); (see Chapter VIII). Accordingly,
cases under these constitutional and statutory provisions may shed light on an analysis
concerning the applicability of Title VI to a given situation.
-2-
[Annotation] tkelly
[Annotation] tkelly
II. Synopsis of Legislative History and Purpose of Title VI
The landmark Civil Rights Act of 1964 was a product of the growing demand
during the early 1960s for the Federal Government to launch a nationwide offensive
against racial discrimination. In calling for its enactment, President John F. Kennedy
identified "simple justice" as the justification for Title VI:
Simple justice requires that public funds, to which all taxpayers of all races
contribute, not be spent in any fashion which encourages, entrenches,
subsidizes, or results in racial discrimination. Direct discrimination by Federal,
State, or local governments is prohibited by the Constitution. But indirect
discrimination, through the use of Federal funds, is just as invidious; and it
should not be necessary to resort to the courts to prevent each individual
violation.
See H.R. Misc. Doc. No. 124, 88th Cong., 1st Sess. 3, 12 (1963).
Title VI was not the first attempt to ensure that Federal monies not be used to
finance discrimination on the basis of race, color, or national origin. For example,
various prior Executive Orders prohibited racial discrimination in the armed forces, in
employment by federally funded construction contractors, and in federally assisted
housing.2/ Various Federal court decisions also served to eliminate discrimination in
individual federally assisted programs.3/
Congress recognized the need for a statutory nondiscrimination provision such
as Title VI to apply across-the-board "to make sure that the funds of the United States
2 Exec. Order No. 11063, 3C.F.R. 652-656 (1959-1963) (equal opportunity in
housing), as amended by Exec. Order No. 12259, 3 C.F.R. 307 (1981); Exec. Order No.
10479, 3 C.F.R. 61 (1949-1953), as amended by Exec. Order No. 10482, 3 C.F.R. 968
(1949-1953) (equal employment opportunity by government); Exec. Order No. 9981, 3
C.F.R. 722 (1943-1948) (equal opportunity in the armed services).
3 See, e.g., Cooper v. Aaron, 358 U.S. 1 (1958); Simkins v. Moses H. Cone
Memorial Hosp., 323 F.2d 959 (5th Cir. 1963), cert. denied, 376 U.S. 938 (1964).
-3-
are not used to support racial discrimination." 110 Cong. Rec. 6544 (Statement of Sen.
Humphrey). Senator Humphrey, the Senate manager of H.R. 7152, which became the
Civil Rights Act of 1964, identified several reasons for the enactment of Title VI. Id.
First, several Federal financial assistance statutes, enacted prior to Brown v. Board of
Education, 347 U.S. 483 (1954), expressly provided for Federal grants to racially
segregated institutions under the "separate but equal" doctrine that was overturned by
Brown. Although the validity of these programs was doubtful after Brown , this decision
did not automatically invalidate these statutory provisions. Second, Title VI would
eliminate any doubts that some Federal agencies may have had about their authority to
prohibit discrimination in their programs.
Third, through Title VI, Congress would "insure the uniformity and permanence
to the nondiscrimination policy" in all programs and activities involving Federal financial
assistance. Id. Thus, Title VI would eliminate the need for Congress to debate
nondiscrimination amendments in each new piece of legislation authorizing Federal
financial assistance.4/ As stated by Congressman Celler:
Title VI enables the Congress to consider the overall issue of racial
discrimination separately from the issue of the desirability of particular
Federal assistance programs. Its enactment would avoid for the future
the occasion for further legislative maneuvers like the so-called Powell
amendment.
4 See 6 Op. Off. Legal Counsel 83, 93 (1982) ("The statutes [Title VI, Title IX,
Section 504, and the Age Discrimination Act] . . . [are] intended to apply to all programs
or activities receiving federal financial assistance without being explicitly referenced in
subsequent legislation. They should therefore be considered applicable to all
legislation authorizing federal financial assistance . . . unless Congress evidences a
contrary intent.")
-4-
110 Cong. Rec. 2468 (1964).5/
Fourth, the supporters of Title VI considered it an efficient alternative to litigation.
It was uncertain whether the courts consistently would declare that government funding
to recipients that engaged in discriminatory practices was unconstitutional. Prior court
decisions had demonstrated that litigation involving private discrimination would
proceed slowly, and the adoption of Title VI was seen as an alternative to such an
arduous route. See 110 Cong. Rec. 7054 (1964) (Statement by Sen. Pastore).
Further, despite various remedial efforts, racial discrimination continued to be
widely subsidized by Federal funds. For example, Senator Pastore addressed how
North Carolina hospitals received substantial Federal monies for construction, that such
hospitals discriminated against blacks as patients and as medical staff, and that, in the
absence of legislation, judicial action was the only means to end these discriminatory
practices.
That is why we need Title VI of the Civil Rights Act, H.R. 7152 - to prevent such
discrimination where Federal funds are involved. . . . Title VI is sound; it is
morally right; it is legally right; it is constitutionally right. . . . What will it
accomplish? It will guarantee that the money collected by colorblind tax
collectors will be distributed by Federal and State administrators who are equally
colorblind. Let me say it again: The title has a simple purpose - to eliminate
discrimination in Federally financed programs.
Id.
President Lyndon Johnson signed the Civil Rights Act of 1964 into law on July 2,
1964, after more than a year of hearings, analyses, and debate. During the course of
congressional consideration, Title VI was one of the most debated provisions of the Act.
5 These amendments were so named because of their proponent, Congressman
Adam Clayton Powell. See 110 Cong. Rec. 2465 (1964) (Statement by Cong. Powell).
-5-
III. Title VI Applies to "Persons"
Title VI states "no person" shall be discriminated against on the basis of race,
color, or national origin. While the courts have not addressed the scope of "person" as
that term is used in Title VI, the Supreme Court has addressed this term in the context
of challenges brought under the Fifth and Fourteenth Amendments. See, e.g., Plyler v.
Doe, 457 U.S. 202 (1982); Mathews v. Diaz, 426 U.S. 67 (1976). The Supreme Court
has held that undocumented aliens are considered "persons" under the equal
protection and due process clauses of the Fifth and Fourteenth Amendments. Plyler,
457 U.S. at 210-211; Mathews, 426 U.S. at 77. Since rights protected by Title VI, at a
minimum, are analogous to such protections under the Fifth and Fourteenth
Amendments, these cases provide persuasive authority as to the scope of "persons"
protected by Title VI. See Guardians Ass'n. v. Civil Serv. Comm'n, 463 U.S. 582
(1983); Regents of the Univ. of Cal. v Bakke, 438 U.S. 265 (1978).6/ Thus, one may
assume that Title VI protections are not limited to citizens.
Related to the scope of coverage of Title VI is the issue of standing to challenge
program operations as a violation of Title VI. Individuals may bring a cause of action
under Title VI if they are excluded from participation in, denied the benefits of, or
subjected to discrimination under, any Federal assistance program. See Coalition of
Bedford-Stuyvesant Block Ass'n, v. Cuomo, 651 F. Supp. 1202, 1209 n.2 (E.D.N.Y.
1987); Bryant v. New Jersey Dep't of Transp., 998 F.Supp. 438 (D.N.J. 1998). At least
two courts of appeal have ruled that a city or other instrumentality of a State does not
6 Fifth and Fourteenth Amendment equal protection claims are coextensive, and
"indistinguishable." Adarand Constructors, Inc. v. Pea, 515 U.S. 200, 217 (1995).
-6-
have standing to bring suit against the State under Title VI. In United States v.
Alabama, 791 F.2d 1450 (11th Cir. 1986), the United States, later joined by intervenors,
Alabama State University (ASU), a majority-black institution, along with faculty, staff,
students, and graduates of ASU, filed suit against the state of Alabama, state
educational authorities, and all state four-year institutions of higher education, claiming
that Alabama operates a dual system of segregated higher education. Based on its
review of Title VI and its legislative history, the court concluded that neither the statute
nor the legislative history of Title VI provided for a state instrumentality to be considered
"a person" protected by Title VI, and the court "decline[d] to infer such a right of action
by judicial fiat." Id. at 1456-57. The court further stated there are other avenues of
recourse to remedy Title VI violations, including a private right of action for individuals
under Title VI and Title VI's comprehensive scheme of administrative enforcement.7/
Id. at 1456, (citing Cannon v. University of Chicago , 441 U.S. 677, 696-97 (1978)).
See also Dekalb County Sch. Dist. v. Schrenko, 109 F.3d 680, 689 (11th Cir. 1997)
(concluding that a political subdivision created by the state has no standing to bring a
Title VI claim against the state); Stanley v. Darlington County Sch. Dist., 84 F.3d 707,
717 n.2 (4th Cir. 1995) (finding no authorization under Title VI for a political subdivision
to sue the state).
7 See discussion infra Chs. XI and XII for a discussion of these remedies. This may
mean that although a subrecipient could not sue a state recipient of Federal financial
assistance for alleged discriminatory allocation of funds among subrecipients,
aggrieved individuals may be able to bring suit against the state recipient for
discriminatory distribution of funds.
-7-
IV. "In the United States"
Title VI states that no person "in the United States" shall be discriminated against
on the basis of race, color, or national origin by an entity receiving Federal financial
assistance. Agency Title VI regulations define "recipients" or "United States" to
encompass, inter alia, territories and possessions.8/ No court has addressed the scope
of "United States" or the validity of the regulations including territories and possessions,
although we believe such regulations are valid. Cases interpreting the Fifth and
Fourteenth Amendments again provide guidance in this analysis.
The Fourteenth Amendment only prohibits violations by the States, and does not
encompass the territories. District of Columbia v. Carter, 409 U.S. 418, 424 (1973)
(Territories are not "States" and are not subject to the Fourteenth Amendment). The
Fifth Amendment equal protection guarantees, however, do apply to the territories. In
re Naturalization of 68 Filipino War Veterans, 406 F. Supp. 931, 940-41 (N.D. Cal.
1975), citing Balzac v. Puerto Rico, 258 U.S. 298, 312-13 (1922) (Fifth Amendment
applies to territories); Downes v. Bidwell, 182 U.S. 244, 282-83 (1901) (same). Thus,
all areas under the sovereignty of the United States fall within the combined jurisdiction
of the Fifth and Fourteenth Amendments. Accordingly, since Title VI is at least
coextensive with the Fifth and Fourteenth Amendments (for purposes of intentional
8 See e.g., 5 C.F.R. 900.403(f) (Office of Personnel Management's definition of
"recipient"); 24 C.F.R. 1.2(d) (Housing and Urban Development's definition of "United
States"); 28 C.F.R. 42.102(b) (Department of Justice's definition of "United States");
29 C.F.R. 31.2(j) (Department of Labor's definition of "United States"); 38 C.F.R.
18.13(d) (Veterans Administration's definition of "United States"); 45 C.F.R.
80.13(e) (Health and Human Services' definition of "United States"); and 49 C.F.R.
21.23(f) (Department of Transportation's definition of "recipient").
-8-
violations), to construe Title VI to apply to the States yet not to the territories would be
inconsistent with its constitutional underpinnings, as well as congressional intent that
Title VI be interpreted broadly to effectuate its purpose. See 110 Cong. Rec. 6544
(Statement of Sen. Humphrey); S. Rep. No. 64, 100th Cong., 2d Sess. 4-5 (1988),
reprinted in 1988 U.S.C.C.A.N. 3, 6-7.
-9-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
V. Federal Financial Assistance Includes More Than Money
Title VI states that no program or activity receiving "Federal financial assistance"
shall discriminate against individuals based on their race, color, or national origin. The
clearest example of Federal financial assistance is the award or grant of money.
Federal financial assistance, however, also may be in nonmonetary form. See United
States Dep't of Transp. v. Paralyzed Veterans, 477 U.S. 597, 607 n.11 (1986). As
discussed below, Federal financial assistance may include the use or rent of Federal
land or property at below market value, Federal training, a loan of Federal personnel,
subsidies, and other arrangements with the intention of providing assistance. Federal
financial assistance does not encompass contracts of guarantee or insurance,
regulated programs, licenses, procurement contracts by the Federal government at
market value, or programs that provide direct benefits. It is also important to remember
that not only must a program receive Federal financial assistance to be subject to Title
VI, but the entity also must receive Federal assistance at the time of the alleged
discriminatory act(s). See Huber v. Howard County, Md., 849 F. Supp. 407, 415 (D.
Md.1994) (Motion to dismiss claim of discriminatory employment practices under 504
denied as defendant received Federal assistance during the time of probationary
employment and discharge.), aff'd without opinion, 56 F.3d 61 (4th Cir. 1995), cert.
denied, 516 U.S. 916 (1995); see also Delmonte v. Department of Bus. Prof'l
Regulation, 877 F. Supp. 1563 (S.D. Fla. 1995).9/
9 In Delmonte, the plaintiff alleged that he was demoted in 1990 on a prohibited
basis in violation of Section 504. 877 F. Supp. at 1564. The court held that the
defendant received Federal financial assistance through its participation in at least 10
Federal training programs (consisting of less than one to three-day programs) both
-10-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
A. Examples of Federal Financial Assistance
Agency regulations use similar, if not identical, language to define Federal
financial assistance:
(1) Grants and loans of Federal funds,
(2) The grant or donation of Federal property and interests in property,
(3) The detail of Federal personnel,
(4) The sale and lease of, and the permission to use (on other than a
casual or transient basis), Federal property or any interest in such
property without consideration or at a nominal consideration, or at a
consideration which is reduced for the purpose of assisting the recipient,
or in recognition of the public interest to be served by such sale or lease
to the recipient, and
(5) Any Federal agreement, arrangement, or other contract which has as
one of its purposes the provision of assistance.
28 C.F.R. 42.102(c).10/ No extended discussion is necessary to show that money,
through Federal grants, cooperative agreements and loans, is Federal financial
assistance within the meaning of Title VI. See Paralyzed Veterans, 477 U.S. at 607.
For example:
# A State health department receives $372,000 in Federal funds from the
Department of Health and Human Services to be distributed to private hospitals
before and after the demotion, over a course of approximately twelve years. Id. at
1565-66. The court does not clearly address if its conclusion is based on training in the
aggregate, or if a single training session (with the required contractual assurances of
compliance with nondiscrimination), is sufficient. Id. at 1566.
10 Agency Title VI regulations include an appendix that sets forth examples of the
types of Federal financial assistance provided through the agency's programs. This list
can provide guidance, although it should not be considered (and may specifically state
that it is not) an exhaustive list of all Federal financial assistance provided by that
agency. Agencies should amend the appendix, "at appropriate intervals," to include
programs enacted after issuance of the regulations. See 28 C.F.R. 42.403(d).
-11-
for emergency room services. The funds constitute Federal financial assistance
to the State health department as well as the private hospitals that are funded,
and thus Title VI would apply to all of these entities. See 42 U.S.C. 2000d-
4a(1)(a), 4a(3)(A)(ii).
# White patients are treated more expeditiously than minority patients at the
emergency room of HealWell Hospital, even though the minority patients'
medical needs are similar. HealWell receives Medicare funds through its
patients. Partial payments by Medicare funds constitute Federal financial
assistance to HealWell. See United States v. Baylor Univ. Med. Ctr., 736 F.2d
1039 (5th Cir. 1984), cert. denied, 469 U.S. 1189 (1985).
# United States military veterans are enrolled at Holy University, a private, religious
university. The veterans receive payments from the Federal government for
educational pursuits and such monies are used by the veterans to pay a portion
of their respective tuition payments at Holy University. Although Federal
payments are direct to the veterans and indirect to Holy University, the university
is receiving Federal financial assistance. See Grove City College v. Bell, 465
U.S. 555 (1984).
As set forth in the regulations, Federal financial assistance may be in the form of
a grant or donation of land or use (rental) of Federal property for the recipient at no or
reduced cost. Since the recipient pays nothing or a lower amount for ownership of land
or rental of property, the recipient is being assisted financially by the Federal agency.
Typically, assurances state that this type of assistance is considered to be ongoing for
as long as the land or property is being used for the original or a similar purpose for
which such assistance was intended. E.g., 28 C.F.R. 42.105. Moreover, regulations
bind the successors and transferees of this property, as long as the original purpose, or
a similar objective, is pursued. Id. Thus, if the recipient uses the land or rents property
for the same purpose at the time of the alleged discriminatory act, the recipient is
receiving Federal financial assistance, irrespective of when the land was granted or
-12-
donated.11/
For example:
# Sixteen years ago, the Department of Defense (DOD) donated land from a
closed military base to a State as the location for a new prison. Currently, the
prison has been built and houses 130 inmates. Black and Hispanic inmates
complain that they tend to be in long-term segregation more often than white
inmates, and allege racial discrimination by the prison administrators. Because
the State still uses the land donated to it by the DOD for its original (or similar
purpose), the State is still receiving Federal financial assistance. See 32 C.F.R.
195.6.
# A police department has a branch office located in a housing project built,
subsidized, and operated with Housing and Urban Development (HUD) funds.
The police department is not charged rent. Thus, the police department is
receiving Federal financial assistance and is subject to Title VI.
Under the Intergovernmental Personnel Act of 1970, Federal agencies may allow
a temporary assignment of personnel to State, local, and Indian tribal governments,
institutions of higher education, Federally funded research and development centers,
and certain other organizations for work of mutual concern and benefit. See 5 U.S.C.
3372. This detail of Federal personnel to a State or other entity is considered Federal
financial assistance, even if the entity reimburses the Federal agency for some of the
detailed employee's Federal salary. See Paralyzed Veterans, 477 U.S. at 612 n.14.
However, if the State or other entity fully reimburses the Federal agency for the
employee's salary, it is unlikely that the entity receives Federal financial assistance. For
example:
# Two research scientists from the National Institute of Health (NIH) are detailed to
a research organization for two years to help research treatments for cancer.
NIH pays for three-fourths of the salary of the two detailed employees, while the
11 Regulations also typically bind the successors and transferees of this property, as
long as the original purpose, or a similar objective, is pursued. Id.
-13-
[Annotation] tkelly
organization pays the remaining portion. The research organization is
considered to be receiving Federal financial assistance since the Federal
government is paying a substantial portion of the salary of the detailed Federal
employees. The research organization is thus now subject to Title VI.
Another common form of Federal financial assistance provided by many
agencies is training by Federal personnel. For example:
# A city police department sends several police officers to training at the FBI
Academy at Quantico without cost to the city. The police department is
considered to have received Federal financial assistance. See Delmonte v.
Department of Bus. & Prof'l Regulation, 877 F. Supp. 1563 (S.D. Fla. 1995).
B. Direct and Indirect Receipt of Federal Assistance
Federal financial assistance may be received directly or indirectly.12/ For
example, colleges indirectly receive Federal financial assistance when they accept
students who pay, in part, with Federal financial aid directly distributed to the students.
Grove City College v. Bell, 465 U.S. 555, 564 (1984)13/; see also Bob Jones Univ. v.
Johnson, 396 F. Supp. 597, 603 (D.S.C. 1974), aff'd, 529 F.2d 514 (4th Cir. 1975). In
Bob Jones Univ., the university was deemed to have received Federal financial
assistance for participating in a program wherein veterans received monies directly
from the Veterans Administration to support approved educational pursuits, although
12 It is often difficult to separate discussions of closely linked concepts, such as what
is a recipient and what is Federal financial assistance. Accordingly, the concept of
"direct" and "indirect" are discussed both in terms of "direct/indirect recipient" and
"directly receive/indirectly receive Federal financial assistance."
13 "With the benefit of clear statutory language, powerful evidence of Congress'
intent, and a longstanding and coherent administrative construction of the phrase
'receiving federal financial assistance,' we have little trouble concluding that Title IX
coverage is not foreclosed because federal funds are granted to Grove City's students
rather than directly to one of the College's educational programs." Grove City College
v. Bell, 465 U.S. 555, 569.
-14-
the veterans were not required to use the specific Federal monies to pay the schools for
tuition and expenses. 396 F. Supp. at 602-03 & n.22. Even if the financial aid to the
veterans did not reach the university, the court considered this financial assistance to
the school since this released the school's funds for other purposes. Id. at 602. Thus,
an entity may be deemed to have "received Federal financial assistance" even if the
entity did not show a "financial gain, in the sense of a net increment in its assets." Id. at
602-03. Aid such as this, and noncapital grants, are equally Federal financial
assistance. Id.
C. Federal Action That Is Not Federal Financial Assistance
To simply assert that an entity receives something of value in nonmonetary form
from the Federal government's presence or operations, however, does not mean that
such benefit is Federal financial assistance. For example, licenses impart a benefit
since they entitle the licensee to engage in a particular activity, and they can be quite
valuable. Licenses, however, are not Federal financial assistance. Community
Television of S. Cal. v. Gottfried, 459 U.S. 498, 509 (1983) (The Federal
Communications Commission is not a funding agency and television broadcasting
licenses do not constitute Federal financial assistance); California Ass'n. of the
Physically Handicapped v. FCC, 840 F.2d 88, 92-93 (D.C. Cir. 1988) (same); see
Herman v. United Bhd. of Carpenters, 60 F.3d 1375, 1381-82 (9th Cir. 1995)
(Certification of union by the National Labor Relations Board is akin to a license, and
not Federal financial assistance under 504.).
Similarly, statutory programs or regulations that directly or indirectly support, or
establish guidelines for, an entity's operations are not Federal financial assistance.
-15-
Herman, 60 F.3d at 1382 (Neither Labor regulations establishing apprenticeship
programs nor Davis-Bacon Act wage protections are Federal financial assistance.);
Steptoe v. Savings of America, 800 F. Supp. 1542, 1548 (N.D. Ohio 1992) (Mortgage
lender subject to Federal banking laws does not receive Federal financial assistance.);
Rannels v. Hargrove, 731 F. Supp. 1214, 1222-23 (E.D. Pa. 1990) (Federal bank
regulations are not Federal financial assistance under the Age Discrimination Act).
Furthermore, programs "owned and operated" by the Federal government, such
as the air traffic control system, do not constitute Federal financial assistance.
Paralyzed Veterans, 477 U.S. at 612; Jacobson v. Delta Airlines, 742 F.2d 1202, 1213
(9th Cir. 1984) (air traffic control and national weather service programs do not
constitute Federal financial assistance).14/
It also should be noted that, while contracts of guaranty and insurance may
constitute Federal financial assistance, Title VI specifically states that it does not apply
to "Federal financial assistance...extended by way of a contract of insurance or
guaranty." 42 U.S.C. 2000d-4; see Gallagher v. Croghan Colonial Bank, 89 F.3d 275,
14 As stated by then-Deputy Attorney General Nicholas deB. Katzenbach to Hon.
Emanuel Celler, Chairman, Committee on the Judiciary, House of Representatives
(December 2, 1963):
Activities wholly carried out by the United States with Federal funds, such as
river and harbor improvements or other public works, defense installations,
veteran's hospitals, mail service, etc. are not included in the list [of federally
assisted programs]. Such activities, being wholly owned by, and operated by or
for, the United States, cannot fairly be described as receiving Federal
'assistance.' While they may result in general economic benefit to neighboring
communities, such benefit is not considered to be financial assistance to a
program or activity within the meaning of Title VI.
110 Cong. Rec. 13380 (1964).
-16-
277 (6th Cir. 1996) (Default insurance for bank's disbursement of Federal student loans
is a "contract of insurance," and excluded from Section 504 coverage by agency
regulations). But see Moore v. Sun Bank, 923 F.2d 1423, 1427 (11th Cir. 1991) (loans
guaranteed by the Small Business Administration constituted Federal financial
assistance since Section 504 does not exclude contracts of insurance or guaranty from
coverage as does Title VI).
Procurement contracts also are not considered Federal financial assistance.15/
DeVargas v. Mason & Hanger-Silas Mason Co., 911 F.2d 1377 (10th Cir. 1990);
Jacobson, 742 F.2d at 1209; Muller v. Hotsy Corp., 917 F. Supp. 1389, 1418 (N.D. Iowa
1996) (procurement contract by company with GSA to provide supplies is not Federal
financial assistance); Hamilton v. Illinois Cent. R.R. Co., 894 F. Supp. 1014, 1020 (S.D.
Miss. 1995). A distinction must be made between procurement contracts at fair market
value and subsidies; the former is not Federal financial assistance although the latter is.
Jacobson, 742 F.2d at 1209; Mass v. Martin Marietta Corp., 805 F. Supp. 1530, 1542
15 In response to specific questions from Senator John Sherman Cooper, Attorney
General Robert F. Kennedy explained the exclusion of procurement contracts from Title
VI:
Title VI does not apply to procurement contracts, or to other business
contracts which do not involve financial assistance by the United States.
It does apply to grant and loan agreements, and to certain other contracts
involving financial assistance (for example, those research "contracts"
which are essentially grants in nature). In those cases in which Title VI is
applicable, section 602 would apply to a person or corporation who
accepts a direct grant, loan, or assistance contract from the Federal
Government. But, as indicated, the fact that the title applied would not
authorize any action, except with respect to discrimination against
beneficiaries of the particular program involved.
110 Cong. Rec. 10075 (1964).
-17-
(D. Co. 1992) (Federal payments for goods pursuant to a contract, even if greater than
fair market value, do not constitute Federal financial assistance). As described in
Jacobson and followed in DeVargas, there need not be a detailed analysis of whether a
contract is at fair market value, but instead a focus on whether the government
intended to provide a subsidy to the contractor. DeVargas, 911 F.2d at 1382-83;
Jacobson, 742 F.2d at 1210. In DeVargas, a Department of Energy contract, issued
through a competitive bidding process after a determination that a private entity could
provide the service in a less costly manner, evidenced no intention to provide a subsidy
to the contractor. Id. at 1382-83. For example:
# DOD contracts with SpaceElec, a private aerospace company, to develop and
manufacture parts for the space shuttle. Under the contract, full price is paid by
the DOD for the goods and services to be provided by SpaceElec. Because this
is a direct procurement contract by the Federal government, the funds paid to
SpaceElec by the DOD do not subject SpaceElec to Title VI.
Finally, Title VI does not apply to direct, unconditional assistance to ultimate
beneficiaries, the intended class of private citizens receiving Federal aid. For example,
social security payments and veterans' pensions are not Federal financial assistance.
Soberal-Perez v. Heckler, 717 F.2d 36, 40 (2d Cir. 1983), cert. denied, 466 U.S. 929
(1984); Bob Jones Univ., 396 F. Supp. at 602, n.16.16/ Members of Congress,
responding to criticisms about the scope of Title VI, repeatedly explained during the
congressional hearings in 1964 that Title VI does not apply to direct benefit programs:
16 The court in Bob Jones Univ., distinguished pensions from payments to veterans
for educational purposes since the latter is a program with a requirement or condition
that the individual participate in a program or activity. 396 F. Supp. at 602 n.16. For a
more detailed discussion of when assistance to a beneficiary may constitute indirect
assistance to a recipient, see discussion of indirect recipient in section (VI)(C) of this
chapter.
-18-
The title does not provide for action against individuals receiving funds
under federally assisted programs -- for example, widows, children of
veterans, homeowners, farmers, or elderly persons living on social
security benefits.
110 Cong. Rec. 15866 (1964) (Statement of Senator Humphrey); see 100 Cong. Rec.
6544 (1963) (Statement of Senator Humphrey). See also 110 Cong. Rec. 1542 (1964)
(Statement of Rep. Lindsay); 110 Cong. Rec. 13700 (1964) (Statement of Sen. Javits).
-19-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
VI. What is a Recipient?
A. Regulations
A "recipient" receives Federal financial assistance and/or operates a "program or
activity," and therefore its conduct is subject to Title VI. All agency Title VI regulations
use a similar if not identical definition of "recipient," as follows:
The term recipient means any State, political subdivision of any State, or
instrumentality of any State or political subdivision, any public or private agency,
institution, or organization, or other entity, or any individual, in any State, to
whom Federal financial assistance is extended, directly or through another
recipient, for any program, including any successor, assign, or transferee
thereof, but such term does not include any ultimate beneficiary under any such
program.
The term primary recipient means any recipient which is authorized or required to
extend Federal financial assistance to another recipient for the purpose of
carrying out a program.
28 C.F.R. 42.102(f), (g) (emphasis in original).
Several aspects of the plain language of the regulations should be noted. First,
a recipient may be a public (e.g., a State, local or municipal agency) or a private entity.
Second, Title VI does not apply to the Federal government. Therefore, a Federal
agency cannot be considered a "recipient" within the meaning of Title VI. Third, there
may be more than one recipient in a program; that is, a primary recipient (e.g., State
agency) that transfers or distributes assistance to a subrecipient (local entity) for
distribution to an ultimate beneficiary.17/ Fourth, a recipient also encompasses a
successor, transferee, or assignee of the Federal assistance (property or otherwise),
under certain circumstances. Fifth, as discussed in detail below, there is a distinction
17 An ultimate beneficiary usually does not receive a "distribution" of the federal
money. Rather, he or she enjoys the benefits of enrollment in the program.
-20-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
between a recipient and a beneficiary. Finally, although not addressed in the
regulations, a recipient may receive Federal assistance either directly from the Federal
government or indirectly through a third party, who is not necessarily another recipient.
For example, schools are indirect recipients when they accept payments from students
who directly receive Federal financial aid.
B. Direct Relationship
The clearest means of identifying a "recipient" of Federal financial assistance is
to determine whether the entity has voluntarily entered into a relationship with the
Federal government and receives Federal assistance under a condition or assurance of
compliance with Title VI (and/or other nondiscrimination obligations). Paralyzed
Veterans, 477 U.S. at 605-06.
By limiting coverage to recipients, Congress imposes the obligations of
504 [and Title VI] upon those who are in a position to accept or reject
those obligations as part of the decision whether or not to "receive"
federal funds.
Id. at 606; see also Soberal-Perez, 717 F.2d at 41. It is important to note that by
signing an assurance, the recipient is committing itself to complying with the
nondiscrimination mandates. Even without a written assurance, courts describe
obligations under nondiscrimination laws as similar to a contract, and have thus
concluded that "the recipients' acceptance of the funds triggers coverage under the
nondiscrimination provision." Paralyzed Veterans, 477 U.S. at 605. In this scenario,
the recipient has a direct relationship with the funding agency and, therefore, is subject
to the requirements of Title VI. For example:
# Airport operators are recipients of Federal financial assistance pursuant to a
statutory program providing funds for airport construction and capital
-21-
[Annotation] tkelly
development. Id. at 607.
# Hall City Police Department (HCPD) received a grant from the U. S. Department
of Justice for community outreach programs. HCPD is considered to be a
recipient of Federal financial assistance.
# Six years ago, LegalSkool, a law school at a university, was built partly with
Federal grants, loans, and interest subsidies in excess of $7 million from the
Department of Education (ED). The law school is a "recipient" because of the
funding from ED for construction purposes.
While showing that the entity directly receives a Federal grant, loan, or contract,
(other than a contract of insurance or guaranty) is the easiest means of identifying a
Title VI recipient, this direct cash flow does not describe the full reach of Title VI.18/
C. Indirect Recipient
A recipient may receive funds either directly or indirectly. Grove City, 465 U.S. at
564-65.19/ For example, educational institutions receive Federal financial assistance
indirectly when they accept students who pay, in part, with Federal loans. Although the
money is paid directly to the students, the universities and other educational institutions
are the indirect recipients. Id.; Bob Jones Univ., 396 F. Supp. at 602.
In Grove City, the Supreme Court found that there was no basis to create a
distinction not made by Congress regarding funding paid directly to or received
18 It should be noted that the remaining text of this section distinguishes various
scenarios for recipients and beneficiaries. While captions are used to separate
different circumstances, courts do not uniformly use the same phrase to explain the
same funding pattern. Thus, a court may refer to an "indirect recipient" when the
situation more closely fits the paradigm of "primary recipient/subrecipient." See
discussion infra Section E.
19 While the court's analysis in Grove City of the scope of "program or activity" was
reversed by the Civil Rights Restoration Act of 1987, Pub. L. No. 100-259, 102 Stat. 28
(1988), the Court's discussion of other principles, including direct and indirect
recipients, remains undisturbed.
-22-
indirectly by a recipient. 465 U.S. at 564-65. In reaching its conclusion, the Court
considered the congressional intent and legislative history of the statute in question to
identify the intended recipient. The Court found that the 1972 Education Amendments,
of which Title IX is a part, are "replete with statements evincing Congress' awareness
that the student assistance programs established by the Amendments would
significantly aid colleges and universities. In fact, one of the stated purposes of the
student aid provisions was to 'provid[e] assistance to institutions of higher education.'
Pub. L. 92-318, 1001(c)(1), 86 Stat. 831, 20 U.S.C. 1070(a)(5) " Id. at 565-66.
Finally, the Court distinguished student aid programs that are "designed to assist"
educational institutions and that allow such institutions an option to participate in, or
exclude themselves from, other general welfare programs where individuals, including
students, are free to spend the payments without limitation. Id. at 565 n.13.
In contrast, as subsequently explained by the Supreme Court in Paralyzed
Veterans, it is essential to distinguish aid that flows indirectly to a recipient from aid to a
recipient that reaches a beneficiary.
While Grove City stands for the proposition that Title IX coverage extends to
Congress' intended recipient, whether receiving the aid directly or indirectly, it
does not stand for the proposition that federal coverage follows the aid past the
recipient to those who merely benefit from the aid.
Paralyzed Veterans, 477 U.S. at 607 (citing Grove city, 465 U.S. at 564).
Along these lines, the Supreme Court in NCAA v. Smith, 525 U.S. 459, 470
(1999), citing both Grove City and Paralyzed Veterans, stated that while dues paid to
an entity (NCAA) by colleges and universities, who were recipients of federal financial
assistance, "at most ... demonstrates that it [NCAA] indirectly benefits from the federal
-23-
assistance afforded its afforded members." But the Court stated, "This showing,
without more, is insufficient to trigger Title IX coverage. Id. at 468.20/
D. Transferees and Assignees
Agency regulations and assurances often include specific statements on the
application of Title VI to successors, transferees, assignees, and contractors. For
example, the Department of Justice's regulations state:
In the case where Federal financial assistance is to provide or is in the form of
personal property, or real property or interest therein or structures thereon, such
assurance shall obligate the recipient, or in the case of a subsequent transfer,
the transferee, for the period during which the property is used for a purpose for
which the Federal financial assistance is extended or for another purpose
involving the provision of similar services or benefits . . . . The responsible
Department official shall specify the form of the foregoing assurances for each
program, and the extent to which the assurances will be required of subgrantees,
contractors, and subcontractors, transferees, successors in interest, and other
participants in the program.
28 C.F.R. 42.105(a)(1) (emphasis added).
Furthermore, land that originally was acquired through a program receiving
Federal financial assistance shall include a covenant binding on subsequent purchasers
or transferees that requires nondiscrimination for as long as the land is used for the
original or a similar purpose for which the Federal assistance is extended. 28 C.F.R.
42.105(a)(2).21/
20 The Court in Smith specifically did not address the Department's argument that
"when a recipient cedes controlling authority over a federally funded program to another
entity, the controlling entity is covered by Title IX regardless whether it is itself a
recipient. Id. at 469-471.
21 In contrast, in Independent Hous. Servs. of San Francisco (IHS) v. Fillmore Ctr.
Assoc., 840 F. Supp. 1328, 1341 (N.D. Ca. 1993), the transfer of property in issue
occurred before the effective date of HUD regulations that stated transferees or
purchasers of real property are subject to Section 504. Accordingly, in IHS, a San
-24-
[Annotation] tkelly
E. Primary/Subrecipient Programs
Many programs have two recipients. The primary recipient directly receives the
Federal financial assistance. The primary recipient then distributes the Federal
assistance to a subrecipient to carry out a program. See, e.g., 28 C.F.R. 42.102(g).
Both the primary recipient and subrecipient are covered by and must conform their
actions to Title VI. For example:
# A State agency, such as the Department of Children and Family Services,
receives a substantial portion of its funding from the Federal government. The
State agency, as the primary recipient or conduit, in turn, funds local social
service organizations, in part, with its Federal funds. The local agencies receive
Federal financial assistance, and thus are subject to Section 504 (and Title VI,
and other nondiscrimination laws). See Graves v. Methodist Youth Servs., Inc.,
624 F. Supp. 429 (N.D. Ill. 1985).22/
# Under the Older Americans Act, funds are given by the Department of Health
and Human Services to State agencies which, in turn, distribute funds according
to funding formulas to local agencies operating programs for elderly Americans.
Title VI applies to the programs and activities of the State agencies because of
each agency's status as a direct conduit recipient passing Federal funds on to
subrecipients. Title VI also applies to the local agencies as subrecipients of
Federal financial assistance. See Chicago v. Lindley, 66 F.3d 819 (7th Cir.
1995).
F. Contractor and Agent
A recipient may not absolve itself of its Title VI obligations by hiring a contractor
or agent to perform or deliver assistance to beneficiaries. Agency regulations
Francisco agency was a recipient of funds under a block grant to assemble and clear
land for redevelopment, and the purchaser of the land, who built housing units, was
considered a beneficiary. Id.
22 The Graves court described the local agency as an "indirect" recipient since the
Federal money flowed "through another recipient," and compared this situation to Grove
City College's indirect receipt of BEOG funds from students. Id. at 433. Given that the
funding was distributed to a State agency and a portion allocated to a local entity, the
more accurate description is that of primary/subrecipient.
-25-
[Annotation] tkelly
[Annotation] tkelly
consistently state that prohibitions against discriminatory conduct, whether intentional or
through race neutral means with a disparate impact, apply to a recipient, whether
committed "directly or through contractual or other arrangements." E.g. , 28 C.F.R.
42.104(b)(1), (2) (emphasis added). For example:
# A recipient public housing authority contracts with a residential management
company for the management and oversight of a public housing authority.
Employees of the contractor reject prospective tenants based on their race,
color, or national origin. The recipient is liable under Title VI for the contractor's
actions as the contractor is performing a program function of the recipient.
One also should evaluate the agency's assurances or certifications; such
documents can provide an independent basis to seek enforcement. For example, the
assurance for the Office of Justice Programs, within the Department of Justice, states,
inter alia,
It [the Applicant] will comply, and all its contractors will comply, with the
nondiscrimination requirements of the [Safe Streets Act, Title VI, Section 504,
Title IX . . . .] (emphasis added).
G. Recipient v. Beneficiary
Finally, in analyzing whether an entity is a recipient, it is necessary to distinguish
a recipient from a beneficiary; the former is covered by Title VI while the latter is not.23/
Paralyzed Veterans, 477 U.S. at 606-07. An assistance program may have many
beneficiaries, that is, individuals and/or entities that directly or indirectly receive an
advantage through the operation of a Federal program. Beneficiaries, however, do not
enter into any formal contract or agreement with the Federal government where
23 Most agency Title VI regulations state that the term recipient "does not include any
ultimate beneficiary under the program." See, e.g., 28 C.F.R.
42.102(f) (DOJ).
-26-
[Annotation] tkelly
compliance with Title VI is a condition of receiving the assistance.24/ Id .
In almost any major federal program, Congress may intend to benefit a large
class of persons, yet it may do so by funding - that is, extending federal financial
assistance to - a limited class of recipients. Section 504, like Title IX in Grove
City [465 U.S. 555 (1984)], draws the line of federal regulatory coverage
between the recipient and the beneficiary.
Id. at 609-10. Title VI was meant to cover only those situations where Federal funding
is given to a non-Federal entity which, in turn, provides financial assistance to the
ultimate beneficiary, or disburses Federal assistance to another recipient for ultimate
distribution to a beneficiary. It is important to note that the Supreme Court has firmly
established that the receipt of student loans or grants by an entity renders the entity a
recipient of Federal financial assistance. See Grove City, 456 U.S. at 596
In Paralyzed Veterans, a Section 504 case decided under Department of
Transportation regulations, the Court held that commercial airlines that used airports
and gained an advantage from the capital improvements and construction at airports
were beneficiaries, and not recipients, under the airport improvement program. 477
U.S. at 607. The airport operators, in contrast, directly receive the Federal financial
assistance for the airport construction. The Court examined the program statutes and
24 For example, in Cuffley v. Mickes, 208 F.3d 702 (8th Cir. 2000) plaintiffs, the
Knights of the Ku Klux Klan, brought suit against the Missouri Highway and
Transportation Commission (State) for denying its application to participate in Missouri's
Adopt-A-Highway program. Among the State's reasons for denying the application was
that allowing the Klan to participate in the Adopt-A-Highway program would violate Title
VI of the Civil Rights Act of 1964 and would cause the state to lose its federal funding.
The Eighth Circuit ruled that "Title VI clearly does not apply directly to prohibit the Klan's
discriminatory membership criteria" and that the Klan is not a direct recipient of federal
financial assistant through the Adopt-A-Highway program, but merely a beneficiary of
the program. Therefore, the State's denial of the Klan's application was invalid. Id. at
710.
-27-
concluded:
Congress recognized a need to improve airports in order to benefit a wide variety
of persons and entities, all of them classified together as beneficiaries. [note
omitted]. Congress did not set up a system where passengers were the primary
or direct beneficiaries, and all others benefitted by the Acts are indirect recipients
of the financial assistance to airports.
The statute covers those who receive the aid, but does not extend as far as
those who benefit from it. . . Congress tied the regulatory authority to those
programs or activities that receive federal financial assistance.
Id. at 607-09.
-28-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
VII. "Program or Activity"
Title VI prohibits discrimination in "any program or activity," any part of which
receives Federal financial assistance. Initially, it should be understood that
interpretations of "program or activity" depend on whether one is analyzing the scope of
Title VI's prohibitions or evaluating what part of the entity is subject to a potential fund
termination or refusal. Further, the Civil Rights Restoration Act of 1987 (CRRA)
amended Title VI and related statutes by adding an expansive definition of "program or
activity." As described more fully below, the CRRA was passed to restore broad
interpretations, consistent with original congressional intent, and to reverse the
Supreme Court's narrow ruling in Grove City, 465 U.S. 555.
A. Initial Passage and Judicial Interpretations
When enacted in 1964, Title VI did not include a definition of "program or
activity."25/ Congress, however, made its intentions clearly known: Title VI's
prohibitions were meant to be applied institution-wide, and as broadly as necessary to
eradicate discriminatory practices supported by Federal funds. 110 Cong. Rec. 6544
(Statement of Sen. Humphrey); see S. Rep. No. 64, 100th Cong., 2d Sess. 5-7 (1988),
reprinted in 1988 U.S.C.C.A.N. 3, 7-9.
The courts, consistent with congressional intent, initially interpreted "program or
activity" broadly to encompass the entire institution in question. For example, all of the
services and activities of a university were subject to Title VI even if the sole Federal
assistance was Federal financial aid to students. See Bob Jones Univ., 396 F. Supp. at
25 See, e.g., 42 U.S.C. 2000d (1964), 42 U.S.C. 2000d-1 (1964), and 42 U.S.C.
2000d-4 (1964).
-29-
[Annotation] tkelly
603; S. Rep. No. 64 at 10, reprinted in 1988 U.S.C.C.A.N. at 12.26/
B. Grove City College
In 1984, however, the Supreme Court in Grove City, severely narrowed the
interpretation of "program or activity." 465 U.S. at 571-74. The Court ruled that Title
IX's prohibitions against discrimination applied only to the limited aspect of the
institution's operations that specifically received the Federal funding. Since the college
received Federal funds as a result of Federal financial aid to students, the "program or
activity" was the college's financial aid program. Id. at 574. The Court rejected the
court of appeal's analysis that receipt of Federal funds for one purpose (financial aid)
freed up school funds for other purposes (e.g., athletics) to render the entire university
(or at least the other programs that benefitted from 'freed up' funds) a "program or
activity." Id. at 572.
Further, the Court held that, although the Federal money was added to the
college's general funds, the purpose of the monies was for financial aid, and, therefore,
the covered program or activity was the financial aid program. Id. Thus, the receipt of
Federal financial aid by some of the students of the college did not subject an entire
college to Title IX, but only the operations of the financial aid program. Finally, the
Court noted that earmarked funds, such as the Federal financial aid monies, increase
resources and obligations of the recipient, while non-earmarked funds are unrestricted
in use and purpose. Id. at 573.
26 Agency regulations, while broad in scope, provide limited, specific guidance. See,
e.g., 28 C.F.R. 42.102(d).
-30-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
C. Civil Rights Restoration Act
The Grove City interpretation of "program or activity" lasted for four years, until
Congress passed the Civil Rights Restoration Act of 1987 (CRRA), Pub. L. No. 100-
259, 102 Stat. 28 (1988). Congress' intent in passing the CRRA was clear. As the
Senate Report states:
S.557 was introduced . . . to overturn the Supreme Court's 1984 decision
in Grove City College v. Bell, . . . and to restore the effectiveness and
vitality of the four major civil rights statutes [Title IX, Title VI, Section 504,
and the Age Discrimination Act of 1975] that prohibit discrimination in
federally assisted programs.
S. Rep. No. 64 at 2, reprinted in 1988 U.S.C.C.A.N. at 3-4.27/ The CRRA includes
virtually identical amendments to broadly define "program or activity" (for coverage
purposes) for the four cross-cutting civil rights statutes.
The Senate Report provides extensive detail about the history of these statutes,
including Congress' original intent that they be broadly interpreted and enforced; the
consequences of Grove City, i.e., the narrow interpretations by courts and agencies that
relieved entities of liability for apparent acts of discrimination because of the new,
constricted interpretation of program or activity; and detailed explanations of the Act's
language. Id. at 5-20.28/
As explained in Chapter VIII, Title VI prohibits intentional discrimination, and
27 The Senate further stated:
The purpose of the Civil Rights Restoration Act of 1987 is to reaffirm pre-Grove
City judicial and executive branch interpretations and enforcement practices
which provided for broad coverage of the anti-discrimination provisions of these
civil rights statutes. Id.
28 No House Report or Conference Report was submitted with the legislation.
-31-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
agency Title VI regulations prohibit conduct that has an unjustified discriminatory effect.
See Guardians Ass'n v. Civil Serv. Comm'n, 463 U.S. 582 (1983) and Alexander v.
Choate, 469 U.S. 287, 293 (1985). In 1999, the Third Circuit held that the CRRA's
statutory definition of "program or activity" did not apply to the effects test created by
Title VI regulations. Cureton v. NCAA, 198 F.3d 107 (3d Cir. 1999) (appeal pending).
The court reasoned that since the Title VI regulations in question had not been
amended to reflect the CRRA's definition, the effects test only applied to specifically
funded programs.29/ In response to the decision, federal agencies took steps to
amend their regulations to make clear that the broad definition of program or activity
applies to claims brought under the effects test enunciated in regulations, as well as to
intentional discrimination.30/
D. State and Local Governments
The CRRA defines coverage in specific areas. As to State and local
governments, Title VI now states:
For the purposes of this subchapter, the term "program or activity" and the
term "program" mean all of the operations of--
(A) a department, agency, special purpose district, or other
instrumentality of a State or of a local government; or
29 The Cureton court implied that the CRRA definition of "program or activity"
applied to the regulations dealing with the disparate treatment or intent standard.
However, it specifically refused to rule on the issue, because the allegations in the case
were solely based upon the regulatory disparate impact theory. 198 F.3d at 116.
30 See, e.g., the Department of Education Notice of Proposed Rulemaking. 65 Fed.
Reg. 26464 (2000) (to be codified at 34 C.F.R. pts. 100, 104, 106, & 110) (proposed
May 5, 2000); the Department of Health and Human Services Notice of Proposed
Rulemaking, 65 Fed. Reg. 64194 (2000) (to be codified at 45 C.F.R. pts. 80, 84, 86, 90,
91) (proposed Oct. 26, 2000).
-32-
[Annotation] tkelly
(B) the entity of such State or local government that distributes such
assistance and each such department or agency (and each other
State or local government entity) to which the assistance is
extended, in the case of assistance to a State or local government;
any part of which is extended Federal financial assistance.
42 U.S.C. 2000d-4a(1) (emphasis added).
Two courts of appeals and several district courts have interpreted this language,
and most of the cases have concerned the scope of 504. Generally, the entire
department or office within a State or local government is identified as the "program or
activity."31/ For example, if a State receives funding that is designated for a particular
State prison, the entire State Department of Corrections is considered the covered
"program or activity" (but not, however, the entire State).
In Huber v. Howard County, Md, 849 F. Supp. 407, 415 (D. Md. 1994), the court
held that the county fire department received Federal financial assistance under 504
upon evidence that a subunit within the fire department received Federal funds and the
salary of one employee was partially paid with Federal funds. The court stated:
While the receipt of federal financial assistance by one department or agency of
a county does not render the entire county subject to the provisions of 504,
and while such assistance to one department does not subject another
department to the requirements of 504, if one part of a department receives
federal financial assistance, the whole department is considered to receive
federal assistance as to be subject to 504. Id.
Thus, while the CRRA overruled Grove City's narrow interpretation, the amendments
were not so broad as to cover an entire local or State government as part of a "program
31At least one court, however, has held that an entire county was the "program or
activity." See Bentley v. Cleveland County Bd. of Comm'rs, 41 F.3d 600 (10th Cir.
1994).
-33-
[Annotation] tkelly
or activity." See Hodges by Hodges v. Public Bldg. Comm'n of Chicago (I), 864 F.
Supp. 1493, 1505 (N.D. Ill. 1994), reconsideration denied, 873 F. Supp. 128, 132 (N.D.
Ill. 1995) (City of Chicago "is a municipality and, as such, it does not fit within the
definition of 'program or activity' for purposes of Title VI.");32/ see also Schroeder v.
City of Chicago, 927 F.2d 957, 962 (7th Cir. 1991).33/
Examples:
# If Federal health assistance is extended to a part of a State health department,
the entire health department would be covered in all of its operations. However,
the entire State government is not considered a recipient just because the health
department receives Federal financial assistance.
# If the office of a mayor receives Federal financial assistance and distributes it to
departments or agencies, all of the operations of the mayor's office are covered
along with the departments or agencies which actually receive the aid from the
Mayor's office.
It is significant to note that some courts have held that a State need not be a
"program or activity" to be a defendant under Title VI. A State is properly included as a
defendant if it is partly responsible for or participates in the discriminatory conduct. See
32 In the first opinion, the District Court recognized that the Public Building
Commission (PBC) could be subject to Title VI even if it did not directly receive Federal
funds (as part of a larger program or activity). Conclusory allegations of PBC's
contractual relationship with the Board of Education (CBOE), which received Federal
funds, were insufficient to survive a motion to dismiss. "These conclusory allegations
are insufficient to show that the PBC administered the CBOE's funds, benefitted from
the CBOE's funds, or was connected in any other way to the Federal funds received by
the CBOE." Id. at 1507.
33 In Schroeder, the court stated:
But the amendment was not, so far as we are able to determine--there are no
cases on the question--intended to sweep in the whole state or local
government, so that if two little crannies (the personnel and medical
departments) of one city agency (the fire department) discriminate, the entire city
government is in jeopardy of losing its federal financial assistance. Id.
-34-
[Annotation] tkelly
United States v. City of Yonkers, 880 F. Supp. 212, 232 (S.D.N.Y. 1995) vacated and
remanded on other grounds, 96 F. 3d 600 (2d Cir. 1996); New York Urban League v.
Metropolitan Transp. Auth., 905 F. Supp. 1266, 1273 (S.D.N.Y. 1995), vacated on other
grounds, 71 F.3d 1031 (2d Cir. 1995).
In United States v. City of Yonkers,the court rejected the State's argument that
sovereign immunity applied since it is not a "program or activity." 880 F. Supp. at 232.
The court stated that not only does the plain language of 2000d-7 defeat the State's
assertion, but also that
nothing in the legislative history of Title VI compels the conclusion that an entity
must be a 'program' or 'activity' to be a Title VI defendant. . . .We therefore hold
that the State of New York can be sued under Title VI as long as it, along with
those of its agencies receiving federal financial assistance, is alleged to have
been responsible for a Title VI violation. Id. (note omitted).34/
E. Educational Institutions
The CRRA also defines "program or activity" in an educational context. Title VI
(and Title IX, Section 504 and the ADEA of 1975) now provide:
For the purposes of this subchapter, the term "program or activity" and the
term "program" mean all of the operations of--
(2)(A) a college, university, or other postsecondary institution, or a public
system of higher education; or
34 Plaintiffs had alleged that the State, through its legislature, contributed to the
alleged school segregation by passing laws that impeded desegregation efforts and
providing limited financial assistance for such efforts. Id. at n.25. It is unclear whether
evidence of such allegations was introduced. In a subsequent opinion, the court did not
address these facts and rejected plaintiffs' arguments that a State, solely by its failure
to prevent alleged discrimination, could be held vicariously liable for the discriminatory
acts of a local education agency under either an intent or impact theory. United States
v. City of Yonkers, 880 F. Supp. 591, 597-98 (S.D.N.Y. 1995), vacated and remanded,
96 F. 3d 600 (2d Cir. 1996).
-35-
[Annotation] tkelly
[Annotation] tkelly
(B) a local educational agency (as defined in section 8801 of
Title 20), system of vocational education, or other school
system;
any part of which is extended Federal financial assistance.
42 U.S.C. 2000d-4a(2) (emphasis added). It is section 2(A) that specifically overturns
the Grove City decision by including all of the operations of a postsecondary institution
when any part of that institution is extended Federal financial assistance.35/ See
Knight v. Alabama, 787 F. Supp. 1030, 1364 (N.D. Ala. 1991) (entire Statewide
university system constituted "program or activity," notwithstanding limited autonomy of
institutions and even though not all institutions received Federal assistance), aff'd in
part, rev'd in part, and vacated in part, 14 F.3d 1534 (11th Cir. 1994).
Senate Report 64 provides several examples of the scope of an educational
"program or activity." Federal funding to one school subjects the entire school system
to Title VI. S. Rep. No. 64 at 17, reprinted in 1988 U.S.C.C.A.N. at 19. For example,
Federal aid to one of three schools operated by the Catholic Diocese would subject all
three schools to Title VI. Further, Congress explained that "all of the operations of"
encompasses, but is not limited to, "traditional educational operations, faculty and
student housing, campus shuttle bus service, campus restaurants, the bookstore, and
other commercial activities." Id.
The courts have followed this broad interpretation by ruling that a local
educational agency includes school boards, their members, and agents of such boards.
35 "Postsecondary institution is a generic term for any institution which offers
education beyond the twelfth grade. Examples of postsecondary institutions would
include vocational, business and secretarial schools." S. Rep. No. 64 at 16, reprinted in
1988 U.S.C.C.A.N. at 18.
-36-
[Annotation] tkelly
Meyers by and through Meyers v. Board of Educ. of the San Juan Sch. Dist., 905 F.
Supp. 1544 (D. Utah 1995)36/; Horner v. Kentucky High Sch. Athletic Ass'n, 43 F.3d
265, 272 (6th Cir. 1994) (Title IX case); see also Young by and through Young v.
Montgomery County (Ala.) Bd. of Educ., 922 F. Supp. 544 (M.D. Ala. 1996) (Court
addressed the merits of Title VI claims against the county board of education without
comment or question as to the propriety of such claims). In Horner, the Sixth Circuit
held that both the school board and its agent for intercollegiate athletics were subject to
Title IX. The court addressed this issue in terms of identifying a "program or activity"
and "recipient" interchangeably. Id. at 271-72. The court reasoned that the State
Department of Education receives the Federal funds, and the Board statutorily "controls
and manages," on behalf of the Department, the operations of the schools.
Furthermore, the Board's agent (a high school athletic association) was also a recipient
since it had statutory authority to perform the Board's functions and received dues from
schools that received Federal funds. Id.
F. Corporations and Private Entities
The CRRA also defines "program or activity" to include certain private entities.
The scope of "program or activity" as it applies to a corporation or other private entity
depends on the operational purpose of the entity, the purpose of the funds, and the
structure of the entity. Title VI provides:
For the purposes of this subchapter, the term "program or activity" and the
term "program" mean all of the operations of--
36 The court in Meyers opined that the Department of Education's regulations have a
more narrow definition of "program or activity" than is set forth in the statute. Id. at
1574 n.37.
-37-
[Annotation] tkelly
(3)(A) an entire corporation, partnership, or other private
organization, or an entire sole proprietorship--
(i) if assistance is extended to such corporation,
partnership, private organization, or sole
proprietorship as a whole; or
(ii) which is principally engaged in the business of
providing education, health care, housing,
social services, or parks and recreation; or
(B) the entire plant or other comparable, geographically
separate facility to which Federal financial assistance is
extended, in the case of any other corporation, partnership,
private organization, or sole proprietorship;
any part of which is extended Federal financial assistance.
42 U.S.C. 2000d-4a(3) (emphasis added).
Generally, funds are given to an entity "as a whole" when such funds further the
central or primary purpose of the entity, or the funds are not for a specific, narrow
purpose. Senate Report No. 64 provides several examples regarding the application of
this section. S. Rep. No. 64 at 17-18, reprinted in 1988 U.S.C.C.A.N. at 19-20. The
following principles can be identified based on examples set forth in the Senate Report:
a. Funds provided to ensure the continued operation of a corporation are
assistance to the entity "as a whole," and thus all operations of the entire corporation
are subject to Title VI. Federal financial assistance extended to a corporation or other
entity "as a whole" refers to situations where the corporation receives general
assistance that is not designated for a particular purpose. For example:
# Federal financial assistance to the Chrysler Company for the purpose of
preventing the company from going bankrupt would be an example of
assistance to a corporation "as a whole." Id.;
b. When any recipient is principally engaged in the business of providing education,
-38-
health care, housing, social services, or parks and recreation, and any part of this entity
is extended Federal financial assistance, then "program or activity" encompasses all of
the operations of the entire entity. For example:
# If a private hospital corporation receives Federal funds to operate its
emergency room, all of the operations of the hospital (e.g., the operating
rooms, pediatrics, discharge and admissions offices, etc.) are subject to
Title VI.
# Nursewell Corporation owns and runs a chain of five nursing homes as its
principal business. One of the five nursing homes receives Federal
financial assistance under the Older Americans Act. Because the
corporation is principally engaged in the business of providing social
services and housing for elderly persons, aid to one home will subject the
entire corporation to the requirements of Title VI. See 42 U.S.C. 2000d-
4a(3)(A)(ii); S. Rep. No. 64 at 18, reprinted in 1988 U.S.C.C.A.N. at 20.
c. Funds for a specific purpose or funds that support one of several functions of the
recipient would not be considered assistance "as a whole," and thus only that aspect of
the recipient's operations would be subject to Title VI. For example:
# A grant to a religious organization to enable it to extend assistance to
refugees would not be assistance to the religious organization as a whole
if the funded program is only one among a number of activities of the
organization.
# Federal aid which is limited in purpose, e.g., Job Training Partnership Act
(JTPA) funds, is not considered aid to the corporation as a whole, even if
it is used at several facilities and the corporation has the discretion to
determine which of its facilities participate in the program.
d. When Federal assistance is extended to a plant or any other comparable,
geographically separate business facility of a corporation or other private entity, only the
operations of the specific plant or facility are a "program or activity" subject to Title VI.
Further, Federal financial assistance that is earmarked for one or more facilities of a
private corporation or other private entity when it is extended is not assistance to the
-39-
entity "as a whole." Id. For example:
# The Dearborn, Michigan plant of General Motors is extended Federal financial
assistance for first aid training through the State department of health. All of the
operations of the Dearborn plant are covered by Title VI, as well as the State
health department that distributed the Federal money. However, other
geographically separate facilities of General Motors are not considered to be
covered just because of the assistance to the Dearborn plant. See S. Rep. No.
64 at 18, reprinted in 1988 U.S.C.C.A.N. at 20-21.
e. The theory of "freeing up" funds for other purposes due to the receipt of Federal
aid does not expand the application of Title VI beyond the principles described
above.37/
G. Catch-All/Combinations of Entities
Finally, the CRRA defines "program or activity" to include the operations of
entities formed by any combination of the aforementioned entities. Title VI is amended
to read:
For the purposes of this subchapter, the term "program or activity" and the
term "program" mean all of the operations of--
(4) any other entity which is established by two or more of the entities
described in paragraph (1), (2), or (3);
any part of which is extended Federal financial assistance.
42 U.S.C. 2000d-4a(4) (emphasis added).
Since any entity under this provision will include a partnership with a public
entity, coverage will extend to the entire entity.
[A]n entity which is established by two or more entities described in [Paragraphs]
37 Nor does S. 557 embody a notion of "freeing up." Federal financial assistance to
a corporation for particular purposes does not become assistance to the
corporation as a whole simply because receipt of the money may free up funds
for use elsewhere in the company. Id.
-40-
(1), (2), or (3) is inevitably a public venture of some kind, i.e., either a
government-private effort (1 and 3), a public education-business venture (2 and
3) or a wholly government effort (1 and 2). It cannot be a wholly private venture
under which limited coverage is the general rule. The governmental or public
character helps determine institution-wide coverage. . . . Even private
corporations are covered in their entirety under (3) if they perform governmental
functions, i.e., are "principally engaged in the business of providing education,
health care, housing, social services, or parks and recreation."
S. Rep. No. 64 at 19-20, reprinted in 1988 U.S.C.C.A.N. at 21-22. Thus, all of the
operations of a partnership between a public and private entity, such as a school and a
private corporation, would be subject to Title VI. The Senate Report also notes that
coverage under Paragraph (4) applies to the newly created entity; coverage of the
separate entities that comprise the partnership or joint venture must be determined
independently. Id. at 20, reprinted in 1988 U.S.C.C.A.N. at 22.
-41-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
VIII. What Constitutes Discriminatory Conduct?
Title VI prohibits discrimination on the basis of "race, color, or national origin . . .
under any program or activity receiving Federal financial assistance." 42 U.S.C.
2000d. The purpose of Title VI is simple: to ensure that public funds are not spent in a
way which encourages, subsidizes, or results in racial discrimination. Toward that end,
Title VI bars intentional discrimination. See Guardians, 463 U.S. at 607-08; Alexander
v. Choate, 469 U.S. 287, 293 (1985). In addition, Title VI authorizes and directs
Federal agencies to enact "rules, regulations, or orders of general applicability" to
achieve the statute's objectives. 42 U.S.C. 2000d-1. Most Federal agencies have
adopted regulations that prohibit recipients of Federal funds from using criteria or
methods of administering their programs that have the effect of subjecting individuals to
discrimination based on race, color, or national origin. The Supreme Court has held
that such regulations may validly prohibit practices having a disparate impact on
protected groups, even if the actions or practices are not intentionally discriminatory.
Guardians, 463 U.S. at 582; Alexander v. Choate, 469 U.S. at 292-94; see Elston v.
Talladega County Bd. of Educ., 997 F.2d 1394, 1406 (11th Cir.), reh'g denied, 7 F.3d
242 (11th Cir. 1993).
Thus, Title VI claims may be proven under two primary theories: intentional
discrimination/disparate treatment and disparate impact/effects. Under the first theory,
the recipient, in violation of the statute, engages in intentional discrimination based on
race, color, or national origin. The analysis of intentional discrimination under Title VI is
equivalent to the analysis of disparate treatment under the Equal Protection Clause of
the Fourteenth Amendment. Elston, 997 F.2d at 1405 n. 11; Guardians, 463 U.S. at
-42-
[Annotation] tkelly
582, Alexander, 469 U.S. at 287, 293; Georgia State Conference of Branches of
NAACP v. Georgia, 775 F.2d 1403, 1417 (11th Cir. 1985).
Under the second theory, a recipient, in violation of agency regulations, uses a
neutral procedure or practice that has a disparate impact on individuals of a particular
race, color, or national origin, and such practice lacks a "substantial legitimate
justification." Larry P. v. Riles, 793 F.2d 969, 983 (9th Cir. 1984); New York Urban
League v. New York, 71 F.3d 1031, 1038 (2d Cir. 1995); Elston, 997 F.2d at 1407. Title
VI disparate impact claims are analyzed using principles similar to those used to
analyze Title VII disparate impact claims. Young by and through Young v. Montgomery
County (Ala.) Bd. of Educ., 922 F. Supp. 544, 549 (M.D. Ala. 1996).
A. Intentional Discrimination/Disparate Treatment
An intent claim alleges that similarly situated persons are treated differently
because of their race, color, or national origin. To prove intentional discrimination, one
must show that "a challenged action was motivated by an intent to discriminate." Elston,
997 F.2d at 1406. This requires a showing that the decisionmaker was not only aware
of the complainant's race, color, or national origin, but that the recipient acted, at least
in part, because of the complainant's race, color, or national origin. However, the
record need not contain evidence of "bad faith, ill will or any evil motive on the part of
the [recipient]." Elston, 997 F.2d at 1406 (quoting Williams v. City of Dothan, 745 F.2d
1406, 1414 (11th Cir. 1984)).
Evidence of discriminatory intent may be direct or circumstantial and may be
found in various sources, including statements by decisionmakers, the historical
background of the events in issue, the sequence of events leading to the decision in
-43-
[Annotation] tkelly
issue, a departure from standard procedure (e.g., failure to consider factors normally
considered), legislative or administrative history (e.g., minutes of meetings), a past
history of discriminatory or segregated conduct, and evidence of a substantial disparate
impact on a protected group. See Arlington Heights v. Metropolitan Hous.
Redevelopment Corp., 429 U.S. 252 at 266-68 (1977) (evaluation of intentional
discrimination claim under the Fourteenth Amendment); Elston, 997 F.2d at 1406.
Direct proof of discriminatory motive is often unavailable. In the absence of such
evidence, claims of intentional discrimination under Title VI may be analyzed using the
Title VII burden shifting analytic framework established by the Supreme Court in
McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).38/ See Baldwin v. Univ. of
Texas Med. Branch at Galveston, 945 F.Supp. 1022, 1031 (S.D.Tex. 1996); Brantley v.
Independent Sch. Dist. No. 625, St. Paul Public Schools, 936 F.Supp. 649, 658 n.17
(D.Minn. 1996).39/
Applying the McDonnell Douglas principles to a Title VI claim, the investigating
agency must first determine if the complainant can raise an inference of discrimination
by establishing a prima facie case. The elements of a prima facie case may vary
depending on the facts of the complaint, but such elements often include the following:
1. that the aggrieved person was a member of a protected class;
2. that this person applied for, and was eligible for, a federally assisted
38At least one court, however, has declined to apply the McDonnell Douglas burden
shifting framework to the analysis of a Title VI claim. See Godby v. Montgomery County
Bd. of Educ., 996 F. Supp. 1390, 1414 n.17 (M.D. Ala. 1998).
39The Civil Rights Act of 1991 amended Title VII to clarify the burdens of proof in
disparate impact cases. 42 U.S.C. 2000e-2.
-44-
program that was accepting applicants;
3. that despite the person's eligibility, he or she was rejected; and,
4. that the recipient selected applicants of the complainant's qualifications --
or that the program remained open and the recipient continued to accept
applications from applicants of complainant's qualifications.40/
If the case file contains sufficient evidence to establish a prima facie case of
discrimination, the investigating agency must then determine if the recipient can
articulate a legitimate, nondiscriminatory reason for the challenged action. See
McDonnell Douglas, 411 U.S. at 802. If the recipient can articulate a nondiscriminatory
explanation for the alleged discriminatory action, the investigating agency must
determine whether the case file contains sufficient evidence to establish that the
recipient's stated reason was a pretext for discrimination. Id. In other words, the
evidence must support a finding that the reason articulated by the recipient was not the
40 It is important to remember that the "prima facie case method established in
McDonnell Douglas was 'never intended to be rigid, mechanized or ritualistic. Rather, it
is merely a sensible, orderly way to evaluate the evidence in light of common
experience as it bears on the critical question of discrimination.'" United States Postal
Serv. Bd. of Governors v. Aikens, 460 U.S. 715 (1982) (quoting Furnco Constr. Corp. v.
Waters, 438 U.S. 567, 577 (1978)).
For example, it should be noted that the McDonnell Douglas prima facie
framework for Title VII claims does not require that the applicant selected for the
position be of a different race, color, or national origin than the complainant. Under
McDonnell Douglass, the complainant only needs to show that "after his rejection, the
position remained open and the employer continued to seek applicants from persons of
complainant's qualifications." McDonnell Douglas, 411 U.S. at 802. Several courts
dealing with this issue in the Title VII context have noted that the fact that the applicant
selected in place of the complainant is of a different race "may help to raise an
inference of discrimination," but it is not necessarily dispositive on the question of
discriminatory intent. Byers v. Dallas Morning News, Inc., 209 F.3d 419, 427 (5th Cir.
2000) (internal citations omitted); see also Pivirotto v. Innovative Systems, Inc., 191
F.3d 344, 354 (3d Cir. 1999); Jackson v. Richards Med. Co., 961 F.2d 575, 587 n.12
(6th Cir. 1992).
-45-
[Annotation] tkelly
true reason for the challenged action, and that the real reason was discrimination based
on race, color, or national origin.
Similar principles may be used to analyze claims that a recipient has engaged in
a "pattern or practice" of unlawful discrimination. Such claims may be proven by a
showing of "more than the mere occurrence of isolated or 'accidental' or sporadic
discriminatory acts." See International Bhd. of Teamsters v. United States, 431 U.S.
324, 336 (1977). The evidence must establish that a pattern of discrimination based on
race, color, or national origin was the recipient's "standard operating procedure the
regular rather than the unusual practice." Id. Once the existence of such a
discriminatory pattern has been proven, it may be presumed that every disadvantaged
member of the protected class was a victim of the discriminatory policy, unless the
recipient can show that its action was not based on its discriminatory policy. Id. at 362.
It is also important to remember that some claims of intentional discrimination
may involve the use of policies or practices that explicitly classify individuals on the
basis of membership in a particular group. Such "classifications" may constitute
unlawful discrimination if based on characteristics such as race, color, national origin,
sex, etc. For example, the Supreme Court held in a Title VII case that a policy that
required female employees to make larger contributions to the pension fund than male
employees created an unlawful classification based on sex. See City of Los Angeles,
Dep't of Water and Power v. Manhart, 435 U.S. 702 (1978). The investigation of such
claims should focus on the recipient's reasons for utilizing the challenged classification
policies. Most such policies will be deemed to violate Title VI, unless the recipient can
articulate a lawful justification for classifying people on the basis of race, color, or
-46-
[Annotation] tkelly
[Annotation] tkelly
national origin.
B. Disparate Impact/Effects
The second primary theory for proving a Title VI violation is based on Title VI
regulations and is known as the discriminatory "effects" or disparate impact theory. As
noted previously, Title VI authorizes Federal agencies to enact regulations to achieve
the statute's objectives. Most Federal agencies have adopted regulations that apply the
disparate impact or effects standard. For example, the Department of Justice
regulations state:
(2) A recipient, in determining the type of disposition,
services, financial aid, benefits, or facilities which will be
provided under any such program, or the class of individuals
to whom, or the situations in which, such will be provided
under any such program, or the class of individuals to be
afforded an opportunity to participate in any such program,
may not, directly or through contractual or other
arrangements, utilize criteria or methods of administration
which have the effect of subjecting individuals to
discrimination because of their race, color, or national origin,
or have the effect of defeating or substantially impairing
accomplishment of the objectives of the program as
respects individuals of a particular race, color, or national
origin.
28 C.F.R. 42.104(b)(2) (emphasis added).
Pursuant to such regulations, all entities that receive Federal funding enter into
standard agreements or provide assurances that require certification that the recipient
will comply with the implementing regulations under Title VI. Guardians, 463 U.S. 582,
642 n. 13. The Supreme Court has held that these regulations may validly prohibit
practices having a disparate impact on protected groups, even if the actions or
practices are not intentionally discriminatory. Guardians, 463 U.S. at 582, Alexander v.
-47-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
Choate, 469 U.S. at 293.
Many subsequent cases have also recognized the validity of Title VI disparate
impact claims. See Villanueva v. Carere, 85 F.3d 481 (10th Cir. 1996); New York Urban
League v. New York, 71 F.3d 1031, 1036 (2d Cir. 1995); Chicago v. Lindley, 66 F.3d
819 (7th Cir. 1995); David K. v. Lane, 839 F.2d 1265 (7th Cir. 1988); Gomez v. Illinois
State Bd. Of Educ., 811 F.2d 1030 (7th Cir. 1987); Georgia State Conference of
Branches of NAACP v. Georgia, 775 F.2d 1403 (11th Cir. 1985); Larry P. v. Riles, 793
F.2d 969 (9th Cir. 1984). 41/ In addition, by memorandum dated July 14, 1994, the
Attorney General directed the Heads of Departments and Agencies to "ensure that the
disparate impact provisions in your regulations are fully utilized so that all persons may
enjoy equally the benefits of Federally financed programs."
Under the disparate impact theory, a recipient, in violation of agency regulations,
uses a neutral procedure or practice that has a disparate impact on protected
individuals, and such practice lacks a substantial legitimate justification. The elements
of a Title VI disparate impact claim derive from the analysis of cases decided under
Title VII disparate impact law. New York Urban League, 71 F.3d at 1036.
In a disparate impact case, the focus of the investigation concerns the
consequences of the recipient's practices, rather than the recipient's intent. Lau v.
Nichols, 414 U.S. 563 at 568 (1974). For example, in Sandoval v. Hagan, 197 F.3d 484
41 While there is no question that a Federal funding agency can enforce its Title VI
regulations providing for a disparate impact standard of proof, several courts of appeals
have held that plaintiffs have a private right of action to enforce the disparate impact
regulations implementing Section 602 of Title VI, as well. See Chapter XII for further
discussion of this issue.
-48-
(11th Cir. 1999), cert. granted sub. nom. Alexander v. Sandoval, __ U.S. __, 121 S.Ct.
28, 68 U.S.L.W. 3749 (U.S. Sept. 26, 2000) (No. 99-1908) plaintiffs filed a private
action under Title VI claiming that Alabama's English-only driver's license exam policy,
although facially neutral, had a disparate impact on the basis of national origin in
violation of section 602 of Title VI. The court observed that the defendant-recipients,
the Alabama Department of Public Safety, did not contest the district court's finding of
fact "as to the disparate impact of the [English-only] policy on non-English speaking
license applicants," nor the "disparate impact their English-only policy visits on Alabama
residents of foreign descent." Id. at 508. Instead, the court stated that the defendants
argued "that an English language policy, even if exerting a disparate impact on the
basis of national origin, cannot ever constitute national origin discrimination." Id. The
court rejected this claim, concluding that regardless of whether language may serve as
a proxy for national origin discrimination in an intentional discrimination claim, claims
brought under section 602 of Title VI do not involve an intent requirement. Id. at 508-
09. Rather, in order to establish a disparate impact claim under section 602, plaintiffs
need only show that the policy "has a 'disparate impact on groups protected by the
statute, even if those actions are not intentionally discriminatory.'" Id. at 509 (quoting
Elston, 997 F.2d at 1407).
To establish discrimination under a disparate impact scheme, the investigating
agency must first ascertain whether the recipient utilized a facially neutral practice that
had a disproportionate impact on a group protected by Title VI.42/ Larry P. v. Riles ,
42 The policy or procedure in question need not be formalized in writing, but can also
be a practice that is understood as a "standard operating procedure" by its employees
-49-
793 F.2d 969, 982; Elston, 997 F.2d at 1407 (citing Georgia State Conference of
Branches of NAACP v. Georgia, 775 F.2d 1403, 1417 (11th Cir. 1985)). The agency
must show a causal connection between the facially neutral policy and the
disproportionate and adverse impact on a protected Title VI group.
In New York City Envtl. Justice Alliance (NYCEJA) v. Giuliani, 214 F.3d 65, 69
(2d Cir. 2000), plaintiffs sought to enjoin the City of New York from selling or bulldozing
certain city-owned lots containing 600 community gardens mainly located in minority
neighborhoods. They alleged that the city's actions would violate the Environmental
Protection Agency's Title VI implementing regulations because the actions would have
a disproportionately adverse impact on the city's minority residents. 214 F. 3d 65, 67.
Although plaintiffs "alleged in substance that white community districts tend to
have access to more open space than minority ones, and that the sale of community
gardens would perpetuate and exacerbate this disparity," the court found that the
evidence plaintiffs presented in support of their claim consisted of broad conclusive
statements or flawed statistics. 214 F.3d 65, 69-71. Accordingly, the court dismissed
plaintiff's motion for preliminary injunction for failure to present adequate proof of
causation. Id. at 69. In order to establish causation, plaintiffs were required "to employ
facts and statistics that 'adequately capture[d]' the impact of the city's plans on similarly
situated members of protected and non-protected groups." 214 F. 3d 65, 70 quoting
New York Urban League, 71 F. 3d 1031, 1037.
If the evidence establishes a prima facie case, the investigating agency must
or others who implement it.
-50-
then determine whether the recipient can articulate a "substantial legitimate justification"
for the challenged practice. Georgia State Conference, 775 F.2d at 1417. "Substantial
legitimate justification" is similar to the Title VII concept of "business necessity," which
involves showing that the policy or practice in question is related to performance on the
job. Griggs v. Duke Power, 401 U.S. 424 (1971).
To prove a "substantial legitimate justification," the recipient must show that the
challenged policy was "necessary to meeting a goal that was legitimate, important, and
integral to the [recipient's] institutional mission." Sandoval v. Hagan, 7 F.Supp. 2d
1234, 1278 (M.D. Ala. 1998), aff'd, 197 F.3d 484 (11th Cir. 1999), cert. granted sub.
nom. Alexander v. Sandoval, __ U.S. __, 121 S.Ct. 28, 68 U.S.L.W. 3749 (U.S. Sept.
26, 2000) (No. 99-1908) (quoting Elston, 997 F.2d at 1413). The justification must bear
a "manifest demonstrable relationship" to the challenged policy. Georgia State
Conference, 775 F.2d. at 1418. See, e.g., Elston, 997 F. 2d at 1413 (In an education
context, the practice must be demonstrably necessary to meeting an important
educational goal, i.e. there must be an "educational necessity" for the practice).
If the recipient can make such a showing, the inquiry must focus on whether
there are any "equally effective alternative practices" that would result in less racial
disproportionality or whether the justification proffered by the recipient is actually a
pretext for discrimination. Id. See generally , McDonnell Douglas, 411 U.S. 792.
Evidence of either will support a finding of liability.
Courts have often found Title VI disparate impact violations in cases where
recipients utilize policies or practices that result in the provision of fewer services or
benefits, or inferior services or benefits, to members of a protected group. In Larry P. v.
-51-
Riles, 793 F.2d 969 (9th Cir. 1984), the Ninth Circuit applied a discriminatory effects test
to analyze the Title VI claims of a class of black school children who were placed in
special classes for the "educable mentally retarded" ("EMR") on the basis of nonvalidated
IQ tests. The Ninth Circuit upheld the district court's finding that use of these
IQ tests for placement in EMR classes constituted a violation of Title VI. Id. at 983.
Similarly, in Sandoval, the court held that discrimination on the basis of language, in the
form of an English-only policy, had an unjustified disparate impact on the basis of
national origin, and thus violated Title VI. Sandoval, 7 F.Supp. 2d at 1312. See Meek
v. Martinez, 724 F.Supp. 888 (S.D.Fla. 1987) (Florida's use of funding formula in
distributing aid resulted in a substantially adverse disparate impact on minorities and
the elderly). See also, Campaign for Fiscal Equity, Inc. v. State, 86 N.Y.2d 307, 655
N.E.2d 1178 (N.Y. Ct. App. Jun 15, 1995) (Prima facie case established where
allocation of educational aid had a racially disparate impact).
In evaluating a potential disparate impact claim under Title VI, it is important to
examine whether there is a substantial legitimate justification for the challenged practice
and whether there exists an alternative practice that is comparably effective with less of
a disparate impact. See Elston, 997 F.2d at 1407. For example, the Second Circuit
in New York Urban League, reversed the district court's preliminary injunction for its
failure to consider whether there was a "substantial legitimate justification" for a subway
fare increase that had an adverse impact. 71 F.3d at 1039.
[B]ut the district court did not consider, much less analyze, whether the
defendants had shown a substantial legitimate justification for this
allocation. The MTA and the State identified several factors favoring a
higher subsidization of the commuter lines. By encouraging suburban
residents not to drive into the City, subsidization of the commuter rails
-52-
minimizes congestion and pollution levels associated with greater use of
automobiles in the city; encourages business to locate in the City; and
provides additional fare-paying passengers to the City subway and bus
system. In these respects and in others, subsidizing the commuter rails
may bring material benefits to the minority riders of the subway and bus
system. The district court dismissed such factors, concluding that the
MTA board did not explicitly consider them before voting on the NYCTA
and commuter line fare increases. That finding is largely irrelevant to
whether such considerations would justify the relative allocation of total
funds to the NYCTA and the commuter lines. (Emphasis added) 43/
Similarly, in Young by and through Young, 922 F.Supp at 544, the court ruled
that even if a disparate impact were assumed, the defendants had established a
"substantial legitimate justification."
[T]he Defendants presented evidence that Policy IDFA was adopted to
address concerns that the M to M transfer program was being used to
facilitate athletic recruiting in the Montgomery County school system and
to help revitalize Montgomery's west side [minority] high schools. Both of
these justifications are substantial and legitimate because they evince a
genuine attempt by the Board of Education to improve the quality of
education offered in [the] County.
Id. at 551.
If a substantial legitimate justification is identified, the third stage of the disparate
impact analysis is the plaintiff's demonstration of a less discriminatory alternative.
Elston, 997 F. 2d at 1407; see also, Young by and through Young, 922 F. Supp. at 551
(where defendants established a substantial legitimate justification, plaintiffs failed to
demonstrate existence of an equally effective alternative practice).
43 It is interesting to note that this opinion suggests that post-hoc justifications, be
they "substantial and legitimate," will be considered. Furthermore, these justifications
also are arguably tangential in their alleged benefits to the minority riders disparately
affected by the fare increase. However, it also should be remembered that this case
was on review of a preliminary injunction, where plaintiffs must show a likelihood of
success on the merits to receive an injunction. New York Urban League, 71 F. 3d at
1039.
-53-
C. National Origin Discrimination and Services in Languages Other
than English
Since its adoption and initial implementation, Title VI regulations have barred
utilization of criteria and methods of administration which have, among other results,
"the effect of defeating or substantially impairing accomplishment of the objectives of
the program as respect individuals of a particular race, color or national origin."44/ This
universal regulatory language incorporates a disparate impact standard into Title VI.45/
In Lau v. Nichols, 414 U.S. 563 (1974), the Supreme Court faced a challenge by
Chinese-speaking students to a school district's policy of offering instruction only in
English. Siding with the students, the Court concluded that the failure to provide
information and services in languages other than English could result in discrimination
on the basis of national origin where the failure to do so resulted in a significant number
of limited English proficiency (LEP) beneficiaries from the same language minority
being unable to fully realize the intended benefits of a federally assisted program or
activity.
[i]t seems obvious that the Chinese-speaking minority receive fewer
benefits than the English-speaking majority from respondents' school
system which denies them a meaningful opportunity to participate in the
educational program - all earmarks of the discrimination banned by [the
Title VI implementing regulations]."46/
Lau has its clearest application in the educational setting. However, Lau's reach
44 65 Fed. Reg. 50121, 50123.
45 See discussion supra Section B of this chapter for a discussion of the disparate
impact standard.
46 Lau v. Nichols, 414 U.S. at 568.
-54-
is not limited to educational programs or activities. The core holding in Lau -- that the
failure to address limited English proficiency among beneficiary classes could constitute
national origin discrimination -- has equal vitality with respect to any federally assisted
program or activity providing services to the public.47/
1. Presidential Reaffirmance and Clarification of Lau Obligations
Recently, the obligation to eliminate limited English proficiency as an artificial
barrier to full and meaningful participation in all federally assisted programs and
activities was reaffirmed and clarified by the President. See Executive Order 13166, 65
Fed. Reg. 50121 (August 16, 2000).48/
The Federal Government is committed to improving the accessibility
of...services to eligible [limited English proficiency] persons, a goal that
reinforces its equally important commitment to promoting programs and
activities designed to help individuals learn English....Each Federal
agency shall...work to ensure that recipients of Federal financial
assistance (recipients) provide meaningful access to their LEP applicants
and beneficiaries....[R]ecipients must take reasonable steps to ensure
meaningful access to their programs and activities by LEP persons.49/
The Executive Order requires each federal agency to develop, after consultation
47 See e.g., Sandoval v. Hagen, 7 F. Supp. 2d 1234 (driver's licence examinations);
Pabon v. Levine, 70 F.R.D. 674 (S.D.N.Y. 1976) (unemployment insurance
information).
48 Executive Order 13166 also expanded the obligation to address the language
needs of Limited English Proficiency (LEP) persons beyond federally assisted programs
and activities to include federally conducted programs and activities. The Executive
Order makes clear that the same compliance standards expected of recipients of
federal financial assistance are applicable to Federal agencies themselves in the
conduct of their own programs and activities. See Section 2, Executive Order 13166,
65 Fed. Reg. at 50121.
49 Section 1, Executive Order 13166.
-55-
with appropriate program and activity stakeholders50/, agency-specific LEP guidance
for recipients of federal financial assistance.51/ As an aid in developing this guidance,
the Executive Order incorporates the Department of Justice LEP Guidance (LEP
Guidance) issued contemporaneously with the Executive Order.52/ The LEP Guidance
"sets forth the compliance standards that recipients must follow to ensure that programs
and activities they normally provide in English are accessible to LEP persons."53/
Agency-specific LEP guidance for recipients is to be "consistent with the standards set
forth in the [DOJ] LEP Guidance."54/
2. The Four Factor Analysis: Reasonable Steps Toward Reasonable
Measures
Title VI, Executive Order 13166, and the LEP Guidance do not require a recipient
to re-invent or mirror a federally assisted program or activity solely because a significant
number or proportion of its beneficiary class are LEP persons. Indeed, in some
50 Id. at Section 4. "Stakeholders" are persons and organizations having an interest
in the administration and operation of particular programs and activities providing
services or benefits to the public. For the purposes of documents developed in
furtherance of Executive Order 13166, "stakeholders" includes, but is not necessarily
limited to, "LEP persons and their representative organizations, recipients, and other
appropriate individuals or entities." Id.
51 Id. at Section 3. Agency-specific LEP Guidance for recipients must be submitted
to the Department of Justice for review and approval prior to final issuance. Approval
responsibility for the Department has been assigned to the Coordination and Review
Section of the Civil Rights Division, Department of Justice.
52 Policy Guidance Document: Enforcement of Title VI of the Civil Rights Act of 1964
- National Origin Discrimination Against Persons with Limited English Proficiency, dated
August, 11, 2000, reprinted at 65 Fed. Reg. 50123 (August 16, 2000).
53 See Executive Order 13166 at Section 1.
54 Id. at Section 3.
-56-
circumstances, the creation of separate but equal language-based mirror programs
could itself be questioned under Title VI. Nor do they require recipients to add non-
English modules to a program or activity where English competency is an essential
element (such as providing employment examinations only in English when English
proficiency is a legitimate job requirement).55/ Rather, recipients are required to
address, consistent with the core objectives of the federally assisted programs or
activities, the specific language needs of their LEP beneficiaries which operate as
artificial barriers to full and meaningful participation in the federally assisted program or
activity. This requires that recipients evaluate how a LEP person's inability to
understand oral and written information provided by and about a federally assisted
program or activity might adversely impact his or her ability to fully participate in or
benefit from that program or activity. The LEP Guidance provides a structure through
which these various aspects of a program or activity can be consistently evaluated.
Given the wide range of programs and activities receiving Federal financial
assistance, no single uniform rule of compliance is either possible or reasonable.
Instead, the LEP Guidance incorporates "reasonableness" as its guiding principle.
Toward that end, the LEP Guidance articulates a flexible four-factor analysis requiring
reasonable steps to identify and implement reasonable measures to mitigate those
55 See 65 Fed. Reg. at 50125, n. 13. The fact that English competency is a core
element of the federally assisted program or activity does not necessarily mean that a
recipient is alleviated from an LEP obligations to program beneficiaries. Recipients
should undertake a separate analysis for each aspect of their program or activity (e.g.,
application, admission, instruction/service, referral, recruitment, outreach, etc.) to
ensure that some specific language need on the part of LEP persons does not operate
directly or indirectly as an artificial barrier to full and meaningful participation in the
English proficiency portion of the federally assisted program or activity.
-57-
aspects of beneficiaries' limited English proficiency that act as artificial barriers to
"accomplishment of the objectives of the program as respects individuals of a particular
race, color or national origin."56/
Title VI and its regulations require recipients to take reasonable steps to
ensure "meaningful" access to the information and services they provide.
What constitutes reasonable steps to ensure meaningful access will be
contingent on a number of factors. Among the factors to be considered
are the number or proportion of LEP persons in the eligible service
population, the frequency with which LEP individuals come in contact with
the program, the importance of the service provided by the program, and
the resources available to the recipient.57/
Under the DOJ four-factor analysis, the search for "reasonableness" flows from a
balancing or blending of all four factors to determine what, if any, language mitigation
measures are reasonably necessary to eliminate or minimize LEP as a barrier to
participation in or receipt of the benefits of a federally assisted program or activity.
Under this approach, no single factor alone is determinative and no single factor is
entitled to greater weight in isolation from the other three. Finally, separate analyses
should be undertaken with respect to each different language group within the
recipient's beneficiary class.
D. Environmental Justice and Title VI
"Although the term 'environmental justice' is of fairly recent vintage, the concept
is not."58/ For thirty-five years, Title VI has prohibited methods of administration or the
56 See 65 Fed. Reg. at 50123.
57 See 65 Fed. Reg. at 50124 (LEP Guidance).
58 Jersey Heights Neighborhood Ass'n v. Glendening, 174 F.3d 180, 195 (4th Cir.
1999) (King, Circuit Judge, concurring). To highlight his point, Judge King recalled an
observation made almost thirty years ago that continues to have validity. "'As often
-58-
use of criteria which had the effect of discriminating on the basis of race, color or
national origin. The application of this result-oriented analysis to criteria used or not
used in decision-making on projects or activities affecting the human environment is a
logical extension of Title VI. Indeed, the core tenet of environmental justice that
development and urban renewal benefitting a community as a whole not be unjustifiably
purchased through the disproportionate allocation of its adverse environmental and
health burdens on the community's minority flows directly from the underlying
principal of Title VI itself.
1. Executive Order 12898: The Duty to Collect, Disseminate and
Think
In 1994, the President issued Executive Order 12898 entitled "Federal Actions to
Address Environmental Justice in Minority Populations and Low-Income
Populations."59/ While that Executive Order creates no new obligations or rights, it
does clarify existing Title VI requirements on Federal officials and those that receive
federal financial assistance to incorporate into their respective cost-benefit analyses a
meaningful consideration of possible disproportionate adverse environmental and
health impacts on minority and low-income populations.
[Executive Order 12898] is designed to focus Federal attention on the
environmental and human health conditions in minority communities and
low-income communities with the goal of achieving environmental justice.
That order is also intended to promote non-discrimination in Federal
happens with interstate highways, the route selected was through the poor area of
town, not through the area where the politically powerful people live'." Id. quoting
Triangle Improvement Council v. Ritchie, 402 U.S. 497, 502 (1971) (per curiam)
(Douglas, J., dissenting).
59 59 Fed. Reg. 7629 (1994), codified at 3 C.F.R. 859 (1995).
-59-
programs substantially affecting human health and the environment, and
to provide minority communities and low-income communities access to
public information on, and an opportunity for public participation in,
matters relating to human health or the environment.60/
In order to accomplish its goals, Executive Order 12898 requires each federal
agency to develop, under the guidance of an Interagency Working Group on
Environmental Justice, a written strategy to identify and address disproportionately high
and adverse human health or environmental effects of its programs, policies, and
activities on minority and low-income populations. That strategy is to reflect agency
efforts to re-focus and, if necessary re-tool, its programs, policies, planning and public
participation processes, enforcement, and/or rulemaking related to human health or the
environment to:
(1) promote enforcement of all health and environmental statutes in areas
with minority populations and low-income populations; (2) ensure greater
public participation; (3) improve research and data collection relating to
the health of and environment of minority populations and low-income
populations; and (4) identify differential patterns of consumption of natural
resources among minority populations and low-income populations.61/
In sum, Executive Order 12898 requires agencies to develop and implement an
integrated approach to realizing environmental justice through the collection, analysis
and dissemination of understandable62/ and useful information on the adverse
60 Presidential Memorandum for the Heads of all Departments and Agencies, 30
Weekly Comp. Pres. Doc. 279 (February 11, 1994) ("Presidential Memorandum").
61 59 Fed. Reg. 7629, 7630 at 1-103(a).
62 In this regard, Executive Order 12898 directs federal agencies to ensure that
public documents, notices and hearing are "concise, understandable, and readily
accessible to the public." Executive Order 12898, 5-5(c). In addition, where
practicable and appropriate, agencies are authorized to translate crucial environmental
or health information into languages other than English. Id., 5-5(b). For a discussion
-60-
environmental and health impacts on protected populations. Armed with this
information, decision-making on projects and proposals affecting the social and
physical environment should be enriched to the benefit of both decision-makers and the
public.
2. EPA Guidance on Environmental Justice
While the concept of environmental justice is applicable to any federally assisted
program or activity involving potential environmental or health burdens, it has its
clearest impact with respect to undertakings which also trigger federal obligations under
the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 321, et seq, or its
state and local progeny.63/ Such undertakings generally involve changes to a
community's land use patterns or physical environment and include, but are not limited
to, such things as highways, water/sewer/power lines, mass transit projects, urban redevelopment
and other activities associated with community infrastructure construction.
Consistent with its leadership role over federal environmental policy and its
enhanced obligations under Executive Order 12898,64/ the Environmental Protection
of where such translations may be required under Executive Order 13166, issued six
years after Executive Order 12898, see pp. 59-65 in this chapter.
63 As clarified by the President when he issued Executive Order 12898, the duty to
engage in an environmental justice analysis is coextensive with the duty to engage in
an environmental analysis under NEPA. See Presidential Memorandum.
64 In addition to its environmental justice responsibilities share in common with other
federal departments and agencies, EPA is directed to ensure as part of its reviews
under Section 309 of the Clean Air Act, 42 U.S.C. 760, that the environmental effects
of proposed action on minority and low-income communities have been fully analyzed,
including all human health, social, and economic effects. See Presidential
Memorandum.
-61-
Agency is currently finalizing two environmental guidance documents focusing on the
application of environmental justice concepts in the permitting context.65/ The first
outlines EPA's policies on recipients' existing environmental justice obligations under
Title VI of the Civil Rights Act of 1964, as amended. The second details the internal
investigative procedures and criteria that will be used by EPA to investigate Title VI
complaints containing environmental justice concerns. Through these documents, EPA
intends to address questions raised over how to achieve environmental justice in this
important yet difficult area. Notwithstanding their focus on permitting, the EPA
guidance documents offer valuable assistance in clarifying environmental justice
questions raised in other areas. These documents are available on the EPA Office of
Civil Rights website at www.epa.gov/civilrights.
3. An Analytical Approach and its Attendant Problems of Timing and
Proof
Two recent cases illustrate the approach and inherent difficulties of timing and
proof associated with environmental justice actions. The first, Jersey Heights
Neighborhood Ass'n v. Glendening, 174 F.3d 180 (4th Cir. 1999) highlights the
consequences of lack of meaningful notice on the ability to seek environmental justice
through litigation. The second, New York City Envtl. Justice Alliance v. Giuliani, 214
F.3d 65 (2d Cir. 2000) [hereinafter NYCEJA], sets out one approach to analyzing
environmental justice claims but highlights the difficulties of proof a complainant faces
in establishing a prima facie case.
65 "Draft Title VI Guidance for EPA Assistance Recipients Administering
Environmental Permitting Programs" and "Revised Draft Guidance for Investigating Title
VI Administrative Complaints Challenging Permits," 65 Fed. Reg. 39650 (2000).
-62-
In Jersey Heights, an African-American community challenged under Title VI,
among other grounds, a decision to route a highway bypass through their community.
The challenged route, initially chosen in 1985, confirmed in 1989 and revised in 1991,
placed the path of the bypass adjacent to Jersey Heights, a local community whose
population was more than 90% African-American. The other route under consideration
in 1985, running through a predominantly white area of the city, was rejected after
residents of that area voiced strong and timely objections to its selection. The
residents of the predominantly white area had received individual notice in 1985 of the
planning process while the residents of Jersey Heights had not. Planning officials did
not specifically meet with Jersey Heights residents until 1992, after the bypass routing
decision had already been made.66/ When administrative remedies under Title VI
failed to address their concerns, the residents resorted to their judicial remedies in
1997. On appeal, the Fourth Circuit Court of Appeals sustained a dismissal of the
action as untimely.
In connection with the plaintiff's Title VI claim against state official,67/ the court in
Jersey Heights first held that Title VI actions were subject to the state's three-year
limitation period.68/ Because the final route decision was made in 1989 and in light of
66 Jersey Heights, 174 F.3d at 195.
67 The court affirmed dismissal of parallel claims against federal official under Title VI
as barred by sovereign immunity and, with respect to a claimed abdication of
enforcement duty, unauthorized. Id. at 191.
68 In so doing, the court acknowledged that the question of which limitations period
applied to Title VI actions had not been definitively addressed in the Fourth Circuit. In
addition, finding no state statute comparable to Title VI, the court concluded that the
applicable limitation period of that applied to personal injuries. Id. at 187.
-63-
evidence indicating that at least some of the residents of Jersey Heights had actual or
imputed knowledge of the decision at that time, their 1997 action was time-barred. In
reaching this result, the court rejected argument that Title VI is triggered by the final
commitment of federal assistance to the project rather than the local decision to
proceed with the project. It also refused to adopt the "continuing violation" theory, citing
established Circuit law that a "'continuing violation is occasioned by continual unlawful
acts, not continual ill effects from an original violation.'"69/ Finally, while recognizing the
desirability of resort to administrative remedies, the court declined to hold that the
limitations period was tolled during the administrative complaint process.70/
In large measure, Executive Order 12898 seeks to address the Jersey Heights
result by mandating timely and effective notice to minority and low-income populations
as part of any planning process. In drafting guidance or conducting program reviews,
agency officials should focus specific attention on the public notice and participation
procedures employed by themselves and their recipients to ensure compliance with the
public consultation requirements of Executive Order 12898.
Even where notice is sufficient, environmental justice litigants must overcome the
inherent difficulties of providing adequate proof of discrimination.71/ In NYCEJA , a
panel of the Second Circuit Court of Appeals confronted a challenge to a proposed
69 Id. at 189 (quoting National Adver. Co. v. City of Raleigh, 947 F.2d 1158, 1166 (4th
Cir. 1991).
70 Id. at 191.
71 See supra pp. 55-57 for a discussion on NYCEJA and providing proof of disparate
impact.
-64-
auction of city-owned lots, most located in minority communities and used as
community gardens, for the asserted purpose of building new housing and fostering
urban renewal. 214 F. 3d 65. As discussed above in Section B of this Chapter, the
court rejected the plaintiffs' proffered prima facie case because it was not based on an
"appropriate measure" that "adequately captured" the nature and scope of the asserted
adverse impact borne specifically and principally by the minority population in relation to
the non-minority population.72/
The decision in NYCEJA demonstrates that although the analytical approach to
environmental justice claims is relatively easy to articulate, they are difficult to resolve.
In such circumstances, the ability to isolate and prove adverse environmental and
health burdens disproportionately suffered by a minority which are not shared by other
parts of a community will play a determinative role in establishing a violation of Title VI
in the environmental justice setting.
E. Retaliation
A complainant may bring a retaliation claim under Title VI or under a Title VI
regulation that prohibits retaliation. For example, most agency Title VI regulations
provide that "[n]o recipient or other person shall intimidate, threaten, coerce, or
discriminate against any individual for the purpose of interfering with any right or
privilege secured by [Title VI], or because he has made a complaint, testified, assisted,
or participated in any manner in an investigation, proceeding or hearing under this
subpart." 28 C.F.R. 42.108(e) (Department of Justice Regulation).
72See NYCEJA, 214 F.3d 65, 69 (2d Cir. 2000).
-65-
To establish a prima facie case of retaliation, the investigating agency must first
determine if the complainant can show (1) that he or she engaged in a protected
activity, (2) that the recipient knew of the complainant's protected activity, (3) that the
recipient took some sort of adverse action against the complainant, and (4) that there
was a causal connection between the complainant's protected activity and the
recipient's adverse actions. See Davis v. Halpern, 768 F.Supp. 968, 985 (E.D.N.Y.
1991). (Defendants's summary judgment motion to dismiss Title VI retaliation claim
was denied because plaintiff established evidence of prima facie case).
Once a prima facie case of retaliation has been established, the investigating
agency must then determine if the recipient can articulate a "legitimate nondiscriminatory
reason" for the action. Id. If the recipient can offer such a reason, the
investigating agency must then show that recipient's proffered reason is pretextual and
that the recipient's actual reason was retaliation. Id. A showing of pretext is sufficient
to support an inference of retaliation. Id.
-66-
IX. Employment Coverage
A. Scope of Coverage
While Title VI was not meant to be the primary Federal vehicle to prohibit
employment discrimination, it does forbid employment discrimination by recipients in
certain situations. If a primary objective of the Federal financial assistance to a
recipient is to promote employment, then the recipient's employment practices are
subject to Title VI. 42 U.S.C. 2000d-3.73/
Nothing contained in [Title VI] shall be construed to authorize action under [Title
VI] by any department or agency with respect to any employment practice of any
employer, employment agency, or labor organization except where a primary
objective of the Federal financial assistance is to provide employment.
Id. (emphasis added). In addition, as explained below, a recipient's employment
practices also are subject to Title VI where those practices negatively affect the delivery
of services to ultimate beneficiaries.
For example, if a recipient built a temporary shelter with funds designed to
provide temporary assistance to dislocated individuals, the employment practices of the
recipient with respect to the construction of such facility are not subject to Title VI.
73 In contrast, if employment of potential beneficiaries was not a primary object of the
Federal assistance, the employment practices of a recipient are not covered by Title VI.
[S]ection 604 would be added, to preclude action by a Federal agency
under Title VI with respect to any employment practices of an employer,
employment agency, or labor organization, except where a primary
objective of the Federal financial assistance involved is to provide
employment. This provision is in line with the provisions of section 602
and serves to spell out more precisely the declared scope of coverage of
the title. 110 Cong. Rec. 12720 (1964) (Statement by Sen. Humphrey);
see 110 Cong. Rec. 2484 (1964) (Statement by Sen. Poff).
-67-
However, if the recipient built the same facility with funds received through a public
works program whose primary objective is to generate employment, the employment
practices are subject to Title VI. In the former case, the program's benefit was to
provide shelter to dislocated individuals while, in the latter case, the benefit was the
employment of individuals to build the facility.
Thus, to sustain a claim of employment discrimination under Title VI, the plaintiff
has an additional threshold requirement: not only must the plaintiff establish that the
recipient receives Federal financial assistance, but also that the "primary objective" of
the Federal funding is to provide employment. Reynolds v. School Dist. No. 1, Denver,
Colo., 69 F.3d 1523, 1531 (10th Cir. 1995) (motion to dismiss granted due to plaintiff's
failure to show that the primary purpose of Federal assistance was to provide
employment); Association Against Discrimination in Employment v. City of Bridgeport,
647 F.2d 256, 276 (2d Cir. 1981) (failure to prove all elements of employment
discrimination claim due to lack of evidence of primary purpose of Federal funds), cert.
denied, 455 U.S. 988 (1982); Bass v. Board of County Comm'rs of Orange County, 38
F. Supp. 2d 1001 (M.D. Fla, 1999) (summary judgment against plaintiff due to lack of
evidence of primary purpose of Federal funds); Thornton v. National R.R. Passenger
Corp., 16 F. Supp. 2d 5 (D.D.C. 1998) (complaint dismissed because primary objective
of funding was to promote transportation, not employment). In Reynolds, plaintiff's
assertion that Federal funds paid, in part, the salary of an employee was insufficient,
since plaintiff did not show that the primary objective of the Federal funds was
employment rather than general funding of school programs. Id. at 1532.
Further, where employment discrimination by a recipient has a secondary effect
-68-
on the ability of beneficiaries to meaningfully participate in and/or receive the benefits of
a federally assisted program in a nondiscriminatory manner, those employment
practices are within the purview of Title VI.74/ Agency regulations specifically address
this principle in identical or similar language:
In regard to Federal financial assistance which does not have providing
employment as a primary objective, the provisions of paragraph (c)(1)
[prohibitions where objective is employment] apply to the employment practices
of the recipient if discrimination on the grounds of race, color, or national origin in
such employment practices tends, on the grounds of race, color, or national
origin, to exclude persons from participation in, to deny them the benefits of or to
subject them to discrimination under the program receiving Federal financial
assistance. In any such case, the provisions of paragraph (c)(1) of this section
shall apply to the extent necessary to assure equality of opportunity to and
nondiscriminatory treatment of beneficiaries.
28 C.F.R. 42.104(c)(2); see also 15 C.F.R. 8.4(c)(2) (Commerce); 34 C.F.R.
100.3(c)(3) (Education). In this situation, there is a causal nexus between
employment discrimination and discrimination against beneficiaries. United States v.
Jefferson County Bd. of Educ., 372 F.2d 836, 883 (5th Cir. 1966) ("Faculty integration is
essential to student desegregation."), cert. denied. sub nom., Caddo Parish Sch. Bd. v.
United States, 389 U.S. 840 (1967); Ahern v. Board of Educ., 133 F. 3d 975 (7th Cir.
1998) (applying infection theory to public school plan for assignment of principals);
Caulfield v. Board of Educ., 486 F. Supp. 862, 876 (E.D.N.Y. 1979) (characterization of
infection theory where employment practices affect beneficiaries, i.e., students);
Marable v. Alabama Mental Health Bd., 297 F. Supp. 291, 297 (M.D. Ala. 1969)
(patients of State mental health system have standing to challenge segregated
employment practices which affect delivery of services to patients.).
74 This is oftentimes referred to as the "infection theory."
-69-
Section 2000d-3 does not exempt a recipient's employment practices from other
applicable Federal statutes, executive orders, or regulations. United States by Clark v.
Frazer, 297 F. Supp. 319, 321-322 (M.D. Ala. 1968); see also, Contractors Ass'n. of E.
Pa. v. Secretary of Labor, 442 F.2d 159, 173 (3d. Cir. 1971), cert. denied., 404 U.S.
854 (1971). Furthermore, a recipient's compliance with State and local merit systems
for employment may not constitute compliance with Title VI. 28 C.F.R. 42.409.
B. Regulatory Referral of Employment Complaints to EEOC
In 1983, the Department of Justice and the Equal Employment Opportunity
Commission (EEOC) published "Procedures for Complaints of Employment
Discrimination Filed Against Recipients of Federal financial assistance." 28 C.F.R.
42.601-42.613 (DOJ); 29 C.F.R. 1691.1 - 1691.13 (EEOC) (often referred to as
the Title VI/VII rule). In summary, the procedures provide that a Federal agency
receiving a complaint of employment discrimination against a recipient that is covered
by both Title VI (and/or other grant-related prohibitions against discrimination) and Title
VII should refer the complaint to the EEOC for investigation and conciliation.75/ 28
C.F.R. 42.605(d), 42.609. If the EEOC determines that there is discrimination and is
unable to resolve the complaint, the rule calls for the funding agency to evaluate the
matter, "with due weight to the EEOC's determination that reasonable cause exists,"
and to take appropriate enforcement action. 28 C.F.R. 42.610. Where complaints
75 If the complaint only alleges a violation of Title VII and not Title VI, the matter
should be transferred to the EEOC. In addition, the regulation exempts from its
application Executive Order 11246, which is enforced by the Office of Federal Contracts
Compliance Programs, and the Omnibus Crime Control and Safe Streets Act, as
amended, and the Juvenile Justice and Delinquency Prevention Act. 28 C.F.R.
42.601.
-70-
allege a pattern or practice of discrimination and there is dual coverage, agencies have
the option of keeping the complaint rather than referring it.
The reason for this regulation is clearly stated in the Preamble to the notice in
the Federal Register:
The rule . . . will reduce duplicative efforts by different Federal agencies to
enforce differing employment discrimination prohibitions and thereby will
reduce the burden on employers covered by more than one of those
prohibitions. At the same time it will allow the Federal fund granting
agencies to focus their resources on allegations of services discrimination.
48 Fed. Reg. 3570 (1983).
-71-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
X. Federal Funding Agency Methods to Evaluate Compliance
The Federal agency providing the financial assistance is primarily responsible for
enforcing Title VI as it applies to its recipients. Agencies have several mechanisms
available to evaluate whether recipients are in compliance with Title VI, and additional
means to enforce or obtain compliance should a recipient's practices be found lacking.
Evaluation mechanisms, discussed below, include pre-award reviews, post-award
compliance reviews, and investigations of complaints.
A. Pre-Award Procedures
Agencies should endeavor to ensure that awards of Federal financial assistance
are only granted to entities that adhere to the substantive antidiscrimination mandates
of Title VI and other nondiscrimination laws.
1. Assurances of Compliance
The Title VI Coordination Regulations, (as well as the Section 504 coordinating
regulation), require that agencies obtain assurances of compliance from prospective
recipients. 28 C.F.R. 41.5(a)(2), 42.407(b). Regulations requiring applicants to
execute an assurance of compliance as a condition for receiving assistance are valid.
Grove City, 465 U.S. at 574-575 (Title IX assurances); Gardner v. Alabama, 385 F.2d
804 (5th Cir. 1967), cert. denied, 389 U.S. 1046 (1968) (Title VI assurances). If an
applicant refuses to sign a required assurance, the agency may deny assistance only
after providing notice of the noncompliance, an opportunity for a hearing, and other
statutory procedures. 42 U.S.C. 2000d-1; 28 C.F.R. 50.3 II.A.1. However, the
agency need not prove actual discrimination at the administrative hearing, but only that
the applicant refused to sign an assurance of compliance with Title VI (or similar
-72-
[Annotation] tkelly
nondiscrimination laws). Grove City, 465 U.S. at 575. Assurances serve two important
purposes: they remind prospective recipients of their nondiscrimination obligations, and
they provide a basis for the Federal government to sue to enforce compliance with
these statutes. See United States v. Marion County Sch. Dist., 625 F.2d 607, 609, 612-
13 (5th Cir.), reh'g denied, 629 F.2d 1350 (5th Cir. 1980), cert. denied, 451 U.S. 910
(1981).
2. Deferral of the Decision Whether to Grant Assistance
The "Guidelines for the Enforcement of Title VI, Civil Rights Act of 1964," (the
"Title VI Guidelines") specifically state that agencies may defer assistance decisions:
"In some instances . . . it is legally permissible temporarily to defer action on an
application for assistance, pending initiation and completion of [statutory remedial]
procedures--including attempts to secure voluntary compliance with title VI." 28 C.F.R.
50.3 I.A. Thus, deferral may occur while negotiations are ongoing to special condition
the award, during the pendency of a lawsuit to obtain relief, or during proceedings
aimed at refusing to grant the requested assistance.76/
76 The Title VI Guidelines distinguish between the applicability of an agency's
deferral authority for initial or one-time awards versus continuing, periodic awards. The
Title VI Guidelines state, that agencies have deferral authority with regard to
"applications for one-time or noncontinuing assistance and initial applications for new or
existing programs of continuing assistance." 28 C.F.R. 50.3 II.A. In contrast, if an
application for funds has been approved and a recipient is entitled to "future, periodic
payments," or if "assistance is given without formal application pursuant to statutory
direction or authorization," distribution of funds may not be deferred or withheld unless
all the Title VI statutory procedures for a termination of funds are followed. Id. II.B.
The Title VI Guidelines do not specify what may constitute "abnormal" or
exceptional circumstances to warrant deferral of a continuing grant. In these renewal or
continuation situations, the Title VI Guidelines indicate that an assurance of compliance
or a nondiscrimination plan may be required prior to continuing the payout of funds.
-73-
This interpretation is a reasonable, and even necessary, application of the
statutory remedial scheme. The congressional authorization to obtain relief pre-award
would be sharply reduced, if not rendered a near nullity, if agencies could not postpone
the assistance decision while spending the time needed to conduct a full and fair
investigation and while seeking appropriate relief. Furthermore, the Attorney General's
administrative interpretation is entitled to deference. See, e.g., Chevron U.S.A. v.
Natural Resources Defense Council, Inc., 467 U.S. 837, 842-45 (1984).77/
The Title VI Guidelines recommend that agencies adopt a flexible, case-by-case
approach in assessing when deferral is appropriate, and consider the nature of the
77 Subsequent to the adoption of Title VI, Congress on at least two occasions has
refused to prohibit agencies from exercising pre-award deferral authority. In 1966, in
considering the Elementary and Secondary Education Amendments of 1966, the House
adopted a provision that effectively would have prohibited pre-award deferrals of certain
education grants by the Department of Health, Education, and Welfare. The
amendment, offered by Representative Fountain, provided that no deferral could occur
unless and until there was a formal finding, after opportunity for hearing, that the
applicant was violating Title VI. 112 Cong. Rec. 25,573 (1966). Representative
Fountain argued that a deferral was the same as a refusal, and accordingly that
deferrals should be subject to the same hearing procedure required to refuse or
terminate assistance. Id. at 25,573-74. In opposition, Representative Celler argued
that the amendment would preclude HEW from obtaining pre-award relief since the
award procedure would be completed before the Title VI hearing could be held. Id. at
25,575. During the debate, Rep. Celler noted that HEW was acting pursuant to the
directives set out in the Title VI Guidelines. Id. The Senate version did not include any
limitation on deferrals. In conference, the prohibition was deleted and replaced with a
durational/procedural limitation on certain HEW deferrals. Conf. Rep. No. 2309, 89th
Cong., 2d Sess. (1966), reprinted in 1966 U.S.C.C.A.N. 3896. Codified at 42 U.S.C.
2000d-5. Again in 1976, in adopting the Education Amendments of 1976, Congress
imposed a durational/procedural limitation on HEW deferral authority, codified at 20
U.S.C. 1232i(b), but rejected a House passed amendment effectively prohibiting
specified HEW deferrals. 122 Cong. Rec. 13411-13416; H.R. Conf. Rep. No. 1701,
94th Cong., 1st Sess. 242-43 (1976), reprinted in 1976 U.S.C.C.A.N. 4943-44. This
post-adoption legislative history buttresses the conclusion that deferrals are an
appropriate application of the pre-award remedial authority granted agencies by
Congress. Board of Pub. Instruction v. Cohen, 413 F.2d 1201 (5th Cir. 1969).
-74-
potential noncompliance problem. Where an assistance application is inadequate on
its face, such as when the applicant has failed to provide an assurance or other
material required by the agency, "the agency head should defer action on the
application pending prompt initiation and completion of [statutory remedial] procedures."
28 C.F.R. 50.3 II.A.1 (emphasis added). Where the application is adequate on its face
but there are "reasonable grounds" for believing that the applicant is not complying with
Title VI, "the agency head may defer action on the application pending prompt initiation
and completion of [statutory remedial] procedures." Id. II.A.2 (emphasis added).78/
When action on an assistance application is deferred, remedial efforts "should
be conducted without delay and completed as soon as possible." Id. I.A. Agencies
should also be cognizant of the time involved in a deferral to ensure that a deferral does
not become "tantamount to a final refusal to grant assistance." Id. II.C. The agency
should not completely rule out deferrals where time is of the essence in granting the
assistance, but should consider special measures that may be taken to seek expedited
relief (e.g., by referring the matter to the Department of Justice to file suit for interim
injunctive relief).
78 The Title VI Guidelines note that deferral may be more appropriate where it will
be difficult during the life of the grant to obtain compliance, e.g., where the application is
for noncontinuing assistance. On the other hand, deferral may be less appropriate
where full compliance may be achieved during the life of the grant, e.g., where the
application is for a program of continuing assistance. Where the grant of assistance is
not deferred despite a concern about noncompliance, the Title VI Guidelines advise that
the applicant should be given prompt notice of the asserted noncompliance;
funds should be paid out for short periods only, with no long-term commitment of
assistance given; and the applicant advised that acceptance of the funds carries
an enforceable obligation of nondiscrimination and the risk of invocation of
severe sanctions, if noncompliance in fact is found. Id. II.A.2.
-75-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
3. Pre-Award Authority of Recipients vis-a-vis Subrecipients
The Title VI Guidelines provide that the "same [pre-award] rules and procedures
would apply" where a Federal assistance recipient is granted discretionary authority to
dispense the assistance to subrecipients. Id. III:
[T]he Federal Agency should instruct the approving agency -- typically a State
agency -- to defer approval or refuse to grant funds, in individual cases in which
such action would be taken by the original granting agency itself . . . . Provision
should be made for appropriate notice of such action to the Federal agency
which retains responsibility for compliance with [Title VI compliance] procedures.
Id.
Thus, the Title VI Guidelines support Federal agencies requiring that
recipients/subgrantors obtain assurances of compliance from subrecipients.79/ When
the recipient receives information pre-award that indicates noncompliance by an
applicant for a subgrant, recipients may defer making the grant decision, may seek a
voluntary resolution and, if no settlement is reached, (after complying with statutory
procedural requirements), may refuse to award assistance.
4. Data Collection
Section 42.406(d) of the Coordination Regulations lists the types of data that
should be submitted to and reviewed by Federal agencies prior to granting funds. In
addition to submitting an assurance that it will compile and maintain records as
required, an applicant should provide: (1) notice of all lawsuits (and, for recipients,
complaints) filed against it; (2) a description of assistance applications that it has
pending in other agencies and of other Federal assistance being provided; (3) a
79 In the alternative, a Federal agency may obtain assurances directly from
subrecipients, if it so chooses.
-76-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
description of any civil rights compliance reviews of the applicant during the preceding
two years; and (4) a statement as to whether the applicant has been found in
noncompliance with any relevant civil rights requirements. Id.
The Coordination Regulations require that agencies "shall make [a] written
determination as to whether the applicant is in compliance with Title VI." 28 C.F.R.
42.407(b). Where a determination cannot be made from the submitted data, the
agency shall require the submission of additional information and take other steps
necessary for making a compliance determination, which could include communicating
with local government officials or community organizations and/or conducting field
reviews. Id.
5. Recommendations Concerning Pre-award Reviews
It is recommended that agencies implement an internal screening process
whereby agency officials are notified of potential assistance grants and are provided the
opportunity to raise a "red flag" or concern about the potential grant recipient.80/ If
limited resources are a problem, agencies should develop a system to target a
significant proportion of assistance applications.81/ As part of the Department of
Justice's oversight and coordinating function, each agency should submit to the
Department, as part of its annual implementation plan, any targeting procedures that
80 A further refinement would involve agencies sharing their lists of potential grantees
with other agencies, as appropriate. For example, there may be instances in which it
would be appropriate for HUD to share its lists with the Department of Justice, Civil
Rights Division's Housing and Civil Enforcement Section.
81 For example, pre-award reviews would not be necessary for applications that are
unlikely to be funded for programmatic reasons.
-77-
[Annotation] tkelly
[Annotation] tkelly
are adopted.
B. Post-Award Compliance Reviews82/
Federal agencies are required to maintain an effective program of post-award
compliance reviews.83/ Federal agency Title VI regulations reiterate this
requirement.84/ Compliance reviews can be large and complex, or more limited in
scope.
1. Selection of Targets and Scope of Compliance Review
Federal agencies have broad discretion in determining which recipients and
subrecipients to target for compliance reviews. However, this discretion is not
unfettered. In United States v. Harris Methodist Fort Worth, 970 F.2d 94 (5th Cir.
1992), the Fifth Circuit found that a Title VI compliance review involves an
administrative search and, therefore, Fourth Amendment requirements for
"reasonableness" of a search are applicable. The Court considered three factors: (1)
whether the proposed search is authorized by statute; (2) whether the proposed search
is properly limited in scope; and (3) how the administrative agency designated the
target of the search. Id. at 101; United States v. New Orleans Pub. Serv. Inc., 723 F.2d
422 (5th Cir.) reh'g en banc denied, 734 F.2d 226 (5th Cir. 1984) [hereinafter NOPSI III]
(E.O. 11246 compliance review unreasonable) (citing United States v. Mississippi
82 Post-award reviews may be limited to a "desk audit," i.e., a review of
documentation submitted by the recipient, or may involve an on-site review. In either
case, an agency will demand the production of or access to records, and this discussion
addresses the limits on an agency's demand for such records.
83 See Coordination Regulations, 28 C.F.R. 42.407(c).
84 See, e.g., Department of Justice Title VI Regulations, 28 C.F.R. 42.107(a).
-78-
Power & Light Co., 638 F.2d 899 (5th Cir. 1981)); and First Ala. Bank of Montgomery,
N.A., v. Donovan, 692 F.2d 714, 721 (11th Cir. 1982) (Exec. Order No. 11246
compliance review reasonable); see Marshall v. Barlow's Inc., 436 U.S. 307 (1978).85/
The Harris Methodist Court suggested that selection of a target for a compliance
review will be reasonable if it is based either on (1) specific evidence of an existing
violation, (2) a showing that "reasonable legislative or administrative standards for
conducting an . . . inspection are satisfied with respect to a particular [establishment],"
or (3) a showing that the search is "pursuant to an administrative plan containing
specific neutral criteria." Harris Methodist, 970 F.2d at 101 (internal citations omitted);
NOPSI III, 723 F.2d at 425.
In Harris Methodist, the court rejected the Department of Health and Human
Services' (HHS') attempts to gain access to records, including a vast array of records
associated with confidential, physician peer review evaluations, as part of a compliance
review of the hospital. The court held that signing an assurance gives consent "only to
searches that comport with constitutional standards of reasonableness." 970 F.2d at
100. Where the proposed compliance review was not subjected to management review
and not based upon consideration of a management plan or objective criteria, the court
of appeals agreed that the HHS official acted "arbitrarily and without an administrative
plan containing neutral criteria. Id. at 103.
85 As mentioned above, it is assumed that the first two factors can be established.
First, that the access provision is an appropriate exercise of agency authority to issue
regulations consistent with the statute. Second, it is assumed that any data sought will
be relevant to an evaluation of whether the recipient's employment practices or delivery
of services are discriminatory.
-79-
[Annotation] tkelly
[Annotation] tkelly
[Annotation] tkelly
Thus, agencies are cautioned that they should not select targets randomly for
compliance reviews but, rather, they should base their decisions on neutral criteria or
evidence of a violation. A credible complaint can serve as specific evidence suggesting
a violation that could trigger a compliance review.
In developing targets for compliance reviews, agencies may wish to take into
consideration the following:
Y Issues targeted in the agency's strategic plan, if any;
Y Issues frequently identified as problems faced by program
beneficiaries;
Y Geographical areas the agency wishes to target because of the
many known problems beneficiaries are experiencing or because
the agency has not had a "presence" there for some time;
Y Issues raised in a complaint or identified during a complaint
investigation that could not be covered within the scope of the
complaint investigation;
Y Problems identified to the agency by community organizations or
advocacy groups that cite actual incidents to support their
concerns;
Y Problems identified to the agency by its block grant recipients;86/
and
Y Problems identified to the agency by other Federal, State, or local
civil rights agencies.
Apart from complying with the standards outlined above, it is recommended that
a decision to conduct a compliance review be set forth in writing and approved by
senior civil rights management. An agency may be required to show that it has
86 An agency may wish to consider involving the block grant recipient (generally, a
State agency) in the compliance review and in any subsequent negotiations to resolve
identified violations.
-80-
[Annotation] tkelly
[Annotation] tkelly
selected its targets for compliance reviews in an objective, reasonable manner. A
contemporaneous, written record that reflects the factors considered will aid in refuting
allegations of bias or improper targeting of a recipient. See NOPSI III, 723 F.2d at 428.
The memorandum should identify any regulations or internal guidance that set forth
criteria for selection of targets for compliance reviews, and explain how such criteria are
met.
2. Procedures for Compliance Reviews
Agency Title VI regulations are silent as to procedures for conducting compliance
reviews, although, as discussed, the Coordination Regulations provide general
guidance as to the types of data to solicit. Federal agencies granting Federal financial
assistance are required to "establish and maintain an effective program of postapproval
compliance reviews" of recipients to ensure that the recipients are complying
with the requirements of Title VI. 28 C.F.R. 42.407(a). Related to the reviews
themselves, recipients should be required to submit periodic compliance reports to the
agencies and, where appropriate, conduct field reviews of a representative number of
major recipients. Finally, the Coordination Regulations recommend that agencies
consider incorporating a Title VI component into general program reviews and audits.
28 C.F.R. 42.407(c)(1).87/
87 "All Federal staff determinations of Title VI compliance shall be made by, or be
subject to the review of, the agency's civil rights office." 28 C.F.R. 42.407(a). Where
regional or area offices of Federal agencies have responsibility for approving
applications or specific projects, the agency shall "include personnel having Title VI
review responsibility on the staffs" of these offices. These personnel will conduct the
post-approval compliance reviews. Id.
In this era of downsizing, it is understood that not all field offices will have Title VI
-81-
[Annotation] tkelly
Results of post-approval reviews by the Federal agencies should be in writing
and include specific findings of fact and recommendations. The determination by the
Federal agency of the recipient's compliance status shall be made as promptly as
possible. 28 C.F.R. 42.407(c).
C. Complaints
The Coordination Regulations require that Federal agencies establish
procedures for the "prompt processing and disposition" of complaints of discrimination
in federally funded programs. 28 C.F.R. 42.408(a). Agency regulations with respect
to procedures for the investigation of complaints of discriminatory practices, however,
are typically brief, and lack details as to the manner or time table for such inquiry. See,
e.g., 28 C.F.R. 42.107; 32 C.F.R. 195.8. Generally, by regulation, an agency will
allow complainants 180 days to file a complaint, although the agency may exercise its
discretion and accept a complaint filed later in time. See, e.g., 28 C.F.R. 42.107(b).
An agency is not obliged to investigate a complaint that is frivolous, has no apparent
merit, or where other good cause is present, such as a pending law suit. An
investigation customarily will include interviews of the complainant, the recipient's staff,
and other witnesses; a review of the recipient's pertinent records, and potentially its
facility(ies); and consideration of the evidence gathered and defenses asserted. If the
agency finds no violation after an investigation, it must notify, in writing, the recipient
and the complainant, of this decision. See, e.g., 28 C.F.R. 42.107(d)(2). If the agency
staff. This element of review, however, should be conducted and reviewed by
experienced Title VI personnel, whether as a full time or collateral duty, and whether or
not as members of the office in issue.
-82-
believes there is adequate evidence to support a finding of noncompliance, the first
course of action for the agency is to seek voluntary compliance by the recipient. See,
e.g., 28 C.F.R. 42.107(d)(1). If the agency concludes that the matter cannot be
resolved through voluntary negotiations, the agency must make a formal finding of
noncompliance and seek enforcement, either through judicial action or administrative
fund suspension.
If an agency receives a complaint that is not within its jurisdiction, the agency
should consider whether the matter may be referred to another Federal agency that has
or may have jurisdiction, or to a State agency to address the matter. 28 C.F.R.
42.408(a)-(b). If a recipient is required or permitted by a Federal agency to process
Title VI complaints, such as under certain block grant programs, the agency must
ascertain whether the recipient's procedures for processing complaints are adequate.
In such instances, the Coordination Regulations require that the Federal agency obtain
a written report of each complaint and investigation processed by the recipient, and
retain oversight responsibility regarding the investigation and disposition of each
complaint. 28 C.F.R. 42.408(c).
Finally, the Coordination Regulations require that each Federal agency, (and
recipients that process Title VI complaints), maintain a log of Title VI complaints
received. 28 C.F.R. 42.408(d). The log shall include the following: the race, color, or
national origin of the complainant, the identity of the recipient, the nature of the
complaint, the date the complaint was filed, the investigation completed, the date and
nature of the disposition, and other pertinent information.
-83-
[Annotation] tkelly
[Annotation] tkelly
XI. Federal Funding Agency Methods to Enforce Compliance
Agencies should remember that the primary means of enforcing compliance with
Title VI is through voluntary agreements with the recipients, and that fund suspension or
termination is a means of last resort.88/ This approach is set forth in the statute, is a
reflection of congressional intent, and is recognized by the courts. See 42 U.S.C.
2000d-1; Board of Pub. Instruction v. Finch, 414 F.2d 1068, 1075 n.11 (5th Cir. 1969)
(citing 110 Cong. Rec. 7062 (1964) (Statement of Sen. Pastore)). Accordingly, if an
agency believes an applicant is not in compliance with Title VI, the agency has three
potential remedies:
(1) resolution of the noncompliance (or potential noncompliance) "by voluntary
means" by entering into an agreement with the applicant, which becomes a condition of
the assistance agreement; or
(2) where voluntary compliance efforts are unsuccessful, a refusal to grant or
continue the assistance ; or
(3) where voluntary compliance efforts are unsuccessful, referral of the violation
to the Department of Justice for judicial action. 42 U.S.C. 2000d-1. In addition,
agencies may defer the decision whether to grant the assistance pending completion of
a Title VI (Title IX, or Section 504) investigation, negotiations, or other action to obtain
remedial relief.89/
88 The discussion herein applies primarily to post-award enforcement. Subsections
address the extent to which enforcement may vary in a pre-award context.
89 In considering options for enforcement, agencies should consult the Title VI
Guidelines. 28 C.F.R. 50.3.
-84-
[Annotation] tkelly
[Annotation] tkelly
A. Efforts to Achieve Voluntary Compliance
Under Title VI, before an agency initiates administrative or judicial proceedings to
compel compliance, it must attempt to obtain voluntary compliance from a recipient.
Compliance with any requirement adopted pursuant to this section may be
effected (1) by the termination of or refusal to grant or to continue
assistance under such program or activity to any recipient . . . or (2) by
any other means authorized by law: Provided, however, that no such
action shall be taken until the department or agency concerned . . . has
determined that compliance cannot be secured by voluntary means.
42 U.S.C. 2000d-1 (emphasis in original); see Alabama NAACP State Conference of
Branches v. Wallace, 269 F. Supp. 346, 351 (M.D. Ala. 1967) (voluntary compliance is
to be effectuated if possible). Both the Coordination Regulations and the Title VI
Guidelines urge agencies to seek voluntary compliance before, and throughout, the
administrative or judicial process.90/ See 28 C.F.R. 42.411(a) ("Effective
enforcement of Title VI requires that agencies take prompt action to achieve voluntary
compliance in all instances in which noncompliance is found."); 28 C.F.R. 50.3 I.C.
Title VI requires that a concerted effort be made to persuade any noncomplying
applicant or recipient voluntarily to comply with Title VI. Efforts to secure
voluntary compliance should be undertaken at the outset in every noncompliance
situation and should be pursued through each state of enforcement action.
Similarly, when an applicant fails to file an adequate assurance or apparently
breaches its terms, notice should be promptly given of the nature of the
noncompliance problem and of the possible consequences thereof, and an
immediate effort made to secure voluntary compliance. Id.
90 Agencies are strongly encouraged to make use of alternative dispute resolution
(ADR), whenever appropriate. Both the President and the Attorney General have
encouraged the use of alternative dispute resolution in matters that are the subject of
civil litigation. See Executive Order 12988 and Attorney General Order OBD 1160.1.
The Administrative Dispute Resolution Act of 1996 authorizes the use of ADR to
resolve administrative disputes. 5 U.S.C. 571 et seq.). ADR can consist of anything
from the use of a neutral third party or mediator to informally resolving a matter without
completing a full investigation.
-85-
[Annotation] tkelly
An agency is not required to make formal findings of noncompliance before
undertaking negotiations or reaching a voluntary agreement to end alleged
discriminatory practices. However, there must be a basis for an agency and recipient to
enter into such a voluntary agreement (e.g., identification of alleged discriminatory
practices, even if the parties do not agree as to the extent of such practices).91/ In
addition, throughout the negotiation process, agencies should be prepared with
sufficient evidence to support administrative or judicial enforcement should voluntary
negotiations fail.
An agency must balance its duty to permit informal resolution of findings of
noncompliance against its duty to effectuate, without undue delay, the national policy
prohibiting continued assistance to programs or activities which discriminate. Efforts to
obtain voluntary compliance should continue throughout the process, but should not be
allowed to become a device to avoid compliance.92/ Once an area of noncompliance
is identified, an agency is required to enforce Title VI.
1. Voluntary Compliance at the Pre-Award Stage
a. Special Conditions
As is done post-award, agencies may obtain compliance "by voluntary means" in
91 Where voluntary compliance is achieved, the agreement must be in writing and
specify the action necessary for the correction of Title VI deficiencies. 28 C.F.R.
42.411(b).
92 Although Title VI does not provide a specific limit within which voluntary
compliance may be sought, it is clear that a request for voluntary compliance , if not
followed by responsive action on the part of the institution within a reasonable time,
does not relieve the agency of the responsibility to enforce Title VI by one of the two
alternative means contemplated by the statute. A consistent failure to do so is a
dereliction of duty reviewable in the courts. 28 C.F.R. 42.411(b)
-86-
[Annotation] tkelly
the pre-award context by entering into an agreement with the applicant that enjoins the
applicant from taking specified actions, requires that specified remedial actions be
taken, and/or provides for other appropriate relief. The terms of the agreement become
effective once the assistance is granted, and typically are attached as a special
condition to the assistance agreement. Three issues arise by exercise of the voluntary
compliance authority at the pre-award stage: what is the appropriate scope of special
remedial conditions; what is the remedy if an applicant refuses to agree to a special
condition proposed by an agency; and what is the remedy if, post-award, the recipient
fails to comply with a special remedial condition of the assistance agreement.
When voluntary compliance is sought at the pre-award stage, agencies may
exercise greater flexibility in designing appropriate remedial conditions, for two reasons.
First, if the pre-award remedy does not fully resolve the discrimination concern,
agencies may have the opportunity to rectify this matter during the life of the assistance
grant. Second, since a pre-award investigation and remedial efforts likely would require
a deferral of the assistance award, it may be in the interest of the applicant (as well as
potentially the agency) that interim measures be agreed to that allow the award to go
forward while also addressing the discrimination concern. Thus, a pre-award special
condition may grant provisional relief, require that certain aspects of the recipient's
program be monitored, and/or require that the recipient provide additional information
relating to the discrimination allegations. Of course, the mere fact that relief may be
sought post-award does not necessarily mean that full relief, using voluntary means or
otherwise, should not be sought pre-award.
Agency authority to attach special conditions to assistance agreements extends
-87-
no further than the agency's authority to seek voluntary compliance. Thus, if an
applicant refuses to agree to a proposed special remedial condition, the agency either
would have to negotiate a different condition, award the assistance without the
condition, seek to obtain compliance "by any other means authorized by law," or initiate
administrative procedures to refuse to grant assistance. However, an agency may not
refuse to grant assistance based solely on an applicant's refusal to accept a special
condition unless the agency is prepared to make a finding of noncompliance and
proceed to an administrative hearing. This is because the applicant has a right to
challenge a refusal to grant assistance through an administrative hearing. See 42
U.S.C. 2000d-1.
Whether an agency may immediately suspend payment based on
noncompliance with a previously imposed special remedial condition depends on the
terms of the condition. As a general matter, if a recipient violates the terms of a special
remedial condition, the noncompliance must be remedied in the same manner that any
other post-award noncompliance is addressed -- through voluntary efforts, by the
government filing suit, or by the agency suspending or terminating the assistance
pursuant to the statutory procedure. If, however, as part of the remedial condition the
applicant agrees that the agency immediately may suspend payment if noncompliance
occurs, then that contractual provision would likely supersede the statutory protection
against instant fund suspension that the recipient otherwise enjoys.
b. Use of Cautionary Language
If an agency has evidence at the time of the award which does not rise to the
level of an actual violation by an applicant, and thus does not warrant refusal of a grant
-88-
award, the agency may consider notifying the recipient in the grant award letter that the
agency has a civil rights concern. The statement could acknowledge, where
appropriate, the applicant's cooperation with an ongoing civil rights investigation or its
attempts to resolve the concern.93/ By including this language, the applicant is on
notice that there may be a potential problem and that the funding arm is aware of what
the civil rights arm is doing. It also warns that a failure to cooperate could lead to a
denial of funds in the future. The language also may encourage the applicant to enter
into voluntary compliance negotiations and engage in alternative dispute resolution, in
appropriate cases, to resolve the alleged discrimination at issue without a formal finding
or the completion of an investigation. A major advantage of this approach is that it
avoids the due process concerns raised when deferral or special conditioning is utilized
because, in this case, the funds are being awarded, i.e., there is no "refusal to grant,"
which would trigger the right to an administrative hearing.
2. Other Nonlitigation Alternatives
The Title VI Guidelines list four other approaches, short of litigation or fund
termination, that may be available when civil rights concerns are discovered. The
93 One example of language currently used by the Department of Justice's Office of
Justice Programs is as follows:
In reviewing an application for funding, we consider whether the applicant
is in compliance with federal civil rights laws. A determination of
noncompliance could lead to a denial of assistance or an award
conditioned on remedial action being taken. We are aware that the
Department's Civil Rights Division is conducting an investigation involving
possible civil rights violations. The Civil Rights Division has advised us
that your agency is cooperating with its investigation, and we have taken
that into account in deciding to approve your grant application.
-89-
possibilities listed include:
(1) consulting with or seeking assistance from other Federal agencies . . . having
authority to enforce nondiscrimination requirements; (2) consulting with or
seeking assistance from State or local agencies having such authority; (3)
bypassing a recalcitrant central agency applicant in order to obtain assurances
from or to grant assistance to complying local agencies; and (4) bypassing all
recalcitrant non-Federal agencies and providing assistance directly to the
complying ultimate beneficiaries.
28 C.F.R. 50.3 I.B.2. Agencies are urged to consider all of these options, as
appropriate.
B. "Any Other Means Authorized by Law:" Judicial Enforcement
The Department of Justice's statutory authority to sue in Federal district court on
behalf of an agency for violation of Title VI is contained in the phrase "by any other
means authorized by law." See 42 U.S.C. 2000d-1; United States. v. City and County
of Denver, 927 F. Supp. 1396, 1400 (D. Colo. 1996); Ayers v. Allain, 674 F. Supp.
1523, 1551 n.6 (N.D. Miss. 1987); United States v. Marion County Sch. Dist., 625 F.2d
607, 612-13 & n.14, reh'g denied, 629 F.2d 1350 (5th Cir. 1980), cert. denied, 451 U.S.
910 (1981). In addition, the Department of Justice may pursue judicial enforcement
through specific enforcement of assurances, certifications of compliance, covenants
attached to property, desegregation or other plans submitted to the agency as
conditions of assistance, or violations of other provisions of the Civil Rights Act of 1964,
other statutes, or the Constitution. See Marion County, 625 F.2d at 612; 28 C.F.R.
50.3 I.B.
Agency regulations interpreting this phrase provide for several options including:
1) referral to the Department of Justice for proceedings, 2) referrals to State agencies,
and 3) referrals to local agencies. See, e.g., 29 C.F.R. 31.8(a) (Labor); 34 C.F.R.
-90-
100.8 (Education); and 45 C.F.R. 80.8(a) (HHS):
[C]ompliance may be effected by . . . other means authorized by law.
Such other means may include, but are not limited to, (1) a reference to
the Department of Justice with a recommendation that appropriate
proceedings be brought to enforce any rights of the United States under
any law of the United States (including other titles of the Act), or any
assurance or contractual undertaking and (2) any applicable proceedings
under State or local law.
In order to refer a matter to the Justice Department for litigation, agency
regulations require that the funding agency make a finding that a violation exists and a
determination that voluntary compliance cannot be achieved. The recipient must be
notified of its failure to comply and must be notified of the intended agency action to
effectuate compliance.94/ Some agency regulations require additional time after this
notification to the recipient to continue negotiation efforts to achieve voluntary
compliance.95/ It should be noted that the funding agency must in fact formally initiate
referral of the matter to the Justice Department, because there is no automatic referral
mechanism.
In United States v. Baylor Univ. Med. Ctr., 736 F.2d 1039 (5th Cir. 1984), the Fifth
Circuit held that when a referral is made to the Department of Justice, and suit for
injunctive relief is filed, a court can order termination of Federal financial assistance as
a remedy. However, the termination cannot become effective until 30 days have
passed. The court reasoned that the congressional intent to allow a 30-day period
when the administrative hearing route is followed (see 42 U.S.C. 2000d-1, which
94 See, e.g., 24 C.F.R. 1.8(d) (HUD); 29 C.F.R. 31.8(c) (Labor).
95 For example, HUD regulations require that the agency continue negotiations for
ten days from the date of mailing the notice of noncompliance to the recipient. Id.
-91-
provides that the agency must file a report with Congress and 30 days must elapse
before termination of the funds) evinces a congressional intent to likewise permit a 30-
day grace period before a court's order to terminate funds takes effect.
C. Fund Suspension and Termination
Several procedural requirements must be satisfied before an agency may deny
or terminate Federal funds to an applicant/recipient. A four step process is involved:
1) the agency must notify the recipient that it is not in compliance with the
statute and that voluntary compliance cannot be achieved;
2) after an opportunity for a hearing on the record, the "responsible Department
official;" must make an express finding of failure to comply.
3) the head of the agency must approve the decision to suspend or terminate
funds; and
4) the head of the agency must file a report with the House and Senate
legislative committees having jurisdiction over the programs involved and wait 30 days
before terminating funds.96/ The report must provide the grounds for the decision to
deny or terminate the funds to the recipient or applicant. 42 U.S.C. 2000d-1; See,
e.g., 45 C.F.R. 80.8(c) (HHS).
1. Fund Termination Hearings
As noted above, funds cannot be terminated without providing the recipient an
opportunity for a formal hearing. See, e.g., 28 C.F.R. 42.109(a). If the recipient
waives this right, a decision will be issued by the "responsible Department official"
based on the record compiled by the investigative agency. Hearings on terminations
cannot be held less than 20 days after receipt of notice of the violation. See, e.g., 45
96 The congressional intent behind the 30 day requirement was to include seemingly
neutral third parties, (the relevant Congressional committees), to ensure that the
decision to terminate funds was fair, reasoned, and not arbitrary. See 110 Cong. Rec.
2498 (1964) (Statement of Cong. Willis); 110 Cong. Rec. 7059 (1964) (Statement of
Sen. Pastore).
-92-
[Annotation] tkelly
C.F.R. 80.9(a) (HHS).
Agencies have adopted the procedures of the Administrative Procedures Act for
administrative hearings. See, e.g., 28 C.F.R. 42.109(d) (Justice); 45 C.F.R. 80.9
(HHS). Technical rules of evidence do not apply, although the hearing examiner may
exclude evidence that is "irrelevant, immaterial, or unduly repetitious." See, e.g., 28
C.F.R. 42.109(d); 45 C.F.R. 80.9(d)(2) [HHS]. The hearing examiner may issue an
initial decision or a recommendation to the "responsible agency official." See, e.g., 28
C.F.R. 42.110. The recipient may file exceptions to any initial decision. In the
absence of exceptions or review initiated by the "responsible department official," the
hearing examiner's decision will be the final decision. A final decision that suspends or
terminates funds, or imposes other sanctions, is subject to review and approval by the
agency head. Upon approval, an order shall be issued that identifies the basis for
noncompliance, and the action(s) that must be taken in order to come into compliance.
A recipient may request restoration of funds upon a showing of compliance with the
terms of the order, or if the recipient is otherwise able to show compliance with Title VI.
See, e.g., 28 C.F.R. 42.110; 45 C.F.R. 80.10(g). The restoration of funds is subject
to judicial review. 42 U.S.C. 2000d-2. Moreover, as noted above, no funds can be
terminated until 30 days after the agency head files a written report on the matter with
the House and Senate committees having legislative jurisdiction over the program or
activity involved. 42 U.S.C. 2000d-1.
2. Agency Fund Termination is Limited to the Particular Political
Entity, or Part Thereof, that Discriminated
Congress specifically limited the effect of fund termination by providing that it
-93-
[Annotation] tkelly
[Annotation] tkelly
...shall be limited to the particular political entity, or part thereof, or other
recipient as to whom such a finding has been made and, shall be limited
in its effect to the particular program, or part thereof, in which such
noncompliance has been so found, . . . .
42 U.S.C. 2000d-1. This is called the "pinpoint provision." As discussed below, the
CRRA did not modify interpretations of this provision, but only affected the
interpretation of "program or activity" for purposes of coverage of Title VI (and related
statutes). See S. Rep. No. 64 at 20, reprinted in 1988 U.S.C.C.A.N. at 22.
Congress' intent was to limit the adverse affects of fund termination on innocent
beneficiaries and to insure against the vindictive or punitive use of the fund termination
remedy. Board of Pub. Instruction v. Finch, 414 F.2d 1068, 1075 (5th Cir. 1969).97/
97 Much of the legislative debate on Title VI centered on the potential scope of any
termination of assistance due to a failure to comply with the rules effectuating Section
601. The Dirksen-Mansfield substitute bill, which was developed through informal,
bipartisan conferences, sought to answer those concerns. For a listing and explanation
of specific changes made by the substitute see, 110 Cong. Rec. 12817-12820 (1964)
(Report of Senator Dirksen). Senator Humphrey explained the purpose behind the
substitute language.
Some Senators have expressed the fear that in its original form Title VI would
authorize cutting off of all federal funds going to a state for a particular program
even though only part of the state were guilty of racial discrimination in that
program. And some Senators have feared that the title would authorize
canceling all federal assistance to a state if it were discriminating in any of the
federally-assisted programs in that State.
As was explained a number of times on the floor of the Senate, these
interpretations of Title VI are inaccurate. The title is designed to limit any
termination of federal assistance to the particular offenders in the
particular area where the unlawful discrimination occurs. Since this was
our intention, we have made this specific in the provisions of Title VI by
adding language to 602 to spell out these limitations more precisely. This
language provides that any termination of federal assistance will be
restricted to the particular political subdivision which is violating
non-discriminatory regulations established under Title VI. It further
provides that the termination shall affect only the particular program, or
-94-
"The procedural limitations placed on the exercise of such power were designed to
insure that termination would be 'pinpoint(ed) . . . to the situation where discriminatory
practices prevail.'" Id. (quoting 1964 U.S.C.C.A.N. 2512).
The seminal case on this issue is Finch, 414 F.2d at 1068. A Department of
Health, Education, and Welfare (HEW) hearing officer had found that the school district
had made inadequate progress toward student and teacher desegregation and that the
district had sought to perpetuate the dual school system through its construction
program. Based on these findings, a final order was entered terminating "any class of
Federal financial assistance" to the district "arising under any Act of Congress"
administered by HEW, the National Science Foundation, and the Department of the
Interior. Id. at 1071.
On appeal, the Fifth Circuit vacated the termination order, holding that it was in
violation of the purpose and statutory scope of the agency's power. The "programs" in
issue were three education statutes, yet the HEW officer had not made any specific
findings as to whether there was discrimination in all three programs, and/or if action in
one program tainted, or caused discriminatory treatment in, other programs. Id. at
1073-74, 79. The court paid considerable attention to the congressional intent of the
pinpoint provision: limiting the termination power to "activities which are actually
discriminatory or segregated" was designed to protect the innocent beneficiaries of
untainted programs. Id. at 1077. The court further held that it was improper to construe
part thereof, in which such a violation is taking place.
110 Cong. Rec. 12714-12715 (l964); see, 110 Cong. Rec. 1520 (1964) (Celler); 110
Cong. Rec. 1538 (1964) (Rodino); 110 Cong. Rec. 7061-7063 (1964) (Pastore).
-95-
Section 602 as placing the burden on recipients to limit the effect of termination orders
by proving that certain programs are untainted by discrimination, rather than on an
agency to establish the basis for findings as to the scope of discrimination. Id.
As to the meaning of the term "program" in the pinpoint proviso, the court
concluded that the legislative history of Title VI evidenced a congressional intent that
the term refer not to generic categories of programs by a recipient, but rather to specific
programs of assistance, or specific statutes, administered by the Federal government.
Id. at 1077-78.98/ Further, even if "program" was meant to refer to generic categories
of aid, the parenthetical phrase, "or part thereof", must be given meaning. Thus, an
agency's fund termination order must be based on program-specific (i.e., grant statute
specific) findings of noncompliance. The Court reasoned that:
[T]he purpose of the Title VI [fund] cutoff is best effectuated by separate
consideration of the use or intended use of federal funds under each grant
statute. If the funds provided by the grant are administered in a
discriminatory manner, or if they support a program which is infected by a
discriminatory environment, then termination of such funds is proper. But
there will also be cases from time to time where a particular program,
within a state, within a county, within a district, even within a school (in
short, within a "political entity or part thereof"), is effectively insulated from
otherwise unlawful activities. Congress did not intend that such a program
suffer for the sins of others. HEW was denied the right to condemn
programs by association. The statute prescribes a policy of
disassociation of programs in the fact finding process. Each must be
considered on its own merits to determine whether or not it is in
compliance with the Act. In this way the Act is shielded from a vindictive
application. Schools and programs are not condemned enmasse or in
gross, with the good and the bad condemned together, but the termination
power reaches only those programs which would utilize federal money for
unconstitutional ends.
98 The court noted that each of the grant statutes affected by the order was
denominated "a program" by the terms of its own statutory scheme.
-96-
Id. at 1078.99/
The specificity required for fund termination was also addressed by the Seventh
Circuit in Gautreaux v. Romney, 457 F.2d 124 (7th Cir. 1972). In Gautreaux, the court
reversed a district court's order approving Federal fund termination for a Housing and
Urban Development (HUD) program where there were no findings of discrimination in
such program, and where such action was pursued in an effort to pressure action to
remedy the defendant's discriminatory conduct in a wholly sparate HUD program. 457
F.2d at 127-128. The district court had previously found that defendants had violated
fair housing laws yet intended to withhold Model Cities Program funds, which primarily
support education, job training, and day care programs on behalf of low and moderate
income families. Although a small portion of Model Cities money also supported public
housing, there was no allegation or finding that any Model Cities program was operated
in a discriminatory fashion. Id. at 126. Accordingly, the court of appeals held that the
district court violated Section 602 of Title VI and the "mandate of" Finch, and abused its
discretion in withholding the Model Cities funds. Id. at 128.
It is equally critical to note that, notwithstanding the need for an independent
evaluation of each program, an agency (or reviewing court) must examine not only
99 The court also quoted Senator Long from the debate on passage of the Act:
Proponents of the bill have continually made it clear that it is the intent of
Title VI not to require wholesale cutoffs of Federal [f]unds from all Federal
programs in entire States, but instead to require a careful case-by-case
application of the principle of nondiscrimination to those particular
activities which are actually discriminatory or segregated.
Id. at 1075 (quoting 110 Cong. Rec. 7103 (1964)).
-97-
whether the Federal funds are "administered in a discriminatory manner, . . . [but also] if
they support a program which is infected by a discriminatory environment." Finch, 414
F.2d at 1078 (emphasis added). Not all programs operate in isolation. Thus,
the administrative agency seeking to cut off federal funds must make findings of
fact indicating either that a particular program is itself administered in a
discriminatory manner, or is so affected by discriminatory practices elsewhere in
the [overall operation, e.g., school system] that it thereby becomes
discriminatory.
Id. at 1079; see North Haven, 456 U.S. at 539-540 (approval of HEW Title IX
regulations that adopt the Finch "infection" standard.) This latter analysis is often
referred to as the "infection theory." Although Finch and Gautreaux were decided prior
to passage of the CRRA, it is important to recognize that while the CRRA defined the
meaning of "program or activity" for purposes of prohibited conduct, it did not change
the definition of such terms for purposes of fund termination for a violation of Title VI. In
particular, the CRRA left intact the "pinpoint" provision that limits any fund termination
to the "program, or part thereof, in which noncompliance has been so found." 42
U.S.C. 2000d-1.
-98-
XII. Private Right of Action and Individual Relief through Agency Action
The Supreme Court has established that individuals have an implied private right
of action under Title VI (and Title IX and Section 504). The Court has stated that it has
"no doubt that Congress...understood Title VI as authorizing an implied private right of
action for victims of illegal discrimination." See Cannon v. University of Chicago, 441
U.S. 677 (1979) (holding that an individual has a private right of action under Title IX).
In addition, several courts of appeals have held that plaintiffs have a private right of
action to enforce the disparate impact regulations implementing Section 602 of Title VI.
See Sandoval v. Hagan, 197 F.3d 484 (11th Cir. 1999), cert. granted sub. nom.
Alexander v. Sandoval, __ U.S. __, 121 S.Ct. 28, 68 U.S.L.W. 3749 (U.S. Sept. 26,
2000) (No. 99-1908).; Powell v. Ridge, 189 F.3d 387 (3d Cir. 1999).
In Sandoval, the court found that a reading of Lau, Guardians, and Alexander, in
pari materia supported the finding of an implied private cause of action under Section
602 of Title VI. 197 F.3d 484, 507 (11th Cir. 1999). Likewise, in Powell v. Ridge, 189
F.3d 387, 397-400 (1999), the Third Circuit Court of Appeals recognized an implied
private right of action to enforce regulations promulgated pursuant to Section 602 of
Title VI. The Second Circuit, however, declined to reach the issue of whether a private
right of action may be brought under regulations implementing Section 602 and let
stand the lower court's ruling that a private right of action is not available to plaintiffs
bringing suit pursuant to Section 602. NYCEJA, 214 F.3d at 72-73. The Supreme
Court will likely definitively decide the issue when it hears Sandoval.
Many circuits have ruled that individuals may not bring suit against the federal
government for failure to enforce Title VI (and Section 504 and Title IX). Jersey Heights
-99-
Neighborhood Ass'n v. Glendening et al., 174 F.3d 180 (4th Cir. 1999); Washington
Legal Found. v. Alexander, 984 F.2d 483, (D.C. Cir. 1993); Women's Equity Action
League v. Cavazos, 906 F.2d 742 (D.C. Cir. 1990) [hereinafter WEAL II]. In Jersey
Heights, plaintiffs, African-American landowners, filed suit against the U.S. Department
of Transportation, among others, claiming that it abdicated its duties under section 602
of Title VI to eliminate discrimination in federally-funded programs by failing to terminate
funds to recipients who failed to comply with Title VI. The Fourth Circuit found that Title
VI provides two avenues of recourse to address discrimination by federal funding
agencies: private right of action against recipients of Federal financial assistance and
petition to the federal funding agency to secure voluntary compliance by its recipients.
After reviewing the legislative history of Title VI, the court concluded that Congress did
not intend for aggrieved parties "to circumvent that very administrative scheme through
direct litigation against federal agencies." 174 F.3d at 191.
Similarly, the court in WEAL II, ruled that, absent congressional authorization,
individuals do not have a private right of action against the federal government under
Title VI, Title IX, or Section 504.100/ 906 F.2d at 752. Citing the Supreme Court's
examination of the legislative history of Title VI in Cannon, the court found that
Congress did not intend for private suits to be brought against the federal funding
agencies. Id. at 748. The WEAL II court further concluded that because individuals
100 The WEAL II decision brought to a close sub nom. the twenty year history of
litigation that began in 1970 under Adams v. Richardson, 356 F. Supp. 92 (D.D.C.
1973), a suit that challenged the Department of Health, Education, and Welfare's
dereliction in enforcing Title VI.
-100-
[Annotation] tkelly
already have an adequate remedy through private rights of action against the recipients
of Federal financial assistance, individuals could not maintain a cause of action against
the federal funding agency to compel enforcement of Title VI under the Administrative
Procedure Act, the Mandamus Act, or the Constitution. Id. at 752. One possible
exception to these rulings might to be a situation where the federal funding agency
makes a finding that a recipient is in violation of Title VI but, nonetheless, refuses to
enforce its own determination. See Washington Legal Found. v. Alexander, 984 F.2d
at 488 101/.
The most common form of relief sought and obtained through a private right of
action is an injunction ordering a recipient to do something. See Cannon, 441 U.S.
667. See also, United States v. Baylor Univ. Med. Ctr., 736 F. 2d 1039, in which the
court ordered termination of funds. The Supreme Court also has held that individuals
may obtain monetary damages for claims of intentional discrimination under Title IX.
See Franklin v. Gwinett, 503 U.S. 60 (1990) at 75 n.8. 102/ As discussed below,
agencies are encouraged to identify and seek the full complement of relief for
complainants and identified victims, where appropriate, as part of voluntary settlements,
101 In this case, plaintiffs brought suit to enjoin the Department of Education from
allowing recipients of its funds to offer certain federally funded scholarships exclusively
to minorities. Id. at 486.
102 The broad reasoning employed in Franklin is equally applicable to Title VI
lawsuits, and the Franklin Court explicitly linked the availability of damages under Titles
VI and IX by its citation to Guardians. Subsequent to Franklin , courts of appeals have
unanimously extended the Franklin holding to Section 504 lawsuits. W.B. v. Matula, 67
F.3d 484, 494 (3d Cir. 1995); Rodgers v. Magnet Cove Pub. Sch., 34 F.3d 642, 644
(8th Cir. 1994); Waldrop v. Southern Co. Servs.,, 24 F.3d 152, 156 (11th Cir. 1994);
Pandazides v. Virginia Bd. of Educ., 13 F.3d 823, 831 (4th Cir. 1994).
-101-
[Annotation] tkelly
including, where appropriate, not only the obvious remedy of back pay for certain
employment discrimination cases, but also compensatory damages for violations in a
nonemployment context. Agencies are also asked to recommend the scope of relief to
be sought in referrals of matters to the Department of Justice for judicial enforcement.
A. Entitlement to Damages for Intentional Violations
In addition to agency enforcement mechanisms, private individuals have an
implied right of action under Title VI (as well as Title IX and Section 504). See Cannon,
441 U.S. at 696 (private right of action recognized under Title IX, and citing with
approval cases finding a private right of action under Title VI).103/ In addition, the
Supreme Court has ruled that monetary damages are an available remedy in private
actions brought to enforce Title IX for alleged intentional violations. See Franklin, 503
U.S. at 72-75104/, Consolidated Rail Corp. v. Darrone, 465 U.S. 624, 630-31 (1984).
Franklin contains a detailed discussion on the merits of allowing monetary
damages for intentional violations of Title IX (as well as Title VI and Section 504). Id. at
71-76. The Court placed great reliance on the "longstanding rule" that where a Federal
statute provides (expressly or impliedly) for a right to bring suit, Federal courts
103 See Lane v. Pea, 518 U.S. 187, 202 & n.3 (1996) (Stevens, J., dissenting)
(citing uniform holdings of ten courts of appeals that Section 504 provides an implied
right of action). The Supreme Court had addressed the merits of two Title VI cases
brought by private plaintiffs without addressing the issue of whether a private right of
action exists. See, Bakke, 438 U.S. at 282; Lau, 414 U.S. 563.
104 Justice White authored the opinion for the Court in which five Justices joined.
Justice Scalia wrote an opinion concurring in the judgment, in which Chief Justice
Rehnquist and Justice Thomas joined. The Franklin Court also recognized that a
majority of justices in Guardians, notwithstanding the multiple opinions, opined that
private plaintiffs may obtain damages under Title VI to remedy intentional violations. Id.
at 70.
-102-
"presume the availability of all appropriate remedies unless Congress has expressly
indicated otherwise." Id. at 66.105/ The Court found no congressional intent to
abandon this presumption in the enforcement of Title IX.106/ Accordingly, the Court
concluded that private individuals may obtain damages in appropriate cases.
Throughout its opinion, the Franklin Court broadly referred to the relief being
sanctioned as "monetary damages." Although the Court did not define this term, it
specifically rejected limiting Title IX plaintiffs to monetary relief that is equitable in
nature, such as backpay. See id. at 75-76. In these circumstances, it appears
appropriate to be guided by the traditional definition of "compensatory damages," which
includes damages for both pecuniary and nonpecuniary injuries.107/
105 The Court further stated, "absent clear direction to the contrary by Congress, the
federal courts have the power to award any appropriate relief in a cognizable cause of
action brought pursuant to a federal statute." Id. at 70-71.
106 The Court examined congressional intent expressed both prior to and after its
decision in Cannon. When Title IX was enacted, Congress was silent on the subject of
a private right of action, but the Court noted that Congress acted in the context of the
prevailing presumption in favor of all available remedies. Id. at 72. Following Cannon,
Title IX (Title VI, Section 504, and the Age Discrimination Act) were amended on two
occasions, although neither action evidenced congressional disagreement with this
presumption. Id. at 72-73. First, Congress added 42 U.S.C. 2000d-7 through the
Rehabilitation Act Amendments of 1986, to abrogate the States' Eleventh Amendment
immunity in suits under these statutes. Second, Congress added 42 U.S.C. 2000d-4a
under the CRRA to broaden the scope of programs covered by these statutes.
107 Section 903 of Restatement (Second) of Torts (1979) defines "compensatory
damages" as "the damages awarded to a person as compensation, indemnity or
restitution for harm sustained." Section 904 states that damages for nonpecuniary
harm include damages for bodily harm and emotional distress. See generally id.,
901-932.
Courts applying Franklin generally have interpreted it to permit the award of the
full range of compensatory damages, including damages for emotional distress. Doe v.
District of Columbia, 796 F. Supp. 559 (D.D.C. 1992) (same); see also DeLeo v. City of
-103-
B. Availability of Monetary Damages in Other Circumstances
In Franklin, the Supreme Court was not called upon to rule whether monetary
damages are available where other types of discrimination are proven. Nonetheless,
the Court noted that unintentional discrimination may present a different legal question,
and damages may not be available. Id. at 74.108/ Awarding damages may be
particularly problematic where the violation rests on a "disparate impact" theory of
discrimination. See Guardians, 463 U.S. at 595-603 (Opinion of White, J.).
C. Recommendations for Agency Action
In incorporating the damages remedy into agency compliance activities,
agencies will need to decide when damages should be sought as part of a voluntary
compliance agreement and, if damages are requested, the amount of emphasis to be
placed on the damages request in compliance negotiations. Agencies will want to
ensure that the damages remedy is implemented in a manner consonant with other
Stamford, 919 F. Supp. 70 (D. Conn. 1995) (citing cases equating monetary damages
with compensatory damages). Contra, Leija v. Canutillo Indep. Sch. Dist., 887 F. Supp.
947 (W.D. Tex. 1995), rev'd on other grounds, 101 F.3d 393 (5th Cir. 1996).
108 The Court explained that the problem with "permitting monetary damages for an
unintentional violation is that the receiving entity of federal funds lacks notice that it will
be liable for a monetary award." Id. at 74. The notice problem is a function of the
consensual nature of an entity's decision to accept Federal funds and the conditions
attached to their receipt. The entity weighs the benefits and burdens before accepting
the funds, including the nondiscrimination obligations that attach to the funding. The
concern is that where the violation is unintentional, particularly if it is a "disparate
impact" violation, the recipient may not have been sufficiently aware at the time the
funds were accepted that the nature and scope of the nondiscrimination obligation
included a prohibition on the specific behavior subsequently found to constitute unlawful
discrimination. Accordingly, responsibility for money damages may not have been
foreseen. See id.; Guardians, 463 U.S. at 596-597 (White, J., joined by Rehnquist, J.);
Pennhurst State Sch. and Hosp. v. Halderman, 451 U.S. 1, 17 (1981).
-104-
[Annotation] tkelly
enforcement goals and policies, in a manner consistent among compliance
agreements, and in a manner that protects the flexibility of the voluntary compliance
process. To effectuate these goals, agencies may wish to draft written guidelines, and
establish special supervisory procedures and internal reporting requirements.
There are several considerations that may be relevant in deciding how to
exercise administrative discretion in applying the damages remedy in particular cases.
One factor may be the degree of seriousness of the violation. A second factor may be
whether the injury is substantial. A third factor may be whether the injury is pecuniary in
nature. Since pecuniary losses represent a concrete injury and are relatively
straightforward to measure, they may represent a type of loss for which damages
almost always should be sought. Injuries involving "emotional distress" also should be
addressed, but may require closer analysis. A fourth factor may be whether the
discrimination victim has a current, ongoing relationship with the recipient that involves
regular interactions between the two. If such a relationship exists and prospective relief
is obtained that benefits the victim, that may weigh against providing compensation for
any nonpecuniary injury that is relatively slight.
Another issue is how agencies should respond to requests by recipients that
discrimination victims sign a liability release in order to obtain a damage award through
a compliance agreement. As a practical matter, agencies likely will need to be open to
including such a release in any agreement that provides for damages, if requested by
the recipient.
D. States Do Not Have Eleventh Amendment Immunity Under Title VI
The Eleventh Amendment bars a State from being sued by a citizen of the State
-105-
[Annotation] tkelly
in Federal court.109/ Since 1890, the Supreme Court has consistently held that this
Amendment protects a State from being sued in Federal court without the State's
consent. See Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 54 n.7 (1996) (cases
cited). However, Federal courts have jurisdiction over a State if the State has either
waived its immunity or Congress has abrogated unequivocally a State's immunity
pursuant to valid powers. See id. at 68. Congress has unequivocally done so with
respect to Title VI and related statutes.
In 1986, Congress enacted 42 U.S.C. 2000d-7 as part of the Rehabilitation Act
Amendments of 1986, Pub. L. No. 99-506, Tit. X, 1003, 100 Stat. 1845 (1986), to
abrogate States' immunity from suit for violations of Section 504, Title VI, Title IX, the
Age Discrimination Act, and similar nondiscrimination statutes. See Lane, 518 U.S. at
199. Section 2000d-7 states:
(1) A State shall not be immune under the Eleventh Amendment of the
Constitution of the United States from suit in Federal court for a violation
of section 504 of the Rehabilitation Act of 1973 [29 U.S.C. 794], title IX
of the Education Amendments of 1972 [20 U.S.C. 1681 et seq.], the Age
Discrimination Act of 1975 [42 U.S.C. 6101 et seq.], title VI of the Civil
Rights Act of 1964 [42 U.S.C. 2000d et seq.], or the provisions of any
other Federal statute prohibiting discrimination by recipients of Federal
financial assistance.
(2) In a suit against a State for a violation of a statute referred to in
paragraph (1), remedies (including remedies both at law and in equity) are
available for such a violation to the same extent as such remedies are
available for such a violation in the suit against any public or private entity
other than a State.
109 U.S. Const. Amend. XI states: "The judicial power of the United States shall not
be construed to extend to any suit in law or equity, commenced or prosecuted against
one of the United States by Citizens of another State, or by Citizens or subjects of any
Foreign State." See, Hans v. Louisiana, 134 U.S. 1 (1890).
-106-
It is the position of the Department of Justice that Section 2000d-7 is an
unambiguous abrogation which gives States express notice that a condition for
receiving Federal funds is the requirement that they consent to suit in Federal court for
alleged violations of Title VI and the other statutes enumerated.
-107-
XIII. Department of Justice Role Under Title VI
The Department of Justice has two roles to play in Title VI enforcement:
coordination of Federal agency implementation and enforcement, and legal
representative of the United States. Pursuant to Exec. Order No. 12250, 28 C.F.R. Pt.
41, App. A, the Attorney General shall "coordinate the implementation and enforcement
by Executive agencies" of Title VI, Title, IX, Section 504 and "any other provision of
Federal statutory law which provides, in whole or in part, that no person in the United
States shall, on the ground of race, color, national origin, handicap, religion, or sex, be
excluded from participation in, be denied the benefits of, or be subject to discrimination
under any program or activity receiving Federal financial assistance. Exec. Order No.
12250 1-201. Except for approval of agency regulations implementing Title VI and
Title IX and the issuance of coordinating regulations, all other responsibilities have been
delegated to the Assistant Attorney General for Civil Rights. While each Federal
agency extending Federal financial assistance has primary responsibility for
implementing Title VI with respect to its recipients, overall coordination in identifying
legal and operational standards, and ensuring consistent application and enforcement,
rests with the Civil Rights Division of the Department of Justice.
Initially, the Title VI coordination responsibility was assigned to a President's
Council on Equal Opportunity, which was created by Exec. Order No. 11197, dated
February 5, 1965. Exec. Order No. 11197, 3 C.F.R. 1964-1965 Comp. 278. However,
the Council was abolished after six months and the responsibility was reassigned to the
Attorney General pursuant to Exec. Order No. 11247, dated September 24, 1965. 3
C.F.R. 1964-1965 Comp. 348. Exec. Order No. 11247 provided that the Attorney
-108-
General was to assist Federal departments and agencies in coordinating their Title VI
enforcement activities adopting consistent, uniform policies, practices, and procedures.
During this period, the Department issued its "Guidelines for the Enforcement of Title
VI, Civil Rights Act of 1964," 28 C.F.R. 50.3.
In 1974, the President signed Exec. Order No. 11764, which was designed "to
clarify and broaden the role of the Attorney General with respect to Title VI
enforcement." Exec. Order No. 11764, 3A C.F.R. 124 (1974 Comp.). The Order
gave the Attorney General broad power to insure the effective and coordinated
enforcement of Title VI. Pursuant to this Executive Order, in 1976, the Department
promulgated its Coordination Regulations describing specific implementation,
compliance, and enforcement obligations of Federal funding agencies under Title VI.
See 28 C.F.R. 42.401-42.415.110/ Every agency that extends Federal financial
assistance covered by Title VI is subject to the Coordination Regulations and Title VI
Guidelines issued by the Department of Justice.
Finally, on November 2, 1980, President Carter signed Exec. Order No. 12250,
which directs the Attorney General to oversee and coordinate the implementation and
enforcement responsibilities of the Federal agencies pursuant to Title VI. For the first
time, the President's approval power over regulations was delegated to the Attorney
General. See id. at 1-1.111/ This Executive Order also requires agencies to issue
110 These regulations were amended slightly after the signing of Executive Order
12250 in 1980 to correctly identify the applicable Executive Order, but in substance they
are substantially as they were when issued in 1976.
111 Title VI provides that no rules, regulations and orders of general applicability
"shall become effective unless and until approved by the President." 42 U.S.C.
-109-
appropriate implementing directives either in the form of policy guidance or regulations
that are consistent with the requirements prescribed by the Attorney General. Id. at 1-
402.
The Department of Justice's second role is as the Federal government's litigator.
As discussed in Chapter XI, the Department of Justice, on behalf of Executive
agencies, may seek injunctive relief, specific performance, or other remedies when
agencies have referred determinations of noncompliance by recipients to the
Department for judicial enforcement. Such litigation will be assigned to the
Department's Civil Rights Division. In addition, the Department is responsible for
representing agency officials should they be named in private litigation involving Title
VI.
2000d-1.
-110-
Index
agency remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85-93, 103
aliens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Any other means authorized by law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85-86, 90-92
assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11-12, 24, 26, 47, 72-73, 76, 90
Attorney General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16-17, 48, 74, 85, 108-110
beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 20-21, 23, 25-28, 55-56, 58
cautionary language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88-89
Civil Rights Restoration Act of 1987 . . . . . . . . . . . . . . 22, 29-33, 35, 37, 40, 94, 98,103
compensatory damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102-104
complaints
investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72, 82-83
processing procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82-83
referral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70-71, 84, 90-91,102
compliance
enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84-91
evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72-77
judicial enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100, 104-105 90-91,
non-litigation alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95-89
notice of concern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88-89
post-award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78-81
data collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76-77
review procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72-77
review target selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78-80
voluntary . . . . . . . . . . . . . . . . . . . . . . . . . . . 73, 83, 88-89, 91-92,100, 104-105
contracts of insurance or guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16-17, 22
contractor and agent, recipient responsibilities for . . . . . . . . . . . . . . . . . . . . . . . . 25-26
corporations or private entities as "program or activity" . . . . . . . . . . . . . . . . . . . . . 37-39
damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95-105
implementing remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104-105
under disparate impact theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
data collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76-77
deferral of assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73-76
Department of Justice Title VI role
litigation to enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90-92, 108-110
coordinator of agency enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90-92
discriminatory conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42-54
disparate impact/effects . . . . . . . . . . . . . . . . 2, 26, 32, 42-44, 47-54, 64, 99, 104
environmental justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58-65
evidence of . . . . . . . . . . . . . . . . . . . . . . . . 42-53, 66, 68, 57, 73, 88, 91, 95, 103
intentional discrimination/disparate treatment . . . 2, 31-32, 42-47, 49, 101, 104
"substantial legitimate justification" . . . . . . . . . . . . . . . . . . . . . . . . . 43, 48, 51-53
less discriminatory alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
limited English proficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54-58
national origin discrimination . . . . . . . . . . . . 1, 3, 6, 26, 42-43, 45-46, 49, 54-68
pattern or practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46, 71
retaliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65-66
Eleventh Amendment Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105-107
employment, coverage under Title VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 67-70
environmental justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58-65
exceptions to Title VI coverage
contracts of insurance or guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16-17, 22
employment discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 67-70
procurement contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 17-18
Executive Orders
11197 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
11246 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70, 78-79
11247 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
11764 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
12250 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108-109
12898 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50, 60-61, 64
13166 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55-56, 61
Equal Employment Opportunity Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70-72
Federal financial assistance
contracts of insurance or guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . 16-17, 22
definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-14
direct/indirect assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14-15
fair market value v. subsidy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17-18
land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 12-13, 24
licenses not . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 15
money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-11, 22, 25, 30, 40, 96
nonmonetary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 15
personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-11, 13-14
procurement contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 17
programs owned and operated by the Federal government not . . . . . . . . . . . 16
property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-13
regulatory programs not . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15-16
social security payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-19
veteran's benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-19
Fifth Amendment, applicability of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fourteenth Amendment, applicability of . . . . . . . . . . . . . . . . . . . . . . . . 1,-2, 6, 8, 42, 44
funding
post-award compliance review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78-82
data collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76-77
pre-award procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72-78
fund termination hearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92-93
fund suspension and termination process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92-98
infection theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69, 98
immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35, 63,103, 105-108
"in the United States," definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9
legislative history, Title VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-5
LEP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54-58
licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 15
limitations on fund terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92-93
limited English proficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54-58
monetary damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99-105
"persons," definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7
"pinpoint provision" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94-96, 98
prima facie case, intentional discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43-47
prima facie case, disparate impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47-53
prima facie case, retaliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65-66
primary recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 22, 25
primary/sub-recipient programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
private right of action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 48, 99-108
procurement contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 17
"program or activity"
catch all/combination of entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40-41
definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29-41
recipient
assignees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
combination of entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40-41
contractor and agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25-26
contract relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25-26
corporations and private entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37-40
definition of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
educational institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-23, 35-37
indirect recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-24
primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 22, 25
subrecipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 20, 22, 25
transferees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12-13, 24
recipient v. beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26-28
pattern or practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
referral of employment complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70-71
regulation approval
by the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
delegation to the Attorney General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
retaliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65-66
"simple justice" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7
Title VI/Title VII rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67-71
Title IX/Section 504/Americans with Disabilities Act, relationship to Title VI . . . . . . . 1-2
theories of discrimination
intentional discrimination/disparate
treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 31-32, 42-47, 49,101, 104
disparate impact/effects . . . . . . . . . . . . . . . . . . . 2, 26, 32, 42-44, 47-64, 99, 104
transferees and assignees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12-13, 24
ultimate beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 26-27
voluntary compliance
need to determine not achievable prior to enforcement action . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84-89, 91-92,100, 104-105
at the pre-award stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72-79
September 14, 2016
VIA U.S. MAIL AND EMAIL
Peter Rogoff, Chief Executive Officer
Sound Transit Board of Directors
Sound Transit
401 South Jackson Street
Seattle, WA 98104
RE: MINORITY BUSINESS CONCERNS SOUND TRANSIT PROJECT LABOR AGREEMENT
CREATING DISPARATE IMPACTS - VIOLATIONS OF THE CIVIL RIGHTS ACTS OF 1964
Dear Mr. Rogoff and the Sound Transit Board of Directors,
We are the National Minority Business Advisory Council (MBAC), a 501(c)(4) headquartered in
Washington State, King County, positioned as a unifying voice in Washington State for minority
business enterprises (MBEs) on policy and public procurement reform. The mission of MBAC is to
engage, inform, and empower MBEs to achieve public contract equity by increasing awareness of
public procurement inequities, advancing action that invokes accountability of Title VI of the Civil
Rights Acts of 1964 for those municipalities that receive Federal funds, and finally, assisting minority
business advocacy efforts that promote fair and equal opportunity for our historically disadvantaged
communities of color, both regionally and nationally.
We write to you today to draw your attention to a growing concern of the minority business
community of the rapidly increasing use of Project Labor Agreements (PLAs) and Community
Workforce Agreements (CWAs) that are widely known to hurt local small businesses that are both
union and nonunion contractors. MBAC believes that all local small businesses, as a matter of
common sense economics, deserve the best possible chance to participate competitively in local
taxpayer funded public infrastructure projects. Mega corporate prime contractors gaining the
opportunities and creating profits spent outside our community should be a paramount consideration
that our elected officials contend with when negotiating big labor agreements like Sound Transit's
PLA. We all benefit, including labor, when the majority of our tax dollars stay in our regional
community.
Before moving to specific concerns of Sound Transit's PLA, we would like to recognize and express
appreciation to Sound Transit leadership for creating and running one of the most successful
apprenticeship programs in the state, via the Sound Transit PLA. We commend the intent and
documented success of creating skilled labor jobs for those persons in and from historically
disadvantaged communities, which include minorities and women in construction. Minority business
advocates and community leaders alike understand that we need public programs that not only
track, but at times mandate, inclusion of women and minority labor in construction. Without these
affirmative action programs on public projects, national data has shown that people of color
specifically, do not have an entrance point to these well-paying trade careers. In particular, our
young African American men, who statistically more than other racial demographics can get stuck in
the cycle of poverty, joblessness, and hopelessness.
MBAC Letter to Sound Transit
Minority Business Concerns Violations of Title VI
September 14, 2016
Page 2 of 8
Moving forward, as we are considering fair and equitable job access, we need to also take a long
hard look at business development and business opportunity equity, the actual economic engine that
lifts communities by building wealth, access, and influence from those entrepreneurs within these
same disadvantaged communities that Sound Transit works so hard to provide training and
employment to. We understand the world is not a fair place, capitalism is not necessarily a fair
process, as neither is low bid construction, unless contractors all start with the same resources; such
as education, finances, assets or past project experience. We know as evidenced in the 2013 Sound
Transit Disparity Study (Exhibit A), Washington State minority businesses do not have fair access
and/or fair contracting opportunities.
Numbers do not lie. That same study reported that it was necessary for Sound Transit to waiver
white women DBEs due to the evidence that there was no proof that this historically disadvantaged
demographic was experiencing inequity in contracting with Sound Transit from the years of 2009 to
2012. This waiver recommendation, yet to be approved by the United States Department of
Transportation, has cost disadvantaged minority businesses hundreds of millions in lost mandated
contracting opportunities with Sound Transit, which went to white women DBEs yet to be waivered.
MBAC concedes that Sound Transit is making its overall annual DBE inclusion numbers with the illegal
inclusion of this demographic and without this demographic Sound Transit would be failing to meet
its overall DBE goals these last seven years.
Truth be told, Sound Transit has yet to fix the discrimination it was found guilty of in 2013. The
Disparate Impacts/Effects put upon our disadvantaged African American, Native American, and
Hispanic minority businesses ready, willing and able to compete for Sound Transit contracting
opportunities still exist. We challenge this Board to take a deep dive into the contract numbers,
both the number of contracts issued and dollars spent, broken out by business name, race, and
gender since 2012 and see that Sound Transit has continued to fail the minority business community
in the Puget Sound.
Committing less violations of Civil Rights is not an improvement or a result anyone should stand
by. According to our forefathers of the 1964 Civil Rights Acts, there is zero tolerance for any
Federal dollars to be granted and used by a recipient that knowingly has neutral processes and
programs that promote Disparate Impacts/Effects. Zero discrimination institution-wide is the law
and zero discrimination should be of the highest priority of this Board.
MBAC has provided the United States Department of Justice Legal Manual (Exhibit B) for your review
and consideration. We have outlined a few excerpts to help communicate our position outlined
above.
Title VI states that no program or activity receiving "Federal financial assistance" shall
discriminate against individuals based on their race, color, or national origin.1
A "recipient" receives Federal financial assistance and/or operates a "program or activity,"
and therefore its conduct is subject to Title VI.2
1 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 10
2 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 20
MBAC Letter to Sound Transit
Minority Business Concerns Violations of Title VI
September 14, 2016
Page 3 of 8
When enacted in 1964, Title VI did not include a definition of "program or activity."
Congress, however, made its intentions clearly known: Title VI's prohibitions were meant to
be applied institution-wide, and as broadly as necessary to eradicate discriminatory practices
supported by Federal funds.3
Thus, Title VI claims may be proven under two primary theories: intentional
discrimination/disparate treatment and disparate impact/effects.4 Under the second
theory, a recipient, in violation of agency regulations, uses a neutral procedure or practice
that has a disparate impact on individuals of a particular race, color, or national origin, and
such practice lacks a "substantial legitimate justification."5
When combining the true obligation of Title VI with desegregated data of contract dollars that are
not going to minority businesses, you are faced with the reality of how bad things are for our
disadvantaged businesses in the community which you serve and operate. Then, to add insult to
injury, to have yet another barrier put upon these businesses, a barrier Sound Transit's own 2011
commissioned PLA Study suggested that Sound Transit's PLA is not the best public contracting
environment for small business. It is no wonder minority businesses and minority community leaders
are at a point of complete frustration and faced with having to take public action, advocating against
these biased, discriminatory systems and the injustice they create. MBAC is providing you with the
2011 Sound Transit Project Labor Agreement Study by Agreement Dynamics (Exhibit C). One final
quote from the author demonstrates the point above:
"From the subcontractors interviewed and surveyed and from the prime contractors
opinions, it appears that most non-union subcontractors feel a PLA is a disincentive to bid on
Sound Transit projects."6
Or put more directly, Sound Transit's PLA creates encumbrances and known barriers for small nonunion
contractors specifically, which include the disadvantaged women and minority contractors this
Board has publically expressed support of via the 1999 Resolution No. R99-21 (Exhibit D), clearly
illustrating how critical they are to the success of a community inclusive PLA program. These
barriers, based on the fact that minority-owned businesses are for an overwhelming majority small
non-union businesses, violate the principle intent of Title VI and also violate three of the nine Sound
Transit Board's key objectives outlined in the 1999 Resolution. All nine objectives are outlined
below.
Paying Prevailing wage
Standardizing work rules
Preventing strikes and lockouts on the jobsite
Ensuring an adequate supply of skilled labor and labor certainty
Using skilled labor from throughout the Puget Sound region
Increasing local economic benefits in employment and contracting on construction
contracts
3 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 29
4 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 42
5 See the U. S. Department of Justice Civil Right Division Title VI Legal Manual, page 43
6 See the 2011 Sound Transit Project Labor Agreement Study, page 8
MBAC Letter to Sound Transit
Minority Business Concerns Violations of Title VI
September 14, 2016
Page 4 of 8
Administering construction contracts in a manner consistent with Sound Transit's
objectives and federal grant requirements for the participation of local, small, and
minority, women and disadvantaged business enterprises and equal opportunity goals
Increasing opportunities for the participation of people of color, women, economically
disadvantaged persons and local owned businesses on construction contracts
Increasing local job training and apprenticeship on construction projects
In closing, MBAC believes that Sound Transit leadership and this Board seek to always maintain
community inclusive policies and lead the state in both job and contract equity so that the
community as a whole all benefits from Sound Transit's growth and expansion. It is MBAC's position
that all state-certified minority-owned businesses ready, willing and able should, by Federal law, be
able to fairly and equitably compete for contract and subcontract opportunities with Sound Transit
without any labor negotiated encumbrances. We request immediate and concrete action to provide
relief to our disadvantaged businesses that continue to experience inequity in contract opportunity
with Sound Transit. We also request that Sound Transit lead an effort to have state-certified
minority-owned businesses completely exempt from Sound Transit's pre-negotiated PLA so that our
disadvantaged communities of color are not left having to file dozens, if not hundreds, of Title VI
actions against Sound Transit for their continued disparate contracting procurement outcomes. We
understand this threat of action may not provide immediate resolution and may further prolong
contracting opportunities for those we seek to support, but when the minority community is left with
the same discriminatory results year after year, our only option is to elevate our concerns to the
Federal government and intentionally put at risk future grants, loans, and/or contracts Sound Transit
will need to further its ST3 program.
We thank you for your time, attention and consideration. We look forward to discussing in detail
how we can work to address these concerns of the minority business community with regard to Sound
Transit's Project Labor Agreement.
Sincerely,
Frank Lemos, President
National Minority Business Advisory Council (MBAC)
Enclosures:
Exhibit A 2013 Sound Transit Disparity Study, BBC Research and Consulting
Exhibit B Title VI Legal Manual, United State Department of Justice Civil Rights Division
Exhibit C 2011 Sound Transit Project Labor Agreement Study, Agreement Dynamics
Exhibit D Sound Transit 1999 Resolution No. R99-21
MBAC Letter to Sound Transit
Minority Business Concerns Violations of Title VI
September 14, 2016
Page 5 of 8
cc: SOUND TRANSIT BOARD OF DIRECTORS
Dow Constantine, Chair Sound Transit Board of Directors
Paul Roberts, Vice Chair - Sound Transit Board of Directors
Marilyn Strickland, Vice Chair - Sound Transit Board of Directors
Nancy Backus, Board member - Sound Transit Board of Directors
Claudia Balducci, Board member - Sound Transit Board of Directors
Fred Butler, Board member - Sound Transit Board of Directors
Dave Earling, Board member - Sound Transit Board of Directors
Dave Enslow, Board member - Sound Transit Board of Directors
Rob Johnson, Board member - Sound Transit Board of Directors
John Marchione, Board member - Sound Transit Board of Directors
Pat McCarthy, Board member - Sound Transit Board of Directors
Joe McDermott, Board member - Sound Transit Board of Directors
Roger Millar, Board member - Sound Transit Board of Directors
Mary Moss, Board member - Sound Transit Board of Directors
Ed Murray, Board member - Sound Transit Board of Directors
Dave Somers, Board member - Sound Transit Board of Directors
Dave Upthegrove, Board member - Sound Transit Board of Directors
Peter von Reichbauer, Board member - Sound Transit Board of Directors
FEDERAL AGENCY AND CONGRESSIONAL LEADERSHIP
Loretta Lynch, Attorney General U.S. Department of Justice
Sally Yates, Deputy Attorney General U.S. Department of Justice
Vanita Gupta, Principal Deputy Assistant Attorney General, Civil Rights Division
Deena Jang, Chief U.S. Department of Justice, Civil Rights Division
Anthony Foxx, Secretary of Transportation U.S. Department of Transportation
Victor Mendez, Deputy Secretary of Transportation - U.S. Department of Transportation
Leslie Proll, Director U.S. Department of Transportation, Civil Rights Office
Gregory Nadeau, Federal Highway Administrator - Federal Highway Administration
David Kim, Deputy Administrator - Federal Highway Administration
Walter Waidelich, Jr., Executive Director Federal Highway Administration
Irene Rico, Acting Associate Administrator - Federal Highway Administration Office of Civil Rights
Linda Ford, Associate Administrator of the Office of Civil Rights Federal Transit Administration
Kenneth Feldman, Deputy Regional Administrator Federal Transit Administration Region 10 Office
Alejandra Castillo, National Director - Minority Business Development Agency
Albert Shen, National Deputy Director - Minority Business Development Agency
Congressman G. K. Butterfield, Chair - African American Congressional Caucus
Representative Judy Chu, Chair Asian Pacific American Congressional Caucus
Representative Madeleine Bordallo, Vice Chair Asian Pacific American Congressional Caucus
Representative Krystal Ka'ai, Executive Director, Asian Pacific American Congressional Caucus
Representative Linda, Sanches, Chair - Hispanic Congressional Caucus
Representative Michelle Grisham, 1st Vice Chair - Hispanic Congressional Caucus
Representative Joaquin Castro, 2nd Vice Chair - Hispanic Congressional Caucus
Representative Ruben Gallego, Whip - Hispanic Congressional Caucus
WASHINGTON STATE OFFICE OF THE GOVERNOR
Governor Jay Inslee
Sam Ricketts, Director WA D.C. Office
David Postman, Chief of Staff
Kelly Wicker, Deputy Chief of Staff
Nicholas Brown, General Counsel
Jaime Smith, Executive Director of Communications
Miguel Perez-Gibson, Executive Director of Legislative Affairs
MBAC Letter to Sound Transit
Minority Business Concerns Violations of Title VI
September 14, 2016
Page 6 of 8
Matt Steuerwalt, Executive Director of Policy
David Schumacher, Director of Office of Financial Management
WASHINGTON STATE ETHNIC COMMISSIONS
Uriel Iiguez, Executive Director Commission on Hispanic Affairs
Andrs Mantilla, Chair Commission on Hispanic Affairs
Michael Itti, Executive Director Commission on Asian Pacific American Affairs
Tyati Tufono, Chair - Commission on Asian Pacific American Affairs
Edward Prince, Executive Director Commission on African American Affairs
Franklin Donahoe, Chair - Commission on African American Affairs
WASHINGTON STATE CIVIL RIGHTS COALTION
Hayward Evans, Co-Chair - Washington State African American Political Action Committee
Eddie Rye, Co-Convener - Community Coalition for Contracts and Jobs (CCCJ)
Charlie James, Co-Founder - Martin Luther King Jr. Foundation and MLK Memorial
Lyle Quasim, Co-Chair - Washington Black Collective Tacoma/Pierce County
Frank Irigon, Member - OCA Asian Pacific American
Grover Johnson, President - A. Philip Randolph Institute (APRI) Tacoma Chapter
Reverend Carl Livingston, Economic Development Chair - Washington Christian Leadership Coalition
Reverend Dr. Gregory Christopher, President - NAACP Tacoma, WA Chapter
Reverend Lawrence R. Willis, President - United Black Christian Clergy of Washington State
Reverend Dr. Robert L. Jeffrey, Founder - Black Dollar Days Task Force
Reverend Toney Montgomery, President - Washington Ministerial Alliance Tacoma
Estela Ortega, Executive Director El Centro de la Raza
Toshiko Hasegawa, Chair of the Civil Rights Committee - Seattle Japanese American Citizens League
Alfredo Medina, Director - Veterans Advocate
Doug Chin, President - Organization of Chinese Americans (OCA)
Gerald Hankerson, President - The National Association for the Advancement of Colored People
(NAACP) King County, WA and State Ch. (WA, AK, and OR)
Greg Taylor, Founder - Community Connection Consulting
Gwen Allen-Carston, Executive Director - Kent Black Action Commission (KBAC)
Michael Greenwood, Chief Commander - National Association of Black Veterans (NABVETS) Seattle
Roberto Jourdan, President - Seattle Black Firefighters Association
Verlene Jones, Director - A. Philip Randolph Institute (APRI) Seattle, WA Chapter
Claude Burfect, Executive Board Member - King County Labor Council
Jacquie Jones-Welsh, President - Blacks in Government
Ted Thomas, President - Coalition of Black Trade Unionists
Velma Veloria, Organizer and Policy Advocate - Faith Action Network
Michele D. Evans, Member - Seattle Chapter African American Political Action Committee
Don T. Dudley, Member - MLK County Chapter African American Political Action Committee
Carl L. Hightower, President - African American Veterans Group of Washington State
Richard Johnson, Director of Public Relations - Kent Black Action Commission (KBAC)
Reverend Steve Baber, Cho-Chair - Washington Christian Leadership Coalition
Dr. Art Banks, Co-Chair - Washington Christian Leadership Coalition
Reverend Aaron Williams, Member - United Black Christian Clergy
Clyde Merriwether, Member - African American Political Action Committee
Reverend Dr. Charles Horne, Executive Director - Tacoma Ministerial Alliance HCDC
Oscar Eason, President NAACP Seattle, WA Chapter
LATINO CIVIC ALLIANCE
Nina Martinez, Chair
Claudia D'Allegrim, Vice Chair
Mateo Arteaga, Treasurer
Sandra Rodarte, Secretary
MBAC Letter to Sound Transit
Minority Business Concerns Violations of Title VI
September 14, 2016
Page 7 of 8
Jimmy Matta, Member
Sergio Castaneda, Member
Gabriel Portugal, Member
Ruvine Jimenez, Member
Chris Paredes, Member
Enrique Lopez, Member
Gustavo Ramos, Member
Nick Marquez, Member
Larry Sanchez, Member
ETHNIC BUSINESS COALITION
Taylor Hoang, Executive Director
Heather Jensvold, Public Relations and Marketing
Keiko Okada, Administration & Outreach Manager
Susanna Tran, Board Member
Soon Beng Yeap, Ph.D., Board Member
I-Miun Liu, Board Member
Assunta Ng, Board Member
Markham McIntyre, Board Member
NATIONAL ASSOCIATION OF MINORITY CONTRACTORS LEADERSHIP
Wendell Stemley, National President
Kaye Gantt, National Executive Vice President
Pete Varma, National Treasurer
Rosalind Styles, National Secretary
Lisa ColonHeron, General Counsel
Nayan Parikh, National Board Member
Arthur Queen, President Emeritus
Gloria Shealey, National Board Member Emeritus
Melvin Griffin, National Board Member Emeritus
Art Landers, National Board Member Emeritus
Kathy Meyer, National Board Member Emeritus
R. C. Armstead, Washington State Chapter
Jan Bryson, Atlanta, GA Chapter
Frank Chiaramonte, Washington, DC Metro Area Chapter
James Clayton, North Carolina Chapter
Joseph Coello, New York State Chapter
Sharon Coleman, Southern California Chapter
Leonardo Fabio, New York State Chapter
Keith Forney, Washington, DC Metro Area Chapter
Robert J. Gonzalez, Greater Houston Chapter
Carlo Lachmansingh, Upper Midwest Chapter
Xavier Leal, Greater Houston Chapter
Dr. Louis Lynn, South Carolina Chapter
Brian Mitchell, Wisconsin State Chapter
Dan Moncrief, National Member
Necole Parker, Atlanta, GA Chapter
Richard Platt, Wisconsin State Chapter
Alando Simpson, Oregon State Chapter
Hilton Smith, Major Corporate Group
Vic Verma, Atlanta, GA Chapter
Joseph Argrette, New York State Chapter
John Macklin, Philadelphia, PA Chapter
Gloria Shealey, North Carolina Chapter
MBAC Letter to Sound Transit
Minority Business Concerns Violations of Title VI
September 14, 2016
Page 8 of 8
ASSOCIATED GENERAL CONTRACTORS
Nancy Munro, President
Jake Jacobson, Frist Vice President
David D'Hondt, Executive Vice President
Jerry Vanderwood, Chief Lobbyist
PORT OF SEATTLE
MEMORANDUM
COMMISSION AGENDA Item No. 7c
STAFF BRIEFING
Date of Meeting January 26, 2016
DATE: January 20, 2016
TO: Ted Fick, Chief Executive Officer
FROM: Ralph Graves, Senior Director, Capital Development
David Freiboth, Senior Director, Labor Relations
SUBJECT: Construction Labor Relations
SYNOPSIS
The Port and its tenants construct facilities to support public and commercial activities.
This briefing presents a draft Construction Labor Relations Resolution to set policy
governing employment on projects constructed on Port property. The purposes of the
proposed policy are to expand access to construction jobs; ensure fair treatment of
workers; promote labor harmony and uninterrupted work progress; and improve safety at
construction sites.
BACKGROUND
Port of Seattle facilities support regional transportation, job creation and economic
development. Labor harmony is essential to ensure uninterrupted delivery of critically
needed facilities. State prevailing wage standards help ensure equitable pay for
construction workers. Apprenticeship utilization requirements, along with aspirational
hiring goals for women and minorities, promote access to construction jobs. Project
labor agreements (PLAs), and related construction workforce agreements (CWAs),
provide means to align the interests of public owners such as the Port with those of
construction labor unions.
In 1999 the Port entered into a broad PLA with regional construction unions that
governed employment on many of the construction contracts for airport terminal
expansion, construction of the Third Runway and creation of the Smith Cove Cruise
Terminal. In 2009 the Port clarified criteria for determining when a PLA would be
required and began negotiating and administering PLAs with in-house staff. In the past
five years, 28 of 109 Port major construction contracts have been covered by PLAs. This
26% of contracts has encompassed 80% of dollars and 66% of jobs during the period.
While PLAs provide the benefits described above, the Port is aware that PLAs may
adversely affect small businesses that are less likely to employ union labor.
Construction at Port properties may be funded and administered by the Port, administered
by tenants with Port financial support or administered and funded by tenants. The
Template revised May 30, 2013.
COMMISSION AGENDA
Ted Fick, Chief Executive Officer
January 20, 2016
Page 2 of 2
proposed resolution affirms criteria for determining when the Port will enter into PLAs
on projects the Port administers, requires prevailing wages to be paid on construction
contracts funded entirely or in part by the Port and directs encouragement of tenants to
employ similar criteria and procedures on construction contracts that they administer.
PLA DECISION CRITERIA
Project needs for labor continuity and stability
Project complexity, cost and duration
Value of having uniform working conditions
Potential impact of PLA on small business
Past labor disputes or issues
Potential impact on project cost
Specific public safety concerns
Value of PLA processes to resolve disputes
LABOR POLICY PROPOSAL FOR 3 TYPES OF CONSTRUCTION
CONTRACTS
Port Contracts
o Largely continues per recent practice
o Add presumption of using PLA for contracts exceeding $10M
o Continue apprenticeship goals and consider locality hiring
Port Reimbursed
o Encourage employing PLA per Port practice
o Require paying and reporting prevailing wages
o Encourage hiring goals
Tenant Funded
o Encourage employing PLA per Port practice
o Make construction labor measures and element of lease competitions and
incorporate proposed measures into leases
o Encourage hiring goals
ATTACHMENTS TO THIS BRIEFING
Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
None
Limitations of Translatable Documents
PDF files are created with text and images are placed at an exact position on a page of a fixed size.
Web pages are fluid in nature, and the exact positioning of PDF text creates presentation problems.
PDFs that are full page graphics, or scanned pages are generally unable to be made accessible, In these cases, viewing whatever plain text could be extracted is the only alternative.