TRB Session 352 Aftermath of DBE Program Due to Ninth Circuit Court Decision Survey of State Transportation Agencies that have undergone disparity studies.

TRB Session 352Aftermath of DBE Program Due to Ninth Circuit Court Decision

Survey of State Transportation Agencies that have undergone

disparity studies

Introduction

• 10 Questions survey conducted by phone• 88% response rate to survey• Cursory Review to share: summary, lessons

learned, anecdotes

Questions1. Does DBE participation decrease after legal

challenge to the DBE program?2. How do disparity study results impact DBE

goals? 3. To what extent can Race Neutral measures

address equity in opportunity?

Outline • Ninth Circuit Decision• Comparison of 9th Circuit States’ Disparity Studies

– Protected class exclusions

– DBE Goals

• Pre- and Post Disparity Study Challenges• DBE Program Adjustments • Creative Strategies• Trends Across States & Studies• Lessons Learned

9th Circuit DecisionWhat the courts said

1. 9th Circuit panel held that 49 CFR Part 26 and the authorizing statute for the DBE program in TEA-21 were constitutional

2. WSDOT did not need to establish a compelling need for its DBE program

3. Race conscious elements of a national program must be limited to those parts of the country where its race-based measures are demonstrably needed to be narrowly tailored as applied,

4. Program is narrowly tailored only if its application is limited to specific groups that have suffered discrimination or its effects

5. Concluded: WSDOT’s DBE program was not narrowly tailored due the supporting evidence of discrimination was inadequate

9th Circuit DecisionWhat the courts said

• Supreme Court explains, “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.” City of Richmond vs. JA Croson

• “Both statistical and anecdotal evidence are relevant in identifying the existence of discrimination.” Adarand Constructors vs. Slater

Legal AnalysisEvidence of Discrimination

• Disparity Index or disparity ratio calculated by dividing utilization of M/WBE by the availability of M/WBEs

• Courts look to disparity indices in determining Croson’s evidentiary foundation

• An index less than 100% indicates a group being utilized less than expected based on its availability

• Measures of availability determine whether – Discriminatory barriers depress the formation and

success of M/Ws in public and private sector – If M/WBE utilization is below availability in un-remediated

markets, an inference of discrimination may be supportable

9th Circuit DecisionWhat USDOT/FHWA said

• STA’s should examine evidence on hand of discrimination and its effects.

• If STA currently has sufficient evidence of discrimination or its effects, STA should submit race- and gender-conscious goals where appropriate.

• If evidence of discrimination and its effects pertains to some, but not all, then race- and gender-conscious goals should apply for group(s) with adequate evidence.

9th Circuit DecisionWhat USDOT/FHWA Waiver

• May entertain program waivers of Part 26’s prohibition of group-specific goals.

• Without sufficient evidence of discrimination or its effects, STA submits an all-race neutral overall goal to include a statement concerning the absence of adequate evidence of discrimination and its effects.

• Race-neutral submission requires a description of plans to conduct a study or ‘evidence-gathering process’ to determine discrimination or its effects in STA’s market with an action plan describing the study and time line for completion.

Comparison of Disparity Study Format

3

2

2

2

BBCResearch

D Wilson Inc

MGT ofAmerica

NERA

• Disparity Study, Availability Analysis, Relevant Market determinants differ between consultants

• Data gathering is STA & Consultant effort

• Anecdotal evidence collected by consultant only for each

Comparison of Disparity Study

Protected Classes Excluded Per Disparity StudySTA-1 STA-2 STA-3 STA-4 STA-5 STA-6 STA-7 STA-8 STA-9

African American

Alaska Native Corporation

Asian (Subcontinent & Pacific)

Caucasian Women

Caucasian Men

Hispanic American

Native American

Impact of Disparity Study Results to Goal Setting

• Step 1: Base figure analysis

• Step 2: Adjustments ratio based on quantitative evidence

• Step 3: Divide percentage between Conscious and Neutral

• Example: 10% goal with 9% RN (all) and 1% RC (2 groups)

• Overall goal required by FHWA

• Race Neutral goals apply to ALL certified DBE

• Race Conscious goals are specific to DBE of the race/gender with evidence of discrimination

• USDOT/FHWA expects STA to submit waiver requesting race/gender specific goal supported by evidence

DBE Goal AchievementPre & Post Disparity Study

0

5

10

15

20

STA1 STA2 STA3 STA4 STA5 STA6 STA7 STA8 STA9

Pre Disparity Study Goal Achievement

Post Disparity Study Goal Achievement

Pre Disparity Study Challenges

• Bid Shopping• Bonding • Cash flow • DBE Capacity• DBE Marketing• Good old boy

network

• Lack of Business Management skills

• Prime’s reluctance to use New DBE’s

• Prompt Payment• Union Affiliation

Pre- Disparity Study Challenges

Exceptions:• Challenging to convince DBE firms to

participate in government work when private sector has greater goals and no regulatory, paperwork requirements

• Challenging to justify the DBE program when there is no majority population and small, M/WBEs readily win contracts.

Post Disparity Study Challenges

Common to all surveyed states• All Race Neutral Program takes away program’s teeth,

reduces enforcement but increases STA creativity• DBE firm Complacency

– No formal complaints - Decreased marketing efforts

• Challenges collecting data– prime’s perception that no goals means no paperwork

• Primes self-perform more due no race conscious goals• FHWA waiver process may delay goal approval {8

months}• Disparity study data Step 1 Base figure analysis• Reinstituting race conscious goals, corresponding

explanations

Trends• Ethnic and STA-region specific goals to meet

narrowly tailoring and strict scrutiny tests

• DBE achievement decreased by half or less when program shifted from RC to all RN

• States who were RN prior to 9th circuit maintained/ increased DBE achievement levels post disparity study

• Most STA’s report that the majority of its DBE firms are non-minority women, accounting for 35 – 60% of participation

Required Program Adjustments

• Directories must reflect ethnicity and gender

• Data collection and tracking must be implemented for professional service, related modes just as it is for construction

• Focus shifts to support services and technical assistance; creativity required to get participation

• STA’s must market/promote DBE program benefits and realities to M/W owned firms

• Study results require stakeholder involvement, public posting and information sessions prior to implementation

Creative Strategies

• DBE program language should become more generic referencing “race neutral and or race conscious efforts” as well as small business

• Revamp of policy language for DBE Commitment, design build, good faith waivers

• CUF reviews on all DBE’s helps maintain program integrity and assess capacity ongoing

• Fraud hotline development and maintenance• Small business program implementation

recommended

Lessons Learned 1

• Data collection and tracking system is necessary to track contracting participation and dollars for related industries

• Department leads are territorial about contracting data. Explain upfront and get leadership involved early.

• Helpful to clarify that DBE program is required if federal funds received; noncompliance leads to decreased funding

Lessons Learned 2• FHWA does not give

input on the study; however they encourage its incorporation in your goal submission

• FHWA not likely to allow creative goal plans (denied request for phased goals)

• Stakeholder committees are advisable STA for support, data, impact analysis

Lingering Questions

• Is negative public perception or legal challenge more detrimental to DBE program?

• Will ethnic-specific goals lead to over concentration in the specified ethnic groups

• At what interval should Disparity studies be redone, updated?

• Can equal opportunity be assumed when there is no majority group?