-
OREGON DEPARTMENT OF TRANSPORTATION 2016 AVAILABILITY AND
DISPARITY STUDY
Final Report June 2016 Prepared for:
Oregon Department of Transportation 355 Capitol Street NE, MS 11
Salem, OR 97301-3871
Prepared by:
Keen Independent Research LLC 100 Fillmore Street, 5th Floor
Denver CO 80206 303-385-8515 928-684-3021 (fax)
www.keenindependent.com [email protected]
http://www.keenindependent.com/mailto:[email protected]
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY TABLE OF CONTENTS,
I
TABLE OF CONTENTS
EXECUTIVE SUMMARY. ODOT 2016 DISPARITY STUDY
A. Background
....................................................................................................................
ES-2 B. Disparity Study Research Activities
...............................................................................
ES-2 C. Availability Results and Base Figure for ODOT Overall DBE
Goal .................................. ES-4 D. Potential
Adjustments to Calculate the Overall DBE Goal
............................................. ES-7 E. Information
to Project the Portion of the Overall Goal to be Met through
Neutral Means
...............................................................................................................
ES-7 F. Quantitative and Qualitative Information for the Oregon
Marketplace ....................... ES-9 G. Disparity Analysis for
ODOT Contracts
........................................................................
ES-10 H. Recommendations
.......................................................................................................
ES-13 I. Next Steps in the Disparity Study Process
...................................................................
ES-14
CHAPTER 1. INTRODUCTION
A. Study team
.......................................................................................................................
1-2 B. Federal DBE Program
.......................................................................................................
1-2 C. Oregon MWESB Program and Other Programs
............................................................... 1-5
D. Previous Disparity Analyses Regarding ODOT Contracts
................................................. 1-6 E. Analyses
Performed in the 2016 Disparity Study and Location of Results
...................... 1-6 F. Public Participation in the 2016
Disparity Study
............................................................. 1-9
G. Public Comment Process for the 2016 Disparity Study Report and
ODOT DBE Goal .... 1-10
CHAPTER 2. LEGAL FRAMEWORK
A. The Federal DBE Program
................................................................................................
2-3 B. State and Local MBE/WBE Programs in the United States
.............................................. 2-5 C. Legal
Standards that Race- and Gender-Conscious Programs Must Satisfy
.................... 2-5
CHAPTER 3. ODOT TRANSPORTATION CONTRACTS
A. Overview of ODOT Transportation Contracts
..................................................................
3-1 B. Collection and Analysis of ODOT Contract Data
.............................................................. 3-3
C. Types of Work Involved in ODOT Contracts
....................................................................
3-5 D. Location of Businesses Performing ODOT Work
.............................................................
3-8
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY TABLE OF CONTENTS,
II
CHAPTER 4. ODOT OPERATION OF THE FEDERAL DBE PROGRAM
A. Setting an Overall Annual DBE Goal – 49 CFR Section 26.45
........................................... 4-1 B. Role of Race-
and Gender-Neutral Measures in Meeting the Goal
................................. 4-2 C. Types of Race- and
Gender-Neutral Measures
................................................................
4-3 D. Use of Any Race- and Gender-Conscious Measures
...................................................... 4-12 E.
Statements, Reporting and Recordkeeping
...................................................................
4-19 F. Summary
........................................................................................................................
4-20
CHAPTER 5. MARKETPLACE CONDITIONS
A. Historical Context in Oregon
...........................................................................................
5-2 B. Entry and Advancement
..................................................................................................
5-5 C. Business Ownership
.........................................................................................................
5-7 D. Access to Capital, Bonding and Insurance
.......................................................................
5-9 E. Success of Businesses
....................................................................................................
5-15 F. Summary
........................................................................................................................
5-21
CHAPTER 6. AVAILABILITY ANALYSIS
A. Purpose of the Availability Analysis
.................................................................................
6-1 B. Definitions of MBEs, WBEs, Certified DBEs, Potential DBEs
and
Majority-owned Businesses
.............................................................................................
6-2 C. Information Collected about Potentially Available Businesses
....................................... 6-5 D. Businesses Included
in the Availability Database
............................................................ 6-8 E.
MBE/WBE Availability Calculations on a Contract-by-Contract Basis
............................. 6-9 F. Availability Results
.........................................................................................................
6-12 G. Base Figure for ODOT’s Overall DBE Goal for FHWA-funded
Contracts ........................ 6-13
CHAPTER 7. UTILIZATION AND DISPARITY ANALYSIS
A. Overview of the Utilization Analysis
................................................................................
7-1 B. Overall MBE/WBE and DBE Utilization on ODOT Contracts
............................................ 7-4 C. Utilization by
Racial, Ethnic and Gender Group
.............................................................. 7-6
D. Disparity Analysis for ODOT Contracts
..........................................................................
7-10 E. Statistical Significance of Disparity Analysis Results
...................................................... 7-17
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY TABLE OF CONTENTS,
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CHAPTER 8. FURTHER EXPLORATION OF MBE/WBE AND DBE UTILIZATION ON
FHWA- AND STATE-FUNDED CONTRACTS
A. Contracts With and Without DBE Contract Goals
........................................................... 8-1 B.
Construction and Engineering Contracts
.........................................................................
8-2 C. ODOT Contracts and Local Public Agency (LPA) Contracts
.............................................. 8-3 D. ODOT Regions
..................................................................................................................
8-4 E. Prime Contracts and Subcontracts
..................................................................................
8-5 F. Analysis of Potential Barriers to MBE/WBE/DBE Participation
in ODOT
Construction Contracts
....................................................................................................
8-6 G. Analysis of Potential Barriers to MBE/WBE/DBE Participation
in ODOT
Engineering-related Prime Contracts
............................................................................
8-12 H. ODOT Operation of the Federal DBE Program, including
Overconcentration
Analysis
..........................................................................................................................
8-16 I. Summary from Further Exploration of MBE/WBE and DBE
Utilization ......................... 8-23
CHAPTER 9. OVERALL ANNUAL DBE GOAL
A. Establishing a Base Figure
................................................................................................
9-1 B. Consideration of a Step 2 Adjustment
.............................................................................
9-2
CHAPTER 10. PORTION OF DBE GOAL FOR FHWA-FUNDED CONTRACTS TO BE
MET THROUGH NEUTRAL MEANS
A. Is there evidence of discrimination within the local
transportation contracting marketplace for any racial, ethnic or
gender groups? ...................................................
10-3
B. What has been the agency’s past experience in meeting its
overall DBE goal? ............ 10-5 C. What has DBE participation
been when ODOT has not applied DBE contract goals
(or other race-conscious remedies)?
.............................................................................
10-6 D. What is the extent and effectiveness of race- and
gender-neutral measures that
the agency could have in place for the next fiscal year?
.............................................. 10-7 E. Summary
........................................................................................................................
10-8
CHAPTER 11. RECOMMENDATIONS
1. Openness
.......................................................................................................................
11-2 2. Simplicity
.......................................................................................................................
11-4 3. Fairness
..........................................................................................................................
11-5 4. Transparency
.................................................................................................................
11-9 5. Impact
............................................................................................................................
11-9 6. Monitored and improving
...........................................................................................
11-13
Summary
......................................................................................................................
11-16
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY TABLE OF CONTENTS,
IV
APPENDIX A. DEFINITION OF TERMS
...........................................................................................
A-1
APPENDIX B. LEGAL FRAMEWORK AND ANALYSIS
A. Introduction
.....................................................................................................................
B-1 B. U.S. Supreme Court Cases
...............................................................................................
B-4 C. The Legal Framework Applied to the Federal DBE Program and
State and Local
Government MBE/WBE Programs
...................................................................................
B-7 D. Recent Decisions Involving the Federal DBE Program and State
or Local
Government MBE/WBE Programs in the Ninth Circuit
................................................. B-29 E. Recent
Decisions Involving the Federal DBE Program and its Implementation
in
Other Jurisdictions
.........................................................................................................
B-61 F. Recent Decisions Involving State or Local Government
MBE/WBE Programs in
Other Jurisdictions
.......................................................................................................B-116
G. Recent Decisions and Authorities Involving Federal Procurement
that May Impact
DBE and MBE/WBE Programs
......................................................................................B-189
APPENDIX C. CONTRACT DATA COLLECTION
A. ODOT Contract and Agreement Data
..............................................................................
C-1 B. Local Certification Program Contract Data
......................................................................
C-3 C. ODOT Bid and Proposal Data
...........................................................................................
C-4 D. Characteristics of Utilized Firms and Bidders
..................................................................
C-4 E. ODOT and External Stakeholder Review
.........................................................................
C-4 F. Data Limitation
................................................................................................................
C-5
APPENDIX D. GENERAL APPROACH TO AVAILABILITY ANALYSIS
A. General Approach to Collecting Detailed Availability
Information ................................ D-1 B. Development of
the Survey Instruments
.......................................................................
D-6 C. Execution of Surveys
.......................................................................................................
D-8 D. Additional Considerations Related to Measuring Availability
...................................... D-11 E. ODOT Disparity Study
— Standard Availability Survey Instrument
.............................. D-15
APPENDIX E. ENTRY AND ADVANCEMENT IN THE OREGON CONSTRUCTION AND
ENGINEERING INDUSTRIES
A. Introduction
.....................................................................................................................
E-1 B. Construction Industry
......................................................................................................
E-4 C. Engineering Industry
......................................................................................................
E-17 D. Summary
........................................................................................................................
E-22
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY TABLE OF CONTENTS,
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APPENDIX F. BUSINESS OWNERSHIP IN THE OREGON CONSTRUCTION AND
ENGINEERING INDUSTRIES
A. Business Ownership Rates
...............................................................................................
F-1 B. Business Ownership Regression Analysis
........................................................................
F-6 C. Summary of Business Ownership in the Construction and
Engineering Industries ....... F-12
APPENDIX G. ACCESS TO CAPITAL FOR BUSINESS FORMATION AND
SUCCESS
A. Homeownership and Mortgage Lending
........................................................................
G-2 B. Access to Business Capital
............................................................................................
G-14 C. Bonding and Insurance
.................................................................................................
G-31 D. Summary
.......................................................................................................................
G-33
APPENDIX H. SUCCESS OF BUSINESSES IN THE OREGON CONSTRUCTION AND
ENGINEERING INDUSTRIES
A. Participation in Public and Private Sector Markets
........................................................ H-2 B.
Relative Bid Capacity
.....................................................................................................
H-6 C. Business Closures, Expansions and Contractions
.......................................................... H-9 D.
Business Receipts and Earnings
...................................................................................
H-15 E. Availability Survey Results Concerning Potential Barriers
........................................... H-24
APPENDIX I. DESCRIPTION OF DATA SOURCES FOR MARKETPLACE
ANALYSES
A. IPUMS Data
.......................................................................................................................
I-1 B. Survey of Small Business Finances (SSBF)
.........................................................................
I-9 C. Survey of Business Owners (SBO)
...................................................................................
I-11 D. Home Mortgage Disclosure Act (HMDA) Data
...............................................................
I-12
APPENDIX J. QUALITATIVE INFORMATION FROM IN-DEPTH PERSONAL
INTERVIEWS, TELEPHONE INTERVIEWS, PUBLIC MEETINGS AND WRITTEN
COMMENTS
A. Introduction and Background
..........................................................................................
J-2 B. Background on the Businesses in Oregon
.......................................................................
J-6 C. Economic Conditions Affecting the Transportation Contracting
Industry in Oregon .... J-20 D. Public and Private Sector
Transportation Contracting in Oregon
................................. J-28 E. Doing Business as a Prime
Contractor or as a Subcontractor
........................................ J-38 F. Keys to Business
Success and Any Barriers in the Way
................................................. J-48 G.
Experience Doing Business with Public Agencies Including Oregon
Department
of Transportation
...........................................................................................................
J-64 H. Allegations of Unfair Treatment
....................................................................................
J-99 I. Information Regarding any Racial-, Ethnic- or Gender-based
Discrimination ............. J-105 J. Insights Regarding Business
Assistance Programs, Changes in Contracting
Processes or Any Other Neutral Measures
..................................................................
J-120
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY TABLE OF CONTENTS,
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K. Insights Regarding DBE/MWESB Programs and Other Related Race-
and Gender-based Measures
.............................................................................................
J-150
L. DBE and MWESB Certification
.....................................................................................
J-170 M. Any Other Insights and Recommendations for ODOT
................................................. J-178
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
PAGE 1
EXECUTIVE SUMMARY. ODOT 2016 Disparity Study
The Oregon Department of Transportation (ODOT) is required to
implement the Federal Disadvantaged Business Enterprise (DBE)
Program as a condition of receiving funding from the U.S.
Department of Transportation (USDOT). ODOT’s operation of the
Federal DBE Program is guided by federal regulations and
instructions from USDOT.
ODOT has periodically conducted disparity studies since 2007 to
analyze whether there is a level playing field for minority- and
women-owned firms in the Oregon transportation contracting
industry. The information collected through these studies helps
ODOT operate the Federal DBE Program in compliance with Title 49
Code of Federal Regulations (CFR) Part 26, USDOT guidance and Ninth
Circuit case law. ODOT’s last disparity study was completed in
2011.
In late 2014 ODOT engaged a team led by Keen Independent
Research LLC (Keen Independent) to prepare the 2016 Disparity
Study, which examines the relative availability and participation
of minority- and women-owned firms in ODOT’s contracts from October
2010 through September 2014. The disparity study also analyzes
conditions for minorities, women, and minority- and women-owned
firms within the Oregon marketplace. Finally, the study identifies
recommendations and specific steps that may be taken to encourage
utilization of all small businesses in ODOT contracting as well as
programs specific to DBEs.
Information from the 2016 Disparity Study will assist ODOT with
the following:
Setting an overall annual goal for DBE participation in its
contracts funded by the Federal Highway Administration (FHWA) for
federal fiscal years 2017 through 2019;
Evaluating whether it can attain its overall DBE goal solely
through neutral measures, or whether race- or gender-conscious
measures are also needed; and
Determining the specific race, ethnic and gender groups that may
be eligible for any race- or gender-conscious program elements,
such as DBE contract goals.
This Executive Summary includes:
A. Background; B. Disparity Study research activities; C.
Availability results and base figure for the overall DBE goal; D.
Potential adjustments to calculate ODOT’s overall DBE goal; E.
Information to project the portion of the overall goal to be met
through neutral means; F. Quantitative and qualitative information
for the Oregon marketplace; G. Disparity analysis for ODOT
contracts; H. Recommendations; and I. Next steps in the Disparity
Study process.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
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A. Background
For federal fiscal years (FFYs) 2015 and 2016, ODOT’s overall
goal for DBE participation on its FHWA-funded contracts is 13.1
percent. The agency is attempting to meet that goal through a
combination of neutral and race- and gender-conscious measures.
ODOT must implement the Federal DBE Program in light of the
pivotal 2005 Ninth Circuit Court of Appeals decision in Western
States Paving Co. v. Washington State DOT. The Court upheld the
constitutionality of the Federal DBE Program, but found that
Washington State DOT failed to show its implementation of the
Federal DBE Program was narrowly tailored.
In response to the Western States Paving decision and per USDOT
guidance, state and local agencies affected by the decision,
including ODOT, suspended use of race- and gender-conscious program
elements such as setting goals for DBE participation on
federally-funded contracts. USDOT recommended that agencies conduct
disparity studies to determine how they might narrowly tailor the
Federal DBE Program to their local industries. ODOT completed a
disparity study in 2007 and, based on the results, began setting
DBE contract goals again in FFY 2008 for its construction
contracts. However, as a result of the study findings, only a
subset of DBE groups was eligible to meet contract goals. ODOT
completed an update report in 2011 and, based on the results,
continued setting DBE goals on construction contracts and
reinstated setting goals on architectural and engineering and
related services contracts. Again, only a subset of DBE groups was
eligible to meet contract goals.
A 2013 Ninth Circuit decision regarding operation of the Federal
DBE Program by the California Department of Transportation
(Caltrans) provides further direction on agency implementation of
the program. Leaders of the Keen Independent team directed the 2007
Caltrans disparity study and helped to defend Caltrans when a
contractors association challenged its operation of the Federal DBE
Program. The Ninth Circuit favorably reviewed the methodology and
information provided in the disparity study and determined that the
information supported Caltrans’ operation of the Federal DBE
Program. Keen Independent applied a methodology in the 2016
Disparity Study for ODOT that is very similar to what the Court
favorably reviewed in the Caltrans case.
B. Disparity Study Research Activities
Keen Independent began the Disparity Study in November 2014. The
study team includes Holland & Knight, a law firm; local
subconsultants JLA Public Involvement, Benetti Partners, Donaldson
Enterprises, Merina & Company and Customer Research
International, a survey firm.
Stakeholder engagement and other public input. Throughout the
study, the study team consulted with an External Stakeholder Group
that included representatives from DBE-certified firms, other
businesses, industry associations, other public agencies and FHWA.
The team set up a study website, dedicated email address, and a
telephone hotline, and both ODOT and the study team conducted
extensive communications with the public from the beginning of the
study. This included requests for public input and public meetings
held at the start of the study in 2015 and in upon release of a
draft report to the public in spring 2016. Also, ODOT and the
External Stakeholder Group reviewed the race, ethnicity, and gender
contractor data together before Keen Independent completed the
disparity analysis.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
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Data collection and review. The study team collected information
about FHWA- and state-funded contracts awarded by ODOT or by local
agencies from October 2010 through September 2014. The contract
data included 8,027 prime contracts and subcontracts totaling $1.9
billion.
Utilization analysis. Keen Independent identified the race,
ethnicity and gender ownership of companies receiving ODOT prime
contracts or subcontracts through a combination of sources,
including telephone interviews with those firms. The team then
calculated the value of the contracts and subcontracts awarded to
each contractor, or the contractor’s “utilization.” The utilization
analysis then examined the value of contracts awarded to
minority-owned firms (by race and ethnicity), white women-owned
firms and majority-owned firms (firms that are not minority- or
women-owned).
Relevant market area determination. Because 88 percent of ODOT
contract dollars during the study period went to firms located in
Oregon or the two Washington counties within the Portland
Metropolitan Area, the study team defined Oregon and Southwest
Washington as the study area. Keen Independent examined
quantitative and qualitative information about the statewide
transportation contracting industry gathered through survey
research, secondary data and in-depth interviews with
representatives of 71 companies, trade associations and other
public agencies throughout the state.
Benchmark availability determination. The study team completed
telephone surveys with thousands of businesses to determine the
benchmark availability of different types of businesses for
individual ODOT prime contracts and subcontracts. The availability
analysis also examined the size and location of prime contracts and
subcontracts when determining a firm’s availability for specific
ODOT contracts.
Contracting disparity analysis. The study team then compared the
percentage of contract dollars going to minority-, white women, and
majority-owned firms to the benchmark availability for each
group.
Overall DBE goal calculations. Finally, Keen Independent
prepared analyses that would help ODOT set an overall goal for DBE
participation on FHWA-funded contracts, project the portion to be
met through neutral means, and determine which groups of DBEs might
be eligible for any race- and gender-conscious programs such as DBE
contract goals.
The full Disparity Study report is more than 700 pages in length
and provides a complete discussion of methodology and study
information. The following briefly summarizes results.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
PAGE 4
C. Availability Results and Base Figure for ODOT Overall DBE
Goal
Keen Independent compiled information about the availability of
minority- and white women-owned firms (MBEs and WBEs, regardless of
certification status) and majority-owned firms (firms with less
than 51 percent minority or women ownership) for work in ODOT
transportation contracts. The study team used this information to
establish availability benchmarks for MBE and WBE utilization that
could be compared with actual MBE and WBE utilization observed for
ODOT contracts.
The study team also used availability analyses as inputs to the
overall DBE goal for FHWA-funded contracts. Keen Independent
calculated the overall goal based on firms currently certified as
DBEs (“current DBEs”) and those minority- and women-owned firms
that potentially could be certified as DBEs (“potential DBEs”). Not
all MBE/WBEs are current or potential DBEs, as explained below.
Database of firms available for ODOT contracts. Keen Independent
created a master availability database that contains detailed
information from businesses about the types, sizes and locations of
the highway construction and engineering-related work they perform.
The study team surveyed firms that had expressed interest in ODOT
work or operated in fields related to highway construction and
engineering. The study team’s final availability database included
1,639 businesses with qualifications and interest in specific types
of ODOT and local agency transportation contracting. Of those 1,639
businesses, 446 (27%) were minority- or women-owned.
Figure ES-1 shows the number of businesses by ownership in the
availability database for this study. Because results are a simple
headcount of firms with no analysis of availability for specific
ODOT contracts, they only reflect the first step in the
availability analysis.
Figure ES-1. Number of minority-, women- and majority-owned
businesses included in the availability database
Note:
Numbers rounded to nearest tenth of 1 percent. Percentages may
not add to totals due to rounding.
Source:
Keen Independent availability analysis.
Dollar-weighted availability. For each of the availability
analyses prepared for this study, Keen Independent developed
dollar-weighted availability benchmarks:
The study team identified specific characteristics of each of
the 8,027 prime contracts and subcontracts included in the set of
contracts being analyzed.
Race/ethnicity and gender
African American-owned 38 2.3 %Asian-Pacific American-owned 27
1.6Subcontinent Asian American-owned 15 0.9Hispanic American-owned
57 3.5Native American-owned 35 2.1 Total MBE 172 10.5 %
WBE (white women-owned) 274 16.7 Total MBE/WBE 446 27.2 %
Total majority-owned firms 1,193 72.8 Total firms 1,639 100.0
%
Number of firms
Percent of firms
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
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For each prime contract and subcontract, Keen Independent
identified the businesses in the detailed availability database
that indicated that they performed the type, size and location of
work pertinent to that prime contract or subcontract. After the
available firms for a prime contract or subcontract were
identified, the study team calculated the percentage of available
firms that were minority-owned (by group), white women-owned and
majority-owned.
Once Keen Independent had calculated availability for 8,027
individual prime contracts and subcontracts, the study team
developed aggregate availability results across all prime contracts
and subcontracts. The first step to aggregating results was to
determine dollar weights for the availability figures for each
prime contract and subcontract. Keen Independent calculated weights
by dividing the value of that prime contract or subcontract by the
total dollars of all the contracts ($1.9 billion when examining all
contracts). After applying the weights to the results of the
availability analysis for each prime contract and subcontract, Keen
Independent added the results to calculate overall availability
estimates for WBEs and each MBE group for the entire set of
contracts.
Including all 8,027 prime contracts and subcontracts,
dollar-weighted MBE/WBE availability was 19.24 percent. In other
words, if there were a level playing field for firms available for
ODOT work, MBE/WBEs might be expected to receive 19.24 percent of
ODOT transportation contract dollars. This dollar-weighted
availability was lower than the proportion of firms in the
availability database that were MBE/WBEs (27%) because minority-
and women-owned firms comprised a smaller portion of firms
available for large highway construction prime contracts than for
specialty trade prime contracts or subcontracts. Figure ES-2
presents dollar-weighted availability results for FHWA-funded,
state-funded and all contracts combined.
Figure ES-2. Overall dollar-weighted availability estimates for
MBE/WBEs for ODOT FHWA- and state-funded contracts, October
2010–September 2014
Note: Numbers may not add to totals due to rounding.
Source: Keen Independent availability analysis.
Race/ethnicity and gender
African American-owned 2.92 % 2.59 % 2.86 %Asian-Pacific
American-owned 0.83 1.04 0.86 Subcontinent Asian American-owned
0.62 0.81 0.66 Hispanic American-owned 2.31 2.09 2.27 Native
American-owned 2.78 2.34 2.71 Total MBE 9.47 % 8.86 % 9.37 %
WBE (white women-owned) 9.82 10.15 9.88 Total MBE/WBE 19.29 %
19.01 % 19.24 %
FHWA State Total
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
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Converting MBE/WBE availability to identify current and
potential DBEs for the base figure. Figure ES-3 provides the
calculations to separately identify current and “potential” DBE
availability from the 19.29 percent MBE/WBE availability figure for
FHWA-funded contracts shown in Figure ES-2. There were three groups
of MBE/WBEs that Keen Independent did not count as
current/potential DBEs when calculating the base figure:
Graduated or been denied DBE certification. Keen Independent did
not include MBE/WBEs that in recent years graduated from the DBE
Program or had applied for DBE certification in Oregon and had been
denied (based on information supplied by ODOT’s Office of Civil
Rights). This was three firms.
Revenue exceeding DBE size limits. The study team did not count
MBE/WBEs with average annual revenue that exceeded the revenue
limits for DBE certification for their subindustry. This was 18
firms.
Ineligible for public contracts. Also excluded were MBE/WBEs in
the availability surveys that are prohibited from work for any
portion of the FFY 2017-FFY 2019 time period based on their
inclusion on the Oregon Bureau of Labor and Industries (BOLI) List
of Contractors Ineligible to Received Public Works Contracts (as of
November 2, 2015). This was one firm.
Adjusting for these three categories of MBE/WBEs reduces the
base figure for FHWA-funded contracts by 3.45 percentage points.
The base figure for ODOT’s overall DBE goal is 15.84 percent. It
represents the level of current/potential DBE participation
anticipated based on analysis of FHWA-funded contracts from October
2010 through September 2014.
Assuming ODOT’s mix of future FHWA-funded contracts is expected
to be similar to FHWA-funded contracts from October 2010 through
September 2014, Keen Independent recommends that ODOT use the 15.84
percent current/potential DBE availability figure as the “base
figure” when determining its overall DBE goal for FFY 2017 through
FFY 2019.
Figure ES-3. Overall dollar-weighted availability estimates for
current and potential DBEs for FHWA-funded contracts, October
2010–September 2014
Note: Numbers may not add to totals due to rounding.
Source: Keen Independent availability analysis.
Calculation of base figure FHWA
Total MBE/WBE 19.29 %
Less firms that graduated from the DBE Program or denied DBE
certification in recent years or exceed revenue thresholds or on
BOLI list 3.45
Subtotal 15.84 %
Plus white male-owned DBEs --
Current and potential DBEs 15.84 %
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
PAGE 7
For purposes of comparison, Keen Independent also performed
dollar-weighted availability calculations for currently-certified
DBEs. The dollar-weighted availability of current DBEs is 6.00
percent.
D. Potential Adjustments to Calculate the Overall DBE Goal
Per the Federal DBE Program, ODOT must consider potential
adjustments to the base figure as part of determining its overall
annual DBE goal for FHWA-funded contracts. The Federal DBE Program
outlines factors that an agency must consider when assessing
whether to make any adjustments to its base figure:
1. Current capacity of DBEs to perform work, as measured by the
volume of work DBEs have performed in recent years;
2. Information related to employment, self-employment,
education, training, and unions; 3. Any disparities in the ability
of DBEs to get financing, bonding and insurance; and 4. Other
relevant factors.
If ODOT makes a downward step 2 adjustment reflecting current
capacity to perform work, its overall DBE goal for FHWA-funded
contracts might be 11.63 percent. If ODOT decides to not make a
downward adjustment and to make an upward adjustment that reflects
analyses of business ownership rates, its overall DBE goal might be
21.31 percent. ODOT might also choose to not make a step 2
adjustment, which would mean a DBE goal of 15.84 percent. Figure
ES-4 summarizes this information and Chapter 9 further explains
these calculations.
Figure ES-4. Potential step 2 adjustments to overall DBE goal
for FHWA-funded contracts, FFY 2017–FFY 2019
Note:
For further explanation see Chapter 9.
E. Information to Project the Portion of the Overall Goal to be
Met through Neutral Means
The Federal DBE Program requires state and local transportation
agencies to meet the maximum feasible portion of their overall DBE
goals using race- and gender-neutral measures.1 Race- and
gender-neutral measures are initiatives that encourage the
participation of all businesses, or all small
1 49 CFR Section 26.51.
Downward step 2 adjustment Base figure Upward step 2
adjustment0%
5%
10%
15%
20%
25%
30%
11.63%
15.84%
15.8%
21.31%
21.3%
100%
(past participation) ("but for" analysis)
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
PAGE 8
businesses, and are not specifically limited to MBE/WBEs or
DBEs. Agencies must determine whether they can meet their overall
DBE goals solely through neutral means or whether race- and
gender-conscious measures — such as DBE contract goals — are also
needed. As part of doing so, agencies must project the portion of
their overall DBE goals that they expect to meet (a) through race-
and gender-neutral means, and (b) through race- and
gender-conscious programs (if any).
If an agency determines that it can meet its overall DBE goal
solely through race- and gender-neutral means, then it would
propose using only neutral measures in its operation of the Federal
DBE Program.
If an agency determines that a combination of race- and
gender-neutral and race- and gender-conscious measures are needed
to meet its overall DBE goal, then the agency would propose using a
combination of neutral and conscious measures when operating the
Federal DBE Program.
Projections of goal attainment through neutral means. USDOT
offers guidance concerning how transportation agencies should make
these projections. Using this information, Keen Independent
analyzed different approaches ODOT could apply when making its
projection for FFY 2017 through FFY 2019.
The most complete and accurate information about past DBE
participation in a neutral environment comes from Keen
Independent’s utilization analysis for contracts without DBE
contract goals. ODOT achieved 5.0 percent DBE participation on ODOT
contracts without DBE contract goals based on Keen Independent
analysis of these contracts from October 2010 through September
2014.
Using this 5.0 percentage point projection for illustration,
Figure ES-5 summarizes this analysis for three different examples
of overall DBE goals that ODOT might select. In each column, the
neutral projection (row 2) is subtracted from the overall DBE goal
(row 1) to derive the race-conscious projection (row 3). The
left-most column of results presents ODOT’s overall goal and
neutral projection for the current time period (FFY 2015 through
FFY 2016).
Figure ES-5. Current ODOT overall DBE goal and projections of
race-neutral for FHWA-funded contracts for FFY 2014–FFY2016 and
examples of overall goal and projections for FFY 2017 through FFY
2019
Source: Keen Independent analysis.
Component of overall DBE goal
Overall goal 13.10 % 11.63 % 15.84 % 21.31 %
Neutral projection - 7.90 - 5.00 - 5.00 - 5.00
Race-conscious projection 5.20 % 6.63 % 10.84 % 16.31 %
FFY 2017- FFY 2019Upward
adjustmentBase figureDownward adjustment
FFY 2015-FFY 2016
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
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Determining whether there is evidence of discrimination. Before
making the projection of neutral attainment and determining whether
it will use DBE contract goals for any group, or which groups, ODOT
must consider whether there is evidence of discrimination within
the local transportation contracting marketplace for any racial,
ethnic or gender groups.
In Western States Paving, the Ninth Circuit Court of Appeals
held the recipient of federal funds must have independent evidence
of discrimination within the recipient’s own transportation
contracting marketplace in order to determine whether or not there
is the need for race-, ethnicity-, or gender-conscious remedial
action.2 In Western States Paving, and in AGC, SDC v. Caltrans, the
Ninth Circuit 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 that
suffered discrimination. Thus, under a race- or ethnicity-conscious
program, for each of the minority groups to be included in any
race- or ethnicity-conscious elements in a recipient’s
implementation of the Federal DBE Program, there must be evidence
that the minority group suffered discrimination within the
recipient’s marketplace.3
ODOT should review the results of this disparity study and other
information it has when making this determination. The balance of
this Executive Summary briefly outlines key information provided in
the full report concerning quantitative and qualitative information
for the Oregon marketplace; and results of the disparity analysis
for ODOT contracts.
F. Quantitative and Qualitative Information for the Oregon
Marketplace
As discussed in Chapter 5 of the report and in supporting
appendices, there is quantitative and qualitative information
indicating that there is not a level playing field for minorities
and women, and minority- and women-owned businesses, in the Oregon
transportation contracting industry.
Summary of quantitative information. From Keen Independent’s
analysis of U.S. Bureau of the Census data, survey data and other
information, there is quantitative information indicating
disparities for certain minority groups and women regarding entry
and advancement as employees within the industry, disparities in
business ownership, disparities concerning access to capital and
bonding, and certain disparities in success of minority- and
women-owned firms. Also, relatively more minority- and women-owned
firms report difficulties networking with prime contractors or
customers based on survey data.
There was evidence of disparities in the Oregon marketplace
affecting African American-, Asian-Pacific American-, Subcontinent
Asian American-, Hispanic American- and Native American-owned firms
as well as white women-owned firms. This includes evidence that
there are fewer Hispanic American, Native American and female
business owners in the Oregon construction industry than what might
be expected given a level playing field.
2 Western States Paving, 407 F.3d at 997-98, 1002-03; see AGC,
SDC v. Caltrans, 713 F.3d at 1197-1199. 3 407 F.3d at 996-1000; See
AGC, SDC v. Caltrans, 713 F.3d at 1197-1199.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
PAGE 10
Summary of qualitative information. Based on in-depth interviews
of business owners and others, telephone surveys, public meetings
and other information, there was substantial evidence of barriers
to new and small businesses in the Oregon transportation
contracting industry. Owners and managers of small businesses
reported that public agency contracting processes and requirements,
such as minimum prequalification, bonding, and insurance levels,
often put small businesses at a disadvantage when competing for
public sector work.
Existing relationships are an important factor in finding
opportunities to bid on work according to many prime contractors
and subcontractors. There is also substantial evidence that a “good
ol’ boy” network negatively affects opportunities for businesses
including those owned by minorities and women.
From the in-depth interviews, availability interviews and other
information analyzed as part of the study, there appeared to be
difficulties for minorities and women beyond those associated with
being a small business. This included evidence of:
Workplace conditions unfavorable to women and minorities in the
Oregon construction industry;
Greater difficulties for women and minorities to obtain
financing; Different treatment of minority- and women-owned firms
by bonding companies; and Negative stereotypes concerning minority-
and women-owned firms held by some
prime contractors and customers.
The combined quantitative and qualitative information indicate
that there is not a level playing field for minorities, women and
minority- and women-owned firms in the Oregon transportation
contracting industry.
G. Disparity Analysis for ODOT Contracts
Keen Independent compared the share of ODOT contract dollars
going to minority- and women-owned firms with what might be
expected from the availability analysis. (Disparity analysis is
properly done based on utilization and availability of all
MBE/WBEs, not DBEs.)
Utilization. Considering all FHWA- and state-funded ODOT
transportation construction and engineering contracts from October
2010 through September 2014, minority- and women-owned firms
received $225 million out of the $1.9 billion in contract dollars,
or 11.7 percent of total dollars. As shown in Figure ES-5:
About 5.1 percent of total dollars went to white women-owned
firms and 6.5 percent went to minority-owned firms (including
businesses owned by minority women).
Firms certified as DBEs received 7.1 percent of total dollars.
About one-half of the MBE/WBE utilization was for firms not
DBE-certified at the time of contract award. This included former
DBEs that are now too large to be certified or have otherwise let
their certifications expire or have withdrawn from the program.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
PAGE 11
Figure ES-6 also demonstrates the drop in MBE utilization
between the first two years of the study period (FFY 2011 and FFY
2012) and the most recent two years (FFY 2013 and FFY 2014).
Participation of DBEs was also much lower in the FFY 2013 and FFY
2014.
Figure ES-6. MBE/WBE and DBE share of prime contract/subcontract
dollars for ODOT FHWA- and state-funded transportation contracts,
October 2010–September 2014 Note:
Numbers rounded to nearest tenth of 1 percent. Percentages may
not add to totals due to rounding.
Source:
Keen Independent availability analysis.
Disparity analysis. To conduct the disparity analysis, Keen
Independent compared the actual utilization of MBE/WBEs on ODOT
contracts with the percentage of contract dollars that MBEs and
WBEs might be expected to receive based on their availability for
that work. Keen Independent made those comparisons for MBEs, WBEs
and individual MBE groups.
White women-owned firms received 5.1 percent of ODOT contract
dollars (FHWA- and state-funded combined). This utilization was
below what might be expected from the availability analysis — 9.9
percent. Minority-owned firms received 6.5 percent of ODOT contract
dollars, a result that was also below what might be expected from
the availability analysis — 9.4 percent. Figure ES-7shows these
results.
Figure ES-7. MBE/WBE utilization and availability for ODOT FHWA-
and state-funded contracts, October 2010–September 2014
Note:
Number of contracts/subcontracts analyzed is 8,027.
Source:
Keen Independent disparity analysis for ODOT and LPA
contracts.
Calculation of disparity indices. Keen Independent then
calculated a “disparity index” to help compare utilization and
availability results among MBE/WBE groups and across different sets
of contracts. A disparity index of “100” indicates “parity,” or an
exact match between actual utilization and what might be expected
based on MBE/WBE availability for a specific set of contracts.
A
Group
MBE 8.4 % 5.0 % 6.5 %WBE 5.2 5.0 5.1Total MBE/WBE 13.6 % 10.0 %
11.7 %
DBE 8.7 % 5.7 % 7.1 %
FFY 2011 - FFY 2012
FFY 2013 - FFY 2014 Total
Utilization Availability Utilization Availability0%
5%
10%
15%
20%
25%
30%
5.1%
9.9%
6.5%
9.4%
100%
MBEWBE
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
PAGE 12
disparity index of less than 100 may indicate a disparity
between utilization and availability, and disparity indices of less
than 80 in this report are described as “substantial” based on
relevant court decisions.
The resulting disparity indices for ODOT contracts were:
51 for WBEs (5.1% divided by 9.9%, multiplied by 100); and 69
for MBEs (6.5% divided by 9.4%, multiplied by 100).
Because the indices for WBEs and for MBEs were below 80, they
are “substantial.”
In addition to the above results for white women-owned firms and
MBEs overall, utilization was below the availability benchmarks for
the following MBE groups for the October 2010 through September
2014 study period:
African American-owned firms received 1.7 percent of contract
dollars, substantially less than what might be expected in the
availability analysis (2.9%). The disparity index for this group
was 58. Keen Independent identified this substantial disparity for
African American-owned firms even with DBE-certified African
American-owned businesses being eligible to participate in ODOT’s
DBE goals for construction contracts.
Utilization of Asian-Pacific American-owned firms (0.6%) was
substantially below what might be expected from the availability
analysis (0.9%), and the disparity index was 69 for this group even
though DBEs owned by Asian-Pacific Americans were eligible to meet
DBE contract goals in the first two years of the study period.
Utilization of Subcontinent Asian-owned (0.6%) was somewhat less
than expected from the availability analysis (0.7%). The disparity
index for this group was 90, indicating a disparity even though
Subcontinent Asian American-owned firms were eligible to meet DBE
contract goals for construction contracts during the study period.
(There was less than 0.2 percent participation of Subcontinent
Asian American-owned firms for contracts without goals, with a
disparity index of 24 for those contracts.)
Native American-owned firms had a utilization of 1.3 percent,
below what might be expected based on the availability analysis
(2.7%). The disparity index for this group was 49.
From October 2010 through September 2014, Hispanic
American-owned firms obtained 2.4 percent of ODOT contract dollars,
higher than what might be expected from the availability analysis
(2.3%), resulting in a disparity index of 104. Most of this
utilization was two firms: Capital Concrete Construction and LaDuke
Construction. The availability results for Hispanic American-owned
firms are limited by the fact that neither of these firms provided
information to be included in the detailed availability analysis.
Capital Concrete has voluntarily surrendered its contractor’s
license, no longer has a working telephone number and does not
appear to be available for ODOT work. LaDuke Construction indicated
that they were not interested in discussing future work for ODOT
when contacted by the study team to participate in an availability
interview in 2015. Even though neither
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
PAGE 13
firm provided information necessary to be included in the
availability analysis for Hispanic American-owned firms, both of
these firms are still counted in the utilization results. (Without
these two firms, utilization of Hispanic American-owned firms would
have been 0.9 percent, a substantial disparity.)
Keen Independent also examined utilization and availability for
Hispanic American-owned firms for the most recent two years of the
study period; October 2012 through September 2014. There was a
large drop in utilization of Hispanic American-owned firms in this
time period, with utilization of Hispanic American-owned firms
(1.2%) substantially less than availability for that time period
(2.1%), resulting in a disparity index of 59. These most recent
results indicate the need for a race-conscious remedy for Hispanic
American-owned firms, especially given apparent changes in the
operations of the two firms that accounted for most of the contract
dollars for this group.
Statistical significance of disparities. Keen Independent also
examined whether the disparities for MBEs and for WBEs could be
replicated simply through “chance” in award of prime contracts and
subcontracts to available firms. The study team determined that the
disparities for MBEs and for WBEs are statistically significant and
cannot be reasonably replicated by chance.
Other disparity analyses. Keen Independent analyzed the
utilization and availability of minority- and women-owned firms for
additional subsets of ODOT prime contracts and subcontracts. The
study team identified a pattern of disparities in the utilization
of MBE/WBEs across different subsets of ODOT contracts, including
by contract type and by region.
H. Recommendations
Study team recommendations emerged from the quantitative and
qualitative results of the disparity study, especially the comments
of many individuals inside and outside ODOT who provided input.
First, many of those providing input recognized ODOT’s past
changes in contracting policies and practices that enhanced access
for small businesses. Suggestions for further improvement, as well
as Keen Independent’s assessment of results, tended to group around
a set of desired outcomes regarding ODOT contracting and assistance
programs. Simply put, ODOT can do more to ensure that its
contracting and assistance is:
1. Open; 2. Simple; 3. Fair; 4. Transparent; 5. Impactful; and
6. Monitored and improving.
ODOT should continue top-to-bottom improvement regarding its
contracting and its assistance programs.
Figure ES-8, on the following page, summarizes examples of
initiatives ODOT might consider in pursuing these objectives. The
initiatives are illustrative and by no means exhaustive. ODOT might
find that some are not possible or effective after further review,
or might be able to address the identified issue through another
approach. Chapter 11 discusses these recommendations in detail.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY EXECUTIVE SUMMARY,
PAGE 14
Figure ES-8. Examples of potential ODOT initiatives under each
objective
I. Next Steps in the Disparity Study Process
There is considerably more quantitative and qualitative
information in the full report, which ODOT should review when
making decisions about its future operation of the Federal DBE
Program and other programs.
In March 2016, ODOT made this Executive Summary and the draft
report available for public comment. ODOT also published its
proposed overall DBE goal regarding FHWA-funded contracts. ODOT
held public meetings in April 2016 to solicit input on both the
draft report and DBE goal. Keen Independent augmented the report
with public input regarding the study before finalizing the ODOT
2016 Disparity Study report. Information about this process can be
found at www.ODOTDBEstudy.org. ODOT should review the final report
and public comments before submitting its final DBE goal to FHWA
for its consideration and approval.
Objectives and recommendations
1. Openness
a. Continue outreach to potential bidders, proposers,
subcontractors and suppliers
b. Disseminate information through an electronic newsletter
c. Provide real-time training and assistance on how to win and
perform work on ODOT projects
2. Simplicity
a. Simplify learning about, bidding on and performing ODOT work,
especially small contracts
b. Increase number of certified DBEs through targeted outreach
and certification assistance
3. Fairness
a. Review how firm qualifications are assessed in construction
and A&E contract awards
b. Implement payment notification service for subcontractors and
subconsultants
c. Explore initiatives to limit opportunities for bid shopping
and other unfair contracting practices
d. Research other ways to improve treatment of subcontractors on
ODOT contractse. Continue support for apprenticeships and other
programs to promote entry and advancement
4. Transparency
a. Expand awareness of construction contract award
information
b. Provide comprehensive information about consultant contract
awards, including subcontractors
5. Impact
a. Continue partnerships to provide general business
assistance
b. Build stronger DBEs and other small businesses within core
transportation contracting disciplines
c. Consider an ESB contract goals program for state-funded
contracts
d. Pursue changes in state law to allow expansion of Small
Contracting Program and ESB/SBE Programs
e. Consider including each DBE group as eligible for DBE
contract goals program
6. Monitored and improving
a. Expand data collection and reporting including a
comprehensive business contact list
b. Continue to use external stakeholder groups that include DBEs
and ESBs
c. Plan future disparity studies
http://www.odotdbestudy.org/
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 1, PAGE 1
CHAPTER 1. Introduction
The federal government requires state and local governments to
operate the Federal Disadvantaged Business Enterprise (DBE) Program
if they receive U.S. Department of Transportation (USDOT) funds for
transportation projects. The Oregon Department of Transportation
(ODOT) has operated some version of the Federal DBE Program for
many years.
Most of the USDOT funds that ODOT receives are for
highway-related work from the Federal Highway Administration
(FHWA), which is the focus of the 2016 Disparity Study. 1 ODOT must
set an overall goal for participation of DBEs in its FHWA-funded
contracts, expressed as the percentage of contract dollars that
ODOT would expect to go to DBEs absent the effects of
discrimination. ODOT’s next three-year overall DBE goal will begin
October 1, 2016.
ODOT retained Keen Independent Research LLC (Keen Independent)
to conduct the 2016 Disparity Study. This report is a draft and
will be augmented based on further public input. ODOT is using
information from this report to propose a three-year overall DBE
goal for FHWA-funded contracts and to propose the measures it will
use to meet that goal, which can be found at www.ODOTDBEstudy.org.
ODOT received public comment on the 2016 Disparity Study draft
report and its proposed overall DBE goal through April 30,
2016.
The balance of Chapter 1:
A. Introduces the study team; B. Provides background on the
Federal DBE Program; C. Describes Oregon’s MWESB Program and other
programs; D. Discusses previous disparity analyses regarding ODOT
contracts; E. Outlines the analyses in the 2016 Disparity Study and
describes where results appear in
the report; F. Summarizes the public participation process in
the 2016 Disparity Study; and G. Provides information about the
public comment process for the draft report and
ODOT’s proposed DBE goal, including five public meetings held in
April 2016.
1 ODOT also receives a relatively small amount of funds from the
Federal Transit Administration (FTA) and separately sets an overall
DBE goal for those contracts. The Oregon Department of Aviation
operates the Federal DBE Program for Federal Aviation
Administration (FAA) funding that the State of Oregon receives.
http://www.odotdbestudy.org/
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 1, PAGE 2
A. Study Team
David Keen, Principal of Keen Independent, directed this study.
He has led similar studies for more than 90 public agencies
throughout the country, including a number of state departments of
transportation. Keith Wiener from Holland & Knight provided the
legal framework for this study. Mr. Wiener has extensive experience
with disparity studies as well, and has worked with Mr. Keen in
this field since the early 1990s. Mr. Keen and Mr. Wiener have
helped public agencies successfully defend DBE and minority
business enterprise programs in court.
As shown in Figure 1-1, JLA Public Involvement, Benetti Partners
and Donaldson Enterprises performed in-depth interviews and
outreach as part of the study. Merina & Company conducted
onsite contract data collection at ODOT offices. Customer Research
International (CRI) performed telephone surveys with business
owners and managers that identified firms available for ODOT
contracts. These five team members are minority- and/or women-owned
firms.
Keen Independent worked closely with ODOT staff, including
senior leadership, throughout the study.
Figure 1-1. 2016 Disparity Study team
Firm
Location
Team Leader
Responsibilities
Keen Independent Research LLC, prime consultant
Denver CO Wickenburg, AZ
David Keen Principal
All study phases
Holland & Knight LLP (H&K) Atlanta, GA Keith Wiener
Partner
Legal framework
JLA Public Involvement, Inc. Portland, OR Stacy Thomas Sr.
Project Manager
In-depth interviews, public outreach
Benetti Partners LLC Portland, OR Juanita Walton Principal
In-depth interviews
Donaldson Enterprises Consulting Washougal, WA Suzanne Donaldson
Principal
In-depth interviews
Customer Research International (CRI)
San Marcos, TX Sanjay Vrudhula President
Availability telephone interviews
Merina & Company LLP West Linn, OR Kamala Austin Partner
Data collection
B. Federal DBE Program
ODOT has been operating some version of a Federal DBE Program
since the 1980s. After enactment of the Transportation Equity Act
for the 21st Century (TEA-21) in 1998, USDOT established a new
Federal DBE Program to be operated by state and local agencies
receiving USDOT funds. USDOT recently revised the Federal DBE
Program in 2011 and again in 2014.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 1, PAGE 3
Federal regulations located at Title 49 Code of Federal
Regulations (CFR) Part 26 direct how state and local governments
must operate the Federal DBE Program.2 If necessary, the Program
allows state and local agencies to use DBE contract goals, which
ODOT currently sets on certain FHWA-funded contracts. When awarding
those contracts, ODOT considers whether or not a bidder or proposer
meets the DBE goal set for a contract or has shown adequate good
faith efforts to do so.
The Federal DBE Program also applies to cities, towns, counties,
transportation authorities, tribal governments and other
jurisdictions that receive USDOT funds as a subrecipient of ODOT.
When agencies such as TriMet and the Port of Portland directly
receive USDOT funds, they are responsible for determining overall
DBE goals and how they will implement the Federal DBE Program.
Key Program elements. The Federal DBE Program includes the
following elements.
Setting an overall goal for DBE participation. Every three
years, ODOT must develop an overall annual goal for DBE
participation in its USDOT-funded contracts. The Federal DBE
Program sets forth the steps an agency must follow in establishing
its goal, including development of a “base figure” and
consideration of possible “step 2” adjustments to the goal.3 For
FHWA-funded contracts for the federal fiscal year (FFY) ending
September 30, 2016, ODOT has a 13.10 percent overall DBE goal.
ODOT’s overall goal for DBE participation is aspirational. An
agency’s failure to meet an annual DBE goal does not automatically
cause any USDOT penalties unless that agency fails to administer
the DBE Program in good faith. However, if an agency does not meet
its overall DBE goal, federal regulations require it to analyze the
reasons for any shortfall and develop a corrective action plan to
meet the goal in the next fiscal year.4
Establishing the portion of the overall DBE goal to be met
through neutral means. The Federal DBE Program allow for state and
local governments to operate the program without the use or with
limited use of race- or gender-based measures such as DBE contract
goals. According to program regulations 49 CFR Section 26.51, a
state or local agency must meet the maximum feasible portion of its
overall goal for DBE participation through “race-neutral
means.”
Race-neutral program measures include removing barriers to
participation and promoting use of small businesses. The Federal
DBE Program requires agencies such as ODOT to develop programs to
assist small businesses.5 For example, small business preference
programs, including reserving contracts on which only small
businesses can bid, are allowable under the Federal DBE
Program.
If an agency can meet its goal solely through race-neutral
means, it must not use race-conscious program elements. The Federal
DBE Program requires that an agency project the portion of its
overall DBE goal that it will meet through neutral measures and the
portion, if any, to be met through race-conscious measures such as
DBE contract goals. USDOT has outlined a number of
2 49 CFR Part 26
http://www.ecfr.gov/cgi-bin/text-idx?tpl=/ecfrbrowse/Title49/49cfr26_main_02.tpl.
3 49 CFR Section 26.45. 4 49 CFR Section 26.47. 5 49 CFR Section
26.39.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 1, PAGE 4
factors for an agency to consider when making that
determination.6 Some state DOTs and other agencies operate a 100
percent race- and gender-neutral program and do not apply DBE
contract goals. Other state DOTs project that they will meet their
overall DBE goal through a combination of race-neutral and
race-conscious measures.
The 2016 Disparity Study provides information for ODOT to make
this projection (Chapter 10).
Determining whether all racial/ethnic/gender groups will be
eligible for race- or gender-conscious elements of the Federal DBE
Program. To be certified as a DBE, the firm’s owner must be both
socially and economically disadvantaged. Under the Federal DBE
Program, the following racial, ethnic and gender groups can be
presumed to be socially disadvantaged:
Black Americans (or “African Americans” in this study); Hispanic
Americans; Native Americans; Asian-Pacific Americans; Subcontinent
Asian Americans; and Women of any race or ethnicity.
To be economically disadvantaged, a company must be below an
overall revenue limit and an industry-specific limit, and its firm
owner(s) must be below personal net worth limits.7 White male-owned
firms and other ethnicities not listed above can also meet the
federal certification requirements and be certified as DBEs if they
demonstrate that they are both socially and economically
disadvantaged, as described in 49 CFR Part 26.67(d).
ODOT’s current operation of the Program limits participation in
the contract goals program to:
DBEs owned by African Americans and Subcontinent Asian Americans
on construction contracts; and
All DBEs except those owned by Asian-Pacific Americans on
engineering-related contracts.
Only DBEs in the above groups can count toward meeting an
assigned DBE contract goal. Any DBE can currently participate in
other aspects of the Federal DBE Program. ODOT counts utilization
of other DBEs toward its overall DBE goal.
6 See Chapter 10 of this report for an in-depth discussion of
these factors. 7 49 CFR 26 Subpart D provides certification
requirements. There is a gross receipts limit (currently not more
than a $23.98 million annual three-year average revenue, and lower
limits for certain lines of business) and a personal net worth
limit (currently $1.32 million excluding equity in the business and
primary personal residence) that firms and firm owners must fall
below to be able to be certified as a DBE.
http://www.ecfr.gov/cgi-bin/text-idx?SID=5423bdfc26e2255aef5fb43e3f450a13&node=49:1.0.1.1.20.4&rgn=div6.
Under 49 CFR Section 26.67(b), a certifying agency may consider
other factors to determine if an individual is able to accumulate
substantial wealth, in which certification is denied (annual gross
income of the owner and whether the fair market value of the
owner’s assets exceed $6 million are two such factors that may be
considered).
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 1, PAGE 5
The 2016 Disparity Study includes information for ODOT to
consider in evaluating whether any, all, or just some of the DBE
groups should be eligible for the contract goals element of the
Program (if ODOT chooses to continue to use DBE contract
goals).
Past court challenges to the Federal DBE Program and to state
and local agency implementation of the Program. Although agencies
are required to operate the Federal DBE Program in order to receive
USDOT funds, different groups have challenged program operation in
court.
A number of courts have held the Federal DBE Program to be
constitutional, as discussed in Chapter 2 and Appendix B of this
report.
State transportation departments in California, Illinois,
Minnesota, Montana and Nebraska successfully defended their
operation of the Federal DBE Program, as have certain local
government agencies. In 2005, the Washington State Department of
Transportation was not able to successfully defend its operation of
the Federal DBE Program. (See Chapter 2 and Appendix B.)
The Ninth Circuit Court of Appeals examined the methodology and
results of the disparity study David Keen directed for the
California Department of Transportation (Caltrans) in Associated
General Contractors of America, San Diego Chapter, Inc. v.
California Department of Transportation. As discussed in more
detail in Chapter 2 and Appendix B, the Ninth Circuit favorably
reviewed the methodology and the quantitative and qualitative
information provided in the disparity study and determined that the
information justified Caltrans’ operation of the Federal DBE
Program. Keen Independent’s methodology in ODOT’s 2016 Disparity
Study is very similar to what the court favorably reviewed in the
Caltrans case.
C. Oregon MWESB Program and Other Programs
ODOT participates in other programs beyond the Federal DBE
Program. These include:
State MBE/WBE Policy. The State of Oregon has a policy of
supporting Oregon’s minority business enterprises and woman
business enterprises. Eleven Oregon state agencies including ODOT
set aspirational targets for MBE/WBE procurement contracts valued
at $150,000 or less that might be performed by MBEs/WBEs. In
addition to aspirational targets, the State implements other
initiatives to improve opportunities for certified business
enterprises, address race- and gender-based discrimination and
ensure state funds are used to foster an inclusive business
climate.
Emerging Small Business Program. The State of Oregon and several
local governments operate an Emerging Small Business Program that
reserves certain contracting opportunities for ESB bidders. Under
the Program, qualified small businesses compete against other small
companies for identified small contracts.
Small Contracting Program. ODOT operates a Small Contracting
Program that streamlines bidding or proposing on small
architectural, engineering and land surveying contracts, small
construction contracts and other small purchases. Any company may
register to participate in the program.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 1, PAGE 6
Other small business support. ODOT supports small businesses
through other programs such as the Oregon Small Business Initiative
and the Project Specific Mentor-Protégé Program.
Chapter 11 of the report assesses opportunities to expand
efforts to encourage participation of small businesses in ODOT
contracts.
D. Previous Disparity Analyses Regarding ODOT Contracts
The USDOT recommends that agencies such as ODOT conduct
disparity studies to develop the information needed to effectively
implement the Program. ODOT completed full disparity studies in
2007 and 2011, and an availability update in 2013. MGT of American,
Inc. prepared each of those studies.8
ODOT used results of the studies prepared by MGT when
determining how to implement the Federal DBE Program for past
years, including its request to FHWA for a “waiver” in which only
certain racial, ethnic and gender groups of DBEs would participate
in the DBE contract goals program.
ODOT first applied for a waiver in January 2008 based on the
results of the 2007 study prepared by MGT.
It applied for a new DBE Program Waiver in 2012 for years 2013
through 2015 based on the results of the 2011 study prepared by
MGT.
Under the waiver, only some DBE groups can participate in
meeting a DBE contract goal ODOT sets for its FHWA-funded
construction and engineering-related contracts.9
The 2016 Disparity Study examines participation of minority- and
women-owned firms in ODOT contracts from October 2010 through
September 2014. Keen Independent and ODOT chose this study period
so that the utilization analysis would begin where the 2011 study
ended (contracts awarded through September 2010). The 2016 Study
also includes certain enhancements to the disparity study
methodology compared to what was employed in ODOT’s previous
studies, in accordance with the more recent 2013 Ninth Circuit
review of Mr. Keen’s methodology for a Caltrans disparity
study.
E. Analyses Performed in the 2016 Disparity Study and Location
of Results
Figure 1-2 on the following page outlines the chapters in the
2016 Disparity Study.
8
http://www.oregon.gov/ODOT/CS/CIVILRIGHTS/Pages/dbe_disp_avail_stud.aspx.
9 ODOT’s waiver requests and FHWA’s past approvals can be viewed at
http://www.oregon.gov/ODOT/CS/CIVILRIGHTS/Pages/dbe_prog_wav.aspx.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 1, PAGE 7
Figure 1-2. Chapters in 2016 Disparity Study report
Chapter Description of 2016 Disparity Study
report chapters
ES. Executive Summary Brief summary of study results
1. Introduction Study purpose, study team and overview of
analyses
2. Legal Framework Summary of Federal DBE Program regulations
and relevant court decisions
3. ODOT Transportation Contracts How the study team collected
ODOT contract data and defined the geographic area and
transportation contracting industry
4. ODOT Operation of the Federal DBE Program
Review of ODOT’s implementation of the Federal DBE Program and
other programs as well as State and local agency programs and other
technical assistance programs in Oregon
5. Marketplace Conditions Summary of quantitative and
qualitative information about the Oregon transportation contracting
marketplace
6. Availability Analysis Methodology and results regarding
availability of minority- and women-owned firms and other
businesses for ODOT contracts and subcontracts
7. Utilization and Disparity Analysis Comparison of utilization
and availability of minority- and women-owned firms (disparity
analysis)
8. Exploration of Neutral Explanations for any Disparities
Further examination of disparity results to determine if any can
be explained by neutral factors
9. Overall Annual DBE Goal Information to review when setting a
three-year overall DBE goal, including consideration of a “step 2
adjustment”
10. Portion of Overall DBE Goal to be Met Through Neutral
Means
Information to review when determining the portion of the
overall DBE goal to be met through neutral means
11. Recommendations Study team recommendations concerning future
implementation of the Federal DBE Program and other ways to assist
small businesses and minority- and women-owned companies
The following briefly describes where to find specific
information in the 2016 Disparity Study report.
Definition of terms. Appendix A provides explanations of
acronyms and definitions of key terms used in the study.
Legal framework. Chapter 2 summarizes the legal framework for
the study. Appendix B presents detailed analyses of relevant
cases.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 1, PAGE 8
Collection of prime contract and subcontract information for
past USDOT- and state-funded contracts. The study team collected
information about past FHWA- and state-funded contracts awarded by
ODOT or by local public agencies from October 1, 2010 through
September 30, 2014. Chapter 3 outlines the data collection process
and describes these contract data. Appendix C provides additional
documentation.
ODOT and other agencies’ programs. Background on the Federal DBE
Program is provided in Chapter 4. The chapter also discusses ODOT’s
implementation of the program and its race- and gender-neutral
efforts for DBE participation.
Analysis of local marketplace conditions. The study team
examined quantitative and qualitative information relevant to the
Oregon transportation contracting industry. Chapter 5 synthesizes
quantitative information about local marketplace conditions. In
accordance with USDOT guidance, Keen Independent analyzed:
Any evidence of barriers for minorities and women to enter and
advance in their careers in the construction and engineering
industries in Oregon (detailed results in Appendix E);
Any differences in rates of business ownership in Oregon
(discussed in Appendix F); Access to business credit, insurance and
bonding (detailed results in Appendix G); Any differences in
measures of business success and access to prime contract and
subcontract opportunities (examined in detail in Appendix H);
and Certain other issues potentially affecting minorities and women
in the local
marketplace.
Appendices E through I provide supporting information.
Chapter 5 also summarizes analysis of qualitative information,
including results of in-depth personal interviews and focus groups
with 71 business owners, trade associations and public agencies as
well as comments 275 business owners and managers provided through
online and telephone surveys. The study team conducted additional
interviews and focus groups with staff from ODOT and local public
agencies and public input as part of the public comment process
held at the outset of the study. Appendix J of this report
summarizes comments received and provides detailed analysis of this
qualitative information.
This combined quantitative and qualitative information about the
marketplace is relevant to ODOT’s development of an overall DBE
goal and its projection of how much of the goal will be met through
neutral means.
Availability analysis, including calculation of base figure for
overall DBE goal. Keen Independent’s availability analysis
generates benchmarks to use when assessing ODOT’s utilization of
minority- and women-owned firms. The availability results also
provide information for ODOT to consider when setting its overall
annual goal for DBE participation on FHWA-funded contracts in FFY
2017 through FFY 2019.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 1, PAGE 9
Chapter 6, which presents these results, is organized as
follows:
The methods used to collect and analyze availability of
minority-, women- and majority-owned firms;
Availability benchmarks used in the disparity analysis; and
Information relevant to ODOT’s “base figure” for its overall DBE
goals for FHWA-
funded contracts.
MBE/WBE utilization and disparity analysis. Chapter 7 describes
Keen Independent’s analysis of the utilization of minority- and
women-owned businesses in ODOT’s FHWA- and state-funded contracts
during the study period. The disparity analysis in Chapter 7
compares utilization to availability to determine whether there is
underutilization of minority- or women-owned firms in ODOT
transportation contracts. Chapter 7 provides utilization and
disparity analysis results for ODOT contracts overall, and for
contracts within two-year time periods.
Chapter 8 further explores this information, including
utilization and disparity results for different types of ODOT
contracts. It also contains analysis of DBE participation on FHWA-
and state-funded contracts, and explores whether there is any
evidence of overconcentration of DBEs.
Information for overall DBE goal and DBE Program operation for
FHWA-funded contracts. Chapter 9 provides Keen Independent’s
analysis of the overall DBE goal for FHWA-funded contracts for
October 1, 2016 through September 30, 2019. This provides
information to ODOT as it determines its overall DBE goal for these
three federal fiscal years.
Portion of overall DBE goal to be met through neutral means.
Chapter 10 details Keen Independent’s analysis of the portion of
the overall DBE goal that can be met through neutral means and
whether there is evidence that race- and gender-conscious programs
will be needed. ODOT can review this information as it determines
how it will implement the Federal DBE Program starting October 1,
2016, including which racial, ethnic and gender groups of DBEs, if
any, will participate in a DBE contract goals program.
Recommendations. Keen Independent suggests refinements to ODOT
implementation of the Federal DBE Program and other efforts to
include small and minority- and women-owned businesses in ODOT
contracts. Chapter 11 provides recommendations for ODOT
consideration.
F. Public Participation in the 2016 Disparity Study
Keen Independent and ODOT implemented an extensive public
participation process as part of the 2016 Disparity Study. To date,
these activities include:
An External Stakeholder Group that met with the study team and
ODOT at key junctures of the study process (meetings in December
2014; January, June, August and October 2015; and January and March
2016).
Information provided to interested groups through press
releases, email blasts and presentations.
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 1, PAGE
10
A study website that posted information about the 2016 Disparity
Study from the outset of the study.
A telephone hotline and dedicated email address for anyone
wishing to comment.
Public meetings at the start of the study to obtain input from
stakeholders and other interested groups. ODOT held these meetings
in Bend, Roseburg, Salem and Portland in February 2015, and
included call-in opportunities for individuals unable to attend a
meeting in person. As discussed under Part G below, ODOT held
additional public meetings upon release of the draft report and its
proposed overall DBE goal.
Opportunities for company owners and managers to provide
information about their businesses and any perceived barriers in
the marketplace. The study team successfully reached 7,119
businesses through online surveys and telephone surveys conducted
in summer 2015.
In-depth personal interviews and focus groups with 71 business
owners, managers and trade association representatives throughout
the state. The study team also interviewed staff from ODOT and
other public agencies in Oregon.
G. Public Comment Process for the 2016 Disparity Study Report
and ODOT DBE Goal
Keen Independent published this draft Disparity Study report for
public comment before finalizing the report. Public comments
concerning information in this report as well as ODOT’s proposed
overall DBE goal were made from mid-March 2016 through April 30,
2016. The public was able to give feedback at the meetings listed
below and provide written comments (a) in person at the meetings,
(b) online at www.ODOTDBEstudy.org, (c) via email at
[email protected], (d) through regular mail to ODOT Office of
Civil Rights, MS31, 355 Capitol Street NE, Salem OR 97301-3871.
ODOT held five public meetings concerning the study and ODOT’s
proposed DBE goal:
La Grande on April 5; Bend on April 6; Medford on April 7;
Portland on April 11; and Eugene on April 12.
The La Grande and Bend public meetings were also hosted live
online for people who wished to participate remotely.
Keen Independent incorporated information from the public
meetings and written comments into the final Disparity Study
report. ODOT will also review this information as when finalizing
its proposed overall DBE goal calculation for submission to FHWA
prior to August 1, 2016.
http://www.odotdbestudy.org/mailto:[email protected]
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KEEN INDEPENDENT 2016 ODOT DISPARITY STUDY CHAPTER 2, PAGE 1
CHAPTER 2. Legal Framework
The legal framework for the disparity study is based on
applicable regulations for the Federal DBE Program and other
sources, including the Official USDOT Guidance, court decisions
related to the Federal DBE Program and relevant court decisions
concerning challenges to minority- and women-owned business
programs. The applicable federal regulations are located at Title
49 Code of Federal Regulations (CFR) Part 26.
Since the 1980s, there have been lawsuits challenging the
constitutionality of the Federal DBE Program and individual state
and local agencies’ implementation of the Program. Figure 2-1 on
the following page provides an overview of some of the recent legal
challenges. To summarize:
The Federal DBE Program has been upheld as valid and
constitutional.
For the most part, state DOTs have been successful in defending
against legal challenges. Western States Paving Company, however,
was successful in challenging the Washington State Department of
Transportation’s implementation of the Federal DBE Program.
Many state and local agencies, especially those in the West
(i.e., states within the Ninth Circuit), made adjustments in their
implementation of the Federal DBE Program to comply with the United
States Ninth Circuit Court of Appeals decision in the Western
States Paving case, and in accordance with the Official USDOT
Guidance issued after the decision.
The Ninth Circuit Court of Appeals held California Department of
Transportation’s implementation of the Federal DBE Program was
valid and complied with the decision in Western States Paving.
Each of the lawsuits identified in Figure 2-1 pertains to state
DOT implementation of the Federal DBE Program for USDOT-funded
contracts. Appendix B discusses court decisions regarding local and
state government implementation of the Federal DBE Program.
Individual companies and trade associations have also challenged
the constitutionality of state or local government MBE/WBE programs
related to non-federally-funded contracts (including state
programs