2018 disparity study - virginia beach, virginia...final report january 2019 2018 city of virginia...

FINAL REPORT

2018 Disparity Study

City of Virginia Beach

Final Report

January 2019

2018 City of Virginia Beach Disparity Study

Prepared for City of Virginia Beach Prepared by BBC Research & Consulting 1999 Broadway, Suite 2200 Denver, Colorado 80202‐9750 303.321.2547 fax 303.399.0448 www.bbcresearch.com [email protected]

Table of Contents

BBC RESEARCH & CONSULTING—FINAL REPORT i

ES. Executive Summary

A. Analyses in the Disparity Study ........................................................................................... ES–2

B. Availability Analysis Results ................................................................................................. ES–3

C. Utilization Analysis Results .................................................................................................. ES–5

D. Disparity Analysis Results .................................................................................................... ES–7

E. Program Implementation .................................................................................................. ES–11

1. Introduction

A. Background ........................................................................................................................... 1–2

B. Study Scope ........................................................................................................................... 1–3

C. Study Team Members ........................................................................................................... 1–5

2. Legal Analysis

A. Program Overview .............................................................................................................. 2–2

B. Legal Standards ................................................................................................................... 2–2

3. Marketplace Conditions

A. Human Capital ....................................................................................................................... 3–2

B. Financial Capital .................................................................................................................... 3–6

C. Business Ownership ............................................................................................................ 3–10

D. Business Success ................................................................................................................. 3–11

E. Summary .............................................................................................................................. 3–13

4. Collection and Analysis of Contract Data

A. Overview of Contracting and Procurement Policies ............................................................. 4–1

B. Collection and Analysis of Contract Data and Procurement Data......................................... 4–3

C. Collection of Vendor Data ..................................................................................................... 4–5

D. Relevant Geographic Market Area ........................................................................................ 4–6

E. Relevant Types of Work ......................................................................................................... 4–6

G. Agency Review Process ......................................................................................................... 4–7

5. Availability Analysis

A. Purpose of the Availability Analysis ...................................................................................... 5–1

B. Potentially Available Businesses ........................................................................................... 5–1

C. Businesses in the Availability Database ................................................................................. 5–3

D. Availability Calculations ........................................................................................................ 5–4

E. Availability Results ................................................................................................................. 5–6

Table of Contents

BBC RESEARCH & CONSULTING—FINAL REPORT ii

6. Utilization Analysis

Minority‐ and Woman‐owned Businesses ................................................................................ 6–1

Service Disabled Veteran‐owned Businesses ............................................................................ 6–4

7. Disparity Analysis

A. Overview ............................................................................................................................... 7–1

B. Disparity Analysis Results ...................................................................................................... 7–5

C. Statistical Significance ......................................................................................................... 7–10

8. Program Measures

A. Program Overview................................................................................................................. 8–1

B. Race‐ and Gender‐Neutral Measures .................................................................................... 8–2

C. Other Organizations’ Program Measures .............................................................................. 8–4

9. Program Implementation

Overall Goals ............................................................................................................................. 9–1

Other Considerations ................................................................................................................ 9–3

Appendices

A. Definitions of Terms

B. Legal Framework and Analysis

C. Quantitative Analysis

D. Qualitative Information about Marketplace Conditions

E. Availability Analysis Approach

F. Disparity Tables

CHAPTER ES.

Executive Summary

BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER ES, PAGE 1

CHAPTER ES. Executive Summary

TheCityofVirginiaBeach(TheCity)retainedBBCResearch&Consulting(BBC)toconductadisparitystudytohelprefinetheorganization’simplementationoftheSmall,Woman,andMinority‐ownedBusiness(SWaM)Program.Theprimaryobjectiveoftheprogramistoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesinCitycontracting.1Tomeetthatobjective,theCityusesvariousrace‐andgender‐neutralmeasures.Inthecontextofcontractingandprocurement,race‐andgender‐neutralmeasuresaremeasuresthataredesignedtoencouragetheparticipationofsmallbusinessesinagovernmentorganization’scontracting,regardlessoftherace/ethnicityorgenderofthebusinesses’owners.Incontrasttorace‐andgender‐neutralmeasures,race‐andgender‐consciousmeasuresaremeasuresthatarespecificallydesignedtoencouragetheparticipationofminority‐andwoman‐ownedbusinessesingovernmentcontracting.TheCitydoesnotcurrentlyuseanyrace‐orgender‐consciousmeasuresaspartoftheSWaMProgram.

Aspartofthedisparitystudy,BBCassessedwhethertherewereanydisparitiesbetween:

ThepercentageofcontractdollarsthattheCityspentwithofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesbetweenJuly1,2012andJune30,2017(i.e.,thestudyperiod)(i.e.,utilization,orparticipation);and

Thepercentageofcontractdollarsthatminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesmightbeexpectedtoreceivebasedontheiravailabilitytoperformspecifictypesandsizesoftheCity’sprimecontractsandsubcontracts(i.e.,availability).

Thedisparitystudyalsoexaminedotherquantitativeandqualitativeinformationrelatedto:

ThelegalframeworkrelatedtotheCity’simplementationoftheSWaMProgram;

Localmarketplaceconditionsforthatminority‐,woman‐,andveteran‐ownedbusinesses;and

ContractingpracticesandbusinessassistanceprogramsthattheCitycurrentlyhasinplace.

TheCitycoulduseinformationfromthestudytohelprefineitsimplementationoftheSWaMProgram,includingsettingoverallaspirationalgoalsfortheparticipationofminority‐andwoman‐ownedbusinessesinCitycontracting;determiningwhichprogrammeasurestousetoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinCitycontracting;and,ifappropriate,determiningwhichracial/ethnicandgendergroupswouldbeeligibleto

1“Woman‐ownedbusinesses”referstonon‐Hispanicwhitewomanownedbusinesses.Informationandresultsforminoritywoman‐ownedbusinessesareincludedalongwiththeircorrespondingracial/ethnicgroups.


participateinanyrace‐orgender‐consciousprogrammeasuresthattheCitymightdecidetouseinthefuture.

BBCsummarizeskeyinformationfromthe2018CityofVirginiaBeachDisparityStudyinfiveparts:

A. Analysesinthedisparitystudy;

B. Availabilityanalysisresults;

C. Utilizationanalysisresults;

D. Disparityanalysisresults;and

E. Programimplementation.

A. Analyses in the Disparity Study

Alongwithmeasuringdisparitiesbetweentheparticipationandavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinCitycontracts,BBCalsoexaminedotherinformationrelatedtotheCity’simplementationoftheSWaMProgram:

Thestudyteamconductedananalysisoffederalregulations,caselaw,andotherinformationtoguidethemethodologyforthedisparitystudy.Theanalysisincludedareviewoflegalrequirementsrelatedtominority‐andwoman‐ownedbusinessprograms,includingtheSWaMProgram(seeChapter2andAppendixB).

BBCconductedquantitativeanalysesofoutcomesforminorities,women,veterans,andthebusinessesthattheyownthroughouttherelevantgeographicmarketarea.2Inaddition,thestudyteamcollectedqualitativeinformationaboutpotentialbarriersthatminorities,women,veterans,andthebusinessesthattheyownfaceinthelocalmarketplacethroughin‐depthinterviews,telephonesurveys,publicmeetings,andwrittentestimony(seeChapter3,AppendixC,andAppendixD).

BBCanalyzedthepercentageofrelevantCitycontractingdollarsthatminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesareavailabletoperform.Thatanalysiswasbasedontelephonesurveysthatthestudyteamcompletedwithmorethan1,000businessesthatworkinindustriesrelatedtothespecifictypesofconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontractsthattheCityawards(seeChapter5andAppendixE).

BBCanalyzedthedollarsthatminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesreceivedonmorethan26,000construction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontractsthattheCityawardedduringthestudyperiod(seeChapter6).

BBCexaminedwhethertherewereanydisparitiesbetweentheparticipationandavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinesseson

2BBCidentifiedtherelevantgeographicmarketareaasChesapeakeCity,NorfolkCity,PortsmouthCity,andVirginiaBeachCity.


construction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontractsthattheCityawardedduringthestudyperiod(seeChapter7).

BBCreviewedthemeasuresthattheCityusestoencouragetheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinitscontractingaswellasmeasuresthatotherorganizationsintheregionuse(seeChapter8).

BBCprovidedguidancerelatedtoadditionalprogramoptionsandpotentialchangestocurrentcontractingpracticesfortheCity’sconsideration(seeChapter9).

B. Availability Analysis Results

BBCconductedacustomcensustoanalyzetheavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesforCityprimecontractsandsubcontracts.BBC’sapproachreliedoninformationfromsurveysthatthestudyteamconductedwithpotentiallyavailablebusinesseslocatedintherelevantgeographicmarketareathatperformworkwithinrelevantsubindustries.ThatapproachallowedBBCtodeveloparepresentative,unbiased,andstatistically‐validdatabaseofpotentiallyavailablebusinessestoestimatetheavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesaccurately.

Minority‐and woman‐owned businesses.BBCexaminedtheavailabilityofminority‐andwoman‐ownedbusinessesforvariouscontractssetstoassessthedegreetowhichtheyareready,willing,andabletoperformdifferenttypesofCitywork.

Overall.FigureES‐1presentsoveralldollar‐weightedavailabilityestimatesbyrelevantbusinessgroupforallCitycontractsandprocurements.Overall,theavailabilityofminority‐andwoman‐ownedbusinessesforCitycontractsandprocurementsis25.2percent,indicatingthatminority‐andwoman‐ownedbusinessesmightbeexpectedtoreceive25.2percentofthedollarsthattheCityawardsinconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservices.Non‐Hispanicwhitewoman‐ownedbusinesses(13.3%)andBlackAmerican‐ownedbusinesses(8.1%)exhibitedthehighestavailabilitypercentagesamongallgroups.

Figure ES‐1. Overall availability estimates by racial/ethnic and gender group

Note:

Numbers rounded to nearest tenth of 1 percent and thus may not sum exactly to totals.

For more detail and results by group, see Figure F‐2 in Appendix F.

Source:

BBC Research & Consulting availability analysis.

Contract role. Manyminority‐andwoman‐ownedbusinessesaresmallbusinessesandthusoftenworkassubcontractors.Becauseofthattendency,itisusefultoexamineavailabilityestimatesseparatelyforprimecontractsandsubcontracts.AsshowninFigureES‐2,theavailabilityofminority‐andwoman‐ownedbusinessesconsideredtogetherislowerforCityprimecontracts(24.5%)thanforsubcontracts(31.6%).Amongotherfactors,thatresultcould

Business group

Asian American‐owned 0.8 %

Black American‐owned 8.1 %

Hispanic American‐owned 2.7 %

Native American‐owned 0.4 %

Total Minority‐owned 12.0 %

Non‐Hispanic white woman‐owned 13.3 %

Total Minority‐ and Woman‐owned 25.2 %

Availability %


beduetothefactthatsubcontractstendtobemuchsmallerinsizethanprimecontractsandarethusmoreaccessiblethanprimecontractstominority‐andwoman‐ownedbusinesses.

Figure ES‐2. Availability estimates by contract role

Note:


For more detail, see Figures F‐9 and F‐10 in Appendix F.

Source:


Industry.BBCexaminedavailabilityanalysisresultsseparatelyforconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontracts.AsshowninFigureES‐3,theavailabilityofminority‐andwoman‐ownedbusinessesishighestfortheCity’sarchitectureandengineeringcontracts(32.6%)andlowestforconstructioncontracts(19.8%).

Figure ES‐3. Availability estimates by industry

Note: Numbers rounded to nearest tenth of 1 percent and thus may not sum exactly to totals.

For more detail and results by group, see Figure F‐5, F‐6, F‐7, and F‐8 in Appendix F.

Source: BBC Research & Consulting availability analysis.

Goal status.TheCityusedSWaMcontractgoalstoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,andwoman‐ownedbusinessesinmanyofthecontractsthatitawardedduringthestudyperiod.SWaMgoalsonlyappliedtoselectconstructioncontractsduringthestudyperiod.ItisusefultoexamineavailabilityanalysisresultsseparatelyforcontractsthattheCityawardedwiththeuseofSWaMcontractgoals(goalscontracts)andcontractsthatitawardedwithouttheuseofgoals(nogoalscontracts).FigureES‐4presentsavailabilityestimatesseparatelyforgoalsandnogoalscontracts.AsshowninFigureES‐4,theavailabilityofminority‐andwoman‐ownedbusinessesconsideredtogetherislowerforgoalscontracts(21.1%)thanfornogoalscontracts(28.0%).

Business group

Asian American‐owned 0.8 % 1.0 %

Black American‐owned 8.0 % 8.4 %

Hispanic American‐owned 2.7 % 2.8 %

Native American‐owned 0.4 % 0.2 %

Non‐Hispanic white woman‐owned 12.5 % 19.2 %

Total Minority‐ and Woman‐owned 24.5 % 31.6 %

Contract role

Prime

contracts Subcontracts

Business group

Asian American‐owned 1.6 % 0.0 % 0.1 % 0.1 %

Black American‐owned 5.7 % 9.2 % 10.4 % 10.1 %

Hispanic American‐owned 2.8 % 3.1 % 4.8 % 1.1 %

Native American‐owned 0.0 % 1.7 % 0.7 % 0.1 %

Non‐Hispanic white woman‐owned 9.6 % 18.6 % 10.3 % 18.8 %

Total Minority‐ and Woman‐owned 19.8 % 32.6 % 26.3 % 30.3 %

Construction

Other professional

services

Goods and

services

Industry

Architecture and

engineering


Figure ES‐4 Availability estimates by contract goals status

Note:



Source:


Service disabled veteran‐owned businesses.BBCexaminedtheoverallavailabilityofservice‐disabledveteran‐ownedbusinessesforCitywork(i.e.,businessesownedbyveteranswhohaveadisabilityasaresultoftheirservice).Theavailabilityanalysisindicatedthattheavailabilityofservice‐disabledveteran‐ownedbusinessesfortheCity’scontractsandprocurementsis11.9percent.

C. Utilization Analysis Results

BBCmeasuredtheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinCitycontractingintermsofutilization—thepercentageofprimecontractandsubcontractdollarsthatthosebusinessesreceivedonCityprimecontractsandsubcontractsduringthestudyperiod.BBCmeasuredtheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinCitycontractsregardlessofwhethertheywerecertifiedSWaMbusinesses.

Minority‐ and woman‐owned businesses.BBCexaminedtheparticipationofminority‐andwoman‐ownedbusinessesforvarioussetsofcontractsthattheCityawardedduringthestudyperiod.Thestudyteamassessedtheparticipationofallofthosebusinessesconsideredtogetherandseparatelyforeachrelevantracial/ethnicandgendergroup.

Overall.FigureES‐5presentsthepercentageofcontractingdollarsthatminority‐andwoman‐ownedbusinessesreceivedonconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontractsandprocurementsthattheCityawardedduringthestudyperiod(includingbothprimecontractsandsubcontracts).Overall,minority‐andwoman‐ownedbusinessesconsideredtogetherreceived18.9percentoftherelevantcontractingdollarsthattheCityawardedduringthestudyperiod.Non‐Hispanicwhitewoman‐ownedbusinesses(8.2%)andAsianAmerican‐ownedbusinesses(5.6%)exhibitedhigherlevelsofparticipationthanallothergroups.

Business group


Black American‐owned 5.5 9.7

Hispanic American‐owned 3.3 2.4

Native American‐owned 0.4 0.4



Goals status

Goals No goals


Figure ES‐5. Overall utilization results

Note:

Numbers rounded to nearest tenth of 1 percent. Numbers may not add to totals.

For more detail, see Figure F‐2 in Appendix F.

Source:

BBC Research & Consulting utilization analysis.

Contract role.Manyminority‐andwoman‐ownedbusinessesaresmallbusinesses,andthus,oftenworkassubcontractors.Becauseofthattendency,itisusefultoexamineutilizationresultsseparatelyforprimecontractsandsubcontracts.AsshowninFigureES‐6,theparticipationofminority‐andwoman‐ownedbusinessesconsideredtogetherwashigherintheCity’ssubcontracts(21.9%)thanprimecontracts(18.5%).ThevastmajorityofcontractingdollarsthattheCityawardedduringthestudyperiodwereassociatedwithprimecontracts.

Figure ES‐6. Utilization results by contract role



Source:


Figure ES‐7. Utilization results by relevant industry

Note: Numbers rounded to nearest tenth of 1 percent. Numbers may not add to totals.

For more detail, see Figures F‐5, F‐6, F‐7, and F‐8 in Appendix F.

Source: BBC Research & Consulting utilization analysis.

Industry. BBCexaminedutilizationanalysisresultsseparatelyfortheCity’sconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontracts.AsshowninFigureES‐7,theparticipationofminority‐andwoman‐ownedbusinessesconsideredtogetherwashighestintheCity’sotherprofessionalservicescontracts(50.6%)andlowestin

Business group

Minority‐ and Woman‐owned







Utilization

Business group







Contract role

Prime


Business Group







Industry

Construction

Other Professional

Services

Goods and

Services

Architecture

and Engineering


architectureandengineeringcontracts(10.1%).ThepluralityofcontractingdollarsthattheCityawardedduringthestudyperiodwereassociatedwithconstructioncontractsforwhichtheparticipationofminority‐andwoman‐ownedbusinesseswas11.8percent.

Goal status.TheCityusedSWaMcontractgoalstoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,andwoman‐ownedbusinessesinmanyofthecontractsthatitawardedduringthestudyperiod.SWaMgoalsonlyappliedtoselectconstructioncontractsduringthestudyperiod.Itisusefultoexamineparticipationseparatelyforgoalscontractsandnogoalscontractsanassessmentofhoweffectivetheuseofthosegoalswasinencouragingtheparticipationofminority‐andwoman‐ownedbusinessesinparticular.AsshowninFigureES‐8,theparticipationofminority‐andwoman‐ownedbusinessesconsideredtogetherwasactuallymuchhigherinnogoalscontracts(23.7%)thangoalscontracts(11.5%).

Figure ES‐8. Utilization results by contract goal status



Source:


Service‐disabled veteran‐owned businesses.BBCalsoexaminedtheparticipationofservice‐disabledveteran‐ownedbusinessesinthecontractsandprocurementsthattheCityawardedduringthestudyperiod.Theutilizationanalysisindicatedthattheparticipationofservice‐disabledveteran‐ownedbusinessesinCitycontractsandprocurementswas0.7percent.

D. Disparity Analysis Results

Althoughinformationabouttheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinCitycontractsisusefulonitsown,itisevenmoreusefulwhenitiscomparedwiththelevelofparticipationthatmightbeexpectedbasedontheiravailabilityforCitywork.Aspartofthedisparityanalysis,BBCcomparedtheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinCityprimecontractsandsubcontractswiththepercentageofcontractdollarsthatthosebusinessesmightbeexpectedtoreceivebasedontheiravailabilityforthatwork.BBCcalculateddisparityindicesforeachrelevantbusinessgroupandforvariouscontractsetsbydividingpercentutilizationbypercentavailabilityandmultiplyingby100.Adisparityindexof100indicatesanexactmatchbetweenparticipationandavailabilityforaparticulargroupforaparticularcontractset(referredtoasparity).Adisparityindexoflessthan100indicatesadisparitybetweenparticipationandavailability.Adisparityindexoflessthan80indicatesasubstantialdisparitybetweenparticipationandavailability.

Minority‐and woman‐owned businesses.BBCexaminedtheavailabilityofminority‐andwoman‐ownedbusinessesforvariouscontractssetstoassessthedegreetowhichtheymayhavebeenunderutilizedonvarioustypesofCitywork.

Business group







Goal status

Goals No goals


Overall.FigureES‐9presentsdisparityindicesforallrelevantprimecontractsandsubcontractsthattheCityawardedduringthestudyperiod.Thelinedownthecenterofthegraphshowsadisparityindexlevelof100,whichindicatesparitybetweenparticipationandavailability.Alineisalsodrawnatadisparityindexlevelof80,becausesomecourtsuse80asthethresholdforwhatindicatesasubstantialdisparity.AsshowninFigureES‐9,overall,theparticipationofminority‐andwoman‐ownedbusinessesincontractsthattheCityawardedduringthestudyperiodwassubstantiallylowerthanwhatonemightexpectbasedontheavailabilityofthosebusinessesforthatwork.Thedisparityindexof75indicatesthatminority‐andwoman‐ownedbusinessesreceivedapproximately$0.75foreverydollarthattheymightbeexpectedtoreceivebasedontheiravailabilityfortherelevantprimecontractsandsubcontractsthattheCityawardedduringthestudyperiod.Disparityanalysisresultsbyindividualracial/ethnicandgendergroupindicatedthat:

Fourgroupsexhibiteddisparityindicessubstantiallybelowparity:non‐Hispanicwhitewoman‐ownedbusinesses(disparityindexof62),BlackAmerican‐ownedbusinesses(disparityindexof56),HispanicAmerican‐ownedbusinesses(disparityindexof20),andNativeAmerican‐ownedbusinesses(disparityindexof5).

AsianAmerican‐ownedbusinesses(disparityindexof200+)didnotexhibitadisparity.

Figure ES‐9. Disparity indices by group

Note:


Source:

BBC Research & Consulting disparity analysis.

Contract role. Subcontractstendtobemuchsmallerinsizethanprimecontracts.Asaresult,subcontractsareoftenmoreaccessiblethanprimecontractstominority‐andwoman‐ownedbusinesses.Thus,itmightbereasonabletoexpectbetteroutcomesforminority‐andwoman‐ownedbusinessesonsubcontractsthanonprimecontracts.AsshowninFigureES‐10,minority‐andwoman‐ownedbusinessesconsideredtogethershowedasubstantialdisparityforbothprimecontracts(disparityindexof76)andsubcontracts(disparityindexof69).Resultsforindividualgroupsindicatedthat:

AllgroupsshowedsubstantialdisparitiesonprimecontractsexceptforAsianAmerican‐ownedbusinesses(disparityindexof200+).

Allgroupsshowedsubstantialdisparitiesonsubcontractsexceptfornon‐Hispanicwhitewoman‐ownedbusinesses(disparityindexof94).


Figure ES‐10. Disparity indices for prime contracts and subcontracts

Note:


Source:


Industry.BBCexamineddisparityanalysisresultsseparatelyfortheCity’sconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontracts.AsshowninFigureES‐11,minority‐andwoman‐ownedbusinessesconsideredtogethershowedsubstantialdisparitiesforeachrelevantindustryexceptotherprofessionalservices(disparityindexof193).Disparityanalysisresultsdifferedbyindustryandgroup:

Threeindividualgroupsshowedsubstantialdisparitiesonconstructioncontracts:AsianAmerican‐ownedbusinesses(disparityindexof13),BlackAmerican‐ownedbusinesses(disparityindexof23),andHispanicAmerican‐ownedbusinesses(disparityindexof35).

AllindividualgroupsshowedsubstantialdisparitiesonarchitectureandengineeringcontractsexceptforAsianAmerican‐ownedbusinesses(disparityindexof200+).

Threeindividualgroupsshowedsubstantialdisparitiesonotherprofessionalservicescontracts:HispanicAmerican‐ownedbusinesses(disparityindexof8),NativeAmerican‐ownedbusinesses(disparityindexof0),andnon‐Hispanicwhitewoman‐ownedbusinesses(disparityindexof29).

AllindividualgroupsshowedsubstantialdisparitiesongoodsandservicescontractsexceptforAsianAmerican‐ownedbusinesses(disparityindexof200+).


Figure ES‐11. Disparity analysis results by relevant industry

Note:


Source:


Goal status.TheCityusedSWaMcontractgoalstoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,andwoman‐ownedbusinessesinmanyofthecontractsthatitawardedduringthestudyperiod.SWaMgoalsonlyappliedtoselectconstructioncontractsduringthestudyperiod.Itisusefultoexaminedisparityanalysisresultsseparatelyforgoalscontractsandnogoalscontractstoassesstheeffectivenessofthosegoalstoaddressanydisparitiesbetweenparticipationandavailability.AsshowninFigureES‐12,minority‐andwoman‐ownedbusinessesconsideredtogetheractuallyshowedasubstantialdisparityforgoalscontracts(disparityindexof55)butnotfornogoalscontracts(disparityindexof85).ResultsforindividualgroupsindicatedthatSWaMcontractgoalsmaybemoreeffectiveinaddressingdisparitiesforcertaingroupsthanothers:

Non‐Hispanicwhitewoman‐ownedbusinessesdidnotexhibitasubstantialdisparityongoalscontracts(disparityindexof88)butallotherindividualgroupsdidexhibitsubstantialdisparities.

AllindividualgroupsshowedsubstantialdisparitiesonnogoalscontractsexceptforAsianAmerican‐ownedbusinesses(disparityindexof200+).


Service‐disabled veteran‐owned businesses. BBCalsocomparedparticipationtoavailabilityforservice‐disabledveteran‐ownedbusinessesinCitywork.Service‐disabledveteran‐ownedbusinessesexhibitedadisparityindexof6,indicatingthattheiractualparticipationinCitycontractingwassubstantiallylessthantheiravailability.

Figure ES‐12. Disparity analysis results by contract goals status

Note:



Source:


E. Program Implementation

TheCityshouldreviewstudyresultsandotherrelevantinformationinconnectionwithmakingdecisionsconcerningitsimplementationoftheSWaM.Keyconsiderationsofpotentialrefinementarediscussedbelow.Inmakingthoseconsiderations,theCityshouldalsoassesswhetheradditionalresources,changesininternalpolicy,orchangesinstatelawmayberequired.

Overall annual aspirational goal.In2010,theCityadoptedanannualaspirationalgoalof10percentforminority‐ownedbusinessparticipationinCitycontracts.Resultsfromthedisparitystudy—particularlytheavailabilityanalysisandanalysesofmarketplaceconditions—canbehelpfultotheCityinadjustingitsoverallannualgoalfortheparticipationofminority‐ownedbusinessesandalsotopotentiallyincludewoman‐ownedbusinessesandservice‐disabledveteran‐ownedbusinesses.Theavailabilityanalysisindicatesthat,consideringallindustriestogether,minority‐ownedbusinessesmightbeexpectedtoreceive12.0percentofCitycontractingdollarsandwoman‐ownedbusinessesmightbeexpectedtoreceive13.3percentof


Citycontractingdollars.3Theavailabilityanalysisindicatedthatservice‐disabledveteran‐ownedbusinessesmightbeexpectedtoreceive11.9percentofCitycontractingdollars.TheCityshouldconsideradjustingitsoverallaspirationalgoalbasedonthatinformationandinformationaboutlocalmarketplaceconditionspresentedinChapter3,AppendixC,andAppendixD.

SWaM Office.TheCitydoesnothaveadedicatedofficetoimplementtheSWaMProgramandmonitortheparticipationofSWaM‐certifiedbusinessesinitscontracts.Instead,theCitycurrentlyreliesonstaffwhoworkinthePurchasingDivisiontodoso.TheCityshouldconsiderestablishingadedicatedofficeresponsibleforimplementingtheSWaMProgramandmonitoringprogressthattheCityismakingtowardsencouragingtheparticipationofminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesinitscontracting.Theofficeshouldhaveenoughdedicatedstafftocarryoutessentialprogramfunctions.AlthoughtheCity’sMinorityBusinessCoordinatorcurrentlyworkswithinthePurchasingDivision,theCitymightinsteadconsiderhousingaSWaMOfficewithintheOfficeofEconomicDevelopment.DoingsowouldallowSWaMstafftomoreeffectivelypartnerwiththeOfficeofEconomicDevelopment,whichalreadycarriesoutanumberofactivitiesrelevanttopotentialSWaMOfficeefforts.

Data collection.TheCitymaintainscomprehensivedataontheprimecontractsandprocurementsthatitawardsandmaintainsthosedatainawell‐organizedandintuitivemanner.However,theCitydoesnotmaintainanadequatelinkbetweenitscontractingandpaymentinformationandcouldeasilydosoinitscurrentsystems.DoingsowouldallowtheCitytoaccuratelyassesswhethertherearesubstantialdifferencesbetweencontractawardandpaymentamounts.Moreover,theCitydoesnotmaintaincomprehensivedataonsubcontractsthatareassociatedwiththeprimecontractsthatitawards.TheCityshouldconsidercollectingcomprehensivedataonallsubcontracts,regardlessoftheownershipstatusofeachbusiness.CollectingdataonallsubcontractswillhelpensurethattheCitymonitorstheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesaccurately.TheCityshouldconsidercollectingthosedataaspartofbidsandalsorequiringprimecontractorstosubmitdataonsubcontractsaspartoftheinvoicingprocessforallcontracts.TheCityshouldtrainrelevantdepartmentstafftocollectandentersubcontractdataaccuratelyandconsistently.

Growth monitoring.Alongwithworkingtoimproveitscontractingandvendordatasystems,theCitymightalsoconsidercollectingdataontheimpactthattheSWaMProgramhasonthegrowthofminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesovertime.DoingsowouldrequiretheCitytocollectbaselineinformationonSWaM‐certifiedbusinesses—suchasrevenue,numberoflocations,numberofemployees,andemployeedemographics—andthencontinuetocollectthatinformationfromeachbusinessonanannualbasis.SuchmetricswouldallowtheCitytoassesswhethertheprogramishelpingbusinessesgrowandrefinethemeasuresthatitusesaspartoftheSWaMProgram.

3Theavailabilityofminority‐andwoman‐ownedbusinessesforallindustriesconsideredtogetherreflectsaweightof0.45forconstruction;0.13forarchitectureandengineering;0.17forotherprofessionalservices;and0.26forgoodsandservices,basedonthevolumeofdollarsthattheCityspentduringthestudyperiodineachindustry.


Business certification. TheCitydoesnotcurrentlycertifyminority‐andwoman‐ownedbusinessesorotherdiversebusinessesitselfbutinsteadreliesontheVirginiaDepartmentofSmallBusinessandSupplierDiversity(SBSD)todoso.Somebusinessesparticipatinginin‐depthinterviewsandpublicmeetingscommentedonthedifficultiesandtimerequirementsassociatedwithSBSD’scertificationprocess.TheCitymightconsideroperatingitsowncertificationprocessaspartoftheSWaMProgramalongwithrecognizingSBSD‐certifiedbusinesses.DoingsowouldallowtheCitytocertifyminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesusingcriteriathataremostrelevanttoitslocalmarketplace(e.g.,race/ethnicityofowners,genderofowners,andrevenuerequirements).

Subcontract opportunities.Subcontractsoftenrepresentaccessibleopportunitiesforsmallanddiversebusinessestobecomeinvolvedincontracting.However,subcontractingaccountedforarelativelysmallpercentageofthetotalcontractingdollarsthattheCityawardedduringthestudyperiod.Toincreasethenumberofsubcontractopportunities,theCitycouldconsiderimplementingaprogramthatrequiresprimecontractorstosubcontractacertainamountofprojectworkaspartoftheirbidsandproposals,regardlessoftherace/ethnicityorgenderofsubcontractorowners.Forspecifictypesofcontractswheresubcontractingorpartnershipopportunitiesmightexist,theCitycouldsetaminimumpercentageofworktobesubcontracted.Primecontractorswouldthenhavetomeetorexceedthatthresholdinorderfortheirbidstobeconsideredresponsive.

Contract goals. TheCityshouldconsiderusingminority‐andwoman‐ownedbusinessgoalsonindividualcontractsthatitawards.DisparityanalysisresultsindicatedthatnearlyallrelevantgroupsshowedsubstantialdisparitiesonthecontractsthattheCityawardedduringthestudyperiod,indicatingthattheyarefacingbarriersaspartoftheCity’scontractingprocesses.BecausetheCityusesmanyrace‐andgender‐neutralmeasurestoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitscontracting,andbecausethosemeasureshavenotsufficientlyaddresseddisparitiesforseveralindividualgroups,theCitymightconsiderusingcontractgoalsinthefuture.Becausetheuseofsuchgoalswouldbeconsideredarace‐andgender‐consciousmeasure,theCitywillneedtoensurethattheuseofthosegoalsmeetsthestructscrutinystandardofconstitutionalreview(fordetails,seeChapter2andAppendixB).

Unbundling large contracts. Ingeneral,minority‐andwoman‐ownedbusinessesexhibitedreducedavailabilityforrelativelylargecontractsthattheCityawardedduringthestudyperiod.Inaddition,aspartofin‐depthinterviewsandpublicmeetings,severalbusinessesownersreportedthatthesizeofgovernmentcontractsoftenservesasabarriertotheirsuccess(fordetails,seeAppendixD).Tofurtherencouragetheparticipationofsmallanddiversebusinesses,theCityshouldconsidermakingeffortstounbundlerelativelylargeprimecontractsandevensubcontractsintoseveralsmallercontracts.Forexample,theCityofCharlotte,NorthCarolinaencouragesprimecontractorstounbundlesubcontractingopportunitiesintosmallercontractpiecesthataremorefeasibleforsmallbusinessesandminority‐andwoman‐ownedbusinessestoworkonandacceptssuchattemptsasgoodfaitheffortsaspartofitscontractinggoalsprogram.

Prompt payment.Aspartofin‐depthinterviews,severalbusinesses,includingmanyminority‐andwoman‐ownedbusinesses,reporteddifficultieswithreceivingpaymentinatimelymanneronCitycontracts,particularlywhentheyworkassubcontractors(fordetails,see


AppendixD).Manybusinessesalsocommentedthathavingcapitalonhandiscrucialtobusinesssuccessandisoftenchallengingforsmallbusinesses.Citycontractsincludelanguagetoensurepromptpaymentofsubcontractors,buttheCityshouldconsiderreinforcingpromptpaymentpolicieswithitsprocurementstaffandprimecontractors.Inaddition,theCitytypicallypayscontractorsviahardcopychecksandcouldconsiderautomatingpayments.Doingsomighthelpensurethatbothprimecontractorsandsubcontractorsreceivepaymentinatimelymanner.

CHAPTER 1.

Introduction

BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER 1, PAGE 1

CHAPTER 1. Introduction

VirginiaBeachisthemostpopulouscityinVirginiaandoneofthe40mostpopulouscitiesintheUnitedStates.TheCityofVirginiaBeach(theCity)providesmyriadservicestothenearly500,000peoplewholiveandworkintheregion.Thoseservicesincludepoliceandfireprotection;healthandmentalhealthservices;roadconstructionandmaintenance;waterandsewageservices;andavarietyofsocialandeconomicservices.Aspartofprovidingthoseservices,theCitytypicallyspendshundredsofmillionsofcontractingdollarseachyeartoprocurevariousgoodsandservicesinconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservices.

Overthepast20years,theCityhasusedvariousstrategiesandeffortstoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesinitscontracting.Thoseeffortshaveincluded:

EstablishingtheSmall,Woman,andMinority‐ownedBusiness(SWaM)Program;

EstablishingtheSmallBusinessEnhancementProgram;

Establishinganaspirational10percentgoalfortheparticipationofminority‐ownedbusinessesinCitycontracting;

Creatingtheregion’sfirstMinorityBusinessCouncil;

UnbundlingCitycontractstobetterenableSWaMbusinessestocompeteforCitycontracts;

ProvidingdepartmentbuyersaccesstoacomprehensivedatabaseofSWaMbusinesses;

ImplementingaCityAdministrativeDirectiverequiringthesolicitationofSWaMbusinessesandservice‐disabledveteran‐ownedbusinessesforprocurementsworthlessthan$50,000;

EnteringintoaMemorandumofUnderstandingwiththeVirginiaDepartmentofSmallBusinessandSupplierDiversity‐SBSD;

Creatingthreebusinessdiversitypositions:theMinorityBusinessCoordinator,theSWaMBusinessDevelopmentManager,andtheTitleVICivilRightsComplianceCoordinator;and

Implementingabondwaiver/prequalificationprogram.

TheCityretainedBBCResearch&Consulting(BBC)toconductadisparitystudytohelpevaluatetheeffectivenessofitsmeasurestoencouragetheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinitscontractsandprocurements.Aspartofthestudy,BBCexaminedwhetherthereareanydisparitiesbetween:

ThepercentageofcontractdollarsthattheCityspentwithofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesduringthestudyperiod(i.e.,utilization);and

Thepercentageofcontractdollarsthatminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesmightbeexpectedtoreceivebasedontheiravailabilitytoperformspecifictypesandsizesoftheCity’sprimecontractsandsubcontracts(i.e.,availability).


BBCalsoassessedotherquantitativeandqualitativeinformationrelatedto:

ThelegalframeworkrelatedtotheCity’simplementationoftheSWaMProgram;

Localmarketplaceconditionsforminority‐andwoman‐ownedbusinesses;and

ContractingpracticesandbusinessassistanceprogramsthattheCitycurrentlyhasinplace.

ThereareseveralreasonswhythedisparitystudywillbeusefultotheCity:

Thedisparitystudyprovidesanindependentreviewoftheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesintheCity’scontractingandprocurement,whichwillbevaluabletoCityleadershipandexternalstakeholders;

InformationfromthedisparitystudywillbeusefultotheCityasitmakesdecisionsabouttheSWaMProgram;

Thedisparitystudyprovidesinsightsintohowtoincreasecontractingopportunitiesforminority‐,woman‐,andservice‐disabledveteran‐ownedbusinesses;and

Organizationsthathavesuccessfullydefendedtheirimplementationsofcontractingprogramsincourthavetypicallyreliedoninformationfromdisparitystudies.

BBCintroducestheCityofVirginiaBeachDisparityStudyinthreeparts:

A. Background;

B. Studyscope;and

C. Studyteammembers.

A. Background

TheSWaMProgramisdesignedtoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,andwoman‐ownedbusinessesinCitycontractingandprocurement,particularlyinthecontractingareasofconstruction;architectureandengineering;andotherprofessionalservices.Totrytomeettheobjectivesoftheprogram,theCityusesvariousrace‐andgender‐neutralprogrammeasurestoencouragetheparticipationofthosebusinessesinitsowncontracting.Race‐andgender‐neutralmeasuresaremeasuresthataredesignedtoencouragetheparticipationofsmallbusinessesinagovernmentorganization’scontracting,regardlessoftherace/ethnicityorgenderofbusinesses’owners.Thetypesofrace‐andgender‐neutralmeasuresthattheCitycurrentlyusesinclude:

Networkingandoutreachevents;

Trainingseminarsandworkshops;

Financingandbondingassistance;

Mentorship;and

Monitoringandreporting.


Incontrasttorace‐andgender‐neutralmeasures,race‐andgender‐consciousmeasuresaremeasuresthatarespecificallydesignedtoencouragetheparticipationofminority‐andwoman‐ownedbusinessesingovernmentcontracting(e.g.,participationgoalsforminority‐andwoman‐ownedbusinessonindividualcontracts).TheCitydoesnotcurrentlyuseanyrace‐orgender‐consciousmeasuresaspartoftheSWaMProgram.

B. Study Scope

InformationfromthedisparitystudywillhelptheCitycontinuetoencouragetheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinitscontractingandprocurement.Inaddition,itwillhelptheCityimplementtheSWaMProgrameffectivelyandinalegally‐defensiblemanner.

Relevant business groups.Ingeneral,BBCfocuseditsanalysesonwhetherbarriersordiscriminationbasedonrace/ethnicity,gender,oramilitary‐relateddisabilityaffectedtheparticipationofbusinessesinCitycontractsorprocurements,regardlessofwhetherthosebusinesseswere,orcouldbe,SWaM‐certified.AnalyzingtheparticipationandavailabilityofbusinessesregardlessofSWaMcertificationallowedBBCtoassesswhethersuchbarriersaffectbusinesssuccessindependentofcertificationstatus.Tointerpretthecoreanalysespresentedinthedisparitystudy,itisusefultounderstandhowthestudyteamdefinesthevariousgroupsofbusinessesthatarethefocusoftheSWaMProgramandthedisparitystudy.

Minority‐ and woman‐owned businesses.BBCanalyzedbusinessoutcomesforminority‐andwoman‐ownedbusinesses,whichweredefinedasbusinessesownedbyAsianAmericans,BlackAmericans,HispanicAmericans,NativeAmericans,orwomenofanyrace/ethnicity.Toavoiddouble‐counting,BBCclassifiedminoritywoman‐ownedbusinesseswiththeircorrespondingminoritygroups.(Forexample,BlackAmericanwoman‐ownedbusinesseswereclassifiedalongwithbusinessesownedbyBlackAmericanmenasBlackAmerican‐ownedbusinesses.)Thus,woman‐ownedbusinessesinthisreportreferstonon‐Hispanicwhitewoman‐ownedbusinesses.

Service‐disabled veteran‐owned businesses.BBCanalyzedbusinessoutcomesforservice‐disabledveteran‐ownedbusinesses,whichweredefinedasbusinessesthatareownedbyveteransoftheUnitedStatesmilitarywhohaveamentalorphysicaldisabilitythatresulteddirectlyfromtheirmilitaryservice.

SWaM‐certified businesses.SWaM‐certifiedbusinessesaresmallbusinesses,minority‐ownedbusinesses,orwoman‐ownedbusinessesthatarespecificallycertifiedasSWaMbusinessesthroughtheCommonwealthofVirginia(theCommonwealth).BusinessesseekingSWaMcertificationarerequiredtosubmitanapplicationtotheCommonwealth.Theapplicationisavailableonlineandrequiresbusinessestosubmitvariousinformationincludingbusinessname;contactinformation;licenseinformation;financialinformation;workspecializations;andtherace/ethnicityandgenderoftheirowners.TheCommonwealthreviewseachapplicationforapproval.Notethatfirmsownedbynon‐Hispanicwhitemenwhoarenotservice‐disabledveteranscanalsobecomeSWaM‐certifiediftheymeeteligibilityrequirementsforbeingsmallbusinesses.However,BBC’sanalysesfocusedprimarilyonbusinessesthatareminority‐ownedorwoman‐owned.

Potential SWaM‐certified businesses.PotentialSWaM‐certifiedbusinessesareminority‐orwoman‐ownedbusinessesthatareSWaM‐certifiedorappearthattheycouldbecertifiedbased


onownershipstatusandsizerequirementssetforthbytheCommonwealth.ThestudyteamdidnotcountbusinessesthathavebeendecertifiedfromtheSWaMProgramaspotentialSWaM‐certifiedbusinessesinthisstudy.

Majority‐owned businesses.Majority‐ownedbusinessesarebusinessesthatareownedbynon‐Hispanicwhitemenwhoarenotservice‐disabledveterans.

Analyses in the disparity study.Thedisparitystudyexaminedwhetherthereareanydisparitiesbetweentheparticipationandavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesonCitycontracts.Inaddition,thedisparitystudyalsoincludes:

AreviewoflegalissuesrelatedtotheCity’simplementationoftheSWaMProgram;

Ananalysisoflocalmarketplaceconditionsforminority‐,woman‐,andservice‐disabledveteran‐ownedbusinesses;

AnassessmentoftheCity’scontractingpracticesandbusinessassistanceprograms;and

OtherinformationfortheCitytoconsiderasitrefinesitsimplementationoftheSWaMProgram.

Thedisparitystudyfocusedonconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicesthattheCityawardedbetweenJuly1,2012andJune30,2017(i.e.,thestudyperiod).Informationfromthedisparitystudyisorganizedasfollows:

Legal framework and analysis.Thestudyteamconductedadetailedanalysisofrelevantfederalregulations,caselaw,statelaw,andotherinformationtoguidethemethodologyforthedisparitystudy.Theanalysisincludedareviewoffederalandstaterequirementsconcerningtheimplementationofminority‐andwoman‐ownedbusinessprograms.ThelegalframeworkandanalysisissummarizedinChapter2andpresentedindetailinAppendixB.

Marketplace conditions.BBCconductedquantitativeanalysesofthesuccessofminoritiesandwomenaswellasminority‐,woman‐,andveteran‐ownedbusinessesinthelocalcontractingandprocurementindustries.BBCcomparedbusinessoutcomesforminoritiesandwomenaswellasminority‐andwoman‐ownedbusinessestooutcomesfornon‐Hispanicwhitemenandbusinessesownedbynon‐Hispanicwhitemen.Inaddition,thestudyteamcollectedqualitativeinformationaboutpotentialbarriersthatminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesfaceintheVirginiaBeachregionthroughin‐depthinterviewsandpublicmeetings.InformationaboutmarketplaceconditionsispresentedinChapter3,AppendixC,andAppendixD.

Data collection.BBCcollectedcomprehensivedataontheprimecontractsandsubcontractsthattheCityawardedduringthestudyperiodaswellasinformationonthebusinessesthatparticipatedinthosecontracts.ThescopeofBBC’sdatacollectioneffortsispresentedinChapter4.

Availability analysis.BBCassessedthedegreetowhichminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesareready,willing,andabletoperformonCityprimecontractsandsubcontracts.ThatanalysiswasbasedonCitydataandtelephonesurveysthatthestudyteamconductedwiththousandsofbusinessesthatarelocatedintheVirginiaBeachregionandthat


workinindustriesrelatedtothetypesofcontractsandprocurementsthattheCityawards.ResultsfromtheavailabilityanalysisarepresentedinChapter5andAppendixE.

Utilization analysis.BBCanalyzedprimecontractandsubcontractdollarsthattheCityspentwithminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesoncontractsthatitawardedduringthestudyperiod.ResultsfromtheutilizationanalysisarepresentedinChapter6.

Disparity analysis.BBCexaminedwhethertherewereanydisparitiesbetweentheutilizationandavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesonprimecontractsandsubcontractsthattheCityawardedduringthestudyperiod.Thestudyteamalsoassessedwhetheranyobserveddisparitieswerestatisticallysignificant.ResultsfromthedisparityanalysisarepresentedinChapter7andAppendixF.

Program measures. BBCreviewedtherace‐andgender‐neutralmeasuresthattheCityusestoencouragetheparticipationofsmallbusinessesinitscontractingaswellasmeasuresthatotherorganizationsacrossthecountryuse.ThatinformationispresentedinChapter8.

Program implementation.BBCreviewedtheCity’scontractingpracticesandprogrammeasuresthatarepartofitsimplementationoftheSWaMProgram.BBCprovidedguidancerelatedtoadditionalprogramoptionsandchangestocurrentcontractingpracticesfortheCitytoconsider.Thestudyteam’sreviewandguidancerelatedtoprogramimplementationispresentedinChapter9.

C. Study Team Members

TheBBCdisparitystudyteamwasmadeupoffourfirmsthat,collectively,possessdecadesofexperiencerelatedtoconductingdisparitystudiesinconnectionwithsmallanddiversebusinessprograms.

BBC (prime consultant).BBCisaDenver‐baseddisparitystudyandeconomicresearchfirm.BBChadoverallresponsibilityforthedisparitystudyandperformedallofthequantitativeanalyses.

The Miles Agency.TheMilesAgencyisaBlackAmericanwoman‐ownedcommunityengagementfirmbasedinVirginiaBeach.TheMilesAgencyconductedin‐depthinterviewswithbusinesseslocatedintheVirginiaBeachregionaspartofthestudyteam’squalitativeanalysesofmarketplaceconditions.Inaddition,thefirmhelpedfacilitatevariouscommunityengagementefforts.

Holland & Knight. Holland&Knightisalawfirmwithofficesthroughoutthecountry.Holland&Knightconductedthelegalanalysisthatprovidedthebasisforthestudy.

Customer Research International (CRI).CRIisaSubcontinentAsianAmerican‐ownedsurveyfieldworkfirmbasedinSanMarcos,Texas.CRIconductedtelephonesurveyswiththousandsofbusinesseslocatedintheVirginiaBeachregiontogatherinformationfortheutilizationandavailabilityanalyses.

CHAPTER 2.

Legal Analysis


CHAPTER 2. Legal Analysis

TheCityofVirginiaBeach(TheCity)usesvariouseffortstoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,woman‐ownedbusinesses,andservicedisabledveteran‐ownedbusinessesinitscontracting,includingitsoperationoftheSmall,Woman,andMinority‐ownedBusiness(SWaM)Program.Totrytomeettheobjectivesoftheprogram,theCityusesvariousrace‐andgender‐neutralprogrammeasures.Race‐andgender‐neutralmeasuresaremeasuresthataredesignedtoencouragetheparticipationofsmallbusinessesinanorganization’scontractingregardlessoftherace/ethnicityorgenderofbusinesses’owners.Incontrast,race‐andgender‐consciousmeasuresaredesignedtospecificallyencouragetheparticipationofminority‐andwoman‐ownedbusinessesintheorganization’scontracting(e.g.,participationgoalsforminority‐andwoman‐ownedbusinessonindividualcontracts).

AlthoughtheCitydoesnotcurrentlyuseanyrace‐orgender‐consciousmeasuresaspartoftheSWaMProgram,itisinstructivetoreviewlegalstandardssurroundingtheiruseincasetheCitydecidesthatusingsuchmeasuresisappropriateinthefuture.Anyuseofrace‐andgender‐consciousmeasuresmustmeetthestrictscrutinystandardofconstitutionalreview.1Thestrictscrutinystandardpresentsthehighestthresholdforevaluatingthelegalityofrace‐andgender‐consciousmeasuresshortofprohibitingthemaltogether.Underthestrictscrutinystandard,agovernmentorganizationmust:

Haveacompellinggovernmentalinterestinremedyingpastidentifieddiscriminationoritspresenteffects;and

Establishthattheuseofanysuchmeasureisnarrowlytailoredtoachievethegoalofremedyingtheidentifieddiscrimination.

Agovernmentorganization’sprogrammustmeetboththecompellinggovernmentalinterestandthenarrowtailoringcomponentsofthestrictscrutinystandard.Aprogramthatfailstomeeteithercomponentisunconstitutional.

BBCResearch&Consulting(BBC)summarizestheelementsoftheSWaMProgramaswellasthelegalstandardstowhichtheCitymustadhereinimplementingtheprogram.BBCpresentsthatinformationintwoparts:

A. Programoverview;and

B. Legalstandards.

1CertainFederalCourtsofAppealsapplytheintermediatescrutinystandardtogender‐consciousprograms.AppendixBdescribestheintermediatescrutinystandardindetail.


A. Program Overview

TheSWaMProgramisdesignedtoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,andwoman‐ownedbusinessesinCitycontractingandprocurement,particularlyinthecontractingareasofconstructionandarchitectureandengineering.Totrytomeettheobjectivesoftheprogram,theCityusesvariousrace‐andgender‐neutralprogrammeasurestoencouragetheparticipationofthosebusinessesinitsowncontracting,including:

Networkingandoutreachevents;

Trainingseminarsandworkshops;

Financingandbondingassistance;

Mentorship;

Monitoringandreporting;

TheBondWaiver/PrequalificationProgram;and

TheSmallBusinessEnhancementProgram.

TheCityalsoencouragesprimecontractorstoutilizeSWaM‐certifiedsubcontractorsonselectconstructionandarchitectureandengineeringcontracts.Forconstructionandarchitectureandengineeringcontractsworth$100,000ormore,theCityasksthatprimecontractorsfulfill50percentofsubcontractingopportunitieswithSWaM‐certifiedbusinesses.TheCitydoesnotcurrentlyuseanyrace‐orgender‐consciousmeasuresaspartoftheSWaMProgram.

B. Legal Standards

Therearedifferentlegalstandardsfordeterminingtheconstitutionalityofcontractingprogramsdependingonwhethertheyrelyonlyonrace‐andgender‐neutralmeasuresoracombinationofrace‐andgender‐neutralandrace‐andgender‐consciousmeasures.BBCbrieflysummarizeslegalstandardsforbothtypesofprogramsbelow.

Programs that rely only on race‐ and gender‐neutral measures.Governmentorganizationsthatimplementcontractingprogramsthatrelyonlyonrace‐andgender‐neutralmeasuresmustshowarationalbasisfortheirprograms.Showingarationalbasisrequiresorganizationstodemonstratethattheircontractingprogramsarerationallyrelatedtoalegitimategovernmentinterest.Itisthelowestthresholdforevaluatingthelegalityofgovernmentcontractingprograms.Whencourtsreviewprogramsbasedonarationalbasis,onlythemostegregiousviolationsleadtoprogramsbeingdeemedunconstitutional.TheCityimplementstheSWaMPrograminarace‐andgender‐neutralmanner.

Programs that rely on race‐ and gender‐neutral and race‐ and gender‐conscious measures.TheUnitedStatesSupremeCourthasestablishedthatcontractingprogramsthatincludebothrace‐andgender‐neutralandrace‐andgender‐consciousmeasuresmustmeetthestrictscrutinystandardofconstitutionalreview.2Incontrasttoarationalbasis,thestrict

2CertainFederalCourtsofAppealsapplytheintermediatescrutinystandardtogender‐consciousprograms.AppendixBdescribestheintermediatescrutinystandardindetail.


scrutinystandardpresentsthehighestthresholdforevaluatingthelegalityofgovernmentcontractingprogramsshortofprohibitingthemaltogether.ThetwokeyUnitedStatesSupremeCourtcasesthatestablishedthestrictscrutinystandardforsuchprogramsare:

The1989decisioninCityofRichmondv.J.A.CrosonCompany,whichestablishedthestrictscrutinystandardofreviewforrace‐consciousprogramsadoptedbystateandlocalgovernments;3and

The1995decisioninAdarandConstructors,Inc.v.Peña,whichestablishedthestrictscrutinystandardofreviewforfederalrace‐consciousprograms.4

Underthestrictscrutinystandard,agovernmentorganizationmustshowacompellinggovernmentalinteresttouserace‐andgender‐consciousmeasuresandensurethatitsuseofrace‐andgender‐consciousmeasuresisnarrowtailored.Aprogramthatfailstomeeteithercomponentisunconstitutional.

Compelling governmental interest. Anorganizationthatusesrace‐orgender‐consciousmeasuresaspartofaminority‐orwoman‐ownedbusinessprogramhastheinitialburdenofshowingevidenceofdiscrimination—includingstatisticalandanecdotalevidence—thatsupportstheuseofsuchmeasures.Organizationscannotrelyonnationalstatisticsofdiscriminationinanindustrytodrawconclusionsabouttheprevailingmarketconditionsintheirownregions.Rather,theymustassessdiscriminationwithintheirownrelevantmarketareas.5Itisnotnecessaryforagovernmentorganizationitselftohavediscriminatedagainstminority‐orwoman‐ownedbusinessesforittoact.InCityofRichmondv.J.A.CrosonCompany,theSupremeCourtfound,“if[theorganization]couldshowthatithadessentiallybecomea‘passiveparticipant’inasystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry…[i]tcouldtakeaffirmativestepstodismantlesuchasystem.”

Narrow tailoring.Inadditiontodemonstratingacompellinggovernmentalinterest,agovernmentagencymustalsodemonstratethatitsuseofrace‐andgender‐consciousmeasuresisnarrowlytailored.Thereareanumberoffactorsthatacourtconsiderswhendeterminingwhethertheuseofsuchmeasuresisnarrowlytailoredincluding:

Thenecessityofsuchmeasuresandtheefficacyofalternative,race‐andgender‐neutralmeasures;

Thedegreetowhichtheuseofsuchmeasuresislimitedtothosegroupsthatactuallysufferdiscriminationinthelocalmarketplace;

Thedegreetowhichtheuseofsuchmeasuresisflexibleandlimitedindurationincludingtheavailabilityofwaiversandsunsetprovisions;

Therelationshipofanynumericalgoalstotherelevantbusinessmarketplace;and

3CityofRichmondv.J.A.CrosonCompany,488U.S.469(1989).

4AdarandConstructors,Inc.v.Peña,515U.S.200(1995).

5Seee.g.,ConcreteWorks,Inc.v.CityandCountyofDenver(“ConcreteWorksI”),36F.3d1513,1520(10thCir.1994).


Theimpactofsuchmeasuresontherightsofthirdparties.6

Meeting the strict scrutiny standard.Manygovernmentorganizationshaveusedinformationfromdisparitystudiesaspartofdeterminingwhethertheircontractingpracticesareaffectedbyrace‐orgender‐baseddiscriminationandensuringthattheiruseofrace‐andgender‐consciousmeasuresisnarrowlytailored.Specifically,organizationshaveassessedevidenceofanydisparitiesbetweentheparticipationandavailabilityofminority‐andwoman‐ownedbusinessesfortheircontractsandprocurements.InCityofRichmondv.J.A.CrosonCompany,theUnitedStatesSupremeCourtheldthat,“[w]herethereisasignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractorswillingandabletoperformaparticularserviceandthenumberofsuchcontractorsactuallyengagedbythelocalityorthelocality’sprimecontractors,aninferenceofdiscriminatoryexclusioncouldarise.”LowercourtdecisionssinceCityofRichmondv.J.A.CrosonCompanyhaveheldthatacompellinggovernmentalinterestmustbeestablishedforeachracial/ethnicandgendergrouptowhichrace‐andgender‐consciousmeasuresapply.

Manyprogramshavefailedtomeetthestrictscrutinystandard,becausetheyhavefailedtomeetthecompellinggovernmentalinterestrequirement,thenarrowtailoringrequirement,orboth.However,manyotherprogramshavemetthestrictscrutinystandardandcourtshavedeemedthemtobeconstitutional.AppendixBprovidesdetaileddiscussionsofthecaselawrelatedtothoseprograms.

6See,e.g.,AGC,SDCv.Caltrans,713F.3dat1198‐1199;Rothe,545F.3dat1036;WesternStatesPaving,407F3dat993‐995;SherbrookeTurf,345F.3dat971;AdarandVII,228F.3dat1181;Eng’gContractorsAss’n,122F.3dat927(internalquotationsandcitationsomitted).

CHAPTER 3.

Marketplace Conditions


CHAPTER 3. Marketplace Conditions

Historically,therehavebeenmyriadlegal,economic,andsocialobstaclesthathaveimpededminoritiesandwomenfromacquiringthehumanandfinancialcapitalnecessarytostartandoperatesuccessfulbusinesses.Barrierssuchasslavery,racialoppression,segregation,race‐baseddisplacement,andlabormarketdiscriminationproducedsubstantialdisparitiesforminoritiesandwomen,theeffectsofwhicharestillapparenttoday.Thosebarrierslimitedopportunitiesforminoritiesintermsofbotheducationandworkplaceexperience.1,2,3,4

Similarly,manywomenwererestrictedtoeitherbeinghomemakersortakinggender‐specificjobswithlowpayandlittlechanceforadvancement.5

Inthe19thandearly20thcenturies,minoritiesinVirginiafacedbarriersthatweresimilartothosethatminoritiesfacednationwide.DiscriminatorytreatmentwascommonforminoritiesinVirginia.BlackAmericanswereforcedtoliveinracially‐segregatedneighborhoodsandsendtheirchildrentosegregatedschools.Intheearly20thcentury,BlackAmericanmeninVirginiawerebarredfromvoting.BlackAmericanswerealsoforcedtouseseparatefacilitiesatarearestaurants,publicbuildings,andculturalinstitutions.6Severalofthemostwell‐documentedexamplesofredlining—whereBlackAmericansweresystematicallydeniedaccesstobankingandmortgageservicesbecausetheyweredeemedtoliveinhigher‐risk,“undesirable”neighborhoods—occurredinplaceslikeRichmondandNorfolk,Virginia.7,8Disparatetreatmentalsoextendedintothelabormarket.BlackAmericanswereconcentratedinlowwageworkinagricultureandotherindustrieswithfewopportunitiesforadvancement.9,10

Inthemiddleofthe20thcentury,manylegalandworkplacereformsopenedupnewopportunitiesforminoritiesandwomennationwide.Forexample,Brownv.BoardofEducation,TheEqualPayAct,TheCivilRightsAct,andTheWomen’sEducationalEquityActoutlawedmanyformsofrace‐andgender‐baseddiscrimination.Workplacesadoptedformalizedpersonnelpoliciesandimplementedprogramstodiversifytheirstaffs.11Thosereformsincreaseddiversityinworkplacesandreducededucationalandemploymentdisparitiesforminoritiesandwomen12,13,14,15However,despitethoseimprovements,minoritiesandwomencontinuetofacebarriers—suchasincarceration,residentialsegregation,andfamilyresponsibilities—thathavemadeitmoredifficulttoacquirethehumanandfinancialcapitalnecessarytostartandoperatebusinessessuccessfully.16,17,18,19

FederalCourtsandtheUnitedStatesCongresshaveconsideredbarriersthatminorities;women;andminority‐andwoman‐ownedbusinessesfaceinalocalmarketplaceasevidencefortheexistenceofrace‐andgender‐baseddiscriminationinthatmarketplace.20,21,22TheUnitedStatesSupremeCourtandotherfederalcourtshaveheldthatanalysesofconditionsinalocalmarketplaceforminorities;women;andminority‐andwoman‐ownedbusinessesareinstructiveindeterminingwhetheragencies’implementationsofminority‐andwoman‐ownedbusinessprogramsareappropriateandjustified.Thoseanalyseshelpagenciesdeterminewhethertheyarepassivelyparticipatinginanyrace‐orgender‐baseddiscriminationthatmakesitmore


difficultforminority‐andwoman‐ownedbusinessestosuccessfullycompetefortheircontracts.Passiveparticipationindiscriminationmeansthatagenciesunintentionallyperpetuaterace‐orgender‐baseddiscriminationsimplybyoperatingwithindiscriminatorymarketplaces.Manycourtshaveheldthatpassiveparticipationinanyrace‐orgender‐baseddiscriminationestablishesacompellinggovernmentalinterestforagenciestotakeremedialactiontoaddresssuchdiscrimination.23,24,25

Thestudyteamconductedquantitativeandqualitativeanalysestoassesswhetherminorities;women;andminority‐andwoman‐ownedbusinessesfaceanybarriersintheVirginiaBeachconstruction;architecturalandengineering,professionalservices;andgoodsandservicesindustries.1Thestudyteamalsoexaminedthepotentialeffectsthatanysuchbarriershaveontheformationandsuccessofminority‐andwoman‐ownedbusinessesandontheirparticipationin,andavailabilityfor,contractsthattheCityofVirginiaBeachawards.Thestudyteamexaminedlocalmarketplaceconditionsprimarilyinfourareas:

Humancapital,toassesswhetherminoritiesandwomenfaceanybarriersrelatedtoeducation,employment,andgainingmanagerialexperienceinrelevantindustries;

Financialcapital,toassesswhetherminoritiesandwomenfaceanybarriersrelatedtowages,homeownership,personalwealth,andaccesstofinancing;

Businessownershiptoassesswhetherminoritiesandwomenownbusinessesatratesthatarecomparabletothatofnon‐Hispanicwhitemen;and

Successofbusinessestoassesswhetherminority‐andwoman‐ownedbusinesseshaveoutcomesthataresimilartothoseofbusinessesownedbynon‐Hispanicwhitemen.

TheinformationinChapter3comesfromexistingresearchintheareaofrace‐andgender‐baseddiscriminationaswellasfromprimaryresearchthatthestudyteamconductedofcurrentmarketplaceconditions.AdditionalquantitativeandqualitativeanalysesofmarketplaceconditionsarepresentedinAppendixCandAppendixD,respectively.

A. Human Capital

Humancapitalisthecollectionofpersonalknowledge,behavior,experience,andcharacteristicsthatmakeupanindividual’sabilitytoperformandsucceedinparticularlabormarkets.Humancapitalfactorssuchaseducation,businessexperience,andmanagerialexperiencehavebeenshowntoberelatedtobusinesssuccess.26,27,28,29Anyrace‐orgender‐basedbarriersinthoseareasmaymakeitmoredifficultforminoritiesandwomentoworkinrelevantindustriesandpreventsomeofthemfromstartingandoperatingbusinessessuccessfully.

Education.Barriersassociatedwitheducationalattainmentmayprecludeentryoradvancementincertainindustries,becausemanyoccupationsrequireatleastahighschooldiploma,andsomeoccupations—suchasoccupationsinprofessionalservices—requireatleastafour‐yearcollegedegree.Inaddition,educationalattainmentisastrongpredictorofboth

1TheVirginiaBeachmarketplaceisdefinedinthisstudyasChesapeakeCity,NorfolkCity,PortsmouthCity,andVirginiaBeachCity.


incomeandpersonalwealth,whicharebothshowntoberelatedtobusinessformationandsuccess.30,31Nationally,minoritieslagbehindnon‐Hispanicwhitesintermsofbotheducationalattainmentandthequalityofeducationthattheyreceive.32,33Minoritiesarefarmorelikelythannon‐Hispanicwhitestoattendschoolsthatdonotprovideaccesstocoreclassesinscienceandmath.34Inaddition,BlackAmericanstudentsaremorethanthreetimesmorelikelythannon‐Hispanicwhitestobeexpelledorsuspendedfromhighschool.35Forthoseandotherreasons,minoritiesarefarlesslikelythannon‐Hispanicwhitestoattendcollege;enrollathighly‐ormoderatelyselectivefour‐yearinstitutions;orearncollegedegrees.36

EducationaloutcomesforminoritiesinVirginiaBeacharesimilartothoseforminoritiesnationwide.Thestudyteam’sanalysesoftheVirginiaBeachlaborforceindicatethatcertainminoritygroupsarefarlesslikelythannon‐Hispanicwhitestoearnacollegedegree.Figure3‐1presentsthepercentageofVirginiaBeachworkersthathaveearnedfour‐yearcollegedegreesbyrace/ethnicityandgender.AsshowninFigure3‐1,BlackAmericansandHispanicAmericansaresubstantiallylesslikelythannon‐Hispanicwhiteworkerstohavefour‐yearcollegedegrees.Incontrast,AsianAmericansaremorelikelythannon‐Hispanicwhiteworkersandwomenaremorelikelythanmentohavefour‐yearcollegedegrees,

Figure 3‐1. Percentage of workers 25 and older with at least a four‐year college degree, Virginia Beach, 2012‐2016

Note:

** Denotes that the difference in proportions between the minority group and non‐Hispanic whites (or between women and men) is statistically significant at the 95% confidence level for Virginia Beach.

Source:

BBC Research & Consulting from 2012‐2016 ACS 5% Public Use Microdata sample. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.

Employment and management experience.Animportantprecursortobusinessownershipandsuccessisacquiringdirectworkandmanagementexperienceinrelevantindustries.Anybarriersthatlimitminoritiesandwomenfromacquiringthatexperiencecouldpreventthemfromstartingandoperatingrelatedbusinessesinthefuture.

Employment.Onanationallevel,priorindustryexperiencehasbeenshowntobeanimportantindicatorforbusinessownershipandsuccess.However,minoritiesandwomenareoftenunabletoacquirerelevantworkexperience.Theyaresometimesdiscriminatedagainstinhiringdecisions,whichimpedestheirentryintothelabormarket.37,38,39Whenemployed,theyareoftenrelegatedtoperipheralpositionsinthelabormarketandtoindustriesthatexhibitalreadyhighconcentrationsofminoritiesorwomen.40,41,42,43,44Inaddition,minoritiesareincarceratedatahigherratethannon‐HispanicwhitesinVirginiaandnationwide,whichcontributestoanumberoflabordifficulties,includingdifficultiesfindingsjobsandrelativelyslowwagegrowth.45,46,47,48


Thestudyteam’sanalysesofthelaborforceinVirginiaBeacharelargelyconsistentwiththosefindings.Figures3‐2and3‐3presenttherepresentationsofminorityandwomenworkersinvariousVirginiaBeachindustries.AsshowninFigure3‐2,theVirginiaBeachindustrieswiththehighestrepresentationsofminorityworkersarechildcare,hair,andnails;healthcare;andotherservices.TheVirginiaBeachindustrieswiththelowestrepresentationsofminorityworkersareconstruction;wholesaletrade;andextractionandagriculture.

Figure 3‐2.

Percent representation of minorities in various industries in Virginia Beach, 2012‐2016

Note: ** Denotes that the difference in proportions between minority workers in the specified industry and all industries is statistically significant at the 95% confidence level.

The representation of minorities among all Virginia Beach workers is 29% for Black Americans, 7% for Hispanic Americans, 6% for Asian Americans, 1% for Native Americans, 0% for Other race minorities and 43% for all minorities considered together.

"Other race minority" includes respondents who do not identify with the racial categories defined by the U.S. Census Bureau in its survey questionnaire.

Workers in the finance, insurance, real estate, legal services, accounting, advertising, architecture, management, scientific research, and veterinary services industries were combined to one category of Architecture & Engineering; Workers in the rental and leasing, travel, investigation, waste remediation, arts, entertainment, recreation, accommodations, food services, and select Other services were combined into one category of Other services; Workers in child day care services, barber shops, beauty salons, nail salons, and Other personal were combined into one category of childcare, hair, and nails.

Source: BBC Research & Consulting from 2012‐2016 ACS 5% Public Use Microdata sample. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.

Figures3‐3indicatesthattheVirginiaBeachindustrieswiththehighestrepresentationsofwomenworkersarechildcare,hair,andnails;healthcare;andeducation.TheVirginiaBeachindustrieswiththelowestrepresentationsofwomenworkersaremanufacturing;extractionandagriculture;andconstruction.


Figure 3‐3.

Percent representation of women in various industries in Virginia Beach, 2012‐2016

Note: ** Denotes that the difference in proportions between women workers in the specified industry and all industries is statistically significant at the 95% confidence level.

The representation of women among all Virginia Beach workers is 46%.



Management experience.Managerialexperienceisanessentialpredictorofbusinesssuccess.However,race‐andgender‐baseddiscriminationremainsapersistentobstacletogreaterdiversityinmanagementpositions.49,50,51Nationally,minoritiesandwomenarefarlesslikelythannon‐Hispanicwhitementoworkinmanagementpositions.52,53SimilaroutcomesappeartoexistforminoritiesandwomeninVirginiaBeach.ThestudyteamexaminedtheconcentrationofminoritiesandwomeninmanagementpositionsintheVirginiaBeachconstruction;professionalservices;andgoodsandgeneralservicesindustries.AsshowninFigure3‐4,comparedtonon‐HispanicwhiteAmericans,asmallerpercentageofBlackAmericansworkasmanagersintheconstructionandgoodsandservicesindustriesandasmallerpercentageofHispanicAmericansworkasmanagersintheconstructionindustry.Comparedtomen,asmallerpercentageofwomenworkasmanagersinthearchitectureandengineeringindustry.Incontrast,alargerpercentageofwomenthanmenworkasmanagersintheconstructionindustry.

Intergenerational business experience.Havingafamilymemberwhoownsabusinessandisworkinginthatbusinessisanimportantpredictorofbusinessownershipandbusinesssuccess.Suchexperienceshelpentrepreneursgainaccesstoimportantopportunitynetworks;


obtainknowledgeofbestpracticesandbusinessetiquette;andreceivehands‐onexperienceinhelpingtorunbusinesses.However,atleastnationally,minoritieshavesubstantiallyfewerfamilymemberswhoownbusinessesandbothminoritiesandwomenhavefeweropportunitiestobeinvolvedwiththosebusinesses.54,55Thatlackofexperiencemakesitdifficultforminoritiesandwomentosubsequentlystarttheirownbusinessesandoperatethemsuccessfully.

Figure 3‐4. Percentage of workers who worked as a manager in each study‐related industry, Virginia Beach, 2012‐2016

Note: *, ** Denotes that the difference in proportions between the minority group and non‐Hispanic whites (or between women and men) is statistically significant at the 90% and 95% confidence level, respectively.

† Denotes that significant differences in proportions were not reported due to small sample size.


B. Financial Capital

Inadditiontohumancapital,financialcapitalhasbeenshowntobeanimportantindicatorofbusinessformationandsuccess.56,57,58Individualscanacquirefinancialcapitalthroughmanysourcesincludingemploymentwages,personalwealth,homeownership,andfinancing.Ifrace‐orgender‐baseddiscriminationexistsinfinancialcapitalmarkets,minoritiesandwomenmayhavedifficultyacquiringthecapitalnecessarytostart,operate,orexpandbusinesses.

Wages and income.Wageandincomegapsbetweenminoritiesandnon‐Hispanicwhitesandbetweenwomenandmenarewell‐documentedthroughoutthecountry,evenwhenresearchershavestatisticallycontrolledforvariousfactorsunrelatedtoraceandgender.59,60,61Forexample,nationalincomedataindicatethat,onaverage,BlackAmericansandHispanicAmericanshavehouseholdincomesthatarelessthantwo‐thirdsthoseofnon‐Hispanicwhites.62,63Womenhavealsofacedconsistentwageandincomegapsrelativetomen.Nationally,themedianhourlywageofwomenisstillonly82percentthemedianhourlywageofmen.64Suchdisparitiesmakeitdifficultforminoritiesandwomentouseemploymentwagesasasourceofbusinesscapital.

BBCobservedwagegapsinVirginiaBeachconsistentwiththosethatresearchershaveobservednationally.Figure3‐5presentsmeanannualwagesforVirginiaBeachworkersbyrace/ethnicity

Virginia Beach

Race/ethnicity

Black American 2.8 % ** 8.3 % 2.4 % 5.8 % **

Asian American 6.6 3.3 7.9 12.7

Hispanic American 4.5 ** 2.9 0.0 7.0

Native American 10.7 † 0.0 † 39.3 † 7.4

Other Race Minority 0.0 † 0.0 † 0.0 † 0.0 †

Non‐Hispanic white 11.8 5.5 4.8 8.7

Gender

Women 14.6 % * 2.4 % ** 4.1 % 8.2 %

Men 8.5 7.0 3.7 7.8

All individuals 9.1 % 5.5 % 4.0 % 7.9 %

Construction

Architecture &

Engineering Professional Services

Goods &

Services


andgender.AsshowninFigure3‐5,BlackAmericans,AsianAmericans,HispanicAmericans,NativeAmericans,andotherraceminoritiesinVirginiaBeachearnsubstantiallylessthannon‐Hispanicwhites.Inaddition,womenworkersearnsubstantiallylessthanmen.BBCalsoconductedregressionanalysestoassesswhetherwagedisparitiesexistevenafteraccountingforvariousrace‐andgender‐neutralfactorssuchasage,education,andfamilystatus.ThoseanalysesindicatedthatbeingBlackAmerican,AsianAmerican,HispanicAmerican,otherraceminority,orawomanwasassociatedwithsubstantiallylowerearningsthanbeingnon‐Hispanicwhiteoraman,evenafteraccountingforvariousrace‐andgender‐neutralfactors(fordetails,seeFigureC‐9inAppendixC).

Figure 3‐5. Mean annual wages, Virginia Beach, 2012‐2016

Note:

The sample universe is all non‐institutionalized, employed individuals aged 25‐64 that are not in school, the military, or self‐employed.

** Denotes statistically significant differences from non‐Hispanic whites (for minority groups) or from men (for women) at the 95% confidence level for Virginia Beach.

Source:


Personal wealth.Anotherpotentiallyimportantsourceofbusinesscapitalispersonalwealth.Aswithwagesandincome,therearesubstantialdisparitiesbetweenminoritiesandnon‐Hispanicwhitesandbetweenwomenandmenintermsofpersonalwealth.65,66Forexample,in2010,BlackAmericansandHispanicAmericansacrossthecountryexhibitedaveragehouseholdnetworththatwas5percentand1percentthatofnon‐Hispanicwhites,respectively.InVirginia,approximatelyone‐out‐of‐fiveBlackAmericansandone‐out‐of‐tenHispanicAmericansarelivinginpoverty.IntheUnitedStates,approximatelyone‐out‐of‐fiveBlackAmericansandHispanicAmericansarelivinginpoverty,aboutdoublethecomparableratefornon‐Hispanicwhites.67Wealthinequalitiesalsoexistforwomenrelativetomen.Forexample,themedianwealthofnon‐marriedwomennationallyisapproximatelyone‐thirdthatofnon‐marriedmen.68

Homeownership.Homeownershipandhomeequityhavebeenshowntobekeysourcesofbusinesscapital.69,70However,minoritiesappeartofacesubstantialbarriersnationwideinowninghomes.Forexample,BlackAmericansandHispanicAmericansownhomesatlessthantwo‐thirdstherateofnon‐Hispanicwhites.71Discriminationisatleastpartlytoblameforthosedisparities.Researchindicatesthatminoritiescontinuetobegivenlessinformationonprospectivehomesandhavetheirpurchaseoffersrejectedbecauseoftheirrace.72,73Minoritieswhoownhomestendtoownhomesthatareworthsubstantiallylessthanthoseofnon‐Hispanicwhitesandalsotendtoaccruesubstantiallylessequity.74,75Differencesinhomevaluesandequitybetweenminoritiesandnon‐Hispanicwhitescanbeattributed—atleast,inpart—tothedepressedpropertyvaluesthattendtoexistinracially‐segregatedneighborhoods.76,77


MinoritiesappeartofacehomeownershipbarriersinVirginiaBeachthataresimilartothoseobservednationally.BBCexaminedhomeownershipratesinVirginiaBeachforrelevantracial/ethnicgroups.AsshowninFigure3‐6,BlackAmericans,HispanicAmericans,andNativeAmericansinVirginiaBeachexhibithomeownershipratesthatarelowerthanthatofnon‐Hispanicwhites.

Figure 3‐6. Home Ownership Rates, Virginia Beach, 2012‐2016

Note:

The sample universe is all households.

** Denotes statistically significant differences from non‐Hispanic whites at the 95% confidence level for Virginia Beach.

Source:


Figure3‐7presentsmedianhomevaluesamonghomeownersofdifferentracial/ethnicgroupsinVirginiaBeach.Consistentwithnationaltrends,homeownersofcertainminoritygroups—BlackAmerican,HispanicAmerican,NativeAmerican,andotherminorities—ownhomesthat,onaverage,areworthlessthanthoseofnon‐Hispanicwhites.

Figure 3‐7. Median home values, Virginia Beach, 2012‐2016

Note:

The sample universe is all owner‐occupied housing units.

Source:


Access to financing. Minoritiesandwomenfacemanybarriersintryingtoaccesscreditandfinancing,bothforhomepurchasesandforbusinesscapital.Researchershaveoftenattributedthosebarrierstovariousformsofrace‐andgender‐baseddiscriminationthatexistincreditmarkets.78,79,80,81,82,83Thestudyteamsummarizesresultsrelatedtodifficultiesthatminorities;women;andminority‐andwoman‐ownedbusinessesfaceinhomecreditandbusinesscreditmarkets.

Home credit.Minoritiesandwomencontinuetofacebarrierswhentryingtoaccesscredittopurchasehomes.Examplesofsuchbarriersincludediscriminatorytreatmentofminoritiesandwomenduringthepre‐applicationphaseanddisproportionatetargetingofminorityandwomenborrowersforsubprimehomeloans.84,85,86,87,88Race‐andgender‐basedbarriersinhomecreditmarkets,aswellastheforeclosurecrisis,haveledtodecreasesinhomeownershipamongminoritiesandwomenandhaveerodedtheirlevelsofpersonalwealth.89,90,91,92Toexaminehow


minoritiesfareinthehomecreditmarketrelativetonon‐Hispanicwhites,thestudyteamanalyzedhomeloandenialratesforhigh‐incomehouseholdsbyrace/ethnicity.ThestudyteamanalyzedthosedataforVirginiaBeachandtheUnitedStatesasawhole.AsshowninFigure3‐8,in2016,BlackAmericans;AsianAmericans,HispanicAmericans;andNativeAmericansorOtherPacificIslandersinVirginiaBeachweredeniedhomeloansathigherratesthannon‐Hispanicwhites.Inaddition,thestudyteam’sanalysesindicatethatcertainminoritygroupsinVirginiaBeacharemorelikelythannon‐Hispanicwhitestoreceivesubprimemortgages(fordetails,seeFigureC‐14inAppendixC).

Figure 3‐8. Denial rates of conventional purchase loans for high‐income households, Virginia Beach and the United States, 2007 and 2016

Note:

High‐income borrowers are those households with 120% or more of the HUD area median family income (MFI).

Native Americans are combined with Pacific Islanders due to small sample size.

Source:

FFIEC HMDA data 2007 and 2016. The raw data extract was obtained from the Consumer Financial Protection Bureau HMDA data tool: http://www.consumerfinance.gov/hmda/explore.

Business credit.Minority‐andwoman‐ownedbusinessesfacesubstantialdifficultiesaccessingbusinesscredit.Forexample,duringloanpre‐applicationmeetings,minority‐ownedbusinessesaregivenlessinformationaboutloanproducts,aresubjectedtomorecreditinformationrequests,andareofferedlesssupportthantheirnon‐Hispanicwhitecounterparts.93ResearchershaveshownthatBlackAmerican‐ownedbusinessesandHispanicAmerican‐ownedbusinessesaremorelikelytoforegosubmittingbusinessloanapplicationsandaremorelikelytobedeniedbusinesscreditwhentheydoseekloans,evenafteraccountingforvariousrace‐andgender‐neutralfactors.94,95,96Inaddition,womenarelesslikelytoapplyforcreditandreceiveloansoflessvaluewhentheydo.97,98Withoutequalaccesstobusinesscapital,minority‐andwoman‐ownedbusinessesmustoperatewithlesscapitalthanbusinessesownedbynon‐Hispanicwhitemenandrelymoreonpersonalfinances.99,100,101,102


C. Business Ownership

Nationally,therehasbeensubstantialgrowthinthenumberofminority‐andwoman‐ownedbusinessesinrecentyears.Forexample,from2007to2012,thenumberofwoman‐ownedbusinessesincreasedby27percent,BlackAmerican‐ownedbusinessesincreasedby35percent,andHispanicAmerican‐ownedbusinessesincreasedby46percent.103Despitetheprogressthatminoritiesandwomenhavemadewithregardtobusinessownership,importantbarriersinstartingandoperatingbusinessesremain.BlackAmericans,HispanicAmericans,andwomenarestilllesslikelytostartbusinessesthannon‐Hispanicwhitemen.104,105,106,107Inaddition,althoughratesofbusinessownershiphaveincreasedamongminoritiesandwomen,theyhavebeenunabletopenetrateallindustriesevenly.Minoritiesandwomendisproportionatelyownbusinessesinindustriesthatrequirelesshumanandfinancialcapitaltobesuccessfulandthatalreadyincludelargeconcentrationsofindividualsfromdisadvantagedgroups.108,109,110

ThestudyteamexaminedratesofbusinessownershipintheVirginiaBeachconstruction;architectureandengineering;professionalservices;andgoodsandservicesindustriesbyrace/ethnicityandgender.AsshowninFigure3‐9,BlackAmericansexhibitlowerratesofbusinessownershipthannon‐Hispanicwhitesacrossallindustries.HispanicAmericansinthearchitectureandengineeringindustryexhibitedlowerratesofbusinessownershipthannon‐HispanicwhiteAmericans.Inaddition,womenworkingintheprofessionalservicesindustryintheVirginiaBeachmarketplacealsoexhibitedlowerratesofbusinessownershipthanmen.

Figure 3‐9. Self‐employment rates in study‐related industries, Virginia Beach, 2012‐2016

Note: ** Denotes that the difference in proportions between the minority group and non‐Hispanic whites (or between women and men) is statistically significant at the 95% confidence level.


Source: BBC Research & Consulting from 2012‐2016 ACS 5% Public Use Microdata samples. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.

BBCalsoconductedregressionanalysestodeterminewhetherdifferencesinbusinessownershipratesbetweenminoritiesandnon‐Hispanicwhitesandbetweenwomenandmenexistevenafterstatisticallycontrollingforvariousrace‐andgender‐neutralfactorssuchasincome,education,andfamilialstatus.Thestudyteamconductedthoseanalysesseparatelyfor

Virginia Beach

Race/ethnicity

Black American 14.3 % ** 2.8 % ** 6.4 % ** 4.9 % **

Asian American 17.0 13.2 13.5 10.3

Hispanic American 19.6 2.9 ** 10.8 5.3

Native American 43.4 † 0.0 † 0.0 † 1.5



Gender

Women 17.8 % 12.7 % 8.5 % ** 6.4 %

Men 22.9 9.7 14.8 7.4

All individuals 22.3 % 10.7 % 10.4 % 7.0 %

Architecture &

Engineering Professional Services

Goods &

ServicesConstruction


eachrelevantindustry.Figure3‐10presentstherace/ethnicityandgenderfactorsthatweresignificantlyandindependentlyrelatedtobusinessownershipforeachrelevantindustry.AsshowninFigure3‐10,evenafteraccountingforrace‐andgender‐neutralfactors,beingawomanandbeingBlackAmericanwereassociatedwithlowerratesofbusinessownershipintheVirginiaBeachconstructionindustry.Thus,disparitiesinbusinessownershipratesbetweenwomenandmenarenotcompletelyexplainedbydifferencesingender‐neutralfactorssuchasincome,education,andfamilialstatus.

Figure 3‐10. Predictors of business ownership in construction (probit regression), Virginia Beach, 2012‐2016

Note:

*,** Denote statistical significance at the 90% and 95% confidence levels, respectively.

Other race minority omitted from the regression due to small sample size.

The referent for each set of categorical variables is as follows: high school diploma for the education variables, non‐Hispanic whites for the race variables, and men for the gender variable.

Source:

BBC Research & Consulting from 2012‐2016 ACS 5% Public Use Microdata samples. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa.

D. Business Success

Thereisagreatdealofresearchindicatingthat,nationally,minority‐andwoman‐ownedbusinessesfareworsethanbusinessesownedbynon‐Hispanicwhitemen.Forexample,BlackAmericans,NativeAmericans,HispanicAmericans,andwomenexhibithigherratesofmovingfrombusinessownershiptounemploymentthannon‐Hispanicwhitesandmen.Inaddition,minority‐andwoman‐ownedbusinesseshavebeenshowntobelesssuccessfulthanbusinessesownedbynon‐Hispanicwhitesandmenusinganumberofdifferentindicatorssuchasprofits,closurerates,andbusinesssize(butalsoseeRobbandWatson2012).111,112,113Thestudyteamexamineddataonbusinessclosure,businessreceipts,andbusinessownerearningstofurtherexplorethesuccessofminority‐andwoman‐ownedbusinessesinVirginia.

Business closure. ThestudyteamexaminedtheratesofclosureamongVirginiabusinessesbytherace/ethnicityandgenderoftheowners.Figure3‐11presentsthoseresults.AsshowninFigure3‐11,BlackAmerican‐,AsianAmerican‐,andHispanicAmerican‐ownedbusinessesinVirginiaappeartocloseathigherratesthannon‐Hispanicwhite‐ownedbusinesses.Inaddition,

Variable

Constant ‐1.3672 *

Age 0.0002

Age‐squared 0.0002

Married 0.0852

Disabled 0.0874

Number of children in household ‐0.0341

Number of people over 65 in household ‐0.1195

Owns home 0.1821

Home value ($000s) 0.0001

Monthly mortgage payment ($000s) 0.0314

Interest and dividend income ($000s) 0.0046

Income of spouse or partner ($0000s) ‐0.0002

Speaks English well 0.1183

Less than high school education ‐0.0360

Some college ‐0.0856

Four‐year degree ‐0.4149 **

Advanced degree ‐0.3952

Black American ‐0.3077 **

Asian American ‐0.1464

Hispanic American 0.1035

Native American 0.4897

Women ‐0.3270 **

Coefficient


woman‐ownedbusinessesinVirginiaappeartocloseathigherratesthanbusinessesownedbymen.Increasedratesofbusinessclosureamongminority‐andwoman‐ownedbusinessesmayhaveimportanteffectsontheiravailabilityforgovernmentcontractsinVirginiaandintheCityofVirginiaBeach.

Figure 3‐11. Rates of business closure in Virginia, 2002‐2006

Note:

Data include only to non‐publicly held businesses.

Equal Gender Ownership refers to those businesses for which ownership is split evenly between women and men.

Statistical significance of these results cannot be determined, because sample sizes were not reported.

Source:

Lowrey, Ying. 2010. “Race/Ethnicity and Establishment Dynamics, 2002‐2006.” U.S. Small Business Administration Office of Advocacy. Washington D.C.

Lowrey, Ying. 2014. "Gender and Establishment Dynamics, 2002‐2006." U.S. Small Business Administration Office of Advocacy. Washington D.C.

Business receipts. BBCalsoexamineddataonbusinessreceiptstoassesswhetherminority‐andwoman‐ownedbusinessesinVirginiaBeachearnasmuchasbusinessesownedbywhitesorbusinessownedbymen,respectively.Figure3‐12showsmeanannualreceiptsforbusinessesintheVirginiaBeach‐Norfolk‐NewportNewsMetropolitanAreabytherace/ethnicityandgenderofowners.Thoseresultsindicatethat,in2012,allrelevantminoritygroupsinVirginiaBeachshowedlowermeanannualbusinessreceiptsthanbusinessesownedbywhites.Inaddition,woman‐ownedbusinessesinVirginiaBeachshowedlowermeanannualbusinessreceiptsthanbusinessesownedbymen.

Figure 3‐12. Mean annual business receipts (in thousands), Virginia Beach‐Norfolk‐Newport News, VA‐NC Metro Area, 2012

Note:

Includes employer and non‐employer firms. Does not include publicly‐traded companies or other firms not classifiable by race/ethnicity and gender.

Source:

2012 Survey of Business Owners, part of the U.S. Census Bureau’s 2012 Economic Census.

Business owner earnings.ThestudyteamanalyzedbusinessownerearningstoassesswhetherminoritiesandwomeninVirginiaBeachearnasmuchfromthebusinessesthattheyownasnon‐Hispanicwhitesandmendo.AsshowninFigure3‐13,BlackAmericansandHispanicAmericansearnedlessonaveragefromtheirbusinessesthannon‐Hispanicwhites


earnedfromtheirbusinesses.Inaddition,womeninVirginiaBeachearnedlessfromtheirbusinessesthanmenearnedfromtheirbusinesses.BBCalsoconductedregressionanalysestodeterminewhetherearningsdisparitiesinVirginiaBeachexistevenafterstatisticallycontrollingforvariousrace‐andgender‐neutralfactorssuchasage,education,andfamilystatus.Theresultsofthoseanalysesindicatedthat,comparedtobeingaman,beingawomaninVirginiaBeachwasassociatedwithsubstantiallylowerbusinessownerearnings(fordetails,seeFigureC‐27inAppendixC).

Figure 3‐13. Mean annual business owner earnings, Virginia Beach, 2012‐2016

Note:

The sample universe is business owners age 16 and older who reported positive earnings. All amounts in 2016 dollars.

** Denotes statistically significant differences from non‐Hispanic whites (for minority groups) or from men (for women) at the 95% confidence level.


Source:

BBC Research & Consulting from 2012‐2016 ACS 5% Public Use Microdata sample. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/..

E. Summary

BBC’sanalysesofmarketplaceconditionsindicatethatminorities,women,minority‐ownedbusinesses,andwoman‐ownedbusinessesfacesubstantialbarriersinVirginiaBeach.Existingresearch,aswellasprimaryresearchthatthestudyteamconducted,indicatethatrace‐andgender‐baseddisparitiesexistintermsofacquiringhumancapital,accruingfinancialcapital,owningbusinesses,andoperatingsuccessfulbusinesses.Inmanycases,thereisevidencethatthosedisparitiesexistevenafteraccountingforvariousrace‐andgender‐neutralfactorssuchasage,income,education,andfamilialstatus.Thereisalsoevidencethatmanydisparitiesaredue—atleast,inpart—torace‐andgender‐baseddiscrimination.

BarriersinthemarketplacelikelyhaveimportanteffectsontheabilityofminoritiesandwomentostartbusinessesinrelevantVirginiaBeachindustries—construction;architectureandengineering;professionalservices;andgoodsandservices—andoperatingthosebusinessessuccessfully.Anydifficultiesthatminoritiesandwomenfaceinstartingandoperatingbusinessesmayreducetheiravailabilityforgovernmentworkandmayalsoreducethedegreetowhichtheyareabletosuccessfullycompeteforgovernmentcontracts.Inaddition,theexistenceofbarriersintheVirginiaBeachmarketplaceindicatesthatgovernmentagenciesinthestatearepassivelyparticipatinginrace‐andgender‐baseddiscriminationthatmakesitmoredifficultforminority‐andwoman‐ownedbusinessestosuccessfullycompetefortheircontracts.TheCityofVirginiaBeachisnotuniquelyfacedwithpassiveparticipation.Othergovernmentagenciesthroughoutthemarketplacearelikelyaffectedbytheirpassiveparticipationinrace‐andgender‐baseddiscriminationaswell.Manycourtshaveheldthatpassiveparticipationinany


race‐orgender‐baseddiscriminationestablishesacompellinggovernmentalinterestforagenciestotakeremedialactiontoaddresssuchdiscrimination.

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16Travis,Jeremy,BruceWestern,andSteveRedburn.2014.TheGrowthofIncarcerationintheUnitedStates:ExploringCausesandConsequences.NationalResearchCouncil.WashingtonD.C.:DivisionofBehavioralandSocialSciencesandEducation.RetrievedJanuary6,2015(http://www.nap.edu/booksearch.php?booksearch=1&record_id=18613&term=Black&chapter=33‐69).

17Charles,CamilleZubrinsky.2003.“TheDynamicsofRacialResidentialSegregation.”AnnualReviewofSociology29:167–207.

18Bianchi,SuzanneM.,LianaC.Sayer,MelissaA.Milkie,andJohnP.Robinson.2012.“Housework:WhoDid,DoesorWillDoIt,andHowMuchDoesItMatter?”SocialForces91(1):55–63.

19Alexander,Michelle.2010.TheNewJimCrow:MassIncarcerationintheAgeofColorblindness.NewYork:TheNewPress.20AdarandVII,228F.3dat1167–76;seealsoWesternStatesPaving,407F.3dat992(Congress“explicitlyreliedupon”theDepartmentofJusticestudythat“documentedthediscriminatoryhurdlesthatminoritiesmustovercometosecurefederallyfundedcontracts”);MidwestFenceCorp.v.U.S.DOT,IllinoisDOT,etal.,2015WL1396376,appealpending.

21AdarandVII,228F.3d.at1168‐70;WesternStatesPaving,407F.3dat992;seeDynaLantic,885F.Supp.2d237;MidwestFenceCorp.v.U.S.DOT,IllinoisDOT,etal.,2015WL1396376,appealpending;GeyerSignal,2014WL130909297at*14.

22AdarandVIIat1170‐72;seeDynaLantic,885F.Supp.2d237;GeyerSignal,2014WL1309092at*14.

23CityofRichmondv.J.A.CrosonCo.,488U.S.469(1989).

24ConcreteWorksofColo.,Inc.v.CityandCountyofDenver,36F.3d1513,1524(10thCir.1994).

25RotheDevelopmentCorpv.U.S.DeptofDefense,545F.3d1023,1041.

26Fairlie,RobertW.andAliciaM.Robb.2007.“WhyAreBlack‐OwnedBusinessesLessSuccessfulthanWhite‐OwnedBusinesses?TheRoleofFamilies,Inheritances,andBusinessHumanCapital.”JournalofLaborEconomics25(2):289–323.


27Fairlie,RobertW.andAliciaM.Robb.2008.RaceandEntrepreneurialSuccess:Black‐,Asian‐,andWhite‐OwnedBusinessesintheUnitedStates.Cambridge,Mass.:MITPress.

28Fairlie,RobertW.andAliciaM.Robb.2009.“GenderDifferencesinBusinessPerformance:EvidenceFromtheCharacteristicsofBusinessOwnersSurvey.”SmallBusinessEconomics33(4):375–95.

29Hout,MichaelandHarveyRosen.2000.“Self‐Employment,FamilyBackground,andRace.”JournalofHumanResources35(4):670–92.

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31Shapiro,Thomas,TatjanaMeschede,andSamOsoro.2013.TheRootsoftheWideningRacialWealthGap:ExplainingtheBlack‐WhiteEconomicDivide.Waltham,MA:InstituteonAssetsandSocialPolicy.RetrievedJanuary2,2015(http://iasp.brandeis.edu/pdfs/Author/shapiro‐thomas‐m/racialwealthgapbrief.pdf).32NationalCenterforEducationStatistics.2010.StatusandTrendsintheEducationofRacialandEthnicMinorities.NationalCenterforEducationStatistics.RetrievedJanuary20,2015(http://nces.ed.gov/pubs2010/2010015/tables.asp).

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60McCall,Leslie.2001.“SourcesofRacialWageInequalityinMetropolitanLaborMarkets:Racial,Ethnic,andGenderDifferences.”AmericanSociologicalReview66(4):520–41.

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68Chang,MarikoLin.2010.Shortchanged:WhyWomenHaveLessWealthandWhatCanBeDoneAboutIt.Oxford:OxfordUniversityPress.

69Berger,AllenN.andGregoryF.Udell.1998.“TheEconomicsofSmallBusinessFinance:TheRolesofPrivateEquityandDebtMarketsintheFinancialGrowthCycle.”JournalofBanking&Finance22(6–8):613–73.

70Fairlie,RobertW.andHarryA.Krashinsky.2012.“LiquidityConstraints,HouseholdWealth,andEntrepreneurshipRevisited.”ReviewofIncome&Wealth58(2):279–306.

71U.S.CensusBureau.2013a.“AmericanCommunitySurvey20131YearEstimates.”RetrievedJanuary20,2015(http://factfinder.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).


72Turner,MargeryAusten,RobSantos,andDianeK.Levy,DougWissoker,ClaudiaAranda,andRobPitingolo.2013.HousingDiscriminationAgainstRacialandEthnicMinorities2012.Washington,D.C.:U.S.DepartmentofHousingandUrbanDevelopment.RetrievedJanuary2,2015(http://www.huduser.org/portal/publications/fairhsg/hsg_discrimination_2012.html).73Roscigno,VincentJ.,DianaL.Karafin,andGriffTester.2009.“TheComplexitiesandProcessesofRacialHousingDiscrimination.”SocialProblems56(1):49‐69.74Kochhar,RakeshandRichardFry.2014.“WealthInequalityHasWidenedalongRacial,EthnicLinessinceEndofGreatRecession.”PewResearchCenter.RetrievedDecember29,2014(http://www.pewresearch.org/fact‐tank/2014/12/12/racial‐wealth‐gaps‐great‐recession/).

75Burd‐Sharps,SarahandRebeccaRasch.2015.ImpactoftheUSHousingCrisisontheRacialWealthGapAcrossGenerations.Brooklyn,NY:SocialScienceResearchCouncil.RetrievedJune23,2015.(http://www.ssrc.org/publications/view/129CDF74‐1F11‐E511‐940A‐005056AB4B80/).

76Charles,CamilleZubrinsky.2003.“TheDynamicsofRacialResidentialSegregation.”AnnualReviewofSociology29:167–207.

77Shapiro,Thomas,TatjanaMeschede,andSamOsoro.2013.TheRootsoftheWideningRacialWealthGap:ExplainingtheBlack‐WhiteEconomicDivide.Waltham,MA:InstituteonAssetsandSocialPolicy.RetrievedJanuary2,2015(http://iasp.brandeis.edu/pdfs/Author/shapiro‐thomas‐m/racialwealthgapbrief.pdf).

78Blanchard,Lloyd,BoZhao,andJohnYinger.2008.“DoLendersDiscriminateAgainstMinorityandWomanEntrepreneurs?”JournalofUrbanEconomics63(2):467–97.

79Cavalluzzo,KenS.,LindaC.Cavalluzzo,andJohnD.Wolken.2002.“Competition,SmallBusinessFinancing,andDiscrimination:EvidencefromaNewSurvey.”TheJournalofBusiness75(4):641–79.

80Cavalluzzo,KenandJohnWolken.2005.“SmallBusinessLoanTurndowns,PersonalWealth,andDiscrimination.”TheJournalofBusiness78(6):2153–78.

81GruensteinBocian,Debbie,WeiLi,CarolinaReid,andRobertG.Quercia.2011.LostGround,2011:DisparitiesinMortgageLendingandForeclosures.WashingtonD.C.:CenterforResponsibleLending.RetrievedJanuary21,2015

82Mijid,NaranchimegandAlexandraBernasek.2013.“GenderandtheCreditRationingofSmallBusinesses.”TheSocialScienceJournal50(1):55–65.

83Ross,StephenL.andJohnYinger.2002.TheColorofCredit:MortgageDiscrimination,ResearchMethodology,andFair‐LendingEnforcement.Cambridge,MA:MITPress.

84Ross,StephenL.,MargeryAustinTurner,ErinGodfrey,andRobinR.Smith.2008.“MortgageLendinginChicagoandLosAngeles:APairedTestingStudyofthePre‐ApplicationProcess.”JournalofUrbanEconomics63(3):902–19.

85Dymski,Gary,JesusHernandez,andLisaMohanty.2013.“Race,Gender,Power,andtheUSSubprimeMortgageandForeclosureCrisis:AMesoAnalysis.”FeministEconomics19(3):124–51.

86Fishbein,AllenJ.andPatrickWoodall.2006.WomenarePrimeTargetsSubprime:WomenAreDisproportionatelyRepresentedinHigh‐CostMortgageMarket.WashingtonD.C.:ConsumerFederationofAmerica.RetrievedJanuary5,2015(http://policylinkcontent.s3.amazonaws.com/WomenPrimeTargetsSubprimeLending_CFA_0.pdf).

87Williams,Richard,ReynoldNesiba,andEileenDiazMcConnell.2005.“TheChangingFaceofInequalityinHomeMortgageLending.”SocialProblems52(2):181–208.

88Wyly,ElvinandC.S.Ponder.2011.“Gender,Age,andRaceinSubprimeAmerica.”HousingPolicyDebate21(4):529–64.

89Baker,AmyCastro.2011.TearingDowntheWealthofWomen.NewYork:Women’sMediaCenter.RetrievedJanuary5,2015(http://www.womensmediacenter.com/feature/entry/tearing‐down‐the‐wealth‐of‐women).

90Baker,AmyCastro.2014.“ErodingtheWealthofWomen:GenderandtheSubprimeForeclosureCrisis.”SocialServiceReview88(1):59–91.

91Rugh,JacobS.andDouglasS.Massey.2010.“RacialSegregationandtheAmericanForeclosureCrisis.”AmericanSociologicalReview75(5):629–51.

92Burd‐Sharps,SarahandRebeccaRasch.2015.ImpactoftheUSHousingCrisisontheRacialWealthGapAcrossGenerations.Brooklyn,NY:SocialScienceResearchCouncil.RetrievedJune23,2015.(http://www.ssrc.org/publications/view/129CDF74‐1F11‐E511‐940A‐005056AB4B80/).

93Bone,SterlingA.,GlennL.Christensen,andJeromeD.Williams.2014.“Rejected,Shackled,andAlone:TheImpactofSystematicRestrictedChoiceonMinorityConsumers’ConstructionofSelf.”JournalofConsumerResearch41(2):451‐474.94Blanchard,Lloyd,BoZhao,andJohnYinger.2008.“DoLendersDiscriminateAgainstMinorityandWomanEntrepreneurs?”JournalofUrbanEconomics63(2):467–97.


95Blanchflower,DavidG.,PhillipB.Levine,andDavidJ.Zimmerman.2003.“DiscriminationintheSmallBusinessCreditMarket.”TheReviewofEconomicsandStatistics85(4):930–43.

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99Coleman,SusanandAliciaRobb.2009.“AComparisonofNewFirmFinancingbyGender:EvidencefromtheKauffmanFirmSurveyData.”SmallBusinessEconomics33(4):397–411.

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CHAPTER 4.

Collection and Analysis of Contract Data


CHAPTER 4. Collection and Analysis of Contract Data

Chapter4providesanoverviewofthepoliciesthattheCityofVirginiaBeach(theCity)usestoawardcontractsandprocurements;thecontractsandprocurementsthatthestudyteamanalyzedaspartofthedisparitystudy;andtheprocessthatthestudyteamusedtocollectrelevantprimecontract,procurement,andsubcontractdataforthedisparitystudy.Chapter4isorganizedintosixparts:

A. Overviewofcontractingandprocurementpolicies;

B. Collectionandanalysisofcontractandprocurementdata;

C. Collectionofvendordata;

D. Relevantgeographicmarketarea;

E. Relevanttypesofwork;and

F. Agencyreviewprocess.

A. Overview of Contracting and Procurement Policies

TheCity’sPurchasingDivisionprovidesguidancetoalldepartmentstoensureconsistencyinprocurementproceduresandcompliancewiththeVirginiaPublicProcurementAct(VPPA)andtheVirginiaBeachPurchasingOrdinance.TheCityhasdevelopeddetailedguidelinesfortheprocurementofconstruction,design,goods,services,andtechnology.WithintheFinanceDepartment,thePurchasingDivisionisresponsibleforthepurchaseorleaseofallgoods,supplies,andservicesfortheCity.AcentralizedPurchasingAgent—whosedutiesandauthorityaregrantedbyCityCouncil—overseesallCitypurchasesandcontracts.ThePurchasingAgentisalsoresponsibleforestablishingandmaintainingprocurementpoliciesandproceduresandensuringcompliancewiththosepolicies.

Purchase limits.TheCityimplementsvariouspurchasingmethodsdependingontheestimatedcostofthepurchase;therequiredgoodorservices;theneedsoftheusingagency;andthelevelofcompetitioninthemarket.Ingeneral,theCity’spurchasingprocedurescanbecategorizedintooneofthreetypes:smallpurchases,competitivesealedbidding,andcompetitivenegotiations.MostCitypurchasesareprocuredusingoneofthosethreeprocesses.

Small purchases.TheCityfollowssmallpurchaseproceduresforallprocurementsworth$100,000orless.Purchasingrequirementsforsmallpurchasesdifferdependingonthesizeofthepurchase.

Purchasesworth$5,000orless.TheCity’sPurchasingAgenthasdelegatedallCityagenciestheauthoritytopurchasegoodsandservicesworth$5,000orless.AgenciesarerequiredtofollowtheCity’sPurchasingManualandareencouragedtosolicitminority‐andwoman‐ownedbusinessesforsuchprocurementopportunities


Purchasesworthbetween$5,001and$30,000.TheCityisrequiredtosolicitaminimumoffourverbalorwrittenquotationsforpurchasesworthmorethan$5,000butlessthan$30,000.Atleasttwoofthequotationsmustbefromsmall,minority‐,orwoman‐ownedbusinesses,andatleastonequotationmustbefromaminority‐orwoman‐ownedbusiness,ifavailable.

Purchasesbetween$30,001and$100,000.TheCityisrequiredtosolicitaminimumoffivebusinessesforverbalorwrittenquotationsforpurchasesworthatleast$30,001butlessthan$100,000.Atleastthreeofthequotationsmustbefromsmall,minority‐,orwoman‐ownedbusinesses,andatleasttwoquotationsmustbefromminority‐orwoman‐ownedbusinesses,ifavailable.

Competitive sealed bidding.TheCityfollowscompetitivesealedbiddingprocedurestoprocuregoodsandservicesforwhichdetailedspecificationsarepossible,includingsomeconstructionservices,supportservices,andgoodsworth$100,000ormore.AsrequiredbyVPPA§2.2‐4303,thePurchasingDivisiondraftsandadvertisesallinvitationsforbids(IFB)forallcompetitivelybidprocurements.IFBsmustprovideadetaileddescriptionoftherequiredscopeofworkandmustbepostedintheCity’sPurchasingDivisionofficeatleast10calendardayspriortothebidclosingdate.IFBsmayalsobepublishedinanewspaperofgeneralcirculation.TheCityisrequiredtonotifyminority‐andwoman‐ownedbusinessesaboutIFBsandcollectatleastthreebidsfromsuchbusinesses.Bidsremainsealeduntilthebidopeningday,whentheyareopenedandreadaloudpublicly.

Onceopened,competitivebidsareevaluatedbyboththeusingCityagencyandpurchasingstaff.Theprocurementisthenawardedtothelowestresponsiveandresponsiblebidder.AllpurchasesawardedusingcompetitivesealedbiddingproceduremustbeapprovedbytheCity’sPurchasingAgent.

Competitive negotiations.TheCityfollowscompetitivenegotiationsprocedures—whichrequirearequestforproposals(RFP)process—toawardprofessionalservicescontractsworthmorethan$60,000andnonprofessionalservicescontractsworth$100,000ormore.RFPproceduresallowforbestvaluepurchases.Undercompetitivenegotiationsprocedures,thesolicitationmustbeadvertisedinanewspaperandthenamesofthesubmittingofferorsarereadaloudduringapublicproposalopening.Afterpublicopeningoftheofferors’names,anevaluationcommitteescoreseachproposalbeforeenteringintonegotiationswithashort‐listofofferors.Uponcompletionofnegotiations,theevaluationcommitteeselectsthesuccessfulofferorbeforeforwardingitalongtotheCity’sPurchasingAgentforapproval.

Professionalservicescontractsworthlessthan$60,000canbeawardedbytheusingCityagencyafterbeingpre‐approvedbythePurchasingDivision.Theusingagencyisrequiredtocontactaminimumoffivequalifiedfirmstorequestwrittenproposals.Atleastoneofthosefirmsmustbeaminority‐ownedbusinessorwoman‐ownedbusiness.

Information technology and software.AlltechnologypurchasesmustbereviewedandapprovedbyCommunicationsandInformationTechnology(ComIT)priortoanyprocurementaction,regardlessofthefundingsourceorusingCityagency.Hardwareandsoftwarepurchasesworthlessthan$5,000mustbesubmittedtoComITforapproval.Onceapproved,theusingagencycanprocessthepurchaseorderdirectlywiththevendor.Technologypurchaseworth


$5,000ormoremustbeprocessedthroughComITforreviewandapprovalandthensubmittedtoPurchasingforprocurement.

Special procurements. TheCitycanusespecialoremergencypurchasingmethodsforcertaingoodsandtechnologypurchasesinsituationsprovidedunderVPPA.1Suchmethodscanbeusediftheprocurementmeetsoneofthefollowingcriteria:

Government‐to‐governmentpurchases;

Emergencypurchases;

Publishingandadvertising;

Licensingfeesandmembershipdues;

Legalservicesandexperttestimony;

Testing,evaluation,andtrainingservices;

Utilities;

Clientspecifichumanservices;

Solesource;or

AnotherexceptionspecifiedunderVPPA.

AnyCitydepartmentusingspecialoremergencypurchasingmethodsmustprovidewrittenjustificationtothePurchasingDivisionexplainingwhyaspecialprocurementmethodisnecessary.

B. Collection and Analysis of Contract Data and Procurement Data

BBCResearch&Consulting(BBC)collectedcontractingandvendordatafromtheCity’scentralizedInSitedatasystemtoserveasthebasisofkeydisparitystudyanalyses,includingtheutilization,availability,anddisparityanalyses.ThestudyteamcollectedthemostcomprehensivedatathatwasavailableonprimecontractsandsubcontractsthattheCityawardedbetweenJuly1,2012andJune30,2017.BBCsoughtdatathatincludedinformationaboutprimecontractorsandsubcontractorsregardlessoftherace/ethnicityandgenderoftheirownersortheirstatusesascertifiedSmall,Women‐Owned,andMinority‐owned(SWaM)businesses.Thestudyteamcollecteddataonconstruction;architectureandengineering,otherprofessionalservices;andgoodsandservicesprimecontractsandsubcontractsthattheCityawardedduringthestudyperiod.Thestudyteam’sanalysesincludedcontractsandpaymentsworth$1,000ormore.2

Prime contract data collection.TheCityprovidedthestudyteamwithelectronicdataonconstruction;architectureandengineering,otherprofessionalservices;andgoodsandservices

1VPPA2.2‐4303

2Thestudyteamchose$1,000asitsanalysisthresholdbecausemanypaymentsunder$1,000representedrefundsorotherpaymentstoindividualsandrepresentedarelativelysmallamountofthepaymentdollarsduringthestudyperiod.Paymentsof$1,000ormoreaccountedformorethan99percentofallCitypaymentdollarsduringthestudyperiod.


primecontractsthattheagencyawardedduringthestudyperiod.TheCitymaintainsthosedataintheInSitedatasystemaswellasthroughtheOfficeofMinorityBusinessCoordinator.Asavailable,BBCcollectedthefollowinginformationabouteachrelevantprimecontract:

Contractorpurchaseordernumber;

Descriptionofwork;

Awarddate;

Awardamount(includingchangeordersandamendments);

Amountpaid‐to‐date;

WhetherSWaMgoalswereused;

Fundingsource(federal,state,orlocalfunding);

Primecontractorname;and

Primecontractoridentificationnumber.

TheCityalsoprovidedthestudyteamwithinformationaboutallpaymentsthattheCitymadeduringthestudyperiod.TheCityadvisedthestudyteamonhowtointerprettheprovideddata,includinghowtoidentifyuniquebidopportunitiesandhowtoaggregaterelatedpaymentamounts.Whenpossible,thestudyteamaggregatedindividualpaymentsintocontractorpurchaseorderelements.Ininstanceswherepaymentinformationcouldnotbeaggregated,thestudyteamtreatedpaymentrecordsasindividualcontractelements.

Subcontract data collection.InordertogathercomprehensivesubcontractdataaboutrelevantCitycontracts,thestudyteamconductedsurveyswithprimecontractorstocollectinformationonthesubcontractsthatwereassociatedwiththecontractsonwhichtheyworkedduringthestudyperiod.BBCcollectedsubcontractinformationaboutconstruction;architectureandengineering;parkingservices;andjanitorialcontracts.BBCsentoutsurveystorequestsubcontractdataabout533primecontractsthattheCityawardedduringthestudyperiod.Afterthefirstroundofsurveys,BBCsentreminderletterstounresponsiveprimecontractors.BBCthenworkedwiththeCitytocontactremainingunresponsiveprimecontractorswiththehighestvaluedcontracts.BBCcollectedthefollowinginformationabouteachrelevantsubcontractaspartofthesurveyprocess:

Associatedprimecontractnumber;

AmountpaidonthesubcontractasofJune30,2017;

Descriptionofwork;

Subcontractorname;and

Subcontractorcontactinformation.

Those533contractsaccountedforapproximately$674millionworthofpaymentsduringthestudyperiod.Throughthesurveyeffort,BBCcollectedsubcontractdataassociatedwithmorethan$385million,or56percent,ofthosecontractpayments.


Contracts included in study analyses. Thestudyteamcollectedinformationon24,701relevantprimecontractelementsand1,621associatedsubcontractsthattheCityawardedduringthestudyperiodintheareasofconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservices,accountingforapproximately$1.2billionofCityspend.Figure4‐1presentsdollarsbyrelevantcontractingareafortheprimecontractsandsubcontractsthatthestudyteamincludedinitsanalyses.

Figure 4‐1. Number of City contracts included in the study

Note:

Numbers rounded to nearest dollar and thus may not sum exactly to totals.

Source:

BBC Research & Consulting from City contract and payment data.

Prime contract and subcontract amounts.Foreachcontractelementincludedinthestudyteam’sanalyses,BBCexaminedthedollarsthattheCityawardedorpaidtoeachprimecontractorduringthestudyperiodandthedollarsthattheprimecontractorpaidtoanysubcontractors.

Ifacontractdidnotincludeanysubcontracts,thestudyteamattributedtheentireamountawardedorpaidduringthestudyperiodtotheprimecontractor.

Ifacontractincludedsubcontracts,thestudyteamcalculatedsubcontractamountsasthetotalamountpaidtoeachsubcontractorduringthestudyperiod.BBCthencalculatedtheprimecontractamountasthetotalamountpaidduringthestudyperiodlessthesumofdollarspaidtoallsubcontractors.

C. Collection of Vendor Data

TheCitymaintainsalistofallbusinessesthathavedonebusinessorexpressedinterestindoingbusinesswiththeCity.InordertobeawardedacontractorreceivepaymentbytheCity,vendorsmustregisterwiththeCity’scentralvendorregistrationsystem.VendorsinterestedinworkingwiththeCitymayalsoregistertoreceivenotificationsaboutcontractingopportunities.RegisteringwiththeCityisfreeofchargebutrequiresthatvendorssubmitabidder’sapplicationandprovidetheircontactinformationaswellasinformationabouttheircompanies’characteristics.Thestudyteamcollectedvendorinformationfromthoselistsaswellasthroughnationalbusinesslistings,certificationlists,telephonesurveys,andothersources.ThestudyteamcompiledthefollowinginformationonbusinessesthatparticipatedinrelevantCitycontractsduringthestudyperiod:

Businessname;

Physicaladdressesandphonenumbers;

Ownershipstatus(i.e.,whethereachbusinesswasminority‐owned,woman‐owned,veteran‐owned,orservicedisabled‐veteranowned);

Ethnicityofownership(ifminority‐owned);

Contract Type

Dollars

(in thousands)

Construction 3,445 $525,979

Architecture and engineering 1,377 153,581

Other professional services 5,725 196,174

Good and services 15,775 300,725

Total 26,322 $1,176,459

Number of

Contract Elements


SWaMcertificationstatus;

Primarylinesofwork;

Businesssize;and

Yearofestablishment.

BBCreliedonavarietyofsourcesforthatinformation,including:

Citycontractandvendordata;

Cityvendorregistrationlist;

VirginiaDepartmentofSmallBusinessSupplierDiversitycertificationdirectory;

SmallBusinessAdministrationcertificationandownershiplists,including8(a)HUBZoneandself‐certificationlists;

Dun&Bradstreet(D&B)businesslistingsandotherbusinessinformationsources;

Telephonesurveysthatthestudyteamconductedwithbusinessownersandmanagersaspartoftheutilizationandavailabilityanalyses;and

Businesswebsites.

BBCcollectedallvendorinformationin2017and2018.

D. Relevant Geographic Market Area

ThestudyteamusedtheCity’scontractingandvendordatatohelpdeterminetherelevantgeographicmarketarea—thegeographicalareainwhichtheagencyspendsthesubstantialmajorityofitscontractingdollars—forthestudy.Thestudyteam’sanalysisshowedthat76percentofrelevantcontractingdollarsduringthestudyperiodwenttobusinesseswithlocationsinthecitiesofVirginiaBeach,Chesapeake,Portsmouth,andNorfolk,indicatingthatthosecitiesshouldbeconsideredtherelevantgeographicmarketareaforthestudy.BBC’sanalyses—includingtheavailabilityanalysisandquantitativeanalysesofmarketplaceconditions—focusedonthosefourcities.

E. Relevant Types of Work

Foreachprimecontractandsubcontractelement,thestudyteamdeterminedthesubindustrythatbestcharacterizedthebusiness’sprimarylineofwork(e.g.,heavyconstruction).BBCidentifiedsubindustriesbasedonCitycontractdata;telephonesurveysthatBBCconductedwithprimecontractorsandsubcontractors;businesscertificationlists;D&Bbusinesslistings;andothersources.BBCdevelopedsubindustriesbasedinparton8‐digitD&Bindustryclassificationcodes.Figure4‐2presentsthedollarsthatthestudyteamexaminedinthevariousconstruction;architectureandengineering,otherprofessionalservices;andgoodsandservicessubindustriesthatBBCincludedinitsanalyses.

Thestudyteamcombinedrelatedsubindustriesthataccountedforrelativelysmallpercentagesoftotalcontractingdollarsintofour“other”subindustries—“otherconstructionservices,”“otherconstructionmaterials,”“othergoods,”and“otherservices.”Forexample,thecontractingdollars


thattheCityawardedtocontractorsfor“roofing,siding,andflooring”representedlessthan1percentoftotalCitydollarsthatBBCexaminedinthestudy.BBCcombined“roofing,siding,andflooring”withotherconstructionservicessubindustriesthatalsoaccountedforrelativelysmallpercentagesoftotaldollarsandthatwererelativelydissimilartoothersubindustriesintothe“otherconstructionservices”subindustry.

TherewerealsocontractsthatwerecategorizedinvarioussubindustriesthatBBCdidnotincludeaspartofitsanalyses,becausetheyarenottypicallyanalyzedaspartofdisparitystudies.BBCdidnotincludecontractsinitsanalysesthat:

TheCityawardedtouniversities,governmentagencies,utilityproviders,hospitals,orothernonprofitorganizations($152millionofassociatedcontractdollars);

Wereclassifiedinsubindustriesthatreflectednationalmarkets(i.e.,subindustriesthataredominatedbylargenationalorinternationalbusinesses)orwereclassifiedinsubindustriesforwhichtheCityawardedthemajorityofcontractingdollarstobusinesseslocatedoutsideoftherelevantgeographicmarketarea($80millionofassociatedcontractdollars);3

Wereclassifiedinsubindustrieswhichoftenincludepropertypurchases,leases,orotherpass‐throughdollars(e.g.,realestateorlegalservices;$125millionofassociatedcontractdollars);

WereclassifiedinsubindustriesnottypicallyincludedinadisparitystudyandaccountforsmallproportionsofCitycontractingdollars($12millionofassociatedcontractdollars).4

F. Agency Review Process

TheCityreviewedBBC’scontractingandpaymentdataseveraltimesduringthestudyprocess.TheBBCstudyteammetwithCitystafftoreviewthedatacollectionprocess,informationthatthestudyteamgathered,andsummaryresults.BBCincorporatedtheCity’sfeedbackinthefinalcontractandvendordatathatthestudyteamusedaspartofthedisparitystudy.

3Examplesofsuchindustriesincludebanking;insurance;firetrucks;andsoftware.

4Examplesofindustriesnottypicallyincludedinadisparitystudyincludesubscriptionsservices,healthservices,andlodging.


Figure 4‐2. City contract dollars by subindustry

Note:


Source:


Industry

Total

(in Thousands)

Construction

Heavy construction $133,255

Water, sewer, and utility lines 123,654

Building construction 85,631

Electrical work 40,995

Dam and marine construction 29,049

Excavation 19,123

Other construction services 17,933

Concrete, asphalt, and related products 17,262

Mechanical contracting services 16,601

Concrete work 13,811

Trucking, hauling and storage 9,741

Roofing, siding, and flooring contractors 5,701

Painting and weatherproofing 3,924

Structural metals 3,557

Structural steel construction 2,894

Masonry, drywall and stonework 2,450

Elevators, conveyors, and moving walkways 399

Total construction $525,979

Architecture and engineering

Engineering $113,262

Environmental and planning services 13,286

Architectural and design services 11,069

Surveying and mapmaking 9,589

Construction management 6,375

Total architecture and engineering $153,581

Other professional services

IT and data services $88,060

Human resources and job training services 62,165

Business and market research services 29,625

Health and medical services 9,940

Advertising, marketing and public relations 4,006

Finance and accounting 1,626

Educational services 624

Scientific and medical research 92

Testing services 36

Total other professional services $196,174


Figure 4‐2 (continued). City contract dollars by subindustry

Note:


Source:


Industry

Total

(in Thousands)

Goods and services

Automobiles $30,096

Other goods 29,196

Other services 28,404

Communications equipment 20,102

Engineering equipment and precision instruments 19,500

Event coordination and promotion 18,163

Industrial equipment and machinery 16,913

Plumbing and HVAC supplies 15,863

Vehicle parts and supplies 13,063

Heavy construction equipment 11,365

Landscape services 9,218

Dining and recreational services 9,213

Printing, copying, and mailing 8,482

Office equipment and supplies 7,342

Computers and peripherals 7,329

Cleaning and janitorial services 6,993

Waste and recycling services 5,912

Electrical equipment and supplies 5,297

Security guard services 4,285

Other construction materials 4,143

Lawn and garden equipment 3,879

Fencing, guardrails and signs 3,684

Parking services 3,332

Traffic signals and street lighting 3,287

Uniforms, apparels, and linen 2,699

Furniture 2,333

Food products, wholesale and retail 1,921

Petroleum and petroleum products 1,856

Doors, windows, and glasswork 1,620

Industrial chemicals 1,439

Equipment maintenance and repair 960

Cleaning and janitorial supplies 876

Security services 598

Lawn and garden supplies 417

Computer systems and services 408

Transit services 395

Vehicle repair 141

Total goods and services $300,725

GRAND TOTAL $1,176,459

CHAPTER 5.

Availability Analysis


CHAPTER 5. Availability Analysis

BBCResearch&Consulting(BBC)analyzedtheavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinesses(i.e.,businessesownedbyveteranswhohaveadisabilityasaresultoftheirservice)thatareready,willing,andabletoperformonCityofVirginiaBeach(City)construction;architectureandengineering;otherprofessionalservices;andgoodsandservicesprimecontractsandsubcontracts.1Chapter5describestheavailabilityanalysisinfiveparts:

A. Purposeoftheavailabilityanalysis;

B. Potentiallyavailablebusinesses;

C. Availabilitydatabase;

D. Availabilitycalculations;and

E. Availabilityresults.

AppendixEprovidessupportinginformationrelatedtotheavailabilityanalysis.

A. Purpose of the Availability Analysis

BBCexaminedtheavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesforCityprimecontractsandsubcontractstorefineitsimplementationoftheSmall,Woman,andMinority‐ownedBusiness(SWaM)Programandtouseasinputsinthedisparityanalysis.Inthedisparityanalysis,BBCcomparedthepercentageofCitycontractdollarsthatwenttominority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesduringthestudyperiod(i.e.,participation,orutilization)tothepercentageofdollarsthatonemightexpectthosebusinessestoreceivebasedontheiravailabilityforspecifictypesandsizesofCityprimecontractsandsubcontracts.ThestudyperiodincludedcontractsthattheCityawardedbetweenJuly1,2012andJune30,2017.ComparisonsbetweenparticipationandavailabilityallowedBBCtodeterminewhethercertainbusinessgroupswereunderutilizedduringthestudyperiodrelativetotheiravailabilityforCitywork(fordetails,seeChapter7).

B. Potentially Available Businesses

BBC’savailabilityanalysisfocusedonspecificareasofwork,orsubindustries,relatedtotherelevanttypesofcontractsandprocurementsthattheCityawardedduringthestudyperiod.BBCbegantheavailabilityanalysisbyidentifyingthespecificsubindustriesinwhichtheCityspendsthemajorityofitscontractingdollars(fordetails,seeChapter4)aswellasthe



geographicareasinwhichthemajorityofthebusinesseswithwhichtheCityspendsthosecontractingdollarsarelocated(i.e.,therelevantgeographicmarketarea).2

BBCthenconductedextensivesurveystodeveloparepresentative,unbiased,andstatistically‐validdatabaseofpotentiallyavailablebusinesseslocatedintherelevantgeographicmarketareathatperformworkwithinrelevantsubindustries.Thatmethodofexaminingavailabilityisreferredtoasacustomcensusandhasbeenacceptedinfederalcourtasthepreferredmethodologyforconductingavailabilityanalyses.Theobjectiveoftheavailabilitysurveywasnottocollectinformationfromeachandeveryrelevantbusinessthatisoperatinginthelocalmarketplace.Itwastocollectinformationfromanunbiasedsubsetofthebusinesspopulationthatappropriatelyrepresentstheentirebusinesspopulationoperatinginthelocalmarketplace.ThatapproachallowedBBCtoestimatetheavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinanaccurate,statistically‐validmanner.

Overview of availability surveys. ThestudyteamconductedtelephonesurveyswithbusinessownersandmanagerstoidentifylocalbusinessesthatarepotentiallyavailableforCityprimecontractsandsubcontracts.3BBCbeganthesurveyprocessbycompilingacomprehensiveandunbiasedphonebookofallbusinesses—regardlessofownership—thatperformworkinrelevantindustriesandhavealocationwithintherelevantgeographicmarketarea.BBCdevelopedthatphonebookbasedoninformationfromavarietyofdatasourcesincludingDun&Bradstreet(D&B)MarketplaceandtheCity’svendorregistrationlist.BBCcollectedinformationaboutallbusinessestablishmentslistedunder8‐digitworkspecializationcodes(asdevelopedbyD&B)thatweremostrelatedtothecontractsthattheCityawardedduringthestudyperiod.BBCobtainedlistingson7,013localbusinessesthatdoworkrelatedtothoseworkspecializations.BBCdidnothaveworkingphonenumbersfor1,145ofthosebusinessesbutattemptedavailabilitysurveyswiththeremaining5,868businessestablishments.

Availability survey information.BBCworkedwithCustomerResearchInternationaltoconducttelephonesurveyswiththeownersormanagersoftheidentifiedbusinessestablishments.Surveyquestionscoveredmanytopicsabouteachbusinessincluding:

Statusasaprivatebusiness(asopposedtoapublicagencyornonprofitorganization);

Statusasasubsidiaryorbranchofanothercompany;

Primarylinesofwork;

InterestinperformingworkfortheCityandothergovernmentagencies;

Interestinperformingworkasaprimecontractororasasubcontractor;

Largestprimecontractorsubcontractbidonorperformedinthepreviousfiveyears;

Race/ethnicityandgenderofownership;and

Service‐disabledveteranstatusofownership.

2BBCidentifiedtherelevantgeographicmarketareaforthedisparitystudyasChesapeakeCity,NorfolkCity,PortsmouthCity,andVirginiaBeachCity.

3Thestudyteamofferedbusinessrepresentativestheoptionofcompletingsurveysviafaxore‐mailiftheypreferrednottocompletesurveysviatelephone.


Potentially available businesses.BBCconsideredbusinessestobepotentiallyavailableforCityprimecontractsorsubcontractsiftheyreportedhavingalocationintherelevantgeographicmarketareaandreportedpossessingallofthefollowingcharacteristics:

Beingaprivatesectorbusiness(asopposedtoagovernmentornonprofitorganization);

HavingperformedworkrelevanttoCityconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontractingorprocurement;

Havingbidonorperformedconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicesprimecontractsorsubcontractsineitherthepublicorprivatesectorintherelevantgeographicmarketareainthepastfiveyears;and

BeinginterestedinworkfortheCityorothergovernmentagencies.4

BBCalsoconsideredthefollowinginformationaboutbusinessestodetermineiftheywerepotentiallyavailableforspecificprimecontractsandsubcontractsthattheCityawards:

Theroleinwhichtheywork(i.e.,asaprimecontractor,subcontractor,orboth);and

Thelargestcontracttheybidorperformedinthepastfiveyears.

C. Businesses in the Availability Database

Afterconductingavailabilitysurveyswithmorethanonethousandlocalbusinesses,BBCdevelopedadatabaseofinformationaboutbusinessesthatarepotentiallyavailableforCityconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontractsandprocurements.InformationfromthedatabaseallowedBBCtoassessbusinessesthatareready,willing,andabletoperformworkfortheCity.Figure5‐1presentsthepercentageofbusinessesintheavailabilitydatabasethatwereminority‐,woman,orservice‐disabledveteranowned.Thestudyteam’sanalysisincluded659businessesthatarepotentiallyavailableforspecificconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontractsandprocurementsthattheCityawards.AsshowninFigure5‐1,ofthosebusinesses,39percentwereminority‐orwoman‐owned,and7percentwereservice‐disabledveteran‐owned.TheinformationinFigure5‐1reflectsasimpleheadcountofbusinesseswithnoanalysisoftheiravailabilityforspecificCitycontracts.Thus,itrepresentsonlyafirststeptowardanalyzingtheavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesforCitywork.

4Thatinformationwasgatheredseparatelyforprimecontractandsubcontractwork.


Figure 5‐1. Percentage of businesses in the availability database that were minority‐, woman‐, or service‐disabled veteran‐owned

Note:


Source:


D. Availability Calculations

BBCanalyzedinformationfromtheavailabilitydatabasetodevelopdollar‐weightedestimatesoftheavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesforCitywork.ThoseestimatesrepresentthepercentageofCitycontractingandprocurementdollarsthatminority‐,woman‐,andservice‐disabledveteran‐ownedbusinesseswouldbeexpectedtoreceivebasedontheiravailabilityforspecifictypesandsizesofCityprimecontractsandsubcontracts.

Steps to calculating availability.BBCusedabottomup,contract‐by‐contractmatchingapproachtocalculateavailability.OnlyaportionofthebusinessesintheavailabilitydatabasewasconsideredpotentiallyavailableforanygivenCityprimecontractorsubcontract.BBCfirstexaminedthecharacteristicsofeachspecificprimecontractorsubcontract(referredtogenerallyasacontractelement).includingtypeofworkandcontractsize.BBCthenidentifiedbusinessesintheavailabilitydatabasethatperformworkofthattype,inthatrole(i.e.,asaprimecontractororsubcontractor),andofthatsize.BBCidentifiedthecharacteristicsofeachprimecontractandsubcontractincludedinthedisparitystudyandthentookthefollowingstepstocalculateavailabilityforeachcontractelement:

1. Foreachcontractelement,thestudyteamidentifiedbusinessesintheavailabilitydatabasethatreportedthatthey:

Areinterestedinperformingconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicesworkinthatparticularroleforthatspecifictypeofworkfortheCity;and

Havebidonorperformedworkofthatsizeinthepastfiveyears.

2. Thestudyteamthencountedthenumberofminority‐ownedbusinesses,woman‐ownedbusinesses,service‐disabledveteran‐ownedbusinesses,andbusinessesownedbynon‐Hispanicwhitemenwhowerenotservice‐disabledveterans(i.e.,majority‐ownedbusinesses)intheavailabilitydatabasethatmetthecriteriaspecifiedinStep1.

3. Thestudyteamtranslatedthenumericavailabilityofbusinessesforthecontractelementintopercentageavailability.

BBCrepeatedthosestepsforeachcontractelementthatthestudyteamexaminedinthedisparitystudy.BBCmultipliedpercentageavailabilityforeachcontractelementbythedollarsassociatedwithit,addedresultsacrossallcontractelements,anddividedbythetotaldollarsfor

Business group







Service‐disabled veteran‐owned 7.0 %

Availability %


allcontractelements.Theresultwasdollar‐weightedestimatesoftheavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesoverallandseparatelyforeachrelevantgroup.Figure5‐2providesanexampleofhowBBCcalculatedavailabilityforaspecificsubcontractassociatedwithaconstructionprimecontractthattheCityawardedduringthestudyperiod.

BBC’savailabilitycalculationsarebasedonprimecontractsandsubcontractsthattheCityawardedbetweenJuly1,2012andJune30,2017.AkeyassumptionoftheavailabilityanalysisisthatthecontractsandprocurementsthattheCityawardedduringthestudyperiodarerepresentativeofthecontractsandprocurementsthattheCitywillawardinthefuture.IfthetypesandsizesofthosecontractsandprocurementsdiffersubstantiallyfromtheonestheCityawardedinthepast,thentheCityshouldadjustavailabilityestimatesaccordingly.

Improvements on a simple head count of businesses.BBCusedacustomcensusapproachtocalculatetheavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesforCityworkratherthanusingasimpleheadcountofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinesses(e.g.,simplycalculatingthepercentageofalllocalbusinessesthatareminority‐,woman‐,orservice‐disabledveteran‐owned).ThereareseveralimportantwaysinwhichBBC’scustomcensusapproachtomeasuringavailabilityismoreprecisethancompletingasimpleheadcount.

BBC’s approach accounts for type of work.Federalregulationssuggestcalculatingavailabilitybasedonbusinesses’abilitiestoperformspecifictypesofwork.BBCtookworktypeintoaccountbyexamining71differentsubindustriesaspartofestimatingavailabilityforCitycontracting.

BBC’s approach accounts for contractor role.Thestudyteamcollectedinformationonwhetherbusinessesworkasprimecontractors,subcontractors,orboth.BusinessesthatreportedworkingasprimecontractorswereconsideredpotentiallyavailableforCityprimecontracts.Businessesthatreportedworkingassubcontractorswereconsideredpotentiallyavailableforsubcontracts.Businessesthatreportedworkingasbothprimecontractorsandsubcontractorswereconsideredpotentiallyavailableforbothprimecontractsandsubcontracts.

Figure 5‐2. Example of an availability calculation for a City subcontract

On a contract that the City awarded in 2015, the prime

contractor awarded a subcontract worth $67,447 for

engineering services. To determine the overall

availability of minority-, woman-, and service-disabled veteran-owned businesses for that subcontract, the study team identified businesses in the availability

database that:

a. Were in business in 2015;

b. Indicated that they performed engineering

work;

c. Reported bidding on work of similar or

greater size in the past; and

d. Reported interest in working as a

subcontractor on City or other government

agency projects.

The study team found 42 businesses in the availability

database that met those criteria. Of those businesses,

13 were minority‐ or woman‐owned businesses and 3

were service‐disabled veteran‐owned business. Thus,

the availability of minority‐ and woman‐owned

businesses for the subcontract was 31 percent (i.e.,

13/42 X 100 = 31), and the availability of service‐

disabled veteran‐owned businesses was 7 percent

(3/42 X 100 = 7).


BBC’s approach accounts for the relative capacity of businesses.ToaccountforthecapacityofbusinessestoworkonCitycontracts,BBCconsideredthesize—intermsofdollarvalue—oftheprimecontractsandsubcontractsthatabusinessbidonorreceivedinthepreviousfiveyearswhendeterminingwhethertocountthatbusinessasavailableforparticularprimecontractsorsubcontracts.Foreachcontractelement,BBCconsideredwhetherbusinesseshadpreviouslybidonorreceivedatleastonecontractofanequivalentorgreaterdollarvalue.BBC’sapproachtoaccountingforcapacityisconsistentwithmanyrecent,keycourtdecisionsthathavefoundsuchmeasurestobeimportanttomeasuringavailability(e.g.,AssociatedGeneralContractorsofAmerica,SanDiegoChaptervs.CaliforniaDepartmentofTransportation,etal.,5WesternStatesPavingCompanyv.WashingtonStateDOT,6RotheDevelopmentCorp.v.U.S.DepartmentofDefense,7andEngineeringContractorsAssociationofS.Fla.Inc.vs.MetroDadeCounty8).

BBC’s approach accounts for interest in relevant work.ThestudyteamcollectedinformationonwhetherbusinessesareinterestedinworkingonCityconstruction;architectureandengineering;otherprofessionalservices;andgoodsandgeneralserviceswork(inadditiontoseveralotherfactorsrelatedtoCityprimecontractsandsubcontracts,suchascontracttypeandsize).BusinesseshadtoindicatethattheyareinterestedinperformingsuchworkfortheCityinordertobeconsideredpotentiallyavailableforCitycontractsandprocurements.

BBC’s approach generates dollar‐weighted results.BBCexaminedavailabilityonacontract‐by‐contractbasisandthendollar‐weightedtheresults.Thus,theresultsofrelativelylargecontractelementscontributedmoretooverallavailabilityestimatesthanthoseofrelativelysmallcontractelements.Thatapproachisconsistentwithrelevantcaselawandregulations.

E. Availability Results

BBCestimatedtheavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesfor26,322construction;architectureandengineering;otherprofessionalservices;andgoodsandservicesprimecontractsandsubcontractsthattheCityawardedbetweenJuly1,2012andJune30,2017.

Minority‐and woman‐owned businesses.BBCexaminedtheavailabilityofminority‐andwoman‐ownedbusinessesforvariouscontractssetstoassessthedegreetowhichtheyareready,willing,andabletoperformdifferenttypesofCitywork.

Overall.Figure5‐3presentsdollar‐weightedavailabilityestimatesbyrelevantbusinessgroupforCitycontractsandprocurements.Overall,theavailabilityofminority‐andwoman‐ownedbusinessesforCitycontractsandprocurementsis25.2percent,indicatingthatminority‐andwoman‐ownedbusinessesmightbeexpectedtoreceive25.2percentofthedollarsthattheCityawardsinconstruction;architectureandengineering;otherprofessionalservices;andgoods

5AGC,SanDiegoChapterv.CaliforniaDOT,2013WL1607239(9thCir.April16,2013).

6WesternStatesPavingCo.v.WashingtonStateDOT,407F.3d983(9thCir.2005),cert.denied,546U.S.1170(2006).7RotheDevelopmentCorp.v.U.S.DepartmentofDefense,545F.3d1023(Fed.Cir.2008).

8EngineeringContractorsAssociationofS.Fla.Inc.vs.MetroDadeCounty,943F.Supp.1546(S.D.Fla.1996).


andservices.Non‐Hispanicwhitewoman‐ownedbusinesses(13.3%)andBlackAmerican‐ownedbusinesses(8.1%)exhibitedthehighestavailabilitypercentagesamongallgroups.

Figure 5‐3. Overall availability estimates by racial/ethnic and gender group

Note:


For more detail and results by group, see Figure F‐2 in Appendix F.

Source:


Contract role. Manyminority‐andwoman‐ownedbusinessesaresmallbusinessesandthusoftenworkassubcontractors.Becauseofthattendency,itisusefultoexamineavailabilityestimatesseparatelyforprimecontractsandsubcontracts.Figure5‐4presentsthoseresults.AsshowninFigure5‐4,theavailabilityofminority‐andwoman‐ownedbusinessesconsideredtogetherislowerforCityprimecontracts(24.5%)thanforsubcontracts(31.6%).Amongotherfactors,thatresultcouldbeduetothefactthatsubcontractstendtobemuchsmallerinsizethanprimecontractsandareoftenmoreaccessiblethanprimecontractstominority‐andwoman‐ownedbusinesses.

Figure 5‐4. Availability estimates by contract role

Note:



Source:


Industry.BBCexaminedavailabilityanalysisresultsseparatelyfortheCity’sconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontracts.AsshowninFigure5‐5,theavailabilityofminority‐andwoman‐ownedbusinessesconsideredtogetherishighestfortheCity’sarchitectureandengineeringcontracts(32.6%)andlowestforconstructioncontracts(19.8%).

Business group





Total Minority‐owned 12.0 %



Availability %

Business group







Contract role

Prime



Figure 5‐5. Availability estimates by industry


For more detail and results by group, see Figure F‐5, F‐6, F‐7, and F‐8 in Appendix F.


Goal status.TheCityusedSWaMcontractgoalstoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,andwoman‐ownedbusinessesinmanyofthecontractsthatitawardedduringthestudyperiod.SWaMgoalsonlyappliedtoselectconstructioncontractsduringthestudyperiod.ItisusefultoexamineavailabilityanalysisresultsseparatelyforcontractsthattheCityawardedwiththeuseofSWaMcontractgoals(goalscontracts)andcontractsthattheCityawardedwithouttheuseofgoals(nogoalscontracts).Figure5‐6presentsavailabilityestimatesseparatelyforgoalsandnogoalscontracts.AsshowninFigure5‐6,theavailabilityofminority‐andwoman‐ownedbusinessesconsideredtogetherislowerforgoalscontracts(21.1%)thanfornogoalscontracts(28.0%).

Figure 5‐6. Availability estimates by contract goals status

Note:



Source:


Time period.BBCexaminedavailabilityanalysisresultsseparatelyforcontractsandprocurementsthattheCityawardedintheearlystudyperiod(i.e.,July1,2012–June30,2015)andthelatestudyperiod(i.e.,July1,2015–June30,2017)todeterminewhetherthetypesandsizesofcontractsthattheCityawardedacrossthestudyperiodchangedovertime,whichinturnwouldaffectavailability.AsshowninFigure5‐7,theavailabilityofminority‐andwoman‐ownedbusinessesconsideredtogetherwassomewhatlowerintheearlystudyperiod(24.2%)thanthelatestudyperiod(26.9%).

Business group







Construction

Other professional

services

Goods and

services

Industry

Architecture and

engineering

Business group


Black American‐owned 5.5 9.7

Hispanic American‐owned 3.3 2.4

Native American‐owned 0.4 0.4



Goals status

Goals No goals


Figure 5‐7. Availability estimates by time period

Note:


For more detail and results by group, see Figure F‐3 and F‐4 in Appendix F.

Source:


Service‐disabled veteran‐owned businesses.Similarly,BBCexaminedtheoverallavailabilityofservice‐disabledveteran‐ownedbusinessesforCitywork.Theavailabilityanalysisindicatedthattheavailabilityofservice‐disabledveteran‐ownedbusinessesfortheCity’scontractsandprocurementsis11.9percent.

Business group







LateEarly

Time period

CHAPTER 6.

Utilization Analysis


CHAPTER 6. Utilization Analysis

Chapter6presentsinformationabouttheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinesses(i.e.,businessesownedbyveteranswhohaveadisabilityasaresultoftheirservice)inconstruction;architectureandengineering;otherprofessionalservices;andgoodsandgeneralservicescontractsandprocurementsthattheCityofVirginiaBeach(theCity)awardedbetweenJuly1,2012andJune30,2017.BBCResearch&Consulting(BBC)measuredtheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinCitycontractingintermsofutilization—thepercentageofprimecontractandsubcontractdollarsthatthosebusinessesreceivedonCityprimecontractsandsubcontractsduringthestudyperiod.1Forexample,if5percentofCityprimecontractandsubcontractdollarswenttonon‐Hispanicwhitewoman‐ownedbusinessesonaparticularsetofcontracts,utilizationofnon‐Hispanicwhitewoman‐ownedbusinessesforthatsetofcontractswouldbe5percent.BBCconsideredutilizationresultsontheirownandasinputsinthedisparityanalysis(fordetails,seeChapter7).Thestudyteammeasuredtheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinCitycontractsregardlessofwhethertheywerecertifiedasSmall,Woman,andMinority‐owned(SWaM)businesses.

Minority‐ and Woman‐owned Businesses

BBCexaminedtheparticipationofminority‐andwoman‐ownedbusinessesforvarioussetsofcontractsthattheCityawardedduringthestudyperiod.Thestudyteamassessedtheparticipationofallofthosebusinessesconsideredtogetherandseparatelyforeachrelevantracial/ethnicandgendergroup.

Overall.Figure6‐1presentsthepercentageofcontractingdollarsthatminority‐andwoman‐ownedbusinessesreceivedonconstruction;architectureandengineering;otherprofessionalservices;andgoodsandgeneralservicescontractsandprocurementsthattheCityawardedduringthestudyperiod(includingbothprimecontractsandsubcontracts).AsshowninFigure6‐1,overall,minority‐andwoman‐ownedbusinessesconsideredtogetherreceived18.9percentoftherelevantcontractingdollarsthattheCityawardedduringthestudyperiod.Lessthanone‐halfofthosedollars—8.6percent—wenttoSWaM‐certifiedbusinesses.Non‐Hispanicwhitewoman‐ownedbusinesses(8.2%)andAsianAmerican‐ownedbusinesses(5.6%)exhibitedhigherlevelsofparticipationonCitycontractsthanallothergroups.



Figure 6‐1. Overall utilization results

Note:



Source:


Contract role.Manyminority‐andwoman‐ownedbusinessesaresmallbusinesses,andthus,oftenworkassubcontractors.Becauseofthattendency,itisusefultoexamineutilizationresultsseparatelyforprimecontractsandsubcontracts.Figure6‐2presentsthoseresults.AsshowninFigure6‐2,theparticipationofminority‐andwoman‐ownedbusinessesconsideredtogetherwashigherintheCity’ssubcontracts(21.9%)thanprimecontracts(18.5%).ThevastmajorityofcontractingdollarsthattheCityawardedduringthestudyperiodwereassociatedwithprimecontracts.

Figure 6‐2. Utilization results by contract role



Source:


Industry. BBCexaminedutilizationanalysisresultsseparatelyfortheCity’sconstruction;architectureandengineering;otherprofessionalservices;andgoodsandgeneralservicescontracts.AsshowninFigure6‐3,theparticipationofminority‐andwoman‐ownedbusinessesconsideredtogetherwashighestintheCity’sotherprofessionalservicescontracts(50.6%)andlowestinarchitectureandengineeringcontracts(10.1%).ThepluralityofcontractingdollarsthattheCityawardedduringthestudyperiodwereassociatedwithconstructioncontractsforwhichtheparticipationofminority‐andwoman‐ownedbusinesseswas11.8percent.

Business group

Minority‐ and Woman‐owned







SWaM‐certified






Total SWaM‐certified 8.6 %

Utilization

Business group







Contract role

Prime



Figure 6‐3. Utilization results by relevant industry

Note: Numbers rounded to nearest tenth of 1 percent. Numbers may not add to totals.


Source: BBC Research & Consulting utilization analysis.

Goal status.TheCityusedSWaMcontractgoalstoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,andwoman‐ownedbusinessesinmanyofthecontractsthatitawardedduringthestudyperiod.SWaMgoalsonlyappliedtoselectconstructioncontractsduringthestudyperiod.ItisusefultoexamineparticipationseparatelyforcontractsthattheCityawardedwiththeuseofSWaMcontractgoals(goalscontracts)andcontractsthattheCityawardedwithouttheuseofgoals(nogoalscontracts)asanassessmentofhoweffectivetheuseofthosegoalswereinencouragingtheparticipationofminority‐andwoman‐ownedbusinessesinparticular.Figure6‐4presentsutilizationresultsseparatelyforgoalsandnogoalscontracts.AsshowninFigure6‐4,theparticipationofminority‐andwoman‐ownedbusinessesconsideredtogetherwasactuallymuchhigherinnogoalscontracts(23.7%)thangoalscontracts(11.5%).

Figure 6‐4. Utilization results by contract goal status



Source:


Time period. BBCexaminedutilizationresultsseparatelyforcontractsandprocurementsthattheCityawardedintheearlystudyperiod(i.e.,July1,2012–June30,2015)andthelatestudyperiod(i.e.,July1,2015–June30,2017)todeterminewhethertheparticipationofminority‐andwoman‐ownedbusinessesinCitycontractschangedovertime.AsshowninFigure6‐5,theparticipationofminority‐andwoman‐ownedbusinesseswassomewhathigherinthelatestudyperiod(20.0%)thantheearlystudyperiod(18.2%).

Business Group







Construction

Other Professional

Services

Goods and

Services

Architecture

and Engineering

Business group







Goal status

Goals No goals


Figure 6‐5. Utilization results by time period



Source:


Concentration of dollars. BBCanalyzedwhetherthedollarsthateachrelevantbusinessgroupreceivedonCitycontractsduringthestudyperiodwerespreadacrossarelativelylargenumberofbusinessesorwereconcentratedwitharelativelysmallnumberofbusinesses.Thestudyteamassessedthatquestionbycalculating:

Thenumberofdifferentbusinesseswithineachrelevantgroupthatreceivedcontractingdollarsduringthestudyperiod;and

Thenumberofdifferentbusinesseswithineachrelevantgroupthataccountedfor75percentofthegroup’stotalcontractingdollarsduringthestudyperiod.

Overall,437differentminority‐andwoman‐ownedbusinessesparticipatedinCitycontractsduringthestudyperiod.Thirty‐eightofthosebusinesses,or8.7percentofallutilizedminority‐andwoman‐ownedbusinesses,accountedfor75percentofthetotalcontractingdollarsthatminority‐andwoman‐ownedbusinessesreceivedduringthestudyperiod.Figure6‐6presentsanalogousresultsforeachrelevantracial/ethnicandgendergroup.Mostnotably,asingleAsianAmerican‐ownedbusinessaccountedforthevastmajority—86percent—ofthetotalcontractingdollarsthatAsianAmerican‐ownedbusinessesreceivedduringthestudyperiod).

Figure 6‐6. Concentration of dollars that went to minority‐ and woman‐owned businesses

Note:

The number of utilized businesses does not sum to 437, because 17 minority‐owned businesses were of an unknown minority group.

Source:


Service‐Disabled Veteran‐Owned Businesses

Similarly,BBCexaminedtheparticipationofservice‐disabledveteran‐ownedbusinessesinthecontractsandprocurementsthattheCityawardedduringthestudyperiod.Theutilizationanalysisindicatedthattheparticipationofservice‐disabledveteran‐ownedbusinessesinCitycontractsandprocurementswas0.7percent.

Business group







Time period

Early Late

Business group

Asian American‐owned 36 1 2.8%

Black American‐owned 89 2 2.2%

Hispanic American‐owned 21 2 9.5%

Native American‐owned 4 1 25.0%

Non‐Hispanic white woman‐owned 270 29 10.7%

Number Percent

Businesses accounting

for 75% of dollarsUtilized

businesses

CHAPTER 7.

Disparity Analysis


CHAPTER 7. Disparity Analysis

Thedisparityanalysiscomparedtheparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesincontractsthattheCityofVirginiaBeach(theCity)awardedbetweenJuly1,2012andJune30,2017(i.e.,thestudyperiod)towhatthosebusinessesmightbeexpectedtoreceivebasedontheiravailabilityforthatwork.Theanalysisfocusedonconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontractsandprocurements.Chapter7presentsthedisparityanalysisinthreeparts:

A. Overview;

B. Disparityanalysisresults;and

C. Statisticalsignificance.

A. Overview

Aspartofthedisparityanalysis,BBCResearch&Consulting(BBC)comparedtheactualparticipationofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinCityprimecontractsandsubcontractswiththepercentageofcontractdollarsthatthosebusinessesmightbeexpectedtoreceivebasedontheiravailabilityforthatwork.1BBCexpressedbothactualparticipationandavailabilityaspercentagesofthetotaldollarsassociatedwithaparticularsetofcontracts(e.g.,5%participationcomparedwith4%availability).BBCthencalculatedadisparityindextohelpcompareparticipationandavailabilityresultsacrossrelevantbusinessgroupsandcontractsetsusingthefollowingformula:

Adisparityindexof100indicatesparitybetweenactualparticipation,orutilization,andavailability.Thatis,participationofaparticularbusinessgroupwaslargelyinlinewithitsavailability.Adisparityindexoflessthan100indicatesadisparitybetweenparticipationandavailability.Thatis,aparticularbusinessgroupwasunderutilizedrelativetoitsavailability.Finally,adisparityindexoflessthan80indicatesasubstantialdisparitybetweenparticipationandavailability.Thatis,aparticularbusinessgroupwassubstantiallyunderutilizedrelativetoitsavailability.2

1“Woman‐ownedbusinesses”referstonon‐Hispanicwhitewomanownedbusinesses.Informationandresultsforminoritywoman‐ownedbusinessesareincludedalongwiththeircorrespondingracial/ethnicgroups.2Manycourtshavedeemeddisparityindicesbelow80asbeingsubstantialandhaveacceptedsuchoutcomesasevidenceofadverseconditionsforaparticularbusinessgroup(e.g.,seeRotheDevelopmentCorpv.U.S.DeptofDefense,545F.3d1023,1041;Eng’gContractorsAss’nofSouthFlorida,Inc.v.MetropolitanDadeCounty,122F.3dat914,923(11thCircuit1997);and

%participation

%availabilityx100


ThedisparityanalysisresultsthatBBCpresentsinChapter7summarizedetailedresultstablesthatarepresentedinAppendixF.EachtableinAppendixFpresentsdisparityanalysisresultsforadifferentsetofcontracts.Forexample,Figure7‐1,whichisidenticaltoFigureF‐2inAppendixF,presentsdisparityanalysisresultsforallCitycontractsthatBBCexaminedaspartofthestudy.AppendixFincludesanalogoustablesfordifferentsubsetsofcontractsincluding:

Construction;architectureandengineering;otherprofessionalservices;andgoodsandservicescontracts;

Primecontractsandsubcontracts;and

ContractsthattheCityawardedindifferentstudyperiodyears.

TheheadingofeachtableinAppendixFprovidesadescriptionofthesubsetofcontractsthatBBCanalyzedforthatparticulartable.

AreviewofFigure7‐1helpstointroducethecalculationsandformatofallofthedisparityanalysistablesinAppendixF.AsillustratedinFigure7‐1,thedisparityanalysistablespresentinformationabouteachrelevantbusinessgroupinseparaterows:

“Allbusinesses”inrow(1)pertainstoinformationaboutallbusinessesregardlessoftherace/ethnicityandgenderoftheirowners.

Row(2)presentsresultsforallminority‐andwoman‐ownedbusinessesconsideredtogether,regardlessofwhethertheywerecertifiedasSmall,Woman,andMinority‐owned(SWaM)businesses.

Row(3)presentsresultsforallnon‐Hispanicwhitewoman‐ownedbusinesses,regardlessofwhethertheywerecertifiedasSWaMbusinesses.

Row(4)presentsresultsforallminority‐ownedbusinesses,regardlessofwhethertheywerecertifiedasSWaMbusinesses.

Rows(5)through(9)presentresultsforbusinessesofeachindividualracial/ethnicgroup,regardlessofwhethertheywerecertifiedasSWaMbusinesses.

Rows(10)through(17)presentresultsforbusinessesofeachindividualracial/ethnicgroupthatwerecertifiedasSWaMbusiness.

Utilization results.Eachdisparityanalysistableincludesthesamecolumnsandrows:

Column(a)presentsthetotalnumberofprimecontractsandsubcontracts(i.e.,contractelements)thatBBCanalyzedaspartofthecontractset.Asshowninrow(1)ofcolumn(a)ofFigure7‐1,BBCanalyzed26,322contractelements.Thevaluepresentedincolumn(a)foreachindividualbusinessgrouprepresentsthenumberofcontractelementsinwhichbusinessesofthatparticulargroupparticipated(e.g.,asshowninrow(6)ofcolumn(a),BlackAmerican‐ownedbusinessesparticipatedin3,033primecontractsandsubcontracts).

ConcreteWorksofColo.,Inc.v.CityandCountyofDenver,36F.3d1513,1524(10thCir.1994).SeeAppendixBforadditionaldiscussionofthoseandothercases.


Figure 7‐1. Example of a disparity analysis table from Appendix F (same as Figure F‐2 in Appendix F)

Note: Numbers are rounded to the nearest thousand dollars or tenth of one percent. “woman‐owned” refers to non‐Hispanic white woman‐owned.

* Unknown minority‐owned businesses were allocated to minority subgroups proportional to the known total dollars of those groups. For example, if total dollars of Black American‐owned businesses (column b, row 5) accounted for 25 percent of total minority‐owned business dollars (column b, row 4), then 25 percent of column b, row 9 would be added to column b, row 5 and the sum would be shown in column c, row 5.

Source: BBC Research & Consulting disparity analysis.

(1) All businesses 26,322 $1,176,459 $1,176,459

(2) Minority and woman‐owned businesses 7,429 $221,800 $221,800 18.9 25.2 ‐6.4 74.7

(3) Non‐Hispanic white woman‐owned 3,838 $95,902 $95,902 8.2 13.3 ‐5.1 61.5

(4) Minority‐owned 3,591 $125,898 $125,898 10.7 12.0 ‐1.3 89.4

(5) Asian American‐owned 339 $65,543 $66,330 5.6 0.8 4.9 200+

(6) Black American‐owned 3,033 $52,414 $53,043 4.5 8.1 ‐3.6 55.9

(7) Hispanic American‐owned 105 $6,219 $6,293 0.5 2.7 ‐2.2 19.5

(8) Native American‐owned 42 $229 $231 0.0 0.4 ‐0.4 5.1

(9) Unknown minority‐owned 72 $1,495

(10) SWAM‐certified 3,061 $101,744 $101,744 8.6

(11) Non‐Hispanic white woman‐owned SWaM 2,181 $73,118 $73,589 6.3

(12) Minority‐owned SWAM 858 $27,974 $28,155 2.4

(13) Asian American‐owned SWAM 222 $2,246 $2,301 0.2

(14) Black American‐owned SWAM 514 $21,706 $22,240 1.9

(15) Hispanic American‐owned SWAM 78 $3,432 $3,516 0.3

(16) Native American‐owned SWAM 17 $95 $98 0.0

(17) Unknown minority‐owned SWAM 27 $496

(d) (g)

Disparityindex

(f)

Utilization ‐Availability

Availabilitypercentagepercentage

Utilization

(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group

Number of contractelements

dollarsTotal

(thousands)

(e)


Column(b)presentsthedollars(inthousands)thatwereassociatedwiththesetofcontractelements.Asshowninrow(1)ofcolumn(b)ofFigure7‐1,BBCexaminedapproximately$1.2billionfortheentiresetofcontractelements.Thedollartotalsincludebothprimecontractandsubcontractdollars.Thevaluepresentedincolumn(b)foreachindividualbusinessgrouprepresentsthedollarsthatthebusinessesofthatparticulargroupreceivedonthesetofcontractelements(e.g.,asshowninrow(6)ofcolumn(b),BlackAmerican‐ownedbusinessesreceivedapproximately$52.4million).

Column(c)presentsthedollars(inthousands)thatwereassociatedwiththesetofcontractelementsafteradjustingthosedollarsforbusinessesthatBBCidentifiedasminority‐ownedbutforwhichspecificrace/ethnicityinformationwasnotavailable.

Column(d)presentstheparticipationofeachbusinessgroupasapercentageoftotaldollarsassociatedwiththesetofcontractelements.BBCcalculatedeachpercentageincolumn(d)bydividingthedollarsgoingtoaparticulargroupincolumn(c)bythetotaldollarsassociatedwiththesetofcontractelementsshowninrow(1)ofcolumn(c),andthenexpressingtheresultasapercentage(e.g.,forBlackAmerican‐ownedbusinesses,thestudyteamdivided$53.0millionby$1.2billionandmultipliedby100foraresultof4.5%,asshowninrow(6)ofcolumn(d)).

ThebottomhalfofFigure7‐1presentsutilizationresultsforminority‐andwoman‐ownedbusinessesthatwereSWaM‐certified.

Availability results.Column(e)ofFigure7‐1presentstheavailabilityofeachrelevantbusinessgroupforallcontractelementsthatthestudyteamanalyzedaspartofthecontractset.Availabilityestimates,whicharerepresentedaspercentagesofthetotalcontractingdollarsassociatedwiththesetofcontracts,serveasbenchmarksagainstwhichtocomparetheparticipationofspecificgroupsforspecificsetsofcontracts(e.g.,asshowninrow(6)ofcolumn(e),theavailabilityofBlackAmerican‐ownedbusinessesforCityworkis8.1%).

Differences between participation and availability.Thenextstepinanalyzingwhethertherewasadisparitybetweentheparticipationandavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesistosubtracttheparticipationpercentagefromtheavailabilitypercentage.Column(f)ofFigure7‐1presentsthepercentagepointdifferencebetweenparticipationandavailabilityforeachrelevantracial/ethnicandgendergroup.Forexample,aspresentedinrow(6)ofcolumn(f)ofFigure7‐1,theparticipationofBlackAmerican‐ownedbusinessesinCitycontractswas3.6percentagepointslessthantheiravailability.

Disparity indices.Itissometimesdifficulttointerpretabsolutepercentagedifferencesbetweenparticipationandavailability.Therefore,BBCalsocalculatedadisparityindexforeachrelevantracial/ethnicandgendergroup.Column(g)ofFigure7‐1presentsthedisparityindexforeachgroup.Forexample,asreportedinrow(6)ofcolumn(g),thedisparityindexforBlackAmerican‐ownedbusinesseswasapproximately56,indicatingthatBlackAmerican‐ownedbusinessesactuallyreceivedapproximately$0.56foreverydollarthattheymightbeexpectedtoreceivebasedontheiravailabilityforprimecontractsandsubcontractsthattheCityawardedduringthestudyperiod.


BBCappliedthefollowingruleswhendisparityindiceswereexceedinglylargeorcouldnotbecalculatedbecausethestudyteamdidnotidentifyanybusinessesofaparticulargroupasavailableforaparticularcontractset:

WhenBBC’scalculationsshowedadisparityindexexceeding200,BBCreportedanindexof“200+.”Adisparityindexof200+meansthatparticipationwasmorethantwiceasmuchasavailabilityforaparticulargroupforaparticularsetofcontracts.

Whentherewasnoparticipationandnoavailabilityforaparticulargroupforaparticularsetofcontracts,BBCreportedadisparityindexof“100,”indicatingparity.

B. Disparity Analysis Results

BBCmeasureddisparitiesbetweentheparticipationandavailabilityofminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesforvarioussetsofcontractsthattheCityawardedduringthestudyperiod.

Minority‐and woman‐owned businesses.BBCexaminedtheavailabilityofminority‐andwoman‐ownedbusinessesforvariouscontractssetstoassessthedegreetowhichtheymayhavebeenunderutilizedonvarioustypesofCitywork.

Overall.Figure7‐2presentsdisparityindicesforallrelevantprimecontractsandsubcontractsthattheCityawardedduringthestudyperiod.Thelinedownthecenterofthegraphshowsadisparityindexlevelof100,whichindicatesparitybetweenparticipationandavailability.Disparityindicesoflessthan100indicatedisparitiesbetweenparticipationandavailability(i.e.,underutilization).Forreference,alineisalsodrawnatadisparityindexlevelof80,becausesomecourtsuse80asthethresholdforwhatindicatesasubstantialdisparity.AsshowninFigure7‐2,overall,theparticipationofminority‐andwoman‐ownedbusinessesincontractsthattheCityawardedduringthestudyperiodwassubstantiallylowerthanwhatonemightexpectbasedontheavailabilityofthosebusinessesforthatwork.Thedisparityindexof75indicatesthatminority‐andwoman‐ownedbusinessesreceivedapproximately$0.75foreverydollarthattheymightbeexpectedtoreceivebasedontheiravailabilityfortherelevantprimecontractsandsubcontractsthattheCityawardedduringthestudyperiod.Disparityanalysisresultsbyindividualracial/ethnicandgendergroupindicatedthat:

Fourgroupsexhibiteddisparityindicessubstantiallybelowparity:non‐Hispanicwhitewoman‐ownedbusinesses(disparityindexof62),BlackAmerican‐ownedbusinesses(disparityindexof56),HispanicAmerican‐ownedbusinesses(disparityindexof20),andNativeAmerican‐ownedbusinesses(disparityindexof5).

AsianAmerican‐ownedbusinesses(disparityindexof200+)didnotexhibitadisparity.


Figure 7‐2. Disparity indices by group

Note:


Source:


Contract role. Subcontractstendtobemuchsmallerinsizethanprimecontracts.Asaresult,subcontractsareoftenmoreaccessiblethanprimecontractstominority‐andwoman‐ownedbusinesses.Thus,itmightbereasonabletoexpectbetteroutcomesforminority‐andwoman‐ownedbusinessesonsubcontractsthanonprimecontracts.Figure7‐3presentsdisparityindicesforallrelevantgroupsforprimecontractsandsubcontracts.AsshowninFigure7‐3,minority‐andwoman‐ownedbusinessesconsideredtogethershowedasubstantialdisparityforbothprimecontracts(disparityindexof76)andsubcontracts(disparityindexof69).

Figure 7‐3. Disparity indices for prime contracts and subcontracts

Note:


Source:



Resultsforindividualgroupsindicatedthat:

AllgroupsshowedsubstantialdisparitiesonprimecontractsexceptforAsianAmerican‐ownedbusinesses(disparityindexof200+).

Allgroupsshowedsubstantialdisparitiesonsubcontractsexceptfornon‐Hispanicwhitewoman‐ownedbusinesses(disparityindexof94).

Industry.BBCexamineddisparityanalysisresultsseparatelyfortheCity’sconstruction;architectureandengineering;otherprofessionalservices;andgoodsandgeneralservicescontracts.Figure7‐4presentsdisparityindicesforallrelevantgroupsbycontractingarea.AsshowninFigure7‐4,minority‐andwoman‐ownedbusinessesconsideredtogethershowedsubstantialdisparitiesforeachrelevantindustryexceptotherprofessionalservices(disparityindexof193).

Figure 7‐4. Disparity analysis results by relevant industry

Note:


Source:



Disparityanalysisresultsdifferedbyindustryandgroup:

Threeindividualgroupsshowedsubstantialdisparitiesonconstructioncontracts:AsianAmerican‐ownedbusinesses(disparityindexof13),BlackAmerican‐ownedbusinesses(disparityindexof23),andHispanicAmerican‐ownedbusinesses(disparityindexof35).

AllindividualgroupsshowedsubstantialdisparitiesonarchitectureandengineeringcontractsexceptforAsianAmerican‐ownedbusinesses(disparityindexof200+).

Threeindividualgroupsshowedsubstantialdisparitiesonotherprofessionalservicescontracts:HispanicAmerican‐ownedbusinesses(disparityindexof8),NativeAmerican‐ownedbusinesses(disparityindexof0),andnon‐Hispanicwhitewoman‐ownedbusinesses(disparityindexof29).

AllindividualgroupsshowedsubstantialdisparitiesongoodsandservicescontractsexceptforAsianAmerican‐ownedbusinesses(disparityindexof200+).

Figure 7‐5. Disparity analysis results by contract goals status

Note:



Source:


Goal status.TheCityusedSWaMcontractgoalstoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,andwoman‐ownedbusinessesinmanyofthecontractsthatitawardedduringthestudyperiod.SWaMgoalsonlyappliedtoselectconstructioncontractsduringthestudyperiod.ItisusefultoexaminedisparityanalysisresultsseparatelyforcontractsthattheCityawardedwiththeuseofSWaMcontractgoals(goalscontracts)andcontractsthattheCityawardedwithouttheuseofgoals(nogoalscontracts)toassesstheeffectivenessofthosegoalstoaddressanydisparitiesbetweenparticipationandavailability.Figure7‐5presentsdisparityindicesseparatelyforgoalsandnogoalscontracts.AsshowninFigure7‐5,minority‐andwoman‐ownedbusinessesconsideredtogetheractuallyshowedasubstantialdisparityforgoalscontracts(disparityindexof55)butnotfornogoalscontracts


(disparityindexof85).ResultsforindividualgroupsindicatedthatSWaMcontractgoalsmaybemoreeffectiveinaddressingdisparitiesforcertaingroupsthanothers:

Non‐Hispanicwhitewoman‐ownedbusinessesdidnotexhibitasubstantialdisparityongoalscontracts(disparityindexof88)butallotherindividualgroupsdidexhibitsubstantialdisparities.

AllindividualgroupsshowedsubstantialdisparitiesonnogoalscontractsexceptforAsianAmerican‐ownedbusinesses(disparityindexof200+).

Time period.BBCalsoexamineddisparityanalysisresultsseparatelyfortwoseparatetimeperiods:July1,2012throughJune30,2015(earlystudyperiod)andJuly1,2015throughJune30,2017(latestudyperiod).ThatinformationmighthelptheCitydeterminewhetherthereweredifferentoutcomesforminority‐andwoman‐ownedbusinessesasthecountrymovedfurtherandfurtherfromtheeconomicdownturnthatbeganin2008.Figure7‐6presentsdisparityindicesforallrelevantracial/ethnicandgendergroupsseparatelyfortheearlyandlatestudyperiods.AsshowninFigure7‐6,disparityanalysisresultswereverysimilarbetweentheearlyandlatestudyperiods.Minority‐andwoman‐ownedbusinessesshowedsubstantialdisparitiesforcontractsthattheCityawardedintheearlystudyperiod(disparityindexof75)andinthelatestudyperiod(disparityindexof74).ResultsforindividualgroupsindicatedthatthatallgroupsshowedsubstantialdisparitiesinbothtimeperiodswiththeexceptionofAsianAmerican‐ownedbusinesses,whichdidnotshowadisparityineithertimeperiod.

Figure 7‐6. Disparity indices for early and late study period

Note:


Source:


Service‐disabled veteran‐owned businesses. Similarly,BBCcomparedparticipationtoavailabilityforservice‐disabledveteran‐ownedbusinessesinCitywork.Thedisparityanalysisindicatedthatservice‐disabledveteran‐ownedbusinessesexhibitedadisparityindexof


Figure 7‐7. Monte Carlo Analysis

BBC used a Monte Carlo approach to randomly select businesses to win each individual contract element that the study team included in its analyses. For each contract element, BBC’s availability database provided information on individual businesses that are available for that contract element based on type of work, contractor role, and contract size. BBC assumed that each available business had an equal chance of winning the contract element, so the odds of a business from a certain group winning it were equal to the number of businesses from that group available for it divided by the total number of businesses available for it. The Monte Carlo simulation then randomly chose a business from the pool of available businesses to win the contract element.

The Monte Carlo simulation repeated the above process for all contract elements in a particular contract set. The output of a single Monte Carlo simulation for all contract elements in the set represented the simulated participation of minority‐ and woman‐owned businesses for that set of contract elements. The entire Monte Carlo simulation was then repeated 1 million times for each contract set. The combined output from all 1 million simulations represented a probability distribution of the overall participation of minority‐ and woman‐owned businesses if contracts were awarded randomly based only on the availability of relevant businesses working in the local marketplace.

The output of the Monte Carlo simulations represents the number of simulations out of 1 million that produced simulated participation that was equal or below the actual observed participation for each racial/ethnic and gender group and for each set of contracts. If that number was less than or equal to 25,000 (i.e., 2.5% of the total number of simulations), then BBC considered the corresponding disparity index to be statistically significant at the 95 percent confidence level. If that number was less than or equal to 50,000 (i.e., 5.0% of the total number of simulations), then BBC considered that disparity index to be statistically significant at the 90 percent confidence level.

6,indicatingthattheiractualparticipationinCitycontractingwassubstantiallylessthantheiravailability.

C. Statistical Significance

Statisticalsignificancetestsallowresearcherstotestthedegreetowhichtheycanrejectrandomchanceasanexplanationforanyobservedquantitativedifferences.Inotherwords,astatisticallysignificantdifferenceisonethatonecanconsidertobereliableorreal.BBCusedaprocessthatreliesonrepeated,randomsimulationstoexaminethestatisticalsignificanceofdisparityanalysisresults.ThatapproachisreferredtoasaMonteCarloanalysis.Figure7‐7describeshowthestudyteamusedMonteCarlototestthestatisticalsignificanceofdisparityanalysisresults.

Results.AsshowninFigure7‐8,resultsfromtheMonteCarloanalysisindicatedthatthedisparitiesonallcontractsforallminority‐andwoman‐ownedbusinesses,Non‐Hispanicwhitewoman‐ownedbusinesses,BlackAmerican‐ownedbusinesses,HispanicAmerican‐ownedbusinesses,andNativeAmerican‐ownedbusinesseswerestatisticallysignificantatthe95percentconfidencelevel.Thesubstantialdisparitiesfoundforthosegroupsduringthelatestudyperiodandonprimecontractswerealsostatisticallysignificantatthe95percentconfidencelevel.


Figure 7‐8. Monte Carlo simulation results for disparity analysis results

Business Group

All contracts

Minority‐owned and woman‐owned 75 0 <0.1 %

Non‐Hispanic white woman‐owned 62 0 <0.1 %

Minority‐owned 89 155,185 15.5 %

Asian American‐owned 200+ N/A N/A

Black American‐owned 56 0 <0.1 %

Hispanic American‐owned 19 0 <0.1 %

Native American‐owned 5 0 <0.1 %

Late study period (July 1, 2015 ‐ June 30, 2017)

Minority‐owned and woman‐owned 74 6,199 0.6 %

Non‐Hispanic white woman‐owned 65 191 N/A


Asian American‐owned 200+ N/A N/A

Black American‐owned 61 10,411 1.0 %



Prime contracts

Minority‐owned and woman‐owned 76 0 <0.1 %

Non‐Hispanic white woman‐owned 55 0 <0.1 %


Asian American‐owned 200+ N/A N/A %

Black American‐owned 61 5 <0.1 %



Probability of observed

disparity occurring due

to "chance"

Disparity

index

Number of simulation runs out

of one million that replicated

observed utilization

CHAPTER 8.

Program Measures


CHAPTER 8. Program Measures

AspartofimplementingtheSmall,Women‐Owned,andMinority‐ownedBusiness(SWaM)Program,theCityofVirginiaBeach(theCity)usesvariousrace‐andgender‐neutralmeasurestoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesinitscontracting.1Race‐andgender‐neutralmeasuresaremeasuresthataredesignedtoencouragetheparticipationofallbusinesses—or,allsmallbusinesses—inanorganization’scontracting.Participationinsuchmeasuresisnotlimitedtominority‐andwoman‐ownedbusinesses.Incontrast,race‐andgender‐consciousmeasuresaremeasuresthataredesignedtospecificallyencouragetheparticipationofminority‐andwoman‐ownedbusinessesinanorganization’scontracting(e.g.,usingminority‐ownedbusinesssubcontractinggoalsonindividualcontracts).TheCitydoesnotcurrentlyimplementanyrace‐orgender‐consciousmeasures.

BBCResearch&Consulting(BBC)reviewedmeasuresthattheCitycurrentlyusestoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesinitscontracting.Inaddition,BBCreviewedrace‐andgender‐neutralmeasuresthatotherorganizationsintheregionuse.ThatinformationisinstructivebecauseitallowsanassessmentofthemeasuresthattheCityiscurrentlyusingandanassessmentofadditionalmeasuresthattheorganizationcouldconsiderusinginthefuture.BBCreviewedtheCity’sprogrammeasuresinthreeparts:

A. Programoverview;

B. Race‐andgender‐neutralmeasures;and

C. Otherorganizations’programmeasures.

A. Program Overview

TheCityimplementstheSWaMProgramtoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesinitscontracting.TheCitybeganimplementingtheSWaMProgram—whichwasmodelledaftertheCommonwealthofVirginia’sSWaMProgram—in2007.InordertobeSWaM‐certified,abusinessmustbe:

Asmallbusinesswith250orfeweremployees,oraverageannualgrossreceiptsof$10millionorlessoverthepreviousthreeyears;

1“Woman‐ownedbusinesses”referstonon‐Hispanicwhitewoman‐ownedbusinesses.Informationandresultsforminority‐andwoman‐ownedbusinessesareincludedalongwiththeircorrespondingracial/ethnicgroups.


Aminority‐ownedbusinessthatisatleast51percentownedandcontrolledbyoneormoreminorityindividualswhoareUnitedStatescitizensorlegalresidentaliens;

Awoman‐ownedbusinessthatisatleast51percentownedandcontrolledbyoneormorewomenwhoareU.S.citizensorlegalresidentaliens;or

Aservice‐disabledveteran‐ownedbusinessthatisatleast51percentownedandcontrolledbyservice‐disabledveteranswhoarecertifiedassuchbytheVirginiaDepartmentofVeteranServices.2

TheCity’sFinanceDepartmentPurchasingDivisionisresponsibleformonitoringprogressrelatedtotheparticipationofSWaM‐certifiedbusinessesinCitycontracts;maintainingalistofSWaM‐certifiedbusinesses;anddevelopingplanstoincreasetheparticipationofSWaMbusinesses.Inaddition,in2008,theCityofVirginiaBeachCityCounciladoptedaresolutionestablishingacitywideaspirationalgoalof10percentminority‐ownedbusinessparticipationinCitycontracts.Theresolutionappliestoconstruction;architectureandengineering;andgoodsandservicescontractswithparticularemphasisonconstructionandarchitectureandengineeringforwhichthereissubstantiallocalmarketcompetition.

B. Race‐ and Gender‐Neutral Measures

TheCityusesmyriadrace‐andgender‐neutralmeasurestoencouragetheparticipationofsmallbusinesses—includingmanyminority‐,woman‐,andservice‐disabledveteran‐ownedbusinesses—initscontracting.TheCityusesthefollowingtypesofrace‐andgender‐neutralmeasures:

Businessdevelopmentprograms;

Advocacyandoutreachefforts;

Financialincentives;

TheSWaMMentorshipProgram;

Entrepreneur‐in‐ResidenceProgram;

TheBondWaiver/PrequalificationProgram;and

TheSmallBusinessEnhancementProgram.

Business development programs.TheCityoffersbusinessdevelopmentopportunitiestosmallbusinessesthroughaseriesofworkshopsandprograms.

Small Business Development Workshop Series.TheCityhostsaseriesoffreeeducationworkshopsontopicsrangingfrombusinessfinancingtocybersecurity.Theworkshopsaredesignedtoeducatesmallbusinessownersaboutkeyfactorsneededtodevelopandgrowtheirbusinesses.Workshopsareheldquarterlyandarefreetoattend.

2AlthoughtheCommonwealthofVirginiaisthesolecertifyingagencyfortheSWaMProgram,theCityofVirginiaBeachallowsbusinessestoself‐certifyasservice‐disabledveteran‐ownedbusinesses.


Contractors Institute (CI).InpartnershipwiththeSoutheasternSmallBusinessDevelopmentCenter,theCityoffersaseriesofbusinesseducationsessionscalledCI.CIprovidessmallbusinesseswithtraininginthepreparationofsubmittingbidsandproposalstolocal,state,andfederalgovernmentagencies.Todate,98smallbusinessesthroughouttheHamptonRoadsregionhavecompletedthethree‐dayprogram,andsmallbusinesseshavebeenawarded23primecontractsafterattendingtheprogram.

Advocacy and outreach efforts.TheCityalsoparticipatesinvariousadvocacy,educational,andoutreachefforts.

Project information sessions. TheDepartmentsofPublicUtilitiesandPublicWorkshostprojectinformationsessionsthroughouttheyeartoprovideinformationaboutupcomingprojects.TheCitytriestoholdprojectsessionsthreetosixmonthspriortomajorsolicitationstoallowbusinessesampleopportunitytoprepareforthesolicitationasaprimecontractororsubcontractor.ProjectmanagersfromtheDepartmentsofPublicUtilitiesandPublicWorksalsoattendthesesessionstoprovidedetailsrelatedtorequestedscopesofservicesandtonetworkwithbusinessownersandrepresentatives.

Hampton University Small Business Center. TheCitypartnerswithHamptonUniversitytohelpitidentifySWaM‐certifiedbusinessesthatareavailableforCityandprivatesectorcontracts.HamptonUniversitythendistributesnoticestothosebusinessesregardingupcomingandfuturenetworkingevents,educationalworkshops,andsolicitations.TheUniversityalsoprovidesassistancewithbidandproposalsubmissions.

Procurement Opportunity Committee (POC).TheCityformedthePOCin2015toassistsmallbusinessesinsuccessfullypursuingcontractingopportunities.TheCity’sPurchasingAgent,SeniorProcurementSpecialist,DepartmentalRepresentatives,SWaMBusinessDevelopmentManager,andtheMinorityBusinessCoordinatorsserveasPOCmembers.POCofferscoaching,mentoring,outreach,andeducationtolocalsmallbusinesses.Todate,firmsparticipatinginPOChavebeenawardedmorethan$1millioninCitycontracts.

Small Business Mentorship Program. TheCitypartnerswithlocaluniversitiesandbusinessleaderstoimplementtheSmallBusinessMentorshipProgram.Theprogramprovidestailoredmentoringtosmallbusinessesandminority‐andwoman‐ownedbusinesses.Theprogramisfreeandoffersmentoringintheareasofhumanresources,informationtechnology,finance,andmarketing.

Financial incentives.TheCityoffersavarietyoffinancialincentivestoqualifyingneworexpandingbusinesstoassistwithvariousbusinesscosts.TheCity’sofferingsinclude:

TheEconomicDevelopmentInvestmentProgram(EDIP),whichprovidesgrantstoqualifyingbusinessesforinfrastructureimprovementsandotherbusinessprojects;

TheViBeCreativeDistrictMatchingGrantProgram,whichprovidesgrantstoqualifyingbusinesseswithinparticularCityboundariesforbuildingimprovements,equipmentpurchases,ormodernizationprojects;and


Industrialrevenuebondstoprovidefinancialassistancetoprivatesectorentitiesfortheacquisitionandconstructionofindustrialandcommercialfacilities.

TheCityalsooffersenergy‐efficientbuildingtaxreductions,datacentertaxreductions,andadditionaltaxandbusinesslicensingincentivestosupportbusinessformationandgrowththroughoutVirginiaBeach.

SWaM Mentorship Program.TheCity’sSWaMMentorshipProgramprovidestailoredbusinessmentoringtosmallbusinessesthroughoutVirginiaBeach.TheCitypartnerswithlocaluniversitiesandbusinessleaderstoprovideproject‐specificmentoring,handsonbusinessmentoring,andfocusgrouptrainingintheareasofhumanresources,informationtechnology,finance,andmarketing.Theprogramisfreeofchargeforqualifyingsmallbusinesses.

TheCityalsopartnerswithServiceCorpsofRetiredExecutives(SCORE)—anationalnonprofitassociationthatoffersfreeeducation,counseling,andrelatedresourcesforstartingandexpandingsmallbusinesses—tooffermentorservices.SCOREprovidesfreementoringandlow‐costtrainingandconductsavarietyofworkshopsonlineandinpersonthataddressmanyoftheessentialstrategiesnecessaryforestablishingandmanagingsuccessfulbusinesses.

Entrepreneur‐in‐Residence Program.TheCitypartnerswith1701—VirginiaBeach'sfirstcollaborativecoworkingspacelocatedintheViBeCreativeDistrict—toprovidecoworkingspaceandservicestoconnectlocalbusinessesandsupportbusinessdevelopment.Theprogramoffersnetworkingevents,socialmediaandmagazinepromotion,classesandworkshops,businessmentoring,andvariousotherbusinesssupportiveservices.Businessescanalsoapplytoearnthreemonthsoffreecoworkingofficespace.

Bond Waiver/Prequalification Program.TheVirginiaBeachCityCounciladoptedtheBondWaiver/PrequalificationProgramin2011toassistsmallbusinesses,minority‐,woman‐,andservice‐disabledveteran‐ownedbusinessesinsecuringcontractingopportunitieswithouttheadditionalburdenofbid,performance,andpaymentbondcosts.TheCityappliestheprogramtonon‐transportationconstructionprojectsvaluedbetween$100,000and$500,000.

Small Business Enhancement Program (SBEP).TheCitybeganimplementingSBEPin2012.TheprogramrequiresprimecontractorswhochoosetosubcontractanyportionofaCityconstructioncontracttosubcontractaminimumof50percentofthesubcontractedworktoSWaM‐certifiedbusinesses.

C. Other Organizations’ Program Measures

Inadditiontotherace‐andgender‐neutralmeasuresthattheCitycurrentlyuses,thereareanumberofrace‐andgender‐neutralprogrammeasuresthatotherorganizationsinVirginiausetoencouragetheparticipationofminority‐andwoman‐ownedbusinessesintheircontracting.Figure8‐1providesexamplesofthosemeasures.


Figure 8‐1. Examples of race‐ and gender‐neutral program measures that other organizations in Virginia use

Type Examples of Program Measures

The Virginia Department of Housing and Community Development (DHCD) offers the Virginia

Individual Development Accounts (VIDA) program to encourage saving and improve personal

financial management. DHCD provides matching funds for individuals who are saving for specific

purposes, such as homeownership, education, or business start‐ups. VIDA funds can be used for

various expenses that help individuals start or expand their businesses, including business

equipment, inventory, or post‐secondary education tuition payments. Participants receive $8 in

match funds for every $1 they save, up to $4,000. They also receive technical training and

support.

The Virginia Economic Development Partnership has established the Virginia Small Business

Financing Authority (VSBFA)—the Commonwealth of Virginia’s business and economic

development financing arm—to provide capital to businesses for economic growth and

expansion. The financing comes in many different forms, including loans, bonds, and grants. The

VSBFA also has weekly business development events which are offered free of charge. The

events cover topics such as working with the Commonwealth and Federal Disadvantaged

Business Enterprise (DBE) requirements. VSBFA also offers one‐on‐one business counseling.

The Franklin County Office of Economic Development offers a number of grant opportunities to

assist businesses with growth and expansion. The Franklin County Job Creation Grant is available

to all businesses—new or expanding, in any industry—that are investing in the local economy

and creating local jobs. The grant amount depends on the size of the business’s investment and

the number of jobs it creates within Franklin County. The Franklin County Training Grant is

available to local employers for supporting training related to business expansions. The grant

can also be used to train employees. Businesses can receive up to $150 per employee. Grants

are limited to $5,000 per request.

Hiscox and Hartford Insurance both offer various types of small business insurance, including

general and professional liability; errors and omissions; and workers’ compensation insurance.

Both companies offer free risk assessment to help small businesses select tailored insurance

products to cover their needs.

Mentor‐Protégé

Programs

THRIVE Mentor Network has partnered with the Small Business Development Centers, George

Mason University, Chamber Richmond Virginia , and the Small Business Administration to help

individuals and small businesses with every aspect of starting, running, and growing a business.

Registration is free, and events are held on a weekly basis. Business owners have the option to

choose their own mentor. THRIVE also provides learning guides, which cover a variety of topics

related to starting and operating a business.

Capital, Bonding,

and Insurance


Figure 8‐1. (continued) Examples of race‐ and gender‐neutral program measures that other organizations in Virginia use

Type Examples of Program Measures

Mentor‐Protégé

Programs

The Hampton Roads Chamber of Commerce and the Small Business Development Centers of

Hampton Roads created the PROPEL Mentor‐Protégé Program to provide extensive support and

training to small businesses. The program begins with a seven‐week Business Bootcamp and

then provides follow‐up counseling and monthly mentoring. Mentoring is provided for two

years, and participants are matched with successful entrepreneurs recruited from the

Entrepreneur Organization, the Chamber Board of Directors, and other organizations

throughout the region. Participants also benefit from peer‐to‐peer mentoring during monthly

Protégé Round Up meetings. Tuition for this program is $400 per student and covers all training

materials and follow‐up support.

The Virginia Chamber of Commerce offers businesses the opportunity to market themselves

amongst top executives in Virginia. The Virginia Chamber hosts business recognition events and

conferences on a monthly basis. Events typically cost between $95 and $125 per attendee. The

Virginia Chamber has also developed a nonprofit association for CEOs of small‐ to mid‐size

businesses called the Virginia Council of CEOs. The association allows CEOs to learn and grow

from one another. It currently has 200 members.

The National Seminars Training is an organization that offers educational training and seminars

across the county. The organization offer a number of workshops and seminars throughout

Virginia to business professionals in all industries. The seminars cost anywhere from $99 for a

one‐day seminar to $900 for more intensive multi‐day workshops. Seminars cover a variety of

topics, from human resource and payroll law to using Excel and project management. Seminars

are offered throughout the state on a regular basis. Individuals can register for a seminar

through the National Seminars Training website.

The City of Norfolk offers a series of business training seminars through its Small Business

Initiative (SBI). Seminars are suitable for all stages of business growth, free of charge, and cover

a variety of topics, including business planning, online marketing, financing, networking, and

contracting with government agencies. Recent seminars have covered cash flow management,

bookkeeping, tax planning, social media marketing, and search engine optimization. SBI also

offers one‐on‐one business consultations, networking opportunities, and empowerment events.

The Association of Procurement Technical Assistance Centers (APTAC) is a national nonprofit

that offers Procurement Technical Assistance Programs (PTAP) across the country. Its mission is

to expand the number of businesses capable of participating in the public sector. The Virginia

PTAP provides counseling, training, special events, and bid match services to businesses.

Counseling is free for Virginia‐based businesses as long as they register with APTAC. The

program provides business counseling specifically related to federal set‐asides, certification

requirements, and pre‐ and post‐contract award compliance. Counseling meetings are

conducted in person and scheduled on a first‐come first‐served basis. Counseling sessions

typically last one hour. PTAP offers a number of other business trainings, both in person and via

webinar. Trainings are held quarterly and cover procurement‐related topics. Most trainings are

offered at no charge but some require a small fee. The City has partners with the organizations

local chapter to facilitate a number of trainings and workshops.

Technical

Assistance,

Education, and

Networking

CHAPTER 9.

Program Implementation


CHAPTER 9. Program Implementation

ThedisparitystudyprovidessubstantialinformationthattheCityofVirginiaBeach(theCity)shouldconsidertorefineitsimplementationoftheSmall,Women‐Owned,andMinority‐ownedBusiness(SWaM)Programandbetterencouragetheparticipationofminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesinCitycontracting.Below,BBCpresentsseveralkeyconsiderationsthattheCityshouldmake.

Overall Goals

In2010,theCityadoptedanannualaspirationalgoalof10percentforminority‐ownedbusinessparticipationinCitycontracts.Eachyear,theCityusesmyriadrace‐andgender‐neutralmeasurestoencouragetheparticipationofminority‐ownedbusinessesaswellaswoman‐ownedbusinessesandservice‐disabledveteran‐ownedbusinessesinitscontracting.Resultsfromthedisparitystudy—particularlytheavailabilityanalysisandanalysesofmarketplaceconditions—canbehelpfultotheCityinrevisingitsoverallgoalforminority‐ownedbusinesses.ResultsfromthedisparitystudycanalsobehelpfultotheCityinestablishingoverallgoalsforwoman‐ownedandservice‐disabledveteran‐ownedbusinessesifitdeemsthemappropriate.TheCityshouldconsiderwhetheritisappropriatetoestablishseparategoalsforminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesorwhetheritwillcountparticipationofthosebusinessestowardsoneoverallgoal.

Base.TheavailabilityanalysisprovidedinformationthattheCitycanuseasabasisforitsoverallgoal,orgoals.Figure9‐1presentstheavailabilityofminority‐andwoman‐ownedbusinessesfortheconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicesprimecontractsandsubcontractsthattheCityawardedduringthestudyperiod.AsshowninFigure9‐1,consideringallindustriestogether,minority‐ownedbusinessesmightbeexpectedtoreceive12.0percentofCitycontractingdollars,andwoman‐ownedbusinessesmightbeexpectedtoreceive13.3percentoftheCitycontractingdollars.1Similarly,BBCexaminedtheoverallavailabilityofservice‐disabledveteran‐ownedbusinessesforCitywork.Theavailabilityanalysisindicatedthatservice‐disabledveteran‐ownedbusinessesmightbeexpectedtoreceive11.9percentofCitycontractingdollars.TheCitycouldalsoconsidersettingoverallgoalsseparatelyforitsconstruction;architectureandengineering,otherprofessionalservices;andgoodsandservicescontractsandprocurements.Forexample,asindicatedbyFigure9‐1,theCitycouldestablishanoverallminority‐andwoman‐ownedbusinessgoalof19.8percentforconstructioncontracts.

1Theavailabilityofminority‐andwoman‐ownedbusinessesforallindustriesconsideredtogetherreflectsaweightof0.45forconstruction;0.13forarchitectureandengineering;0.17forotherprofessionalservices;and0.26forgoodsandservices,basedonthevolumeofdollarsthattheCityspentduringthestudyperiodineachindustry.


Figure 9‐1. Availability of minority‐ and woman‐owned businesses for City contracts


Total availability represents a dollar‐weighted aggregation of the availability percentages associated with each relevant industry based on the actual dollars that the City spent in each industry during the study period.

For details, see Figures F‐2, F‐5, F‐6, F‐7, and F‐8 in Appendix F.


Goal adjustments. Insettingoverallannualgoals,organizationsoftenexaminevariousinformationtodeterminewhetheranadjustmenttoavailabilityisnecessarytoaccountforpastparticipationofdisadvantagedbusinessesintheircontracting;currentconditionsinthelocalmarketplacefordisadvantagedindividualsandbusinesses;andotherrelevantfactors.TheFederalDisadvantagedBusinessEnterprise(DBE)Program,whichorganizationsoftenuseasamodeltosetandadjusttheiroverallannualgoals,outlinesseveralfactorsthatorganizationsmightconsiderwhenassessingwhethertoadjusttheirgoals:

1. Volumeofworkminority‐andwoman‐ownedbusinesseshaveperformedinrecentyears;

2. Informationrelatedtoemployment,self‐employment,education,training,andunions;

3. Informationrelatedtofinancing,bonding,andinsurance;and

4. Otherrelevantdata.

1. Volume of work disadvantaged businesses enterprises have performed in recent years. TheUnitedStatesDepartmentofTransportation’s(USDOT’s)“TipsforGoal‐Setting”suggeststhatorganizationsshouldexaminedataonpastparticipationofDBEsintheircontractsinrecentyears.USDOTfurthersuggeststhatorganizationsshouldchoosethemedianlevelofannualDBEparticipationforthoseyearsasthemeasureofpastparticipation:

Yourgoalsettingprocesswillbemoreaccurateifyouusethemedian(insteadoftheaverageormean)ofyourpastparticipationtomakeyouradjustmentbecausetheprocessofdeterminingthemedianexcludesalloutlier(abnormallyhighorabnormallylow)pastparticipationpercentages.2

2SectionIII(A)(5)(c)inUSDOT’s“TipsforGoal‐SettingintheFederalDisadvantagedEnterprise(DBE)Program.”http://www.osdbu.dot.gov/DBEProgram/tips.cfm

Industry

Construction 10.2% 9.6% 19.8%

Architecture and engineering 14.0% 18.6% 32.6%

Other professional services 16.0% 10.3% 26.3%

Goods and services 11.4% 18.8% 30.3%

All industries 12.0% 13.3% 25.2%

Minority‐owned White woman‐owned

Business type

Total


IftheCityweretouseanapproachsimilartotheonethatUSDOToutlinesin“TipsforGoalsSetting,”itmightconsidertakingtheaverageofitsoverallannualgoalwiththemedianpastparticipationtoadjustitsgoals.

2. Information related to employment, self‐employment, education, training, and unions.Chapter3summarizesinformationaboutconditionsinthelocalcontractingindustryforminorities,women,andminority‐andwoman‐ownedbusinesses.AdditionalinformationaboutquantitativeandqualitativeanalysesofconditionsinthelocalmarketplacearepresentedinAppendicesCandD.BBC’sanalysesindicatethattherearebarriersthatcertainminoritygroupsandwomenfacerelatedtohumancapital,financialcapital,andbusinessownershipinthelocalmarketplace.Suchbarriersmaydecreasetheavailabilityofminority‐ownedbusinesses,woman‐ownedbusinesses,andotherdisadvantagedbusinessestoobtainandperformthecontractsthattheCityawards.TheCityshouldconsiderthatinformationcarefullyindeterminingwhetheranyadjustmentstoitsoverallgoaliswarranted.

3. Information related to financing, bonding, and insurance. BBC’sanalysisofaccesstofinancing,bonding,andinsurancealsorevealedquantitativeandqualitativeevidencethatminorities;women;andminority‐andwoman‐ownedbusinessesintheVirginiaBeachareadonothavethesameaccesstothosebusinessinputsasnon‐Hispanicwhitemenandbusinessesownedbynon‐Hispanicwhitemen(fordetails,seeChapter3andAppendicesCandD).Anybarrierstoobtainingfinancing,bonding,andinsurancemightlimitopportunitiesforminorities,women,andotherdisadvantagedindividualstosuccessfullyformandoperatebusinessesinthelocalmarketplace.SuchbarrierswouldalsoplacethosebusinessesatadisadvantageincompetingforCityprimecontractsandsubcontracts.Thus,theCityshouldalsoconsiderinformationaboutfinancing,bonding,andinsuranceindeterminingwhethertomakeanyadjustmentstoitsoverallgoal.

4. Other factors.TheFederalDBEProgramsuggeststhatorganizationsalsoexamine“otherfactors”whendeterminingwhethertoadjusttheiroverallannualgoals.Forexample,thereisquantitativeevidencethatcertaingroupsofminority‐andwoman‐ownedbusinessesarelesssuccessfulthanbusinessesownedbynon‐Hispanicwhitemenandfacegreaterbarriersinthemarketplace,evenafteraccountingforrace‐andgender‐neutralfactors.Chapter3summarizesthatevidenceandAppendixCpresentscorrespondingquantitativeanalyses.Thereisalsoqualitativeevidenceofbarrierstothesuccessofminority‐andwoman‐ownedbusinesses,aspresentedinAppendixD.Someofthatinformationsuggeststhatdiscriminationonthebasisofrace/ethnicityandgenderadverselyaffectsminority‐andwoman‐ownedbusinessesinthelocalcontractingindustry.

Other Considerations

BBCidentifiedvariousconsiderationsthattheCityshouldmakebasedondisparitystudyresultsandthestudyteam’sreviewoftheCity’scontractingpracticesandprogrammeasures.Inmakingthoseconsiderations,theCityshouldassesswhetheradditionalresources,changesininternalpolicy,orchangesinlawmayberequired.

City SWaM office.TheCitydoesnothaveadedicatedofficetoimplementtheSWaMProgramandmonitortheparticipationofSWaM‐certifiedbusinessesinitscontracts.Instead,theCity


currentlyreliesonstaffwhoworkinthePurchasingDivisiontodoso.TheCityshouldconsiderestablishingadedicatedofficeresponsibleforimplementingtheSWaMprogramandmonitoringprogressthattheCityismakingtowardsencouragingtheparticipationofminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesinitscontracting.Theofficeshouldhaveenoughdedicatedstafftocarryoutessentialprogramfunctions,potentiallyincluding:

Certifyingbusinessesandassistingthemwithcertificationrequirements;

Developingprogrammeasuresandsupportingdocuments;

Implementingbusinessdevelopmentprograms;

CollectingdataandmonitoringSWaM‐certifiedbusinessparticipationinCitycontracts;

TrainingCitystaffonprogrampoliciesanddatareportingrequirements;and

WorkingwithCitydepartmentstohostnetworkingandoutreachevents.

AlthoughtheCity’sMinorityBusinessCoordinatorcurrentlyworkswithinthePurchasingDivision,theCitymightinsteadconsiderhousingaSWaMOfficewithintheOfficeofEconomicDevelopment.DoingsowouldallowSWaMstafftomoreeffectivelypartnerwiththeOfficeofEconomicDevelopment,whichalreadycarriesoutanumberofactivitiesrelevanttopotentialSWaMOfficeefforts(e.g.,providingbusinessassistanceservices).

Networking and outreach. TheCityhostsandparticipatesinmanynetworkingandoutreacheventsthatincludeinformationaboutbusinessassistance,doingbusinesswiththeCity,andupcomingbidopportunities.TheCitypartnerswithanumberoflocalorganizationstooffersmallbusinesstrainingandassistance.TheCityshouldconsidercontinuingthoseeffortsandconsiderbroadeningitseffortstoincludemorepartnershipswithlocaltradeorganizationsandotherpublicorganizationsthathaveinitiativesinplacetoencouragethegrowthofminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinesses.TheCitymightalsoconsidercreatingaconsortiumoflocalorganizationsthatwouldjointlyhostquarterlyoutreachandnetworkingeventsaswellastrainingsessionsforbusinessesseekingpublicsectorcontracts.Inaddition,theCityshouldconsiderwaysthatitcanbetterleveragetechnologytonetworkmoreeffectivelywithbusinessesthroughouttheregion.TheCitycouldconsidermakinguseofonlineprocurementfairs,webinars,conferencecalls,andothertoolstoprovideoutreachandtechnicalassistance.

Data collection.TheCitymaintainscomprehensivedataontheprimecontractsandprocurementsthatitawards,andthosedataaregenerallywell‐organizedandcomprehensive.However,theCitydoesnotmaintainanadequatelinkbetweenitscontractingandpaymentinformationandcouldeasilydosoinitscurrentsystems.DoingsowouldallowtheCitytoaccuratelyassesswhethertherearesubstantialdifferencesbetweencontractawardandpaymentamounts.Moreover,theCitydoesnotmaintaincomprehensivedataonsubcontractsthatareassociatedwiththeprimecontractsthatitawards.TheCityshouldconsidercollectingcomprehensivedataonallsubcontracts,regardlessofwhethertheyareperformedbyminority‐ownedbusinesses,woman‐ownedbusinesses,service‐disabledveteran‐ownedbusiness,orbusinessesownedbynon‐Hispanicwhitemenwhoarenotservice‐disabledveterans.Collecting


dataonallsubcontractswillhelpensurethattheCitymonitorstheparticipationofminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesasaccuratelyaspossible.Collectingthefollowingdataonallsubcontractswouldbeappropriate:

Subcontractorname,address,phonenumber,andemailaddress;

Typeofassociatedwork;

Subcontractawardamount;and

Subcontractpaid‐to‐dateamounts.

TheCityshouldconsidercollectingthosedataaspartofbidsbutalsorequiringprimecontractorstosubmitdataonsubcontractsaspartoftheinvoicingprocessforallcontracts.TheCityshouldtrainrelevantdepartmentstafftocollectandentersubcontractdataaccuratelyandconsistently.

Growth monitoring.Alongwithworkingtoimproveitscontractingandvendordatasystems,theCitymightalsoconsidercollectingdataontheimpactthattheSWaMProgramhasonthegrowthofminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesovertime.DoingsowouldrequiretheCitytocollectbaselineinformationonSWaM‐certifiedbusinesses—suchasrevenue,numberoflocations,numberofemployees,andemployeedemographics—andthencontinuetocollectthatinformationfromeachbusinessonanannualbasis.SuchmetricswouldallowtheCitytoassesswhethertheprogramishelpingbusinessesgrowandrefinethemeasuresthatitusesaspartoftheSWaMProgram.

Business certification. TheCitydoesnotcurrentlycertifyminority‐andwoman‐ownedbusinessesorotherdiversebusinessesitselfbutinsteadreliesontheVirginiaDepartmentofSmallBusinessandSupplierDiversity(SBSD)todoso.Somebusinessesparticipatinginin‐depthinterviewsandpublicmeetingscommentedonthedifficultiesandtimerequirementsassociatedwithSBSD’scertificationprocess.TheCitymightconsideroperatingitsowncertificationprocessaspartoftheSWaMProgramalongwithrecognizingSBSD‐certifiedbusinesses.DoingsowouldallowtheCitytocertifyminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinessesusingcriteriathataremostrelevanttoitslocalmarketplace(e.g.,race/ethnicityofowners,genderofowners,andrevenuerequirements).Developingacertificationprocesswouldrequirenewpoliciesandsubstantialresources.TheCitymightconsiderworkingwithaconsultingfirmthatspecializesincertificationprocessesifitisinterestedindevelopingitsowncertificationprogram.Inaddition,theCityshouldconsiderbusinesssizelimitationsaspartofitscertificationprocess,particularlyrelatingtorevenueandpersonalnetworth.ManyorganizationsthatcertifybusinessesusesizelimitationssetforthbytheUnitedStatesSmallBusinessAdministration.

Subcontract opportunities.Subcontractsoftenrepresentaccessibleopportunitiesforsmallanddiversebusinessestobecomeinvolvedincontracting.However,subcontractingaccountedforarelativelysmallpercentageofthetotalcontractingdollarsthattheCityawardedduringthestudyperiod.Toincreasethenumberofsubcontractopportunities,theCitycouldconsiderimplementingaprogramthatrequiresprimecontractorstosubcontractacertainamountofprojectworkaspartoftheirbidsandproposals,regardlessoftherace/ethnicityorgenderof


subcontractorowners.Forspecifictypesofcontractswheresubcontractingorpartnershipopportunitiesmightexist,theCitycouldsetaminimumpercentageofworktobesubcontracted.Primecontractorswouldthenhavetomeetorexceedthisthresholdinorderfortheirbidstobeconsideredresponsive.

IftheCityweretoimplementsuchaprogram,itshouldincludeflexibilityprovisionssimilartogoodfaitheffortsprocessesthatwouldrequireprimecontractorstodocumenttheireffortstoidentifyandincludepotentialsubcontractorsintheirproposalsforCitycontracts.TheCityshoulddevelopclearguidelinestodeterminewhethercontractorsaremakinggoodfaitheffortstomeettheminimumsubcontractingrequirement.

Contract goals. TheCityshouldconsiderusingminority‐andwoman‐ownedbusinessgoalsonindividualcontractsthatitawards.DisparityanalysisresultsindicatedthatnearlyallrelevantgroupsshowedsubstantialdisparitiesonthecontractsthattheCityawardedduringthestudyperiod,indicatingthattheyarefacingbarriersaspartoftheCity’scontractingprocesses.BecausetheCityusesmanyrace‐andgender‐neutralmeasurestoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitscontracting,andbecausethosemeasureshavenotsufficientlyaddresseddisparitiesforseveralindividualgroups,theCitymightconsiderusingcontractgoalsinthefuture.Becausetheuseofsuchgoalswouldbeconsideredarace‐andgender‐consciousmeasure,theCitywillneedtoensurethattheuseofthosegoalsmeetsthestructscrutinystandardofconstitutionalreview,includingshowingacompellinggovernmentalinterestfortheiruseandensuringthattheiruseisnarrowlytailored(fordetails,seeChapter2andAppendixB).Priortoimplementingcontractgoals,theCityshouldconsiderwhetherithasfullyimplementeditsexistingrace‐andgender‐neutralmeasuresandwhetheritcanimplementadditionalrace‐andgender‐neutralmeasurestofurtherencouragetheparticipationofminority‐andwoman‐ownedbusinessesinCitycontracting.

Unbundling large contracts. Ingeneral,minority‐andwoman‐ownedbusinessesexhibitedreducedavailabilityforrelativelylargecontractsthattheCityawardedduringthestudyperiod.Inaddition,aspartofin‐depthinterviewsandpublicmeetings,severalbusinessesownersreportedthatthesizeofgovernmentcontractsoftenservesasabarriertotheirsuccess(fordetails,seeAppendixD).Tofurtherencouragetheparticipationofsmallanddiversebusinesses,theCityshouldconsidermakingeffortstounbundlerelativelylargeprimecontractsandevensubcontractsintoseveralsmallercontracts.Forexample,theCityofCharlotte,NorthCarolinaencouragesprimecontractorstounbundlesubcontractingopportunitiesintosmallercontractpiecesthataremorefeasibleforsmallbusinessesandminority‐andwoman‐ownedbusinessestoworkonandacceptssuchattemptsasgoodfaitheffortsaspartofitscontractinggoalsprogram.Doingsowouldresultinthatworkbeingmoreaccessibletosmallbusinesses,whichinturnmightincreaseopportunitiesforsmallbusinessesandresultingreaterminority‐,woman‐,andservice‐disabledveteran‐ownedbusinessparticipation.

Prompt payment.Aspartofin‐depthinterviews,severalbusinesses,includingmanyminority‐andwoman‐ownedbusinesses,reporteddifficultieswithreceivingpaymentinatimelymanneronCitycontracts,particularlywhentheyworkassubcontractors(fordetails,seeAppendixD).Manybusinessesalsocommentedthathavingcapitalonhandiscrucialtobusinesssuccessandoftenachallengeforsmallbusinesses.Citycontractsincludelanguagetoensure


promptpaymentofsubcontractors,buttheCityshouldconsiderreinforcingpromptpaymentpolicieswithitsprocurementstaffandprimecontractors.Inaddition,theCitytypicallypayscontractorsviahardcopychecksandcouldconsiderautomatingpayments.Doingsomighthelpensurethatbothprimecontractorsandsubcontractorsreceivepaymentinatimelymanner.Itmayalsohelpensurethatminority‐ownedbusinesses,woman‐ownedbusinesses,andservice‐disabledveteran‐ownedbusinesseshaveenoughoperatingcapitaltoremainsuccessful.

APPENDIX A.

Definitions of Terms

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APPENDIX A. Definitions of Terms

AppendixAdefinestermsthatareusefultounderstandingtheCityofVirginiaBeachDisparityStudyreport.Thefollowingdefinitionsareonlyrelevantinthecontextofthisreport.

Anecdotal Information

Anecdotalinformationincludespersonalqualitativeaccountsandperceptionsofspecificincidents—includinganyincidentsofdiscrimination—sharedbyindividualintervieweesorparticipants.

Availability Analysis

Anavailabilityanalysisassessesthepercentageofdollarsthatonemightexpectaspecificgroupofbusinessestoreceiveoncontractsorprocurementsthataparticularorganizationawards.TheavailabilityanalysisinthisreportisbasedonthematchbetweenvariouscharacteristicsofpotentiallyavailablebusinessesandofprimecontractsandsubcontractsthattheCityofVirginiaBeachawardedduringthestudyperiod.

Business

Abusinessisafor‐profitenterpriseincludingallofitsestablishmentsorlocationsandincludingsoleproprietorships,corporations,professionalcorporations,limitedliabilitycompanies,limitedpartnerships,limitedliabilitypartnerships,oranyotherpartnershipsregardlessofwhethertheywereformedunderthelawsoftheCommonwealthofVirginia.

Business Listing

Abusinesslistingisarecordinadatabaseofbusinessinformation.Arecordisconsideredalistinguntilthestudyteamdeterminesthatthelistingactuallyrepresentsabusinessestablishmentwithaworkingphonenumber.

Business Establishment

Abusinessestablishmentisaplaceofbusinesswithanaddressandaworkingphonenumber.Asinglebusiness,orfirm,canhavemanybusinessestablishments,orlocations.

City of Virginia Beach (City)

VirginiaBeachisthemostpopulouscityinVirginiaandoneofthe40mostpopulouscitiesintheUnitedStates.TheCityprovidesmyriadservicestothenearly500,000peoplewholiveandworkintheregion.Thoseservicesincludepoliceandfireprotection;healthandmentalhealthservices;roadconstructionandmaintenance;waterandsewageservices;andavarietyofsocialandeconomicservices.


Commonwealth of Virginia (Commonwealth)

TheCommonwealthcomprisesvariousagencies,departments,andofficestooverseethefunctionsandmanagementofVirginia.ItalsooperatestheSmall,Woman,andMinority‐ownedBusinessProgram.

Compelling Governmental Interest

Aspartofthestrictscrutinystandardofconstitutionalreview,agovernmentorganizationmustdemonstrateacompellinggovernmentalinterestinremedyingpastidentifieddiscriminationinordertoimplementrace‐orgender‐consciousmeasures.Anorganizationthatusesrace‐orgender‐consciousmeasuresaspartofacontractingprogramhastheinitialburdenofshowingevidenceofdiscrimination—includingstatisticalandanecdotalevidence—thatsupportstheuseofsuchmeasures.Theorganizationmustassesssuchdiscriminationwithinitsownrelevantgeographicmarketarea.

Consultant

Aconsultantisabusinessthatperformsprofessionalservicescontracts.

Contract

Acontractisalegallybindingrelationshipbetweenthesellerofgoodsorservicesandabuyer.Thestudyteamoftenusesthetermcontractsynonymouslywithprocurement.

Contract Element

Acontractelementiseitheraprimecontractorasubcontract.

Contractor

Acontractorisabusinessthatperformsconstructioncontracts.

Control

Controlmeansexercisingmanagementandexecutiveauthorityofabusiness.

Custom Census Availability Analysis

Acustomcensusavailabilityanalysisisoneinwhichresearchersattemptsurveyswithpotentiallyavailablebusinessesworkinginthelocalmarketplacetocollectinformationaboutkeybusinesscharacteristics.Researchersthentakesurveyinformationaboutpotentiallyavailablebusinessesandmatchthemtothecharacteristicsofprimecontractsandsubcontractsthatanorganizationactuallyawardedduringthestudyperiodtoassessthepercentageofdollarsthatonemightexpectaspecificgroupofbusinessestoreceiveoncontractsorprocurementsthattheorganizationawards.Acustomcensusavailabilityapproachisacceptedintheindustryasthepreferredmethodforconductingavailabilityanalyses,becauseittakesseveraldifferentfactorsintoaccount,includingbusinesses’primarylinesofworkandtheircapacitytoperformonanorganization’scontracts.


Disparity

Adisparityisadifferenceorgapbetweenanactualoutcomeandsomebenchmark.Inthisreport,thetermdisparityreferstoadifferencebetweentheparticipationofaspecificgroupofbusinessesinCitycontractingandtheavailabilityofthatgroupforCitywork.

Disparity Analysis

AdisparityanalysisexamineswhetherthereareanydifferencesbetweentheparticipationofaspecificgroupofbusinessesinCitycontractingandtheavailabilityofthatgroupforCitywork.

Disparity Index

AdisparityindexiscomputedbydividingtheactualparticipationofaspecificgroupofbusinessesinCitycontractingbytheavailabilityofthatgroupforCityworkandmultiplyingtheresultby100.Smallerdisparityindicesindicatelargerdisparities.

Dun & Bradstreet (D&B)

D&Bistheleadingglobalprovideroflistsofbusinessestablishmentsandotherbusinessinformationforspecificindustrieswithinspecificgeographicalareas(fordetails,seewww.dnb.com).

Enterprise

Anenterpriseisaneconomicunitthatcouldbeafor‐profitbusinessorbusinessestablishment;nonprofitorganization;orpublicsectororganization.

Firm

Seebusiness.

Industry

Anindustryisabroadclassificationforbusinessesprovidingrelatedgoodsorservices(e.g.,constructionorotherprofessionalservices).

Local Marketplace

Seerelevantgeographicmarketarea.

Majority‐owned Business

Amajority‐ownedbusinessisafor‐profitbusinessthatisatleast51percentownedandcontrolledbynon‐Hispanicwhitemenwhoarenotservicedisabledveterans.

Minority

Aminorityisanindividualwhoidentifieswithoneofthefollowingracial/ethnicgroups:AsianAmericans,BlackAmericans,HispanicAmericans,orNativeAmericans.


Minority‐owned Business

Aminority‐ownedbusinessisabusinesswithatleast51percentownershipandcontrolbyindividualswhoidentifythemselveswithoneofthefollowingracial/ethnicgroups:AsianAmericans,BlackAmericans,HispanicAmericans,orNativeAmericans.Abusinessdoesnothavetobecertifiedtobeconsideredaminority‐ownedbusinessinthisstudy.(Thestudyteamconsideredbusinessesownedbyminoritywomenasminority‐ownedbusinesses.)

Narrow Tailoring

Aspartofthestrictscrutinystandardofconstitutionalreview,agovernmentorganizationmustdemonstratethatitsuseofrace‐andgender‐consciousmeasuresisnarrowlytailored.Thereareanumberoffactorsthatacourtconsiderswhendeterminingwhethertheuseofsuchmeasuresisnarrowlytailored,including:

a) Thenecessityofsuchmeasuresandtheefficacyofalternative,race‐andgender‐neutralmeasures;

b) Thedegreetowhichtheuseofsuchmeasuresislimitedtothosegroupsthatactuallysufferdiscriminationinthelocalmarketplace;

c) Thedegreetowhichtheuseofsuchmeasuresisflexibleandlimitedinduration,includingtheavailabilityofwaiversandsunsetprovisions;

d) Therelationshipofanynumericalgoalstotherelevantbusinessmarketplace;and

e) Theimpactofsuchmeasuresontherightsofthirdparties.

Non‐response Bias

Non‐responsebiasoccursinsurveyresearchwhenparticipants’responsestosurveyquestionstheoreticallydifferfromthepotentialresponsesofindividualswhodidnotparticipateinthesurvey.

Participation

Seeutilization.

Prime Consultant

Aprimeconsultantisaprofessionalservicesbusinessthatperformsprofessionalservicesprimecontractsdirectlyforendusers,suchastheCity.

Prime Contract

Aprimecontractisacontractbetweenaprimecontractor,orprimeconsultant,andanenduser,suchastheCity.

Prime Contractor

Aprimecontractorisaconstructionbusinessthatperformsprimecontractsdirectlyforendusers,suchastheCity.


Project

Aprojectreferstoaconstruction;architectureandengineering;otherprofessionalservices;orgoodsandservicesendeavorthattheCitybidoutduringthestudyperiod.Aprojectcouldincludeoneormoreprimecontractsandcorrespondingsubcontracts.

Race‐ and Gender‐conscious Measures

Race‐andgender‐consciousmeasuresarecontractingmeasuresthatarespecificallydesignedtoincreasetheparticipationofminority‐andwoman‐ownedbusinessesingovernmentcontracting.Businessesownedbymembersofcertainracial/ethnicgroupsmightbeeligibleforsuchmeasuresbutnototherbusinesses.Similarly,businessesownedbywomenmightbeeligiblebutnotbusinessesownedbymen.

Race‐ and Gender‐neutral Measures

Race‐andgender‐neutralmeasuresaremeasuresthataredesignedtoremovepotentialbarriersforallbusinessesattemptingtodoworkwithanorganizationormeasuresthataredesignedtoincreasetheparticipationofsmalloremergingbusinessesintheorganization’scontracts,regardlessoftherace/ethnicityorgenderoftheowners.Race‐andgender‐neutralmeasuresmayincludeassistanceinovercomingbondingandfinancingobstacles;simplifyingbiddingprocedures;providingtechnicalassistance;establishingprogramstoassiststart‐ups;andothermethodsopentoallbusinesses,regardlessoftherace/ethnicityorgenderoftheowners.

Rational Basis

Governmentorganizationsthatimplementcontractingprogramsthatrelyonlyonrace‐andgender‐neutralmeasurestoencouragetheparticipationofsmallbusinesses,regardlessoftherace/ethnicityorgenderofbusinessowners,mustshowarationalbasisfortheirprograms.Showingarationalbasisrequiresorganizationstodemonstratethattheircontractingprogramsarerationallyrelatedtoalegitimategovernmentinterest.Itisthelowestthresholdforevaluatingthelegalityofgovernmentcontractingprograms.Whencourtsreviewprogramsbasedonarationalbasis,onlythemostegregiousviolationsleadtoprogramsbeingdeemedunconstitutional.

Relevant Geographic Market Area

TherelevantgeographicmarketareaisthegeographicareainwhichthebusinessestowhichtheCityawardsmostofitscontractingdollarsarelocated.Therelevantgeographicmarketareaisalsoreferredtoasthelocalmarketplace.Caselawrelatedtocontractingprogramsanddisparitystudiesrequiresdisparitystudyanalysestofocusontherelevantgeographicmarketarea.TherelevantgeographicmarketareafortheCityisVirginiaBeach,Norfolk,Chesapeake,andPortsmouthCountiesinVirginia.

Service Disabled Veteran‐owned Business

Aservicedisabledveteran‐ownedbusinessisabusinesswithatleast51percentownershipandcontrolbyveteransoftheUnitedStatesmilitarywhohavephysicalormentaldisabilitiesdirectlyrelatedtotheirmilitaryservice.


Small, Woman, and Minority‐owned Business (SWaM) Program

TheSWaMProgramisdesignedtoencouragetheparticipationofsmallbusinesses,minority‐ownedbusinesses,andwoman‐ownedbusinessesinCitycontractingandprocurement,particularlyinthecontractingareasofconstruction;architectureandengineering;andotherprofessionalservices.TheCityusesvariousrace‐andgender‐neutralmeasurestomeettheobjectivesoftheprogrambutdoesnotcurrentlyuseanyrace‐orgender‐consciousmeasures.

Statistically Significant Difference

Astatisticallysignificantdifferencereferstoaquantitativedifferenceforwhichthereisa0.95or0.90probabilitythatchancecanbecorrectlyrejectedasanexplanationforthedifference(meaningthatthereisa0.05or0.10probability,respectively,thatchanceinthesamplingprocesscouldcorrectlyaccountforthedifference).

Strict Scrutiny

Strictscrutinyisthelegalstandardthatagovernmentorganization’suseofrace‐andgender‐consciousmeasuresmustmeetinorderforittobeconsideredconstitutional.Strictscrutinyrepresentsthehighestthresholdforevaluatingthelegalityofrace‐andgender‐consciousmeasuresshortofprohibitingthemaltogether.Underthestrictscrutinystandard,anorganizationmust:

a) Haveacompellinggovernmentalinterestinremedyingpastidentifieddiscriminationoritspresenteffects;and

b) Establishthattheuseofanysuchmeasuresisnarrowlytailoredtoachievethegoalofremedyingtheidentifieddiscrimination.

Anorganization‘suseofrace‐andgender‐consciousmeasuresmustmeetboththecompellinggovernmentalinterestandthenarrowtailoringcomponentsofthestrictscrutinystandardforittobeconsideredconstitutional.

Study Period

Thestudyperiodisthetimeperiodonwhichthestudyteamfocusedfortheutilization,availability,anddisparityanalyses.TheCityhadtohaveawardedacontractduringthestudyperiodforthecontracttobeincludedinthestudyteam’sanalyses.ThestudyperiodfortheCityofVirginiaBeachDisparityStudywasJuly1,2012throughJune30,2017.

Subconsultant

Asubconsultantisaprofessionalservicesbusinessthatperformsservicesforprimeconsultantsaspartoflargerprofessionalservicescontracts.

Subcontract

Asubcontractisacontractbetweenaprimecontractororprimeconsultantandanotherbusinesssellinggoodsorservicestotheprimecontractororprimeconsultantaspartofalargercontract.


Subcontractor

Asubcontractorisabusinessthatperformsservicesforprimecontractorsaspartoflargercontracts.

Subindustry

Asubindustryisaspecificclassificationforbusinessesprovidingrelatedgoodsorserviceswithinaparticularindustry(e.g.,water,sewer,andutilitylinesisasubindustryofconstruction).

Utilization

Utilizationreferstothepercentageoftotalcontractingdollarsthatwereassociatedwithaparticularsetofcontractsthatwenttoaspecificgroupofbusinesses.

Vendor

AvendorisabusinessthatsellsgoodseithertoaprimecontractororprimeconsultantortoanendusersuchastheCity.

Woman‐owned Business

Awoman‐ownedbusinessisabusinesswithatleast51percentownershipandcontrolbynon‐Hispanicwhitewomen.Abusinessdoesnothavetobecertifiedtobeconsideredawoman‐ownedbusiness.(Thestudyteamconsideredbusinessesownedbyminoritywomenasminority‐ownedbusinesses.)

APPENDIX B.

Legal Framework and Analysis

BBC RESEARCH & CONSULTING—FINAL REPORT APPENDIX B, PAGE i

Table of Contents

APPENDIXB.LEGALFRAMEWORKANDANALYSIS............................................................................................................................1

EXECUTIVESUMMARY.....................................................................................................................................................................................1

A.Introduction..............................................................................................................................................................................................1

B.U.S.SupremeCourtCases....................................................................................................................................................................2

1.CityofRichmondv.J.A.CrosonCo.,488U.S.469(1989)..................................................................................................2

2.AdarandConstructors,Inc.v.Pena(“AdarandI”),515U.S.200(1995).....................................................................4

C.TheLegalFrameworkAppliedtoStateandLocalGovernmentMBE/WBE/DBEPrograms..................................5

1.Strictscrutinyanalysis.....................................................................................................................................................................5

2.Intermediatescrutinyanalysis..................................................................................................................................................17

3.Rationalbasisanalysis..................................................................................................................................................................19

4.Pendingcases(atthetimeofthisreport).............................................................................................................................23

SUMMARIESOFRECENTDECISIONS......................................................................................................................................................26

D.RecentDecisionsInvolvingStateorLocalGovernmentMBE/WBE/DBEProgramsintheFourthCircuitCourtofAppeals........................................................................................................................................................................................26

1.H.B.RoweCo.,Inc.v.W.LyndoTippett,NCDOT,etal.,615F.3d233(4thCir.2010).......................................26

2.H.B.RoweCorp.,Inc.v.W.LyndoTippett,NorthCarolinaDOT,etal.,589F.Supp.2d587(E.D.N.C.2008),affirmedinpart,reversedinpart,andremanded,615F.3d233(4thCir.2010).........................................36

3.AssociatedUtilityContractorsofMaryland,Inc.v.MayorandCityCouncilofBaltimore,218F.Supp.2d749(D.Md.2002)..............................................................................................................................................................40

4.AssociatedUtilityContractorsofMaryland,Inc.v.TheMayorandCityCouncilofBaltimoreandMarylandMinorityContractorsAssociation,Inc.,83F.Supp.2d613(D.Md.2000)...............................................41

E.RecentDecisionsInvolvingStateorLocalGovernmentMBE/WBE/DBEProgramsinOtherJurisdictions................................................................................................................................................................................................48

RecentDecisionsinFederalCircuitCourtsofAppeal...........................................................................................................48

1.Jana‐RockConstruction,Inc.v.NewYorkStateDept.ofEconomicDevelopment,438F.3d195(2dCir.2006).................................................................................................................................................................................................48

2.RapidTestProds.,Inc.v.DurhamSch.Servs.,Inc.,460F.3d859(7thCir.2006).................................................49

3.Virdiv.DeKalbCountySchoolDistrict,135Fed.Appx.262,2005WL138942(11thCir.2005)(unpublishedopinion).......................................................................................................................................................................50

4.ConcreteWorksofColorado,Inc.v.CityandCountyofDenver,321F.3d950(10thCir.2003),cert.denied,540U.S.1027,124S.Ct.556(2003)(Scalia,JusticewithwhomtheChiefJusticeRehnquist,joined,dissentingfromthedenialofcertiorari).....................................................................................................................52

5.InreCityofMemphis,293F.3d345(6thCir.2002)........................................................................................................63

6.BuildersAss’nofGreaterChicagov.CountyofCook,Chicago,256F.3d642(7thCir.2001).........................64

7.AssociatedGen.Contractorsv.Drabik,214F.3d730(6thCir.2000),affirmingCaseNo.C2‐98‐943,998WL812241(S.D.Ohio1998).................................................................................................................................................65

8.W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206(5thCir.1999)...........................................69

9.MontereyMechanicalv.Wilson,125F.3d702(9thCir.1997).....................................................................................71

BBC RESEARCH & CONSULTING—FINAL REPORT APPENDIX B, PAGE ii

10.Eng’gContractorsAss’nofS.Floridav.Metro.DadeCounty,122F.3d895(11thCir.1997)......................72

11.ConcreteWorksofColorado,Inc.v.CityandCountyofDenver,36F.3d1513(10thCir.1994).................83

12.AssociatedGen.ContractorsofCalifornia,Inc.v.CoalitionforEcon.Equity(“AGCC”),950F.2d1401(9thCir.1991)...........................................................................................................................................................................93

13.CoralConstructionCo.v.KingCounty,941F.2d910(9thCir.1991)....................................................................96

RecentDistrictCourtDecisions......................................................................................................................................................99

14.KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(S.D.Tex.2016)..................................99

15.Thomasv.CityofSaintPaul,526F.Supp.2d959(D.Minn2007),affirmed,321Fed.Appx.541,2009WL777932(8thCir.March26,2009)(unpublishedopinion),cert.denied,130S.Ct.408(2009)....106

16.ThompsonBuildingWreckingCo.v.Augusta,Georgia,No.1:07CV019,2007WL926153(S.D.Ga.Mar.14,2007)(Slip.Op.)................................................................................................................................................................108

17.HershellGillConsultingEngineers,Inc.v.Miami‐DadeCounty,333F.Supp.2d1305(S.D.Fla.2004)......................................................................................................................................................................................................109

18.FloridaA.G.C.Council,Inc.v.StateofFlorida,303F.Supp.2d1307(N.D.Fla.2004)...................................114

19.TheBuildersAss’nofGreaterChicagov.TheCityofChicago,298F.Supp.2d725(N.D.Ill.2003)........115

20.KornhassConstruction,Inc.v.StateofOklahoma,DepartmentofCentralServices,140F.Supp.2d1232(W.D.OK.2001)......................................................................................................................................................................116

21.Websterv.FultonCounty,51F.Supp.2d1354(N.D.Ga.1999),affirmedpercuriam218F.3d1267(11thCir.2000).................................................................................................................................................................................121

22.AssociatedGen.Contractorsv.Drabik,50F.Supp.2d741(S.D.Ohio1999)....................................................124

23.Phillips&Jordan,Inc.v.Watts,13F.Supp.2d1308(N.D.Fla.1998)..................................................................126

F.RecentDecisionsInvolvingtheFederalDBEProgramanditsImplementationbyStateandLocalGovernments............................................................................................................................................................................................127

RecentDecisionsinFederalCircuitCourtsofAppeal........................................................................................................127

1.MountainWestHoldingCo.,Inc.v.TheStateofMontana,MontanaDOT,etal.,2017WL2179120(9thCir.May16,2017),Memorandumopinion,(NotforPublication)UnitedStatesCourtofAppeals

BBC RESEARCH & CONSULTING—FINAL REPORT APPENDIX B, PAGE iii

fortheNinthCircuit,May16,2017,DocketNos.14‐26097and15‐35003,dismissinginpart,reversinginpartandremandingtheU.S.DistrictCourtdecisionat2014WL6686734(D.Mont.Nov.26,2014).....127

2.MidwestFenceCorporationv.U.S.DepartmentofTransportation,IllinoisDepartmentofTransportation,IllinoisStateTollHighwayAuthority,840F.3d932,2016WL6543514(7thCir.2016),cert.denied,2017WL497345(2017)......................................................................................................................133

3.DunnetBayConstructionCompanyv.Borggren,IllinoisDOT,etal.,799F.3d676,2015WL4934560(7thCir.2015),cert.denied,DunnetBayConstructionCo.v.Blankenhorn,RandallS.,etal.,2016WL193809(Oct.3,2016)..................................................................................................................................................142

4.AssociatedGeneralContractorsofAmerica,SanDiegoChapter,Inc.v.CaliforniaDepartmentofTransportation,etal.,713F.3d1187(9thCir.2013)........................................................................................................146

5.Braunsteinv.ArizonaDOT,683F.3d1177(9thCir.2012)........................................................................................153

6.NorthernContracting,Inc.v.Illinois,473F.3d715(7thCir.2007).........................................................................155

7.WesternStatesPavingCo.v.WashingtonStateDOT,407F.3d983(9thCir.2005),cert.denied,546U.S.1170(2006)................................................................................................................................................................................157

8.SherbrookeTurf,Inc.v.MinnesotaDOT,andGrossSeedCompanyv.NebraskaDepartmentofRoads,345F.3d964(8thCir.2003),cert.denied,541U.S.1041(2004)..................................................................161

9.AdarandConstructors,Inc.v.Slater,228F.3d1147(10thCir.2000)cert.grantedthendismissedasimprovidentlygrantedsubnom.AdarandConstructors,Inc.v.Mineta,532U.S.941,534U.S.103(2001)....................................................................................................................................................................................................164

RecentDistrictCourtDecisions...................................................................................................................................................172

10.MidwestFenceCorporationv.UnitedStatesDOTandFederalHighwayAdministration,theIllinoisDOT,theIllinoisStateTollHighwayAuthority,etal.,84F.Supp.3d705,2015WL1396376(N.D.Ill,2015),affirmed,840F.3d932(7thCir.2016).....................................................................................................172

11.GeyerSignal,Inc.v.Minnesota,DOT,2014WL1309092(D.Minn.March31,2014)..................................182

12.DunnetBayConstructionCompanyv.GaryHannig,initsofficialcapacityasSecretaryofTransportationfortheIllinoisDOTandtheIllinoisDOT,2014WL552213(C.D.Ill.2014),affirmed,DunnetBayConstructionCo.v.Borggren,IllinoisDOT,etal.,799F.3d676,2015WL4934560(7thCir.2015)..............................................................................................................................................................................................190

13.M.K.WeedenConstructionv.StateofMontana,MontanaDepartmentofTransportation,etal.,2013WL4774517(D.Mont.)(September4,2013)..........................................................................................................194

14.AssociatedGeneralContractorsofAmerica,SanDiegoChapter,Inc.v.CaliforniaDepartmentofTransportation,etal.,U.S.D.C.,E.D.Cal.CivilActionNo.S‐09‐1622,SlipOpinion(E.D.Cal.April20,2011),appealdismissedbasedonstanding,onothergroundsNinthCircuitheldCaltrans’DBEProgramconstitutional,AssociatedGeneralContractorsofAmerica,SanDiegoChapter,Inc.v.CaliforniaDepartmentofTransportation,etal.,713F.3d1187(9thCir.2013)...................................................196

15.GeodCorporationv.NewJerseyTransitCorporation,etal.,746F.Supp.2d642,2010WL4193051(D.N.J.October19,2010).........................................................................................................................................199

16.GeodCorporationv.NewJerseyTransitCorporation,etseq.678F.Supp.2d276,2009WL2595607(D.N.J.August20,2009)..............................................................................................................................................204

17.SouthFloridaChapteroftheAssociatedGeneralContractorsv.BrowardCounty,Florida,544F.Supp.2d1336(S.D.Fla.2008)......................................................................................................................................................207

18.WesternStatesPavingCo.v.WashingtonDOT,USDOT&FHWA,2006WL1734163(W.D.Wash.June23,2006)(unpublishedopinion).....................................................................................................................................209

19.NorthernContracting,Inc.v.Illinois,2005WL2230195(N.D.Ill.,2005),affirmed,473F.3d715(7thCir.2007)......................................................................................................................................................................................210

20.NorthernContracting,Inc.v.StateofIllinois,IllinoisDOT,andUSDOT,2004WL422704(N.D.Ill.March3,2004)...................................................................................................................................................................................215

BBC RESEARCH & CONSULTING—FINAL REPORT APPENDIX B, PAGE iv

21.SherbrookeTurf,Inc.v.MinnesotaDOT,2001WL1502841,No.00‐CV‐1026(D.Minn.2001)(unpublishedopinion),affirmed345F.3d964(8thCir.2003)......................................................................................217

22.GrossSeedCo.v.NebraskaDepartmentofRoads,CivilActionFileNo.4:00CV3073(D.Neb.May6,2002),affirmed345F.3d964(8thCir.2003)........................................................................................................................218

23.KlaverConstruction,Inc.v.KansasDOT,211F.Supp.2d1296(D.Kan.2002)...............................................218

G.RecentDecisionsandAuthoritiesInvolvingFederalProcurementThatMayImpactDBEandMBE/WBEPrograms............................................................................................................................................................................219

1.RotheDevelopment,Inc.v.U.S.Dept.ofDefense,U.S.SmallBusinessAdministration,etal.,836F3d57,2016WL4719049(D.C.Cir.2016),cert.denied,2017WL1375832(2017),affirmingonothergrounds,RotheDevelopment,Inc.v.U.S.Dept.ofDefense,U.S.SmallBusinessAdministration,etal.,107F.Supp.3d183(D.D.C.2015)..............................................................................................................................................219

2.RotheDevelopmentCorp.v.U.S.Dept.ofDefense,etal.,545F.3d1023(Fed.Cir.2008)............................222

3.RotheDevelopment,Inc.v.U.S.Dept.ofDefenseandSmallBusinessAdministration,107F.Supp.3d183,2015WL3536271(D.D.C.2015),affirmedonothergrounds,836F.3d57,2016WL4719049(D.C.Cir.2016)...................................................................................................................................................................................230

4.DynaLanticCorp.v.UnitedStatesDept.ofDefense,etal.,885F.Supp.2d237,2012WL3356813(D.D.C.,2012),appealsvoluntarilydismissed,UnitedStatesCourtofAppeals,DistrictofColumbia,DocketNumbers12‐5329and12‐5330(2014)..................................................................................................................235

5.DynaLanticCorp.v.UnitedStatesDept.ofDefense,etal.,503F.Supp.2d262(D.D.C.2007).....................242

BBC RESEARCH & CONSULTING—FINAL REPORT APPENDIX B, PAGE 1

APPENDIX B. Legal Framework and Analysis

EXECUTIVE SUMMARY

A. Introduction

Inthisappendix,Holland&KnightLLPanalyzesrecentcasesinvolvinglocalandstategovernmentminorityandwomen‐ownedanddisadvantaged‐ownedbusinessenterprise(“MBE/WBE/DBE”)programs.Theappendixalsoreviewsrecentcases,whichareinstructivetothestudyandMBE/WBE/DBEprograms,regardingtheFederalDisadvantagedBusinessEnterprise(“FederalDBE”)Program1andtheimplementationoftheFederalDBEProgrambylocalandstategovernments.TheFederalDBEProgramrecentlywascontinuedandreauthorizedbytheFixingAmerica’sSurfaceTransportationAct(FASTAct)2.TheappendixprovidesasummaryofthelegalframeworkforthedisparitystudyasapplicabletotheCityofVirginiaBeach.

AppendixBbeginswithareviewofthelandmarkUnitedStatesSupremeCourtdecisioninCityofRichmondv.J.A.Croson.3Crosonsetsforththestrictscrutinyconstitutionalanalysisapplicableinthelegalframeworkforconductingadisparitystudy.ThissectionalsonotestheUnitedStatesSupremeCourtdecisioninAdarandConstructors,Inc.v.Pena,4(“AdarandI”),whichappliedthestrictscrutinyanalysissetforthinCrosontofederalprogramsthatprovidefederalassistancetoarecipientoffederalfunds.TheSupremeCourt’sdecisionsinAdarandIandCroson,andsubsequentcasesandauthoritiesprovidethebasisforthelegalanalysisinconnectionwiththestudy.

Thelegalframeworkanalyzesandreviewssignificantrecentcourtdecisionsthathavefollowed,interpreted,andappliedCrosonandAdarandItothepresentandthatareapplicabletothisdisparitystudyandthestrictscrutinyanalysis.ThisanalysisreviewstheFourthCircuitCourtofAppealsdecisioninH.B.RoweCo.,Incv.W.LyndoTippett,NCDOTetal.5anddistrictcourtdecisionsintheFourthCircuitregardingMBE/WBE/DBEprograms.TheanalysisalsoreviewsrecentcourtdecisionsthatinvolvedchallengestoMBE/WBE/DBEprogramsinotherjuridictionsinSectionEbelow,whichareinformativetothestudy.

Inaddition,theanalysisreviewsotherrecentfederalcasesthathaveconsideredthevalidityoftheFederalDBEProgramanditsimplementationbyastateorlocalgovernmentagencyora

1 49CFRPart26(ParticipationbyDisadvantagedBusinessEnterprisesinDepartmentofTransportationFinancial

AssistancePrograms(“FederalDBEProgram”).SeetheTransportationEquityActforthe21stCentury(TEA‐21)asamendedandreauthorized(“MAP‐21,”“SAFETEA”and“SAFETEA‐LU”),andtheUnitedStatesDepartmentofTransportation(“USDOT”or“DOT”)regulationspromulgatedtoimplementTEA‐21theFederalregulationsknownasMovingAheadforProgressinthe21stCenturyAct(“MAP‐21”),PubL.112‐141,H.R.4348,§1101(b),July6,2012,126Stat405.;precededbyPubL.109‐59,TitleI,§1101(b),August10,2005,119Stat.1156;precededbyPubL.105‐178,TitleI,§1101(b),June9,1998,112Stat.107.

2 Pub.L.114‐94,H.R.22,§1101(b),December4,2015,129Stat.1312.3 CityofRichmondv.J.A.Croson,488U.S.469(1989).4 AdarandConstructors,Inc.v.Pena,515U.S.200(1995).5 615F.3d233(4thCir.2010).


recipientoffederalfunds,including:DunnetBayConstructionCo.v.IllinoisDOT,6AssociatedGeneralContractorsofAmerica,SanDiegoChapter,Inc.v.CaliforniaDepartmentofTransportation(“Caltrans”),etal.,7WesternStatesPavingCo.v.WashingtonStateDOT,8MountainWestHoldingCo.v.Montana,MontanaDOT,etal.,9M.K.WeedenConstructionv.Montana,MontanaDOT,etal.,10NorthernContracting,Inc.v.IllinoisDOT,11SherbrookeTurf,Inc.v.MinnDOTandGrossSeedv.NebraskaDepartmentofRoads,12AdarandConstruction,Inc.v.Slater13(“AdarandVII”),MidwestFenceCorp.v.U.S.DOT,FHWA,IllinoisDOT,IllinoisStateTollHighwayAuthority,etal.,14GeyerSignal,Inc.v.MinnesotaDOT,15GeodCorporationv.NewJerseyTransitCorporation,16andSouthFloridaChapteroftheA.G.C.v.BrowardCounty,Florida.17

TheanalysesoftheseandotherrecentcasessummarizedbelowareinstructivetothedisparitystudybecausetheyarethemostrecentandsignificantdecisionsbycourtssettingforththelegalframeworkappliedtoMBE/WBE/DBEProgramsanddisparitystudies,andconstruingthevalidityofgovernmentprogramsinvolvingMBE/WBE/DBEs.

B. U.S. Supreme Court Cases

1. City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989)

InCroson,theU.S.SupremeCourtstruckdowntheCityofRichmond’s“set‐aside”programasunconstitutionalbecauseitdidnotsatisfythestrictscrutinyanalysisappliedto“race‐based”governmentalprograms.18J.A.CrosonCo.(“Croson”)challengedtheCityofRichmond’sminoritycontractingpreferenceplan,whichrequiredprimecontractorstosubcontractatleast30percentofthedollaramountofcontractstooneormoreMinorityBusinessEnterprises(“MBE”).Inenactingtheplan,theCitycitedpastdiscriminationandanintenttoincreaseminoritybusinessparticipationinconstructionprojectsasmotivatingfactors.

TheSupremeCourtheldtheCityofRichmond’s“set‐aside”actionplanviolatedtheEqualProtectionClauseoftheFourteenthAmendment.TheCourtappliedthe“strictscrutiny”

6 DunnetBayConstructionCo.v.Borggren,IllinoisDOT,etal.,799F.3d676,2015WL4934560(7thCir.,2015),cert.denied,

137S.Ct.31,2016WL193809,(October3,2016),DocketNo.15‐906;DunnetBayConstructionCo.v.IllinoisDOT,etal.2014WL552213(C.D.Ill.2014),affirmedbyDunnetBay,2015WL4934560(7thCir.,2015).

7 AssociatedGeneralContractorsofAmerica,SanDiegoChapter,Inc.v.CaliforniaDepartmentofTransportation,etal.,713F.3d1187,(9thCir.2013);U.S.D.,C.,E.D.Cal,CivilActionNo.S‐09‐1622,SlipOpinionTranscript(E.D.Cal.April20,2011),appealdismissedbasedonstanding,onothergroundsNinthCircuitheldCaltrans’DBEProgramconstitutional,AssociatedGeneralContractorsofAmerica,SanDiegoChapter,Inc.v.CaliforniaDepartmentofTransportation,etal.,F.3d1187,(9thCir.2013).

8 WesternStatesPavingCo.v.WashingtonStateDOT,407F.3d983(9thCir.2005),cert.denied,546U.S.1170(2006).9 MountainWestHoldingCo.,Inc.v.Montana,2017WL2179120(9thCir.May16,2017),Memorandum,(Notfor

Publication)U.S.CourtofAppealsfortheNinthCircuit,May16,2017,DocketNos.14‐26097and15‐35003,dismissinginpart,reversinginpartandremandingtheU.S.DistrictCourtdecisionat2014WL6686734(D.Mont.2014).

10 M.K.WeedenConstructionv.StateofMontana,MontanaDOT,2013WL4774517(D.Mont.2013).11 NorthernContracting,Inc.v.IllinoisDOT,473F.3d715(7thCir.2007).

12 SherbrookeTurf,Inc.v.Minn.DOTandGrossSeedv.NebraskaDepartmentofRoads,345F.3d964(8thCir.2003),cert.

denied,541U.S.1041(2004).

13 AdarandConstruction,Inc.v.Slater,228F.3d1147(10thCir.2000)(“AdarandVII”).

14 MidwestFenceCorp.v.U.S.DOT,FHWA,IllinoisDOT,IllinoisStateTollHighwayAuthority,etal.,840F.3d932,2016WL6543514(7thCir.2016).MidwestFencefiledaPetitionforaWritofCertiorariwiththeU.S.SupremeCourt,see2017WL511931(Feb.2,2017),whichwasdenied,2017WL497345(June26,2017)..

15 GeyerSignal,Inc.v.MinnesotaDOT,2014W.L.1309092(D.Minn.2014).16 GeodCorporationv.NewJerseyTransitCorporation,766F.Supp.2d642(D.N.J.2010).17 SouthFloridaChapteroftheA.G.C.v.BrowardCounty,Florida,544F.Supp.2d1336(S.D.Fla.2008).18 488U.S.469(1989).


standard,generallyapplicabletoanyrace‐basedclassification,whichrequiresagovernmentalentitytohavea“compellinggovernmentalinterest”inremedyingpastidentifieddiscriminationandthatanyprogramadoptedbyalocalorstategovernmentmustbe“narrowlytailored”toachievethegoalofremedyingtheidentifieddiscrimination.

TheCourtdeterminedthattheplanneitherserveda“compellinggovernmentalinterest”noroffereda“narrowlytailored”remedytopastdiscrimination.TheCourtfoundno“compellinggovernmentalinterest”becausetheCityhadnotprovided“astrongbasisinevidenceforitsconclusionthat[race‐based]remedialactionwasnecessary.”19TheCourtheldtheCitypresentednodirectevidenceofanyracediscriminationonitspartinawardingconstructioncontractsoranyevidencethattheCity’sprimecontractorshaddiscriminatedagainstminority‐ownedsubcontractors.20TheCourtalsofoundtherewereonlygeneralizedallegationsofsocietalandindustrydiscriminationcoupledwithpositivelegislativemotives.TheCourtconcludedthatthiswasinsufficientevidencetodemonstrateacompellinginterestinawardingpubliccontractsonthebasisofrace.

Similarly,theCourtheldtheCityfailedtodemonstratethattheplanwas“narrowlytailored”forseveralreasons,includingbecausetheredidnotappeartohavebeenanyconsiderationofrace‐neutralmeanstoincreaseminoritybusinessparticipationincitycontracting,andbecauseoftheoverinclusivenessofcertainminoritiesinthe“preference”program(forexample,Aleuts)withoutanyevidencetheysuffereddiscriminationinRichmond.21

TheCourtstatedthatrelianceonthedisparitybetweenthenumberofprimecontractsawardedtominorityfirmsandtheminoritypopulationoftheCityofRichmondwasmisplaced.Thereisnodoubt,theCourtheld,that“[w]heregrossstatisticaldisparitiescanbeshown,theyaloneinapropercasemayconstituteprimafacieproofofapatternorpracticeofdiscrimination”underTitleVII.,22.Butitisequallyclearthat“[w]henspecialqualificationsarerequiredtofillparticularjobs,comparisonstothegeneralpopulation(ratherthantothesmallergroupofindividualswhopossessthenecessaryqualifications)mayhavelittleprobativevalue.”23

TheCourtconcludedthatwherespecialqualificationsarenecessary,therelevantstatisticalpoolforpurposesofdemonstratingdiscriminatoryexclusionmustbethenumberofminoritiesqualifiedtoundertaketheparticulartask.TheCourtnotedthat“thecitydoesnotevenknowhowmanyMBE’sintherelevantmarketarequalifiedtoundertakeprimeorsubcontractingworkinpublicconstructionprojects.”24“Nordoesthecityknowwhatpercentageoftotalcityconstructiondollarsminorityfirmsnowreceiveassubcontractorsonprimecontractsletbythecity.”25

TheSupremeCourtstatedthatitdidnotintenditsdecisiontoprecludeastateorlocalgovernmentfrom“takingactiontorectifytheeffectsofidentifieddiscriminationwithinitsjurisdiction.”26TheCourtheldthat“[w]herethereisasignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractorswillingandabletoperformaparticularservice

19 488U.S.at500,510.20 488U.S.at480,505.21 488U.S.at507‐510.22 488U.S.at501,quotingHazelwoodSchoolDist.v.UnitedStates,433U.S.299,307–308,97S.Ct.2736,2741.23 488U.S.at501quotingHazelwood,433U.S.at308,n.13,97S.Ct.,at2742,n.13.24 488U.S.at502.25 Id.26 488U.S.at509.


andthenumberofsuchcontractorsactuallyengagedbythelocalityorthelocality’sprimecontractors,aninferenceofdiscriminatoryexclusioncouldarise.”27

TheCourtsaid:“IftheCityofRichmondhadevidencebeforeitthatnonminoritycontractorsweresystematicallyexcludingminoritybusinessesfromsubcontractingopportunitiesitcouldtakeactiontoendthediscriminatoryexclusion.”28“Undersuchcircumstances,thecitycouldacttodismantletheclosedbusinesssystembytakingappropriatemeasuresagainstthosewhodiscriminateonthebasisofraceorotherillegitimatecriteria.”“Intheextremecase,someformofnarrowlytailoredracialpreferencemightbenecessarytobreakdownpatternsofdeliberateexclusion.”29

TheCourtfurtherfound“iftheCitycouldshowthatithadessentiallybecomea‘passiveparticipant’inasystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry,wethinkitclearthattheCitycouldtakeaffirmativestepstodismantlesuchasystem.Itisbeyonddisputethatanypublicentity,stateorfederal,hasacompellinginterestinassuringthatpublicdollars,drawnfromthetaxcontributionsofallcitizens,donotservetofinancetheevilofprivateprejudice.”30

2. Adarand Constructors, Inc. v. Pena (“Adarand I”), 515 U.S. 200 (1995)

InAdarandI,theU.S.SupremeCourtextendedtheholdinginCrosonandruledthatallfederalgovernmentprogramsthatuseracialorethniccriteriaasfactorsinprocurementdecisionsmustpassatestofstrictscrutinyinordertosurviveconstitutionalmuster.

ThecasesfollowingandinterpretingAdarandIandCrosonarethemostrecentandsignificantdecisionsbyfederalcourtssettingforththelegalframeworkfordisparitystudiesaswellasthepredicatetosatisfytheconstitutionalstrictscrutinystandardofreview,whichappliestotheimplementationoflocalandstategovernmentMBE/WBE/DBEprogramsandtheFederalDBEProgrambylocalandstategovernmentrecipientsoffederalfunds.

27 Id.28 488U.S.at509.29 Id.30 488U.S.at492.


C. The Legal Framework Applied to State and Local Government MBE/WBE/DBE Programs

ThefollowingprovidesananalysisforthelegalframeworkfocusingonrecentkeycasesregardingstateandlocalMBE/WBE/DBEprograms,andtheirimplicationsforadisparitystudy.Therecentdecisionsinvolvingtheseprograms,theFederalDBEProgram,anditsimplementationbystateandlocalprograms,areinstructivebecausetheyconcernthestrictscrutinyanalysis,thelegalframeworkinthisarea,challengestothevalidityofMBE/WBE/DBEprograms,andananalysisofdisparitystudies.

1. Strict scrutiny analysis

Arace‐andethnicity‐basedprogramimplementedbyastateorlocalgovernmentissubjecttothestrictscrutinyconstitutionalanalysis.31Thestrictscrutinyanalysisiscomprisedoftwoprongs:

Theprogrammustserveanestablishedcompellinggovernmentalinterest;and

Theprogrammustbenarrowlytailoredtoachievethatcompellinggovernmentinterest.32

a.TheCompellingGovernmentalInterestRequirement.

Thefirstprongofthestrictscrutinyanalysisrequiresagovernmentalentitytohavea“compellinggovernmentalinterest”inremedyingpastidentifieddiscriminationinordertoimplementarace‐andethnicity‐basedprogram.33Stateandlocalgovernmentscannotrelyonnationalstatisticsofdiscriminationinanindustrytodrawconclusionsabouttheprevailingmarketconditionsintheirownregions.34Rather,stateandlocalgovernmentsmustmeasurediscriminationintheirstateorlocalmarket.However,thatisnotnecessarilyconfinedbythejurisdiction’sboundaries.35

ItisinstructivetoreviewthetypeofevidenceutilizedbyCongressandconsideredbythecourtstosupporttheFederalDBEProgram,anditsimplementationbylocalandstategovernmentsandagencies,whichissimilartoevidenceconsideredbycasesrulingonthevalidityofMBE/WBE/DBEprograms.ThefederalcourtsfoundCongress“spentdecadescompilingevidenceofracediscriminationingovernmenthighwaycontracting,ofbarrierstotheformation

31 Croson,448U.S.at492‐493;AdarandConstructors,Inc.v.Pena(AdarandI),515U.S.200,227(1995);see,e.g.,Fisherv.

UniversityofTexas,133S.Ct.2411(2013);MidwestFencev.IllinoisDOT,840F.3d932,935,948‐954(7thCir.2016);AGC,SDCv.Caltrans,713F.3d1187,1195‐1200(9thCir.2013);H.B.RoweCo.,Inc.v.NCDOT,615F.3d233,241‐242(4thCir.2010);NorthernContracting,473F.3dat721;WesternStatesPaving,407F.3dat991;SherbrookeTurf,345F.3dat969;AdarandVII,228F.3dat1176;W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206(5thCir.1999);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d990(3d.Cir.1993).

32 AdarandI,515U.S.200,227(1995);MidwestFencev.IllinoisDOT,840F.3d932,935,948‐954(7thCir.2016);AGC,SDCv.Caltrans,713F.3d1187,1195‐1200(9thCir.2013);H.B.RoweCo.,Inc.v.NCDOT,615F.3d233,241‐242(4thCir.2010);NorthernContracting,473F.3dat721;WesternStatesPaving,407F.3dat991(9thCir.2005);SherbrookeTurf,345F.3dat969;AdarandVII,228F.3dat1176;AssociatedGen.ContractorsofOhio,Inc.v.Drabik(“DrabikII”),214F.3d730(6thCir.2000);W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206(5thCir.1999);Eng’gContractorsAss’nofSouthFlorida,Inc.v.Metro.DadeCounty,122F.3d895(11thCir.1997);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d990(3d.Cir.1993).

33 Id.34 Id.;see,e.g.,ConcreteWorks,Inc.v.CityandCountyofDenver(“ConcreteWorksI”),36F.3d1513,1520(10thCir.1994).35 See,e.g.,ConcreteWorksI,36F.3dat1520.


ofminority‐ownedconstructionbusinesses,andofbarrierstoentry.”36Theevidencefoundtosatisfythecompellingintereststandardincludednumerouscongressionalinvestigationsandhearings,andoutsidestudiesofstatisticalandanecdotalevidence(e.g.,disparitystudies).37TheevidentiarybasisonwhichCongressreliedtosupportitsfindingofdiscriminationincludes:

Barrierstominoritybusinessformation. Congressfoundthatdiscriminationbyprimecontractors,unions,andlendershaswoefullyimpededtheformationofqualifiedminoritybusinessenterprisesinthesubcontractingmarketnationwide,notingtheexistenceof“goodol’boy”networks,fromwhichminorityfirmshavetraditionallybeenexcluded,andtherace‐baseddenialofaccesstocapital,whichaffectstheformationofminoritysubcontractingenterprise.38

Barrierstocompetitionforexistingminorityenterprises.Congressfoundevidenceshowingsystematicexclusionanddiscriminationbyprimecontractors,privatesectorcustomers,businessnetworks,suppliers,andbondingcompaniesprecludingminorityenterprisesfromopportunitiestobid.Whenminorityfirmsarepermittedtobidonsubcontracts,primecontractorsoftenresistworkingwiththem.Congressfoundevidenceofthesameprimecontractorusingaminoritybusinessenterpriseonagovernmentcontractnotusingthatminoritybusinessenterpriseonaprivatecontract,despitebeingsatisfiedwiththatsubcontractor’swork.Congressfoundthatinformal,raciallyexclusionarybusinessnetworksdominatethesubcontractingconstructionindustry.39

Localdisparitystudies. Congressfoundthatlocalstudiesthroughoutthecountrytendtoshowadisparitybetweenutilizationandavailabilityofminority‐ownedfirms,raisinganinferenceofdiscrimination.40

Resultsofremovingaffirmativeactionprograms. Congressfoundevidencethatwhenrace‐consciouspubliccontractingprogramsarestruckdownordiscontinued,minoritybusinessparticipationintherelevantmarketdropssharplyorevendisappears,whichcourtshavefoundstronglysupportsthegovernment’sclaimthattherearesignificantbarrierstominoritycompetition,raisingthespecterofdiscrimination.41

FASTActandMAP‐21.InDecember2015andinJuly2012,CongresspassedtheFASTActandMAP‐21,respectively(seeabove),whichmade“Findings”that“discriminationandrelatedbarrierscontinuetoposesignificantobstaclesforminority‐andwomen‐ownedbusinessesseekingtodobusinessinfederally‐assistedsurfacetransportationmarkets,”andthatthecontinuingbarriers“meritthecontinuation”oftheFederalDBEProgram.42CongressalsofoundinboththeFASTActandMAP‐21thatitreceivedandreviewed

36 SherbrookeTurf,345F.3dat970,(citingAdarandVII,228F.3dat1167–76);WesternStatesPaving,407F.3dat992‐93.37 See,e.g.,AdarandVII,228F.3dat1167–76;seealsoWesternStatesPaving,407F.3dat992(Congress“explicitlyrelied

upon”theDepartmentofJusticestudythat“documentedthediscriminatoryhurdlesthatminoritiesmustovercometosecurefederallyfundedcontracts”);GeyerSignal,Inc.,2014WL1309092.

38 AdarandVII,228F.3d.at1168‐70;WesternStatesPaving,407F.3dat992;seeGeyerSignal,Inc.,2014WL1309092;DynaLantic,885F.Supp.2d237.

39 AdarandVII.at1170‐72;seeDynaLantic,885F.Supp.2d237.40 Id.at1172‐74;seeDynaLantic,885F.Supp.2d237;GeyerSignal,Inc.,2014WL1309092.41 AdarandVII,228F.3dat1174‐75;seeH.B.Rowe,615F.3d233,247‐258(4thCir.2010);SherbrookeTurf,345F.3dat973‐

4.42 PubL.114‐94,H.R.22,§1101(b),December4,2015,129Stat1312;PubL.112‐141,H.R.4348,§1101(b),July6,2012,

126Stat405.


testimonyanddocumentationofraceandgenderdiscriminationwhich“provideastrongbasisthatthereisacompellingneedforthecontinuationofthe”FederalDBEProgram.43

Burdenofproof.Underthestrictscrutinyanalysis,andtotheextentastateorlocalgovernmentalentityhasimplementedarace‐andgender‐consciousprogram,thegovernmentalentityhastheinitialburdenofshowingastrongbasisinevidence(includingstatisticalandanecdotalevidence)tosupportitsremedialaction.44Ifthegovernmentmakesitsinitialshowing,theburdenshiftstothechallengertorebutthatshowing.45Thechallengerbearstheultimateburdenofshowingthatthegovernmentalentity’sevidence“didnotsupportaninferenceofpriordiscrimination.”46

Inapplyingthestrictscrutinyanalysis,thecourtsholdthattheburdenisonthegovernmenttoshowbothacompellinginterestandnarrowtailoring.47Itiswellestablishedthat“remedyingtheeffectsofpastorpresentracialdiscrimination”isacompellinginterest.48Inaddition,thegovernmentmustalsodemonstrate“astrongbasisinevidenceforitsconclusionthatremedialaction[is]necessary.”49

SincethedecisionbytheSupremeCourtinCroson,“numerouscourtshaverecognizedthatdisparitystudiesprovideprobativeevidenceofdiscrimination.”50“Aninferenceofdiscriminationmaybemadewithempiricalevidencethatdemonstrates‘asignificantstatisticaldisparitybetweenanumberofqualifiedminoritycontractors…andthenumberofsuchcontractorsactuallyengagedbythelocalityorthelocality’sprimecontractors.’”51Anecdotal 43 Id.at§1101(b)(1).44 SeeAGC,SDCv.Caltrans,713F.3rdat1195;H.B.RoweCo.,Inc.v.NCDOT,615F.3d233,241‐242,247‐258(4thCir.2010);

RotheDevelopmentCorp.v.DepartmentofDefense,545F.3d1023,1036(Fed.Cir.2008);N.Contracting,Inc.Illinois,473F.3dat715,721(7thCir.2007)(FederalDBEProgram);WesternStatesPavingCo.v.WashingtonStateDOT,407F.3d983,990‐991(9thCir.2005)(FederalDBEProgram);SherbrookeTurf,Inc.v.MinnesotaDOT,345F.3d964,969(8thCir.2003)(FederalDBEProgram);AdarandConstructorsInc.v.Slater(“AdarandVII”),228F.3d1147,1166(10thCir.2000)(FederalDBEProgram);Eng’gContractorsAss’n,122F.3dat916;MontereyMechanicalCo.v.Wilson,125F.3d702,713(9thCir.1997);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1005‐1007(3d.Cir.1993);GeyerSignal,Inc.,2014WL1309092;DynaLantic,885F.Supp.2d237,2012WL3356813;HershellGillConsultingEngineers,Inc.v.MiamiDadeCounty,333F.Supp.2d1305,1316(S.D.Fla.2004).

45 AdarandVII,228F.3dat1166;ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1005‐1007(3d.Cir.1993);Eng’gContractorsAss’n,122F.3dat916;GeyerSignal,Inc.,2014WL1309092.

46 See,e.g.,AdarandVII,228F.3dat1166;ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1005‐1007(3d.Cir.1993);Eng’gContractorsAss’n,122F.3dat916;seealsoSherbrookeTurf,345F.3dat971;N.Contracting,473F.3dat721;GeyerSignal,Inc.,2014WL1309092.

47 Id.;MidwestFence,840F.3d932,935,948‐954(7thCir.2016);H.B.RoweCo.,Inc.v.NCDOT,615F.3d233,241‐242(4thCir.2010);WesternStatesPaving,407F.3dat990;SeealsoMajeskev.CityofChicago,218F.3d816,820(7thCir.2000);GeyerSignal,Inc.,2014WL1309092.

48 Shawv.V.Hunt,517U.S.899,909(1996);CityofRichmondv.J.A.CrosonCo.,488U.S.469,492(1989);see,e.g.,MidwestFence,840F.3d932,935,948‐954(7thCir.2016);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1005‐1007(3d.Cir.1993).

49 Croson,488U.S.at500;see,e.g.,MidwestFence,840F.3d932,935,948‐954(7thCir.2016);H.B.RoweCo.,Inc.v.NCDOT,615F.3d233,241‐242;SherbrookeTurf,345F.3dat971‐972;ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1005‐1007(3d.Cir.1993);GeyerSignal,Inc.,2014WL1309092.

50 MidwestFence,2015W.L.1396376at*7(N.D.Ill.2015),affirmed,840F.3d932,2016WL6543514(7thCir.2016);see,e.g.,MidwestFence,840F.3d932,935,948‐954(7thCir.2016);AGC,SDCv.Caltrans,713F.3rdat1195‐1200;H.B.RoweCo.,Inc.v.NCDOT,615F.3d233,241‐242(4thCir.2010);ConcreteWorksofColo.Inc.v.CityandCountyofDenver,36F.3d1513,1522(10thCir.1994),GeyerSignal,2014WL1309092(D.Minn,2014);seealso,ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1005‐1007(3d.Cir.1993).

51 Seee.g.,H.B.Rowev.NCDOT,615F.3d233,241‐242(4thCir.2010);MidwestFence,2015W.L.1396376at*7,quotingConcreteWorks;36F.3d1513,1522(quotingCroson,488U.S.at509),affirmed,840F.3d932,2016WL6543514(7thCir.


evidencemaybeusedincombinationwithstatisticalevidencetoestablishacompellinggovernmentalinterest.52

Inadditiontoproviding“hardproof”tosupportitscompellinginterest,thegovernmentmustalsoshowthatthechallengedprogramisnarrowlytailored.53Oncethegovernmentalentityhasshownacceptableproofofacompellinginterestandremedyingpastdiscriminationandillustratedthatitsplanisnarrowlytailoredtoachievethisgoal,thepartychallengingtheaffirmativeactionplanbearstheultimateburdenofprovingthattheplanisunconstitutional.54Therefore,notwithstandingtheburdenofinitialproductionrestswiththegovernment,theultimateburdenremainswiththepartychallengingtheapplicationofaDBEorMBE/WBEProgramtodemonstratetheunconstitutionalityofanaffirmative‐actiontypeprogram.55

Tosuccessfullyrebutthegovernment’sevidence,thecourtshold,includingtheFourthCircuitCourtofAppealsinH.B.Rowe,thatachallengermustintroduce“credible,particularizedevidence”ofitsownthatrebutsthegovernment’sshowingofastrongbasisinevidenceforthenecessityofremedialaction.56ThisrebuttalcanbeaccomplishedbyprovidinganeutralexplanationforthedisparitybetweenMBE/WBE/DBEutilizationandavailability,showingthatthegovernment’sdataisflawed,demonstratingthattheobserveddisparitiesarestatisticallyinsignificant,orpresentingcontrastingstatisticaldata.57Conjectureandunsupportedcriticismsofthegovernment’smethodologyareinsufficient.58Thecourts,includingH.B.Rowe,haveheldthatmerespeculationthegovernment’sevidenceisinsufficientormethodologicallyflaweddoesnotsufficetorebutagovernment’sshowing.59

2016);seealso,SherbrookeTurf,345F.3d233,241‐242(8thCir.2003);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1005‐1007(3d.Cir.1993).

52 Croson,488U.S.at509;see,e.g.,AGC,SDCv.Caltrans,713R.3dat1196;H.B.Rowev.NCDOT,615F.3d233,241‐242(4thCir.2010);MidwestFence,84F.Supp.3d705,2015WL1396376at*7,affirmed,840F.3d932,2016WL6543514(7thCir.2016);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1005‐1007(3d.Cir.1993).

53 AdarandConstructors,Inc.v.Pena,(“AdarandIII”),515U.S.200at235(1995);see,e.g.,MidwestFence,840F.3d932,952‐954(7thCir.2016);Majeskev.CityofChicago,218F.3dat820;ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1005‐1007(3d.Cir.1993).

54 Majeske,218F.3dat820;see,e.g.Wygantv.JacksonBd.OfEduc.,476U.S.267,277‐78;MidwestFence,840F.3d932,952‐954(7thCir.2016);MidwestFence,2015WL1396376*7,affirmed,840F.3d932,2016WL6543514(7thCir.2016);GeyerSignal,Inc.,2014WL1309092;ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598;603;(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1002‐1007(3d.Cir.1993).

55 Id.;AdarandVII,228F.3dat1166.56 See,e.g.,H.B.Rowev.NCDOT,615F.3d233,at241‐242(4thCir.2010);ConcreteWorks,321F.3d950,959(quotingAdarand

Constructors,Inc.vs.Slater,228F.3d1147,1175(10thCir.2000));ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,596‐598,603(3dCir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d996,1002‐1007(3dCir.1993);MidwestFence,84F.Supp.3d705,2015W.L.1396376at*7,affirmed,840F.3d932,2016WL6543514(7thCir.2016);seealso,SherbrookeTurf,345F.3dat971‐974;GeyerSignal,Inc.,2014WL1309092.

57 See,e.g.,H.B.Rowev.NCDOT,615F.3d233,at241‐242(4thCir.2010);ConcreteWorks,321F.3d950,959(quotingAdarandConstructors,Inc.vs.Slater,228F.3d1147,1175(10thCir.2000));ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPII”),91F.3d586,596‐598;603;(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia(“CAEPI”),6F.3d996,1002‐1007(3d.Cir.1993);MidwestFence,84F.Supp.3d705,2015W.L.1396376at*7,affirmed,840F.3d932,2016WL6543514(7thCir.2016);seealso,SherbrookeTurf,345F.3dat971‐974;GeyerSignal,Inc.,2014WL1309092;see,generally,EngineeringContractors,122F.3dat916;CoralConstruction,Co.v.KingCounty,941F.2d910,921(9thCir.1991).

58 Id.;H.B.Rowe,615F.3dat242;seealso,MidwestFence,840F.3d932,952‐954(7thCir.2016);SherbrookeTurf,345F.3dat971‐974;ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,596‐598,603(3dCir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d996,1002‐1007(3dCir.1993);KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(S.D.Tex.2016);GeyerSignal,2014WL1309092.

59 H.B.Rowe,615F.3dat242;seeMidwestFence,840F.3d932,952‐954(7thCir.2016);ConcreteWorks,321F.3dat991;seealso,SherbrookeTurf,345F.3dat971‐974;GeyerSignal,Inc.,2014WL1309092;KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(S.D.Tex.2016).


TheFourthCircuitinH.B.Roweandothercourtshavenotedthat“thereisno‘precisemathematicalformulatoassessthequantumofevidencethatrisestotheCroson‘strongbasisinevidence’benchmark.’”60TheFourthCircuitandothercourtsholdthatastateneednotconclusivelyprovetheexistenceofpastorpresentracialdiscriminationtoestablishastrongbasisinevidenceforconcludingthatremedialactionisnecessary.61Instead,theSupremeCourtstatedthatagovernmentmaymeetitsburdenbyrelyingon“asignificantstatisticaldisparity”betweentheavailabilityofqualified,willing,andableminoritysubcontractorsandtheutilizationofsuchsubcontractorsbythegovernmentalentityoritsprimecontractors.62IthasbeenfurtherheldbythecourtinH.B.Roweandothercourtsthatthestatisticalevidencebe“corroboratedbysignificantanecdotalevidenceofracialdiscrimination”orbolsteredbyanecdotalevidencesupportinganinferenceofdiscrimination.63

TheFourthCircuitinH.B.Rowestatedthestrictscrutinystandardwasapplicabletojustifyarace‐consciousmeasure,andthatitisasubstantialburdenbutnotautomatically“fatalinfact.”64.Thecourtpointedoutthat“[t]heunhappypersistenceofboththepracticeandthelingeringeffectsofracialdiscriminationagainstminoritygroupsinthiscountryisanunfortunatereality,andgovernmentisnotdisqualifiedfromactinginresponsetoit.”65.Insoacting,agovernmentalentitymustdemonstrateithadacompellinginterestin“remedyingtheeffectsofpastorpresentracialdiscrimination.”66.

Thus,theFourthCircuitfoundthattojustifyarace‐consciousmeasure,agovernmentmustidentifythatdiscrimination,publicorprivate,withsomespecificity,andmusthaveastrongbasisinevidenceforitsconclusionthatremedialactionisnecessary.67ThecourtinH.B.Roweafterfindingthatthereisno‘precisemathematicalformulatoassessthequantumofevidencethatrisestotheCroson‘strongbasisinevidence’benchmark,statedthesufficiencyoftheState’sevidenceofdiscrimination“mustbeevaluatedonacase‐by‐casebasis.”68

ThecourtinH.B.Roweheldthattosatisfystrictscrutiny,thestate’sstatutoryschememustalsobe“narrowlytailored”toservethestate’scompellinginterestinnotfinancingprivatediscriminationwithpublicfunds.69

60 H.B.Rowe,615F.3dat241,quotingRotheDev.Corp.v.Dep’tofDef.,545F.3d1023,1049(Fed.Cir.2008)(quotingW.H.

ScottConstr.Co.v.CityofJackson,199F.3d206,218n.11(5thCir.1999));W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206,217‐218(5thCir.1999);see,ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,596‐598,603(3dCir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d996,1002‐1007(3dCir.1993).

61 H.B.RoweCo.,615F.3dat241;see,e.g.,MidwestFence,840F.3d932,952‐954(7thCir.2016);ConcreteWorks,321F.3dat958;,ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,596‐598,603(3dCir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d996,1002‐1007(3dCir.1993).

62 Croson,488U.S.509,see,e.g.,MidwestFence,840F.3d932,952‐954(7thCir.2016);H.B.Rowe,615F.3dat241;ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,596‐598,603(3dCir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d996,1002‐1007(3dCir.1993).

63 H.B.Rowe,615F.3dat241,quotingMarylandTroopersAssociation,Inc.v.Evans,993F.2d1072,1077(4thCir.1993);see,e.g.,MidwestFence,840F.3d932,952‐954(7thCir.2016);AGC,SanDiegov.Caltrans,713F.3dat1196;seealso,ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,596‐598,603(3dCir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d996,1002‐1007(3dCir.1993);KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(S.D.Tex.2016).

64 615F.3d233at241.65 Id.,615F.3dat241,quotingAlexanderv.Estepp,95F.3d312,315(4thCir.1996).66 Id.,quotingShawv.Hunt,517U.S.899,909(1996).67 615F.3d233at241quoting,Croson,488U.S.at504andWygantv.JacksonBoardofEducation,476U.S.267,277

(1986)(pluralityopinion),see,e.g.,ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,596‐605(3dCir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d990,999,1002,1005‐1008(3dCir.1993).

68 Id.,615F.3dat241.(internalquotationmarksomitted).69 615F.3d233at242,citingAlexander,95F.3dat315(citingAdarand,515U.S.at227).


Statisticalevidence.Statisticalevidenceofdiscriminationisaprimarymethodusedtodeterminewhetherornotastrongbasisinevidenceexiststodevelop,adoptandsupportaremedialprogram(i.e.,toproveacompellinggovernmentalinterest),orinthecaseofarecipientcomplyingwiththeFederalDBEProgram,toprovenarrowtailoringofprogramimplementationatthestaterecipientlevel.70“Wheregrossstatisticaldisparitiescanbeshown,theyaloneinapropercasemayconstituteprimafacieproofofapatternorpracticeofdiscrimination.”71

Oneformofstatisticalevidenceisthecomparisonofagovernment’sutilizationofMBE/WBEscomparedtotherelativeavailabilityofqualified,willingandableMBE/WBEs.72Thefederalcourtshaveheldthatasignificantstatisticaldisparitybetweentheutilizationandavailabilityofminority‐andwomen‐ownedfirmsmayraiseaninferenceofdiscriminatoryexclusion.73However,asmallstatisticaldisparity,standingalone,maybeinsufficienttoestablishdiscrimination.74

Otherconsiderationsregardingstatisticalevidenceinclude:

Availabilityanalysis.Adisparityindexrequiresanavailabilityanalysis.MBE/WBEandDBEavailabilitymeasurestherelativenumberofMBE/WBEsandDBEsamongallfirmsready,willingandabletoperformacertaintypeofworkwithinaparticulargeographicmarketarea.75Thereisauthoritythatmeasuresofavailabilitymaybeapproachedwithdifferentlevelsofspecificityandthepracticalityofvariousapproachesmustbe

70 See,e.g.,Croson,488U.S.at509;MidwestFence,840F.3d932,935,948‐954(7thCir.2016);AGC,SDCv.Caltrans,713F.3dat

1195‐1196;N.Contracting,473F.3dat718‐19,723‐24;WesternStatesPaving,407F.3dat991;SherbrookeTurf,345F.3dat973‐974;AdarandVII,228F.3dat1166;W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206,217‐218(5thCir.1999);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,596‐605(3dCir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d990,999,1002,1005‐1008(3dCir.1993);seealso,KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(S.D.Tex.2016);GeyerSignal,2014WL1309092.

71 Croson,488U.S.at501,quotingHazelwoodSchoolDist.v.UnitedStates,433U.S.299,307‐08(1977);seeMidwestFence,840F.3d932,948‐954(7thCir.2016);AGC,SDCv.Caltrans,713F.3dat1196‐1197;N.Contracting,473F.3dat718‐19,723‐24;WesternStatesPaving,407F.3dat991;SherbrookeTurf,345F.3dat973‐974;AdarandVII,228F.3dat1166;W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206,217‐218(5thCir.1999).

72 Croson,448U.S.at509;seeMidwestFence,840F.3d932,935,948‐954(7thCir.2016);AGC,SDCv.Caltrans,713F.3dat1191‐1197;H.B.Rowev.NCDOT,615F.3d233,241‐244(4thCir.2010);Rothe,545F.3dat1041‐1042;ConcreteWorksofColo.,Inc.v.CityandCountyofDenver(“ConcreteWorksII”),321F.3d950,959(10thCir.2003);DrabikII,214F.3d730,734‐736;W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206,217‐218(5thCir.1999);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,596‐605(3dCir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d990,999,1002,1005‐1008(3dCir.1993);seealso,KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(S.D.Tex.2016).

73 See,e.g.,Croson,488U.S.at509;MidwestFence,840F.3d932,935,948‐954(7thCir.2016);AGC,SDCv.Caltrans,713F.3dat1191‐1197;H.B.Rowev.NCDOT,615F.3d233,241‐244(4thCir.2010);Rothe,545F.3dat1041;ConcreteWorksII,321F.3dat970;W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206,217‐218(5thCir.1999);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,596‐605(3dCir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d990,999,1002,1005‐1008(3d.Cir.1993);seealsoWesternStatesPaving,407F.3dat1001;KossmanContracting,2016WL1104363(S.D.Tex.2016).

74 WesternStatesPaving,407F.3dat1001.75 See,e.g.,Croson,448U.S.at509;49CFR§26.35;AGC,SDCv.Caltrans,713F.3dat1191‐1197;Rothe,545F.3dat1041‐

1042;N.Contracting,473F.3dat718,722‐23;WesternStatesPaving,407F.3dat995;W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206,217‐218(5thCir.1999);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,602‐603(3d.Cir.1996);seealso,KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(S.D.Tex.2016).


considered,76“Ananalysisisnotdevoidofprobativevaluesimplybecauseitmaytheoreticallybepossibletoadoptamorerefinedapproach.”77

Utilizationanalysis.Courtshaveacceptedmeasuringutilizationbasedontheproportionofanagency’scontractdollarsgoingtoMBE/WBEsandDBEs.78

Disparityindex.Animportantcomponentofstatisticalevidenceisthe“disparityindex.”79Adisparityindexisdefinedastheratioofthepercentutilizationtothepercentavailabilitytimes100.Adisparityindexbelow80hasbeenacceptedasevidenceofadverseimpact.Thishasbeenreferredtoas“TheRuleofThumb”or“The80percentRule.”80

Twostandarddeviationtest.Thestandarddeviationfiguredescribestheprobabilitythatthemeasureddisparityistheresultofmerechance.Somecourtshaveheldthatastatisticaldisparitycorrespondingtoastandarddeviationoflessthantwoisnotconsideredstatisticallysignificant.81

Intermsofstatisticalevidence,theFourthCircuithasheldthatastate“neednotconclusivelyprovetheexistenceofpastorpresentracialdiscriminationtoestablishastrongbasisinevidence”,butratheritmayrelyon“asignificantstatisticaldisparity”betweentheavailabilityofqualified,willing,andableminoritysubcontractorsandtheutilizationofsuchsubcontractorsbythegovernmentalentityoritsprimecontractors.82.

TheFourthCircuitinH.B.RoweconsideredthestatisticalevidencefromadisparitystudyinconsideringtheequalprotectionchallengetotheNorthCarolinaminority‐andwoman‐ownedparticipationprogramandlookedtodisparityindices,ortocomputationsofdisparity

76 ContractorsAss’nofEasternPennsylvania,Inc.v.CityofPhiladelphia(“CAEPII”),91F.3d586,603(3dCir.1996);see,e.g.,

AGC,SDCv.Caltrans,713F.3dat1197,quotingCroson,488U.S.at706(“degreeofspecificityrequiredinthefindingsofdiscrimination…mayvary.”);H.B.Rowe,v.NCDOT,615F.3d233,241‐244(4thCir.2010);W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206,217‐218(5thCir.1999);seealso,KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(S.D.Tex.2016).

77 ContractorsAss’nofEasternPennsylvania,Inc.v.CityofPhiladelphia(“CAEPII”),91F.3d586,603(3dCir.1996);see,e.g.,AGC,SDCv.Caltrans,713F.3dat1197,quotingCroson,488U.S.at706(“degreeofspecificityrequiredinthefindingsofdiscrimination…mayvary.”);H.B.Rowe,v.NCDOT,615F.3d233,241‐244(4thCir.2010);W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206,217‐218(5thCir.1999);seealso,KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(S.D.Tex.2016).

78 SeeMidwestFence,840F.3d932,949‐953(7thCir.2016);AGC,SDCv.Caltrans,713F.3dat1191‐1197;H.B.Rowe,v.NCDOT,615F.3d233,241‐244(4thCir.2010);Eng’gContractorsAss’n,122F.3dat912;N.Contracting,473F.3dat717‐720;SherbrookeTurf,345F.3dat973.

79 MidwestFence,840F.3d932,949‐953(7thCir.2016);H.B.Rowe,v.NCDOT,615F.3d233,241‐244(4thCir.2010);Eng’gContractorsAss’n,122F.3dat914;W.H.ScottConstr.Co.v.CityofJackson,199F.3d206,218(5thCir.1999);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,602‐603(3d.Cir.1996);ContractorsAss’nofEasternPennsylvania,Inc.v.CityofPhiladelphia,6F.3d990at1005(3rdCir.1993).

80 See,e.g.,Ricciv.DeStefano,557U.S.557,129S.Ct.2658,2678(2009);MidwestFence,840F.3d932,950(7thCir.2016);H.B.Rowe,v.NCDOT,615F.3d233,241‐244(4thCir.2010);AGC,SDCv.Caltrans,713F.3dat1191;Rothe,545F.3dat1041;Eng’gContractorsAss’n,122F.3dat914,923;ConcreteWorksI,36F.3dat1524.

81 See,e.g.,H.B.Rowe,v.NCDOT,615F.3d233,241‐244(4thCir.2010);Eng’gContractorsAss’n,122F.3dat914,917,923.TheEleventhCircuitfoundthatadisparitygreaterthantwoorthreestandarddeviationshasbeenheldtobestatisticallysignificantandmaycreateapresumptionofdiscriminatoryconduct.;Peightalv.MetropolitanEng’gContractorsAss’n,26F.3d1545,1556(11thCir.1994).TheSeventhCircuitCourtofAppealsinKadasv.MCISystemhouseCorp.,255F.3d359(7thCir.2001),raisedquestionsastotheuseofthestandarddeviationtestaloneasacontrollingfactorindeterminingtheadmissibilityofstatisticalevidencetoshowdiscrimination.Rather,theCourtconcludeditisforthejudgetosay,onthebasisofthestatisticalevidence,whetheraparticularsignificancelevel,inthecontextofaparticularstudyinaparticularcase,istoolowtomakethestudyworththeconsiderationofjudgeorjury.255F.3dat363.

82 615F.3d233at241,citingCroson,488U.S.at509(pluralityopinion),andcitingConcreteWorks,321F.3dat958.


percentages,indeterminingwhetherCroson’sevidentiaryburdenwassatisfied.83TheFourthCircuitfoundthatdisparitystudiescanbeprobativeevidenceofdiscrimination.84

Anecdotalevidence.Anecdotalevidenceincludespersonalaccountsofincidents,includingofdiscrimination,toldfromthewitness’perspective.Anecdotalevidenceofdiscrimination,standingalone,generallyisinsufficienttoshowasystematicpatternofdiscrimination.85Butpersonalaccountsofactualdiscriminationmaycomplementempiricalevidenceandplayanimportantroleinbolsteringstatisticalevidence.86Ithasbeenheldthatanecdotalevidenceofalocalorstategovernment’sinstitutionalpracticesthatexacerbatediscriminatorymarketconditionsareoftenparticularlyprobative.87

Examplesofanecdotalevidencemayinclude:

TestimonyofMBE/WBEorDBEownersregardingwhethertheyfacedifficultiesorbarriers;

DescriptionsofinstancesinwhichMBE/WBEorDBEownersbelievetheyweretreatedunfairlyorwerediscriminatedagainstbasedontheirrace,ethnicity,orgenderorbelievetheyweretreatedfairlywithoutregardtorace,ethnicity,orgender;

Statementsregardingwhetherfirmssolicit,orfailtosolicit,bidsorpricequotesfromMBE/WBEsorDBEsonnon‐goalprojects;and

Statementsregardingwhetherthereareinstancesofdiscriminationinbiddingonspecificcontractsandinthefinancingandinsurancemarkets.88

Courtshaveacceptedandrecognizethatanecdotalevidenceisthewitness’narrativeofincidentstoldfromhisorherperspective,includingthewitness’thoughts,feelings,andperceptions,andthusanecdotalevidenceneednotbeverified.89

TheFourthCircuitinH.B.Rowestatedthatinadditiontostatisticalevidenceit“furtherrequire[s]thatsuchevidencebe‘corroboratedbysignificantanecdotalevidenceofracialdiscrimination.’”90Thecourtrejectedtheplaintiffs’contentionthattheanecdotaldatawas

83 H.B.Rowe,615F.3d233,241‐242;see,e.g.,ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3dat602‐605(3dCir.

1996).84 H.B.Rowe,615F.3dat241‐249;see,e.g.,ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3dat602‐605(3dCir.

1996).85 See,e.g.,AGC,SDCv.Caltrans,713F.3dat1192,1196‐1198;Eng’gContractorsAss’n,122F.3dat924‐25;ContractorsAss’n

ofE.Pa.v.CityofPhiladelphia,6F.3d990,1002‐1003(3d.Cir.1993);CoralConstr.Co.v.KingCounty,941F.2d910,919(9thCir.1991);O’DonnelConstr.Co.v.DistrictofColumbia,963F.2d420,427(D.C.Cir.1992).

86 See,e.g.,MidwestFence,840F.3d932,953(7thCir.2016);AGC,SDCv.Caltrans,713F.3dat1192,1196‐1198;H.B.Rowe,615F.3d233,248‐249;Eng’gContractorsAss’n,122F.3dat925‐26;ConcreteWorks,36F.3dat1520;ContractorsAss’n,6F.3dat1003;CoralConstr.Co.v.KingCounty,941F.2d910,919(9thCir.1991);seealso,KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(S.D.Tex.2016).

87 ConcreteWorksI,36F.3dat1520.88 See,e.g.,AGC,SDCv.Caltrans,713F.3dat1197;H.B.Rowe,615F.3d233,241‐242;249‐251;NorthernContracting,2005

WL2230195,at13‐15(N.D.Ill.2005),affirmed,473F.3d715(7thCir.2007);e.g.,ConcreteWorks,321F.3dat989;AdarandVII,228F.3dat1166‐76.Foradditionalexamplesofanecdotalevidence,seeEng’gContractorsAss’n,122F.3dat924;ConcreteWorks,36F.3dat1520;ConeCorp.v.HillsboroughCounty,908F.2d908,915(11thCir.1990);DynaLantic,885F.Supp.2d237;FloridaA.G.C.Council,Inc.v.StateofFlorida,303F.Supp.2d1307,1325(N.D.Fla.2004).

89 See,e.g.,AGC,SDCv.Caltrans,713F.3dat1197;H.B.Rowe,615F.3d233,241‐242,248‐249;ConcreteWorksII,321F.3dat989;Eng’gContractorsAss’n,122F.3dat924‐26;ConeCorp.,908F.2dat915;NorthernContracting,Inc.v.Illinois,2005WL2230195at*21,N.32(N.D.Ill.Sept.8,2005),aff’d473F.3d715(7thCir.2007).

90 615F.3dat241,quotingMarylandTroopersAssociation,Inc.v.Evans,993F.2d1072,1077(4thCir.1993).


flawedbecausethestudydidnotverifytheanecdotaldataandthattheconsultantoversampledminoritysubcontractorsincollectingthedata.91

TheFourthCircuitstatedthattheplaintiffsofferednorationaleastowhyafactfindercouldnotrelyontheState’s“unverified”anecdotaldata,andpointedoutthatafactfindercouldverywellconcludethatanecdotalevidenceneednot‐andindeedcannot‐beverifiedbecauseit“isnothingmorethanawitness’narrativeofanincidenttoldfromthewitness’perspectiveandincludingthewitness’perceptions.”92ThecourtinH.B.Roweheldthatanecdotalevidencesupplementsstatisticalevidenceofdiscrimination.93

ThecourtinH.B.RowefoundthatNorthCarolina’sanecdotalevidenceofdiscriminationsufficientlysupplementedtheState’sstatisticalshowing.94Thesurveyevidenceexposedaninformal,raciallyexclusivenetworkthatsystemicallydisadvantagedminoritysubcontractors.95ThecourtheldthattheStatecouldconcludethatsuchnetworksexertachronicandperniciousinfluenceonthemarketplacethatcallsforremedialaction.96

ThecourtinH.B.Roweconcludedtheanecdotalevidenceindicatedthatracialdiscriminationisacriticalfactorunderlyingthegrossstatisticaldisparitiespresentedinthedisparitystudy97.Thus,thecourtheldthattheStatepresentedsubstantialstatisticalevidenceofgrossdisparity,corroboratedby“disturbing”anecdotalevidence.98

b.TheNarrowTailoringRequirement.

Thesecondprongofthestrictscrutinyanalysisrequiresthatarace‐orethnicity‐basedprogramorlegislationimplementedtoremedypastidentifieddiscriminationintherelevantmarketbe“narrowlytailored”toreachthatobjective.

Thenarrowtailoringrequirementhasseveralcomponentsandthecourts,includingtheFourthCircuitCourtofAppeals,analyzeseveralcriteriaorfactorsindeterminingwhetheraprogramorlegislationsatisfiesthisrequirementincluding:

Thenecessityforthereliefandtheefficacyofalternativerace‐,ethnicity‐,andgender‐neutralremedies;

Theflexibilityanddurationoftherelief,includingtheavailabilityofwaiverprovisions;

Therelationshipofnumericalgoalstotherelevantlabormarket;and

Theimpactofarace‐,ethnicity‐,orgender‐consciousremedyontherightsofthirdparties.99

91 Id.at249.92 615F.3d233at249,quotingConcreteWorks,321F.3dat989.93 Id.at249.94 Id.95 Id.at251.96 Id.97 Id.at251.98 Id.99 See,e.g.,MidwestFence,840F.3d932,942,953‐954(7thCir.2016);AGC,SDCv.Caltrans,713F.3dat1198‐1199;H.B.

Rowe,615F.3d233,252‐255;Rothe,545F.3dat1036;WesternStatesPaving,407F3dat993‐995;SherbrookeTurf,345


TosatisfythenarrowlytailoredprongofthestrictscrutinyanalysisinthecontextoftheFederalDBEProgram,whichisinstructivetothestudy,thefederalcourtsthathaveevaluatedstateandlocalDBEProgramsandtheirimplementationoftheFederalDBEProgram,heldthefollowingfactorsarepertinent:

Evidenceofdiscriminationoritseffectsinthestatetransportationcontractingindustry;

Flexibilityanddurationofarace‐orethnicity‐consciousremedy;

RelationshipofanynumericalDBEgoalstotherelevantmarket;

Effectivenessofalternativerace‐andethnicity‐neutralremedies;

Impactofarace‐orethnicity‐consciousremedyonthirdparties;and

Applicationofanyrace‐orethnicity‐consciousprogramtoonlythoseminoritygroupswhohaveactuallysuffereddiscrimination.100

TheEleventhCircuitdescribedthe“theessenceofthe‘narrowlytailored’inquiry[as]thenotionthatexplicitlyracialpreferences…mustonlybea‘lastresort’option.”101Courtshavefoundthat“[w]hilenarrowtailoringdoesnotrequireexhaustionofeveryconceivablerace‐neutralalternative,itdoesrequireserious,goodfaithconsiderationofwhethersuchalternativescouldservethegovernmentalinterestatstake.”102

Similarly,theSixthCircuitCourtofAppealsinAssociatedGen.Contractorsv.Drabik(“DrabikII”),stated:“Adarandteachesthatacourtcalledupontoaddressthequestionofnarrowtailoringmustask,“forexample,whethertherewas‘anyconsiderationoftheuseofrace‐neutralmeanstoincreaseminoritybusinessparticipation’ingovernmentcontracting…orwhethertheprogramwasappropriatelylimitedsuchthatit‘willnotlastlongerthanthediscriminatoryeffectsitisdesignedtoeliminate.’”103

TheSupremeCourtinParentsInvolvedinCommunitySchoolsv.SeattleSchoolDistrict104alsofoundthatrace‐andethnicity‐basedmeasuresshouldbeemployedasalastresort.Themajorityopinionstated:“Narrowtailoringrequires‘serious,goodfaithconsiderationofworkablerace‐neutralalternatives,’andyetinSeattleseveralalternativeassignmentplans—manyofwhichwouldnothaveusedexpressracialclassifications—wererejectedwithlittleorno

F.3dat971;AdarandVII,228F.3dat1181;W.H.ScottConstr.Co.v.CityofJackson,Mississippi,199F.3d206(5thCir.1999);Eng’gContractorsAss’n,122F.3dat927(internalquotationsandcitationsomitted);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3d586,605‐610(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3d990,1008‐1009(3d.Cir.1993);seealso,GeyerSignal,Inc.,2014WL1309092.

100 See,e.g.,MidwestFence,840F.3d932,942,953‐954(7thCir.2016);AGC,SDCv.Caltrans,713F.3dat1198‐1199;H.B.Rowe,615F.3d233,243‐245,252‐255;WesternStatesPaving,407F.3dat998;SherbrookeTurf,345F.3dat971;AdarandVII,228F.3dat1181;KornhassConstruction,Inc.v.StateofOklahoma,DepartmentofCentralServices,140F.Supp.2dat1247‐1248;seealsoGeyerSignal,Inc.,2014WL1309092.

101 Eng’gContractorsAss’n,122F.3dat926(internalcitationsomitted);seealsoVirdiv.DeKalbCountySchoolDistrict,135Fed.Appx.262,264,2005WL138942(11thCir.2005)(unpublishedopinion);Websterv.FultonCounty,51F.Supp.2d1354,1380(N.D.Ga.1999),aff’dpercuriam218F.3d1267(11thCir.2000).

102 SeeGrutterv.Bollinger,539U.S.306,339(2003);Richmondv.J.A.CrosonCo.,488U.S.469,509‐10(1989);H.B.Rowe,615F.3d233,252‐255;WesternStatesPaving,407F.3dat993;SherbrookeTurf,345F.3dat972;seealsoAdarandI,515U.S.at237‐38.

103 AssociatedGen.ContractorsofOhio,Inc.v.Drabik(“DrabikII”),214F.3d730,738(6thCir.2000).104 551U.S.701,734‐37,127S.Ct.2738,2760‐61(2007).


consideration.”105TheCourtfoundthattheDistrictfailedtoshowitseriouslyconsideredrace‐neutralmeasures.

The“narrowlytailored”analysisisinstructiveintermsofdevelopinganypotentiallegislationorprogramsthatinvolveMBE/WBE/DBEsorinconnectionwithdeterminingappropriateremedialmeasurestoachievelegislativeobjectives.

Race‐,ethnicity‐,andgender‐neutralmeasures.Totheextenta“strongbasisinevidence”existsconcerningdiscriminationinalocalorstategovernment’srelevantcontractingandprocurementmarket,thecourtsanalyzeseveralcriteriaorfactorstodeterminewhetherastate’simplementationofarace‐orethnicity‐consciousprogramisnecessaryandthusnarrowlytailoredtoachieveremedyingidentifieddiscrimination.Oneofthekeyfactorsdiscussedaboveisconsiderationofrace‐,ethnicity‐andgender‐neutralmeasures.

Thecourtsrequirethatalocalorstategovernmentseriouslyconsiderrace‐,ethnicity‐andgender‐neutraleffortstoremedyidentifieddiscrimination.106Andthecourtshaveheldunconstitutionalthoserace‐andethnicity‐consciousprogramsimplementedwithoutconsiderationofrace‐andethnicity‐neutralalternativestoincreaseminoritybusinessparticipationinstateandlocalcontracting.107

TheCourtinCrosonfollowedbydecisionsfromfederalcourtsofappealfoundthatlocalandstategovernmentshaveattheirdisposala“wholearrayofrace‐neutraldevicestoincreasetheaccessibilityofcitycontractingopportunitiestosmallentrepreneursofallraces.”108

Examplesofrace‐,ethnicity‐,andgender‐neutralalternativesinclude,butarenotlimitedto,thefollowing:

Providingassistanceinovercomingbondingandfinancingobstacles;

Relaxationofbondingrequirements;

Providingtechnical,managerialandfinancialassistance;

Establishingprogramstoassiststart‐upfirms;

Simplificationofbiddingprocedures;

Trainingandfinancialaidforalldisadvantagedentrepreneurs;

Non‐discriminationprovisionsincontractsandinstatelaw;

105 551U.S.701,734‐37,127S.Ct.at2760‐61;seealsoFisherv.UniversityofTexas,133S.Ct.2411(2013);Grutterv.Bollinger,

539U.S.305(2003).106 See,e.g.,MidwestFence,840F.3d932,937‐938,953‐954(7thCir.2016);AGC,SDCv.Caltrans,713F.3dat1199;H.B.Rowe,

615F.3d233,252‐255;WesternStatesPaving,407F.3dat993;SherbrookeTurf,345F.3dat972;AdarandVII,228F.3dat1179;Eng’gContractorsAss’n,122F.3dat927;ContractorsAss’nofE.Pa.v.CityofPhiladelphia(CAEPII),91F.3dat608‐609(3d.Cir.1996);ContractorsAss’n(CAEPI),6F.3dat1008‐1009(3d.Cir.1993);CoralConstr.,941F.2dat923.

107 See,Croson,488U.S.at507;DrabikI,214F.3dat738(citationsandinternalquotationsomitted);seealso,Eng’gContractorsAss’n,122F.3dat927;Virdi,135Fed.Appx.At268;ContractorsAss’nofE.Pa.v.CityofPhiladelphia(CAEPII),91F.3dat608‐609(3d.Cir.1996);ContractorsAss’n(CAEP(I),6F.3dat1008‐1009(3d.Cir.1993).

108 Croson,488U.S.at509‐510.


Mentor‐protégéprogramsandmentoring;

Effortstoaddresspromptpaymentstosmallerbusinesses;

Smallcontractsolicitationstomakecontractsmoreaccessibletosmallerbusinesses;

Expansionofadvertisementofbusinessopportunities;

Outreachprogramsandefforts;

“Howtodobusiness”seminars;

Sponsoringnetworkingsessionsthroughoutthestateacquaintsmallfirmswithlargefirms;

CreationanddistributionofMBE/WBEandDBEdirectories;and

Streamliningandimprovingtheaccessibilityofcontractstoincreasesmallbusinessparticipation.109

Thecourtshaveheldthatwhilethenarrowtailoringanalysisdoesnotrequireagovernmentalentitytoexhausteverypossiblerace‐,ethnicity‐,andgender‐neutralalternative,itdoes“requireserious,goodfaithconsiderationofworkablerace‐neutralalternatives.110

Additionalfactorsconsideredundernarrowtailoring.

Inadditiontotherequiredconsiderationofthenecessityforthereliefandtheefficacyofalternativeremedies(race‐andethnicity‐neutralefforts),thecourtsrequireevaluationofadditionalfactorsaslistedabove.111Forexample,tobeconsiderednarrowlytailored,courtshaveheldthataMBE/WBE‐orDBE‐typeprogramshouldinclude:(1)built‐inflexibility;112(2)goodfaitheffortsprovisions;113(3)waiverprovisions;114(4)arationalbasisforgoals;115(5)graduationprovisions;116(6)remediesonlyforgroupsforwhichtherewerefindingsof

109 See,e.g.,Croson,488U.S.at509‐510;H.B.Rowe,615F.3d233,252‐255;N.Contracting,473F.3dat724;AdarandVII,228

F.3d1179;49CFR§26.51(b);seealso,Eng’gContractorsAss’n,122F.3dat927‐29;ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3dat608‐609(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3dat1008‐1009(3d.Cir.1993).

110 ParentsInvolvedinCommunitySchoolsv.SeattleSchoolDistrict,551U.S.701,732‐47,127S.Ct2738,2760‐61(2007);AGC,SDCv.Caltrans,713F.3dat1199,citingGrutterv.Bollinger,539U.S.306,339(2003);H.B.Rowe,615F.3d233,252‐255;WesternStatesPaving,407F.3dat993;SherbrookeTurf,345F.3dat972;Eng’gContractorsAss’n,122F.3dat927.

111 SeeMidwestFence,840F.3d932,937‐939,947‐954(7thCir.2016);H.B.Rowe,615F.3d233,252‐255;SherbrookeTurf,345F.3dat971‐972;Eng’gContractorsAss’n,122F.3dat927;ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3dat608‐609(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3dat1008‐1009(3d.Cir.1993).

112 MidwestFence,840F.3d932,937‐939,947‐954(7thCir.2016);H.B.Rowe,615F.3d233,253;SherbrookeTurf,345F.3dat971‐972;CAEPI,6F.3dat1009;AssociatedGen.ContractorsofCa.,Inc.v.CoalitionforEconomicEquality(“AGCofCa.”),950F.2d1401,1417(9thCir.1991);CoralConstr.Co.v.KingCounty,941F.2d910,923(9thCir.1991);ConeCorp.v.HillsboroughCounty,908F.2d908,917(11thCir.1990).

113 MidwestFence,840F.3d932,937‐939,947‐954(7thCir.2016);H.B.Rowe,615F.3d233,253;SherbrookeTurf,345F.3dat971‐972;CAEPI,6F.3dat1019;ConeCorp.,908F.2dat917.

114 MidwestFence,840F.3d932,937‐939,947‐954(7thCir.2016);H.B.Rowe,615F.3d233,253;AGCofCa.,950F.2dat1417;ConeCorp.,908F.2dat917;ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3dat606‐608(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3dat1008‐1009(3d.Cir.1993).

115 Id;SherbrookeTurf,345F.3dat971‐973;ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3dat606‐608(3d.Cir.1996);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3dat1008‐1009(3d.Cir.1993).

116 Id.


discrimination;117(7)sunsetprovisions;118and(8)limitationinitsgeographicalscopetotheboundariesoftheenactingjurisdiction.119

2. Intermediate scrutiny analysis

CertainFederalCourtsofAppeal,includingtheFourthCircuitCourtofAppeals,applyintermediatescrutinytogender‐consciousprograms.120TheFourthCircuithasapplied“intermediatescrutiny”toclassificationsbasedongender.121Restrictionssubjecttointermediatescrutinyarepermissiblesolongastheyaresubstantiallyrelatedtoserveanimportantgovernmentalinterest.122

Thecourtshaveinterpretedthisintermediatescrutinystandardtorequirethatgender‐basedclassificationsbe:

1. Supportedbyboth“sufficientprobative”evidenceor“exceedinglypersuasivejustification”insupportofthestatedrationalefortheprogram;and

2. Substantiallyrelatedtotheachievementofthatunderlyingobjective.123

Underthetraditionalintermediatescrutinystandard,thecourtreviewsagender‐consciousprogrambyanalyzingwhetherthestateactorhasestablishedasufficientfactualpredicatefortheclaimthatfemale‐ownedbusinesseshavesuffereddiscrimination,andwhetherthegender‐consciousremedyisanappropriateresponsetosuchdiscrimination.Thisstandardrequiresthestateactortopresent“sufficientprobative”evidenceinsupportofitsstatedrationalefortheprogram.124

117 See,e.g.,AGC,SDCv.Caltrans,713F.3dat1198‐1199;H.B.Rowe,615F.3d233,253‐255;WesternStatesPaving,407F.3d

at998;AGCofCa.,950F.2dat1417;ContractorsAss’nofE.Pa.v.CityofPhiladelphia,91F.3dat593‐594,605‐609(3d.Cir.1996);ContractorsAss’n(CAEPI),6F.3dat1009,1012(3d.Cir.1993);KossmanContractingCo.,Inc.,v.CityofHouston,2016WL1104363(W.D.Tex.2016);SherbrookeTurf,2001WL150284(unpublishedopinion),aff’d345F.3d964.

118 See,e.g.,H.B.Rowe,615F.3d233,254;SherbrookeTurf,345F.3dat971‐972;Peightal,26F.3dat1559;.seealso,KossmanContractingCo.,Inc.v.CityofHouston,2016WL1104363(W.D.Tex.2016).

119 CoralConstr.,941F.2dat925.120 H.B.RoweCo.,Inc.v.NCDOT,615F.3d233,242(4thCir.2010);AssociatedUtilityContractorsofMaryland,Inc.v.TheMayor

andCityCouncilofBaltimore,etal.,83F.Supp.2d613,619‐620(2000);Seegenerally,AGC,SDCv.Caltrans,713F.3dat1195;WesternStatesPaving,407F.3dat990n.6;CoralConstr.Co.,941F.2dat931‐932(9thCir.1991);Equal.Found.v.CityofCincinnati,128F.3d289(6thCir.1997);Eng’gContractorsAss’n,122F.3dat905,908,910;EnsleyBranchN.A.A.C.P.v.Seibels,31F.3d1548(11thCir.1994);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3dat1009‐1011(3dCir.1993);seealsoU.S.v.Virginia,518U.S.515,532andn.6(1996)(“exceedinglypersuasivejustification.”);GeyerSignal,2014WL1309092.

121 H.B.RoweCo.,Inc.v.NCDOT,615F.3d233,242(4thCir.2010);AssociatedUtilityContractorsofMaryland,Inc.v.TheMayorandCityCouncilofBaltimore,etal.,83F.Supp.2d613,619‐620(2000);see,e.g.,ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3dat1009‐1011(3dCir.1993);Cunninghamv.Beavers,858F.2d269,273(5thCir.1988),cert.denied,489U.S.1067(1989)(citingCraigv.Boren,429U.S.190(1976),andLalliv.Lalli,439U.S.259(1978)).

122 H.B.RoweCo.,Inc.v.NCDOT,615F.3d233,242(4thCir.2010);AssociatedUtilityContractorsofMaryland,Inc.v.TheMayorandCityCouncilofBaltimore,etal.,83F.Supp.2d613,619‐620(2000);see,e.g.,Serv.Emp.Int’lUnion,Local5v.CityofHous.,595F.3d588,596(5thCir.2010);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3dat1009‐1011(3dCir.1993).

123 See,AGC,SDCv.Caltrans,713F.3dat1195;H.B.RoweCo.,Inc.v.NCDOT,615F.3d233,242(4thCir.2010);WesternStatesPaving,407F.3dat990n.6;CoralConstr.Co.,941F.2dat931‐932(9thCir.1991);Equal.Found.v.CityofCincinnati,128F.3d289(6thCir.1997);Eng’gContractorsAss’n,122F.3dat905,908,910;EnsleyBranchN.A.A.C.P.v.Seibels,31F.3d1548(11thCir.1994);ContractorsAss’nofE.Pa.v.CityofPhiladelphia,6F.3dat1009‐1011(3dCir.1993);AssociatedUtilityContractorsofMaryland,Inc.v.TheMayorandCityCouncilofBaltimore,etal.,83F.Supp.2d613,619‐620(2000);seealsoU.S.v.Virginia,518U.S.515,532andn.6(1996)(“exceedinglypersuasivejustification.”).

124 Id.TheSeventhCircuitCourtofAppeals,however,inBuildersAss’nofGreaterChicagov.CountyofCook,Chicago,didnotholdthereisadifferentlevelofscrutinyforgenderdiscriminationorgenderbasedprograms.256F.3d642,644‐45(7thCir.2001).TheCourtinBuildersAss’nrejectedthedistinctionappliedbytheEleventhCircuitinEngineeringContractors.


Intermediatescrutiny,asinterpretedbyfederalcircuitcourtsofappeal,requiresadirect,substantialrelationshipbetweentheobjectiveofthegenderpreferenceandthemeanschosentoaccomplishtheobjective.125Themeasureofevidencerequiredtosatisfyintermediatescrutinyislessthanthatnecessarytosatisfystrictscrutiny.Unlikestrictscrutiny,ithasbeenheldthattheintermediatescrutinystandarddoesnotrequireashowingofgovernmentinvolvement,activeorpassive,inthediscriminationitseekstoremedy.126

TheFourthCircuitciteswithapprovaltheguidancefromtheEleventhCircuitthathasheld“[w]henagender‐consciousaffirmativeactionprogramrestsonsufficientevidentiaryfoundation,thegovernmentisnotrequiredtoimplementtheprogramonlyasalastresort….Additionally,underintermediatescrutiny,agender‐consciousprogramneednotcloselytieitsnumericalgoalstotheproportionofqualifiedwomeninthemarket.”127

TheFourthCircuitinH.B.Rowe,foundthatthedisparityanalysisdemonstratedwomen‐ownedbusinesseswonfarmorethantheirexpectedshareofsubcontractingdollarsduringthestudyperiod.128Therefore,thecourtconcludedthatprimecontractorssubstantiallyoverutilizedwomensubcontractorsonpublicroadconstructionprojects.129Thecourtheldthepublic‐sectorevidencedidnotevincethe“exceedinglypersuasivejustification”theSupremeCourtrequires.130

TheSupremeCourthasstatedthatanaffirmativeactionprogramsurvivesintermediatescrutinyiftheproponentcanshowitwas“aproductofanalysisratherthanastereotypedreactionbasedonhabit.”131TheThirdCircuitfoundthisstandardrequiredtheCityofPhiladelphiatopresentprobativeevidenceinsupportofitsstatedrationaleforthegenderpreference,discriminationagainstwomen‐ownedcontractors.132TheCourtinContractorsAss’nofE.Pa.(CAEPI)heldtheCityhadnotproducedenoughevidenceofdiscrimination,notingthatinitsbrief,theCityreliedonstatisticsintheCityCouncilFinanceCommitteeReportandoneaffidavitfromawomanengagedinthecateringbusiness,buttheCourtfoundthisevidenceonlyreflectedtheparticipationofwomeninCitycontractinggenerally,ratherthanintheconstructionindustry,whichwastheonlycognizableissueinthatcase.133

TheThirdCircuitinCAEPIheldtheevidenceofferedbytheCityofPhiladelphiaregardingwomen‐ownedconstructionbusinesseswasinsufficienttocreateanissueoffact.ThestudyinCAEPIcontainednodisparityindexforwomen‐ownedconstructionbusinessesinCitycontracting,suchasthatpresentedforminority‐ownedbusinesses.134Giventheabsenceofprobativestatisticalevidence,theCity,accordingtotheCourt,mustrelysolelyonanecdotalevidencetoestablishgenderdiscriminationnecessarytosupporttheOrdinance.135Butthe 125 See,e.g.,AGC,SDCv.Caltrans,713F.3dat1195;H.B.Rowe,Inc.v.NCDOT,615F.3d233,242(4thCir.2010);WesternStates

Paving,407F.3dat990n.6;CoralConstr.Co.,941F.2dat931‐932(9thCir.1991);Equal.Found.v.CityofCincinnati,128F.3d289(6thCir.1997);Eng’gContractorsAss’n,122F.3dat905,908,910;EnsleyBranchN.A.A.C.P.v.Seibels,31F.3d1548(11thCir.1994);Assoc.UtilityContractorsofMaryland,Inc.v.TheMayorandCityCouncilofBaltimore,etal.,83F.Supp2d613,619‐620(2000);see,also,U.S.v.Virginia,518U.S.515,532andn.6(1996)(“exceedinglypersuasivejustification.”)

126 CoralConstr.Co.,941F.2dat931‐932;SeeEng’gContractorsAss’n,122F.3dat910.127 615F.3d233,242;122F.3dat929(internalcitationsomitted).128 615F.3d233at254.129 Id.130 Id.at255.131 ContractorsAss’nofE.Pa.(CAEPI),6F.3dat1010(3d.Cir.1993).132 ContractorsAss’nofE.Pa.(CAEPI),6F.3dat1010(3d.Cir.1993).133 ContractorsAss’nofE.Pa.(CAEPI),6F.3dat1011(3d.Cir.1993).134 ContractorsAss’nofE.Pa.(CAEPI),6F.3dat1011(3d.Cir.1993).135 Id.


recordcontainedonlyonethree‐pageaffidavitalleginggenderdiscriminationintheconstructionindustry.136Theonlyothertestimonyonthissubject,theCourtfoundinCAEPI,consistedofasingle,conclusorysentenceofonewitnesswhoappearedataCityCouncilhearing.137ThisevidencetheCourtheldwasnotenoughtocreateatriableissueoffactregardinggenderdiscriminationundertheintermediatescrutinystandard.

3. Rational basis analysis

Whereachallengetotheconstitutionalityofastatuteoraregulationdoesnotinvolveafundamentalrightorasuspectclass,theappropriatelevelofscrutinytoapplyistherationalbasisstandard.138WhenapplyingrationalbasisreviewundertheEqualProtectionClauseoftheFourteenthAmendmentoftheUnitedStatesConstitution,acourtisrequiredtoinquire“whetherthechallengedclassificationhasalegitimatepurposeandwhetheritwasreasonable[forthelegislature]tobelievethatuseofthechallengedclassificationwouldpromotethatpurpose.”139

ThecourtsinVirginiaandtheFourthCircuitCourtofAppealsinapplyingtherationalbasistestgenerallyfindthatachallengedlawisupheld“aslongastherecouldbesomerationalbasisforenacting[it],”thatis,that“thelawinquestionisrationallyrelatedtoalegitimategovernmentpurpose.”140Thisstandardthecourtsconcludeisconsideredquitedeferential141and“thefitbetweentheenactmentandthepublicpurposesbehinditneednotbemathematicallyprecise.”142Solongasagovernmentlegislaturehadareasonablebasisforadoptingtheclassification—whichcaninclude“rationalspeculationunsupportedbyevidenceorempiricaldata”—thelawwillpassconstitutionalmuster.143

“[T]heburdenisontheoneattackingthelegislativearrangementtonegativeeveryconceivablebasiswhichmightsupportit,whetherornotthebasishasafoundationintherecord.”144Moreover,“courtsarecompelledunderrational‐basisreviewtoacceptalegislature’sgeneralizationsevenwhenthereisanimperfectfitbetweenmeansandends.Aclassificationdoesnotfailrational‐basisreviewbecauseitisnotmadewithmathematicalnicetyorbecauseinpracticeitresultsinsomeinequality”.145

136 Id.137 Id.138 Grayv.CommonwealthofVirginia,247Va.290,306‐309,645S.E.2d448,458‐460(Va.2007);see,e.g.,Hellerv.Doe,509

U.S.312,320(1993);Hettingav.UnitedStates,677F.3d471,478(D.C.Cir2012);Cunninghamv.Beavers858F.2d269,273(5thCir.1988);seealsoLundeenv.CanadianPac.R.Co.,532F.3d682,689(8thCir.2008)(statingthatfederalcourtsreviewlegislationregulatingeconomicandbusinessaffairsundera‘highlydeferentialrationalbasis’standardofreview.”);H.B.Rowe,Inc.v.NCDOT,615F.3d233at254.

139 See,Grayv.CommonwealthofVirginia,247Va.290,306‐309,645S.E.2d448,458‐460(Va.2007);see,e.g.,Hellerv.Doe,509U.S.312,320(1993);Hettingav.UnitedStates,677F.3d471,478(D.C.Cir2012);Cunninghamv.Beavers858F.2d269,273(5thCir.1988).

140 Grayv.CommonwealthofVirginia,274Va.290,645S.E.2d448,459(Va.2007),citingKadrmasv.DickinsonPublicSchools,487U.S.450,457‐58(1998);seealsoCityofCleburnev.CleburneLivingCtr.,Inc.,473U.S.432,440,(1985)(citationsomitted);Hellerv.Doe,509U.S.312,318‐321(1993)(Underrationalbasisstandard,alegislativeclassificationisaccordedastrongpresumptionofvalidity).

141 Wilkinsv.Gaddy,734F.3d344,347(4thCir.2013).142 Id.143 Id.(citingFCCv.BeachCommc'ns,Inc.,508U.S.307,315(1993));see,Grayv.CommonwealthofVirginia,274Va.290,307,

645S.E.2d448,459(Va.2007);Finnv.VirginiaRetirementSVS,259Va.144,155,524S.E.2d125,131(2000).144 UnitedStatesv.Timms,664F.3d436,448‐49(4thCir.2012),cert.denied,133S.Ct.189(2012)(citingHellerv.Doe,509

U.S.312,320‐21(1993))(quotationmarksandcitationomitted);Grayv.CommonwealthofVirginia,274Va.at308‐9,645S.E.2dat460.

145 Hellerv.Doe,509U.S.312,321(1993).


Underarationalbasisreviewstandard,alegislativeclassificationwillbeupheld“ifthereisarationalrelationshipbetweenthedisparityoftreatmentandsomelegitimategovernmentalpurpose.”146Becausealllegislationclassifiesitsobjects,differentialtreatmentisjustifiedby“anyreasonablyconceivablestateoffacts.”147

Arecentfederalcourtdecision,whichisinstructivetothestudy,involvedachallengetoandtheapplicationofasmallbusinessgoalinapre‐bidprocessforafederalprocurement.FirstlineTransportationSecurity,Inc.v.UnitedStates,isinstructiveandanalogoustosomeoftheissuesinasmallbusinessprogram.Thecaseisinformativeastotheuse,estimationanddeterminationofgoals(smallbusinessgoals,includingveteranpreferencegoals)inaprocurementundertheFederalAcquisitionRegulations(“FAR”)148.

Firstlineinvolvedasolicitationthatestablishedasmallbusinesssubcontractinggoalrequirement.InFirstline,theTransportationSecurityAdministration(“TSA”)issuedasolicitationforsecurityscreeningservicesattheKansasCityAirport.Thesolicitationstatedthatthe:“GovernmentanticipatesanoverallSmallBusinessgoalof40percent,”andthat“[w]ithinthatgoal,thegovernmentanticipatesfurthersmallbusinessgoalsof:Small,Disadvantagedbusiness[:]14.5%;WomanOwned[:]5percent:HUBZone[:]3percent;ServiceDisabled,VeteranOwned[:]3percent.”149

ThecourtappliedtherationalbasistestinconstruingthechallengetotheestablishmentbytheTSAofa40percentsmallbusinessparticipationgoalasunlawfulandirrational.150Thecourtstatedit“cannotsaythattheagency’sapproachisclearlyunlawful,orthattheapproachlacksarationalbasis.”151

Thecourtfoundthat“anagencymayrationallyestablishaspirationalsmallbusinesssubcontractinggoalsforprospectiveofferors….”Consequently,thecourtheldonerationalmethodbywhichtheGovernmentmayattempttomaximizesmallbusinessparticipation(includingveteranpreferencegoals)istoestablisharoughsubcontractinggoalforagivencontract,andthenallowpotentialcontractorstocompeteindesigninginnovatewaystostructureandmaximizesmallbusinesssubcontractingwithintheirproposals.152Thecourt,inanexerciseofjudicialrestraint,foundthe“40percentgoalisarationalexpressionoftheGovernment’spolicyofaffordingsmallbusinessconcerns…themaximumpracticableopportunitytoparticipateassubcontractors….”153

Veteranspreferences.InHooperv.BernalilloCountyAssessor,theSupremeCourtinaninstructivecaseaddressedtheconstitutionalityofaveteranspreferencestatute.154InHooper,NewMexicostatuteexemptedfromtheState’spropertytaxthetaxablevalueofpropertyofveteranswhoservedonactivedutyduringtheVietnamWar,butlimitedtheexemptiontoveteranswhowereNewMexicoresidentsbefore1976155.TheCourtconsideredwhetherthe

146 Hellerv.Doe,509U.S.312,320(1993);see,e.g.,Hettingav.UnitedStates,677F.3d471,478(D.C.Cir2012).147 Id.;see,Grayv.CommonwealthofVirginia,274Va.at308,645S.E.2dat459.148 2012WL5939228(Fed.Cl.2012).149 Id.150 Id.151 Id.152 Id.153 Id.154Hooperv.BernalilloCountyAssessor,472U.S.612(1985).155Hooperv.BernalilloCountyAssessor,472U.S.612(1985)


NewMexicostatutethatgrantsataxexemptionlimitedtothoseVietnamveteranswhoresidedintheStatebefore1976,violatedtheEqualProtectionClauseoftheFourteenthAmendment.156TheCourtheldNewMexicostatute’sresidencerequirementviolatestheguaranteesoftheEqualProtectionClauseapplyingarationalbasisstandardanalysis.157

TheCourtinHooper,notedthatwhenastatedistributesbenefitsunequally,thedistinctionsitmakesaresubjecttoscrutinyundertheEqualProtectionClauseoftheFourteenthAmendment.Generally,alawwillsurvivethatscrutinyifthedistinctionrationallyfurthersalegitimatestatepurpose.158.ThedistinctionNewMexicomadebetweenveteranswhoestablishedresidencebefore1976,andthoseveteranswhoarrivedintheStatethereafter,theCourtfoundbearsnorationalrelationshiptooneoftheState’sobjectives‐encouragingVietnamveteranstomovetoNewMexico.Id.at619.Thelegislaturesetthiseligibilitydatelongafterthetriggeringeventoccurred.159

TheCourtfoundthatonecomponentofthesecondpurposerationaleofthestatute‐rewardingveteranswhoresidedintheStatebefore1976,fortheirmilitaryservicetosupportthestatute’sdistinctionbetweenresidentveteranswaslegitimate;theCourtobservedthat“[o]urcountryhasalongstandingpolicyofcompensatingveteransfortheirpastcontributionsbyprovidingthemwithnumerousadvantages.”160Thevariouspreferencesforveteransaregroundedina“[d]esiretocompensateinsomemeasureforthedisruptionofawayoflife...andtoexpressgratitude....”161.Consistentwiththispolicy,theStatemayawardcertainbenefitstoallitsbonafideveterans,becauseitthenismakingneitheraninvidiousnorirrationaldistinctionamongitsresidents.162Residentveterans,asagroup,maywelldeservepreferentialtreatment,andsuchdifferentialtreatmentvis‐à‐visnon‐veteransdoesnotoffendtheEqualProtectionClause.163

EvenassumingthattheStatemaylegitimatelygrantbenefitsonthebasisofacoincidencebetweenmilitaryserviceandpastresidence,theCourtsaidtheNewMexicostatute’sdistinctionbetweenresidentveteranswasnotrationallyrelatedtotheState’sassertedlegislativegoal.164Thestatutewasnotwrittentorequireanyconnectionbetweentheveteran’spriorresidenceandmilitaryservice.Id.TheveteranwhoresidedinNewMexicoasaninfantlongagowouldimmediatelyqualifyfortheexemptionuponsettlingintheStateatanytimeinthefutureregardlessofwhereheresidedbefore,during,oraftermilitaryservice.165

TheCourtfoundtheNewMexicostatutecreatestwotiersofresidentVietnamveterans,identifyingresidentveteranswhosettledintheStateafter1976,asinasense“second‐classcitizens.”166Thisdiscriminationonthebasisofresidencewasnotsupportedbyanyidentifiablestateinterest;thestatuteisnotwrittentobenefitonlythoseresidentswhosuffereddislocationwithintheState’sbordersbyreasonofmilitaryservice.167TheCourtstatedithasmadeclear

156Id.at614.157Id.at624.158Id.at618.159Id.160Id.at620(internalcitationsomitted).161Id.,quoting,Russellv.Hodges,470F.2d212,218(CA21972).162Id.163Id.164Id.at622.165Id.166Id.at623.167Id.


thattheConstitutionwillnottolerateastatebenefitprogramthat“createsfixed,permanentdistinctions...between...classesofconcededlybonafideresidents,basedonhowlongtheyhavebeenintheState.”Id.TheCourtheldthatneithertheEqualProtectionClause,northeCourt’sprecedents,permittheStatetopreferestablishedresidentveteransovernewcomersintheretroactiveapportionmentofaneconomicbenefit.168

TheCourtheldthattheNewMexicoveterans’taxexemptionstatuteviolatedtheguaranteesoftheEqualProtectionClauseoftheFourteenthAmendmentrulingthestatutedidnotsatisfytherationalbasisstandardanalysis.

Inanotherinstructivecaseregardingacivilrightsactionwhereaplaintiffchallengedtheconstitutionalityofgivingapreferencetoveteransincivilserviceexaminations,adistrictcourtheldthatprovisionsofPennsylvaniaVeterans'PreferenceActgrantingatenpointbonustoscoreofanyveteranreceivingapassinggradeonstatecivilserviceexaminationwerenotviolativeofequalprotection.169Thecourtalsoheldthebonuspreferencedidnotdiscriminateagainstwomenbyreasonof“acute”disproportionbetweenmenandwomeninarmedforces,andevenifprovisionsdiddiscriminateagainstwomen,thecourtsaidtheymaybejustifiedasarecognitionthatexperience,discipline,andloyaltythatveteransgaininmilitaryserviceisconducivetobetterperformanceofpublicduties.170Thecourtdeniedtherequestfordeclaratoryandinjunctiverelief.171

ThecourtinFeinermanv.Jonesinconsideringtheanalysistoapplytoaveteranpreferencestatedthatanessentialelementofanyanalysisinvolvingtheequalprotectionclauserequiresadeterminationoftheappropriatestandardtobeusedbywhichtogaugetheconstitutionalityofagivenstatute.TheCourtstatedthetraditionalequalprotectionstandardlookstothereasonablenessoftheclassificationinlightofitspossibleintendedpurposes.172TheclassificationmustbearsomerationalrelationshiptoalegitimateendandwillbesetasideasviolativeoftheEqualProtectionclauseonlyifbasedonreasonstotallyunrelatedtothatgoal.173Underthistest,theCourtsaid,thepartychallengingtheconstitutionalityofastatutehastheburdenofprovingthatthestatutedenieshimequalprotection,anditwillnotbesetasideifitisreasonablyrelatedtosomepermissiblelegislativeoradministrativepurpose.174

Sincetheabstractrighttobefairlyconsideredforpublicemployment,accordingtothecourt,didnotinvolvea“fundamentalright”or“fundamentalinterest”,the“rationalbasis”testmustbeappliedtotestthevalidityoftheVeterans'PreferenceAct.175Theplaintiffhastheburdenofovercomingthepresumptionofconstitutionalityandofprovingthatveterans'preferenceisarbitraryandnotreasonablyrelatedtosomepermissiblelegislativeoradministrativepurpose.176

TheVeterans'PreferenceAct,whichawardsaten‐pointbonustoallveteranswhohavescoredapassinggradeoncivilservicetests,thecourtfoundwastypicalofthemanyStateandFederal

168Id.169Feinermanv.Jones,356F.Supp.252(1973)(M.D.Penn.1973).170Id.171Id.172Id.,citing,Shapirov.Thompson,394U.S.618(1969).173Id.citing,McDonaldv.BoardofElectionCommissioners,394U.S.802(1969).174Id.citing,McGowanv.Maryland,366U.S.420(1961).175Id.at258.176Id.at259.


statutoryprovisionsgivingveterans'preferenceinpublicemployment.Plaintiffcontendedthatsuchabonusforveteranswasunconstitutionalinthatitdeniedequalprotectionofthelawbycreatingtwoclasses,veteransandnon‐veterans,extendingtotheformerbenefitswhichitdeniedtoothers.177

ThecourtfoundthattherearethreeunderlyingjustificationsinmostofthesecasesupholdingthevariousVeterans'PreferenceActs:(1)Asarecognitionthattheexperience,discipline,andloyaltywhichveteransgaininmilitaryserviceisconducivetothebetterperformanceofpublicduties;(2)Asarewardforthoseveteranswho,eitherinvoluntarilyorthroughenlistment,haveservedtheircountryintimeofwar;and(3)Asanaidintherehabilitationandrelocationoftheveteranwhosenormallifestylehasbeendisruptedbymilitaryservice.178

InadoptingtheVeterans'PreferenceAct,thecourtfoundthestatelegislatureexpresslyrecognizedthefirsttworeasonssetoutaboveasjustifyinggivingpreferencetoveterans.Section2oftheActprovidesthatcreditwillbegiventoaveteranonappointment“forthedisciplineandexperiencerepresentedbyhismilitarytrainingandfortheloyaltyandpublicspiritdemonstratedbyhisserviceforthepreservationofhiscountry.”179Similarly,inacasechallengingthevalidityofgrantingabonustoveteransunderapriorveterans'preferenceprovision,thecourtstateditspurposeinthismanner:“Asabasisforappointmentitisnotunreasonabletoselectwarveteransfromcandidatesforofficeandtogivethemacertaincreditinrecognitionofthediscipline,experienceandservicerepresentedbytheirmilitaryactivity.Nooneshoulddenythattheseadvantagesareconducivetothebetterperformanceofpublicduties,wherediscipline,loyalty,andpublicspiritarelikewiseessential.”180

Thecourtsustainedthevalidityofgrantingafifteen‐pointbonustoveteranstakingappointmentexaminations,solongastheapplicantsinitiallyreceivedapassinggrade.Atthesametime,however,thecourtstruckdownaprovisionofthestatutegranting15%credittoallveteranstakingtheexaminations,regardlessofwhethertheyachievedapassinggrade.181

4. Pending cases (at the time of this report)

Therearenosignificantpendingcasesonappealatthetimeofthisreport,whichmaypotentiallydirectlyimpactandbeinstructivetothestudy.Themostrecentcase,citedbelow,wasjustsettledandvoluntarilydismissedonMarch14,2018byorderofthedistrictcourtandstipulatedtobytheparties,afterremandfromtheNinthCircuitCourtofAppeals.

MountainWestHoldingCo.,Inc.v.Montana,2017WL2179120(9thCir.May16,2017),MemorandumOpinion(NotForPublication),U.S.CourtofAppealsfortheNinthCircuit,May16,2017,DocketNos.14‐26097and15‐35003,dismissinginpart,reversinginpartandremandingtheU.S.DistrictCourtdecisionat2014WL6686734(D.Mont.2014).PetitionforPanelRehearingandRehearingEnBancfiledwiththeU.S.CourtofAppealsfortheNinthCircuitbyMontanaDOT,May30,2017,deniedonJune27,2017.ThecaseonremandwasvoluntarilydismissedbystipulationofthepartiesafterthepartiesenteredintoaSettlementAgreement

177Id.at259.178Id.at259citing,Koelfgenv.Jackson,355F.Supp.243(D.Minn.1972).179Id.180Id.at259quoting,Commonwealthexrel.Grahamv.Schmid,333Pa.568,at573,3A.2d701,at704(1938).181Id.


(February23,2018).ThecasewasordereddismissedbythedistrictcourtonMarch14,2018afterthepartiesperformedtheSettlementAgreement.(SeeSectionFbelow.)

RotheDevelopment,Inc.v.U.S.D.O.D.andS.B.A.,2016WL4719049(D.C.Cir.2016).Also,itisinstructivetothestudytopointouttherecentdecisioninRotheDevelopment,Inc.v.U.S.DepartmentofDefenseandSmallBusinessAdministration,2016WL4719049(D.C.Cir.Sept.9,2016),affirmingonothergrounds,RotheDevelopment,Inc.v.UnitedStatesDepartmentofDefense,U.S.SmallBusinessAdministration,etal,107F.Supp.3d183,2015WL3536271(D.D.C.,2015),certiorarideniedin2017.

RothefiledthisactionagainsttheU.S.DepartmentofDefenseandtheU.S.SmallBusinessAdministrationchallengingtheconstitutionalityoftheSection8(a)Programonitsface.TheRothecaseisnearlyidenticaltothechallengebroughtinDynaLanticCorp.v.U.S.DepartmentofDefense,885F.Supp.2d237(D.D.C.2012).DynaLantic’scourtrejectedtheplaintiff’sfacialattackandheldtheSection8(a)Programfaciallyconstitutional.

PlaintiffRothereliesonsubstantiallythesamerecordevidenceandnearlyidenticallegalargumentsasinDynaLantic,andurgedthecourttostrikedowntherace‐consciousprovisionsofSection8(a)ontheirface.ThedistrictcourtinRotheagreedwiththecourt’sfindings,holdingsandreasoninginDynaLantic,andthusconcludedthatSection8(a)isconstitutionalonitsface.

Thedistrictcourtconcludedthatplaintiff’sfacialconstitutionalchallengetotheSection8(a)Programfailed,thatthegovernmentdemonstratedacompellinginterestfortheracialclassification,theneedforremedialactionissupportedbystrongandunrebuttedevidence,andtheSection8(a)programisnarrowlytailored.

RotheappealedthedecisiontotheUnitedStatesCourtofAppealsfortheDistrictofColumbiaCircuit.Themajorityofthethreejudgepanelaffirmedthedistrictcourt’sdecision,butonothergrounds.182

TheCourtofAppealsinRothefoundthatthechallengewasonlytotheSection8(a)statute,nottheimplementingregulations,andthusheldtheSection8(a)statutewasrace‐neutral.183Therefore,thecourtheldtherationalbasistestappliedandnotstrictscrutiny.184Thecourtaffirmedthegrantofsummaryjudgmenttothegovernmentdefendantsapplyingtherationalbasisstandard,andupheldthevalidityofSection8(a)basedonthelimitedchallengebyRothetothestatuteandnottheregulations.

TheCourtofAppealsheldthatSection8(a)oftheSmallBusinessActdoesnotwarrantstrictscrutinybecauseitdoesnotonitsfaceclassifyindividualsbyrace.185Section8(a),theCourtsaid,unliketheimplementingregulations,usesfaciallyrace‐neutraltermsofeligibilitytoidentifyindividualvictimsofdiscrimination,prejudice,orbias,withoutpresumingthatmembersofcertainracial,ethnic,orculturalgroupsqualifyassuch.186(SeeSectionGbelow.)

1822016WL4719049(September9,2016).1832016WL4719049,at*1‐2.184Id.1852016WL4719049at**1‐2.186Id.


RothefiledaPetitionforRehearingandRehearingEnBanctothefullCourtofAppeals.ThecourtdeniedthePetition.RothethenfiledaPetitionforaWritofCertioraritotheU.S.SupremeCourt,whichwasdeniedonOctober16,2017.2017WL1375832.

Ongoingreview.TheaboverepresentsasummaryofthelegalframeworkpertinenttothestudyandimplementationofDBE/MBE/WBE,orrace‐,ethnicity‐,orgender‐neutralprograms,theFederalDBEProgram,andtheimplementationoftheFederalDBEProgrambystateDOTsandlocalgovernmentrecipientsoffederalfunds.Becausethisisadynamicareaofthelaw,theframeworkissubjecttoongoingreviewasthelawcontinuestoevolve.Thefollowingprovidesmoredetailedsummariesofkeyrecentdecisions.


SUMMARIES OF RECENT DECISIONS

D. Recent Decisions Involving State or Local Government MBE/WBE/DBE Programs in the Fourth Circuit Court of Appeals

1. H. B. Rowe Co., Inc. v. W. Lyndo Tippett, NCDOT, et al., 615 F.3d 233 (4th Cir. 2010)

TheStateofNorthCarolinaenactedstatutorylegislationthatrequiredprimecontractorstoengageingoodfaitheffortstosatisfyparticipationgoalsforminorityandwomensubcontractorsonstate‐fundedprojects.(SeefactsasdetailedinthedecisionoftheUnitedStatesDistrictCourtfortheEasternDistrictofNorthCarolinadiscussedbelow.).Theplaintiff,aprimecontractor,broughtthisactionafterbeingdeniedacontractbecauseofitsfailuretodemonstrategoodfaitheffortstomeettheparticipationgoalssetonaparticularcontractthatitwasseekinganawardtoperformworkwiththeNorthCarolinaDepartmentofTransportation(“NCDOT”).PlaintiffassertedthattheparticipationgoalsviolatedtheEqualProtectionClauseandsoughtinjunctivereliefandmoneydamages.

Afterabenchtrial,thedistrictcourtheldthechallengedstatutoryschemeconstitutionalbothonitsfaceandasapplied,andtheplaintiffprimecontractorappealed.615F.3d233at236.TheCourtofAppealsheldthattheStatedidnotmeetitsburdenofproofinallrespectstoupholdthevalidityofthestatelegislation.But,theCourtagreedwiththedistrictcourtthattheStateproducedastrongbasisinevidencejustifyingthestatutoryschemeonitsface,andasappliedtoAfricanAmericanandNativeAmericansubcontractors,andthattheStatedemonstratedthatthelegislativeschemeisnarrowlytailoredtoserveitscompellinginterestinremedyingdiscriminationagainsttheseracialgroups.TheCourtthusaffirmedthedecisionofthedistrictcourtinpart,reverseditinpartandremandedforfurtherproceedingsconsistentwiththeopinion.Id.

TheCourtfoundthattheNorthCarolinastatutoryscheme“largelymirroredthefederalDisadvantagedBusinessEnterprise(“DBE”)program,withwhicheverystatemustcomplyinawardinghighwayconstructioncontractsthatutilizefederalfunds.”615F.3d233at236.TheCourtalsonotedthatfederalcourtsofappeal“haveuniformlyupheldtheFederalDBEProgramagainstequal‐protectionchallenges.”Id.,atfootnote1,citing,AdarandConstructors,Inc.v.Slater,228F.3d1147(10thCir.2000).

In2004,theStateretainedaconsultanttoprepareandissueathirdstudyofsubcontractorsemployedinNorthCarolina’shighwayconstructionindustry.Thestudy,accordingtotheCourt,marshaledevidencetoconcludethatdisparitiesintheutilizationofminoritysubcontractorspersisted.615F.3d233at238.TheCourtpointedoutthatinresponsetothestudy,theNorthCarolinaGeneralAssemblysubstantiallyamendedstatelegislationsection136‐28.4andthenewlawwentintoeffectin2006.Thenewstatutemodifiedthepreviousstatutoryscheme,accordingtotheCourtinfiveimportantrespects.Id.

First,theamendedstatuteexpresslyconditionsimplementationofanyparticipationgoalsonthefindingsofthe2004study.Second,theamendedstatuteeliminatesthe5and10percentannualgoalsthatweresetinthepredecessorstatute.615F.3d233at238‐239.Instead,asamended,thestatuterequirestheNCDOTto“establishannualaspirationalgoals,notmandatorygoals,…fortheoverallparticipationincontractsbydisadvantagedminority‐ownedandwomen‐


ownedbusinesses…[that]shallnotbeappliedrigidlyonspecificcontractsorprojects.”Id.at239,quoting,N.C.Gen.Stat.§136‐28.4(b)(2010).ThestatutefurthermandatesthattheNCDOTset“contract‐specificgoalsorproject‐specificgoals…foreachdisadvantagedminority‐ownedandwomen‐ownedbusinesscategorythathasdemonstratedsignificantdisparityincontractutilization”basedonavailability,asdeterminedbythestudy.Id.

Third,theamendedstatutenarrowedthedefinitionof“minority”toencompassonlythosegroupsthathavesuffereddiscrimination.Id.at239.Theamendedstatutereplacedalistofdefinedminoritiestoanycertaingroupsbydefining“minority”as“onlythoseracialorethnicityclassificationsidentifiedby[thestudy]…thathavebeensubjectedtodiscriminationintherelevantmarketplaceandthathavebeenadverselyaffectedintheirabilitytoobtaincontractswiththeDepartment.”Id.at239quotingsection136‐28.4(c)(2)(2010).

Fourth,theamendedstatuterequiredtheNCDOTtoreevaluatetheProgramovertimeandrespondtochangingconditions.615F.3d233at239.Accordingly,theNCDOTmustconductastudysimilartothe2004studyatleasteveryfiveyears.Id.§136‐28.4(b).Finally,theamendedstatutecontainedasunsetprovisionwhichwassettoexpireonAugust31,2009,buttheGeneralAssemblysubsequentlyextendedthesunsetprovisiontoAugust31,2010.Id.Section136‐28.4(e)(2010).

TheCourtalsonotedthatthestatuterequiredonlygoodfaitheffortsbytheprimecontractorstoutilizesubcontractors,andthatthegoodfaithrequirement,theCourtfound,provedpermissiveinpractice:primecontractorssatisfiedtherequirementin98.5percentofcases,failingtodosoinonly13of878attempts.615F.3d233at239.

Strictscrutiny.TheCourtstatedthestrictscrutinystandardwasapplicabletojustifyarace‐consciousmeasure,andthatitisasubstantialburdenbutnotautomatically“fatalinfact.”615F.3d233at241.TheCourtpointedoutthat“[t]heunhappypersistenceofboththepracticeandthelingeringeffectsofracialdiscriminationagainstminoritygroupsinthiscountryisanunfortunatereality,andgovernmentisnotdisqualifiedfromactinginresponsetoit.”Id.at241quotingAlexanderv.Estepp,95F.3d312,315(4thCir.1996).Insoacting,agovernmentalentitymustdemonstrateithadacompellinginterestin“remedyingtheeffectsofpastorpresentracialdiscrimination.”Id.,quotingShawv.Hunt,517U.S.899,909(1996).

Thus,theCourtfoundthattojustifyarace‐consciousmeasure,astatemustidentifythatdiscrimination,publicorprivate,withsomespecificity,andmusthaveastrongbasisinevidenceforitsconclusionthatremedialactionisnecessary.615F.3d233at241quoting,Croson,488U.S.at504andWygantv.JacksonBoardofEducation,476U.S.267,277(1986)(pluralityopinion).

TheCourtsignificantlynotedthat:“Thereisno‘precisemathematicalformulatoassessthequantumofevidencethatrisestotheCroson‘strongbasisinevidence’benchmark.’”615F.3d233at241,quotingRotheDev.Corp.v.DepartmentofDefense,545F.3d1023,1049(Fed.Cir.2008).TheCourtstatedthatthesufficiencyoftheState’sevidenceofdiscrimination“mustbeevaluatedonacase‐by‐casebasis.”Id.at241.(internalquotationmarksomitted).

TheCourtheldthatastate“neednotconclusivelyprovetheexistenceofpastorpresentracialdiscriminationtoestablishastrongbasisinevidenceforconcludingthatremedialactionisnecessary.615F.3d233at241,citingConcreteWorks,321F.3dat958.“Instead,astatemaymeetitsburdenbyrelyingon“asignificantstatisticaldisparity”betweentheavailabilityofqualified,willing,andableminoritysubcontractorsandtheutilizationofsuchsubcontractorsbythegovernmentalentityoritsprimecontractors.Id.at241,citingCroson,488U.S.at509


(pluralityopinion).TheCourtstatedthatwe“furtherrequirethatsuchevidencebe‘corroboratedbysignificantanecdotalevidenceofracialdiscrimination.’”Id.at241,quotingMarylandTroopersAssociation,Inc.v.Evans,993F.2d1072,1077(4thCir.1993).

TheCourtpointedoutthatthosechallengingrace‐basedremedialmeasuresmust“introducecredible,particularizedevidencetorebut”thestate’sshowingofastrongbasisinevidenceforthenecessityforremedialaction.Id.at241‐242,citingConcreteWorks,321F.3dat959.Challengersmayofferaneutralexplanationforthestate’sevidence,presentcontrastingstatisticaldata,ordemonstratethattheevidenceisflawed,insignificant,ornotactionable.Id.at242(citationsomitted).However,theCourtstated“thatmerespeculationthatthestate’sevidenceisinsufficientormethodologicallyflaweddoesnotsufficetorebutastate’sshowing.Id.at242,citingConcreteWorks,321F.3dat991.

TheCourtheldthattosatisfystrictscrutiny,thestate’sstatutoryschememustalsobe“narrowlytailored”toservethestate’scompellinginterestinnotfinancingprivatediscriminationwithpublicfunds.615F.3d233at242,citingAlexander,95F.3dat315(citingAdarand,515U.S.at227).

Intermediatescrutiny.TheCourtheldthatcourtsapply“intermediatescrutiny”tostatutesthatclassifyonthebasisofgender.Id.at242.TheCourtfoundthatadefenderofastatutethatclassifiesonthebasisofgendermeetsthisintermediatescrutinyburden“byshowingatleastthattheclassificationservesimportantgovernmentalobjectivesandthatthediscriminatorymeansemployedaresubstantiallyrelatedtotheachievementofthoseobjectives.”Id.,quotingMississippiUniversityforWomenv.Hogan,458U.S.718,724(1982).TheCourtnotedthatintermediatescrutinyrequireslessofashowingthandoes“themostexacting”strictscrutinystandardofreview.Id.at242.TheCourtfoundthatits“sistercircuits”provideguidanceinformulatingagoverningevidentiarystandardforintermediatescrutiny.Thesecourtsagreethatsuchameasure“canrestsafelyonsomethinglessthanthe‘strongbasisinevidence’requiredtobeartheweightofarace‐orethnicity‐consciousprogram.”Id.at242,quotingEngineeringContractors,122F.3dat909(othercitationsomitted).

Indefiningwhatconstitutes“somethingless”thana‘strongbasisinevidence,’thecourts,…alsoagreethatthepartydefendingthestatutemust‘present[]sufficientprobativeevidenceinsupportofitsstatedrationaleforenactingagenderpreference,i.e.,…theevidence[mustbe]sufficienttoshowthatthepreferencerestsonevidence‐informedanalysisratherthanonstereotypicalgeneralizations.”615F.3d233at242quotingEngineeringContractors,122F.3dat910andConcreteWorks,321F.3dat959.Thegender‐basedmeasuresmustbebasedon“reasonedanalysisratherthanonthemechanicalapplicationoftraditional,ofteninaccurate,assumptions.”Id.at242quotingHogan,458U.S.at726.

Plaintiff’sburden.TheCourtfoundthatwhenaplaintiffallegesthatastatuteviolatestheEqualProtectionClauseasappliedandonitsface,theplaintiffbearsaheavyburden.Initsfacialchallenge,theCourtheldthataplaintiff“hasaveryheavyburdentocarry,andmustshowthat[astatutoryscheme]cannotoperateconstitutionallyunderanycircumstance.”Id.at243,quotingWestVirginiav.U.S.DepartmentofHealth&HumanServices,289F.3d281,292(4thCir.2002).

Statisticalevidence.TheCourtexaminedtheState’sstatisticalevidenceofdiscriminationinpublic‐sectorsubcontracting,includingitsdisparityevidenceandregressionanalysis.TheCourtnotedthatthestatisticalanalysisanalyzedthedifferenceordisparitybetweentheamountofsubcontractingdollarsminority‐andwomen‐ownedbusinessesactuallywoninamarketand


theamountofsubcontractingdollarstheywouldbeexpectedtowingiventheirpresenceinthatmarket.615F.3d233at243.TheCourtfoundthatthestudygroundeditsanalysisinthe“disparityindex,”whichmeasurestheparticipationofagivenracial,ethnic,orgendergroupengagedinsubcontracting.Id.Incalculatingadisparityindex,thestudydividedthepercentageoftotalsubcontractingdollarsthataparticulargroupwonbythepercentthatgrouprepresentsintheavailablelaborpool,andmultipliedtheresultby100.Id.Theclosertheresultingindexisto100,thegreaterthatgroup’sparticipation.Id.

TheCourtheldthatafterCroson,anumberofoursistercircuitshaverecognizedtheutilityofthedisparityindexindeterminingstatisticaldisparitiesintheutilizationofminority‐andwomen‐ownedbusinesses.Id.at243‐244(Citationstomultiplefederalcircuitcourtdecisionsomitted.)TheCourtalsofoundthatgenerally“courtsconsideradisparityindexlowerthan80asanindicationofdiscrimination.”Id.at244.Accordingly,thestudyconsideredonlyadisparityindexlowerthan80aswarrantingfurtherinvestigation.Id.

TheCourtpointedoutthataftercalculatingthedisparityindexforeachrelevantracialorgendergroup,theconsultanttestedforthestatisticalsignificanceoftheresultsbyconductingstandarddeviationanalysisthroughtheuseoft‐tests.TheCourtnotedthatstandarddeviationanalysis“describestheprobabilitythatthemeasureddisparityistheresultofmerechance.”615F.3d233at244,quotingEng’gContractors,122F.3dat914.Theconsultantconsideredthefindingoftwostandarddeviationstodemonstrate“with95percentcertaintythatdisparity,asrepresentedbyeitheroverutilizationorunderutilization,isactuallypresent.”Id.,citingEng’gContractors,122F.3dat914.

ThestudyanalyzedtheparticipationofminorityandwomensubcontractorsinconstructioncontractsawardedandmanagedfromthecentralNCDOTofficeinRaleigh,NorthCarolina.615F.3d233at244.Todetermineutilizationofminorityandwomensubcontractors,theconsultantdevelopedamasterlistofcontractsmainlyfromState‐maintainedelectronicdatabasesandhardcopyfiles;thenselectedfromthatlistastatisticallyvalidsampleofcontracts,andcalculatedthepercentageofsubcontractingdollarsawardedtominority‐andwomen‐ownedbusinessesduringthe5‐yearperiodendinginJune2003.(Thestudywaspublishedin2004).Id.at244.

TheCourtfoundthattheuseofdataforcentrally‐awardedcontractswassufficientforitsanalysis.ItwasnotedthatdatafromconstructioncontractsawardedandmanagedfromtheNCDOTdivisionsacrossthestateandfrompreconstructioncontracts,whichinvolveworkfromengineeringfirmsandarchitecturalfirmsonthedesignofhighways,wasincompleteandnotaccurate.615F.3d233at244,n.6.Thesedatawerenotrelieduponinformingtheopinionsrelatingtothestudy.Id.at244,n.6.

Toestimateavailability,whichtheCourtdefinedasthepercentageofaparticulargroupintherelevantmarketarea,theconsultantcreatedavendorlistcomprising:(1)subcontractorsapprovedbythedepartmenttoperformsubcontractworkonstate‐fundedprojects,(2)subcontractorsthatperformedsuchworkduringthestudyperiod,and(3)contractorsqualifiedtoperformprimeconstructionworkonstate‐fundedcontracts.615F.3d233at244.TheCourtnotedthatprimeconstructionworkonstate‐fundedcontractswasincludedbasedonthetestimonybytheconsultantthatprimecontractorsarequalifiedtoperformsubcontractingworkandoftendoperformsuchwork.Id.at245.TheCourtalsonotedthattheconsultantsubmitteditsmasterlisttotheNCDOTforverification.Id.at245.


Basedontheutilizationandavailabilityfigures,thestudypreparedthedisparityanalysiscomparingtheutilizationbasedonthepercentageofsubcontractingdollarsoverthefiveyearperiod,determiningtheavailabilityinnumbersoffirmsandtheirpercentageofthelaborpool,adisparityindexwhichisthepercentageofutilizationindollarsdividedbythepercentageofavailabilitymultipliedby100,andaTValue.615F.3d233at245.

TheCourtconcludedthatthefiguresdemonstratedprimecontractorsunderutilizedalloftheminoritysubcontractorclassificationsonstate‐fundedconstructioncontractsduringthestudyperiod.615F.3d233245.Thedisparityindexforeachgroupwaslessthan80and,thus,theCourtfoundwarrantedfurtherinvestigation.Id.Thet‐testresults,however,demonstratedmarkedunderutilizationonlyofAfricanAmericanandNativeAmericansubcontractors.Id.ForAfricanAmericansthet‐valuefelloutsideoftwostandarddeviationsfromthemeanand,therefore,wasstatisticallysignificantata95percentconfidencelevel.Id.TheCourtfoundtherewasatleasta95percentprobabilitythatprimecontractors’underutilizationofAfricanAmericansubcontractorswasnottheresultofmerechance.Id.

ForNativeAmericansubcontractors,thet‐valueof1.41wassignificantataconfidencelevelofapproximately85percent.615F.3d233at245.Thet‐valuesforHispanicAmericanandAsianAmericansubcontractors,demonstratedsignificanceataconfidencelevelofapproximately60percent.Thedisparityindexforwomensubcontractorsfoundthattheywereoverutilizedduringthestudyperiod.Theoverutilizationwasstatisticallysignificantata95percentconfidencelevel.Id.

Tocorroboratethedisparitystudy,theconsultantconductedaregressionanalysisstudyingtheinfluenceofcertaincompanyandbusinesscharacteristics–withaparticularfocusonownerraceandgender–onafirm’sgrossrevenues.615F.3d233at246.TheconsultantobtainedthedatafromatelephonesurveyoffirmsthatconductedorattemptedtoconductbusinesswiththeNCDOT.Thesurveypoolconsistedofarandomsampleofsuchfirms.Id.

Theconsultantusedthefirms’grossrevenuesasthedependentvariableintheregressionanalysistotesttheeffectofothervariables,includingcompanyageandnumberoffull‐timeemployees,andtheowners’yearsofexperience,levelofeducation,race,ethnicity,andgender.615F.3d233at246.Theanalysisrevealedthatminorityandwomenownershipuniversallyhadanegativeeffectonrevenue,andAfricanAmericanownershipofafirmhadthelargestnegativeeffectonthatfirm’sgrossrevenueofalltheindependentvariablesincludedintheregressionmodel.Id.ThesefindingsledtotheconclusionthatforAfricanAmericansthedisparityinfirmrevenuewasnotduetocapacity‐relatedormanagerialcharacteristicsalone.Id.

TheCourtrejectedtheargumentsbytheplaintiffsattackingtheavailabilityestimates.TheCourtrejectedtheplaintiff’sexpert,Dr.GeorgeLaNoue,whotestifiedthatbidderdata–reflectingthenumberofsubcontractorsthatactuallybidonDepartmentsubcontracts–estimatesavailabilitybetterthan“vendordata.”615F.3d233at246.Dr.LaNoueconceded,however,thattheStatedoesnotcompilebidderdataandthatbidderdataactuallyreflectsskewedavailabilityinthecontextofagoalsprogramthaturgesprimecontractorstosolicitbidsfromminorityandwomensubcontractors.Id.TheCourtfoundthattheplaintiff’sexpertdidnotdemonstratethatthevendordatausedinthestudywasunreliable,orthatthebidderdatawouldhaveyieldedlesssupportfortheconclusionsreached.Insum,theCourtheldthattheplaintiffschallengetotheavailabilityestimatefailedbecauseitcouldnotdemonstratethatthe2004study’savailabilityestimatewasinadequate.Id.at246.TheCourtcitedConcreteWorks,321F.3dat991forthepropositionthatachallengercannotmeetitsburdenofproofthroughconjectureandunsupportedcriticismsofthestate’sevidence,”andthattheplaintiffRowepresentednoviable


alternativefordeterminingavailability.Id.at246‐247,citingConcreteWorks,321F.3d991andSherbrookeTurf,Inc.v.Minn.DepartmentofTransportation,345F.3d964,973(8thCir.2003).

TheCourtalsorejectedtheplaintiff’sargumentthatminoritysubcontractorsparticipatedonstate‐fundedprojectsatalevelconsistentwiththeiravailabilityintherelevantlaborpool,basedonthestate’sresponsethatevidenceastothenumberofminoritysubcontractorsworkingwithstate‐fundedprojectsdoesnoteffectivelyrebuttheevidenceofdiscriminationintermsofsubcontractingdollars.615F.3d233at247.TheStatepointedtoevidenceindicatingthatprimecontractorsusedminoritybusinessesforlow‐valueworkinordertocomplywiththegoals,andthatAfricanAmericanownershiphadasignificantnegativeimpactonfirmrevenueunrelatedtofirmcapacityorexperience.Id.TheCourtconcludedplaintiffdidnotofferanycontraryevidence.Id.

TheCourtfoundthattheStatebolstereditspositionbypresentingevidencethatminoritysubcontractorshavethecapacitytoperformhigher‐valuework.615F.3d233at247.Thestudyconcluded,basedonasampleofsubcontractsandreportsofannualfirmrevenue,thatexclusionofminoritysubcontractorsfromcontractsunder$500,000wasnotafunctionofcapacity.Id.at247.Further,theStateshowedthatover90percentoftheNCDOT’ssubcontractswerevaluedat$500,000orless,andthatcapacityconstraintsdonotoperatewiththesameforceonsubcontractsastheymayonprimecontractsbecausesubcontractstendtoberelativelysmall.Id.at247.TheCourtpointedoutthattheCourtinRotheII,545F.3dat1042‐45,faulteddisparityanalysesoftotalconstructiondollars,includingprimecontracts,forfailingtoaccountfortherelativecapacityoffirmsinthatcase.Id.at247.

TheCourtpointedoutthatinadditiontothestatisticalevidence,theStatealsopresentedevidencedemonstratingthatfrom1991to1993,duringtheProgram’ssuspension,primecontractorsawardedsubstantiallyfewersubcontractingdollarstominorityandwomensubcontractorsonstate‐fundedprojects.TheCourtrejectedtheplaintiff’sargumentthatevidenceofadeclineinutilizationdoesnotraiseaninferenceofdiscrimination.615F.3d233at247‐248.TheCourtheldthattheverysignificantdeclineinutilizationofminorityandwomen‐subcontractors–nearly38percent–“surelyprovidesabasisforafactfindertoinferthatdiscriminationplayedsomeroleinprimecontractors’reducedutilizationofthesegroupsduringthesuspension.”Id.at248,citingAdarandv.Slater,228F.3dat1174(findingthatevidenceofdecliningminorityutilizationafteraprogramhasbeendiscontinued“stronglysupportsthegovernment’sclaimthattherearesignificantbarrierstominoritycompetitioninthepublicsubcontractingmarket,raisingthespecterofracialdiscrimination.”)TheCourtfoundsuchaninferenceisparticularlycompellingforminority‐ownedbusinessesbecause,evenduringthestudyperiod,primecontractorscontinuetounderutilizethemonstate‐fundedroadprojects.Id.at248.

Anecdotalevidence.TheStateadditionallyreliedonthreesourcesofanecdotalevidencecontainedinthestudy:atelephonesurvey,personalinterviews,andfocusgroups.TheCourtfoundtheanecdotalevidenceshowedaninformal“goodoldboy”networkofwhitecontractorsthatdiscriminatedagainstminoritysubcontractors.615F.3d233at248.TheCourtnotedthatthree‐quartersofAfricanAmericanrespondentstothetelephonesurveyagreedthataninformalnetworkofprimeandsubcontractorsexistedintheState,asdidthemajorityofotherminorities,thatmorethanhalfofAfricanAmericanrespondentsbelievedthenetworkexcludedtheircompaniesfrombiddingorawardingacontractasdidmanyoftheotherminorities.Id.at248.TheCourtfoundthatnearlyhalfofnonminoritymalerespondentscorroboratedtheexistenceofaninformalnetwork,however,only17percentofthembelievedthatthenetworkexcludedtheircompaniesfrombiddingorwinningcontracts.Id.


AnecdotalevidencealsoshowedalargemajorityofAfricanAmericanrespondentsreportedthatdoublestandardsinqualificationsandperformancemadeitmoredifficultforthemtowinbidsandcontracts,thatprimecontractorsviewminorityfirmsasbeinglesscompetentthannonminorityfirms,andthatnonminorityfirmschangetheirbidswhennotrequiredtohireminorityfirms.615F.3d233at248.Inaddition,theanecdotalevidenceshowedAfricanAmericanandNativeAmericanrespondentsbelievedthatprimecontractorssometimesdroppedminoritysubcontractorsafterwinningcontracts.Id.at248.TheCourtfoundthatinterviewandfocus‐groupresponsesechoedandunderscoredthesereports.Id.

Theanecdotalevidenceindicatedthatprimecontractorsalreadyknowwhotheywilluseonthecontractbeforetheysolicitbids:thatthe“goodoldboynetwork”affectsbusinessbecauseprimecontractorsjustpickupthephoneandcalltheirbuddies,whichexcludesothersfromthatmarketcompletely;thatprimecontractorsprefertouseotherlessqualifiedminority‐ownedfirmstoavoidsubcontractingwithAfricanAmerican‐ownedfirms;andthatprimecontractorsusetheirpreferredsubcontractorregardlessofthebidprice.615F.3d233at248‐249.Severalminoritysubcontractorsreportedthatprimecontractorsdonottreatminorityfirmsfairly,pointingtoinstancesinwhichprimecontractorssolicitedquotesthedaybeforebidsweredue,didnotrespondtobidsfromminoritysubcontractors,refusedtonegotiatepriceswiththem,orgaveminoritysubcontractorsinsufficientinformationregardingtheproject.Id.at249.

TheCourtrejectedtheplaintiffs’contentionthattheanecdotaldatawasflawedbecausethestudydidnotverifytheanecdotaldataandthattheconsultantoversampledminoritysubcontractorsincollectingthedata.TheCourtstatedthattheplaintiffsofferednorationaleastowhyafactfindercouldnotrelyontheState’s“unverified”anecdotaldata,andpointedoutthatafactfindercouldverywellconcludethatanecdotalevidenceneednot‐andindeedcannot‐beverifiedbecauseit“isnothingmorethanawitness’narrativeofanincidenttoldfromthewitness’perspectiveandincludingthewitness’perceptions.”615F.3d233at249,quotingConcreteWorks,321F.3dat989.

TheCourtheldthatanecdotalevidencesimplysupplementsstatisticalevidenceofdiscrimination.Id.at249.TheCourtrejectedplaintiffs’argumentthatthestudyoversampledrepresentativesfromminoritygroups,andfoundthatsurveyingmorenon‐minoritymenwouldnothaveadvancedtheinquiry.Id.at249.Itwasnotedthatthesamplesoftheminoritygroupswererandomlyselected.Id.TheCourtfoundthestatehadcompellinganecdotalevidencethatminoritysubcontractorsfacerace‐basedobstaclestosuccessfulbidding.Id.at249.

Strongbasisinevidencethattheminorityparticipationgoalswerenecessarytoremedydiscrimination.TheCourtheldthattheStatepresenteda“strongbasisinevidence”foritsconclusionthatminorityparticipationgoalswerenecessarytoremedydiscriminationagainstAfricanAmericanandNativeAmericansubcontractors.”615F.3d233at250.Therefore,theCourtheldthattheStatesatisfiedthestrictscrutinytest.TheCourtfoundthattheState’sdatademonstratedthatprimecontractorsgrosslyunderutilizedAfricanAmericanandNativeAmericansubcontractorsinpublicsectorsubcontractingduringthestudy.Id.at250.TheCourtnotedthatthesefindingshaveparticularresonancebecausesince1983,NorthCarolinahasencouragedminorityparticipationinstate‐fundedhighwayprojects,andyetAfricanAmericanandNativeAmericansubcontractorscontinuetobeunderutilizedonsuchprojects.Id.at250.

Inaddition,theCourtfoundthedisparityindexinthestudydemonstratedstatisticallysignificantunderutilizationofAfricanAmericansubcontractorsata95percentconfidencelevel,andofNativeAmericansubcontractorsataconfidencelevelofapproximately85percent.615F.3d233at250.TheCourtconcludedtheStatebolsteredthedisparityevidencewithregression


analysisdemonstratingthatAfricanAmericanownershipcorrelatedwithasignificant,negativeimpactonfirmrevenue,anddemonstratedtherewasadramaticdeclineintheutilizationofminoritysubcontractorsduringthesuspensionoftheprograminthe1990s.Id.

Thus,theCourtheldtheState’sevidenceshowingagrossstatisticaldisparitybetweentheavailabilityofqualifiedAmericanandNativeAmericansubcontractorsandtheamountofsubcontractingdollarstheywinonpublicsectorcontractsestablishedthenecessarystatisticalfoundationforupholdingtheminorityparticipationgoalswithrespecttothesegroups.615F.3d233at250.TheCourtthenfoundthattheState’sanecdotalevidenceofdiscriminationagainstthesetwogroupssufficientlysupplementedtheState’sstatisticalshowing.Id.Thesurveyinthestudyexposedaninformal,raciallyexclusivenetworkthatsystemicallydisadvantagedminoritysubcontractors.Id.at251.TheCourtheldthattheStatecouldconcludewithgoodreasonthatsuchnetworksexertachronicandperniciousinfluenceonthemarketplacethatcallsforremedialaction.Id.TheCourtfoundtheanecdotalevidenceindicatedthatracialdiscriminationisacriticalfactorunderlyingthegrossstatisticaldisparitiespresentedinthestudy.Id.at251.Thus,theCourtheldthattheStatepresentedsubstantialstatisticalevidenceofgrossdisparity,corroboratedby“disturbing”anecdotalevidence.

TheCourtheldincircumstanceslikethese,theSupremeCourthasmadeitabundantlyclearastatecanremedyapubliccontractingsystemthatwithholdsopportunitiesfromminoritygroupsbecauseoftheirrace.615F.3d233at251‐252.

Narrowlytailored.TheCourtthenaddressedwhethertheNorthCarolinastatutoryschemewasnarrowlytailoredtoachievetheState’scompellinginterestinremedyingdiscriminationagainstAfricanAmericanandNativeAmericansubcontractorsinpublic‐sectorsubcontracting.Thefollowingfactorswereconsideredindeterminingwhetherthestatutoryschemewasnarrowlytailored.

Neutralmeasures.TheCourtheldthatnarrowlytailoringrequires“serious,goodfaithconsiderationofworkablerace‐neutralalternatives,”butastateneednot“exhaust[]…everyconceivablerace‐neutralalternative.”615F.3d233at252quotingGrutterv.Bollinger,539U.S.306,339(2003).TheCourtfoundthatthestudydetailsnumerousalternativerace‐neutralmeasuresaimedatenhancingthedevelopmentandcompetitivenessofsmallorotherwisedisadvantagedbusinessesinNorthCarolina.Id.at252.TheCourtpointedoutvariousrace‐neutralalternativesandmeasures,includingaSmallBusinessEnterpriseProgram;waivinginstitutionalbarriersofbondingandlicensingrequirementsoncertainsmallbusinesscontractsof$500,000orless;andtheDepartmentcontractsforsupportservicestoassistdisadvantagedbusinessenterpriseswithbookkeepingandaccounting,taxes,marketing,bidding,negotiation,andotheraspectsofentrepreneurialdevelopment.Id.at252.

TheCourtfoundthatplaintiffidentifiednoviablerace‐neutralalternativesthatNorthCarolinahadfailedtoconsiderandadopt.TheCourtalsofoundthattheStatehadundertakenmostoftherace‐neutralalternativesidentifiedbyUSDOTinitsregulationsgoverningtheFederalDBEProgram.615F.3d233at252,citing49CFR§26.51(b).TheCourtconcludedthattheStategaveseriousgoodfaithconsiderationtorace‐neutralalternativespriortoadoptingthestatutoryscheme.Id.

TheCourtconcludedthatdespitetheserace‐neutralefforts,thestudydemonstrateddisparitiescontinuetoexistintheutilizationofAfricanAmericanandNativeAmericansubcontractorsinstate‐fundedhighwayconstructionsubcontracting,andthatthese“persistentdisparitiesindicatethenecessityofarace‐consciousremedy.”615F.3d233at252.


Duration.TheCourtagreedwiththedistrictcourtthattheprogramwasnarrowlytailoredinthatitsetaspecificexpirationdateandrequiredanewdisparitystudyeveryfiveyears.615F.3d233at253.TheCourtfoundthattheprogram’sinherenttimelimitandprovisionsrequiringregularreevaluationensureitiscarefullydesignedtoendureonlyuntilthediscriminatoryimpacthasbeeneliminated.Id.at253,citingAdarandConstructorsv.Slater,228F.3dat1179(quotingUnitedStatesv.Paradise,480U.S.149,178(1987)).

Program’sgoalsrelatedtopercentageofminoritysubcontractors.TheCourtconcludedthattheStatehaddemonstratedthattheProgram’sparticipationgoalsarerelatedtothepercentageofminoritysubcontractorsintherelevantmarketsintheState.615F.3d233at253.TheCourtfoundthattheNCDOThadtakenconcretestepstoensurethatthesegoalsaccuratelyreflecttheavailabilityofminority‐ownedbusinessesonaproject‐by‐projectbasis.Id.

Flexibility.TheCourtheldthattheProgramwasflexibleandthussatisfiedthisindicatorofnarrowtailoring.615F.3d233at253.TheProgramcontemplatedawaiverofproject‐specificgoalswhenprimecontractorsmakegoodfaitheffortstomeetthosegoals,andthatthegoodfaitheffortsessentiallyrequireonlythattheprimecontractorsolicitandconsiderbidsfromminorities.Id.TheStatedoesnotrequireorexpecttheprimecontractortoacceptanybidfromanunqualifiedbidder,oranybidthatisnotthelowestbid.Id.TheCourtfoundtherewasalenientstandardandflexibilityofthe“goodfaith”requirement,andnotedtheevidenceshowedonly13of878goodfaithsubmissionsfailedtodemonstrategoodfaithefforts.Id.

Burdenonnon‐MWBE/DBEs.TheCourtrejectedthetwoargumentspresentedbyplaintiffthattheProgramcreatedoneroussolicitationandfollow‐uprequirements,findingthattherewasnoneedforadditionalemployeesdedicatedtothetaskofrunningthesolicitationprogramtoobtainMBE/WBEs,andthattherewasnoevidencetosupporttheclaimthatplaintiffwasrequiredtosubcontractmillionsofdollarsofworkthatitcouldperformitselfforlessmoney.615F.3d233at254.TheStateofferedevidencefromthestudythatprimecontractorsneednotsubmitsubcontractworkthattheycanself‐perform.Id.

Overinclusive.TheCourtfoundbyitsowntermsthestatutoryschemeisnotoverinclusivebecauseitlimitedrelieftoonlythoseracialorethnicityclassificationsthathavebeensubjectedtodiscriminationintherelevantmarketplaceandthathadbeenadverselyaffectedintheirabilitytoobtaincontractswiththeDepartment.615F.3d233at254.TheCourtconcludedthatintailoringtheremedythisway,thelegislaturedidnotrandomlyincluderacialgroupsthatmayneverhavesufferedfromdiscriminationintheconstructionindustry,butrather,contemplatedparticipationgoalsonlyforthosegroupsshowntohavesuffereddiscrimination.Id.

Insum,theCourtheldthatthestatutoryschemeisnarrowlytailoredtoachievetheState’scompellinginterestinremedyingdiscriminationinpublic‐sectorsubcontractingagainstAfricanAmericanandNativeAmericansubcontractors.Id.at254.

Women‐ownedbusinessesoverutilized.Thestudy’spublic‐sectordisparityanalysisdemonstratedthatwomen‐ownedbusinesseswonfarmorethantheirexpectedshareofsubcontractingdollarsduringthestudyperiod.615F.3d233at254.Inotherwords,theCourtconcludedthatprimecontractorssubstantiallyoverutilizedwomensubcontractorsonpublicroadconstructionprojects.Id.TheCourtfoundthepublic‐sectorevidencedidnotevincethe“exceedinglypersuasivejustification”theSupremeCourtrequires.Id.at255.

TheCourtnotedthattheStatereliedheavilyonprivate‐sectordatafromthestudyattemptingtodemonstratethatprimecontractorssignificantlyunderutilizedwomensubcontractorsinthe


generalconstructionindustrystatewideandintheAsheville,NorthCarolinaarea.615F.3d233at255.However,becausethestudydidnotprovideat‐testanalysisontheprivate‐sectordisparityfigurestocalculatestatisticalsignificance,theCourtcouldnotdeterminewhetherthisprivateunderutilizationwas“theresultofmerechance.”Id.at255.TheCourtfoundtroublingthe“evidentiarygap”thattherewasnoevidenceindicatingtheextenttowhichwomen‐ownedbusinessescompetingonpublic‐sectorroadprojectsviedforprivate‐sectorsubcontractsinthegeneralconstructionindustry.Id.at255.TheCourtalsofoundthattheStatedidnotpresentanyanecdotalevidenceindicatingthatwomensubcontractorssuccessfullybiddingonStatecontractsfacedprivate‐sectordiscrimination.Id.Inaddition,theCourtfoundmissinganyevidenceprimecontractorsthatdiscriminateagainstwomensubcontractorsintheprivatesectorneverthelesswinpublic‐sectorcontracts.Id.

TheCourtpointedoutthatitdidnotsuggestthattheproponentofagender‐consciousprogram“mustalwaystieprivatediscriminationtopublicaction.”615F.3d233at255,n.11.But,theCourtheldwhere,ashere,thereexistedsubstantialprobativeevidenceofoverutilizationintherelevantpublicsector,astatemustpresentsomethingmorethangeneralizedprivate‐sectordataunsupportedbycompellinganecdotalevidencetojustifyagender‐consciousprogram.Id.at255,n.11.

Moreover,theCourtfoundthestatefailedtoestablishtheamountofoverlapbetweengeneralconstructionandroadconstructionsubcontracting.615F.3d233at256.TheCourtsaidthatthedearthofevidenceastothecorrelationbetweenpublicroadconstructionsubcontractingandprivategeneralconstructionsubcontractingseverelylimitstheprivatedata’sprobativevalueinthiscase.Id.

Thus,theCourtheldthattheStatecouldnotovercomethestrongevidenceofoverutilizationinthepublicsectorintermsofgenderparticipationgoals,andthattheprofferedprivate‐sectordatafailedtoestablishdiscriminationintheparticularfieldinquestion.615F.3d233at256.Further,theanecdotalevidence,theCourtconcluded,indicatedthatmostwomensubcontractorsdonotexperiencediscrimination.Id.Thus,theCourtheldthattheStatefailedtopresentsufficientevidencetosupporttheProgram’scurrentinclusionofwomensubcontractorsinsettingparticipationgoals.Id.

Holding.TheCourtheldthatthestatelegislaturehadcraftedlegislationthatwithstoodtheconstitutionalscrutiny.615F.3d233at257.TheCourtconcludedthatinlightofthestatutoryscheme’sflexibilityandresponsivenesstotherealitiesofthemarketplace,andgiventheState’sstrongevidenceofdiscriminationagainAfricanAmericanandNativeAmericansubcontractorsinpublic‐sectorsubcontracting,theState’sapplicationofthestatutetothesegroupsisconstitutional.Id.at257.However,theCourtalsoheldthatbecausetheStatefailedtojustifyitsapplicationofthestatutoryschemetowomen,AsianAmerican,andHispanicAmericansubcontractors,theCourtfoundthoseapplicationswerenotconstitutional.

Therefore,theCourtaffirmedthejudgmentofthedistrictcourtwithregardtothefacialvalidityofthestatute,andwithregardtoitsapplicationtoAfricanAmericanandNativeAmericansubcontractors.615F.3d233at258.TheCourtreversedthedistrictcourt’sjudgmentinsofarasitupheldtheconstitutionalityofthestatelegislatureasappliedtowomen,AsianAmericanandHispanicAmericansubcontractors.Id.TheCourtthusremandedthecasetothedistrictcourttofashionanappropriateremedyconsistentwiththeopinion.Id.


Concurringopinions.ItshouldbepointedoutthatthereweretwoconcurringopinionsbythethreeJudgepanel:onejudgeconcurredinthejudgment,andtheotherjudgeconcurredfullyinthemajorityopinionandthejudgment.

2. H. B. Rowe Corp., Inc. v. W. Lyndo Tippett, North Carolina DOT, et al., 589 F. Supp.2d 587 (E.D.N.C. 2008), affirmed in part, reversed in part, and remanded, 615 F.3d 233 (4th Cir. 2010)

InH.B.RoweCompanyv.Tippett,NorthCarolinaDepartmentofTransportation,etal.(“Rowe”),theUnitedStatesDistrictCourtfortheEasternDistrictofNorthCarolina,WesternDivision,heardachallengetotheStateofNorthCarolinaMBEandWBEProgram,whichisaStateofNorthCarolina“affirmativeaction”programadministeredbytheNCDOT.TheNCDOTMWBEProgramchallengedinRoweinvolvesprojectsfundedsolelybytheStateofNorthCarolinaandnotfundedbytheUSDOT.589F.Supp.2d587.

Background. Inthiscaseplaintiff,afamily‐ownedroadconstructionbusiness,bidonaNCDOTinitiatedstate‐fundedproject.NCDOTrejectedplaintiff’sbidinfavorofthenextlowbidthathadproposedhigherminorityparticipationontheprojectaspartofitsbid.AccordingtoNCDOT,plaintiff’sbidwasrejectedbecauseofplaintiff’sfailuretodemonstrate“goodfaithefforts”toobtainpre‐designatedlevelsofminorityparticipationontheproject.

Asaprimecontractor,plaintiffRowewasobligatedundertheMWBEProgramtoeitherobtainparticipationofspecifiedlevelsofMBEandWBEparticipationassubcontractors,ortodemonstrategoodfaitheffortstodoso.Forthisparticularproject,NCDOThadsetMBEandWBEsubcontractorparticipationgoalsof10percentand5percent,respectively.Plaintiff’sbidincluded6.6percentWBEparticipation,butnoMBEparticipation.Thebidwasrejectedafterareviewofplaintiff’sgoodfaitheffortstoobtainMBEparticipation.Thenextlowestbiddersubmittedabidincluding3.3percentMBEparticipationand9.3percentWBEparticipation,andalthoughnotobtainingaspecifiedlevelofMBEparticipation,itwasdeterminedtohavemadegoodfaitheffortstodoso.(OrderoftheDistrictCourt,datedMarch29,2007).

NCDOT’sMWBEProgram“largelymirrors”theFederalDBEProgram,whichNCDOTisrequiredtocomplywithinawardingconstructioncontractsthatutilizeFederalfunds.(589F.Supp.2d587;OrderoftheDistrictCourt,datedSeptember28,2007).LiketheFederalDBEProgram,underNCDOT’sMWBEProgram,thegoalsforminorityandfemaleparticipationareaspirationalratherthanmandatory.Id.AnindividualtargetforMBEparticipationwassetforeachproject.Id.

Historically,NCDOThadengagedinseveraldisparitystudies.Themostrecentstudywasdonein2004.Id.The2004study,whichfollowedthestudyin1998,concludedthatdisparitiesinutilizationofMBEspersistandthatabasisremainsforcontinuationoftheMWBEProgram.Thenewstatuteasrevisedwasapprovedin2006,whichmodifiedthepreviousMBEstatutebyeliminatingthe10percentand5percentgoalsandestablishingafixedexpirationdateof2009.

Plaintifffileditscomplaintinthiscasein2003againsttheNCDOTandindividualsassociatedwiththeNCDOT,includingtheSecretaryofNCDOT,W.LyndoTippett.Initscomplaint,plaintiffallegedthattheMWBEstatuteforNCDOTwasunconstitutionalonitsfaceandasapplied.589F.Supp.2d587.

March29,2007OrderoftheDistrictCourt. Themattercamebeforethedistrictcourtinitiallyonseveralmotions,includingthedefendants’MotiontoDismissorforPartialSummary


Judgment,defendants’MotiontoDismisstheClaimforMootnessandplaintiff’sMotionforSummaryJudgment.ThecourtinitsOctober2007Ordergrantedinpartanddeniedinpartdefendants’MotiontoDismissorforpartialsummaryjudgment;denieddefendants’MotiontoDismisstheClaimforMootness;anddismissedwithoutprejudiceplaintiff’sMotionforSummaryJudgment.

ThecourtheldtheEleventhAmendmenttotheUnitedStatesConstitutionbarsplaintifffromobtaininganyreliefagainstdefendantNCDOT,andfromobtainingaretrospectivedamagesawardagainstanyoftheindividualdefendantsintheirofficialcapacities.Thecourtruledthatplaintiff’sclaimsforreliefagainsttheNCDOTwerebarredbytheEleventhAmendment,andtheNCDOTwasdismissedfromthecaseasadefendant.Plaintiff’sclaimsforinterest,actualdamages,compensatorydamagesandpunitivedamagesagainsttheindividualdefendantssuedintheirofficialcapacitiesalsowasheldbarredbytheEleventhAmendmentandweredismissed.But,thecourtheldthatplaintiffwasentitledtosueforaninjunctiontopreventstateofficersfromviolatingafederallaw,andundertheExParteYoungexception,plaintiff’sclaimfordeclaratoryandinjunctivereliefwaspermittedtogoforwardasagainsttheindividualdefendantswhowereactinginanofficialcapacitywiththeNCDOT.Thecourtalsoheldthattheindividualdefendantswereentitledtoqualifiedimmunity,andthereforedismissedplaintiff’sclaimformoneydamagesagainsttheindividualdefendantsintheirindividualcapacities.OrderoftheDistrictCourt,datedMarch29,2007.

DefendantsarguedthattherecentamendmenttotheMWBEstatuterenderedplaintiff’sclaimfordeclaratoryinjunctivereliefmoot.ThenewMWBEstatuteadoptedin2006,accordingtothecourt,doesawaywithmanyoftheallegedshortcomingsarguedbytheplaintiffinthislawsuit.Thecourtfoundtheamendedstatutehasasunsetdatein2009;specificaspirationalparticipationgoalsbywomenandminoritiesareeliminated;defines“minority”asincludingonlythoseracialgroupswhichdisparitystudiesidentifyassubjecttounderutilizationinstateroadconstructioncontracts;explicitlyreferencesthefindingsofthe2004DisparityStudyandrequiressimilarstudiestobeconductedatleastonceeveryfiveyears;anddirectsNCDOTtoenactregulationstargetingdiscriminationidentifiedinthe2004andfuturestudies.

Thecourtheld,however,thatthe2004DisparityStudyandamendedMWBEstatutedonotremedytheprimaryproblemwhichtheplaintiffcomplainedof:theuseofremedialrace‐andgender‐basedpreferencesallegedlywithoutvalidevidenceofpastracialandgenderdiscrimination.Inthatsense,thecourtheldtheamendedMWBEstatutecontinuedtopresentalivecaseorcontroversy,andaccordinglydeniedthedefendants’MotiontoDismissClaimforMootnessastoplaintiff’ssuitforprospectiveinjunctiverelief.OrderoftheDistrictCourt,datedMarch29,2007.

ThecourtalsoheldthatsincetherehadbeennoanalysisoftheMWBEstatuteapartfromthebriefsregardingmootness,plaintiff’spendingMotionforSummaryJudgmentwasdismissedwithoutprejudice.OrderoftheDistrictCourt,datedMarch29,2007.

September28,2007OrderoftheDistrictCourt. OnSeptember28,2007,thedistrictcourtissuedaneworderinwhichitdeniedboththeplaintiff’sandthedefendants’MotionsforSummaryJudgment.Plaintiffclaimedthatthe2004DisparityStudyisthesolebasisoftheMWBEstatute,thatthestudyisflawed,andthereforeitdoesnotsatisfythefirstprongofstrictscrutinyreview.Plaintiffalsoarguedthatthe2004studytendstoprovenon‐discriminationinthecaseofwomen;andfinallytheMWBEProgramfailsthesecondprongofstrictscrutinyreviewinthatitisnotnarrowlytailored.


Thecourtfoundsummaryjudgmentwasinappropriateforeitherpartyandthattherearegenuineissuesofmaterialfactfortrial.Thefirstandforemostissueofmaterialfact,accordingtothecourt,wastheadequacyofthe2004DisparityStudyasusedtojustifytheMWBEProgram.Therefore,becausethecourtfoundtherewasagenuineissueofmaterialfactregardingthe2004Study,summaryjudgmentwasdeniedonthisissue.

ThecourtalsoheldtherewasconfusionastothebasisoftheMWBEProgram,andwhetheritwasbasedsolelyonthe2004Studyoralsoonthe1993and1998DisparityStudies.Therefore,thecourtheldagenuineissueofmaterialfactexistedonthisissueanddeniedsummaryjudgment.OrderoftheDistrictCourt,datedSeptember28,2007.

December9,2008OrderoftheDistrictCourt(589F.Supp.2d587). ThedistrictcourtonDecember9,2008,afterabenchtrial,issuedanOrderthatfoundasafactandconcludedasamatteroflawthatplaintifffailedtosatisfyitsburdenofproofthattheNorthCarolinaMinorityandWomen’sBusinessEnterpriseprogram,enactedbythestatelegislaturetoaffecttheawardingofcontractsandsubcontractsinstatehighwayconstruction,violatedtheUnitedStatesConstitution.

Plaintiff,initscomplaintfiledagainsttheNCDOTallegedthatN.C.Gen.St.§136‐28.4isunconstitutionalonitsfaceandasapplied,andthattheNCDOTwhileadministeringtheMWBEprogramviolatedplaintiff’srightsunderthefederallawandtheUnitedStatesConstitution.PlaintiffrequestedadeclaratoryjudgmentthattheMWBEprogramisinvalidandsoughtactualandpunitivedamages.

Asaprimecontractor,plaintiffwasobligatedundertheMWBEprogramtoeitherobtainparticipationofspecifiedlevelsofMBEandWBEsubcontractors,ortodemonstratethatgoodfaitheffortsweremadetodoso.Followingareviewofplaintiff’sgoodfaitheffortstoobtainminorityparticipationontheparticularcontractthatwasthesubjectofplaintiff’sbid,thebidwasrejected.Plaintiff’sbidwasrejectedinfavorofthenextlowestbid,whichhadproposedhigherminorityparticipationontheprojectaspartofitsbid.AccordingtoNCDOT,plaintiff’sbidwasrejectedbecauseofplaintiff’sfailuretodemonstrategoodfaitheffortstoobtainpre‐designatedlevelsofminorityparticipationontheproject.589F.Supp.2d587.

NorthCarolina’sMWBEprogram. TheMWBEprogramwasimplementedfollowingamendmentstoN.C.Gen.Stat.§136‐28.4.Pursuanttothedirectivesofthestatute,theNCDOTpromulgatedregulationsgoverningadministrationoftheMWBEprogram.SeeN.C.Admin.Codetit.19A,§2D.1101,etseq.TheregulationshadbeenamendedseveraltimesandprovidethatNCDOTshallensurethatMBEsandWBEshavethemaximumopportunitytoparticipateintheperformanceofcontractsfinancedwithnon‐federalfunds.N.C.Admin.CodeTit.19A§2D.1101.

NorthCarolina’sMWBEprogram,whichaffectedonlyhighwaybidsandcontractsfundedsolelywithstatemoney,accordingtothedistrictcourt,largelymirroredtheFederalDBEProgramwhichNCDOTisrequiredtocomplywithinawardingconstructioncontractsthatutilizefederalfunds.589F.Supp.2d587.LiketheFederalDBEProgram,underNorthCarolina’sMWBEprogram,thetargetsforminorityandfemaleparticipationwereaspirationalratherthanmandatory,andindividualtargetsfordisadvantagedbusinessparticipationweresetforeachindividualproject.N.C.Admin.Codetit.19A§2D.1108.IndeterminingwhatlevelofMBEandWBEparticipationwasappropriateforeachproject,NCDOTwouldtakeintoaccount“theapproximatedollarvalueofthecontract,thegeographicallocationoftheproposedwork,anumberoftheeligiblefundsinthegeographicalarea,andtheanticipatedvalueoftheitemsof


worktobeincludedinthecontract.”Id.NCDOTwouldalsoconsider“theannualgoalsmandatedbyCongressandtheNorthCarolinaGeneralAssembly.”Id.

AfirmcouldbecertifiedasaMBEorWBEbyshowingNCDOTthatitis“ownercontrolledbyoneormoresociallyandeconomicallydisadvantagedindividuals.”NCAdmin.Codetit.1980,§2D.1102.

ThedistrictcourtstatedtheMWBEprogramdidnotdirectlydiscriminateinfavorofminorityandwomencontractors,butrather“encouragedprimecontractorstofavorMBEsandWBEsinsubcontractingbeforesubmittingbidstoNCDOT.”589F.Supp.2d587.Indeterminingwhetherthelowestbidderis“responsible,”NCDOTwouldconsiderwhetherthebidderobtainedthelevelofcertifiedMBEandWBEparticipationpreviouslyspecifiedintheNCDOTprojectproposal.Ifnot,NCDOTwouldconsiderwhetherthebiddermadegoodfaitheffortstosolicitMBEandWBEparticipation.N.C.Admin.Codetit.19A§2D.1108.

ThereweremultiplestudiesproducedandpresentedtotheNorthCarolinaGeneralAssemblyintheyears1993,1998and2004.The1998and2004studiesconcludedthatdisparitiesintheutilizationofminorityandwomencontractorspersist,andthatthereremainsabasisforcontinuationoftheMWBEprogram.TheMWBEprogramasamendedafterthe2004studyincludesprovisionsthateliminatedthe10percentand5percentgoalsandinsteadreplacedthemwithcontract‐specificparticipationgoalscreatedbyNCDOT;establishedasunsetprovisionthathasthestatuteexpiringonAugust31,2009;andprovidesrelianceonadisparitystudyproducedin2004.

TheMWBEprogram,asitstoodatthetimeofthisdecision,providesthatNCDOT“dictatestoprimecontractorstheexpressgoalofMBEandWBEsubcontractorstobeusedonagivenproject.However,insteadofthestatehiringtheMBEandWBEsubcontractorsitself,theNCDOTmakestheprimecontractorsolelyresponsibleforvettingandhiringthesesubcontractors.Ifaprimecontractorfailstohirethegoalamount,itmustsubmiteffortsof‘goodfaith’attemptstodoso.”589F.Supp.2d587.

Compellinginterest. ThedistrictcourtheldthatNCDOTestablishedacompellinggovernmentalinteresttohavetheMWBEprogram.ThecourtnotedthattheUnitedStatesSupremeCourtinCrosonmadeclearthatastatelegislaturehasacompellinginterestineradicatingandremedyingprivatediscriminationintheprivatesubcontractinginherentinthelettingofroadconstructioncontracts.589F.Supp.2d587,citingCroson,488U.S.at492.ThedistrictcourtfoundthattheNorthCarolinaLegislatureestablisheditrelieduponastrongbasisofevidenceinconcludingthatpriorracediscriminationinNorthCarolina’sroadconstructionindustryexistedsoastorequireremedialaction.

Thecourtheldthatthe2004DisparityStudydemonstratedtheexistenceofpreviousdiscriminationinthespecificindustryandlocalityatissue.Thecourtstatedthatdisparityratiosprovidedforinthe2004DisparityStudyhighlightedtheunderutilizationofMBEsbyprimecontractorsbiddingonstatefundedhighwayprojects.Inaddition,thecourtfoundthatevidencerelieduponbythelegislaturedemonstratedadramaticdeclineintheutilizationofMBEsduringtheprogram’ssuspensionin1991.ThecourtalsofoundthatanecdotalsupportrelieduponbythelegislatureconfirmedandreinforcedthegeneraldatademonstratingtheunderutilizationofMBEs.ThecourtheldthattheNCDOTestablishedthat,“baseduponaclearandstronginferenceraisedbythisStudy,theyconcludedminoritycontractorssufferfromthelingeringeffectsofracialdiscrimination.”589F.Supp.2d587.


WithregardtoWBEs,thecourtappliedadifferentstandardofreview.ThecourtheldthelegislativeschemeasitrelatestoMWBEsmustserveanimportantgovernmentalinterestandmustbesubstantiallyrelatedtotheachievementofthoseobjectives.ThecourtfoundthatNCDOTestablishedanimportantgovernmentalinterest.The2004DisparityStudyprovidedthattheaveragecontractsawardedWBEsaresignificantlysmallerthanthoseawardednon‐WBEs.ThecourtheldthatNCDOTestablishedbaseduponaclearandstronginferenceraisedbytheStudy,womencontractorssufferfrompastgenderdiscriminationintheroadconstructionindustry.

Narrowlytailored. ThedistrictcourtnotedthattheFourthCircuitofAppealslistsanumberoffactorstoconsiderinanalyzingastatutefornarrowtailoring:(1)thenecessityofthepolicyandtheefficacyofalternativeraceneutralpolicies;(2)theplanneddurationofthepolicy;(3)therelationshipbetweenthenumericalgoalandthepercentageofminoritygroupmembersintherelevantpopulation;(4)theflexibilityofthepolicy,includingtheprovisionofwaiversifthegoalcannotbemet;and(5)theburdenofthepolicyoninnocentthirdparties.589F.Supp.2d587,quotingBelkv.Charlotte‐MecklenburgBoardofEducation,269F.3d305,344(4thCir.2001).

ThedistrictcourtheldthatthelegislativeschemeinN.C.Gen.Stat.§136‐28.4isnarrowlytailoredtoremedyprivatediscriminationofminoritiesandwomenintheprivatesubcontractinginherentinthelettingofroadconstructioncontracts.Thedistrictcourt’sanalysisfocusedonnarrowlytailoringfactors(2)and(4)above,namelythedurationofthepolicyandtheflexibilityofthepolicy.Withrespecttotheformer,thecourtheldthelegislativeschemeprovidestheprogrambereviewedatleasteveryfiveyearstorevisittheissueofutilizationofMWBEsintheroadconstructionindustry.N.C.Gen.Stat.§136‐28.4(b).Further,thelegislativeschemeincludesasunsetprovisionsothattheprogramwillexpireonAugust31,2009,unlessrenewedbyanactofthelegislature.Id.at§136‐28.4(e).Thecourtheldtheseprovisionsensuredthelegislativeschemelastnolongerthannecessary.

ThecourtalsofoundthatthelegislativeschemeenactedbytheNorthCarolinalegislatureprovidesflexibilityinsofarastheparticipationgoalsforagivencontractordeterminedonaprojectbyprojectbasis.§136‐28.4(b)(1).Additionally,thecourtfoundthelegislativeschemeinquestionisnotoverbroadbecausethestatuteappliesonlyto“thoseracialorethnicityclassificationsidentifiedbyastudyconductedinaccordancewiththissectionthathadbeensubjectedtodiscriminationinarelevantmarketplaceandthathadbeenadverselyaffectedintheirabilitytoobtaincontractswiththeDepartment.”§136‐28.4(c)(2).Thecourtfoundthatplaintifffailedtoprovideanyevidencethatindicatesminoritiesfromnon‐relevantracialgroupshadbeenawardedcontractsasaresultofthestatute.

Thecourtheldthatthelegislativeschemeisnarrowlytailoredtoremedyprivatediscriminationofminoritiesandwomenintheprivatesubcontractinginherentinthelettingofroadconstructioncontracts,andthereforefoundthat§136‐28.4isconstitutional.

ThedecisionofthedistrictcourtwasappealedtotheUnitedStatesCourtofAppealsfortheFourthCircuit,whichaffirmedinpartandreversedinpartthedecisionofthedistrictcourt.See615F3d233(4thCir.2010),discussedabove.

3. Associated Utility Contractors of Maryland, Inc. v. Mayor and City Council of Baltimore, 218 F. Supp.2d 749 (D. Md. 2002)

ThiscaseisinstructivebecausethecourtfoundtheExecutiveOrderoftheMayoroftheCityofBaltimorewasprecatoryinnature(creatingnolegalobligationorduty)andcontainedno


enforcementmechanismorpenaltiesfornoncomplianceandimposednosubstantialrestrictions;theExecutiveOrderannouncedgoalsthatwerefoundtobeaspirationalonly.

TheAssociatedUtilityContractorsofMaryland,Inc.(“AUC”)suedtheCityofBaltimorechallengingitsordinanceprovidingforminorityandwomen‐ownedbusinessenterprise(“MWBE”)participationincitycontracts.Previously,anearlierCityofBaltimoreMWBEprogramwasdeclaredunconstitutional.AssociatedUtilityContractorsofMaryland,Inc.v.MayorandCityCouncilofBaltimore,83F.Supp.2d613(D.Md.2000).TheCityadoptedanewordinancethatprovidedfortheestablishmentofMWBEparticipationgoalsonacontract‐by‐contractbasis,andmadeseveralotherchangesfromthepreviousMWBEprogramdeclaredunconstitutionalintheearliercase.

Inaddition,theMayoroftheCityofBaltimoreissuedanExecutiveOrderthatannouncedagoalofawarding35percentofallCitycontractingdollarstoMBE/WBEs.Thecourtfoundthisgoalof35percentparticipationwasaspirationalonlyandtheExecutiveOrdercontainednoenforcementmechanismorpenaltiesfornoncompliance.TheExecutiveOrderalsospecifiedmany“noncoercive”outreachmeasurestobetakenbytheCityagenciesrelatingtoincreasingparticipationofMBE/WBEs.Thesemeasureswerefoundtobemerelyaspirationalandnoenforcementmechanismwasprovided.

ThecourtaddressedinthiscaseonlyamotiontodismissfiledbytheCityofBaltimorearguingthattheAssociatedUtilityContractorshadnostanding.ThecourtdeniedthemotiontodismissholdingthattheassociationhadstandingtochallengethenewMBE/WBEordinance,althoughthecourtnotedthatithadsignificantissueswiththeAUChavingrepresentationalstandingbecauseofthenatureoftheMBE/WBEplanandthefacttheAUCdidnothaveanyofitsindividualmembersnamedinthesuit.ThecourtalsoheldthattheAUCwasentitledtobringanasappliedchallengetotheExecutiveOrderoftheMayor,butrejectedithavingstandingtobringafacialchallengebasedonafindingthatitimposesnorequirement,createsnosanctions,anddoesnotinflictaninjuryuponanymemberoftheAUCinanyconcreteway.Therefore,theExecutiveOrderdidnotcreatea“caseorcontroversy”inconnectionwithafacialattack.ThecourtfoundthewordingoftheExecutiveOrdertobeprecatoryandimposingnosubstantiverestrictions.

AfterthisdecisiontheCityofBaltimoreandtheAUCenteredintoasettlementagreementandadismissalwithprejudiceofthecase.AnorderwasissuedbythecourtonOctober22,2003dismissingthecasewithprejudice.

4. Associated Utility Contractors of Maryland, Inc. v. The Mayor and City Council of Baltimore and Maryland Minority Contractors Association, Inc., 83 F. Supp.2d 613 (D. Md. 2000)

PlaintiffAssociatedUtilityContractorsofMaryland,Inc.(“AUC”)filedthisactiontochallengethecontinuedimplementationoftheaffirmativeactionprogramcreatedbyBaltimoreCityOrdinance(“theOrdinance”).83F.Supp.2d613(D.Md.2000)

TheOrdinancewasenactedin1990andauthorizedtheCitytoestablishannuallynumericalset‐asidegoalsapplicabletoawiderangeofpubliccontracts,includingconstructionsubcontracts.Id.


AUCfiledamotionforsummaryjudgment,whichtheCityandinterveningdefendantMarylandMinorityContractorsAssociation,Inc.(“MMCA”)opposed.Id.at614.In1999,thecourtissuedanordergrantinginpartanddenyinginpartthemotionforsummaryjudgment(“theDecemberinjunction”).Id.Specifically,astoconstructioncontractsenteredintobytheCity,thecourtenjoinedenforcementoftheOrdinance(and,consequently,continuedimplementationoftheaffirmativeactionprogramitauthorized)inrespecttotheCity’s1999numericalset‐asidegoalsforMinority‐andWomen–OwnedBusinessEnterprises(“MWBEs”),whichhadbeenestablishedat20%and3%,respectively.Id.Thecourtdeniedthemotionforsummaryjudgmentastotheplaintiff’sfacialattackontheconstitutionalityoftheOrdinance,concludingthatthereexisted“adisputeofmaterialfactastowhethertheenactmentoftheOrdinancewasadequatelysupportedbyafactualrecordofunlawfuldiscriminationproperlyremediablethroughrace‐andgender‐basedaffirmativeaction.”Id.

TheCityappealedtheentryoftheDecemberinjunctiontotheUnitedStatesCourtofAppealsfortheFourthCircuit.Inaddition,theCityfiledamotionforstayoftheinjunction.Id.Insupportofthemotionforstay,theCitycontendedthatAUClackedorganizationalstandingtochallengetheOrdinance.Thecourtheldtheplaintiffsatisfiedtherequirementsfororganizationalstandingastotheset‐asidegoalsestablishedbytheCityfor1999.Id.

TheCityalsocontendedthatthecourterredinfailingtoforebearfromtheadjudicationofthiscaseandofthemotionforsummaryjudgmentuntilafterithadcompletedanallegeddisparitystudywhich,itcontended,wouldestablishajustificationfortheset‐asidegoalsestablishedfor1999.Id.Thecourtsaidthisargument,whichthecourtrejected,restedonthenotionthatagovernmentalentitymightpermissiblyadoptanaffirmativeactionplanincludingset‐asidegoalsandwaituntilsuchaplanischallengedincourtbeforeundertakingthenecessarystudiesuponwhichtheconstitutionalityoftheplandepends.Id.

Therefore,becausetheCityofferednocontemporaneousjustificationforthe1999set‐asidegoalsitadoptedontheauthorityoftheOrdinance,thecourtissuedaninjunctioninits1999decisionanddeclinedtostayitseffectiveness.Id.SincetheinjunctionawardedcompleterelieftotheAUC,andanyefforttoadjudicatetheissueofwhethertheCitywouldadoptrevisedset‐asidegoalsontheauthorityoftheOrdinancewaswhollyspeculativeundertaking,thecourtdismissedthecasewithoutprejudice.Id.

FactsandProceduralHistory.In1986,theCityCouncilenactedinOrdinance790thefirstcity‐wideaffirmativeactionset‐asidegoals,whichrequired,interalia,thatforallCitycontracts,20%ofthevalueofsubcontractsbeawardedtoMinority–OwnedBusinessEnterprises(“MBEs”)and3%toWomen–OwnedBusinessEnterprises(“WBEs”).Id.at615.AspermittedunderthencontrollingSupremeCourtprecedent,thecourtsaidOrdinance790wasjustifiedbyafindingthatgeneralsocietaldiscriminationhaddisadvantagedMWBEs.Apparently,nodisparitystatisticswereofferedtojustifyOrdinance790.Id.

AftertheSupremeCourtannounceditsdecisioninCityofRichmondv.J.A.Croson,488U.S.469(1989),theCityconvenedaTaskForcetostudytheconstitutionalityofOrdinance790.Id.TheTaskForceheldhearingsandissuedaPublicCommentDraftReportonNovember1,1989.Id.Itheldadditionalhearings,reviewedpubliccommentsandissueditsfinalreportonApril11,1990,recommendingseveralamendmentstoOrdinance790.Id.TheCityCouncilconductedhearings,andinJune1990,enactedOrdinance610,thelawunderattackinthiscase.Id.


InenactingOrdinance610,theCityCouncilfoundthatitwasjustifiedasanappropriateremedyof“[p]astdiscriminationintheCity’scontractingprocessbyprimecontractorsagainstminorityandwomen’sbusinessenterprises....”Id.TheCityCouncilalsofoundthat“[m]inorityandwomen’sbusinessenterprises...havehaddifficultiesinobtainingfinancing,bonding,creditandinsurance;”that“[t]heCityofBaltimorehascreatedanumberofdifferentassistanceprogramstohelpsmallbusinesseswiththeseproblems...[butthatt]heseassistanceprogramshavenotbeeneffectiveineitherremedyingtheeffectsofpastdiscrimination...orinpreventingongoingdiscrimination.”Id.

TheoperativesectionofOrdinance610relevanttothiscasemandatedaprocedurebywhichset‐asidegoalsweretobeestablishedeachyearforminorityandwomenownedbusinessparticipationinCitycontracts.Id.TheOrdinanceitselfdidnotestablishanygoals,butdirectedtheMayortoconsultwiththeChiefofEqualOpportunityComplianceand“contractauthorities”andtoannuallyspecifygoalsforeachseparatecategoryofcontracting“suchaspublicworks,professionalservices,concessionandpurchasingcontracts,aswellasanyothercategoriesthattheMayordeemsappropriate.”Id.

In1990,uponitsenactmentoftheOrdinance,theCityestablishedacross‐the‐boardset‐asidegoalsof20%MBEand3%WBEforallCitycontractswithnovariationbymarket.Id.ThecourtfoundtheCitysimplyreadoptedthe20%MBEand3%WBEsubcontractorparticipationgoalsfromthepriorlaw,Ordinance790,whichtheOrdinancehadspecificallyrepealed.Id.at616.Thesesameset‐asidegoals,thecourtsaid,wereadoptedwithoutchangeandwithoutfactualsupportineachsucceedingyearsince1990.Id.

Noannualstudyeverwasundertakentosupporttheimplementationoftheaffirmativeactionprogramgenerallyortosupporttheestablishmentofanyannualgoals,thecourtconcluded,andtheCitydidnotcollectthedatawhichcouldhavepermittedsuchfindings.Id.Nodisparitystudyexistedorwasundertakenuntilthecommencementofthislawsuit.Id.Thus,thecourtheldtheCityhadnoreliablerecordoftheavailabilityofMWBEsforeachcategoryofcontracting,andthusnowayofdeterminingwhetherits20%and3%goalswererationallyrelatedtoextantdiscrimination(orthecontinuingeffectsthereof)inthelettingofpublicconstructioncontracts.Id.

AUChasassociationalstanding.AUCestablishedthatithadassociationalstandingtochallengetheset‐asidegoalsadoptedbytheCityin1999.Id.Specifically,AUCsufficientlyestablishedthatitsmemberswere“readyandable”tobidforCitypublicworkscontracts.Id.Nomore,thecourtnoted,wasrequired.Id.

ThecourtfoundthatAUC’smembersweredisadvantagedbythegoalsinthebiddingprocess,andthisalonewasacognizableinjury.Id.Forthepurposesofanequalprotectionchallengetoaffirmativeactionset‐asidegoals,thecourtstatedtheSupremeCourthasheldthatthe“‘injuryinfact’istheinabilitytocompeteonanequalfootinginthebiddingprocess...”Id.at617,quotingNortheasternFloridaChapter,508U.S.at666,andcitingAdarandConstructors,Inc.v.Pena,515U.S.200,211(1995).

TheSupremeCourtinNortheasternFloridaChapterheldthatindividualstandingisestablishedtochallengeaset‐asideprogramwhenapartydemonstrates“thatitisableandreadytobidoncontractsandthatadiscriminatorypolicypreventsitfromdoingsoonanequalbasis.”Id.at616quoting,Northeastern,508U.S.at666.TheSupremeCourtfurtherheldthatonceapartyshowsitis“readyandable”tobidinthiscontext,thepartywillhavesufficientlyshownthattheset‐asidegoalsare“the‘cause’ofitsinjuryandthatajudicialdecreedirectingthecitytodiscontinue


itsprogramwould‘redress’theinjury,”thussatisfyingtheremainingrequirementsforindividualstanding.Id.quotingNortheastern,at666&n.5.

ThecourtfoundtherewasampleevidencethatAUCmemberswere“readyandable”tobidonCitypublicworkscontractsbasedonseveraldocumentsintherecord,andthatmembersofAUCwouldhaveindividualstandingintheirownrighttochallengetheconstitutionalityoftheCity’sset‐asidegoalsapplicabletoconstructioncontracting,satisfyingtheassociationalstandingtest.Id.at617‐18.ThecourtheldAUChadassociationalstandingtochallengetheconstitutionalityofthepublicworkscontractsset‐asideprovisionsestablishedin1999.Id.at618.

Strictscrutinyanalysis.AUCcomplainedthatsincetheirinitialpromulgationin1990,theCity’sset‐asidegoalsrequiredAUCmembersto“selectorrejectcertainsubcontractorsbasedupontherace,ethnicity,orgenderofsuchsubcontractors”inordertobidsuccessfullyonCitypublicworkscontractsforworkexceeding$25,000(“Citypublicworkscontracts”).Id.at618.AUCclaimed,therefore,thattheCity’sset‐asidegoalsviolatedtheFourteenthAmendment’sguaranteeofequalprotectionbecausetheyrequiredprimecontractorstoengageindiscriminationwhichthegovernmentitselfcannotperpetrate.Id.

Thecourtstatedthatgovernmentclassificationsbaseduponraceandethnicityarereviewedunderstrictscrutiny,citingtheSupremeCourtinAdarand,515U.S.at227;andthatthosebasedupongenderarereviewedunderthelessstringentintermediatescrutiny.Id.at618,citingUnitedStatesv.Virginia,518U.S.515,531(1996).Id.“[A]llracialclassifications,imposedbywhateverfederal,state,orlocalgovernmentalactor,mustbeanalyzedbyareviewingcourtunderstrictscrutiny.”Id.at619,quotingAdarand,515U.S.at227.Thegovernmentclassificationmustbenarrowlytailoredtoachieveacompellinggovernmentinterest.Id.citingCroson,488U.S.at493–95.ThecourtthennotedthattheFourthCircuithasexplained:

Therationaleforthisstringentstandardofreviewisplain.Ofallthecriteriabywhichmenandwomencanbejudged,themostperniciousisthatofrace.Theinjusticeofjudginghumanbeingsbythecoloroftheirskinissoapparentthatracialclassificationscannotberationalizedbythecasualinvocationofbenignremedialaims....Whiletheinequitiesandindignitiesvisitedbypastdiscriminationareundeniable,theuseofraceasareparationaldevicerisksperpetuatingtheveryrace‐consciousnesssucharemedypurportstoovercome.

Id.at619,quotingMarylandTroopersAss’n,Inc.v.Evans,993F.2d1072,1076(4thCir.1993)(citationomitted).

ThecourtalsopointedoutthatinCroson,apluralityoftheSupremeCourtconcludedthatstateandlocalgovernmentshaveacompellinginterestinremedyingidentifiedpastandpresentracediscriminationwithintheirborders.Id.at619,citingCroson,488U.S.at492.ThepluralityoftheSupremeCourt,accordingtothecourt,explainedthattheFourteenthAmendmentpermitsrace‐consciousprogramsthatseekbothtoeradicatediscriminationbythegovernmentalentityitself,andtopreventthepublicentityfromactingasa“‘passiveparticipant’inasystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry”byallowingtaxdollars“tofinancetheevilofprivateprejudice.”Id.at619,quotingCroson,488U.S.at492.Thus,thecourtfoundCrosonmakesclearthattheCityhasacompellinginterestineradicatingandremedyingprivatediscriminationintheprivatesubcontractinginherentinthelettingofCityconstructioncontracts.Id.


TheFourthCircuit,thecourtstated,hasinterpretedCrosontoimposea“twostepanalysisforevaluatingarace‐consciousremedy.”Id.at619citingMarylandTroopersAss’n,993F.2dat1076.“First,the[government]musthavea‘strongbasisinevidenceforitsconclusionthatremedialaction[is]necessary....’‘Absentsearchingjudicialinquiryintothejustificationforsuchrace‐basedmeasures,thereissimplynowayofdeterminingwhatclassificationsare...infactmotivatedbyillegitimatenotionsofracialinferiorityorsimpleracialpolitics.’”Id.at619,quotingMarylandTroopersAss’n,993F.2dat1076(citingCroson).

ThesecondstepintheCrosonanalysis,accordingtothecourt,istodeterminewhetherthegovernmenthasadoptedprogramsthat“‘narrowlytailor’anypreferencesbasedonracetomeettheirremedialgoal.”Id.at619.ThecourtfoundthattheFourthCircuitsummarizedSupremeCourtjurisprudenceon“narrowtailoring”asfollows:

Thepreferencesmayremainineffectonlysolongasnecessarytoremedythediscriminationatwhichtheyareaimed;theymaynottakeonalifeoftheirown.Thenumericalgoalsmustbewaivableifqualifiedminorityapplicationsarescarce,andsuchgoalsmustbearareasonablerelationtominoritypercentagesintherelevantqualifiedlaborpool,notinthepopulationasawhole.Finally,thepreferencesmaynotsupplantrace‐neutralalternativesforremedyingthesamediscrimination.

Id.at620,quotingMarylandTroopersAss’n,993F.2dat1076–77(citationsomitted).

Intermediatescrutinyanalysis.Thecourtstatedtheintermediatescrutinyanalysisforgender‐baseddiscriminationasfollows:“Partieswhoseektodefendgender‐basedgovernmentactionmustdemonstratean‘exceedinglypersuasivejustification’forthataction.”Id.at620,quotingVirginia,518U.S.at531,116.Thisburdenisa“demanding[one]anditrestsentirelyontheState.”Id.at620quotingVirginia,518U.S.at533.

Althoughgenderisnot“aproscribedclassification,”inthewayraceorethnicityis,thecourtsnevertheless“carefullyinspect[]officialactionthatclosesadoorordeniesopportunity”onthebasisofgender.Id.at620,quotingVirginia,518U.S.at532‐533.Atbottom,thecourtconcluded,agovernmentwishingtodiscriminateonthebasisofgendermustdemonstratethatitsdoingsoserves“importantgovernmentalobjectivesandthatthediscriminatorymeansemployedaresubstantiallyrelatedtotheachievementofthoseobjectives.”Id.at620,quotingVirginia,518U.S.at533(citationsandquotationsomitted).

Aswiththestandardsforrace‐basedmeasures,thecourtfoundnoformulaexistsbywhichtodeterminewhatevidencewilljustifyeverydifferenttypeofgender‐consciousmeasure.Id.at620.However,astheThirdCircuithasexplained,“[l]ogically,acitymustbeabletorelyonlessevidenceinenactingagenderpreferencethanaracialpreferencebecauseapplyingCroson’sevidentiarystandardtoagenderpreferencewouldevisceratethedifferencebetweenstrictandintermediatescrutiny.”Id.at620,quotingContractorsAss’n,6F.3dat1010.

ThecourtpointedoutthattheSupremeCourthasstatedanaffirmativeactionprogramsurvivesintermediatescrutinyiftheproponentcanshowitwas“aproductofanalysisratherthanastereotypedreactionbasedonhabit.”Id.at620,quotingMetroBroadcasting,Inc.v.F.C.C.,497U.S.547,582–83(1990)(internalquotationsomitted).TheThirdCircuit,thecourtsaid,determinedthat“thisstandardrequirestheCitytopresentprobativeevidenceinsupportofitsstatedrationaleforthe[10%genderset‐aside]preference,discriminationagainstwomen‐ownedcontractors.”Id.at620,quotingContractorsAss’n,6F.3dat1010.


Preenactmentversuspostenactmentevidence.InevaluatingthefirststepoftheCrosontest,whethertheCityhada“strongbasisinevidenceforitsconclusionthat[race‐conscious]remedialactionwasnecessary,”thecourtheldthatitmustlimititsinquirytoevidencewhichtheCityactuallyconsideredbeforeenactingthenumericalgoals.Id.at620.ThecourtfoundtheSupremeCourthasestablishedthestandardthatpreenactmentevidencemustprovidethe“strongbasisinevidence”thatrace‐basedremedialactionisnecessary.Id.at620‐621.

ThecourtnotedtheSupremeCourtinWygant,thepluralityopinion,joinedbyfourjusticesincludingJusticeO’Connor,heldthatastateentity“mustensurethat,beforeitembarksonanaffirmative‐actionprogram,ithasconvincingevidencethatremedialactioniswarranted.Thatis,itmusthavesufficientevidencetojustifytheconclusionthattherehasbeenpriordiscrimination.”Id.at621,quotingWygant,476U.S.at277.

Thecourtstatedthatbecauseofthiscontrollingprecedent,itwascompelledtoanalyzetheevidencebeforetheCitywhenitadoptedthe1999set‐asidegoalsspecifyingthe20%MBEparticipationinCityconstructionsubcontracts,andforanalogousreasons,the3%WBEpreferencemustalsobejustifiedbypreenactmentevidence.Id.at621.

ThecourtsaidtheFourthCircuithasnotruledontheissuewhetheraffirmativeactionmeasuresmustbejustifiedbyastrongbasisinpreenactmentevidence.ThecourtfoundthatintheFourthCircuitdecisionsinvalidatingstateaffirmativeactionpoliciesinPodbereskyv.Kirwan,38F.3d147(4thCir.1994),andMarylandTroopersAss’n,Inc.v.Evans,993F.2d1072(4thCir.1993),thecourtapparentlyreliedwithoutcommentuponpostenactmentevidencewhenevaluatingthepoliciesforCroson“strongbasisinevidence.”Id.at621,n.6,citingPodberesky,38F.3dat154(referringtopostenactmentsurveysofAfrican–AmericanstudentsatCollegeParkcampus);MarylandTroopers,993F.2dat1078(evaluatingstatisticsaboutthepercentageofblacktroopersin1991whendecidingwhethertherewasastatisticaldisparitygreatenoughtojustifytheaffirmativeactionmeasuresina1990consentdecree).Thecourtconcluded,however,thisissuewasapparentlynotraisedinthesecases,andbothweredecidedbeforethe1996SupremeCourtdecisioninShawv.Hunt,517U.S.899,whichclarifiedthattheWygantpluralitydecisionwascontrollingauthorityonthisissue.Id.at621,n.6.

Thecourtnotedthatthreecourtshadheld,priortoShaw,thatpostenactmentevidencemaybereliedupontosatisfytheCroson“strongbasisinevidence”requirement.ConcreteWorksofColorado,Inc.v.Denver,36F.3d1513(10thCir.1994),cert.denied,514U.S.1004,115S.Ct.1315,131L.Ed.2d196(1995);Harrison&BurrowesBridgeConstructors,Inc.v.Cuomo,981F.2d50,60(2dCir.1992);CoralConstructionCo.v.KingCounty,941F.2d910(9thCir.1991).Id.Inaddition,theEleventhCircuitheldin1997that“postenactmentevidenceisadmissibletodeterminewhetheranaffirmativeactionprogram”satisfiesCroson.EngineeringContractorsAss’nofSouthFlorida,Inc.v.MetropolitanDadeCounty,122F.3d895,911–12(11thCir.1997),cert.denied,523U.S.1004(1998).BecausethecourtbelievedthatShawandWygantprovidedcontrollingauthorityontheroleofpostenactmentevidenceinthe“strongbasisinevidence”inquiry,itdidnotfindthesecasespersuasive.Id.at621.

Citydidnotsatisfystrictorintermediatescrutiny:nodisparitystudywascompletedorpreenactmentevidenceestablished.Inthiscase.thecourtfoundthattheCityconsiderednoevidencein1999beforepromulgatingtheconstructionsubcontractingset‐asidegoalsof20%forMBEsand3%forWBEs.Id.at621.BasedontheabsenceofanyrecordofwhatevidencetheCityconsideredpriortopromulgatingtheset‐asidegoalsfor1999,thecourtheldtherewasnodisputeofmaterialfactforeclosingsummaryjudgmentinfavorofplaintiff.Id.Thecourtthusfoundthatthe20%preferenceisnotsupportedbya“strongbasisinevidence”showinganeed


forarace‐consciousremedialplanin1999;noristhe3%preferenceshowntobe“substantiallyrelatedtoachievement”oftheimportantobjectiveofremedyinggenderdiscriminationin1999,intheconstructionindustryinBaltimore.Id.

ThecourtrejectedtheCity’sassertionsthroughoutthecasethatthecourtshouldupholdtheset‐asidegoalsbaseduponstatistics,whichtheCitywasintheprocessofgatheringinadisparitystudyithadcommissioned.Id.at622.ThecourtsaidtheCitydidnotprovideanylegalsupportforthepropositionthatagovernmentalentitymightpermissiblyadoptanaffirmativeactionplanincludingset‐asidegoalsandwaituntilsuchaplanischallengedincourtbeforeundertakingthenecessarystudiesuponwhichtheconstitutionalityoftheplandepends.Id.Theinprocessstudywasnotcompleteasofthedateofthisdecisionbythecourt.Id.ThecourtthusstatedthestudycouldnothaveproduceddatauponwhichtheCityactuallyreliedinestablishingtheset‐asidegoalsfor1999.Id.

Thecourtnotedthatifthedatathestudyproducedwerereliableandcomplete,theCitycouldhavethestatisticalbasisuponwhichtomakethefindingsOrdinance610required,andwhichcouldsatisfytheconstitutionallyrequiredstandardsforthepromulgationandimplementationofnarrowlytailoredset‐asiderace‐andgenderconsciousgoals.Id.at622.Nonetheless,astherecordstoodwhenthecourtenteredtheDecember1999injunctionandasitstoodasofthedateofthedecision,therewerenodatainevidenceshowingadisparity,letaloneagrossdisparity,betweenMWBEavailabilityandutilizationinthesubcontractingconstructionmarketinBaltimoreCity.Id.TheCitypossessednosuchevidencewhenitestablishedthe1999set‐asidegoalschallengedinthecase.Id.

Apercentageset‐asidemeasure,liketheMWBEgoalsatissue,thecourtheldcouldonlybejustifiedbyreferencetotheoverallavailabilityofminority‐andwomen‐ownedbusinessesintherelevantmarkets.Id.Intheabsenceofsuchfigures,the20%MBEand3%WBEsetasidefigureswerearbitraryandunenforceableinlightofcontrollingSupremeCourtandFourthCircuitauthority.Id.

Holding.ThecourtheldthatforthesereasonsitenteredtheinjunctionagainsttheCityonDecember1999anditremainedfullyineffect.Id.at622.Accordingly,theCity’smotionforstayoftheinjunctionorderwasdeniedandtheactionwasdismissedwithoutprejudice.Id.at622.

ThecourtheldunconstitutionaltheCityofBaltimore’s“affirmativeaction”program,whichhadconstructionsubcontracting“set‐aside”goalsof20percentforMBEsand3percentforWBEs.ThecourtheldtherewasnodataorstatisticalevidencesubmittedbytheCitypriortoenactmentoftheOrdinance.TherewasnoevidenceshowingadisparitybetweenMBE/WBEavailabilityandutilizationinthesubcontractingconstructionmarketinBaltimore.ThecourtenjoinedtheCityOrdinance.


E. Recent Decisions Involving State or Local Government MBE/WBE/DBE Programs in Other Jurisdictions

Recent Decisions in Federal Circuit Courts of Appeal

1. Jana‐Rock Construction, Inc. v. New York State Dept. of Economic Development, 438 F.3d 195 (2d Cir. 2006)

ThisrecentcaseisinstructiveinconnectionwiththedeterminationofthegroupsthatmaybeincludedinaMBE/WBE‐typeprogram,andthestandardofanalysisutilizedtoevaluatealocalgovernment’snon‐inclusionofcertaingroups.Inthiscase,theSecondCircuitCourtofAppealsheldracialclassificationsthatarechallengedas“under‐inclusive”(i.e.,thosethatexcludepersonsfromaparticularracialclassification)aresubjecttoa“rationalbasis”review,notstrictscrutiny.

PlaintiffLuiere,a70percentshareholderofJana‐RockConstruction,Inc.(“JanaRock”)andthe“sonofaSpanishmotherwhoseparentswereborninSpain,”challengedtheconstitutionalityoftheStateofNewYork’sdefinitionof“Hispanic”underitslocalminority‐ownedbusinessprogram.438F.3d195,199‐200(2dCir.2006).UndertheUSDOTregulations,49CFR§26.5,“HispanicAmericans”aredefinedas“personsofMexican,PuertoRican,Cuban,Dominican,CentralorSouthAmerican,orotherSpanishorPortuguesecultureororigin,regardlessofrace.”Id.at201.Uponproperapplication,Jana‐RockwascertifiedbytheNewYorkDepartmentofTransportationasaDisadvantagedBusinessEnterprise(“DBE”)underthefederalregulations.Id.

However,unlikethefederalregulations,theStateofNewYork’slocalminority‐ownedbusinessprogramincludedinitsdefinitionofminorities“HispanicpersonsofMexican,PuertoRican,Dominican,Cuban,CentralorSouthAmericanofeitherIndianorHispanicorigin,regardlessofrace.”Thedefinitiondidnotincludeallpersonsfrom,ordescendantsofpersonsfrom,SpainorPortugal.Id.Accordingly,Jana‐RockwasdeniedMBEcertificationunderthelocalprogram;Jana‐RockfiledsuitallegingaviolationoftheEqualProtectionClause.Id.at202‐03.Theplaintiffconcededthattheoverallminority‐ownedbusinessprogramsatisfiedtherequisitestrictscrutiny,butarguedthatthedefinitionof“Hispanic”wasfatallyunder‐inclusive.Id.at205.

TheSecondCircuitfoundthatthenarrow‐tailoringprongofthestrictscrutinyanalysis“allowsNewYorktoidentifywhichgroupsitispreparedtoproveareinneedofaffirmativeactionwithoutdemonstratingthatnoothergroupsmeritconsiderationfortheprogram.”Id.at206.Thecourtfoundthatevaluatingunder‐inclusivenessasanelementofthestrictscrutinyanalysiswasatoddswiththeUnitedStatesSupremeCourtdecisioninCityofRichmondv.J.A.CrosonCo.,488U.S.469(1989)whichrequiredthataffirmativeactionprogramsbenobroaderthannecessary.Id.at207‐08.Thecourtsimilarlyrejectedtheargumentthatthestateshouldmirrorthefederaldefinitionof“Hispanic,”findingthatCongresshasmoreleewaythanthestatestomakebroaderclassificationsbecauseCongressismakingsuchclassificationsonthenationallevel.Id.at209.

Thecourtopined—withoutdeciding—thatitmaybeimpermissibleforNewYorktosimplyadoptthe“federalUSDOTdefinitionofHispanicwithoutatleastmakinganindependentassessmentofdiscriminationagainstHispanicsofSpanishOrigininNewYork.”Id.Additionally,findingthattheplaintifffailedtopointtoanydiscriminatorypurposebyNewYorkinfailingto


includepersonsofSpanishorPortuguesedescent,thecourtdeterminedthattherationalbasisanalysiswasappropriate.Id.at213.

Thecourtheldthattheplaintifffailedtherationalbasistestforthreereasons:(1)becauseitwasnotirrationalnordiditdisplayanimustoexcludepersonsofSpanishandPortuguesedescentfromthedefinitionofHispanic;(2)becausethefacttheplaintiffcoulddemonstrateevidenceofdiscriminationthathepersonallyhadsuffereddidnotrenderNewYork’sdecisiontoexcludepersonsofSpanishandPortuguesedescentirrational;and(3)becausethefactNewYorkmayhavereliedonCensusdataincludingasmallpercentageofHispanicsofSpanishdescentdidnotmeanthatitwasirrationaltoconcludethatHispanicsofLatinAmericanoriginwereingreaterneedofremediallegislation.Id.at213‐14.Thus,theSecondCircuitaffirmedtheconclusionthatNewYorkhadarationalbasisforitsdefinitiontonotincludepersonsofSpanishandPortuguesedescent,andthusaffirmedthedistrictcourtdecisionupholdingtheconstitutionalityofthechallengeddefinition.

2. Rapid Test Prods., Inc. v. Durham Sch. Servs., Inc., 460 F.3d 859 (7th Cir. 2006)

InRapidTestProducts,Inc.v.DurhamSchoolServicesInc.,theSeventhCircuitCourtofAppealsheldthat42U.S.C.§1981(thefederalanti‐discriminationlaw)didnotprovidean“entitlement”indisadvantagedbusinessestoreceivecontractssubjecttosetasideprograms;rather,§1981providedaremedyforindividualswhoweresubjecttodiscrimination.

DurhamSchoolServices,Inc.(“Durham”),aprimecontractor,submittedabidforandwonacontractwithanIllinoisschooldistrict.Thecontractwassubjecttoaset‐asideprogramreservingsomeofthesubcontractsfordisadvantagedbusinessenterprises(arace‐andgender‐consciousprogram).Priortobidding,DurhamnegotiatedwithRapidTestProducts,Inc.(“RapidTest”),madeonepaymenttoRapidTestasanadvance,andincludedRapidTestinitsfinalbid.RapidTestbelievedithadreceivedthesubcontract.However,aftertheschooldistrictawardedthecontracttoDurham,DurhamgavethesubcontracttooneofRapidTest’scompetitor’s,abusinessownedbyanAsianmale.Theschooldistrictagreedtothesubstitution.RapidTestbroughtsuitagainstDurhamunder42U.S.C.§1981allegingthatDurhamdiscriminatedagainstitbecauseRapid’sownerwasablackwoman.

ThedistrictcourtgrantedsummaryjudgmentinfavorofDurhamholdingtheparties’dealinghadbeentooindefinitetocreateacontract.Onappeal,theSeventhCircuitCourtofAppealsstatedthat“§1981establishesaruleagainstdiscriminationincontractinganddoesnotcreateanyentitlementtobethebeneficiaryofacontractreservedforfirmsownedbyspecifiedracial,sexual,ethnic,orreligiousgroups.Argumentsthataparticularset‐asideprogramisalawfulremedyforpriordiscriminationmayormaynotprevailifapotentialsubcontractorclaimstohavebeenexcluded,butitistovictimsofdiscriminationratherthanfrustratedbeneficiariesthat§1981assignstherighttolitigate.”

ThecourtheldthatifraceorsexdiscriminationisthereasonwhyDurhamdidnotawardthesubcontracttoRapidTest,then§1981providesrelief.Havingfailedtoaddressthisissue,theSeventhCircuitCourtofAppealsremandedthecasetothedistrictcourttodeterminewhetherRapidTesthadevidencetobackupitsclaimthatraceandsexdiscrimination,ratherthananondiscriminatoryreasonsuchasinabilitytoperformtheservicesDurhamwanted,accountedforDurham’sdecisiontohireRapidTest’scompetitor.


3. Virdi v. DeKalb County School District, 135 Fed. Appx. 262, 2005 WL 138942 (11th Cir. 2005) (unpublished opinion)

Althoughitisanunpublishedopinion,Virdiv.DeKalbCountySchoolDistrictisarecentEleventhCircuitdecisionreviewingachallengetoalocalgovernmentMBE/WBE‐typeprogram,whichisinstructivetothedisparitystudy.InVirdi,theEleventhCircuitstruckdownaMBE/WBEgoalprogramthatthecourtheldcontainedracialclassifications.ThecourtbaseditsrulingprimarilyonthefailureoftheDeKalbCountySchoolDistrict(the“District”)toseriouslyconsiderandimplementarace‐neutralprogramandtotheinfinitedurationoftheprogram.

PlaintiffVirdi,anAsianAmericanarchitectofIndiandescent,filedsuitagainsttheDistrict,membersoftheDeKalbCountyBoardofEducation(bothindividuallyandintheirofficialcapacities)(the“Board”)andtheSuperintendent(bothindividuallyandinhisofficialcapacity)(collectively“defendants”)pursuantto42U.S.C.§§1981and1983andtheFourteenthAmendmentallegingthattheydiscriminatedagainsthimonthebasisofracewhenawardingarchitecturalcontracts.135Fed.Appx.262,264(11thCir.2005).Virdialsoallegedtheschooldistrict’sMinorityVendorInvolvementProgramwasfaciallyunconstitutional.Id.

Thedistrictcourtinitiallygrantedthedefendants’MotionsforSummaryJudgmentonallofVirdi’sclaimsandtheEleventhCircuitCourtofAppealsreversedinpart,vacatedinpart,andremanded.Id.Onremand,thedistrictcourtgrantedthedefendants’MotionforPartialSummaryJudgmentonthefacialchallenge,andthengrantedthedefendants’motionforajudgmentasamatteroflawontheremainingclaimsatthecloseofVirdi’scase.Id.

In1989,theBoardappointedtheTillmanCommittee(the“Committee”)tostudyparticipationoffemale‐andminority‐ownedbusinesseswiththeDistrict.Id.TheCommitteemetwithvariousDistrictdepartmentsandanumberofminoritycontractorswhoclaimedtheyhadunsuccessfullyattemptedtosolicitbusinesswiththeDistrict.Id.Basedupona“generalfeeling”thatminoritieswereunder‐represented,theCommitteeissuedtheTillmanReport(the“Report”)stating“theCommittee’simpressionthat‘[m]inoritiesha[d]notparticipatedinschoolboardpurchasesandcontractinginaratioreflectingtheminoritymake‐upofthecommunity.”Id.TheReportcontainednospecificevidenceofpastdiscriminationnoranyfactualfindingsofdiscrimination.Id.

TheReportrecommendedthattheDistrict:(1)Advertisebidsandpurchasingopportunitiesinnewspaperstargetingminorities,(2)conductperiodicseminarstoeducateminoritiesondoingbusinesswiththeDistrict,(3)notifyorganizationsrepresentingminorityfirmsregardingbiddingandpurchasingopportunities,and(4)publisha“howto”booklettobemadeavailabletoanybusinessinterestedindoingbusinesswiththeDistrict.

Id.TheReportalsorecommendedthattheDistrictadoptannual,aspirationalparticipationgoalsforwomen‐andminority‐ownedbusinesses.Id.TheReportcontainedstatementsindicatingtheselectionprocessshouldremainneutralandrecommendedthattheBoardadoptanon‐discriminationstatement.Id.

In1991,theBoardadoptedtheReportandimplementedseveraloftherecommendations,includingadvertisingintheAJC,conductingseminars,andpublishingthe“howto”booklet.Id.TheBoardalsoimplementedtheMinorityVendorInvolvementProgram(the“MVP”)whichadoptedtheparticipationgoalssetforthintheReport.Id.at265.


TheBoarddelegatedtheresponsibilityofselectingarchitectstotheSuperintendent.Id.VirdisentalettertotheDistrictinOctober1991expressinginterestinobtainingarchitecturalcontracts.Id.VirdisentthelettertotheDistrictManagerandsentfollow‐upliterature;here‐contactedtheDistrictManagerin1992and1993.Id.InAugust1994,VirdisentaletterandaqualificationspackagetoaprojectmanageremployedbyHeeryInternational.Id.Inafollow‐upconversation,theprojectmanagerallegedlytoldVirdithathisfirmwasnotselectednotbaseduponhisqualifications,butbecausethe“Districtwasonlylookingfor‘black‐ownedfirms.’”Id.VirdisentalettertotheprojectmanagerrequestingconfirmationofhisstatementinwritingandtheprojectmanagerforwardedthelettertotheDistrict.Id.

AfteraseriesofmeetingswithDistrictofficials,in1997,VirdimetwiththenewlyhiredExecutiveDirector.Id.at266.UponrequestoftheExecutiveDirector,Virdire‐submittedhisqualificationsbutwasinformedthathewouldbeconsideredonlyforfutureprojects(PhaseIIISPLOSTprojects).Id.VirdithenfiledsuitbeforeanyPhaseIIISPLOSTprojectswereawarded.Id.

TheEleventhCircuitconsideredwhethertheMVPwasfaciallyunconstitutionalandwhetherthedefendantsintentionallydiscriminatedagainstVirdionthebasisofhisrace.Thecourtheldthatstrictscrutinyappliestoallracialclassificationsandisnotlimitedtomerelyset‐asidesormandatoryquotas;therefore,theMVPwassubjecttostrictscrutinybecauseitcontainedracialclassifications.Id.at267.Thecourtfirstquestionedwhethertheidentifiedgovernmentinterestwascompelling.Id.at268.However,thecourtdeclinedtoreachthatissuebecauseitfoundtherace‐basedparticipationgoalswerenotnarrowlytailoredtoachievingtheidentifiedgovernmentinterest.Id.

ThecourtheldtheMVPwasnotnarrowlytailoredfortworeasons.Id.First,becausenoevidenceexistedthattheDistrictconsideredrace‐neutralalternativesto“avoidunwittingdiscrimination.”Thecourtfoundthat“[w]hilenarrowtailoringdoesnotrequireexhaustionofeveryconceivablerace‐neutralalternative,itdoesrequireserious,goodfaithconsiderationofwhethersuchalternativescouldservethegovernmentalinterestatstake.”Id.,citingGrutterv.Bollinger,539U.S.306,339(2003),andRichmondv.J.A.CrosonCo.,488U.S.469,509‐10(1989).ThecourtfoundthatDistrictcouldhaveengagedinanynumberofequallyeffectiverace‐neutralalternatives,includingusingitsoutreachprocedureandtrackingtheparticipationandsuccessofminority‐ownedbusinessascomparedtonon‐minority‐ownedbusinesses.Id.at268,n.8.Accordingly,thecourtheldtheMVPwasnotnarrowlytailored.Id.at268.

Second,thecourtheldthattheunlimiteddurationoftheMVP’sracialgoalsnegatedafindingofnarrowtailoring.Id.“[R]aceconscious…policiesmustbelimitedintime.”Id.,citingGrutter,539U.S.at342,andWalkerv.CityofMesquite,TX,169F.3d973,982(5thCir.1999).Thecourtheldthatbecausethegovernmentinterestcouldhavebeenachievedutilizingrace‐neutralmeasures,andbecausetheracialgoalswerenottemporallylimited,theMVPcouldnotwithstandstrictscrutinyandwasunconstitutionalonitsface.Id.at268.

WithrespecttoVirdi’sclaimsofintentionaldiscrimination,thecourtheldthatalthoughtheMVPwasfaciallyunconstitutional,noevidenceexistedthattheMVPoritsunconstitutionalitycausedVirditoloseacontractthathewouldhaveotherwisereceived.Id.Thus,becauseVirdifailedtoestablishacausalconnectionbetweentheunconstitutionalaspectoftheMVPandhisowninjuries,thecourtaffirmedthedistrictcourt’sgrantofjudgmentonthatissue.Id.at269.Similarly,thecourtfoundthatVirdipresentedinsufficientevidencetosustainhisclaimsagainsttheSuperintendentforintentionaldiscrimination.Id.


Thecourtreversedthedistrictcourt’sorderpertainingtothefacialconstitutionalityoftheMVP’sracialgoals,andaffirmedthedistrictcourt’sordergrantingdefendants’motionontheissueofintentionaldiscriminationagainstVirdi.Id.at270.

4. Concrete Works of Colorado, Inc. v. City and County of Denver, 321 F.3d 950 (10th Cir. 2003), cert. denied, 540 U.S. 1027, 124 S. Ct. 556 (2003) (Scalia, Justice with whom the Chief Justice Rehnquist, joined, dissenting from the denial of certiorari)

ThiscaseisinstructivetothedisparitystudybecauseitisadecisionthatupholdsthevalidityofalocalgovernmentMBE/WBEprogram.ItissignificanttonotethattheTenthCircuitdidnotapplythenarrowlytailoredtestandthusdidnotruleonanapplicationofthenarrowlytailoredtest,insteadfindingthattheplaintiffhadwaivedthatchallengeinoneoftheearlierdecisionsinthecase.ThiscasealsoisoneoftheonlycasestohavefoundprivatesectormarketplacediscriminationasabasistoupholdanMBE/WBE‐typeprogram.

InConcreteWorkstheUnitedStatesCourtofAppealsfortheTenthCircuitheldthattheCityandCountyofDenverhadacompellinginterestinlimitingracediscriminationintheconstructionindustry,thattheCityhadanimportantgovernmentalinterestinremedyinggenderdiscriminationintheconstructionindustry,andfoundthattheCityandCountyofDenverhadestablishedacompellinggovernmentalinteresttohavearace‐andgender‐basedprogram.InConcreteWorks,theCourtofAppealsdidnotaddresstheissueofwhethertheMWBEOrdinancewasnarrowlytailoredbecauseitheldthedistrictcourtwasbarredunderthelawofthecasedoctrinefromconsideringthatissuesinceitwasnotraisedonappealbytheplaintiffconstructioncompaniesaftertheyhadlostthatissueonsummaryjudgmentinanearlierdecision.Therefore,theCourtofAppealsdidnotreachadecisionastonarrowlytailoringorconsiderthatissueinthecase.

Casehistory.Plaintiff,ConcreteWorksofColorado,Inc.(“CWC”)challengedtheconstitutionalityofan“affirmativeaction”ordinanceenactedbytheCityandCountyofDenver(hereinafterthe“City”or“Denver”).321F.3d950,954(10thCir.2003).TheordinanceestablishedparticipationgoalsforracialminoritiesandwomenoncertainCityconstructionandprofessionaldesignprojects.Id.

TheCityenactedanOrdinanceNo.513(“1990Ordinance”)containingannualgoalsforMBE/WBEutilizationonallcompetitivelybidprojects.Id.at956.Aprimecontractorcouldalsosatisfythe1990Ordinancerequirementsbyusing“goodfaithefforts.”Id.In1996,theCityreplacedthe1990OrdinancewithOrdinanceNo.304(the“1996Ordinance”).Thedistrictcourtstatedthatthe1996Ordinancedifferedfromthe1990OrdinancebyexpandingthedefinitionofcoveredcontractstoincludesomeprivatelyfinancedcontractsonCity‐ownedland;addedupdatedinformationandfindingstothestatementoffactualsupportforcontinuingtheprogram;refinedtherequirementsforMBE/WBEcertificationandgraduation;mandatedtheuseofMBEsandWBEsonchangeorders;andexpandedsanctionsforimproperbehaviorbyMBEs,WBEsormajority‐ownedcontractorsinfailingtoperformtheaffirmativeactioncommitmentsmadeonCityprojects.Id.at956‐57.

The1996Ordinancewasamendedin1998byOrdinanceNo.948(the“1998Ordinance”).The1998OrdinancereducedannualpercentagegoalsandprohibitedanMBEoraWBE,actingasabidder,fromcountingself‐performedworktowardprojectgoals.Id.at957.


CWCfiledsuitchallengingtheconstitutionalityofthe1990Ordinance.Id.Thedistrictcourtconductedabenchtrialontheconstitutionalityofthethreeordinances.Id.ThedistrictcourtruledinfavorofCWCandconcludedthattheordinancesviolatedtheFourteenthAmendment.Id.TheCitythenappealedtotheTenthCircuitCourtofAppeals.Id.TheCourtofAppealsreversedandremanded.Id.at954.

TheCourtofAppealsappliedstrictscrutinytorace‐basedmeasuresandintermediatescrutinytothegender‐basedmeasures.Id.at957‐58,959.TheCourtofAppealsalsocitedRichmondv.J.A.CrosonCo.,forthepropositionthatagovernmentalentity“canuseitsspendingpowerstoremedyprivatediscrimination,ifitidentifiesthatdiscriminationwiththeparticularityrequiredbytheFourteenthAmendment.”488U.S.469,492(1989)(pluralityopinion).Because“anefforttoalleviatetheeffectsofsocietaldiscriminationisnotacompellinginterest,”theCourtofAppealsheldthatDenvercoulddemonstratethatitsinterestiscompellingonlyifit(1)identifiedthepastorpresentdiscrimination“withsomespecificity,”and(2)demonstratedthata“strongbasisinevidence”supportsitsconclusionthatremedialactionisnecessary.Id.at958,quotingShawv.Hunt,517U.S.899,909‐10(1996).

ThecourtheldthatDenvercouldmeetitsburdenwithoutconclusivelyprovingtheexistenceofpastorpresentracialdiscrimination.Id.Rather,Denvercouldrelyon“empiricalevidencethatdemonstrates‘asignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractors…andthenumberofsuchcontractorsactuallyengagedbythelocalityorthelocality’sprimecontractors.’”Id.,quotingCroson,488U.S.at509(pluralityopinion).Furthermore,theCourtofAppealsheldthatDenvercouldrelyonstatisticalevidencegatheredfromthesix‐countyDenverMetropolitanStatisticalArea(MSA)andcouldsupplementthestatisticalevidencewithanecdotalevidenceofpublicandprivatediscrimination.Id.

TheCourtofAppealsheldthatDenvercouldestablishitscompellinginterestbypresentingevidenceofitsowndirectparticipationinracialdiscriminationoritspassiveparticipationinprivatediscrimination.Id.TheCourtofAppealsheldthatonceDenvermetitsburden,CWChadtointroduce“credible,particularizedevidencetorebut[Denver’s]initialshowingoftheexistenceofacompellinginterest,whichcouldconsistofaneutralexplanationforthestatisticaldisparities.”Id.(internalcitationsandquotationsomitted).TheCourtofAppealsheldthatCWCcouldalsorebutDenver’sstatisticalevidence“by(1)showingthatthestatisticsareflawed;(2)demonstratingthatthedisparitiesshownbythestatisticsarenotsignificantoractionable;or(3)presentingcontrastingstatisticaldata.”Id.(internalcitationsandquotationsomitted).TheCourtofAppealsheldthattheburdenofproofatalltimesremainedwithCWCtodemonstratetheunconstitutionalityoftheordinances.Id.at960.

TheCourtofAppealsheldthattomeetitsburdenofdemonstratinganimportantgovernmentalinterestpertheintermediatescrutinyanalysis,Denvermustshowthatthegender‐basedmeasuresintheordinanceswerebasedon“reasonedanalysisratherthanthroughthemechanicalapplicationoftraditional,ofteninaccurate,assumptions.”Id.,quotingMiss.Univ.forWomenv.Hogan,458U.S.718,726(1982).

Thestudies.Denverpresentedhistorical,statisticalandanecdotalevidenceinsupportofitsMBE/WBEprograms.DenvercommissionedanumberofstudiestoassessitsMBE/WBEprograms.Id.at962.TheconsultingfirmhiredbyDenverutilizeddisparityindicesinpart.Id.at962.The1990StudyalsoexaminedMBEandWBEutilizationintheoverallDenverMSAconstructionmarket,bothpublicandprivate.Id.at963.


TheconsultingfirmalsointerviewedrepresentativesofMBEs,WBEs,majority‐ownedconstructionfirms,andgovernmentofficials.Id.Basedonthisinformation,the1990Studyconcludedthat,despiteDenver’seffortstoincreaseMBEandWBEparticipationinDenverPublicWorksprojects,someDenveremployeesandprivatecontractorsengagedinconductdesignedtocircumventthegoalsprogram.Id.Afterreviewingthestatisticalandanecdotalevidencecontainedinthe1990Study,theCityCouncilenactedthe1990Ordinance.Id.

AftertheTenthCircuitdecidedConcreteWorksII,Denvercommissionedanotherstudy(the“1995Study”).Id.at963.Using1987CensusBureaudata,the1995StudyagainexaminedutilizationofMBEsandWBEsintheconstructionandprofessionaldesignindustrieswithintheDenverMSA.Id.The1995StudyconcludedthatMBEsandWBEsweremorelikelytobeone‐personorfamily‐runbusinesses.TheStudyconcludedthatHispanic‐ownedfirmswerelesslikelytohavepaidemployeesthanwhite‐ownedfirmsbutthatAsian/NativeAmerican‐ownedfirmsweremorelikelytohavepaidemployeesthanwhite‐orotherminority‐ownedfirms.Todeterminewhetherthesefactorsexplainedoverallmarketdisparities,the1995StudyusedtheCensusdatatocalculatedisparityindicesforallfirmsintheDenverMSAconstructionindustryandseparatelycalculateddisparityindicesforfirmswithpaidemployeesandfirmswithnopaidemployees.Id.at964.

TheCensusBureauinformationwasalsousedtoexamineaveragerevenuesperemployeeforDenverMSAconstructionfirmswithpaidemployees.Hispanic‐,Asian‐,NativeAmerican‐,andwomen‐ownedfirmswithpaidemployeesallreportedlowerrevenuesperemployeethanmajority‐ownedfirms.The1995Studyalsoused1990Censusdatatocalculateratesofself‐employmentwithintheDenverMSAconstructionindustry.TheStudyconcludedthatthedisparitiesintheratesofself‐employmentforblacks,Hispanics,andwomenpersistedevenaftercontrollingforeducationandlengthofworkexperience.The1995StudycontrolledforthesevariablesandreportedthatblacksandHispanicsworkingintheDenverMSAconstructionindustrywerelessthanhalfaslikelytoowntheirownbusinessesaswerewhitesofcomparableeducationandexperience.Id.

Inlate1994andearly1995,atelephonesurveyofconstructionfirmsdoingbusinessintheDenverMSAwasconducted.Id.at965.Basedoninformationobtainedfromthesurvey,theconsultantcalculatedpercentageutilizationandpercentageavailabilityofMBEsandWBEs.Percentageutilizationwascalculatedfromrevenueinformationprovidedbytherespondingfirms.PercentageavailabilitywascalculatedbasedonthenumberofMBEsandWBEsthatrespondedtothesurveyquestionregardingrevenues.Usingtheseutilizationandavailabilitypercentages,the1995Studyshoweddisparityindicesof64forMBEsand70forWBEsintheconstructionindustry.Intheprofessionaldesignindustry,disparityindiceswere67forMBEsand69forWBEs.The1995Studyconcludedthatthedisparityindicesobtainedfromthetelephonesurveydataweremoreaccuratethanthoseobtainedfromthe1987Censusdatabecausethedataobtainedfromthetelephonesurveyweremorerecent,hadanarrowerfocus,andincludeddataonCcorporations.Additionally,itwaspossibletocalculatedisparityindicesforprofessionaldesignfirmsfromthesurveydata.Id.

In1997,theCityconductedanotherstudytoestimatetheavailabilityofMBEsandWBEsandtoexamine,interalia,whetherraceandgenderdiscriminationlimitedtheparticipationofMBEsandWBEsinconstructionprojectsofthetypetypicallyundertakenbytheCity(the“1997Study”).Id.at966.The1997StudyusedgeographicandspecializationinformationtocalculateMBE/WBEavailability.Availabilitywasdefinedas“theratioofMBE/WBEfirmstothetotalnumberoffirmsinthefour‐digitSICcodesandgeographicmarketarearelevanttotheCity’scontracts.”Id.


The1997StudycomparedMBE/WBEavailabilityandutilizationintheColoradoconstructionindustry.Id.ThestatewidemarketwasusedbecausenecessaryinformationwasunavailablefortheDenverMSA.Id.at967.Additionally,datacollectedin1987bytheCensusBureauwasusedbecausemorecurrentdatawasunavailable.TheStudycalculateddisparityindicesforthestatewideconstructionmarketinColoradoasfollows:41forAfricanAmericanfirms,40forHispanicfirms,14forAsianandotherminorities,and74forwomen‐ownedfirms.Id.

The1997StudyalsocontainedananalysisofwhetherAfricanAmericans,Hispanics,orAsianAmericansworkingintheconstructionindustryarelesslikelytobeself‐employedthansimilarlysituatedwhites.Id.UsingdatafromthePublicUseMicrodataSamples(“PUMS”)ofthe1990CensusofPopulationandHousing,theStudyusedasampleofindividualsworkingintheconstructionindustry.TheStudyconcludedthatinbothColoradoandtheDenverMSA,AfricanAmericans,Hispanics,andNativeAmericansworkingintheconstructionindustryhadlowerself‐employmentratesthanwhites.AsianAmericanshadhigherself‐employmentratesthanwhites.

UsingtheavailabilityfigurescalculatedearlierintheStudy,theStudythencomparedtheactualavailabilityofMBE/WBEsintheDenverMSAwiththepotentialavailabilityofMBE/WBEsiftheyformedbusinessesatthesamerateaswhiteswiththesamecharacteristics.Id.Finally,theStudyexaminedwhetherself‐employedminoritiesandwomenintheconstructionindustryhavelowerearningsthanwhitemaleswithsimilarcharacteristics.Id.at968.Usinglinearregressionanalysis,theStudycomparedbusinessownerswithsimilaryearsofeducation,ofsimilarage,doingbusinessinthesamegeographicarea,andhavingothersimilardemographiccharacteristics.Evenaftercontrollingforseveralfactors,theresultsshowedthatself‐employedAfricanAmericans,Hispanics,NativeAmericans,andwomenhadlowerearningsthanwhitemales.Id.

The1997StudyalsoconductedamailsurveyofbothMBE/WBEsandnon‐MBE/WBEstoobtaininformationontheirexperiencesintheconstructionindustry.OftheMBE/WBEswhoresponded,35percentindicatedthattheyhadexperiencedatleastoneincidentofdisparatetreatmentwithinthelastfiveyearswhileengagedinbusinessactivities.Thesurveyalsoposedthefollowingquestion:“Howoftendoprimecontractorswhouseyourfirmasasubcontractoronpublicsectorprojectswith[MBE/WBE]goalsorrequirements…alsouseyourfirmonpublicsectororprivatesectorprojectswithout[MBE/WBE]goalsorrequirements?”Fifty‐eightpercentofminoritiesand41percentofwhitewomenwhorespondedtothisquestionindicatedtheywere“seldomornever”usedonnon‐goalsprojects.Id.

MBE/WBEswerealsoaskedwhetherthefollowingaspectsofprocurementmadeitmoredifficultorimpossibletoobtainconstructioncontracts:(1)bondingrequirements,(2)insurancerequirements,(3)largeprojectsize,(4)costofcompletingproposals,(5)obtainingworkingcapital,(6)lengthofnotificationforbiddeadlines,(7)prequalificationrequirements,and(8)previousdealingswithanagency.Thisquestionwasalsoaskedofnon‐MBE/WBEsinaseparatesurvey.Withoneexception,MBE/WBEsconsideredeachaspectofprocurementmoreproblematicthannon‐MBE/WBEs.Todeterminewhetherafirm’ssizeorexperienceexplainedthedifferentresponses,aregressionanalysiswasconductedthatcontrolledforageofthefirm,numberofemployees,andlevelofrevenues.Theresultsagainshowedthatwiththesame,singleexception,MBE/WBEshadmoredifficultiesthannon‐MBE/WBEswiththesamecharacteristics.Id.at968‐69.


Afterthe1997Studywascompleted,theCityenactedthe1998Ordinance.The1998Ordinancereducedtheannualgoalsto10percentforbothMBEsandWBEsandeliminatedaprovisionwhichpreviouslyallowedMBE/WBEstocounttheirownworktowardprojectgoals.Id.at969.

Theanecdotalevidenceincludedthetestimonyoftheseniorvice‐presidentofalarge,majority‐ownedconstructionfirmwhostatedthatwhenheworkedinDenver,hereceivedcrediblecomplaintsfromminorityandwomen‐ownedconstructionfirmsthattheyweresubjecttodifferentworkrulesthanmajority‐ownedfirms.Id.HealsotestifiedthathefrequentlyobservedgraffiticontainingracialorgenderepithetswrittenonjobsitesintheDenvermetropolitanarea.Further,hestatedthathebelieved,basedonhispersonalexperiences,thatmanymajority‐ownedfirmsrefusedtohireminority‐orwomen‐ownedsubcontractorsbecausetheybelievedthosefirmswerenotcompetent.Id.

SeveralMBE/WBEwitnessestestifiedthattheyexperienceddifficultyprequalifyingforprivatesectorprojectsandprojectswiththeCityandothergovernmentalentitiesinColorado.Oneindividualtestifiedthathercompanywasrequiredtoprequalifyforaprivatesectorprojectwhilenosimilarrequirementwasimposedonmajority‐ownedfirms.Severalotherstestifiedthattheyattemptedtoprequalifyforprojectsbuttheirapplicationsweredeniedeventhoughtheymettheprequalificationrequirements.Id.

OtherMBE/WBEstestifiedthattheirbidswererejectedevenwhentheywerethelowestbidder;thattheybelievedtheywerepaidmoreslowlythanmajority‐ownedfirmsonbothCityprojectsandprivatesectorprojects;thattheywerechargedmoreforsuppliesandmaterials;thattheywererequiredtodoadditionalworknotpartofthesubcontractingarrangement;andthattheyfounditdifficulttojoinunionsandtradeassociations.Id.TherewastestimonydetailingthedifficultiesMBE/WBEsexperiencedinobtaininglinesofcredit.OneWBEtestifiedthatshewasgivenafalseexplanationofwhyherloanwasdeclined;anothertestifiedthatthelendinginstitutionrequiredtheco‐signatureofherhusbandeventhoughherhusband,whoalsoownedaconstructionfirm,wasnotrequiredtoobtainherco‐signature;athirdtestifiedthatthebankrequiredherfathertobeinvolvedinthelendingnegotiations.Id.

Thecourtalsopointedoutanecdotaltestimonyinvolvingrecitationsofracially‐andgender‐motivatedharassmentexperiencedbyMBE/WBEsatworksites.Therewastestimonythatminorityandfemaleemployeesworkingonconstructionprojectswerephysicallyassaultedandfondled,spatuponwithchewingtobacco,andpeltedwithtwo‐inchboltsthrownbymalesfromaheightof80feet.Id.at969‐70.

Thelegalframeworkappliedbythecourt.TheCourtheldthatthedistrictcourtincorrectlybelievedDenverwasrequiredtoprovetheexistenceofdiscrimination.InsteadofconsideringwhetherDenverhaddemonstratedstrongevidencefromwhichaninferenceofpastorpresentdiscriminationcouldbedrawn,thedistrictcourtanalyzedwhetherDenver’sevidenceshowedthatthereispervasivediscrimination.Id.at970.Thecourt,quotingConcreteWorksII,statedthat“theFourteenthAmendmentdoesnotrequireacourttomakeanultimatefindingofdiscriminationbeforeamunicipalitymaytakeaffirmativestepstoeradicatediscrimination.”Id.at970,quotingConcreteWorksII,36F.3d1513,1522(10thCir.1994).Denver’sinitialburdenwastodemonstratethatstrongevidenceofdiscriminationsupporteditsconclusionthatremedialmeasureswerenecessary.Strongevidenceisthat“approachingaprimafaciecaseofaconstitutionalorstatutoryviolation,”notirrefutableordefinitiveproofofdiscrimination.Id.at97,quotingCroson,488U.S.at500.TheburdenofproofatalltimesremainedwiththecontractorplaintifftoprovebyapreponderanceoftheevidencethatDenver’s“evidencedidnot


supportaninferenceofpriordiscriminationandthusaremedialpurpose.”Id.,quotingAdarandVII,228F.3dat1176.

Denver,theCourtheld,didintroduceevidenceofdiscriminationagainsteachgroupincludedintheordinances.Id.at971.Thus,Denver’sevidencedidnotsufferfromtheproblemdiscussedbythecourtinCroson.TheCourtheldthedistrictcourterroneouslyconcludedthatDenvermustdemonstratethattheprivatefirmsdirectlyengagedinanydiscriminationinwhichDenverpassivelyparticipatesdosointentionally,withthepurposeofdisadvantagingminoritiesandwomen.TheCrosonmajorityconcludedthata“citywouldhaveacompellinginterestinpreventingitstaxdollarsfromassisting[localtrade]organizationsinmaintainingaraciallysegregatedconstructionmarket.”Id.at971,quotingCroson,488U.S.503.Thus,theCourtheldDenver’sburdenwastointroduceevidencewhichraisedtheinferenceofdiscriminatoryexclusioninthelocalconstructionindustryandlinkeditsspendingtothatdiscrimination.Id.

TheCourtnotedtheSupremeCourthasstatedthattheinferenceofdiscriminatoryexclusioncanarisefromstatisticaldisparities.Id.,citingCroson,488U.S.at503.Accordingly,itconcludedthatDenvercouldmeetitsburdenthroughtheintroductionofstatisticalandanecdotalevidence.TotheextentthedistrictcourtrequiredDenvertointroduceadditionalevidencetoshowdiscriminatorymotiveorintentonthepartofprivateconstructionfirms,thedistrictcourterred.Denver,accordingtotheCourt,wasundernoburdentoidentifyanyspecificpracticeorpolicythatresultedindiscrimination.NeitherwasDenverrequiredtodemonstratethatthepurposeofanysuchpracticeorpolicywastodisadvantagewomenorminorities.Id.at972.

ThecourtfoundDenver’sstatisticalandanecdotalevidencerelevantbecauseitidentifiesdiscriminationinthelocalconstructionindustry,notsimplydiscriminationinsociety.ThecourtheldthegenesisoftheidentifieddiscriminationisirrelevantandthedistrictcourterredwhenitdiscountedDenver’sevidenceonthatbasis.Id.

ThecourtheldthedistrictcourterroneouslyrejectedtheevidenceDenverpresentedonmarketplacediscrimination.Id.at973.Thecourtrejectedthedistrictcourt’serroneouslegalconclusionthatamunicipalitymayonlyremedyitsowndiscrimination.ThecourtstatedthisconclusioniscontrarytotheholdingsinConcreteWorksIIandthepluralityopinioninCroson.Id.Thecourthelditpreviouslyrecognizedinthiscasethat“amunicipalityhasacompellinginterestintakingaffirmativestepstoremedybothpublicandprivatediscriminationspecificallyidentifiedinitsarea.”Id.,quotingConcreteWorksII,36F.3dat1529(emphasisadded).InConcreteWorksII,thecourtstatedthat“wedonotreadCrosonasrequiringthemunicipalitytoidentifyanexactlinkagebetweenitsawardofpubliccontractsandprivatediscrimination.”Id.,quotingConcreteWorksII,36F.3dat1529.

ThecourtstatedthatDenvercouldmeetitsburdenofdemonstratingitscompellinginterestwithevidenceofprivatediscriminationinthelocalconstructionindustrycoupledwithevidencethatithasbecomeapassiveparticipantinthatdiscrimination.Id.at973.Thus,Denverwasnotrequiredtodemonstratethatitis“guiltyofprohibiteddiscrimination”tomeetitsinitialburden.Id.

Additionally,thecourthadpreviouslyconcludedthatDenver’sstatisticalstudies,whichcomparedutilizationofMBE/WBEstoavailability,supportedtheinferencethat“localprimecontractors”areengagedinracialandgenderdiscrimination.Id.at974,quotingConcreteWorksII,36F.3dat1529.Thus,thecourtheldDenver’sdisparitystudiesshouldnothavebeendiscountedbecausetheyfailedtospecificallyidentifythoseindividualsorfirmsresponsibleforthediscrimination.Id.


TheCourt’srejectionofCWC’sargumentsandthedistrictcourtfindings.

Useofmarketplacedata.Thecourtheldthedistrictcourt,interalia,erroneouslyconcludedthatthedisparitystudiesuponwhichDenverreliedweresignificantlyflawedbecausetheymeasureddiscriminationintheoverallDenverMSAconstructionindustry,notdiscriminationbytheCityitself.Id.at974.Thecourtfoundthatthedistrictcourt’sconclusionwasdirectlycontrarytotheholdinginAdarandVIIthatevidenceofbothpublicandprivatediscriminationintheconstructionindustryisrelevant.Id.,citingAdarandVII,228F.3dat1166‐67).

ThecourtheldtheconclusionreachedbythemajorityinCrosonthatmarketplacedataarerelevantinequalprotectionchallengestoaffirmativeactionprogramswasconsistentwiththeapproachlatertakenbythecourtinShawv.Hunt.Id.at975.InShaw,amajorityofthecourtreliedonthemajorityopinioninCrosonforthebroadpropositionthatagovernmentalentity’s“interestinremedyingtheeffectsofpastorpresentracialdiscriminationmayinthepropercasejustifyagovernment’suseofracialdistinctions.”Id.,quotingShaw,517U.S.at909.TheShawcourtdidnotadoptanyrequirementthatonlydiscriminationbythegovernmentalentity,eitherdirectlyorbyutilizingfirmsengagedindiscriminationonprojectsfundedbytheentity,wasremediable.Thecourt,however,didsetouttwoconditionsthatmustbemetforthegovernmentalentitytoshowacompellinginterest.“First,thediscriminationmustbeidentifieddiscrimination.”Id.at976,quotingShaw,517U.S.at910.TheCitycansatisfythisconditionbyidentifyingthediscrimination,“‘publicorprivate,withsomespecificity.’“Id.at976,citingShaw,517U.S.at910,quotingCroson,488U.S.at504(emphasisadded).Thegovernmentalentitymustalsohavea“strongbasisinevidencetoconcludethatremedialactionwasnecessary.”Id.Thus,thecourtconcludedShawspecificallystatedthatevidenceofeitherpublicorprivatediscriminationcouldbeusedtosatisfythemunicipality’sburdenofproducingstrongevidence.Id.at976.

InAdarandVII,thecourtnoteditconcludedthatevidenceofmarketplacediscriminationcanbeusedtosupportacompellinginterestinremedyingpastorpresentdiscriminationthroughtheuseofaffirmativeactionlegislation.Id.,citingAdarandVII,228F.3dat1166‐67(“[W]emayconsiderpublicandprivatediscriminationnotonlyinthespecificareaofgovernmentprocurementcontractsbutalsointheconstructionindustrygenerally;thusanyfindingsCongresshasmadeastotheentireconstructionindustryarerelevant.”(emphasisadded)).Further,thecourtpointedoutinthiscaseitearlierrejectedtheargumentCWCreassertedherethatmarketplacedataareirrelevantandremandedthecasetothedistrictcourttodeterminewhetherDenvercouldlinkitspublicspendingto“theDenverMSAevidenceofindustry‐widediscrimination.”Id.,quotingConcreteWorksII,36F.3dat1529.Thecourtstatedthatevidenceexplaining“theDenvergovernment’sroleincontributingtotheunderutilizationofMBEsandWBEsintheprivateconstructionmarketintheDenverMSA”wasrelevanttoDenver’sburdenofproducingstrongevidence.Id.,quotingConcreteWorksII,36F.3dat1530(emphasisadded).

Consistentwiththecourt’smandateinConcreteWorksII,theCityattemptedtoshowattrialthatit“indirectlycontributedtoprivatediscriminationbyawardingpubliccontractstofirmsthatinturndiscriminatedagainstMBEand/orWBEsubcontractorsinotherprivateportionsoftheirbusiness.”Id.TheCitycandemonstratethatitisa“‘passiveparticipant’inasystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry”bycompilingevidenceofmarketplacediscriminationandthenlinkingitsspendingpracticestotheprivatediscrimination.Id.,quotingCroson,488U.S.at492.

ThecourtrejectedCWC’sargumentthatthelendingdiscriminationstudiesandbusinessformationstudiespresentedbyDenverwereirrelevant.InAdarandVII,thecourtconcludedthat


evidenceofdiscriminatorybarrierstotheformationofbusinessesbyminoritiesandwomenandfaircompetitionbetweenMBE/WBEsandmajority‐ownedconstructionfirmsshowsa“stronglink”betweenagovernment’s“disbursementsofpublicfundsforconstructioncontractsandthechannelingofthosefundsduetoprivatediscrimination.”Id.at977,quotingAdarandVII,228F.3dat1167‐68.ThecourtfoundthatevidencethatprivatediscriminationresultedinbarrierstobusinessformationisrelevantbecauseitdemonstratesthatMBE/WBEsareprecludedattheoutsetfromcompetingforpublicconstructioncontracts.ThecourtalsofoundthatevidenceofbarrierstofaircompetitionisrelevantbecauseitagaindemonstratesthatexistingMBE/WBEsareprecludedfromcompetingforpubliccontracts.Thus,likethestudiesmeasuringdisparitiesintheutilizationofMBE/WBEsintheDenverMSAconstructionindustry,studiesshowingthatdiscriminatorybarrierstobusinessformationexistintheDenverconstructionindustryarerelevanttotheCity’sshowingthatitindirectlyparticipatesinindustrydiscrimination.Id.at977.

TheCitypresentedevidenceoflendingdiscriminationtosupportitspositionthatMBE/WBEsintheDenverMSAconstructionindustryfacediscriminatorybarrierstobusinessformation.Denverintroducedadisparitystudypreparedin1996andsponsoredbytheDenverCommunityReinvestmentAlliance,ColoradoCapitalInitiatives,andtheCity.TheStudyultimatelyconcludedthat“despitethefactthatloanapplicantsofthreedifferentracial/ethnicbackgroundsinthissamplewerenotappreciablydifferentasbusinesspeople,theywereultimatelytreateddifferentlybythelendersonthecrucialissueofloanapprovalordenial.”Id.at977‐78.InAdarandVII,thecourtconcludedthatthisstudy,amongotherevidence,“stronglysupport[ed]aninitialshowingofdiscriminationinlending.”Id.at978,quoting,AdarandVII,228F.3dat1170,n.13(“Lendingdiscriminationaloneofcoursedoesnotjustifyactionintheconstructionmarket.However,thepersistenceofsuchdiscrimination…supportstheassertionthattheformation,aswellasutilization,ofminority‐ownedconstructionenterpriseshasbeenimpeded.”).TheCityalsointroducedanecdotalevidenceoflendingdiscriminationintheDenverconstructionindustry.

CWCdidnotpresentanyevidencethatunderminedthereliabilityofthelendingdiscriminationevidencebutsimplyrepeatedtheargument,foreclosedbycircuitprecedent,thatitisirrelevant.Thecourtrejectedthedistrictcourtcriticismoftheevidencebecauseitfailedtodeterminewhetherthediscriminationresultedfromdiscriminatoryattitudesorfromtheneutralapplicationofbankingregulations.Thecourtconcludedthatdiscriminatorymotivecanbeinferredfromtheresultsshownindisparitystudies.Thecourtheldthedistrictcourt’scriticismdidnotunderminethestudy’sreliabilityasanindicatorthattheCityispassivelyparticipatinginmarketplacediscrimination.ThecourtnotedthatinAdarandVIIittook“judicialnoticeoftheobviouscausalconnectionbetweenaccesstocapitalandabilitytoimplementpublicworksconstructionprojects.”Id.at978,quotingAdarandVII,228F.3dat1170.

DenveralsointroducedevidenceofdiscriminatorybarrierstocompetitionfacedbyMBE/WBEsintheformofbusinessformationstudies.The1990Studyandthe1995StudybothshowedthatallminoritygroupsintheDenverMSAformedtheirownconstructionfirmsatrateslowerthanthetotalpopulationbutthatwomenformedconstructionfirmsathigherrates.The1997Studyexaminedself‐employmentratesandcontrolledforgender,maritalstatus,education,availabilityofcapital,andpersonal/familyvariables.Asdiscussed,supra,theStudyconcludedthatAfricanAmericans,Hispanics,andNativeAmericansworkingintheconstructionindustryhavelowerratesofself‐employmentthansimilarlysituatedwhites.AsianAmericanshadhigherrates.The1997Studyalsoconcludedthatminorityandfemalebusinessownersintheconstructionindustry,withtheexceptionofAsianAmericanowners,havelowerearningsthan


whitemaleowners.Thisconclusionwasreachedaftercontrollingforeducation,age,maritalstatus,anddisabilities.Id.at978.

Thecourtheldthatthedistrictcourt’sconclusionthatthebusinessformationstudiescouldnotbeusedtojustifytheordinancesconflictswithitsholdinginAdarandVII.“[T]heexistenceofevidenceindicatingthatthenumberof[MBEs]wouldbesignificantly(butunquantifiably)higherbutforsuchbarriersisneverthelessrelevanttotheassessmentofwhetheradisparityissufficientlysignificanttogiverisetoaninferenceofdiscriminatoryexclusion.”Id.at979,quotingAdarandVII,228F.3dat1174.

Insum,thecourtheldthedistrictcourterredwhenitrefusedtoconsiderorgivesufficientweighttothelendingdiscriminationstudy,thebusinessformationstudies,andthestudiesmeasuringmarketplacediscrimination.ThatevidencewaslegallyrelevanttotheCity’sburdenofdemonstratingastrongbasisinevidencetosupportitsconclusionthatremediallegislationwasnecessary.Id.at979‐80.

Variables. CWCchallengedDenver’sdisparitystudiesasunreliablebecausethedisparitiesshowninthestudiesmaybeattributabletofirmsizeandexperienceratherthandiscrimination.Denvercountered,however,thatafirm’ssizehaslittleeffectonitsqualificationsoritsabilitytoprovideconstructionservicesandthatMBE/WBEs,likeallconstructionfirms,canperformmostserviceseitherbyhiringadditionalemployeesorbyemployingsubcontractors.CWCrespondedthatelasticityitselfisrelativetosizeandexperience;MBE/WBEsarelesscapableofexpandingbecausetheyaresmallerandlessexperienced.Id.at980.

ThecourtconcludedthatevenifitassumedthatMBE/WBEsarelessabletoexpandbecauseoftheirsmallersizeandmorelimitedexperience,CWCdidnotrespondtoDenver’sargumentandtheevidenceitpresentedshowingthatexperienceandsizearenotrace‐andgender‐neutralvariablesandthatMBE/WBEconstructionfirmsaregenerallysmallerandlessexperiencedbecauseofindustrydiscrimination.Id.at981.Thelendingdiscriminationandbusinessformationstudies,accordingtothecourt,bothstronglysupportedDenver’sargumentthatMBE/WBEsaresmallerandlessexperiencedbecauseofmarketplaceandindustrydiscrimination.Inaddition,Denver’sexperttestifiedthatdiscriminationbybanksorbondingcompanieswouldreduceafirm’srevenueandthenumberofemployeesitcouldhire.Id.

DenveralsoargueditsStudiescontrolledforsizeandthe1995Studycontrolledforexperience.Itassertedthatthe1990StudymeasuredrevenuesperemployeeforconstructionforMBE/WBEsandconcludedthattheresultingdisparities,“suggest[]thatevenamongfirmsofthesameemploymentsize,industryutilizationofMBEsandWBEswaslowerthanthatofnon‐minoritymale‐ownedfirms.”Id.at982.Similarly,the1995Studycontrolledforsize,calculating,interalia,disparityindicesforfirmswithnopaidemployeeswhichpresumablyarethesamesize.

Basedontheuncontrovertedevidencepresentedattrial,thecourtconcludedthatthedistrictcourtdidnotgivesufficientweighttoDenver’sdisparitystudiesbecauseofitserroneousconclusionthatthestudiesfailedtoadequatelycontrolforsizeandexperience.ThecourtheldthatDenverispermittedtomakeassumptionsaboutcapacityandqualificationofMBE/WBEstoperformconstructionservicesifitcansupportthoseassumptions.ThecourtfoundtheassumptionsmadeinthiscasewereconsistentwiththeevidencepresentedattrialandsupportedtheCity’spositionthatafirm’ssizedoesnotaffectitsqualifications,willingness,orabilitytoperformconstructionservicesandthatthesmallersizeandlesserexperienceofMBE/WBEsare,themselves,theresultofindustrydiscrimination.Further,thecourtpointedout


CWCdidnotconductitsowndisparitystudyusingmarketplacedataandthusdidnotdemonstratethatthedisparitiesshowninDenver’sstudieswoulddecreaseordisappearifthestudiescontrolledforsizeandexperiencetoCWC’ssatisfaction.Consequently,thecourtheldCWC’srebuttalevidencewasinsufficienttomeetitsburdenofdiscreditingDenver’sdisparitystudiesontheissueofsizeandexperience.Id.at982.

Specialization. ThedistrictcourtalsofaultedDenver’sdisparitystudiesbecausetheydidnotcontrolforfirmspecialization.Thecourtnotedthedistrictcourt’scriticismwouldbeappropriateonlyiftherewasevidencethatMBE/WBEsaremorelikelytospecializeincertainconstructionfields.Id.at982.

ThecourtfoundtherewasnoidentifiedevidenceshowingthatcertainconstructionspecializationsrequireskillslesslikelytobepossessedbyMBE/WBEs.ThecourtfoundrelevantthetestimonyoftheCity’sexpert,thatthedatahereviewedshowedthatMBEswererepresented“widelyacrossthedifferent[construction]specializations.”Id.at982‐83.TherewasnocontrarytestimonythataggregationbiascausedthedisparitiesshowninDenver’sstudies.Id.at983.

ThecourtheldthatCWCfailedtodemonstratethatthedisparitiesshowninDenver’sstudiesareeliminatedwhenthereiscontrolforfirmspecialization.Incontrast,oneoftheDenverstudies,whichcontrolledforSIC‐codesubspecialtyandstillshoweddisparities,providedsupportforDenver’sargumentthatfirmspecializationdoesnotexplainthedisparities.Id.at983.

Thecourtpointedoutthatdisparitystudiesmaymakeassumptionsaboutavailabilityaslongasthesameassumptionscanbemadeforallfirms.Id.at983.

UtilizationofMBE/WBEsonCityprojects. CWCarguedthatDenvercouldnotdemonstrateacompellinginterestbecauseitoverutilizedMBE/WBEsonCityconstructionprojects.Thisargument,accordingtothecourt,wasanextensionofCWC’sargumentthatDenvercouldjustifytheordinancesonlybypresentingevidenceofdiscriminationbytheCityitselforbycontractorswhileworkingonCityprojects.BecausethecourtconcludedthatDenvercouldsatisfyitsburdenbyshowingthatitisanindirectparticipantinindustrydiscrimination,CWC’sargumentrelatingtotheutilizationofMBE/WBEsonCityprojectsgoesonlytotheweightofDenver’sevidence.Id.at984.

Consistentwiththecourt’smandateinConcreteWorksII,attrialDenversoughttodemonstratethattheutilizationdatafromprojectssubjecttothegoalsprogramweretaintedbytheprogramand“reflect[ed]theintendedremedialeffectonMBEandWBEutilization.”Id.at984,quotingConcreteWorksII,36F.3dat1526.Denverarguedthatthenon‐goalsdatawerethebetterindicatorofpastdiscriminationinpubliccontractingthanthedataonallCityconstructionprojects.Id.at984‐85.ThecourtconcludedthatDenverpresentedampleevidencetosupporttheconclusionthattheevidenceshowingMBE/WBEutilizationonCityprojectsnotsubjecttotheordinancesorthegoalsprogramsisthebetterindicatorofdiscriminationinCitycontracting.Id.at985.

ThecourtrejectedCWC’sargumentthatthemarketplacedatawereirrelevantbutagreedthatthenon‐goalsdatawerealsorelevanttoDenver’sburden.ThecourtnotedthatDenverdidnotrelyheavilyonthenon‐goalsdataattrialbutfocusedprimarilyonthemarketplacestudiestosupportitsburden.Id.at985.


Insum,thecourtheldDenverdemonstratedthattheutilizationofMBE/WBEsonCityprojectshadbeenaffectedbytheaffirmativeactionprogramsthathadbeeninplaceinoneformoranothersince1977.Thus,thenon‐goalsdatawerethebetterindicatorofdiscriminationinpubliccontracting.Thecourtconcludedthat,onbalance,thenon‐goalsdataprovidedsomesupportforDenver’spositionthatracialandgenderdiscriminationexistedinpubliccontractingbeforetheenactmentoftheordinances.Id.at987‐88.

Anecdotalevidence. Theanecdotalevidence,accordingtothecourt,includedseveralincidentsinvolvingprofoundlydisturbingbehavioronthepartoflenders,majority‐ownedfirms,andindividualemployees.Id.at989.Thecourtfoundthattheanecdotaltestimonyrevealedbehaviorthatwasnotmerelysophomoricorinsensitive,butwhichresultedinrealeconomicorphysicalharm.WhileCWCalsoarguedthatallneworsmallcontractorshavedifficultyobtainingcreditandthattreatmentthewitnessescharacterizedasdiscriminatoryisexperiencedbyallcontractors,Denver’switnessesspecificallytestifiedthattheybelievedtheincidentstheyexperiencedweremotivatedbyraceorgenderdiscrimination.Thecourtfoundtheysupportedthosebeliefswithtestimonythatmajority‐ownedfirmswerenotsubjecttothesamerequirementsimposedonthem.Id.

ThecourtheldtherewasnomerittoCWC’sargumentthatthewitnesses’accountsmustbeverifiedtoprovidesupportforDenver’sburden.Thecourtstatedthatanecdotalevidenceisnothingmorethanawitness’narrativeofanincidenttoldfromthewitness’perspectiveandincludingthewitness’perceptions.Id.

AfterconsideringDenver’sanecdotalevidence,thedistrictcourtfoundthattheevidence“showsthatrace,ethnicityandgenderaffecttheconstructionindustryandthosewhoworkinit”andthattheegregiousmistreatmentofminorityandwomenemployees“haddirectfinancialconsequences”onconstructionfirms.Id.at989,quotingConcreteWorksIII,86F.Supp.2dat1074,1073.Basedonthedistrictcourt’sfindingsregardingDenver’sanecdotalevidenceanditsreviewoftherecord,thecourtconcludedthattheanecdotalevidenceprovidedpersuasive,unrebuttedsupportforDenver’sinitialburden.Id.at989‐90,citingInt’lBhd.ofTeamstersv.UnitedStates,431U.S.324,339(1977)(concludingthatanecdotalevidencepresentedinapatternorpracticediscriminationcasewaspersuasivebecauseit“broughtthecold[statistics]convincinglytolife”).

Summary. ThecourtheldtherecordcontainedextensiveevidencesupportingDenver’spositionthatithadastrongbasisinevidenceforconcludingthatthe1990Ordinanceandthe1998OrdinancewerenecessarytoremediatediscriminationagainstbothMBEsandWBEs.Id.at990.TheinformationavailabletoDenveranduponwhichtheordinanceswerepredicated,accordingtothecourt,indicatedthatdiscriminationwaspersistentinthelocalconstructionindustryandthatDenverwas,atleast,anindirectparticipantinthatdiscrimination.

TorebutDenver’sevidence,thecourtstatedCWCwasrequiredto“establishthatDenver’sevidencedidnotconstitutestrongevidenceofsuchdiscrimination.”Id.at991,quotingConcreteWorksII,36F.3dat1523.CWCcouldnotmeetitsburdenofproofthroughconjectureandunsupportedcriticismsofDenver’sevidence.Rather,itmustpresent“credible,particularizedevidence.”Id.,quotingAdarandVII,228F.3dat1175.ThecourtheldthatCWCdidnotmeetitsburden.CWChypothesizedthatthedisparitiesshowninthestudiesonwhichDenverreliescouldbeexplainedbyanynumberoffactorsotherthanracialdiscrimination.However,thecourtfounditdidnotconductitsownmarketplacedisparitystudycontrollingforthedisputedvariablesandpresentednootherevidencefromwhichthecourtcouldconcludethatsuchvariablesexplainthedisparities.Id.at991‐92.


Narrowtailoring.HavingconcludedthatDenverdemonstratedacompellinginterestintherace‐basedmeasuresandanimportantgovernmentalinterestinthegender‐basedmeasures,thecourthelditmustexaminewhethertheordinanceswerenarrowlytailoredtoservethecompellinginterestandaresubstantiallyrelatedtotheachievementoftheimportantgovernmentalinterest.Id.at992.

ThecourtstatedithadpreviouslyconcludedinitsearlierdecisionsthatDenver’sprogramwasnarrowlytailored.CWCappealedthegrantofsummaryjudgmentandthatappealculminatedinthedecisioninConcreteWorksII.Thecourtreversedthegrantofsummaryjudgmentonthecompelling‐interestissueandconcludedthatCWChadwaivedanychallengetothenarrowtailoringconclusionreachedbythedistrictcourt.BecausethecourtfoundConcreteWorksdidnotchallengethedistrictcourt’sconclusionwithrespecttothesecondprongofCroson’sstrictscrutinystandard—i.e.,thattheOrdinanceisnarrowlytailoredtoremedypastandpresentdiscrimination—thecourthelditneednotaddressthisissue.Id.at992,citingConcreteWorksII,36F.3dat1531,n.24.

Thecourtconcludedthatthedistrictcourtlackedauthoritytoaddressthenarrowtailoringissueonremandbecausenoneoftheexceptionstothelawofthecasedoctrineareapplicable.Thedistrictcourt’searlierdeterminationthatDenver’saffirmative‐actionmeasureswerenarrowlytailoredislawofthecaseandbindingontheparties.

5. In re City of Memphis, 293 F.3d 345 (6th Cir. 2002)

Thiscaseisinstructivetothedisparitystudybasedonitsholdingthatalocalorstategovernmentmaybeprohibitedfromutilizingpost‐enactmentevidenceinsupportofaMBE/WBE‐typeprogram.293F.3dat350‐351.TheUnitedStatesCourtofAppealsfortheSixthCircuitheldthatpre‐enactmentevidencewasrequiredtojustifytheCityofMemphis’MBE/WBEProgram.Id.TheSixthCircuitheldthatagovernmentmusthavehadsufficientevidentiaryjustificationforaraciallyconsciousstatuteinadvanceofitspassage.

ThedistrictcourthadruledthattheCitycouldnotintroduceapost‐enactmentstudyasevidenceofacompellinginteresttojustifyitsMBE/WBEProgram.Id.at350‐351.TheSixthCircuitdeniedtheCity’sapplicationforaninterlocutoryappealonthedistrictcourt’sorderandrefusedtogranttheCity’srequesttoappealthisissue.Id.at350‐351.

TheCityarguedthatasubstantialgroundfordifferenceofopinionexistedinthefederalcourtsofappeal.293F.3dat350.Thecourtstatedsomecircuitspermitpost‐enactmentevidencetosupplmentpre‐enactmentevidence.Id.Thisissue,accordingtotheCourt,appearstohavebeenresolvedintheSixthCircuit.Id.TheCourtnotedtheSixthCircuitdecisioninAGCv.Drabik,214F.3d730(6thCir.2000),whichheldthatunderCrosonaStatemusthavesufficientevidentiaryjustificationforaracially‐consciousstatuteinadvanceofitsenactment,andthatgovernmentalentitiesmustidentifythatdiscriminationwithsomespecificitybeforetheymayuserace‐consciousrelief.Memphis,293F.3dat350‐351,citingDrabik,214F.3dat738.

TheCourtinMemphissaidthatalthoughDrabikdidnotdirectlyaddresstheadmissibilityofpost‐enactmentevidence,itheldagovernmentalentitymusthavepre‐enactmentevidencesufficienttojustifyaracially‐consciousstatute.293R.3dat351.ThecourtconcludedDrabikindicatestheSixthCircuitwouldnotfavorusingpost‐enactmentevidencetomakethatshowing.Id.at351.UnderDrabik,theCourtinMemphisheldtheCitymustpresentpre‐enactmentevidencetoshowacompellingstateinterest.Id.at351.


6. Builders Ass’n of Greater Chicago v. County of Cook, Chicago, 256 F.3d 642 (7th Cir. 2001)

ThiscaseisinstructivetothedisparitystudybecauseofitsanalysisoftheCookCountyMBE/WBEprogramandtheevidenceusedtosupportthatprogram.Thedecisionemphasizestheneedforanyrace‐consciousprogramtobebaseduponcredibleevidenceofdiscriminationbythelocalgovernmentagainstMBE/WBEsandtobenarrowlytailoredtoremedyonlythatidentifieddiscrimination.

InBuildersAss’nofGreaterChicagov.CountyofCook,Chicago,256F.3d642(7thCir.2001)theUnitedStatesCourtofAppealsfortheSeventhCircuitheldtheCookCounty,ChicagoMBE/WBEProgramwasunconstitutional.Thecourtconcludedtherewasinsufficientevidenceofacompellinginterest.ThecourtheldtherewasnocredibleevidencethatCookCountyintheawardofconstructioncontactsdiscriminatedagainstanyofthegroups“favored”bytheProgram.ThecourtalsofoundthattheProgramwasnot“narrowlytailored”toremedythewrongsoughttoberedressed,inpartbecauseitwasover‐inclusiveinthedefinitionofminorities.ThecourtnotedthelistofminoritiesincludedgroupsthathavenotbeensubjecttodiscriminationbyCookCounty.

Thecourtconsideredasanunresolvedissuewhetheradifferent,andspecificallyamorepermissive,standardthanstrictscrutinyisapplicabletopreferentialtreatmentonthebasisofsex,ratherthanraceorethnicity.256F.3dat644.ThecourtnotedthattheUnitedStatesSupremeCourtinUnitedStatesv.Virginia(“VMI”),518U.S.515,532andn.6(1996),heldracialdiscriminationtoastricterstandardthansexdiscrimination,althoughthecourtinCookCountystatedthedifferencebetweentheapplicablestandardshasbecome“vanishinglysmall.”Id.ThecourtpointedoutthattheSupremeCourtsaidintheVMIcase,that“partieswhoseektodefendgender‐basedgovernmentactionmustdemonstratean‘exceedinglypersuasive’justificationforthataction…”and,realistically,thelawcanasknomoreofrace‐basedremedieseither.”256F.3dat644,quotinginpartVMI,518U.S.at533.ThecourtindicatedthattheEleventhCircuitCourtofAppealsintheEngineeringContractAssociationofSouthFlorida,Inc.v.MetropolitanDadeCounty,122F.3d895,910(11thCir.1997)decisioncreatedthe“paradoxthatapublicagencycanprovidestrongerremediesforsexdiscriminationthanforracediscrimination;itisdifficulttoseewhatsensethatmakes.”256F.3dat644.But,sinceCookCountydidnotargueforadifferentstandardfortheminorityandwomen’s“setasideprograms,”thewomen’sprogramthecourtdeterminedmustclearthesame“hurdles”astheminorityprogram.”256F.3dat644‐645.

Thecourtfoundthatsincetheordinancerequiresprimecontractorsonpublicprojectstoreserveasubstantialportionofthesubcontractsforminoritycontractors,whichisinapplicabletoprivateprojects,itis“tobeexpectedthattherewouldbemoresolicitingofthesecontractorsonpublicthanonprivateprojects.”Id.Therefore,thecourtdidnotfindpersuasivethattherewasdiscriminationbasedonthisdifferencealone.256F.3dat645.ThecourtpointedouttheCounty“concededthat[it]hadnospecificevidenceofpre‐enactmentdiscriminationtosupporttheordinance.”256F.3dat645quotingthedistrictcourtdecision,123F.Supp.2dat1093.Thecourtheldthata“publicagencymusthaveastrongevidentiarybasisforthinkingadiscriminatoryremedyappropriatebeforeitadoptstheremedy.”256F.3dat645(emphasisinoriginal).

Thecourtstatedthatminorityenterprisesintheconstructionindustry“tendtobesubcontractors,moreover,becauseasthedistrictcourtfoundnotclearlyerroneously,123F.Supp.2dat1115,theytendtobenewandthereforesmallandrelativelyuntested—factors


notshowntobeattributabletodiscriminationbytheCounty.”256F.3dat645.ThecourtheldthattherewasnobasisforattributingtotheCountyanydiscriminationthatprimecontractorsmayhaveengagedin.Id.Thecourtnotedthat“[i]fprimecontractorsonCountyprojectswerediscriminatingagainstminoritiesandthiswasknowntotheCounty,whosefundingofthecontractsthusknowinglyperpetuatedthediscrimination,theCountymightbedeemedsufficientlycomplicit…tobeentitledtotakeremedialaction.”Id.But,thecourtfound“ofthatthereisnoevidenceeither.”Id.

ThecourtstatedthatiftheCountyhadbeencomplicitindiscriminationbyprimecontractors,itfound“puzzling”totrytoremedythatdiscriminationbyrequiringdiscriminationinfavorofminoritystockholders,asdistinctfromemployees.256F.3dat646.ThecourtheldthateveniftherecordmadeacaseforremedialactionofthegeneralsortfoundintheMWBEordinancebytheCounty,itwould“flunktheconstitutionaltest”bynotbeingcarefullydesignedtoachievetheostensibleremedialaimandnomore.256F.3dat646.ThecourtheldthatastateandlocalgovernmentthathasdiscriminatedjustagainstblacksmaynotbywayofremedydiscriminateinfavorofblacksandAsianAmericansandwomen.Id.Nor,thecourtstated,mayitdiscriminatemorethanisnecessarytocuretheeffectsoftheearlierdiscrimination.Id.“Normayitcontinuetheremedyinforceindefinitely,withnoefforttodeterminewhether,theremedialpurposeattained,continuedenforcementoftheremedywouldbeagratuitousdiscriminationagainstnonminoritypersons.”Id.Thecourt,therefore,heldthattheordinancewasnot“narrowlytailored”tothewrongthatitseekstocorrect.Id.

ThecourtthusfoundthattheCountybothfailedtoestablishthepremiseforaracialremedy,andalsothattheremedygoesfurtherthanisnecessarytoeliminatetheevilagainstwhichitisdirected.256F.3dat647.Thecourtheldthatthelistof“favoredminorities”includedgroupsthathaveneverbeensubjecttosignificantdiscriminationbyCookCounty.Id.Thecourtfounditunreasonableto“presume”discriminationagainstcertaingroupsmerelyonthebasisofhavinganancestorwhohadbeenborninaparticularcountry.Id.Therefore,thecourtheldtheordinancewasoverinclusive.

ThecourtfoundthattheCountydidnotmakeanyefforttoshowthat,wereitnotforahistoryofdiscrimination,minoritieswouldhave30percent,andwomen10percent,ofCountyconstructioncontracts.256F.3dat647.ThecourtalsorejectedthepropositionadvancedbytheCountyinthiscase—”thatacomparisonofthefractionofminoritysubcontractorsonpublicandprivateprojectsestablisheddiscriminationagainstminoritiesbyprimecontractorsonthelattertypeofproject.”256F.3dat647‐648.

7. Associated Gen. Contractors v. Drabik, 214 F.3d 730 (6th Cir. 2000), affirming Case No. C2‐98‐943, 998 WL 812241 (S.D. Ohio 1998)

ThiscaseisinstructivetothedisparitystudybasedontheanalysisappliedinfindingtheevidenceinsufficienttojustifyanMBE/WBEprogram,andtheapplicationofthenarrowlytailoredtest.TheSixthCircuitCourtofAppealsenjoinedtheenforcementofthestateMBEprogram,andinsodoingreversedstatecourtprecedentfindingtheprogramconstitutional.Thiscaseaffirmedadistrictcourtdecisionenjoiningtheawardofa“set‐aside”contractbasedontheStateofOhio’sMBEprogramwiththeawardofconstructioncontracts.

Thecourtheld,amongotherthings,thatthemereexistenceofsocietaldiscriminationwasinsufficienttosupportaracialclassification.Thecourtfoundthattheeconomicdatawereinsufficientandtoooutdated.ThecourtconcludedtheStatecouldnotestablishacompellinggovernmentalinterestandthatthestatutewasnotnarrowlytailored.Thecourtsaidthestatute


failedthenarrowtailoringtest,includingbecausetherewasnoevidencethattheStatehadconsideredrace‐neutralremedies.

ThiscaseinvolvesasuitbytheAssociatedGeneralContractorsofOhioandAssociatedGeneralContractorsofNorthwestOhio,representingOhiobuildingcontractorstostoptheawardofaconstructioncontractfortheToledoCorrectionalFacilitytoaminority‐ownedbusiness(“MBE”),inabiddingprocessfromwhichnon‐minority‐ownedfirmswerestatutorilyexcludedfromparticipatingunderOhio’sstateMinorityBusinessEnterpriseAct.214F.3dat733.

AGCofOhioandAGCofNorthwestOhio(Plaintiffs‐Appellees)claimedtheOhioMinorityBusinessEnterpriseAct(“MBEA”)wasunconstitutionalinviolationoftheEqualProtectionClauseoftheFourteenthAmendment.Thedistrictcourtagreed,andpermanentlyenjoinedthestatefromawardinganyconstructioncontractsundertheMBEA.Drabik,DirectoroftheOhioDepartmentofAdministrativeServicesandothersappealedthedistrictcourt’sOrder.Id.at733.TheSixthCircuitCourtofAppealsaffirmedtheOrderofthedistrictcourt,holdingunconstitutionaltheMBEAandenjoiningthestatefromawardinganyconstructioncontractsunderthatstatute.Id.

OhiopassedtheMBEAin1980.Id.at733.Thislegislation“setaside”5%,byvalue,ofallstateconstructionprojectsforbiddingbycertifiedMBEsexclusively.Id.PursuanttotheMBEA,thestatedecidedtosetaside,forMBEsonly,biddingforconstructionoftheToledoCorrectionalFacility’sAdministrationBuilding.Non‐MBEswereexcludedonracialgroundsfrombiddingonthataspectoftheprojectandrestrictedintheirparticipationassubcontractors.Id.

TheCourtnoteditruledin1983thattheMBEAwasconstitutional,seeOhioContractorsAss’nv.Keip,713F.2d167(6thCir.1983).Id.Subsequently,theUnitedStatesSupremeCourtintwolandmarkdecisionsappliedthecriteriaofstrictscrutinyunderwhichsuch“raciallypreferentialset‐asides”weretobeevaluated.Id.(seeCityofRichmondv.J.A.CrosonCo.(1989)andAdarandConstructors,Inc.v.Pena(1995),citationomitted.)TheCourtnotedthatthedecisioninKeipwasamorerelaxedtreatmentaccordedtoequalprotectionchallengestostatecontractingdisputespriortoCroson.Id.at733‐734.

Strictscrutiny.TheCourtfounditisclearagovernmenthasacompellinginterestinassuringthatpublicdollarsdonotservetofinancetheevilofprivateprejudice.Id.at734‐735,citingCroson,488U.S.at492.But,theCourtstated“statisticaldisparityintheproportionofcontractsawardedtoaparticulargroup,standingalonedoesnotdemonstratesuchanevil.”Id.at735.

TheCourtsaidthereisnoquestionthatremedyingtheeffectsofpastdiscriminationconstitutesacompellinggovernmentalinterest.Id.at735.TheCourtstatedtomakethisshowing,astatecannotrelyonmerespeculation,orlegislativepronouncements,ofpastdiscrimination,butrather,theSupremeCourthasheldthestatebearstheburdenofdemonstratingastrongbasisinevidenceforitsconclusionthatremedialactionwasnecessarybyprovingeitherthatthestateitselfdiscriminatedinthepastorwasapassiveparticipantinprivateindustry’sdiscriminatorypractices.Id.at735,quotingCroson,488U.S.at486‐92.

Thus,theCourtconcludedthatthelinchpinoftheCrosonanalysisisitsmandatingofstrictscrutiny,therequirementthataprogrambenarrowlytailoredtoachieveacompellinggovernmentinterest,butaboveallitsholdingthatgovernmentsmustidentifydiscriminationwithsomespecificitybeforetheymayuserace‐consciousrelief;explicitfindingsofaconstitutionalorstatutoryviolationmustbemade.Id.at735,quotingCroson,488U.S.at497.


Statisticalevidence:compellinginterest.TheCourtpointedoutthatproponentsof“raciallydiscriminatorysystems”suchastheMBEAhavesoughttogeneratethenecessaryevidencebyavarietyofmeans,however,sucheffortshavegenerallyfocusedon“mereunderrepresentation”byshowingalesserpercentageofcontractsawardedtoaparticulargroupthanthatgroup’spercentageinthegeneralpopulation.Id.at735.“Rawstatisticaldisparity”ofthissortispartoftheevidenceofferedbyOhiointhiscase,accordingtotheCourt.Id.at736.TheCourtstatedhowever,“suchevidenceofmerestatisticaldisparitieshasbeenfirmlyrejectedasinsufficientbytheSupremeCourt,particularlyinacontextsuchascontracting,wherespecialqualificationsaresorelevant.”Id.

TheCourtsaidthatalthoughOhio’smost“compelling”statisticalevidenceinthiscasecomparedthepercentageofcontractsawardedtominoritiestothepercentageofminority‐ownedbusinessesinOhio,whichtheCourtnotedprovidedstrongerstatisticsthanthestatisticsinCroson,itwasstillinsufficient.Id.at736.TheCourtfoundtheproblemwithOhio’sstatisticalcomparisonwasthatthepercentageofminority‐ownedbusinessesinOhio“didnottakeintoaccounthowmanyofthosebusinesseswereconstructioncompaniesofanysort,letalonehowmanywerequalified,willing,andabletoperformstateconstructioncontracts.”Id.

TheCourtheldthestatisticalevidencethattheOhiolegislaturehadbeforeitwhentheMBEAwasenactedconsistedofdatathatwasdeficient.Id.at736.TheCourtsaidthatmuchofthedatawasseverelylimitedinscope(ODOTcontracts)orwasirrelevanttothiscase(ODOTpurchasingcontracts).Id.TheCourtagainnotedthedatadidnotdistinguishminorityconstructioncontractorsfromminoritybusinessesgenerally,andtherefore“madenoattempttoidentifyminorityconstructioncontractingfirmsthatareready,willing,andabletoperformstateconstructioncontractsofanyparticularsize.”Id.TheCourtalsopointedouttheprogramwasnotnarrowlytailored,becausethestateconcededtheAGCshowedthattheStatehadnotperformedarecentstudy.Id.

TheCourtalsoconcludedthatevenstatisticalcomparisonsthatmightbeapparentlymorepertinent,suchaswiththepercentageofallfirmsqualified,insomeminimalsense,toperformtheworkinquestion,wouldalsofailtosatisfytheCourt’scriteria.Id.at736.“IfMBEscomprise10%ofthetotalnumberofcontractingfirmsinthestate,butonlyget3%ofthedollarvalueofcertaincontracts,thatdoesnotaloneshowdiscrimination,orevendisparity.Itdoesnotaccountfortherelativesizeofthefirms,eitherintermsoftheirabilitytodoparticularworkorintermsofthenumberoftaskstheyhavetheresourcestocomplete.”Id.at736.

TheCourtstatedtheonlycasesfoundtopresentthenecessary“compellinginterest”sufficienttojustifyanarrowlytailoredrace‐basedremedy,arethosethatexpose“pervasive,systematic,andobstinatediscriminatoryconduct.…”Id.at737,quotingAdarand,515U.S.at237.TheCourtsaidthatOhiohadmadenosuchshowinginthiscase.

Narrowtailoring.AsecondandseparatehurdlefortheMBEA,theCourtheld,isitsfailureofnarrowtailoring.TheCourtnotedtheSupremeCourtinAdarandtaughtthatacourtcalledupontoaddressthequestionofnarrowtailoringmustask,“forexample,whethertherewas‘anyconsiderationoftheuseofrace‐neutralmeanstoincreaseminoritybusinessparticipation’ingovernmentcontracting….”Id.at737,quotingCroson,488U.S.at507.TheCourtstatedanarrowly‐tailoredset‐asideprogrammustbeappropriatelylimitedsuchthatitwillnotlastlongerthanthediscriminatoryeffectsitisdesignedtoeliminateandmustbelinkedtoidentifieddiscrimination.Id.at737.TheCourtsaidthattheprogrammustalsonotsufferfrom“overinclusiveness.”Id.at737,quotingCroson,515U.S.at506.


TheCourtfoundtheMBEAsufferedfromdefectsbothofoverandunder‐inclusiveness.Id.at737.BylumpingtogetherthegroupsofBlacks,NativeAmericans,HispanicsandOrientals,theMBEAmaywellprovidepreferencewhere·therehasbeennodiscrimination,andmaynotproviderelieftogroupswherediscriminationmighthavebeenproven.Id.at737.Thus,theCourtsaid,theMBEAwassatisfiedifcontractorsofThaiorigin,whomightneverhavebeenseeninOhiountilrecently,receive10%ofstatecontracts,whileAfrican‐Americansreceivenone.Id.

Inaddition,theCourtfoundthatOhio’sownunderutilizationstatisticssufferfromafatalconceptualflaw:theydonotreporttheactualuseofminorityfirms;theyonlyreporttheuseofminorityfirmswhohavegonetothetroubleofbeingcertifiedandlistedamongthestate’s1,180MBEs.Id.at737.TheCourtsaidtherewasnoexaminationofwhethercontractsarebeingawardedtominorityfirmswhohaveneversoughtsuchpreferencetotakeadvantageofthespecialminorityprogram,forwhateverreason,andwhohavebeenawardedcontractsinopenbidding.Id.

TheCourtpointedoutthedistrictcourttooknoteoftheoutdatedcharacterofanyevidencethatmighthavebeenmarshaledinsupportoftheMBEA,andaddedthatevenifsuchdatahadbeensufficienttojustifythestatutetwentyyearsago,itwouldnotsufficetocontinuetojustifyitforever.Id.at737‐738.TheMBEA,theCourtnoted,hasremainedineffectfortwentyyearsandhasnosetexpiration.Id.at738.TheCourtreiteratedarace‐basedpreferenceprogrammustbeappropriatelylimitedsuchthatitwillnotlastlongerthanthediscriminatoryeffectsitisdesignedtoeliminate.Id.at737.

Finally,theCourtmentionedthatoneofthefactorsCrosonidentifiedasindicativeofnarrowtailoringiswhethernon‐race‐basedmeanswereconsideredasalternativestothegoal.Id.at738.TheCourtconcludedthehistoricalrecordcontainednoevidencethattheOhiolegislaturegaveanyconsiderationtothe·useofrace‐neutralmeanstoincreaseminorityparticipationinstatecontractingbeforeresortingtorace‐basedquotas.Id.at738.

Thedistrictcourthadfoundthatthesupplementationofthestate’sexistingdatawhichmightbeofferedgivenacontinuanceofthecasewouldnotsufficientlyenhancetherelevanceoftheevidencetojustifydelayinthedistrictcourt’shearing.Id.at738.TheCourtstatedthatunderCroson,thestatemusthavehadsufficientevidentiaryjustificationforaracially‐consciousstatuteinadvanceofitspassage.Id.TheCourtsaidthatCrosonrequiredgovernmentalentitiesmustidentifythatdiscriminationwithsomespecificitybeforetheymayuserace‐consciousrelief.Id.at738.

TheCourtalsoreferencedthedistrictcourtfindingthatthestatehadbeenlaxinmaintainingthetypeofstatisticsthatwouldbenecessarytoundergirditsaffirmativeactionprogram,andthatthepropermaintenanceofcurrentstatisticsisrelevanttotherequisitenarrowtailoringofsuchaprogram.Id.at738‐739.But,theCourtnotedthestatedoesnotknowhowmanyminority‐ownedbusinessesarenotcertifiedasMBEs,andhowmanyofthemhavebeensuccessfulinobtainingstatecontracts.Id.at739.

ThecourtwasmindfulofthefactitwasstrikingdownanentireclassofprogramsbydeclaringtheStateofOhioMBEstatuteinquestionunconstitutional,andnotedthatitsdecisionwas“notreconcilable”withtheOhioSupremeCourt’sdecisioninRitchieProduce,707N.E.2d871(Ohio1999)(upholdingtheOhioStateMBEProgram).


8. W.H. Scott Constr. Co. v. City of Jackson, Mississippi, 199 F.3d 206 (5th Cir. 1999)

Anon‐minoritygeneralcontractorbroughtthisactionagainsttheCityofJacksonandCityofficialsassertingthataCitypolicyanditsminoritybusinessenterpriseprogramforparticipationandconstructioncontractsviolatedtheEqualProtectionClauseoftheU.S.Constitution.

City of Jackson MBE Program.In1985theCityofJacksonadoptedaMBEProgram,whichinitiallyhadagoalof5%ofallcitycontracts.199F.3dat208.Id.The5%goalwasnotbasedonanyobjectivedata.Id.at209.Instead,itwasa“guess”thatwasadoptedbytheCity.Id.Thegoalwaslaterincreasedto15%becauseitwasfoundthat10%ofbusinessesinMississippiwereminority‐owned.Id.

AftertheMBEProgram’sadoption,theCity’sDepartmentofPublicWorksincludedaSpecialNoticetobiddersaspartofitsspecificationsforallCityconstructionprojects.Id.TheSpecialNoticeencouragedprimeconstructioncontractorstoincludeintheirbid15%participationbysubcontractorscertifiedasDisadvantagedBusinessEnterprises(DBEs)and5%participationbythosecertifiedasWBEs.Id.

TheSpecialNoticedefinedaDBEasasmallbusinessconcernthatisownedandcontrolledbysociallyandeconomicallydisadvantagedindividuals,whichhadthesamemeaningasunderSection8(d)oftheSmallBusinessActandsubcontractingregulationspromulgatedpursuanttothatAct.Id.ThecourtfoundthatSection8(d)oftheSBAstatesthatprimecontractorsaretopresumethatsociallyandeconomicallydisadvantagedindividualsincludecertainracialandethnicgroupsoranyotherindividualfoundtobedisadvantagedbytheSBA.Id.

In1991,theMississippilegislaturepassedabillthatwouldallowcitiestosetaside20%ofprocurementforminoritybusiness.Id.at209‐210.TheCityofJacksonCityCouncilvotedtoimplementtheset‐aside,contingentontheCity’sadoptionofadisparitystudy.Id.at210.TheCityconductedadisparitystudyin1994andconcludedthatthetotalunderutilizationofAfrican‐AmericanandAsian‐American‐ownedfirmswasstatisticallysignificant.Id.ThestudyrecommendedthattheCityimplementarangeofMBEgoalsfrom10‐15%.Id.TheCity,however,wasnotsatisfiedwiththestudy,accordingtothecourt,andchosenottoadoptitsconclusions.Id.Instead,theCityretainedits15%MBEgoalanddidnotadoptthedisparitystudy.Id.

W.H. Scott did not meet DBE goal.In1997theCityadvertisedfortheconstructionofaprojectandtheW.H.ScottConstructionCompany,Inc.(Scott)wasthelowestbidder.Id.Scottobtained11.5%WBEparticipation,butitreportedthatthebidsfromDBEsubcontractorshadnotbeenlowbidsand,therefore,itsDBE‐participationpercentagewouldbeonly1%.Id.

AlthoughScottdidnotachievetheDBEgoalandsubsequentlywouldnotconsidersuggestionsforincreasingitsminorityparticipation,theDepartmentofPublicWorksandtheMayor,aswellastheCity’sFinancialLegalDepartments,approvedScott’sbidanditwasplacedontheagendatobeapprovedbytheCityCouncil.Id.TheCityCouncilvotedagainsttheScottbidwithoutcomment.ScottallegedthatitwastoldtheCityrejecteditsbidbecauseitdidnotachievetheDBEgoal,buttheCityallegedthatitwasrejectedbecauseitexceededthebudgetfortheproject.Id.

TheCitysubsequentlycombinedtheprojectwithanotherrenovationprojectandawardedthatcombinedprojecttoadifferentconstructioncompany.Id.at210‐211.Scottmaintainedtherejectionofhisbidwasraciallymotivatedandfiledthissuit.Id.at211.


District court decision.ThedistrictcourtgrantedScott’smotionforsummaryjudgmentagreeingwithScottthattherelevantPolicyincludednotjusttheSpecialNotice,butthatitalsoincludedtheMBEProgramandPolicydocumentregardingMBEparticipation.Id.at211.ThedistrictcourtfoundthattheMBEPolicywasunconstitutionalbecauseitlackedrequisitefindingstojustifythe15%minority‐participationgoalandsurvivestrictscrutinybasedonthe1989decisionintheCityofRichmond,v.J.A.CrosonCo.Id.Thedistrictcourtstruckdownminority‐participationgoalsfortheCity’sconstructioncontractsonly.Id.at211.ThedistrictcourtfoundthatScott’sbidwasrejectedbecauseScottlackedsufficientminorityparticipation,notbecauseitexceededtheCity’sbudget.Id.Inaddition,thedistrictcourtawardedScottlostprofits.Id.

Standing.TheFifthCircuitdeterminedthatinequalprotectioncaseschallengingaffirmativeactionpolicies,“injuryinfact”forpurposesofestablishingstandingisdefinedastheinabilitytocompeteonanequalfootinginthebiddingprocess.Id.at213.ThecourtstatedthatScottneednotprovethatitlostcontractsbecauseofthePolicy,butonlyprovethattheSpecialNoticeforcesittocompeteonanunequalbasis.Id.Thequestion,therefore,thecourtsaidiswhethertheSpecialNoticeimposesanobligationthatisbornunequallybyDBEcontractorsandnon‐DBEcontractors.Id.at213.

Thecourtfoundthatifanon‐DBEcontractorisunabletoprocure15%DBEparticipation,itmuststillsatisfytheCitythatadequategoodfaitheffortshavebeenmadetomeetthecontractgoalorriskterminationofitscontracts,andthatsucheffortsincludeengaginginadvertising,directsolicitationandfollow‐up,assistanceinattainingbondingorinsurancerequiredbythecontractor.Id.at214.ThecourtconcludedthatalthoughthelanguagedoesnotexpresslyauthorizeaDBEcontractortosatisfyDBE‐participationgoalsbykeepingtherequisitepercentageofworkforitself,itwouldbenonsensicaltointerpretitasprecludingaDBEcontractorfromdoingso.Id.at215.

IfaDBEcontractorperformed15%ofthecontractdollaramount,accordingtothecourt,itcouldsatisfytheparticipationgoalandavoidbothalossofprofitstosubcontractorsandthetimeandexpenseofcomplyingwiththegoodfaithrequirements.Id.at215.Thecourtsaidthatnon‐DBEcontractorsdonothavethisoption,andthus,Scottandothernon‐DBEcontractorsareatacompetitivedisadvantagewithDBEcontractors.Id.

Thecourt,therefore,foundScotthadsatisfiedstandingtobringthelawsuit.

Constitutional strict scrutiny analysis and guidance in determining types of evidence to justify a remedial MBE program.ThecourtfirstrejectedtheCity’scontentionthattheSpecialNoticeshouldnotbesubjecttostrictscrutinybecauseitestablishesgoalsratherthanmandatequotasforDBEparticipation.Id.at215‐217.Thecourtstatedthedistinctionbetweengoalsorquotasisimmaterialbecausethesetechniquesinduceanemployertohirewithaneyetowardmeetinganumericaltarget,andassuch,theywillresultinindividualsbeinggrantedapreferencebecauseoftheirrace.Id.at215.ThecourtalsorejectedtheCity’sargumentthattheDBEclassificationcreatedapreferencebasedon“disadvantage,”notrace.Id.at215‐216.ThecourtfoundthattheSpecialNoticereliedonSection8(d)andSection8(a)oftheSmallBusinessAct,whichprovideexplicitlyforarace‐basedpresumptionofsocialdisadvantage,andthusrequiresstrictscrutiny.Id.at216‐217.

ThecourtdiscussedtheCityofRichmondv.CrosoncaseasprovidingguidanceindeterminingwhattypesofevidencewouldjustifytheenactmentofanMBE‐typeprogram.Id.at217‐218.ThecourtnotedtheSupremeCourtstressedthatagovernmentalentitymustestablishafactualpredicate,tyingitsset‐asidepercentagetoidentifiedinjuriesintheparticularlocalindustry.Id.


at217.ThecourtpointedoutgiventheSupremeCourtinCroson’semphasisonstatisticalevidence,othercourtsconsideringequalprotectionchallengestominority‐participationprogramshavelookedtodisparityindices,ortocomputationsofdisparitypercentages,indeterminingwhetherCroson’sevidentiaryburdenissatisfied.Id.at218.Thecourtfoundthatdisparitystudiesareprobativeevidencefordiscriminationbecausetheyensurethatthe“relevantstatisticalpool,”ofqualifiedminoritycontractorsisbeingconsidered.Id.at218.

ThecourtinafootnotestatedthatitdidnotattempttocraftaprecisemathematicalformulatoassessthequantumofevidencethatrisestotheCroson“strongbasisinevidence”benchmark.Id.at218,n.11.Thesufficiencyofamunicipality’sfindingsofdiscriminationinalocalindustrymustbeevaluatedonacase‐by‐casebasis.Id.

TheCityarguedthatitwaserrorforthedistrictcourttoignoreitsstatisticalevidencesupportingtheuseofracialpresumptionsinitsDBE‐participationgoals,andhighlightedthedisparitystudyitcommissionedinresponsetoCroson.Id.at218.Thecourtstated,however,thatwhateverprobitythestudy’sfindingsmighthavehadontheanalysisisirrelevanttothecase,becausetheCityrefusedtoadoptthestudywhenitwasissuedin1995.Id.Inaddition,thecourtsaidthestudywasrestrictedtothelettingofprimecontractsbytheCityundertheCity’sProgram,anddidnotincludeananalysisoftheavailabilityandutilizationofqualifiedminoritysubcontractors,therelevantstatisticalpool,intheCity’sconstructionprojects.Id.at218.

ThecourtnotedthathadtheCityadoptedparticularizedfindingsofdiscriminationwithinitsvariousagencies,andsetparticipationgoalsforeachaccordingly,theoutcomeofthedecisionmighthavebeendifferent.Id.at219.AbsentsuchevidenceintheCity’sconstructionindustry,however,thecourtconcludedtheCitylackedthefactualpredicatesrequiredundertheEqualProtectionClausetosupporttheCity’s15%DBE‐participationgoal.Id.Thus,thecourtheldtheCityfailedtoestablishacompellinginterestjustifyingtheMBEprogramortheSpecialNotice,andbecausetheCityfailedastrictscrutinyanalysisonthisground,thecourtdeclinedtoaddresswhethertheprogramwasnarrowlytailored.

Lost profits and damages.ScottsoughtdamagesfromtheCityunder42U.S.C.§1983,includinglostprofits.Id.at219.Thecourt,affirmingthedistrictcourt,concludedthatinlightoftheentirerecordtheCityCouncilrejectedScott’slowbidbecauseScottfailedtomeettheSpecialNotice’sDBE‐participationgoal,notbecauseScott’sbidexceededtheCity’sbudget.Id.at220.Thecourt,therefore,affirmedtheawardoflostprofitstoScott.

9. Monterey Mechanical v. Wilson, 125 F.3d 702 (9th Cir. 1997)

ThiscaseisinstructiveinthattheNinthCircuitanalyzedandheldinvalidtheenforcementofaMBE/WBE‐typeprogram.Althoughtheprogramatissueutilizedtheterm“goals”asopposedto“quotas,”theNinthCircuitrejectedsuchadistinction,holding“[t]herelevantquestionisnotwhetherastatuterequirestheuseofsuchmeasures,butwhetheritauthorizesorencouragesthem.”Thecasealsoisinstructivebecauseitfoundtheuseof“goals”andtheapplicationof“goodfaithefforts”inconnectionwithachievinggoalstotriggerstrictscrutiny.

MontereyMechanicalCo.(the“plaintiff”)submittedthelowbidforaconstructionprojectfortheCaliforniaPolytechnicStateUniversity(the“University”).125F.3d702,704(9thCir.1994).TheUniversityrejectedtheplaintiff’sbidbecausetheplaintifffailedtocomplywithastatestatuterequiringprimecontractorsonsuchconstructionprojectstosubcontract23percentoftheworktoMBE/WBEsor,alternatively,demonstrategoodfaithoutreachefforts.Id.Theplaintiffconductedgoodfaithoutreacheffortsbutfailedtoprovidetherequisitedocumentation;the


awardeeprimecontractordidnotsubcontractanyportionoftheworktoMBE/WBEsbutdidincludedocumentationofgoodfaithoutreachefforts.Id.

Importantly,theUniversitydidnotconductadisparitystudy,andinsteadarguedthatbecause“the‘goalrequirements’ofthescheme‘[did]notinvolveracialorgenderquotas,set‐asidesorpreferences,’”theUniversitydidnotneedadisparitystudy.Id.at705.TheplaintiffprotestedthecontractawardandsuedtheUniversity’strustees,andanumberofotherindividuals(collectivelythe“defendants”)allegingthestatelawwasviolativeoftheEqualProtectionClause.Id.Thedistrictcourtdeniedtheplaintiff’smotionforaninterlocutoryinjunctionandtheplaintiffappealedtotheNinthCircuitCourtofAppeals.Id.

Thedefendantsfirstarguedthatthestatutewasconstitutionalbecauseittreatedallgeneralcontractorsalike,byrequiringalltocomplywiththeMBE/WBEparticipationgoals.Id.at708.Thecourtheld,however,thataminorityorwomenbusinessenterprisecouldsatisfytheparticipationgoalsbyallocatingtherequisitepercentageofworktoitself.Id.at709.Thecourtheldthatcontrarytothedistrictcourt’sfinding,suchadifferencewasnotdeminimis.Id.

Thedefendant’salsoarguedthatthestatutewasnotsubjecttostrictscrutinybecausethestatutedidnotimposerigidquotas,butratheronlyrequiredgoodfaithoutreachefforts.Id.at710.Thecourtrejectedtheargumentfindingthatalthoughthestatutepermittedawardstobidderswhodidnotmeetthepercentagegoals,“theyarerigidinrequiringpreciselydescribedandmonitoredeffortstoattainthosegoals.”Id.Thecourtciteditsownearlierprecedenttoholdthat“theprovisionsarenotimmunizedfromscrutinybecausetheypurporttoestablishgoalsratherthanquotas…[T]herelevantquestionisnotwhetherastatuterequirestheuseofsuchmeasures,butwhetheritauthorizesorencouragesthem.”Id.at710‐11(internalcitationsandquotationsomitted).ThecourtfoundthatthestatuteencouragedsetasidesandcitedConcreteWorksofColoradov.Denver,36F.3d1512(10thCir.1994),asanalogoussupportfortheproposition.Id.at711.

Thecourtfoundthatthestatutetreatedcontractorsdifferentlybasedupontheirrace,ethnicityandgender,andalthough“wordedintermsofgoalsandgoodfaith,thestatuteimposesmandatoryrequirementswithconcreteness.”Id.Thecourtalsonotedthatthestatutemayimposeadditionalcomplianceexpensesuponnon‐MBE/WBEfirmswhoarerequiredtomakegoodfaithoutreachefforts(e.g.,advertising)toMBE/WBEfirms.Id.at712.

Thecourtthenconductedstrictscrutiny(race),andanintermediatescrutiny(gender)analyses.Id.at712‐13.ThecourtfoundtheUniversitypresented“noevidence”tojustifytherace‐andgender‐basedclassificationsandthusdidnotconsideradditionalissuesofproof.Id.at713.Thecourtfoundthatthestatutewasnotnarrowlytailoredbecausethedefinitionof“minority”wasoverbroad(e.g.,inclusionofAleuts).Id.at714,citingWygantv.JacksonBoardofEducation,476U.S.267,284,n.13(1986)andCityofRichmondv.J.A.Croson,Co.,488U.S.469,505‐06(1989).Thecourtfound“[a]broadprogramthatsweepsinallminoritieswitharemedythatisinnowayrelatedtopastharmscannotsurviveconstitutionalscrutiny.”Id.at714,citingHopwoodv.StateofTexas,78F.3d932,951(5thCir.1996).ThecourtheldthatthestatuteviolatedtheEqualProtectionClause.

10. Eng’g Contractors Ass’n of S. Florida v. Metro. Dade County, 122 F.3d 895 (11th Cir. 1997)

EngineeringContractorsAssociationofSouthFloridav.MetropolitanEngineeringContractorsAssociationisaparamountcaseintheEleventhCircuitandisinstructivetothedisparitystudy.


ThisdecisionhasbeencitedandappliedbythecourtsinvariouscircuitsthathaveaddressedMBE/WBE‐typeprogramsorlegislationinvolvinglocalgovernmentcontractingandprocurement.

InEngineeringContractorsAssociation,sixtradeorganizations(the“plaintiffs”)filedsuitinthedistrictcourtfortheSouthernDistrictofFlorida,challengingthreeaffirmativeactionprogramsadministeredbyEngineeringContractorsAssociation,Florida,(the“County”)asviolativeoftheEqualProtectionClause.122F.3d895,900(11thCir.1997).ThethreeaffirmativeactionprogramschallengedweretheBlackBusinessEnterpriseprogram(“BBE”),theHispanicBusinessEnterpriseprogram(“HBE”),andtheWomanBusinessEnterpriseprogram,(“WBE”),(collectively“MWBE”programs).Id.TheplaintiffschallengedtheapplicationoftheprogramtoCountyconstructioncontracts.Id.

Forcertainclassesofconstructioncontractsvaluedover$25,000,theCountysetparticipationgoalsof15percentforBBEs,19percentforHBEs,and11percentforWBEs.Id.at901.TheCountyestablishedfive“contractmeasures”toreachtheparticipationgoals:(1)setasides,(2)subcontractorgoals,(3)projectgoals,(4)bidpreferences,and(5)selectionfactors.Onceacontractwasidentifiedascoveredbyaparticipationgoal,areviewcommitteewoulddeterminewhetheracontractmeasureshouldbeutilized.Id.TheCountyCommissionwouldmakethefinaldeterminationanditsdecisionwasappealabletotheCountyManager.Id.TheCountyreviewedtheefficacyoftheMWBEprogramsannually,andreevaluatedthecontinuingviabilityoftheMWBEprogramseveryfiveyears.Id.

Inabenchtrial,thedistrictcourtappliedstrictscrutinytotheBBEandHBEprogramsandheldthattheCountylackedtherequisite“strongbasisinevidence”tosupporttherace‐andethnicity‐consciousmeasures.Id.at902.ThedistrictcourtappliedintermediatescrutinytotheWBEprogramandfoundthatthe“Countyhadpresentedinsufficientprobativeevidencetosupportitsstatedrationaleforimplementingagenderpreference.”Id.Therefore,theCountyhadfailedtodemonstratea“compellinginterest”necessarytosupporttheBBEandHBEprograms,andfailedtodemonstratean“importantinterest”necessarytosupporttheWBEprogram.Id.ThedistrictcourtassumedtheexistenceofasufficientevidentiarybasistosupporttheexistenceoftheMWBEprogramsbutheldtheBBEandHBEprogramswerenotnarrowlytailoredtotheintereststheypurportedtoserve;thedistrictcourtheldtheWBEprogramwasnotsubstantiallyrelatedtoanimportantgovernmentinterest.Id.ThedistrictcourtenteredafinaljudgmentenjoiningtheCountyfromcontinuingtooperatetheMWBEprogramsandtheCountyappealed.TheEleventhCircuitCourtofAppealsaffirmed.Id.at900,903.

Onappeal,theEleventhCircuitconsideredfourmajorissues:

1. Whethertheplaintiffshadstanding.[TheEleventhCircuitansweredthisintheaffirmativeandthatportionoftheopinionisomittedfromthissummary];

2. WhetherthedistrictcourterredinfindingtheCountylackeda“strongbasisinevidence”tojustifytheexistenceoftheBBEandHBEprograms;

3. WhetherthedistrictcourterredinfindingtheCountylackeda“sufficientprobativebasisinevidence”tojustifytheexistenceoftheWBEprogram;and

4. WhethertheMWBEprogramswerenarrowlytailoredtotheintereststheywerepurportedtoserve.


Id.at903.

TheEleventhCircuitheldthattheBBEandHBEprogramsweresubjecttothestrictscrutinystandardenunciatedbytheU.S.SupremeCourtinCityofRichmondv.J.A.CrosonCo.,488U.S.469(1989).Id.at906.Underthisstandard,“anaffirmativeactionprogrammustbebasedupona‘compellinggovernmentinterest’andmustbe‘narrowlytailored’toachievethatinterest.”Id.TheEleventhCircuitfurthernoted:

“Inpractice,theinterestthatisallegedinsupportofracialpreferencesisalmostalwaysthesame—remedyingpastorpresentdiscrimination.Thatinterestiswidelyacceptedascompelling.Asaresult,thetruetestofanaffirmativeactionprogramisusuallynotthenatureofthegovernment’sinterest,butrathertheadequacyoftheevidenceofdiscriminationofferedtoshowthatinterest.”

Id.(internalcitationsomitted).

Therefore,strictscrutinyrequiresafindingofa“‘strongbasisinevidence’tosupporttheconclusionthatremedialactionisnecessary.”Id.,citingCroson,488U.S.at500).Therequisite“‘strongbasisinevidence’cannotreston‘anamorphousclaimofsocietaldiscrimination,onsimplelegislativeassurancesofgoodintention,oroncongressionalfindingsofdiscriminationinthenationaleconomy.’”Id.at907,citingEnsleyBranch,NAACPv.Seibels,31F.3d1548,1565(11thCir.1994)(citingandapplyingCroson)).However,theEleventhCircuitfoundthatagovernmentalentitycan“justifyaffirmativeactionbydemonstrating‘grossstatisticaldisparities’betweentheproportionofminoritieshired…andtheproportionofminoritieswillingandabletodothework…Anecdotalevidencemayalsobeusedtodocumentdiscrimination,especiallyifbuttressedbyrelevantstatisticalevidence.”Id.(internalcitationsomitted).

Notwithstandingthe“exceedinglypersuasivejustification”languageutilizedbytheSupremeCourtinUnitedStatesv.Virginia,116S.Ct.2264(1996)(evaluatinggender‐basedgovernmentaction),theEleventhCircuitheldthattheWBEprogramwassubjecttotraditionalintermediatescrutiny.Id.at908.Underthisstandard,thegovernmentmustprovide“sufficientprobativeevidence”ofdiscrimination,whichisalesserstandardthanthe“strongbasisinevidence”understrictscrutiny.Id.at910.

TheCountyprovidedtwotypesofevidenceinsupportoftheMWBEprograms:(1)statisticalevidence,and(2)non‐statistical“anecdotal”evidence.Id.at911.Asaninitialmatter,theEleventhCircuitfoundthatinsupportoftheBBEprogram,theCountypermissiblyreliedonsubstantially“post‐enactment”evidence(i.e.,evidencebasedondatarelatedtoyearsfollowingtheinitialenactmentoftheBBEprogram).Id.However,“suchevidencecarrieswithitthehazardthattheprogramatissuemayitselfbemaskingdiscriminationthatmightotherwisebeoccurringintherelevantmarket.”Id.at912.Adistrictcourtshouldnot“speculateaboutwhatthedatamighthaveshownhadtheBBEprogramneverbeenenacted.”Id.

Thestatisticalevidence.TheCountypresentedfivebasiccategoriesofstatisticalevidence:(1)Countycontractingstatistics;(2)Countysubcontractingstatistics;(3)marketplacedatastatistics;(4)TheWainwrightStudy;and(5)TheBrimmerStudy.Id.Insummary,theEleventhCircuitheldthattheCounty’sstatisticalevidence(describedmorefullybelow)wassubjecttomorethanoneinterpretation.Id.at924.Thedistrictcourtfoundthattheevidencewas“insufficienttoformtherequisitestrongbasisinevidenceforimplementingaracialorethnicpreference,andthatitwasinsufficientlyprobativetosupporttheCounty’sstatedrationalefor


imposingagenderpreference.”Id.Thedistrictcourt’sviewoftheevidencewasapermissibleone.Id.

Countycontractingstatistics.TheCountypresentedastudycomparingthreefactorsforCountynon‐procurementconstructioncontractsovertwotimeperiods(1981‐1991and1993):(1)thepercentageofbiddersthatwereMWBEfirms;(2)thepercentageofawardeesthatwereMWBEfirms;and(3)theproportionofCountycontractdollarsthathadbeenawardedtoMWBEfirms.Id.at912.

TheEleventhCircuitfoundthatnotably,fortheBBEandHBEstatistics,generallytherewereno“consistentlynegativedisparitiesbetweenthebidderandawardeepercentages.Infact,by1993,theBBEandHBEbiddersarebeingawardedmorethantheirproportionate‘share’…whenthebidderpercentagesareusedasthebaseline.”Id.at913.FortheWBEstatistics,thebidder/awardeestatisticswere“decidedlymixed”asacrosstherangeofCountyconstructioncontracts.Id.

TheCountythenrefinedthosestatisticsbyaddinginthetotalpercentageofannualCountyconstructiondollarsawardedtoMBE/WBEs,bycalculating“disparityindices”foreachprogramandclassificationofconstructioncontract.TheEleventhCircuitexplained:

“[A]disparityindexcomparestheamountofcontractawardsagroupactuallygottotheamountwewouldhaveexpectedittogetbasedonthatgroup’sbiddingactivityandawardeesuccessrate.Morespecifically,adisparityindexmeasurestheparticipationofagroupinCountycontractingdollarsbydividingthatgroup’scontractdollarpercentagebytherelatedbidderorawardeepercentage,andmultiplyingthatnumberby100percent.”

Id.at914.“Theutilityofdisparityindicesorsimilarmeasures…hasbeenrecognizedbyanumberoffederalcircuitcourts.”Id.

TheEleventhCircuitfoundthat“[i]ngeneral…disparityindicesof80percentorgreater,whichareclosetofullparticipation,arenotconsideredindicationsofdiscrimination.”Id.TheEleventhCircuitnotedthat“theEEOC’sdisparateimpactguidelinesusethe80percenttestastheboundarylinefordeterminingaprimafaciecaseofdiscrimination.”Id.,citing29CFR§1607.4D.Inaddition,nocircuitthathas“explicitlyendorsedtheuseofdisparityindices[has]indicatedthatanindexof80percentorgreatermightbeprobativeofdiscrimination.”Id.,citingConcreteWorksv.City&CountyofDenver,36F.3d1513,1524(10thCir.1994)(creditingdisparityindicesrangingfrom0%to3.8%);ContractorsAss’nv.CityofPhiladelphia,6F.3d990(3dCir.1993)(creditingdisparityindexof4%).

Aftercalculationofthedisparityindices,theCountyappliedastandarddeviationanalysistotestthestatisticalsignificanceoftheresults.Id.at914.“Thestandarddeviationfiguredescribestheprobabilitythatthemeasureddisparityistheresultofmerechance.”Id.TheEleventhCircuithadpreviouslyrecognized“[s]ocialscientistsconsiderafindingoftwostandarddeviationssignificant,meaningthereisaboutonechancein20thattheexplanationforthedeviationcouldberandomandthedeviationmustbeaccountedforbysomefactorotherthanchance.”Id.

ThestatisticspresentedbytheCountyindicated“statisticallysignificantunderutilizationofBBEsinCountyconstructioncontracting.”Id.at916.Theresultswere“lessdramatic”forHBEsandmixedasbetweenfavorableandunfavorableforWBEs.Id.


TheEleventhCircuitthenexplainedtheburdenofproof:

“[O]ncetheproponentofaffirmativeactionintroducesitsstatisticalproofasevidenceofitsremedialpurpose,therebysupplyingthe[district]courtwiththemeansfordeterminingthat[it]hadafirmbasisforconcludingthatremedialactionwasappropriate,itisincumbentuponthe[plaintiff]toprovetheircase;theycontinuetobeartheultimateburdenofpersuadingthe[district]courtthatthe[defendant’s]evidencedidnotsupportaninferenceofpriordiscriminationandthusaremedialpurpose,orthattheplaninstitutedonthebasisofthisevidencewasnotsufficiently‘narrowlytailored.”

Id.(internalcitationsomitted).

TheEleventhCircuitnotedthataplaintiffhasatleastthreemethodstorebuttheinferenceofdiscriminationwitha“neutralexplanation”by:“(1)showingthatthestatisticsareflawed;(2)demonstratingthatthedisparitiesshownbythestatisticsarenotsignificantoractionable;or(3)presentingcontrastingstatisticaldata.”Id.(internalquotationsandcitationsomitted).TheEleventhCircuitheldthattheplaintiffsproduced“sufficientevidencetoestablishaneutralexplanationforthedisparities.”Id.

Theplaintiffsallegedthatthedisparitieswere“betterexplainedbyfirmsizethanbydiscrimination…[because]minorityandfemale‐ownedfirmstendtobesmaller,andthatitstandstoreasonsmallerfirmswillwinsmallercontracts.”Id.at916‐17.TheplaintiffsproducedCensusdataindicating,onaverage,minority‐andfemale‐ownedconstructionfirmsinEngineeringContractorsAssociationweresmallerthannon‐MBE/WBEfirms.Id.at917.TheEleventhCircuitfoundthattheplaintiff’sexplanationofthedisparitieswasa“plausibleone,inlightoftheuncontrovertedevidencethatMBE/WBEconstructionfirmstendtobesubstantiallysmallerthannon‐MBE/WBEfirms.”Id.

Additionally,theEleventhCircuitnotedthattheCounty’sownexpertadmittedthat“firmsizeplaysasignificantroleindeterminingwhichfirmswincontracts.”Id.Theexpertstated:

Thesizeofthefirmhasgottobeamajordeterminantbecauseofcoursesomefirmsaregoingtobelarger,aregoingtobebetterprepared,aregoingtobeinagreaternaturalcapacitytobeabletoworkonsomeofthecontractswhileotherssimplybyvirtueoftheirsmallsizesimplywouldnotbeabletodoit.Id.

TheEleventhCircuitthensummarized:

Becausetheyarebigger,biggerfirmshaveabiggerchancetowinbiggercontracts.Itfollowsthat,allotherfactorsbeingequalandinaperfectlynondiscriminatorymarket,onewouldexpectthebigger(onaverage)non‐MWBEfirmstogetadisproportionatelyhigherpercentageoftotalconstructiondollarsawardedthanthesmallerMWBEfirms.Id.

Inanticipationofsuchanargument,theCountyconductedaregressionanalysistocontrolforfirmsize.Id.Aregressionanalysisis“astatisticalprocedurefordeterminingtherelationshipbetweenadependentandindependentvariable,e.g.,thedollarvalueofacontractawardandfirmsize.”Id.(internalcitationsomitted).Thepurposeoftheregressionanalysisis“todeterminewhethertherelationshipbetweenthetwovariablesisstatisticallymeaningful.”Id.


TheCounty’sregressionanalysissoughttoidentifydisparitiesthatcouldnotbeexplainedbyfirmsize,andtheoreticallyinsteadbasedonanotherfactor,suchasdiscrimination.Id.TheCountyconductedtworegressionanalysesusingtwodifferentproxiesforfirmsize:(1)totalawardedvalueofallcontractsbidon;and(2)largestsinglecontractawarded.Id.TheregressionanalysesaccountedformostofthenegativedisparitiesregardingMBE/WBEparticipationinCountyconstructioncontracts(i.e.,mostoftheunfavorabledisparitiesbecamestatisticallyinsignificant,correspondingtostandarddeviationvalueslessthantwo).Id.

Basedonanevaluationoftheregressionanalysis,thedistrictcourtheldthatthedemonstrateddisparitieswereattributabletofirmsizeasopposedtodiscrimination.Id.at918.Thedistrictcourtconcludedthatthefewunexplaineddisparitiesthatremainedafterregressingforfirmsizewereinsufficienttoprovidetherequisite“strongbasisinevidence”ofdiscriminationofBBEsandHBEs.Id.TheEleventhCircuitheldthatthisdecisionwasnotclearlyerroneous.Id.

WithrespecttotheBBEstatistics,theregressionanalysisexplainedallbutonenegativedisparity,foronetypeofconstructioncontractbetween1989‐1991.Id.TheEleventhCircuitheldthedistrictcourtpermissiblyfoundthatthisdidnotconstitutea“strongbasisinevidence”ofdiscrimination.Id.

WithrespecttotheHBEstatistics,oneoftheregressionmethodsfailedtoexplaintheunfavorabledisparityforonetypeofcontractbetween1989‐1991,andbothregressionmethodsfailedtoexplaintheunfavorabledisparityforanothertypeofcontractduringthatsametimeperiod.Id.However,by1993,bothregressionmethodsaccountedforalloftheunfavorabledisparities,andoneofthedisparitiesforonetypeofcontractwasactuallyfavorableforHBEs.Id.TheEleventhCircuitheldthedistrictcourtpermissiblyfoundthatthisdidnotconstitutea“strongbasisinevidence”ofdiscrimination.Id.

Finally,withrespecttotheWBEstatistics,theregressionanalysisexplainedallbutonenegativedisparity,foronetypeofconstructioncontractinthe1993period.Id.Theregressionanalysisexplainedalloftheothernegativedisparities,andinthe1993period,adisparityforonetypeofcontractwasactuallyfavorabletoWBEs.Id.TheEleventhCircuitheldthedistrictcourtpermissiblyfoundthatthisevidencewasnot“sufficientlyprobativeofdiscrimination.”Id.

TheCountyarguedthatthedistrictcourterroneouslyreliedonthedisaggregateddata(i.e.,brokendownbycontracttype)asopposedtotheconsolidatedstatistics.Id.at919.ThedistrictcourtdeclinedtoassigndispositiveweighttotheaggregateddatafortheBBEstatisticsfor1989‐1991because(1)theaggregateddatafor1993didnotshownegativedisparitieswhenregressedforfirmsize,(2)theBBEdisaggregateddataleftonlyoneunexplainednegativedisparityforonetypeofcontractfor1989‐1991whenregressedforfirmsize,and(3)“theCounty’sownexperttestifiedastotheutilityofexaminingthedisaggregateddata‘insofarastheyreflectdifferentkindsofwork,differentbiddingpractices,perhapsavarietyofotherfactorsthatcouldmakethemheterogeneouswithoneanother.”Id.

Additionally,thedistrictcourtnoted,andtheEleventhCircuitfoundthat“theaggregationofdisparitystatisticsfornonheterogenousdatapopulationscangiverisetoastatisticalphenomenonknownas‘Simpson’sParadox,’whichleadstoillusorydisparitiesinimproperlyaggregateddatathatdisappearwhenthedataaredisaggregated.”Id.at919,n.4(internalcitationsomitted).“Underthosecircumstances,”theEleventhCircuitheldthatthedistrictcourtdidnoterrinassigninglessweighttotheaggregateddata,infindingtheaggregateddataforBBEsfor1989‐1991didnotprovidea“strongbasisinevidence”ofdiscrimination,orinfinding


thatthedisaggregateddataformedaninsufficientbasisofsupportforanyoftheMBE/WBEprogramsgiventheapplicableconstitutionalrequirements.Id.at919.

Countysubcontractingstatistics. TheCountyperformedasubcontractingstudytomeasureMBE/WBEparticipationintheCounty’ssubcontractingbusinesses.ForeachMBE/WBEcategory(BBE,HBE,andWBE),“thestudycomparedtheproportionofthedesignatedgroupthatfiledasubcontractor’sreleaseoflienonaCountyconstructionprojectbetween1991and1994withtheproportionofsalesandreceiptdollarsthatthesamegroupreceivedduringthesametimeperiod.”Id.

Thedistrictcourtfoundthestatisticalevidenceinsufficienttosupporttheuseofrace‐andethnicity‐consciousmeasures,notingproblemswithsomeofthedatameasures.Id.at920.

Mostnotably,thedenominatorusedinthecalculationoftheMWBEsalesandreceiptspercentagesisbaseduponthetotalsalesandreceiptsfromallsourcesforthefirmfilingasubcontractor’sreleaseoflienwiththeCounty.Thatmeans,forinstance,thatifanationwidenon‐MWBEcompanyperforming99percentofitsbusinessoutsideofDadeCountyfiledasinglesubcontractor’sreleaseoflienwiththeCountyduringtherelevanttimeframe,allofitssalesandreceiptsforthattimeframewouldbecountedinthedenominatoragainstwhichMWBEsalesandreceiptsarecompared.Asthedistrictcourtpointedout,thatisnotareasonablewaytomeasureDadeCountysubcontractingparticipation.

Id.TheCounty’sargumentthatastrongmajority(72%)ofthesubcontractorswerelocatedinDadeCountydidnotrenderthedistrictcourt’sdecisiontofailtocreditthestudyerroneous.Id.

Marketplacedatastatistics. TheCountyconductedanotherstatisticalstudy“toseewhatthedifferencesareinthemarketplaceandwhattherelationshipsareinthemarketplace.”Id.Thestudywasbasedonasampleof568contractors,fromapoolof10,462firms,thathadfileda“certificateofcompetency”withDadeCountyasofJanuary1995.Id.Theselectedfirmsparticipatedinatelephonesurveyinquiringabouttherace,ethnicity,andgenderofthefirm’sowner,andaskedforinformationonthefirm’stotalsalesandreceiptsfromallsources.Id.TheCounty’sexpertthenstudiedthedatatodetermine“whethermeaningfulrelationshipsexistedbetween(1)therace,ethnicity,andgenderofthesurveyedfirmowners,and(2)thereportedsalesandreceiptsofthatfirm.Id.Theexpert’shypothesiswasthatunfavorabledisparitiesmaybeattributabletomarketplacediscrimination.Theexpertperformedaregressionanalysisusingthenumberofemployeesasaproxyforsize.Id.

TheEleventhCircuitfirstnotedthatthestatisticalpoolusedbytheCountywassubstantiallylargerthantheactualnumberoffirms,willing,able,andqualifiedtodotheworkasthestatisticalpoolrepresentedallthosefirmsmerelylicensedasaconstructioncontractor.Id.Althoughthisfactordidnotrenderthestudymeaningless,thedistrictcourtwasentitledtoconsiderthatinevaluatingtheweightofthestudy.Id.at921.TheEleventhCircuitquotedtheSupremeCourtforthefollowingproposition:“[w]henspecialqualificationsarerequiredtofillparticularjobs,comparisonstothegeneralpopulation(ratherthantothesmallergroupofindividualswhopossessthenecessaryqualifications)mayhavelittleprobativevalue.”Id.,quotingCroson,488U.S.at501,quotingHazelwoodSch.Dist.v.UnitedStates,433U.S.299,308n.13(1977).

TheEleventhCircuitfoundthatafterregressingforfirmsize,neithertheBBEnorWBEdatashowedstatisticallysignificantunfavorabledisparities.Id.Althoughthemarketplacedatadid


revealunfavorabledisparitiesevenafteraregressionanalysis,thedistrictcourtwasnotrequiredtoassignthosedisparitiescontrollingweight,especiallyinlightofthedissimilarresultsoftheCountyContractingStatistics,discussedsupra.Id.

TheWainwrightStudy. TheCountyalsointroducedastatisticalanalysispreparedbyJonWainwright,analyzing“thepersonalandfinancialcharacteristicsofself‐employedpersonsworkingfull‐timeintheDadeCountyconstructionindustry,basedondatafromthe1990PublicUseMicrodataSampledatabase”(derivedfromthedecennialcensus).Id.Thestudy“(1)comparedconstructionbusinessownershipratesofMBE/WBEstothoseofnon‐MBE/WBEs,and(2)analyzeddisparitiesinpersonalincomebetweenMBE/WBEandnon‐MBE/WBEbusinessowners.”Id.“Thestudyconcludedthatblacks,Hispanics,andwomenarelesslikelytoownconstructionbusinessesthansimilarlysituatedwhitemales,andMBE/WBEsthatdoentertheconstructionbusinessearnlessmoneythansimilarlysituatedwhitemales.”Id.

Withrespecttothefirstconclusion,Wainwrightcontrolledfor“humancapital”variables(education,yearsoflabormarketexperience,maritalstatus,andEnglishproficiency)and“financialcapital”variables(interestanddividendincome,andhomeownership).Id.Theanalysisindicatedthatblacks,Hispanicsandwomenentertheconstructionbusinessatlowerratesthanwouldbeexpected,oncenumerosity,andidentifiedhumanandfinancialcapitalarecontrolledfor.Id.Thedisparitiesforblacksandwomen(butnotHispanics)weresubstantialandstatisticallysignificant.Id.at922.Theunderlyingtheoryofthisbusinessownershipcomponentofthestudyisthatanysignificantdisparitiesremainingaftercontrolofvariablesareduetotheongoingeffectsofpastandpresentdiscrimination.Id.

TheEleventhCircuitheld,inlightofCroson,thedistrictcourtneednothaveacceptedthistheory.Id.TheEleventhCircuitquotedCroson,inwhichtheSupremeCourtrespondedtoasimilarargumentadvancedbytheplaintiffsinthatcase:“Therearenumerousexplanationsforthisdearthofminorityparticipation,includingpastsocietaldiscriminationineducationandeconomicopportunitiesaswellasbothblackandwhitecareerandentrepreneurialchoices.Blacksmaybedisproportionatelyattractedtoindustriesotherthanconstruction.”Id.,quotingCroson,488U.S.at503.FollowingtheSupremeCourtinCroson,theEleventhCircuitheld“thedisproportionateattractionofaminoritygrouptonon‐constructionindustriesdoesnotmeanthatdiscriminationintheconstructionindustryisthereason.”Id.,quotingCroson,488U.S.at503.Additionally,thedistrictcourthadevidencethatbetween1982and1987,therewasasubstantialgrowthrateofMBE/WBEfirmsasopposedtonon‐MBE/WBEfirms,whichwouldfurthernegatethepropositionthattheconstructionindustrywasdiscriminatingagainstminority‐andwomen‐ownedfirms.Id.at922.

WithrespecttothepersonalincomecomponentoftheWainwrightstudy,afterregressionanalyseswereconducted,onlytheBBEstatisticsindicatedastatisticallysignificantdisparityratio.Id.at923.However,theEleventhCircuitheldthedistrictcourtwasnotrequiredtoassignthedisparitycontrollingweightbecausethestudydidnotregressforfirmsize,andinlightoftheconflictingstatisticalevidenceintheCountyContractingStatisticsandMarketplaceDataStatistics,discussedsupra,whichdidregressforfirmsize.Id.

TheBrimmerStudy. ThefinalstudypresentedbytheCountywasconductedunderthesupervisionofDr.AndrewF.Brimmerandconcernedonlyblack‐ownedfirms.Id.Thekeycomponentofthestudywasananalysisofthebusinessreceiptsofblack‐ownedconstructionfirmsfortheyearsof1977,1982and1987,basedontheCensusBureau’sSurveyofMinority‐andWomen‐OwnedBusinesses,producedeveryfiveyears.Id.Thestudysoughttodetermine


theexistenceofdisparitiesbetweensalesandreceiptsofblack‐ownedfirmsinDadeCountycomparedtothesalesandreceiptsofallconstructionfirmsinDadeCounty.Id.

Thestudyindicatedsubstantialdisparitiesin1977and1987butnot1982.Id.TheCountyallegedthattheabsenceofdisparityin1982wasduetosubstantialrace‐consciousmeasuresforamajorconstructioncontract(Metrorailproject),andnotduetoalackofdiscriminationintheindustry.Id.However,thestudymadenoattempttofilterfortheMetrorailprojectand“complete[ly]fail[ed]”toaccountforfirmsize.Id.Accordingly,theEleventhCircuitfoundthedistrictcourtpermissiblydiscountedtheresultsoftheBrimmerstudy.Id.at924.

Anecdotalevidence. Inaddition,theCountypresentedasubstantialamountofanecdotalevidenceofperceiveddiscriminationagainstBBEs,asmallamountofsimilaranecdotalevidencepertainingtoWBEs,andnoanecdotalevidencepertainingtoHBEs.Id.TheCountypresentedthreebasicformsofanecdotalevidence:“(1)thetestimonyoftwoCountyemployeesresponsibleforadministeringtheMBE/WBEprograms;(2)thetestimony,primarilybyaffidavit,oftwenty‐threeMBE/WBEcontractorsandsubcontractors;and(3)asurveyofblack‐ownedconstructionfirms.”Id.

TheCountyemployeestestifiedthatthedecentralizedstructureoftheCountyconstructioncontractingsystemaffordsgreatdiscretiontoCountyemployees,whichinturncreatestheopportunityfordiscriminationtoinfectthesystem.Id.Theyalsotestifiedtospecificincidentsofdiscrimination,forexample,thatMBE/WBEscomplainedofreceivinglengthierpunchliststhantheirnon‐MBE/WBEcounterparts.Id.TheyalsotestifiedthatMBE/WBEsencounterdifficultiesinobtainingbondingandfinancing.Id.

TheMBE/WBEcontractorsandsubcontractorstestifiedtonumerousincidentsofperceiveddiscriminationintheDadeCountyconstructionmarket,including:

Situationsinwhichaprojectforemanwouldrefusetodealdirectlywithablackorfemalefirmowner,insteadpreferringtodealwithawhiteemployee;instancesinwhichanMWBEownerknewitselftobethelowbidderonasubcontractingproject,butwasnotawardedthejob;instancesinwhichalowbidbyanMWBEwas“shopped”tosolicitevenlowerbidsfromnon‐MWBEfirms;instancesinwhichanMWBEownerreceivedaninvitationtobidonasubcontractwithinadayofthebidduedate,togetherwitha“letterofunavailability”fortheMWBEownertosigninordertoobtainawaiverfromtheCounty;andinstancesinwhichanMWBEsubcontractorwashiredbyaprimecontractor,butsubsequentlywasreplacedwithanon‐MWBEsubcontractorwithindaysofstartingworkontheproject.

Id.at924‐25.

Finally,theCountysubmittedastudypreparedbyDr.JoeE.Feagin,comprisedofinterviewsof78certifiedblack‐ownedconstructionfirms.Id.at925.Theintervieweesreportedsimilarinstancesofperceiveddiscrimination,including:“difficultyinsecuringbondingandfinancing;slowpaymentbygeneralcontractors;unfairperformanceevaluationsthatweretaintedbyracialstereotypes;difficultyinobtaininginformationfromtheCountyoncontractingprocesses;andhigherpricesonequipmentandsuppliesthanwerebeingchargedtonon‐MBE/WBEfirms.”Id.


TheEleventhCircuitfoundthatnumerousblack‐andsomefemale‐ownedconstructionfirmsinDadeCountyperceivedthattheywerethevictimsofdiscriminationandtwoCountyemployeesalsobelievedthatdiscriminationcouldtainttheCounty’sconstructioncontractingprocess.Id.However,suchanecdotalevidenceishelpful“onlywhenit[is]combinedwithandreinforcedbysufficientlyprobativestatisticalevidence.”Id.InherpluralityopinioninCroson,JusticeO’Connorfoundthat“evidenceofapatternofindividualdiscriminatoryactscan,ifsupportedbyappropriatestatisticalproof,lendsupporttoalocalgovernment’sdeterminationthatbroaderremedialreliefisjustified.”Id.,quotingCroson,488U.S.at509(emphasisaddedbytheEleventhCircuit).Accordingly,theEleventhCircuitheldthat“anecdotalevidencecanplayanimportantroleinbolsteringstatisticalevidence,butthatonlyintherarecasewillanecdotalevidencesufficestandingalone.”Id.at925.TheEleventhCircuitalsocitedtoopinionsfromtheThird,NinthandTenthCircuitsassupportingthesameproposition.Id.at926.TheEleventhCircuitaffirmedthedecisionofthedistrictcourtenjoiningthecontinuedoperationoftheMBE/WBEprogramsbecausetheydidnotrestona“constitutionallysufficientevidentiaryfoundation.”Id.

AlthoughtheEleventhCircuitdeterminedthattheMBE/WBEprogramdidnotsurviveconstitutionalmusterduetotheabsenceofasufficientevidentiaryfoundation,theEleventhCircuitproceededwiththesecondprongofthestrictscrutinyanalysisofdeterminingwhethertheMBE/WBEprogramswerenarrowlytailored(BBEandHBEprograms)orsubstantiallyrelated(WBEprogram)tothelegitimategovernmentinteresttheypurportedtoserve,i.e.,“remedyingtheeffectsofpresentandpastdiscriminationagainstblacks,Hispanics,andwomenintheDadeCountyconstructionmarket.”Id.

Narrowtailoring. “Theessenceofthe‘narrowlytailored’inquiryisthenotionthatexplicitlyracialpreferences…mustonlybea‘lastresort’option.”Id.,quotingHayesv.NorthSideLawEnforcementOfficersAss’n,10F.3d207,217(4thCir.1993)andcitingCroson,488U.S.at519(Kennedy,J.,concurringinpartandconcurringinthejudgment)(“[T]hestrictscrutinystandard…forbidstheuseofevennarrowlydrawnracialclassificationsexceptasalastresort.”).

TheEleventhCircuithasidentifiedfourfactorstoevaluatewhetherarace‐orethnicity‐consciousaffirmativeactionprogramisnarrowlytailored:(1)“thenecessityforthereliefandtheefficacyofalternativeremedies;(2)theflexibilityanddurationoftherelief;(3)therelationshipofnumericalgoalstotherelevantlabormarket;and(4)theimpactofthereliefontherightsofinnocentthirdparties.”Id.at927,citingEnsleyBranch,31F.3dat1569.Thefourfactorsprovide“ausefulanalyticalstructure.”Id.at927.TheEleventhCircuitfocusedonlyonthefirstfactorinthepresentcase“becausethatiswheretheCounty’sMBE/WBEprogramsaremostproblematic.”Id.

TheEleventhCircuit

flatlyreject[ed]theCounty’sassertionthat‘givenastrongbasisinevidenceofarace‐basedproblem,arace‐basedremedyisnecessary.’Thatissimplynotthelaw.Ifarace‐neutralremedyissufficienttocurearace‐basedproblem,thenarace‐consciousremedycanneverbenarrowlytailoredtothatproblem.”Id.,citingCroson,488U.S.at507(holdingthataffirmativeactionprogramwasnotnarrowlytailoredwhere“theredoesnotappeartohavebeenanyconsiderationoftheuseofrace‐neutralmeanstoincreaseminoritybusinessparticipationincitycontracting”)…SupremeCourtdecisionsteachthatarace‐consciousremedyisnotmerelyoneofmanyequallyacceptablemedicationsthegovernmentmayusetotreatarace‐basedproblem.Instead,itisthestrongestof


medicines,withmanypotentialsideeffects,andmustbereservedforthoseseverecasesthatarehighlyresistanttoconventionaltreatment.

Id.at927.

TheEleventhCircuitheldthattheCounty“clearlyfailedtogiveseriousandgoodfaithconsiderationtotheuseofrace‐andethnicity‐neutralmeasures.”Id.Rather,thedeterminationofthenecessitytoestablishtheMWBEprogramswasbaseduponaconclusorylegislativestatementastoitsnecessity,whichinturnwasbaseduponan“equallyconclusoryanalysis”intheBrimmerstudy,andareportthattheSBAonlywasabletodirect5percentofSBAfinancingtoblack‐ownedbusinessesbetween1968‐1980.Id.

TheCountyadmitted,andtheEleventhCircuitconcluded,thattheCountyfailedtogiveanyconsiderationtoanyalternativetotheHBEaffirmativeactionprogram.Id.at928.Moreover,theEleventhCircuitfoundthatthetestimonyoftheCounty’sownwitnessesindicatedtheviabilityofrace‐andethnicity‐neutralmeasurestoremedymanyoftheproblemsfacingblack‐andHispanic‐ownedconstructionfirms.Id.TheCountyemployeesidentifiedproblems,virtuallyallofwhichwererelatedtotheCounty’sownprocessesandprocedures,including:“thedecentralizedCountycontractingsystem,whichaffordsahighlevelofdiscretiontoCountyemployees;thecomplexityofCountycontractspecifications;difficultyinobtainingbonding;difficultyinobtainingfinancing;unnecessarybidrestrictions;inefficientpaymentprocedures;andinsufficientorinefficientexchangeofinformation.”Id.TheEleventhCircuitfoundthattheproblemsfacingMBE/WBEcontractorswere“institutionalbarriers”toentryfacingeverynewentrantintotheconstructionmarket,andwereperhapsaffectingtheMBE/WBEcontractorsdisproportionatelyduetothe“institutionalyouth”ofblack‐andHispanic‐ownedconstructionfirms.Id.“Itfollowsthatthosefirmsshouldbehelpedthemostbydismantlingthosebarriers,somethingtheCountycoulddoatleastinsubstantialpart.”Id.

TheEleventhCircuitnotedthattherace‐andethnicity‐neutraloptionsavailabletotheCountymirroredthoseavailableandcitedbyJusticeO’ConnorinCroson:

[T]hecityhasatitsdisposalawholearrayofrace‐neutralmeasurestoincreasetheaccessibilityofcitycontractingopportunitiestosmallentrepreneursofallraces.Simplificationofbiddingprocedures,relaxationofbondingrequirements,andtrainingandfinancialaidfordisadvantagedentrepreneursofallraceswouldopenthepubliccontractingmarkettoallthosewhohavesufferedtheeffectsofpastsocietaldiscriminationandneglect…Thecitymayalsoacttoprohibitdiscriminationintheprovisionofcreditorbondingbylocalsuppliersandbanks.

Id.,quotingCroson,488U.S.at509‐10.TheEleventhCircuitfoundthatexceptforsome“half‐heartedprograms”consistingof“limitedtechnicalandfinancialaidthatmightbenefitBBEsandHBEs,”theCountyhadnot“seriouslyconsidered”ortriedmostoftherace‐andethnicity‐neutralalternativesavailable.Id.at928.“Mostnotably…theCountyhasnottakenanyactionwhatsoevertoferretoutandrespondtoinstancesofdiscriminationifandwhentheyhaveoccurredintheCounty’sowncontractingprocess.”Id.

TheEleventhCircuitfoundthattheCountyhadtakennostepsto“inform,educate,discipline,orpenalize”discriminatorymisconductbyitsownemployees.Id.at929.NorhadtheCountypassedanylocalordinancesexpresslyprohibitingdiscriminationbylocalcontractors,subcontractors,suppliers,bankers,orinsurers.Id.“Insteadofturningtorace‐andethnicity‐


consciousremediesasalastresort,theCountyhasturnedtothemasafirstresort.”Accordingly,theEleventhCircuitheldthateveniftheBBEandHBEprogramsweresupportedbytherequisiteevidentiaryfoundation,theyviolatedtheEqualProtectionClausebecausetheywerenotnarrowlytailored.Id.

Substantialrelationship. TheEleventhCircuitheldthatduetotherelaxed“substantialrelationship”standardforgender‐consciousprograms,iftheWBEprogramresteduponasufficientevidentiaryfoundation,itcouldpassthesubstantialrelationshiprequirement.Id.However,becauseitdidnotrestuponasufficientevidentiaryfoundation,theWBEprogramcouldnotpassconstitutionalmuster.Id.

Foralloftheforegoingreasons,theEleventhCircuitaffirmedthedecisionofthedistrictcourtdeclaringtheMBE/WBEprogramsunconstitutionalandenjoiningtheircontinuedoperation.

11. Concrete Works of Colorado, Inc. v. City and County of Denver, 36 F.3d 1513 (10th Cir. 1994)

ThecourtconsideredwhethertheCityandCountyofDenver’srace‐andgender‐consciouspubliccontractawardprogramcompliedwiththeFourteenthAmendment’sguaranteeofequalprotectionofthelaws.Plaintiff‐AppellantConcreteWorksofColorado,Inc.(“ConcreteWorks”)appealedthedistrictcourt’ssummaryjudgmentorderupholdingtheconstitutionalityofDenver’spubliccontractprogram.ThecourtconcludedthatgenuineissuesofmaterialfactexistwithregardtotheevidentiarysupportthatDenverpresentstodemonstratethatitsprogramsatisfiestherequirementsofCityofRichmondv.J.A.CrosonCo.,488U.S.469(1989).Accordingly,thecourtreversedandremanded.36F.3d1513(10thCir.1994).

Background.In,1990,theDenverCityCouncilenactedOrdinance(“Ordinance”)toenablecertifiedracialminoritybusinessenterprises(“MBEs”)1andwomen‐ownedbusinessenterprises(“WBEs”)toparticipateinpublicworksprojects“toanextentapproximatingthelevelof[their]availabilityandcapacity.”Id.at1515.ThisOrdinancewasthemostrecentinaseriesofprovisionsthattheDenverCityCouncilhasadoptedsince1983toremedyperceivedraceandgenderdiscriminationinthedistributionofpublicandprivateconstructioncontracts.Id.at1516.

In1992,ConcreteWorks,anonminorityandmale‐ownedconstructionfirm,filedthisEqualProtectionClausechallengetotheOrdinance.Id.ConcreteWorksallegedthattheOrdinancecausedittolosethreeconstructioncontractsforfailuretocomplywitheitherthestatedMBEandWBEparticipationgoalsorthegood‐faithrequirements.RatherthanpursuingadministrativeorstatecourtreviewoftheOCC’sfindings,ConcreteWorksinitiatedthisaction,seekingapermanentinjunctionagainstenforcementoftheOrdinanceanddamagesforlostcontracts.Id.

In1993,andafterextensivediscovery,thedistrictcourtgrantedDenver’ssummaryjudgmentmotion.ConcreteWorks,Inc.v.CityandCountyofDenver,823F.Supp.821(D.Colo.1993).ThecourtconcludedthatConcreteWorkshadstandingtobringthisclaim.Id.Withrespecttothemerits,thecourtheldthatDenver’sprogramsatisfiedthestrictscrutinystandardembracedbyamajorityoftheSupremeCourtinCrosonbecauseitwasnarrowlytailoredtoachieveacompellinggovernmentinterest.Id.

Standing.Attheoutset,theTenthCircuitonappealconsideredDenver’scontentionthatConcreteWorksfailstosatisfyitsburdenofestablishingstandingtochallengetheOrdinance’s


constitutionality.Id.at1518.ThecourtconcludedthatConcreteWorksdemonstrated“injuryinfact”becauseitsubmittedbidsonthreeprojectsandtheOrdinancepreventeditfromcompetingonanequalbasiswithminorityandwomen‐ownedprimecontractors.Id.

Specifically,theunequalnatureofthebiddingprocessliedintheOrdinance’srequirementthatanonminorityprimecontractormustmeetMBEandWBEparticipationgoalsbyenteringintojointventureswithMBEsandWBEsorhiringthemassubcontractors(orsatisfyingtheten‐stepgoodfaithrequirement).Id.Incontrast,minorityandwomen‐ownedprimecontractorscouldusetheirownworktosatisfyMBEandWBEparticipationgoals.Id.Thus,theextrarequirements,thecourtfoundimposedcostsandburdensonnonminorityfirmsthatprecludedthemfromcompetingwithMBEsandWBEsonanequalbasis.Id.at1519.

Inadditiontodemonstrating“injuryinfact,”ConcreteWorks,thecourtheld,alsosatisfiedthetworemainingelementstoestablishstanding:(1)acausalrelationshipbetweentheinjuryandthechallengedconduct;and(2)alikelihoodthattheinjurywillberedressedbyafavorableruling.Thus,thecourtconcludedthatConcreteWorkshadstandingtochallengetheconstitutionalityofDenver’srace‐andgender‐consciouscontractprogram.Id.

EqualProtectionClauseStandards.Thecourtdeterminedtheappropriatestandardofequalprotectionreviewbyexaminingthenatureoftheclassificationsembodiedinthestatute.ThecourtappliedstrictscrutinytotheOrdinance’srace‐basedpreferencescheme,andthusinquiredwhetherthestatutewasnarrowlytailoredtoachieveacompellinggovernmentinterest.Id.Gender‐basedclassifications,incontrast,thecourtconcludedareevaluatedundertheintermediatescrutinyrubric,whichprovidesthatthelawmustbesubstantiallyrelatedtoanimportantgovernmentobjective.Id.

PermissibleEvidenceandBurdensofProof.InCroson,apluralityoftheCourtconcludedthatstateandlocalgovernmentshaveacompellinginterestinremedyingidentifiedpastandpresentdiscriminationwithintheirborders.Id.citing,Croson,488U.S.at492,509,ThepluralityexplainedthattheFourteenthAmendmentpermitsrace‐consciousprogramsthatseekbothtoeradicatediscriminationbythegovernmentalentityitselfandtopreventthepublicentityfromactingasa“‘passiveparticipant’inasystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry”byallowingtaxdollars“tofinancetheevilofprivateprejudice.”Id.citing,Crosonat492.

A.GeographicScopeoftheData.ConcreteWorkscontendedthatCrosonprecludedthecourtfromconsideringempiricalevidenceofdiscriminationinthesix‐countyDenverMetropolitanStatisticalArea(MSA).Instead,itarguedCrosonwouldallowDenveronlytousedatadescribingdiscriminationwithintheCityandCountyofDenver.Id.at1520.

ThecourtstatedthatamajorityinCrosonobservedthatbecausediscriminationvariesacrossmarketareas,stateandlocalgovernmentscannotrelyonnationalstatisticsofdiscriminationintheconstructionindustrytodrawconclusionsaboutprevailingmarketconditionsintheirownregions.Id.at1520,citingCrosonat504.Therelevantareainwhichtomeasurediscrimination,then,isthelocalconstructionmarket,butthatisnotnecessarilyconfinedbyjurisdictionalboundaries.Id.

ThecourtsaidthatCrosonsupporteditsconsiderationofdatafromtheDenverMSAbecausethisdatawassufficientlygeographicallytargetedtotherelevantmarketarea.Id.Therecordrevealedthatover80percentofDenverDepartmentofPublicWorks(“DPW”)constructionanddesigncontractswereawardedtofirmslocatedwithintheDenverMSA.Id.at1520.Toconfine


thepermissibledatatoagovernmentalbody’sstrictgeographicalboundaries,thecourtfound,wouldignoretheeconomicrealitythatcontractsareoftenawardedtofirmssituatedinadjacentareas.Id.

Thecourtsaidthatitisimportantthatthepertinentdatacloselyrelatetothejurisdictionalareaofthemunicipalitywhoseprogramisscrutinized,buthereDenver’scontractingactivity,insofarasconstructionworkwasconcerned,wascloselyrelatedtotheDenverMSA.Id.at1520.Therefore,thecourtheldthatdatafromtheDenverMSAwasadequatelyparticularizedforstrictscrutinypurposes.Id.

B.AnecdotalEvidence.ConcreteWorksarguedthatthedistrictcourtcommittedreversibleerrorbyconsideringsuchnon‐empiricalevidenceofdiscriminationastestimonyfromminorityandwomen‐ownedfirmsdeliveredduringpublichearings,affidavitsfromMBEsandWBEs,summariesoftelephoneinterviewsthatDenverofficialsconductedwithMBEsandWBEs,andreportsgeneratedduringOfficeofAffirmativeActioncomplianceinvestigations.Id.

Thecourtstatedthatselectiveanecdotalevidenceaboutminoritycontractors’experiences,withoutmore,wouldnotprovideastrongbasisinevidencetodemonstratepublicorprivatediscriminationinDenver’sconstructionindustrysufficienttopassconstitutionalmusterunderCroson.Id.at1520.

Personalaccountsofactualdiscriminationortheeffectsofdiscriminatorypracticesmay,accordingtothecourt,however,vividlycomplementempiricalevidence.Id.Thecourtconcludedthatanecdotalevidenceofamunicipality’sinstitutionalpracticesthatexacerbatediscriminatorymarketconditionsareoftenparticularlyprobative.Id.Therefore,thegovernmentmayincludeanecdotalevidenceinitsevidentiarymosaicofpastorpresentdiscrimination.Id.

ThecourtpointedoutthatinthecontextofemploymentdiscriminationsuitsarisingunderTitleVIIoftheCivilRightsActof1964,theSupremeCourthasstatedthatanecdotalevidencemaybring“coldnumbersconvincinglytolife.”Id.at1520,quoting,InternationalBhd.ofTeamstersv.UnitedStates,431U.S.324,339(1977).Infact,thecourtfound,themajorityinCrosonimpliedlyendorsedtheinclusionofpersonalaccountsofdiscrimination.Id.at1521.Thecourtthusdeemedanecdotalevidenceofpublicandprivateraceandgenderdiscriminationappropriatesupplementaryevidenceinthestrictscrutinycalculus.Id.

C.Post–EnactmentEvidence.ConcreteWorksarguedthatthecourtshouldconsideronlyevidenceofdiscriminationthatexistedpriortoDenver’senactmentoftheOrdinance.Id.InCroson,thecourtnotedthattheSupremeCourtunderscoredthatamunicipality“mustidentify[the]discrimination...withsomespecificitybefore[it]mayuserace‐consciousrelief.”Id.at1521,quoting,Croson,488U.S.at504(emphasisadded).Absentanypre‐enactmentevidenceofdiscrimination,thecourtsaidamunicipalitywouldbeunabletosatisfyCroson.Id.

However,thecourtdidnotreadCroson’sevidentiaryrequirementasforeclosingtheconsiderationofpost‐enactmentevidence.Id.at1521.Post‐enactmentevidence,ifcarefullyscrutinizedforitsaccuracy,thecourtfoundwouldoftenprovequiteusefulinevaluatingtheremedialeffectsorshortcomingsoftherace‐consciousprogram.Id.This,thecourtnotedwasespeciallytrueinthiscase,whereDenverfirstimplementedalimitedaffirmativeactionprogramin1983andhassincemodifiedandexpandeditsscope.Id.


Thecourtheldthestrongweightofauthorityendorsestheadmissibilityofpost‐enactmentevidencetodeterminewhetheranaffirmativeactioncontractprogramcomplieswithCroson.Id.at1521.Thecourtagreedthatpost‐enactmentevidencemayproveusefulforacourt’sdeterminationofwhetheranordinance’sdeviationfromthenormofequaltreatmentisnecessary.Id.Thus,evidenceofdiscriminationexistingsubsequenttoenactmentofthe1990Ordinance,thecourtconcludedwasproperlybeforeit.Id.

D.BurdensofProductionandProof.ThecourtstatedthattheSupremeCourtinCrosonstruckdowntheCityofRichmond’sminorityset‐asideprogrambecausetheCityfailedtoprovideanadequateevidentiaryshowingofpastorpresentdiscrimination.Id.at1521,citing,Croson,488U.S.at498–506.ThecourtpointedoutthatbecausetheFourteenthAmendmentonlytoleratesrace‐consciousprogramsthatnarrowlyseektoremedyidentifieddiscrimination,theSupremeCourtinCrosonexplainedthatstateandlocalgovernments“mustidentifythatdiscrimination...withsomespecificitybeforetheymayuserace‐consciousrelief.”Id.,citingCroson,at504.ThecourtsaidthattheSupremeCourt’sbenchmarkforjudgingtheadequacyofthegovernment’sfactualpredicateforaffirmativeactionlegislationwaswhetherthereexistsa“strongbasisinevidencefor[thegovernment’s]conclusionthatremedialactionwasnecessary.”Id.,quoting,Croson,at500.

AlthoughCrosonplacestheburdenofproductiononthemunicipalitytodemonstratea“strongbasisinevidence”thatitsrace‐andgender‐consciouscontractprogramaimstoremedyspecificallyidentifiedpastorpresentdiscrimination,thecourtheldtheFourteenthAmendmentdoesnotrequireacourttomakeanultimatejudicialfindingofdiscriminationbeforeamunicipalitymaytakeaffirmativestepstoeradicatediscrimination.Id.at1521,citing,Wygant,476U.S.at292(O’Connor,J.,concurringinpartandconcurringinthejudgment).Anaffirmativeactionresponsetodiscriminationissustainableagainstanequalprotectionchallengesolongasitispredicateduponstrongevidenceofdiscrimination.Id.at1522,citing,Croson,488U.S.at504.

Aninferenceofdiscrimination,thecourtfound,maybemadewithempiricalevidencethatdemonstrates“asignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractors...andthenumberofsuchcontractorsactuallyengagedbythelocalityorthelocality’sprimecontractors.”Id.at1522,quoting,Crosonat509(plurality).ThecourtconcludedthatitdidnotreadCrosontorequireanattempttocraftaprecisemathematicalformulatoassessthequantumofevidencethatrisestotheCroson“strongbasisinevidence”benchmark.Id.That,thecourtstated,mustbeevaluatedonacase‐by‐casebasis.Id.

Thecourtsaidthattheadequacyofamunicipality’sshowingofdiscriminationmustbeevaluatedinthecontextofthebreadthoftheremedialprogramadvancedbythemunicipality.Id.at1522,citing,Crosonat498.Ultimately,whetherastrongbasisinevidenceofpastorpresentdiscriminationexists,therebyestablishingacompellinginterestforthemunicipalitytoenactarace‐consciousordinance,thecourtfoundisaquestionoflaw.Id.Underlyingthatlegalconclusion,however,thecourtnotedarefactualdeterminationsabouttheaccuracyandvalidityofamunicipality’sevidentiarysupportforitsprogram.Id.

Notwithstandingtheburdenofinitialproductionthatrestswiththemunicipality,“[t]heultimateburden[ofproof]remainswith[thechallengingparty]todemonstratetheunconstitutionalityofanaffirmative‐actionprogram.”Id.at1522,quoting,Wygant,476U.S.at277–78(plurality).Thus,thecourtstatedthatonceDenverpresentedadequatestatisticalevidenceofpreciselydefineddiscriminationintheDenverareaconstructionmarket,itbecameincumbentuponConcreteWorkseithertoestablishthatDenver’sevidencedidnotconstitute


strongevidenceofsuchdiscriminationorthattheremedialstatutewasnotnarrowlydrawn.Id.at1523.AbsentsuchashowingbyConcreteWorks,thecourtsaid,summaryjudgmentupholdingDenver’sOrdinancewouldbeappropriate.Id.

E.EvidentiaryPredicateUnderlyingDenver’sOrdinance.TheevidenceofdiscriminationthatDenverpresentstodemonstrateacompellinggovernmentinterestinenactingtheOrdinanceconsistedofthreecategories:(1)evidenceofdiscriminationincitycontractingfromthemid–1970sto1990;(2)dataaboutMBEandWBEutilizationintheoverallDenverMSAconstructionmarketbetween1977and1992;and(3)anecdotalevidencethatincludedpersonalaccountsbyMBEsandWBEswhohaveexperiencedbothpublicandprivatediscriminationandtestimonyfromcityofficialswhodescribeinstitutionalgovernmentalpracticesthatperpetuatepublicdiscrimination.Id.at1523.

1.DiscriminationintheAwardofPublicContracts.ThecourtconsideredtheevidencethatDenverpresentedtodemonstrateunderutilizationofMBEsandWBEsintheawardofcitycontractsfromthemid1970sto1990.ThecourtfoundthatDenverofferedpersuasivepiecesofevidencethat,consideredintheabstract,couldgiverisetoaninferenceofrace‐andgender‐basedpublicdiscriminationonisolatedpublicworksprojects.Id.at1523.However,thecourtalsofoundtherecordshowedthatMBEandWBEutilizationonpubliccontractsasawholeduringthisperiodwasstrongincomparisontothetotalnumberofMBEsandWBEswithinthelocalconstructionindustry.Id.at1524.Denverofferedarebuttaltothismoregeneralevidence,butthecourtstateditwasclearthattheweighttobegivenbothtothegeneralevidenceandtothespecificevidencerelatingtoindividualcontractspresentedgenuinedisputesofmaterialfacts.

Thecourtthenengagedinananalysisofthefactualrecordandanidentificationofthegenuinematerialissuesoffactarisingfromtheparties’competingevidence.

(a) Federal Agency Reports of Discrimination in Denver.DenversubmittedfederalagencyreportsofdiscriminationinDenverpubliccontractawards.Id.at1524.Therecordcontainedasummaryofa1978studybytheUnitedStatesGeneralAccountingOffice(“GAO”),whichshowedthatbetween1975and1977minoritybusinessesweresignificantlyunderrepresentedintheperformanceofDenverpubliccontractsthatwerefinancedinwholeorinpartbyfederalgrants.Id.

ConcreteWorksarguedthatamaterialfactissuearoseaboutthevalidityofthisevidencebecause“the1978GAOReportwasnothingmorethanalistingoftheproblemsfacedbyallsmallfirms,firststartingoutinbusiness.”Id.at1524.Thecourtpointedout,however,ConcreteWorksignoredtheGAOReport’sempiricaldata,whichquantifiedtheactualdisparitybetweentheutilizationofminoritycontractorsandtheirrepresentationinthelocalconstructionindustry.Id.Inaddition,thecourtnotedthattheGAOReportreflectedthefindingsofanobjectivethirdparty.Id.Becausethisdataremaineduncontested,notwithstandingConcreteWorks’conclusoryallegationstothecontrary,thecourtfoundthe1978GAOReportprovidedevidencetosupportDenver’sshowingofdiscrimination.Id.

AddedtotheGAOfindingswasa1979letterfromtheUnitedStatesDepartmentofTransportation(“USDOT”)totheMayoroftheCityofDenver,describingtheUSDOTOfficeofCivilRights’studyofDenver’sdiscriminatorycontractingpracticesatStapletonInternationalAirport.Id.at1524.USDOTthreatenedtowithholdadditionalfederalfundingforStapletonbecauseDenverhad“deniedminoritycontractorsthebenefitsof,excludedthemfrom,or


otherwisediscriminatedagainstthemconcerningcontractingopportunitiesatStapleton,”inviolationofTitleVIoftheCivilRightsActof1964andotherfederallaws.Id.

ThecourtdiscussedthefollowingdataasreflectedofthelowlevelofMBEandWBEutilizationonStapletoncontractspriortoDenver’sadoptionofanMBEandWBEgoalsprogramatStapletonin1981:fortheyears1977to1980,respectively,MBEutilizationwas0percent,3.8percent,.7percent,and2.1percent;dataonWBEutilizationwasunknownfortheyears1977to1979,anditwas.05percentfor1980.Id.at1524.

ThecourtstatedthatlikeitsunconvincingattempttodiscredittheGAOReport,ConcreteWorkspresentednoevidencetochallengethevalidityofUSDOT’sallegations.Id.ConcreteWorks,thecourtsaid,failedtointroduceevidencerefutingthesubstanceofUSDOT’sinformation,attackingitsmethodology,orchallengingthelowutilizationfiguresforMBEsatStapletonbefore1981.Id.at1525.Thus,accordingtothecourt,ConcreteWorksfailedtocreateagenuineissueoffactabouttheconclusionsintheUSDOT’sreport.Id.Insum,thecourtfoundthefederalagencyreportsofdiscriminationinDenver’scontractawardssupportedDenver’scontentionthatraceandgenderdiscriminationexistedpriortotheenactmentofthechallengedOrdinance.Id.

(b) Denver’s Reports of Discrimination.Denverpointedtoevidenceofpublicdiscriminationpriorto1983,theyearthatthefirstDenverordinancewasenacted.Id.at1525.A1979DPW“MajorBondProjectsFinalReport,”whichreviewedMBEandWBEutilizationonprojectsfundedbythe1972and1974bondreferendaandthe1975and1976revenuebonds,thecourtsaid,showedstrongevidenceofunderutilizationofMBEsandWBEs.Id.BasedonthisReport’sdescriptionoftheapproximately$85millionincontractawards,therewas0percentMBEandWBEutilizationforprofessionaldesignandconstructionmanagementprojects,andlessthan1percentutilizationforconstruction.Id.TheReportconcludedthatifMBEsandWBEshadbeenutilizedinthesameproportionasfoundintheconstructionindustry,5percentofthecontractdollarswouldhavebeenawardedtoMBEsandWBEs.Id.

Tounderminethisdata,ConcreteWorksallegedthattheDPWReportcontained“noinformationaboutthenumberofminorityorwomenownedfirmsthatwereused”onthesebondprojects.Id.at1525.However,thecourtconcludedtheReport’sdescriptionofMBEandWBEutilizationintermsofcontractdollarsprovidedamoreaccuratedepictionoftotalutilizationthanwouldthemerenumberofMBEandWBEfirmsparticipatingintheseprojects.Id.Thus,thecourtsaidthislineofattackbyConcreteWorkswasunavailing.Id.

ConcreteWorksalsoadvancedexperttestimonythatDenver’sdatademonstratedstrongMBEandWBEutilizationonthetotalDPWcontractsawardedbetween1978and1982.Id.Denverrespondedbypointingoutthatbecausefederalandcityaffirmativeactionprogramswereinplacefromthemid–1970stothepresent,thisoverallDPWdatareflectedtheintendedremedialeffectonMBEandWBEutilizationoftheseprograms.Id.at1526.BasedonitscontentionthattheoverallDPWdatawastherefore“tainted”anddistortedbythesepre‐existingaffirmativeactiongoalsprograms,Denveraskedthecourttofocusinsteadonthedatageneratedfromspecificpubliccontractprogramsthatwere,foronereasonoranother,insulatedfromfederalandlocalaffirmativeactiongoalsprograms,i.e.“non‐goalspublicprojects.”Id.

Giventhatthesamelocalconstructionindustryperformedbothgoalsandnon‐goalspubliccontracts,Denverarguedthatdatageneratedonnon‐goalspublicprojectsofferedacontrolgroupwithwhichthecourtcouldcompareMBEandWBEutilizationonpubliccontractsgovernedbyagoalsprogramandthoseinsulatedfromsuchgoalrequirements.Id.Denver


arguedthattheutilizationofMBEsandWBEsonnon‐goalsprojectswasthebettertestofwhethertherehadbeendiscriminationhistoricallyinDenvercontractingpractices.Id.at1526.

DGSdata.Thefirstsetofdatafromnon‐goalspublicprojectsthatDenveridentifiedwereMBEandWBEdisparityindicesonDenverDepartmentofGeneralServices(“DGS”)contracts,whichrepresentedone‐thirdofallcityconstructionfundingandwhich,priortotheenactmentofthe1990Ordinance,werenotsubjecttothegoalsprograminstitutedintheearlierordinancesforDPWcontracts.Id.at1526.TheDGSdata,thecourtfound,revealedextremelylowMBEandWBEutilization.Id.ForMBEs,theDGSdatashoweda.14disparityindexin1989anda.19disparityindexin1990—evidencethecourtstatedwasofsignificantunderutilization.Id.ForWBEs,thedisparityindexwas.47in1989and1.36in1990—thelatter,thecourtsaidshowedgreaterthanfullparticipationandtheformerdemonstratingunderutilization.Id.

ThecourtnotedthatitdidnothavethebenefitofrelevantauthoritywithwhichtocompareDenver’sdisparityindicesforWBEs.Nevertheless,thecourtconcludedDenver’sdataindicatedsignificantWBEunderutilizationsuchthattheOrdinance’sgenderclassificationarosefrom“reasonedanalysisratherthanthroughthemechanicalapplicationoftraditional,ofteninaccurate,assumptions.”Id.at1526,n.19,quoting,MississippiUniv.ofWomen,458U.S.at726.

DPWdata.ThesecondsetofdatapresentedbyDenver,thecourtsaid,reflecteddistinctMBEandWBEunderutilizationonnon‐goalspublicprojectsconsistingofseparateDPWprojectsonwhichnogoalsprogramwasimposed.Id.at1527.ConcreteWorks,accordingtothecourt,attemptedtotrivializethesignificanceofthisdatabycontendingthattheprojects,indollarterms,reflectedasmallfractionofthetotalDenverMSAconstructionmarket.Id.But,thecourtnotedthatConcreteWorksmissedthepointbecausethedatawasnotintendedtoreflectconditionsintheoverallmarket.Id.Insteadthedatadealtsolelywiththeutilizationlevelsforcity‐fundedprojectsonwhichnoMBEandWBEgoalswereimposed.Id.Thecourtfoundthatitwasparticularlytellingthatthedisparityindexsignificantlydeterioratedonprojectsforwhichthecitydidnotestablishminorityandgenderparticipationgoals.Id.InsofarasConcreteWorksdidnotattackthedataonanyothergrounds,thecourtconsidereditwaspersuasiveevidenceofunderlyingdiscriminationintheDenverconstructionmarket.Id.

Empiricaldata.ThethirdevidentiaryitemsupportingDenver’scontentionthatpublicdiscriminationexistedpriortoenactmentofthechallengedOrdinancewasempiricaldatafrom1989,generatedafterDenvermodifieditsrace‐andgender‐consciousprogram.Id.at1527.InthewakeofCroson,DenveramendeditsprogrambyeliminatingtheminimumannualgoalsprogramforMBEandWBEparticipationandbyrequiringMBEsandWBEstodemonstratethattheyhadsufferedfrompastdiscrimination.Id.

Thismodification,thecourtsaid,resultedinanoticeabledeclineintheshareofDPWconstructiondollarsawardedtoMBEs.Id.From1985to1988(priortothe1989modificationofDenver’sprogram),DPWconstructiondollarsawardedtoMBEsrangedfrom17tonearly20percentoftotaldollars.Id.However,thecourtnotedthefiguredroppedto10.4percentin1989,aftertheprogrammodificationstookeffect.Id.at1527.LiketheDGSandnon‐goalsDPWprojects,this1989data,thecourtconcluded,furthersupportedtheinferencethatMBEandWBEutilizationsignificantlydeclinedafterdeletionofagoalsprogramorrelaxationoftheminimumMBEandWBEutilizationgoalrequirements.Id.

Nonetheless,thecourtstateditmustconsiderDenver’sempiricalsupportforitscontentionthatpublicdiscriminationexistedpriortotheenactmentoftheOrdinanceinthecontextoftheoverallDPWdata,whichshowedconsistentlystrongMBEandWBEutilizationfrom1978tothe


present.Id.at1528.ThecourtnotedthatalthoughDenver’sargumentmayprovepersuasiveattrialthatthenon‐goalsprojectswerethemostreliableindiciaofdiscrimination,therecordonsummaryjudgmentcontainedtwosetsofdata,onethatgaverisetoaninferenceofdiscriminationandtheotherthatunderminedsuchaninference.Id.Thisdiscrepancy,thecourtfound,highlightedwhysummaryjudgmentwasinappropriateonthisrecord.Id.

Availabilitydata.ThecourtconcludedthatuncertaintyaboutthecapacityofMBEsandWBEsinthelocalmarkettocompetefor,andperform,thepublicprojectsforwhichtherewasunderutilizationofMBEsandWBEsfurtherhighlightedwhytherecordwasnotripeforsummaryjudgment.Id.at1528.AlthoughDenver’sdatausedasitsbaselinethepercentageoffirmsinthelocalconstructionmarketthatwereMBEsandWBEs,ConcreteWorksarguedthatamoreaccurateindicatorwouldconsiderthecapacityoflocalMBEsandWBEstoundertakethework.Id.ThecourtsaidthatuncertaintyaboutthecapacityofMBEsandWBEsinthelocalmarkettocompetefor,andperform,thepublicprojectsforwhichtherewasunderutilizationofMBEsandWBEsfurtherhighlightedwhytherecordwasnotripeforsummaryjudgment.Id.

ThecourtagreedwiththeothercircuitswhichhadatthattimeinterpretedCrosonimpliedlytopermitamunicipalitytorely,asdidDenver,ongeneraldatareflectingthenumberofMBEsandWBEsinthemarketplacetodefeatthechallenger’ssummaryjudgmentmotionorrequestforapreliminaryinjunction.Id.at1527citing,ContractorsAss’n,6F.3dat1005(comparingMBEparticipationincitycontractswiththe“percentageof[MBE]availabilityorcompositioninthe‘population’ofPhiladelphiaareaconstructionfirms”);AssociatedGen.Contractors,950F.2dat1414(relyingonavailabilitydatatoconcludethatcitypresented“detailedfindingsofpriordiscrimination”);ConeCorp.,908F.2dat916(statisticaldisparitybetween“thetotalpercentageofminoritiesinvolvedinconstructionandtheworkgoingtominorities”showsthat“theracialclassificationintheCountyplan[was]necessary”).

But,thecourtfoundConcreteWorkshadidentifiedalegitimatefactualdisputeabouttheaccuracyofDenver’sdataandquestionedwhetherDenver’srelianceonthepercentageofMBEsandWBEsavailableinthemarketplaceoverstated“theabilityofMBEsorWBEstoconductbusinessrelativetotheindustryasawholebecauseM/WBEstendtobesmallerandlessexperiencedthannonminority‐ownedfirms.”Id.at1528.Inotherwords,thecourtsaid,adisparityindexcalculatedonthebasisoftheabsolutenumberofMBEsinthelocalmarketmayshowgreaterunderutilizationthandoesdatathattakesintoconsiderationthesizeofMBEsandWBEs.Id.

ThecourtstatedthatitwasnotimplyingthatavailabilitywasnotanappropriatebarometertocalculateMBEandWBEutilization,nordiditcastaspersionsondatathatsimplyusedrawnumbersofMBEsandWBEscomparedtonumbersoftotalfirmsinthemarket.Id.Thecourtconcluded,however,oncecredibleinformationaboutthesizeorcapacityofthefirmswasintroducedintherecord,itbecameafactorthatthecourtshouldconsider.Id.

Denverpresentedseveralresponses.Id.at1528.Itarguedthataconstructionfirm’sprecise“capacity”atagivenmomentintimebeliedquantificationduetotheindustry’shighlyelasticnature.Id.DPWcontractsrepresentedlessthan4percentoftotalMBErevenuesandlessthan2percentofWBErevenuesin1989,therebythecourtsaid,stronglyimpliedthatMBEandWBEparticipationinDPWcontractsdidnotrenderthesefirmsincapableofconcurrentlyundertakingadditionalwork.Id.at1529.DenverpresentedevidencethatmostMBEsandWBEshadneverparticipatedincitycontracts,“althoughalmostallfirmscontactedindicatedthattheywereinterestedinCitywork.”Id.OfthoseMBEsandWBEswhohavereceivedworkfromDPW,


availabledatashowedthatlessthan10percentoftheirtotalrevenueswerefromDPWcontracts.Id.

Thecourtheldallofthebackandforthargumentshighlightedthatthereweregenuineandmaterialfactualdisputesintherecord,andthatsuchdisputesabouttheaccuracyofDenver’sdatashouldnotberesolvedatsummaryjudgment.Id.at1529.

(c) Evidence of Private Discrimination in the Denver MSA.Inrecognitionthatamunicipalityhasacompellinginterestintakingaffirmativestepstoremedybothpublicandprivatediscriminationspecificallyidentifiedinitsarea,thecourtalsoconsidereddataaboutconditionsintheoverallDenverMSAconstructionindustrybetween1977and1992.Id.at1529.ThecourtstatedthatgivenDPWandDGSconstructioncontractsrepresentedapproximately2percentofallconstructionintheDenverMSA,DenverMSAindustrydatasharpenedthepictureoflocalmarketconditionsforMBEsandWBEs.Id.

AccordingtoDenver’sexpertaffidavits,theMBEdisparityindexintheDenverMSAwas.44in1977,.26in1982,and.43in1990.Id.ThecorrespondingWBEdisparityindiceswere.46in1977,.30in1982,and.42in1989.Id.Thispre‐enactmentevidenceoftheoverallDenverMSAconstructionmarket—i.e.combinedpublicandprivatesectorutilizationofMBEsandWBEs—thecourtfoundgaverisetoaninferencethatlocalprimecontractorsdiscriminatedonthebasisofraceandgender.Id.

Thecourtpointedoutthatratherthanofferinganyevidenceinrebuttal,ConcreteWorksmerelystatedthatthisempiricalevidencedidnotprovethattheDenvergovernmentitselfdiscriminatedagainstMBEsandWBEs.Id.at1529.ConcreteWorksaskedthecourttodefinetheappropriatemarketaslimitedtocontractswiththeCityandCountyofDenver.Id.But,thecourtsaidthatsucharequestignoredthelessonofCrosonthatamunicipalitymaydesignprogramstopreventtaxdollarsfrom“financ[ing]theevilofprivateprejudice.”Id.,quoting,Croson,488U.S.at492.

ThecourtfoundthatwhattheDenverMSAdatadidnotindicate,however,waswhethertherewasanylinkagebetweenDenver’sawardofpubliccontractsandtheDenverMSAevidenceofindustry‐widediscrimination.Id.at1529.ThecourtsaiditcouldnottellwhetherDenverindirectlycontributedtoprivatediscriminationbyawardingpubliccontractstofirmsthatinturndiscriminatedagainstMBEand/orWBEsubcontractorsinotherprivateportionsoftheirbusinessorwhethertheprivatediscriminationwaspracticedbyfirmswhodidnotreceiveanypubliccontracts.Id.

NeitherCrosonnoritsprogeny,thecourtpointedout,clearlystatedwhetherprivatediscriminationthatwasinnowayfundedwithpublictaxdollarscould,byitself,providetherequisitestrongbasisinevidencenecessarytojustifyamunicipality’saffirmativeactionprogram.Id.ThecourtsaidapluralityinCrosonsuggestedthatremedialmeasurescouldbejustifieduponamunicipality’sshowingthat“ithadessentiallybecomea‘passiveparticipant’inasystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry.”Id.at1529,quoting,Croson,488U.S.at492.

ThecourtconcludedthatCrosondidnotrequirethemunicipalitytoidentifyanexactlinkagebetweenitsawardofpubliccontractsandprivatediscrimination,butsuchevidencewouldatleastenhancethemunicipality’sfactualpredicateforarace‐andgender‐consciousprogram.Id.at1529.TherecordbeforethecourtdidnotexplaintheDenvergovernment’srolein


contributingtotheunderutilizationofMBEsandWBEsintheprivateconstructionmarketintheDenverMSA,andthecourtstatedthatthismaybeafruitfulissuetoexploreattrial.Id.at1530.

(d). Anecdotal Evidence.Therecord,accordingtothecourt,containednumerouspersonalaccountsbyMBEsandWBEs,aswellasprimecontractorsandcityofficials,describingdiscriminatorypracticesintheDenverconstructionindustry.Id.at1530.Suchanecdotalevidencewascollectedduringpublichearingsin1983and1988,interviews,thesubmissionofaffidavits,andcasestudiesperformedbyaconsultingfirmthatDenveremployedtoinvestigatepublicandprivatemarketconditionsin1990,priortotheenactmentofthe1990Ordinance.Id.

Thccourtindicatedagainthatanecdotalevidenceaboutminority‐andwomen‐ownedcontractors’experiencescouldbolsterempiricaldatathatgaverisetoaninferenceofdiscrimination.Id.at1530.Whileafactfinder,thecourtstated,shouldaccordlessweighttopersonalaccountsofdiscriminationthatreflectisolatedincidents,anecdotalevidenceofamunicipality’sinstitutionalpracticescarrymoreweightduetothesystemicimpactthatsuchinstitutionalpracticeshaveonmarketconditions.Id.

ThecourtnotedthatinadditiontotheindividualaccountsofdiscriminationthatMBEsandWBEshadencounteredintheDenverMSA,Cityaffirmativeactionofficialsexplainedthatchangeordersofferedaconvenientmeansofskirtingprojectgoalsbypermittingwhatwouldotherwisebeanewconstructionproject(andthussubjecttotheMBEandWBEparticipationrequirements)tobecharacterizedasanextensionofanexistingprojectandthuswithinDGS’sbailiwick.Id.at1530.Anassistantcityattorney,thecourtsaid,alsorevealedthatprojectshavebeenlabelled“remodeling,”asopposedto“reconstruction,”becausetheformerfallwithinDGS,andthuswerenotsubjecttoMBEandWBEgoalspriortotheenactmentofthe1990Ordinance.Id.at1530.ThecourtconcludedovertheobjectofConcreteWorksthatthisanecdotalevidencecouldbeconsideredinconjunctionwithDenver’sstatisticalanalysis.Id.

2.Summary.ThecourtsummarizeditsrulingbyindicatingDenverhadcompiledsubstantialevidencetosupportitscontentionthattheOrdinancewasenactedtoremedypastrace‐andgender‐baseddiscrimination.Id.at1530.ThecourtfoundincontrasttothepredicatefactsonwhichRichmondunsuccessfullyreliedinCroson,thatDenver’sevidenceofdiscriminationbothintheawardofpubliccontractsandwithintheoverallDenverMSAwasparticularizedandgeographicallytargeted.Id.ThecourtemphasizedthatDenverneednotnegateallevidenceofnon‐discrimination,norwasitDenver’sburdentoprovejudiciallythatdiscriminationdidexist.Id.Rather,thecourtheld,Denverneedonlycomeforwardwitha“strongbasisinevidence”thatitsOrdinancewasanarrowly‐tailoredresponsetospecificallyidentifieddiscrimination.Id.Then,thecourtsaiditbecameConcreteWorks’burdentoshowthattherewasnosuchstrongbasisinevidencetosupportDenver’saffirmativeactionlegislation.Id.

ThecourtalsostatedthatConcreteWorkshadspecificallyidentifiedpotentialflawsinDenver’sdataandhadputforthevidencethatDenver’sdatafailedtosupportaninferenceofeitherpublicorprivatediscrimination.Id.at1530.WithrespecttoDenver’sevidenceofpublicdiscrimination,forexample,thecourtfoundoverallDPWdatademonstratedstrongMBEandWBEutilization,yetdataforisolatedDPWprojectsandDGScontractawardssuggestedtothecontrary.Id.Thepartiesofferedconflictingrationalesforthisdisparatedata,andthecourtconcludedtherecorddidnotprovideaclearexplanation.Id.Inaddition,thecourtsaidthatConcreteWorkspresentedalegitimatecontentionthatDenver’sdisparityindicesfailedtoconsidertherelativelysmallsizeofMBEsandWBEs,whichthecourtnotedfurtherimpededitsabilitytodrawconclusionsfromtheexistingrecord.Id.at1531.


Significantly,thecourtpointedoutthatbecauseConcreteWorksdidnotchallengethedistrictcourt’sconclusionwithrespecttothesecondprongofCroson’sstrictscrutinystandard—i.e.thattheOrdinancewasnarrowlytailoredtoremedypastandpresentdiscrimination—thecourtneednotanddidnotaddressthisissue.Id.at1531.

Onremand,thecourtstatedthepartiesshouldbepermittedtodevelopafactualrecordtosupporttheircompetinginterpretationsoftheempiricaldata.Id.at1531.Accordingly,thecourtreversedthedistrictcourtrulinggrantingsummaryjudgmentandremandedthecaseforfurtherproceedings.SeeConcreteWorksofColoradov.CityandCountyofDenver,321F.3d950(10thCir.2003).

12. Associated Gen. Contractors of California, Inc. v. Coalition for Econ. Equity (“AGCC”), 950 F.2d 1401 (9th Cir. 1991)

InAssociatedGen.ContractorsofCalifornia,Inc.v.CoalitionforEcon.Equity(“AGCC”),theNinthCircuitCourtofAppealsdeniedplaintiffsrequestforpreliminaryinjunctiontoenjoinenforcementofthecity’sbidpreferenceprogram.950F.2d1401(9thCir.1991).Althoughanoldercase,AGCCisinstructiveastotheanalysisconductedbytheNinthCircuit.Thecourtdiscussedtheutilizationofstatisticalevidenceandanecdotalevidenceinthecontextofthestrictscrutinyanalysis.Id.at1413‐18.

TheCityofSanFranciscoadoptedanordinancein1989providingbidpreferencestoprimecontractorswhoweremembersofgroupsfounddisadvantagedbypreviousbiddingpractices,andspecificallyprovideda5percentbidpreferenceforLBEs,WBEsandMBEs.950F.2dat1405.LocalMBEsandWBEswereeligiblefora10percenttotalbidpreference,representingthecumulativetotalofthefivepercentpreferencegivenLocalBusinessEnterprises(“LBEs”)andthe5percentpreferencegivenMBEsandWBEs.Id.Theordinancedefined“MBE”asaneconomicallydisadvantagedbusinessthatwasownedandcontrolledbyoneormoreminoritypersons,whichweredefinedtoincludeAsian,blacksandLatinos.“WBE”wasdefinedasaneconomicallydisadvantagedbusinessthatwasownedandcontrolledbyoneormorewomen.Economicallydisadvantagedwasdefinedasabusinesswithaveragegrossannualreceiptsthatdidnotexceed$14million.Id.

TheMotionforPreliminaryInjunctionchallengedtheconstitutionalityoftheMBEprovisionsofthe1989OrdinanceinsofarasitpertainedtoPublicWorksconstructioncontracts.Id.at1405.ThedistrictcourtdeniedtheMotionforPreliminaryInjunctionontheAGCC’sconstitutionalclaimonthegroundthatAGCCfailedtodemonstratealikelihoodofsuccessonthemerits.Id.at1412.

TheNinthCircuitCourtofAppealsappliedthestrictscrutinyanalysisfollowingthedecisionoftheU.S.SupremeCourtinCityofRichmondv.Croson.ThecourtstatedthataccordingtotheU.S.SupremeCourtinCroson,amunicipalityhasacompellinginterestinginredressing,notonlydiscriminationcommittedbythemunicipalityitself,butalsodiscriminationcommittedbyprivatepartieswithinthemunicipalities’legislativejurisdiction,solongasthemunicipalityinsomewayperpetuatedthediscriminationtoberemediedbytheprogram.Id.at1412‐13,citingCrosonat488U.S.at491‐92,537‐38.Tosatisfythisrequirement,“thegovernmentalactorneednotbeanactiveperpetratorofsuchdiscrimination;passiveparticipationwillsatisfythissub‐partofstrictscrutinyreview.”Id.at1413,quotingCoralConstructionCompanyv.KingCounty,941F.2d910at916(9thCir.1991).Inaddition,the[m]ereinfusionoftaxdollarsintoadiscriminatoryindustrymaybesufficientgovernmentalinvolvementtosatisfythisprong.”Id.at1413quotingCoralConstruction,941F.2dat916.


ThecourtpointedoutthattheCityhadmadedetailedfindingsofpriordiscriminationinconstructionandbuildingwithinitsborders,hadtestimonytakenatmorethantenpublichearingsandreceivednumerouswrittensubmissionsfromthepublicaspartofitsanecdotalevidence.Id.at1414.TheCityDepartmentscontinuedtodiscriminateagainstMBEsandWBEsandcontinuedtooperateunderthe“oldboynetwork”inawardingcontracts,therebydisadvantagingMBEsandWBEs.Id.And,theCityfoundthatlargestatisticaldisparitiesexistedbetweenthepercentageofcontractsawardedtoMBEsandthepercentageofavailableMBEs.950F.2dat1414.ThecourtstatedtheCityalsofound“discriminationintheprivatesectoragainstMBEsandWBEsthatismanifestedinandexacerbatedbytheCity’sprocurementpractices.”Id.at1414.

TheNinthCircuitfoundthestudycommissionedbytheCityindicatedtheexistenceoflargedisparitiesbetweentheawardofcitycontractstoavailablenon‐minoritybusinessesandtoMBEs.Id.at1414.UsingtheCityandCountyofSanFranciscoasthe“relevantmarket,”thestudycomparedthenumberofavailableMBEprimeconstructioncontractorsinSanFranciscowiththeamountofcontractdollarsawardedbytheCitytoSanFrancisco‐basedMBEsforaparticularyear.Id.at1414.ThestudyfoundthatavailableMBEsreceivedfarfewercitycontractsinproportiontotheirnumbersthantheiravailablenon‐minoritycounterparts.Id.Specifically,thestudyfoundthatwithrespecttoprimeconstructioncontracting,disparitiesbetweenthenumberofavailablelocalAsian‐,black‐andHispanic‐ownedfirmsandthenumberofcontractsawardedtosuchfirmswerestatisticallysignificantandsupportedaninferenceofdiscrimination.Id.Forexample,inprimecontractingforconstruction,althoughMBEavailabilitywasdeterminedtobeat49.5percent,MBEdollarparticipationwasonly11.1percent.Id.TheNinthCircuitstatedthaninitsdecisioninCoralConstruction,itemphasizedthatsuchstatisticaldisparitiesare“aninvaluabletoolanddemonstratingthediscriminationnecessarytoestablishacompellinginterest.Id.at1414,citingtoCoralConstruction,941F.2dat918andCroson,488U.S.at509.

Thecourtnotedthattherecorddocumentsavastnumberofindividualaccountsofdiscrimination,whichbring“thecoldnumbersconvincinglytolife.Id.at1414,quotingCoralConstruction,941F.2dat919.TheseaccountsincludenumerousreportsofMBEsbeingdeniedcontractsdespitebeingthelowbidder,MBEsbeingtoldtheywerenotqualifiedalthoughtheywerelaterfoundqualifiedwhenevaluatedbyoutsideparties,MBEsbeingrefusedworkevenaftertheywereawardedcontractsaslowbidder,andMBEsbeingharassedbycitypersonneltodiscouragethemfrombiddingoncitycontracts.Idat1415.TheCitypointedtonumerousindividualaccountsofdiscrimination,thatan“oldboynetwork”stillexists,andthatracialdiscriminationisstillprevalentwithintheSanFranciscoconstructionindustry.Id.Thecourtfoundthatsucha“combinationofconvincinganecdotalandstatisticalevidenceispotent.”Id.at1415quotingCoralConstruction,941F.2dat919.

Thecourtalsostatedthatthe1989OrdinanceappliesonlytoresidentMBEs.TheCity,therefore,accordingtothecourt,appropriatelyconfineditsstudytothecitylimitsinordertofocusonthosewhomthepreferenceschemetargeted.Id.at1415.ThecourtnotedthatthestatisticsrelieduponbytheCitytodemonstratediscriminationinitscontractingprocessesconsideredonlyMBEslocatedwithintheCityofSanFrancisco.Id.

ThecourtpointedouttheCity’sfindingswerebasedupondozensofspecificinstancesofdiscriminationthatarelaidoutwithparticularityintherecord,aswellasthesignificantstatisticaldisparitiesintheawardofcontracts.ThecourtnotedthattheCitymustsimplydemonstratetheexistenceofpastdiscriminationwithspecificity,butthereisnorequirement


thatthelegislativefindingsspecificallydetaileachandeveryincidencethatthelegislativebodyhasrelieduponinsupportofthisdecisionthataffirmativeactionisnecessary.Id.at1416.

Initsanalysisofthe“narrowlytailored”requirement,thecourtfocusedonthreecharacteristicsidentifiedbythedecisioninCrosonasindicativeofnarrowtailoring.First,anMBEprogramshouldbeinstitutedeitherafter,orinconjunctionwith,race‐neutralmeansofincreasingminoritybusinessparticipationinpubliccontracting.Id.at1416.Second,theplanshouldavoidtheuseof“rigidnumericalquotas.”Id.AccordingtotheSupremeCourt,systemsthatpermitwaiverinappropriatecasesandthereforerequiresomeindividualizedconsiderationoftheapplicantsposealesserdangerofoffendingtheConstitution.Id.Mechanismsthatintroduceflexibilityintothesystemalsopreventtheimpositionofadisproportionateburdenonafewindividuals.Id.Third,“anMBEprogrammustbelimitedinitseffectivescopetotheboundariesoftheenactingjurisdiction.Id.at1416quotingCoralConstruction,941F.2dat922.

ThecourtfoundthattherecordshowedtheCityconsidered,butrejectedasnotviable,specificrace‐neutralalternativesincludingafundtoassistnewlyestablishedMBEsinmeetingbondingrequirements.Thecourtstatedthat“whilestrictscrutinyrequiresserious,goodfaithconsiderationofrace‐neutralalternatives,strictscrutinydoesnotrequireexhaustionofeverypossiblesuchalternative…howeverirrational,costly,unreasonable,andunlikelytosucceedsuchalternativemaybe.”Id.at1417quotingCoralConstruction,941F.2dat923.ThecourtfoundtheCitytenyearsbeforehadattemptedtoeradicatediscriminationincitycontractingthroughpassageofarace‐neutralordinancethatprohibitedcitycontractorsfromdiscriminatingagainsttheiremployeesonthebasisofraceandrequiredcontractorstotakestepstointegratetheirworkforce;andthattheCitymadeandcontinuestomakeeffortstoenforcetheanti‐discriminationordinance.Id.at1417.Thecourtstatedinclusionofsuchrace‐neutralmeasuresisonefactorsuggestingthatanMBEplanisnarrowlytailored.Id.at1417.

ThecourtalsofoundthattheOrdinancepossessedtherequisiteflexibility.Ratherthanarigidquotasystem,theCityadoptedamoremodestsystemaccordingtothecourt,thatofbidpreferences.Id.at1417.Thecourtpointedoutthattherewerenogoals,quotas,orset‐asidesandmoreover,theplanremediesonlyspecificallyidentifieddiscrimination:theCityprovidespreferencesonlytothoseminoritygroupsfoundtohavepreviouslyreceivedalowerpercentageofspecifictypesofcontractsthantheiravailabilitytoperformsuchworkwouldsuggest.Id.at1417.

ThecourtrejectedtheargumentofAGCCthattopassconstitutionalmusteranyremedymustprovideredressonlytospecificindividualswhohavebeenidentifiedasvictimsofdiscrimination.Id.at1417,n.12.TheNinthCircuitagreedwiththedistrictcourtthataniron‐cladrequirementlimitinganyremedytoindividualspersonallyproventohavesufferedpriordiscriminationwouldrenderanyrace‐consciousremedy“superfluous,”andwouldthwarttheSupremeCourt’sdirectiveinCrosonthatrace‐consciousremediesmaybepermittedinsomecircumstances.Id.at1417,n.12.Thecourtalsofoundthattheburdensofthebidpreferencesonthosenotentitledtothemappear“relativelylightandwelldistributed.”Id.at1417.ThecourtstatedthattheOrdinancewas“limitedinitsgeographicalscopetotheboundariesoftheenactingjurisdiction.Id.at1418,quotingCoralConstruction,941F.2dat925.ThecourtfoundthatSanFranciscohadcarefullylimitedtheordinancetobenefitonlythoseMBEslocatedwithintheCity’sborders.Id.1418.


13. Coral Construction Co. v. King County, 941 F.2d 910 (9th Cir. 1991)

InCoralConstructionCo.v.KingCounty,941F.2d910(9thCir.1991),theNinthCircuitexaminedtheconstitutionalityofKingCounty,Washington’sminorityandwomenbusinessset‐asideprograminlightofthestandardsetforthinCityofRichmondv.J.A.CrosonCo.ThecourtheldthatalthoughtheCountypresentedampleanecdotalevidenceofdisparatetreatmentofMBEcontractorsandsubcontractors,thetotalabsenceofpre‐programenactmentstatisticalevidencewasproblematictothecompellinggovernmentinterestcomponentofthestrictscrutinyanalysis.Thecourtremandedtothedistrictcourtforadeterminationofwhetherthepost‐programenactmentstudiesconstitutedasufficientcompellinggovernmentinterest.Perthenarrowtailoringprongofthestrictscrutinytest,thecourtfoundthatalthoughtheprogramincludedrace‐neutralalternativemeasuresandwasflexible(i.e.,includedawaiverprovision),theoverbreadthoftheprogramtoincludeMBEsoutsideofKingCountywasfataltothenarrowtailoringanalysis.

Thecourtalsoremandedontheissueofwhethertheplaintiffswereentitledtodamagesunder42U.S.C.§§1981and1983,andinparticulartodeterminewhetherevidenceofcausationexisted.WithrespecttotheWBEprogram,thecourtheldtheplaintiffhadstandingtochallengetheprogram,andapplyingtheintermediatescrutinyanalysis,heldtheWBEprogramsurvivedthefacialchallenge.

InfindingtheabsenceofanystatisticaldatainsupportoftheCounty’sMBEProgram,thecourtmadeitclearthatstatisticalanalyseshaveservedandwillcontinuetoserveanimportantroleincasesinwhichtheexistenceofdiscriminationisadisputedissue.941F.2dat918.Thecourtnotedthatithasrepeatedlyapprovedtheuseofstatisticalprooftoestablishaprimafaciecaseofdiscrimination.Id.ThecourtpointedoutthattheU.S.SupremeCourtinCrosonheldthatwhere“grossstatisticaldisparitiescanbeshown,theyalonemayinapropercaseconstituteprimafacieproofofapatternorpracticeofdiscrimination.”Id.at918,quotingHazelwoodSchoolDist.v.UnitedStates,433U.S.299,307‐08,andCroson,488U.S.at501.

Thecourtpointsoutthatstatisticalevidencemaynotfullyaccountforthecomplexfactorsandmotivationsguidingemploymentdecisions,manyofwhichmaybeentirelyrace‐neutral.Id.at919.Thecourtnotedthattherecordcontainedaplethoraofanecdotalevidence,butthatanecdotalevidence,standingalone,suffersthesameflawsasstatisticalevidence.Id.at919.Whileanecdotalevidencemaysufficetoproveindividualclaimsofdiscrimination,rarely,accordingtothecourt,ifever,cansuchevidenceshowasystemicpatternofdiscriminationnecessaryfortheadoptionofanaffirmativeactionplan.Id.

Nonetheless,thecourtheldthatthecombinationofconvincinganecdotalandstatisticalevidenceispotent.Id.at919.Thecourtpointedoutthatindividualswhotestifiedabouttheirpersonalexperiencesbroughtthecoldnumbersofstatistics“convincinglytolife.”Id.at919,quotingInternationalBrotherhoodofTeamstersv.UnitedStates,431U.S.324,339(1977).ThecourtalsopointedoutthattheEleventhCircuitCourtofAppeals,inpassinguponaminoritysetasideprogramsimilartotheoneinKingCounty,concludedthatthetestimonyregardingcomplaintsofdiscriminationcombinedwiththegrossstatisticaldisparitiesuncoveredbytheCountystudiesprovidedmorethanenoughevidenceonthequestionofpriordiscriminationandneedforracialclassificationtojustifythedenialofaMotionforSummaryJudgment.Id.at919,citingConeCorp.v.HillsboroughCounty,908F.2d908,916(11thCir.1990).

ThecourtfoundthattheMBEProgramoftheCountycouldnotstandwithoutaproperstatisticalfoundation.Id.at919.Thecourtaddressedwhetherpost‐enactmentstudiesdonebytheCounty


ofastatisticalfoundationcouldbeconsideredbythecourtinconnectionwithdeterminingthevalidityoftheCountyMBEProgram.Thecourtheldthatamunicipalitymusthavesomeconcreteevidenceofdiscriminationinaparticularindustrybeforeitmayadoptaremedialprogram.Id.at920.However,thecourtsaidthisrequirementofsomeevidencedoesnotmeanthataprogramwillbeautomaticallystruckdowniftheevidencebeforethemunicipalityatthetimeofenactmentdoesnotcompletelyfulfillbothprongsofthestrictscrutinytest.Id.Rather,thecourtheld,thefactualpredicatefortheprogramshouldbeevaluatedbaseduponallevidencepresentedtothedistrictcourt,whethersuchevidencewasadducedbeforeorafterenactmentoftheMBEProgram.Id.Therefore,thecourtadoptedarulethatamunicipalityshouldhavebeforeitsomeevidenceofdiscriminationbeforeadoptingarace‐consciousprogram,whileallowingpost‐adoptionevidencetobeconsideredinpassingontheconstitutionalityoftheprogram.Id.

Thecourt,therefore,remandedthecasetothedistrictcourtfordeterminationofwhethertheconsultantstudiesthatwereperformedaftertheenactmentoftheMBEProgramcouldprovideanadequatefactualjustificationtoestablisha“propellinggovernmentinterest”forKingCounty’sadoptingtheMBEProgram.Id.at922.

ThecourtalsofoundthatCrosondoesnotrequireashowingofactivediscriminationbytheenactingagency,andthatpassiveparticipation,suchastheinfusionoftaxdollarsintoadiscriminatoryindustry,suffices.Id.at922,citingCroson,488U.S.at492.ThecourtpointedoutthattheSupremeCourtinCrosonconcludedthatiftheCityhadevidencebeforeit,thatnon‐minoritycontractorsweresystematicallyexcludingminoritybusinessesfromsubcontractingopportunities,itcouldtakeactiontoendthediscriminatoryexclusion.Id.at922.Thecourtpointsoutthatiftherecordultimatelysupportedafindingofsystemicdiscrimination,theCountyadequatelylimiteditsprogramtothosebusinessesthatreceivetaxdollars,andtheprogramimposedobligationsupononlythosebusinesseswhichvoluntarilysoughtKingCountytaxdollarsbycontractingwiththeCounty.Id.

Thecourtaddressedseveralfactorsintermsofthenarrowlytailoredanalysis,andfoundthatfirst,anMBEprogramshouldbeinstitutedeitherafter,orinconjunctionwith,race‐neutralmeansofincreasingminoritybusinessparticipationandpubliccontracting.Id.at922,citingCroson,488U.S.at507.Thesecondcharacteristicofthenarrowly‐tailoredprogram,accordingtothecourt,istheuseofminorityutilizationgoalsonacase‐by‐casebasis,ratherthanuponasystemofrigidnumericalquotas.Id.Finally,thecourtstatedthatanMBEprogrammustbelimitedinitseffectivescopetotheboundariesoftheenactingjurisdiction.Id.

Amongthevariousnarrowlytailoredrequirements,thecourtheldconsiderationofrace‐neutralalternativesisamongthemostimportant.Id.at922.Nevertheless,thecourtstatedthatwhilestrictscrutinyrequiresserious,goodfaithconsiderationofrace‐neutralalternatives,strictscrutinydoesnotrequireexhaustionofeverypossiblesuchalternative.Id.at923.Thecourtnotedthatitdoesnotintendagovernmententityexhausteveryalternative,howeverirrational,costly,unreasonable,andunlikelytosucceedsuchalternativemightbe.Id.Thus,thecourtrequiredonlythatastateexhaustsrace‐neutralmeasuresthatthestateisauthorizedtoenact,andthathaveareasonablepossibilityofbeingeffective.Id.ThecourtnotedinthiscasetheCountyconsideredalternatives,butdeterminedthattheywerenotavailableasamatteroflaw.Id.TheCountycannotberequiredtoengageinconductthatmaybeillegal,norcanitbecompelledtoexpendprecioustaxdollarsonprojectswherepotentialforsuccessismarginalatbest.Id.

ThecourtnotedthatKingCountyhadadoptedsomerace‐neutralmeasuresinconjunctionwiththeMBEProgram,forexample,hostingoneortwotrainingsessionsforsmallbusinesses,


coveringsuchtopicsasdoingbusinesswiththegovernment,smallbusinessmanagement,andaccountingtechniques.Id.at923.Inaddition,theCountyprovidedinformationonassessingSmallBusinessAssistancePrograms.Id.ThecourtfoundthatKingCountyfulfilleditsburdenofconsideringrace‐neutralalternativeprograms.Id.

Asecondindicatorofaprogram’snarrowlytailoringisprogramflexibility.Id.at924.Thecourtfoundthatanimportantmeansofachievingsuchflexibilityisthroughuseofcase‐by‐caseutilizationgoals,ratherthanrigidnumericalquotasorgoals.Id.at924.ThecourtpointedoutthatKingCountyuseda“percentagepreference”method,whichisnotaquota,andwhilethepreferenceislockedatfivepercent,suchafixedpreferenceisnotundulyrigidinlightofthewaiverprovisions.ThecourtfoundthatavalidMBEProgramshouldincludeawaiversystemthataccountsforboththeavailabilityofqualifiedMBEsandwhetherthequalifiedMBEshavesufferedfromtheeffectsofpastdiscriminationbytheCountyorprimecontractors.Id.at924.ThecourtfoundthatKingCounty’sprogramprovidedwaiversinbothinstances,includingwhereneitherminoritynorawoman’sbusinessisavailabletoprovideneededgoodsorservicesandwhereavailableminorityand/orwomen’sbusinesseshavegivenpricequotesthatareunreasonablyhigh.Id.

ThecourtalsopointedoutotherattributesofthenarrowlytailoredandflexibleMBEprogram,includingabidderthatdoesnotmeetplannedgoals,maynonethelessbeawardedthecontractbydemonstratingagoodfaithefforttocomply.Id.TheactualpercentagesofrequiredMBEparticipationaredeterminedonacase‐by‐casebasis.Levelsofparticipationmaybereducediftheprescribedlevelsarenotfeasible,ifqualifiedMBEsareunavailable,orifMBEpricequotesarenotcompetitive.Id.

ThecourtconcludedthatanMBEprogrammustalsobelimitedinitsgeographicalscopetotheboundariesoftheenactingjurisdiction.Id.at925.HerethecourtheldthatKingCounty’sMBEprogramfailsthisthirdportionof“narrowlytailored”requirement.Thecourtfoundthedefinitionof“minoritybusiness”includedintheProgramindicatedthataminority‐ownedbusinessmayqualifyforpreferentialtreatmentifthebusinesshasbeendiscriminatedagainstintheparticulargeographicalareasinwhichitoperates.Thecourtheldthisdefinitionasoverlybroad.Id.at925.ThecourtheldthattheCountyshouldaskthequestionwhetherabusinesshasbeendiscriminatedagainstinKingCounty.Id.Thisdetermination,accordingtothecourt,isnotaninsurmountableburdenfortheCounty,astheruledoesnotrequirefindingspecificinstancesofdiscriminatoryexclusionforeachMBE.Id.Rather,iftheCountysuccessfullyprovesmalignantdiscriminationwithintheKingCountybusinesscommunity,anMBEwouldbepresumptivelyeligibleforreliefifithadpreviouslysoughttodobusinessintheCounty.Id.

Inotherwords,ifsystemicdiscriminationintheCountyisshown,thenitisfairtopresumethatanMBEwasvictimizedbythediscrimination.Id.at925.ForthepresumptiontoattachtotheMBE,however,itmustbeestablishedthattheMBEis,orattemptedtobecome,anactiveparticipantintheCounty’sbusinesscommunity.Id.BecauseKingCounty’sprogrampermittedMBEparticipationevenbyMBEsthathavenopriorcontactwithKingCounty,theprogramwasoverbroadtothatextent.Id.Therefore,thecourtreversedthegrantofsummaryjudgmenttoKingCountyontheMBEprogramonthebasisthatitwasgeographicallyoverbroad.

Thecourtconsideredthegender‐specificaspectoftheMBEprogram.Thecourtdeterminedthedegreeofjudicialscrutinyaffordedgender‐consciousprogramswasintermediatescrutiny,ratherthanstrictscrutiny.Id.at930.Underintermediatescrutiny,gender‐basedclassificationmustserveanimportantgovernmentalobjective,andtheremustbeadirect,substantialrelationshipbetweentheobjectiveandthemeanschosentoaccomplishtheobjective.Id.at931.


Inthiscase,thecourtconcluded,thatKingCounty’sWBEpreferencesurvivedafacialchallenge.Id.at932.ThecourtfoundthatKingCountyhadalegitimateandimportantinterestinremedyingthemanydisadvantagesthatconfrontwomenbusinessownersandthatthemeanschosenintheprogramweresubstantiallyrelatedtotheobjective.Id.ThecourtfoundtherecordadequatelyindicateddiscriminationagainstwomenintheKingCountyconstructionindustry,notingtheanecdotalevidenceincludinganaffidavitofthepresidentofaconsultingengineeringfirm.Id.at933.Therefore,thecourtupheldtheWBEportionoftheMBEprogramandaffirmedthedistrictcourt’sgrantofsummaryjudgmenttoKingCountyfortheWBEprogram.

Recent District Court Decisions

14. Kossman Contracting Co., Inc. v. City of Houston, 2016 WL 1104363 (S.D. Tex. 2016).

PlaintiffKossmanisacompanyengagedinthebusinessofprovidingerosioncontrolservicesandismajorityownedbyawhitemale.2016WL1104363at*1.KossmanbroughtthisactionasanequalprotectionchallengetotheCityofHouston’sMinorityandWomenOwnedBusinessEnterprise(“MWBE”)program.Id.TheMWBEprogramthatischallengedhasbeenineffectsince2013andsetsa34percentMWBEgoalforconstructionprojects.Id.Houstonsetthisgoalbasedonadisparitystudyissuedin2012.Id.Thestudyanalyzedthestatusofminority‐ownedandwomen‐ownedbusinessenterprisesinthegeographicandproductmarketsofHouston’sconstructioncontracts.Id.

KossmanallegesthattheMWBEprogramisunconstitutionalonthegroundthatitdeniesnon‐MWBEsequalprotectionofthelaw,andassertsthatithaslostbusinessasaresultoftheMWBEprogrambecauseprimecontractorsareunwillingtosubcontractworktoanon‐MWBEfirmlikeKossman.Id.at*1.Kossmanfiledamotionforsummaryjudgment;HoustonfiledamotiontoexcludethetestimonyofKossman’sexpert;andHoustonfiledamotionforsummaryjudgment.Id.

ThedistrictcourtreferredthesemotionstotheMagistrateJudge.TheMagistrateJudge,onFebruary17,2016,issueditsMemorandum&RecommendationtothedistrictcourtinwhichitfoundthatHouston’smotiontoexcludeKossman’sexpertshouldbegrantedbecausetheexpertarticulatednomethodandhadnotraininginstatisticsoreconomicsthatwouldallowhimtocommentonthevalidityofthedisparitystudy.Id.at*1TheMagistrateJudgealsofoundthattheMWBEprogramwasconstitutionalunderstrictscrutiny,exceptwithrespecttotheinclusionofNative‐American‐ownedbusinesses.Id.TheMagistrateJudgefoundtherewasinsufficientevidencetoestablishaneedforremedialactionforbusinessesownedbyNativeAmericans,butfoundtherewassufficientevidencetojustifyremedialactionandinclusionofotherracialandethnicminoritiesandwomen‐ownedbusinesses.Id.

AftertheMagistrateJudgeissueditsMemorandum&Recommendation,Kossmanfiledobjections,whichthedistrictcourtsubsequentlyinitsorderadoptingMemorandum&Recommendation,decidedonMarch22,2016,affirmedandadoptedtheMemorandum&RecommendationofthemagistratejudgeandoverruledtheobjectionsbyKossman.Id.at*2.

DistrictcourtorderadoptingMemorandum&RecommendationofMagistrateJudge.

Dun&BradstreetunderlyingdataproperlywithheldandKossman’sproposedexpertproperlyexcluded.ThedistrictcourtfirstrejectedKossman’sobjectionthattheCityofHoustonimproperlywithheldtheDun&Bradstreetdatathatwasutilizedinthedisparitystudy.


Thisrulingwasinconnectionwiththedistrictcourt’saffirmingthedecisionoftheMagistrateJudgegrantingthemotionofHoustontoexcludethetestimonyofKossman’sproposedexpert.KossmanhadconcededthattheMagistrateJudgecorrectlydeterminedthatKossman’sproposedexpertarticulatednomethodandreliedonuntestedhypotheses.Id.at*2.Kossmanalsoacknowledgedthattheexpertwasunabletoproducedatatoconfrontthedisparitystudy.Id.

KossmanhadallegedthatHoustonwithheldtheunderlyingdatafromDun&Bradstreet.ThecourtfoundthatunderthecontractualagreementbetweenHoustonanditsconsultant,theconsultantforHoustonhadalicensingagreementwithDun&BradstreetthatprohibiteditfromprovidingtheDun&Bradstreetdatatoanythird‐party.Id.at*2.Inaddition,thecourtagreedwithHoustonthatKossmanwouldnotbeabletoofferadmissibleanalysisoftheDun&Bradstreetdata,evenifithadaccesstothedata.Id.AstheMagistrateJudgepointedout,thecourtfoundKossman’sexperthadnotraininginstatisticsoreconomics,andthuswouldnotbequalifiedtointerprettheDun&Bradstreetdataorchallengethedisparitystudy’smethods.Id.Therefore,thecourtaffirmedthegrantofHouston’smotiontoexcludeKossman’sexpert.

Dun&Bradstreetdataisreliableandacceptedbycourts;biddingdatarejectedasproblematic.ThecourtrejectedKossman’sargumentthatthedisparitystudywasbasedoninsufficient,unverifiedinformationfurnishedbyothers,andrejectedKossman’sargumentthatbiddingdataisasuperiormeasureofdeterminingavailability.Id.at*3.

Thedistrictcourtheldthatbecausethedisparitystudyconsultantdidnotcollectthedata,butinsteadutilizeddatathatDun&Bradstreethadcollected,theconsultantcouldnotguaranteetheinformationitreliedonincreatingthestudyandrecommendations.Id.at*3.Theconsultant’srolewastoanalyzethatdataandmakerecommendationsbasedonthatanalysis,andithadnoreasontodoubttheauthenticityoraccuracyoftheDun&Bradstreetdata,norhadKossmanpresentedanyevidencethatwouldcallthatdataintoquestion.Id.AsHoustonpointedout,Dun&Bradstreetdataisextremelyreliable,isfrequentlyusedindisparitystudies,andhasbeenconsistentlyacceptedbycourtsthroughoutthecountry.Id.

KossmanpresentednoevidenceindicatingthatbiddingdataisacomparablymoreaccurateindicatorofavailabilitythantheDun&Bradstreetdata,butratherKossmanreliedonpureargument.Id.at*3.ThecourtagreedwiththeMagistrateJudgethatbiddingdataisinherentlyproblematicbecauseitreflectsonlythosefirmsactuallysolicitedforbids.Id.Therefore,thecourtfoundthebiddingdatawouldfailtoidentifythosefirmsthatwerenotsolicitedforbidsduetodiscrimination.Id.

Theanecdotalevidenceisvalidandreliable.ThedistrictcourtrejectedKossman’sargumentthatthestudyimproperlyreliedonanecdotalevidence,inthattheevidencewasunreliableandunverified.Id.at*3.Thedistrictcourtheldthatanecdotalevidenceisavalidsupplementtothestatisticalstudy.Id.TheMWBEprogramissupportedbybothstatisticalandanecdotalevidence,andanecdotalevidenceprovidesavaluablenarrativeperspectivethatstatisticsalonecannotprovide.Id.

ThedistrictcourtalsofoundthatHoustonwasnotrequiredtoindependentlyverifytheanecdotes.Id.at*3.Kossman,thedistrictcourtconcluded,couldhavepresentedcontraryevidence,butitdidnot.Id.Thedistrictcourtcitedothercourtsforthepropositionthatthecombinationofanecdotalandstatisticalevidenceispotent,andthatanecdotalevidenceisnothingmorethanawitness’snarrativeofanincidenttoldfromthewitness’sperspectiveandincludingthewitness’sperceptions.Id.Also,thecourtheldthecitywasnotrequiredtopresent


corroboratingevidence,andtheplaintiffwasfreetopresentitsownwitnesstoeitherrefutetheincidentdescribedbythecity’switnessesortorelatetheirownperceptionsondiscriminationintheconstructionindustry.Id.

Thedatarelieduponbythestudywasnotstale.ThecourtrejectedKossman’sargumentthatthestudyreliedondatathatistoooldandnolongerrelevant.Id.at*4.Thecourtfoundthatthedatawasnotstaleandthatthestudyusedthemostcurrentavailabledataatthetimeofthestudy,includingCensusBureaudata(2006‐2008)andFederalReservedata(1993,1998and2003),andthestudyperformedregressionanalysesonthedata.Id.

Moreover,KossmanpresentednoevidencetosuggestthatHouston’sconsultantcouldhaveaccessedmorerecentdataorthattheconsultantwouldhavereacheddifferentconclusionswithmorerecentdata.Id.

TheHoustonMWBEprogramisnarrowlytailored.ThedistrictcourtagreedwiththeMagistrateJudgethatthestudyprovidedsubstantialevidencethatHoustonengagedinrace‐neutralalternatives,whichwereinsufficienttoeliminatedisparities,andthatdespiterace‐neutralalternativesinplaceinHouston,adversedisparitiesforMWBEswereconsistentlyobserved.Id.at*4.Therefore,thecourtfoundtherewasstrongevidencethataremedialprogramwasnecessarytoaddressdiscriminationagainstMWBEs.Id.Moreover,Houstonwasnotrequiredtoexhausteverypossiblerace‐neutralalternativebeforeinstitutingtheMWBEprogram.Id.

ThedistrictcourtalsofoundthattheMWBEprogramdidnotplaceanundueburdenonKossmanorsimilarlysituatedcompanies.Id.at*4.UndertheMWBEprogram,aprimecontractormaysubstituteasmallbusinessenterpriselikeKossmanforanMWBEonaraceandgender‐neutralbasisforuptofourpercentofthevalueofacontract.Id.KossmandidnotpresentevidencethatheeverbidonmorethanfourpercentofaHoustoncontract.Id.Inaddition,thecourtstatedthefacttheMWBEprogramplacedsomeburdenonKossmanisinsufficienttosupporttheconclusionthattheprogramisnotnearlytailored.Id.ThecourtconcurredwiththeMagistrateJudge’sobservationthattheproportionalsharingofopportunitiesis,atthecore,thepointofaremedialprogram.Id.ThedistrictcourtagreedwiththeMagistrateJudge’sconclusionthattheMWBEprogramisnearlytailored.

Native‐American‐ownedbusinesses.ThestudyfoundthatNative‐American‐ownedbusinesseswereutilizedatahigherrateinHouston’sconstructioncontractsthanwouldbeanticipatedbasedontheirrateofavailabilityintherelevantmarketarea.Id.at*4.ThecourtnotedthisfindingwouldtendtonegatethepresenceofdiscriminationagainstNativeAmericansinHouston’sconstructionindustry.Id.

ThisHoustondisparitystudyconsultantstatedthatthehighutilizationrateforNativeAmericansstemslargelyfromtheworkoftwoNative‐American‐ownedfirms.Id.TheHoustonconsultantsuggestedthatwithoutthesetwofirms,theutilizationrateforNativeAmericanswoulddeclinesignificantly,yieldingastatisticallysignificantdisparityratio.Id.

TheMagistrateJudge,accordingtothedistrictcourt,correctlyheldandfoundthattherewasinsufficientevidencetosupportincludingNativeAmericansintheMWBEprogram.Id.ThecourtapprovedandadoptedtheMagistrateJudgeexplanationthattheopinionofthedisparitystudyconsultantthatasignificantstatisticaldisparitywouldexistiftwoofthecontractingNative‐American‐ownedbusinessesweredisregarded,isnotevidenceoftheneedforremedialaction.Id.at*5.Thedistrictcourtfoundnoequal‐protectionsignificancetothefactthemajorityof


contractslettoNative‐American‐ownedbusinessesweretoonlytwofirms.Id.Therefore,theutilizationgoalforbusinessesownedbyNativeAmericansisnotsupportedbyastrongevidentiarybasis.Id.at*5.

ThedistrictcourtagreedwiththeMagistrateJudge’srecommendationthatthedistrictcourtgrantsummaryjudgmentinfavorofKossmanwithrespecttotheutilizationgoalforNative‐American‐ownedbusiness.Id.ThecourtfoundtherewaslimitedsignificancetotheHoustonconsultant’sopinionthatutilizationofNative‐American‐ownedbusinesseswoulddroptostatisticallysignificantlevelsiftwoNative‐American‐ownedbusinesseswereignored.Id.at*5.

ThecourtstatedthesituationpresentedbytheHoustondisparitystudyconsultantofa“hypotheticalnon‐existence”ofthesefirmsisnotevidenceandcannotsatisfystrictscrutiny.Id.at*5.Therefore,thedistrictcourtadoptedtheMagistrateJudge’srecommendationwithrespecttoexcludingtheutilizationgoalforNative‐American‐ownedbusinesses.Id.ThecourtnotedthatapreferenceforNative‐American‐ownedbusinessescouldbecomeconstitutionallyvalidinthefutureifthereweresufficientevidenceofdiscriminationagainstNative‐American‐ownedbusinessesinHouston’sconstructioncontracts.Id.at*5.

Conclusion.ThedistrictcourtheldthattheMemorandum&RecommendationoftheMagistrateJudgeisadoptedinfull;Houston’smotiontoexcludetheKossman’sproposedexpertwitnessisgranted;Kossman’smotionforsummaryjudgmentisgrantedwithrespecttoexcludingtheutilizationgoalforNative‐American‐ownedbusinessesanddeniedinallotherrespects;Houston’smotionforsummaryjudgmentisdeniedwithrespecttoincludingtheutilizationgoalforNative‐American‐ownedbusinessesandgrantedinallotherrespectsastotheMWBEprogramforotherminoritiesandwomen‐ownedfirms.Id.at*5.

MemorandumandRecommendationbyMagistrateJudge,datedFebruary17,2016,S.D.Texas,CivilActionNo.H‐14‐1203.

Kossman’sproposedexpertexcludedandnotadmissible.Kossmaninitsmotionforsummaryjudgmentsolelyreliedonthetestimonyofitsproposedexpert,andsubmittednootherevidenceinsupportofitsmotion.TheMagistrateJudge(hereinafter“MJ”)grantedHouston’smotiontoexcludetestimonyofKossman’sproposedexpert,whichthedistrictcourtadoptedandapproved,formultiplereasons.TheMJfoundthathisexperiencedoesnotincludedesigningorconductingstatisticalstudies,andhehasnoeducationortraininginstatisticsoreconomics.See,MJ,MemorandumandRecommendation(“M&R”)byMJ,datedFebruary17,2016,at31,S.D.Texas,CivilActionNo.H‐14‐1203.TheMJfoundhewasnotqualifiedtocollect,organizeorinterpretnumericaldata,hasnoexperienceextrapolatinggeneralconclusionsaboutasubsetofthepopulationbysamplingit,hasdemonstratednoknowledgeofsamplingmethodsorunderstandingofthemathematicalconceptsusedintheinterpretationofrawdata,andthus,isnotqualifiedtochallengethemethodsandcalculationsofthedisparitystudy.Id.

TheMJfoundthattheproposedexpertreportisonlyatheoreticalattackonthestudywithnobasisandobjectiveevidence,suchasdatarortestimonyofconstructionfirmsintherelativemarketareathatsupporthisassumptionsregardingavailableMWBEsorcomparativestudiesthatcontrolthefactorsaboutwhichhecomplained.Id.at31.TheMJstatedthattheproposedexpertisnotaneconomistandthusisnotqualifiedtochallengethedisparitystudyexplanationofitseconomicconsiderations.Id.at31.Theproposedexpertfailedtoprovideeconometricsupportfortheuseofbidderdata,whichhearguedwasthebettersourcefordeterminingavailability,citednopersonalexperiencefortheuseofbidderdata,andprovidednoproofthatwouldmoreaccuratelyreflectavailabilityofMWBEsabsentdiscriminatoryinfluence.Id.


Moreover,heacknowledgedthatnobidderdatahadbeencollectedfortheyearscoveredbythestudy.Id.

Thecourtfoundthattheproposedexpertarticulatednomethodatalltodoadisparitystudy,butmerelyprovideduntestedhypotheses.Id.at33.Theproposedexpert’scriticismsofthestudy,accordingtotheMJ,werenotfoundedincitedprofessionalsocialscienceoreconometricstandards.Id.at33.TheMJconcludesthattheproposedexpertisnotqualifiedtooffertheopinionscontainedinhisreport,andthathisreportisnotrelevant,notreliable,and,therefore,notadmissible.Id.at34.

Relevantgeographicmarketarea.TheMJfoundthemarketareaofthedisparityanalysiswasgeographicallyconfinedtoareacodesinwhichthemajorityofthepubliccontractingconstructionfirmswerelocated.Id.at3‐4,51.Therelevantmarketarea,theMJsaid,wasweightedbyindustry,andthereforethestudylimitedtherelevantmarketareabygeographyandindustrybasedonHouston’spastyears’recordsfrompriorconstructioncontracts.Id.at3‐4,51.

AvailabilityofMWBEs.TheMJconcludeddisparitystudiesthatcomparedtheavailabilityofMWBEsintherelevantmarketwiththeirutilizationinlocalpubliccontractinghavebeenwidelyrecognizedasstrongevidencetofindacompellinginterestbyagovernmentalentityformakingsurethatitspublicdollarsdonotfinanceracialdiscrimination.Id.at52‐53.Here,thestudydefinedthemarketareabyreviewingpastcontractinformation,anddefinedtherelevantmarketaccordingtotwocriticalfactors,geographyandindustry.Id.at3‐4,53.Thoseparameters,weightedbydollarsattributabletoeachindustry,wereusedtoidentifyforcomparisonMWBEsthatwereavailableandMWBEsthathadbeenutilizedinHouston’sconstructioncontractingoverthelastfiveandone‐halfyears.Id.at4‐6,53.Thestudyadjustedforownerlabormarketexperienceandeducationalattainmentinadditiontogeographiclocationandindustryaffiliation.Id.at6,53.

Kossmanproducednoevidencethattheavailabilityestimatewasinadequate.Id.at53.Plaintiff’scriticismsoftheavailabilityanalysis,includingforcapacity,thecourtstatedwasnotsupportedbyanycontraryevidenceorexpertopinion.Id.at53‐54.TheMJrejectedPlaintiff’sproposedexpert’ssuggestionthatanalysisofbidderdataisabetterwaytoidentifyMWBEs.Id.at54.TheMJnotedthatKossman’sproposedexpertpresentednocomparativeevidencebasedonbidderdata,andtheMJfoundthatbidderdatamayproduceavailabilitystatisticsthatareskewedbyactiveandpassivediscriminationinthemarket.Id.

Inadditiontobeingunderinclusiveduetodiscrimination,theMJsaidbidderdatamaybeoverinclusiveduetoinaccurateself‐evaluationbyfirmsofferingbidsdespitetheinabilitytofulfillthecontract.Id.at54.Itispossiblethatunqualifiedfirmswouldbeincludedintheavailabilityfiguresimplybecausetheybidonaparticularproject.Id.TheMJconcludedthatthelawdoesnotrequireanindividualizedapproachthatmeasureswhetherMWBEsarequalifiedonacontract‐by‐contractbasis.Id.at55.

Disparityanalysis.ThestudyindicatedsignificantstatisticaladversedisparitiesastobusinessesownedbyAfricanAmericansandAsians,whichtheMJfoundprovidedaprimafaciecaseofastrongbasisinevidencethatjustifiedtheProgram’sutilizationgoalsforbusinessesownedbyAfricanAmericans,Asian‐PacificAmericans,andsubcontinentAsianAmericans.Id.at55.


ThedisparityanalysisdidnotreflectsignificantstatisticaldisparitiesastobusinessesownedbyHispanicAmericans,NativeAmericansornon‐minoritywomen.Id.at55‐56.TheMJfound,however,theevidenceofsignificantstatisticaladversedisparityintheutilizationofHispanic‐ownedbusinessesintheunremediated,privatesectormetHouston’sprimafacieburdenofproducingastrongevidentiarybasisforthecontinuedinclusionofbusinessesownedbyHispanicAmericans.Id.at56.TheMJsaidthedifferencebetweentheprivatesectorandHouston’sconstructioncontractingwasespeciallynotablebecausetheutilizationofHispanic‐ownedbusinessesbyHoustonhasbenefittedfromHouston’sremedialprogramformanyyears.Id.Withoutaremedialprogram,theMJstatedtheevidencesuggests,andnoevidencecontradicts,afindingthatutilizationwouldfallbacktoprivatesectorlevels.Id.

WithregardtobusinessesownedbyNativeAmericans,thestudyindicatedtheywereutilizedtoahigherpercentagethantheiravailabilityintherelevantmarketarea.Id.at56.AlthoughtheconsultantforHoustonsuggestedthatasignificantstatisticaldisparitywouldexistiftwoofthecontractingNative‐American‐ownedbusinessesweredisregarded,theMJfoundthatopinionisnotevidenceoftheneedforremedialaction.Id.at56.TheMJconcludedtherewasno‐equalprotectionsignificancetothefactthemajorityofcontractslettoNative‐American‐ownedbusinessesweretoonlytwofirms,whichwasindicatedbyHouston’sconsultant.Id.

Theutilizationofwomen‐ownedbusinesses(WBEs)declinedbyfiftypercentwhentheynolongerbenefittedfromremedialgoals.Id.at57.BecauseWBEswereeliminatedduringtheperiodstudied,thesignificanceofstatisticaldisparity,accordingtotheMJ,isnotreflectedinthenumbersfortheperiodasawhole.Id.at57.TheMJsaidduringthetimeWBEswerenotpartoftheprogram,thestatisticaldisparitybetweenavailabilityandutilizationwassignificant.Id.TheprecipitousdeclineintheutilizationofWBEsafterWBEswereeliminatedandthesignificantstatisticaldisparitywhenWBEsdidnotbenefitfrompreferentialtreatment,theMJfound,providedastrongbasisinevidenceforthenecessityofremedialaction.Id.at57.Kossman,theMJpointedout,offerednoevidenceofagender‐neutralreasonforthedecline.Id.

TheMJrejectedPlaintiff’sargumentthatprimecontractorandsubcontractordatashouldnothavebeencombined.Id.at57.TheMJsaidthatprimecontractorandsubcontractordataisnotrequiredtobeevaluatedseparately,butthattheevidenceshouldcontainreliablesubcontractordatatoindicatediscriminationbyprimecontractors.Id.at58.Here,thestudyidentifiedtheMWBEsthatcontractedwithHoustonbyindustryandthoseavailableintherelevantmarketbyindustry.Id.at58.Thedata,accordingtotheMJ,wasspecificandcomplete,andseparatelyconsideringprimecontractorsandsubcontractorsisnotonlyunnecessarybutmaybemisleading.Id.Theanecdotalevidenceindicatedthatconstructionfirmshadserved,ondifferentcontracts,inbothroles.Id.

TheMJstatedthelawrequiresthatthetargeteddiscriminationbeidentifiedwithparticularity,notthateveryinstanceofexplicitorimplicitdiscriminationbeexposed.Id.at58.Thestudy,theMJfound,definedtherelevantmarketatasufficientlevelofparticularitytoproduceevidenceofpastdiscriminationinHouston’sawardingofconstructioncontractsandtoreachconstitutionallysoundresults.Id.

Anecdotalevidence.Kossmancriticizedtheanecdotalevidencewithwhichastudysupplementeditsstatisticalanalysisasnothavingbeenverifiedandinvestigated.Id.at58‐59.TheMJsaidthatKossmancouldhavepresenteditsownevidence,butdidnot.Id.at59.Kossmanpresentednocontrarybodyofanecdotalevidenceandpointedtonothingthatcalledintoquestionthespecificresultsofthemarketsurveysandfocusgroupsdoneinthestudy.Id.The


courtrejectedanyrequirementthattheanecdotalevidencebeverifiedandinvestigated.Id.at59.

Regressionanalyses.Kossmanchallengedtheregressionanalysesdoneinthestudyofbusinessformation,earningsandcapitalmarkets.Id.at59.Kossmancriticizedtheregressionanalysesforfailingtopreciselypointtowheretheidentifieddiscriminationwasoccurring.Id.TheMJfoundthatthefocusonidentifyingwherediscriminationisoccurringmissesthepoint,asregressionanalysesisnotintendedtopointtospecificsourcesofdiscrimination,buttoeliminatefactorsotherthandiscriminationthatmightexplaindisparities.Id.at59‐60.Discrimination,theMJsaid,isnotrevealedthroughevidenceofexplicitdiscrimination,butisrevealedthroughunexplainabledisparity.Id.at60.

TheMJnotedthatdatausedintheregressionanalyseswerethemostcurrentavailabledataatthetime,andforthemostpartdatadatedfromwithinacoupleofyearsorlessofthestartofthestudyperiod.Id.at60.Again,theMJstated,Kossmanproducednoevidencethatthedataonwhichtheregressionanalyseswerebasedwereinvalid.Id.

NarrowTailoringfactors.TheMJfoundthattheHoustonMWBEprogramsatisfiedthenarrowtailoringprongofastrictscrutinyanalysis.TheMJsaidthatthe2013MWBEprogramcontainedavarietyofrace‐neutralremedies,includingmanyeducationalopportunities,butthattheevidenceoftheirefficacyorlackthereofisfoundinthedisparityanalyses.Id.at60‐61.TheMJconcludedthatwhiletherace‐neutralremediesmayhaveapositiveeffect,theyhavenoteliminatedthediscrimination.Id.at61.TheMJfoundHouston’srace‐neutralprogrammingsufficienttosatisfytherequirementsofnarrowtailoring.Id.

Astothefactorsofflexibilityanddurationofthe2013Program,theMJalsostatedtheseaspectssatisfynarrowtailoring.Id.at61.The2013Programemploysgoalsasopposedtoquotas,setsgoalsonacontract‐by‐contractbasis,allowssubstitutionofsmallbusinessenterprisesforMWBEsforuptofourpercentofthecontract,includesaprocessforallowinggood‐faithwaivers,andbuildsindueprocessforsuspensionsofcontractorswhofailtomakegood‐faitheffortstomeetcontractgoalsorMWSBEsthatfailtomakegood‐faitheffortstomeetallparticipationrequirements.Id.at61.Houstoncommittedtoreviewthe2013Programatleasteveryfiveyears,whichtheMJfoundtobeareasonablybriefdurationperiod.Id.

TheMJconcludedthatthethirty‐fourpercentannualgoalisproportionaltotheavailabilityofMWBEshistoricallysufferingdiscrimination.Id.at61.Finally,theMJfoundthattheeffectofthe2013Programonthirdpartiesisnotsogreatastoimposeanunconstitutionalburdenonnon‐minorities.Id.at62.Theburdenonnon‐minoritySBEs,suchasKossman,islessenedbythefour‐percentsubstitutionprovision.Id.at62.TheMJnotedanotherdistrictcourt’sopinionthatthemerepossibilitythatinnocentpartieswillsharetheburdenofaremedialprogramisitselfinsufficienttowarranttheconclusionthattheprogramisnotnarrowlytailored.Id.at62.

Holding.TheMJheldthatHoustonestablishedaprimafaciecaseofcompellinginterestandnarrowtailoringforallaspectsoftheMWBEprogram,exceptgoalsforNative‐American‐ownedbusinesses.Id.at62.TheMJalsoheldthatPlaintifffailedtoproduceanyevidence,muchlessthegreaterweightofevidence,thatwouldcallintoquestiontheconstitutionalityofthe2013MWBEprogram.Id.at62.


15. Thomas v. City of Saint Paul, 526 F. Supp.2d 959 (D. Minn 2007), affirmed, 321 Fed. Appx. 541, 2009 WL 777932 (8th Cir. March 26, 2009) (unpublished opinion), cert. denied, 130 S.Ct. 408 (2009)

InThomasv.CityofSaintPaul,theplaintiffsareAfricanAmericanbusinessownerswhobroughtthislawsuitclaimingthattheCityofSaintPaul,Minnesotadiscriminatedagainsttheminawardingpublicly‐fundedcontracts.TheCitymovedforsummaryjudgment,whichtheUnitedStatesDistrictCourtgrantedandissuedanorderdismissingtheplaintiff’slawsuitinDecember2007.

ThebackgroundofthecaseinvolvestheadoptionbytheCityofSaintPaulofaVendorOutreachProgram(“VOP”)thatwasdesignedtoassistminorityandothersmallbusinessownersincompetingforCitycontracts.PlaintiffswereVOP‐certifiedminoritybusinessowners.PlaintiffscontendedthattheCityengagedinraciallydiscriminatoryillegalconductinawardingCitycontractsforpublicly‐fundedprojects.PlaintiffThomasclaimedthattheCitydeniedhimopportunitiestoworkonprojectsbecauseofhisracearguingthattheCityfailedtoinvitehimtobidoncertainprojects,theCityfailedtoawardhimcontractsandthefactindependentdevelopershadnotcontractedwithhiscompany.526F.Supp.2dat962.TheCitycontendedthatThomaswasprovidedopportunitiestobidfortheCity’swork.

PlaintiffBrianConoverownedatruckingfirm,andheclaimedthatnoneofhisbidsasasubcontractoron22differentprojectstovariousindependentdeveloperswereaccepted.526F.Supp.2dat962.Thecourtfoundthatafteryearsofdiscovery,plaintiffConoverofferednoadmissibleevidencetosupporthisclaim,hadnotidentifiedthesubcontractorswhosebidswereaccepted,anddidnotofferanycomparisonshowingtheacceptedbidandthebidhesubmitted.Id.PlaintiffConoveralsocomplainedthathereceivedbiddinginvitationsonlyafewdaysbeforeabidwasdue,whichdidnotallowhimadequatetimetoprepareacompetitivebid.Id.Thecourtfound,however,hefailedtoidentifyanyparticularprojectforwhichhehadonlyasingledayofbid,anddidnotidentifyanysimilarlysituatedpersonofanyracewhowasaffordedalongerperiodoftimeinwhichtosubmitabid.Id.at963.PlaintiffNewellclaimedhesubmittednumerousbidsontheCity’sprojectsallofwhichwererejected.Id.Thecourtfound,however,thatheprovidednospecificsaboutwhyhedidnotreceivethework.Id.

TheVOP. UndertheVOP,theCitysetsannualbenchmarksorlevelsofparticipationforthetargetedminoritiesgroups.Id.at963.TheVOPprohibitsquotasandimposesvarious“goodfaith”requirementsonprimecontractorswhobidforCityprojects.Id.at964.Inparticular,theVOPrequiresthatwhenaprimecontractorrejectsabidfromaVOP‐certifiedbusiness,thecontractormustgivetheCityitsbasisfortherejection,andevidencethattherejectionwasjustified.Id.TheVOPfurtherimposesobligationsontheCitywithrespecttovendorcontracts.Id.ThecourtfoundtheCitymustseekwherepossibleandlawfultoawardaportionofvendorcontractstoVOP‐certifiedbusinesses.Id.TheCitycontractmanagermustsolicitthesebidsbyphone,advertisementinalocalnewspaperorothermeans.Whereapplicable,thecontractmanagermayassistinterestedVOPparticipantsinobtainingbonds,linesofcreditorinsurancerequiredtoperformunderthecontract.Id.TheVOPordinanceprovidesthatwhenthecontractmanagerengagesinoneormorepossibleoutreachefforts,heorsheisincompliancewiththeordinance.Id.

AnalysisandOrderoftheCourt. ThedistrictcourtfoundthattheCityisentitledtosummaryjudgmentbecauseplaintiffslackstandingtobringtheseclaimsandthatnogenuineissueofmaterialfactremains.Id.at965.ThecourtheldthattheplaintiffshadnostandingtochallengetheVOPbecausetheyfailedtoshowtheyweredeprivedofanopportunitytocompete,orthat


theirinabilitytoobtainanycontractresultedfromanactofdiscrimination.Id.Thecourtfoundtheyfailedtoshowanyinstanceinwhichtheirracewasadeterminantinthedenialofanycontract.Id.at966.Asaresult,thecourtheldplaintiffsfailedtodemonstratetheCityengagedindiscriminatoryconductorpolicywhichpreventedplaintiffsfromcompeting.Id.at965‐966.

Thecourtheldthatintheabsenceofanyshowingofintentionaldiscriminationbasedonrace,themerefacttheCitydidnotawardanycontractstoplaintiffsdoesnotfurnishthatcausalnexusnecessarytoestablishstanding.Id.at966.ThecourtheldthelawdoesnotrequiretheCitytovoluntarilyadopt“aggressiverace‐basedaffirmativeactionprograms”inordertoawardspecificgroupspublicly‐fundedcontracts.Id.at966.ThecourtfoundthatplaintiffshadfailedtoshowaviolationoftheVOPordinance,oranyillegalpolicyoractiononthepartoftheCity.Id.

Thecourtstatedthattheplaintiffsmustidentifyadiscriminatorypolicyineffect.Id.at966.Thecourtnoted,forexample,evenassumingtheCityfailedtogiveplaintiffsmorethanoneday’snoticetoenterabid,suchafailureisnot,perse,illegal.Id.Thecourtfoundtheplaintiffsofferednoevidencethatanyoneelseofanyotherracereceivedanearliernotice,orthathewasgiventhisallegedlytardynoticeasaresultofhisrace.Id.

ThecourtconcludedthatevenifplaintiffsmaynothavebeenhiredasasubcontractortoworkforprimecontractorsreceivingCitycontracts,thesewereindependentdevelopersandtheCityisnotrequiredtodefendtheallegedbadactsofothers.Id.Therefore,thecourtheldplaintiffshadnostandingtochallengetheVOP.Id.at966.

Plaintiff’sclaims. Thecourtfoundthatevenassumingplaintiffspossessedstanding,theyfailedtoestablishfactswhichdemonstratedaneedforatrial,primarilybecauseeachtheoryofrecoveryisviableonlyiftheCity“intentionally”treatedplaintiffsunfavorablybecauseoftheirrace.Id.at967.Thecourtheldtoestablishaprimafacieviolationoftheequalprotectionclause,theremustbestateaction.Id.Plaintiffsmustofferfactsandevidencethatconstituteproofof“raciallydiscriminatoryintentorpurpose.”Id.at967.Here,thecourtfoundthatplaintifffailedtoallegeanysingleinstanceshowingtheCity“intentionally”rejectedVOPbidsbasedontheirrace.Id.

Thecourtalsofoundthatplaintiffsofferednoevidenceofaspecifictimewhenanyoneofthemsubmittedthelowestbidforacontractorasubcontract,orshowedanycasewheretheirbidswererejectedonthebasisofrace.Id.Thecourtheldtheallegedfailuretoplaceminoritycontractorsinapreferredposition,withoutmore,isinsufficienttosupportafindingthattheCityfailedtotreatthemequallybasedupontheirrace.Id.

TheCityrejectedtheplaintiff’sclaimsofdiscriminationbecausetheplaintiffsdidnotestablishbyevidencethattheCity“intentionally”rejectedtheirbidduetoraceorthattheCity“intentionally”discriminatedagainsttheseplaintiffs.Id.at967‐968.ThecourtheldthattheplaintiffsdidnotestablishasingleinstanceshowingtheCitydeprivedthemoftheirrights,andtheplaintiffsdidnotproduceevidenceofa“discriminatorymotive.”Id.at968.ThecourtconcludedthatplaintiffshadfailedtoshowthattheCity’sactionswere“raciallymotivated.”Id.

TheEighthCircuitCourtofAppealsaffirmedtherulingofthedistrictcourt.Thomasv.CityofSaintPaul,2009WL777932(8thCir.2009)(unpublishedopinion).TheEighthCircuitaffirmedbasedonthedecisionofthedistrictcourtandfindingnoreversibleerror.


16. Thompson Building Wrecking Co. v. Augusta, Georgia, No. 1:07CV019, 2007 WL 926153 (S.D. Ga. Mar. 14, 2007)(Slip. Op.)

ThiscaseconsideredthevalidityoftheCityofAugusta’slocalminorityDBEprogram.ThedistrictcourtenjoinedtheCityfromfavoringanycontractbidonthebasisofracialclassificationandbaseditsdecisionprincipallyupontheoutdatedandinsufficientdataprofferedbytheCityinsupportofitsprogram.2007WL926153at*9‐10.

TheCityofAugustaenactedalocalDBEprogrambasedupontheresultsofadisparitystudycompletedin1994.Thedisparitystudyexaminedthedisparityinsocioeconomicstatusamongraces,comparedblack‐ownedbusinessesinAugustawiththoseinotherregionsandthoseownedbyotherracialgroups,examined“Georgia’sracisthistory”incontractingandprocurement,andexaminedcertaindatarelatedtoAugusta’scontractingandprocurement.Id.at*1‐4.TheplaintiffcontractorsandsubcontractorschallengedtheconstitutionalityoftheDBEprogramandsoughttoextendatemporaryinjunctionenjoiningtheCity’simplementationofracialpreferencesinpublicbiddingandprocurement.

TheCitydefendedtheDBEprogramarguingthatitdidnotutilizeracialclassificationsbecauseitonlyrequiredvendorstomakea“goodfaitheffort”toensureDBEparticipation.Id.at*6.Thecourtrejectedthisargumentnotingthatbidderswererequiredtosubmita“ProposedDBEParticipation”formandthatbidscontainingDBEparticipationweretreatedmorefavorablythanthosebidswithoutDBEparticipation.Thecourtstated:“Becauseaperson’sbusinesscanqualifyforthefavorabletreatmentbasedonthatperson’srace,whileasimilarlysituatedpersonofanotherracewouldnotqualify,theprogramcontainsaracialclassification.”Id.

ThecourtnotedthattheDBEprogramharmedsubcontractorsintwoways:first,becauseprimecontractorswilldiscriminatebetweenDBEandnon‐DBEsubcontractorsandabidwithaDBEsubcontractorwouldbetreatedmorefavorably;andsecond,becausetheCitywouldfavorabidcontainingDBEparticipationoveranequalorevensuperiorbidcontainingnoDBEparticipation.Id.

ThecourtappliedthestrictscrutinystandardsetforthinCrosonandEngineeringContractorsAssociationtodeterminewhethertheCityhadacompellinginterestforitsprogramandwhethertheprogramwasnarrowlytailoredtothatend.ThecourtnotedthatpursuanttoCroson,theCitywouldhaveacompellinginterestinassuringthattaxdollarswouldnotperpetuateprivateprejudice.But,thecourtfound(citingtoCroson),thatastateorlocalgovernmentmustidentifythatdiscrimination,“publicorprivate,withsomespecificitybeforetheymayuserace‐consciousrelief.”ThecourtcitedtheEleventhCircuit’spositionthat“‘grossstatisticaldisparities’betweentheproportionofminoritieshiredbythepublicemployerandtheproportionofminoritieswillingandabletowork”mayjustifyanaffirmativeactionprogram.Id.at*7.Thecourtalsostatedthatanecdotalevidenceisrelevanttotheanalysis.

ThecourtdeterminedthatwhiletheCity’sdisparitystudyshowedsomestatisticaldisparitiesbuttressedbyanecdotalevidence,thestudysufferedfrommultipleissues.Id.at*7‐8.Specifically,thecourtfoundthatthoseportionsofthestudyexaminingdiscriminationoutsidetheareaofsubcontracting(e.g.,socioeconomicstatusofracialgroupsintheAugustaarea)wereirrelevantforpurposesofshowingacompellinginterest.Thecourtalsocitedthefailureofthestudytodifferentiatebetweendifferentminorityracesaswellastheimproperaggregationofrace‐andgender‐baseddiscriminationreferredtoasSimpson’sParadox.


ThecourtassumedforpurposesofitsanalysisthattheCitycouldshowacompellinginterestbutconcludedthattheprogramwasnotnarrowlytailoredandthuscouldnotsatisfystrictscrutiny.Thecourtfoundthatitneedlooknofurtherbeyondthefactofthethirteen‐yeardurationoftheprogramabsentfurtherinvestigation,andtheabsenceofasunsetorexpirationprovision,toconcludethattheDBEprogramwasnotnarrowlytailored.Id.at*8.Notingthataffirmativeactionispermittedonlysparingly,thecourtfound:“[i]twouldbeimpossibleforAugustatoarguethat,13yearsafterlaststudyingtheissue,racialdiscriminationissorampantintheAugustacontractingindustrythattheCitymustaffirmativelyacttoavoidbeingcomplicit.”Id.Thecourtheldinconclusion,thattheplaintiffswere“substantiallylikelytosucceedinprovingthat,whentheCityrequestsbidswithminorityparticipationandinfactfavorsbidswithsuch,theplaintiffswillsufferracialdiscriminationinviolationoftheEqualProtectionClause.”Id.at*9.

InasubsequentOrderdatedSeptember5,2007,thecourtdeniedtheCity’smotiontocontinueplaintiff’sMotionforSummaryJudgment,deniedtheCity’sRule12(b)(6)motiontodismiss,andstayedtheactionfor30dayspendingmediationbetweentheparties.Importantly,inthisOrder,thecourtreiteratedthatthefemale‐andlocally‐ownedbusinesscomponentsoftheprogram(challengedinplaintiff’sMotionforSummaryJudgment)wouldbesubjecttointermediatescrutinyandrationalbasisscrutiny,respectively.ThecourtalsoreiterateditsrejectionoftheCity’schallengetotheplaintiffs’standing.ThecourtnotedthatunderAdarand,preventingacontractorfromcompetingonanequalfootingsatisfiestheparticularizedinjuryprongofstanding.AndshowingthatthecontractorwillsometimeinthefuturebidonaCitycontract“thatoffersfinancialincentivestoaprimecontractorforhiringdisadvantagedsubcontractors”satisfiesthesecondrequirementthattheparticularizedinjurybeactualorimminent.Accordingly,thecourtconcludedthattheplaintiffshavestandingtopursuethisaction.

17. Hershell Gill Consulting Engineers, Inc. v. Miami‐Dade County, 333 F. Supp.2d 1305 (S.D. Fla. 2004)

ThedecisioninHershellGillConsultingEngineers,Inc.v.Miami‐DadeCounty,issignificanttothedisparitystudybecauseitappliedandfollowedtheEngineeringContractorsAssociationdecisioninthecontextofcontractingandprocurementforgoodsandservices(includingarchitectandengineerservices).Manyoftheothercasesfocusedonconstruction,andthusHershellGillisinstructiveastotheanalysisrelatingtoarchitectandengineeringservices.ThedecisioninHershellGillalsoinvolvedadistrictcourtintheEleventhCircuitimposingcompensatoryandpunitivedamagesuponindividualCountyCommissionersduetothedistrictcourt’sfindingoftheirwillfulfailuretoabrogateanunconstitutionalMBE/WBEProgram.Inaddition,thecaseisnoteworthybecausethedistrictcourtrefusedtofollowthe2003TenthCircuitCourtofAppealsdecisioninConcreteWorksofColorado,Inc.v.CityandCountyofDenver,321.3d950(10thCir.2003).Seediscussion,infra.

SixyearsafterthedecisioninEngineeringContractorsAssociation,twowhitemale‐ownedengineeringfirms(the“plaintiffs”)broughtsuitagainstEngineeringContractorsAssociation(the“County”),theformerCountyManager,andvariouscurrentCountyCommissioners(the“Commissioners”)intheirofficialandpersonalcapacities(collectivelythe“defendants”),seekingtoenjointhesame“participationgoals”inthesameMWBEprogramdeemedtoviolatetheFourteenthAmendmentintheearliercase.333F.Supp.1305,1310(S.D.Fla.2004).AftertheEleventhCircuit’sdecisioninEngineeringContractorsAssociationstrikingdowntheMWBEprogramsasappliedtoconstructioncontracts,theCountyenactedaCommunitySmallBusinessEnterprise(“CSBE”)programforconstructioncontracts,“butcontinuedtoapplyracial,ethnic,


andgendercriteriatoitspurchasesofgoodsandservicesinotherareas,includingitsprocurementofA&Eservices.”Id.at1311.

TheplaintiffsbroughtsuitchallengingtheBlackBusinessEnterprise(BBE)program,theHispanicBusinessEnterprise(HBE)program,andtheWomenBusinessEnterprise(WBE)program(collectively“MBE/WBE”).Id.TheMBE/WBEprogramsappliedtoA&Econtractsinexcessof$25,000.Id.at1312.TheCountyestablishedfive“contractmeasures”toreachtheparticipationgoals:(1)setasides,(2)subcontractorgoals,(3)projectgoals,(4)bidpreferences,and(5)selectionfactors.Id.Onceacontractwasidentifiedascoveredbyaparticipationgoal,areviewcommitteewoulddeterminewhetheracontractmeasureshouldbeutilized.Id.TheCountywasrequiredtoreviewtheefficacyoftheMBE/WBEprogramsannually,andreevaluatedthecontinuingviabilityoftheMBE/WBEprogramseveryfiveyears.Id.at1313.However,thedistrictcourtfound“theparticipationgoalsforthethreeMBE/WBEprogramschallenged…remainedunchangedsince1994.”Id.

In1998,counselforplaintiffscontactedtheCountyCommissionersrequestingthediscontinuationofcontractmeasuresonA&Econtracts.Id.at1314.UponrequestoftheCommissioners,thecountymanagerthenmadetworeports(anoriginalandafollow‐up)measuringparityintermsofdollarsawardedanddollarspaidintheareasofA&Eforblacks,Hispanics,andwomen,andconcludedbothtimesthatthe“Countyhasreachedparityforblack,Hispanic,andWomen‐ownedfirmsintheareasof[A&E]services.”Thefinalreportfurtherstated“Basedonalltheanalysesthathavebeenperformed,theCountydoesnothaveabasisfortheestablishmentofparticipationgoalswhichwouldallowstafftoapplycontractmeasures.”Id.at1315.ThedistrictcourtalsofoundthattheCommissionerswereinformedthat“therewasevenlessevidencetosupport[theMBE/WBE]programsasappliedtoarchitectsandengineersthentherewasincontractconstruction.”Id.Nonetheless,theCommissionersvotedtocontinuetheMBE/WBEparticipationgoalsattheirpreviouslevels.Id.

InMayof2000(18monthsafterthelawsuitwasfiled),theCountycommissionedDr.ManuelJ.Carvajal,aneconometrician,tostudyarchitectsandengineersinthecounty.Hisfinalreporthadfourparts:

(1)dataidentificationandcollectionofmethodologyfordisplayingtheresearchresults;(2)presentationanddiscussionoftablespertainingtoarchitecture,civilengineering,structuralengineering,andawardsofcontractsinthoseareas;(3)analysisofthestructureandempiricalestimatesofvarioussetsofregressionequations,thecalculationofcorrespondingindices,andanassessmentoftheirimportance;and(4)aconclusionthatthereisdiscriminationagainstwomenandHispanics—butnotagainstblacks—inthefieldsofarchitectureandengineering.

Id.ThedistrictcourtissuedapreliminaryinjunctionenjoiningtheuseoftheMBE/WBEprogramsforA&Econtracts,pendingtheUnitedStatesSupremeCourtdecisionsinGratzv.Bollinger,539U.S.244(2003)andGrutterv.Bollinger,539U.S.306(2003).Id.at1316.

ThecourtconsideredwhethertheMBE/WBEprogramswereviolativeofTitleVIIoftheCivilRightsAct,andwhethertheCountyandtheCountyCommissionerswereliableforcompensatoryandpunitivedamages.

ThedistrictcourtfoundthattheSupremeCourtdecisionsinGratzandGrutterdidnotaltertheconstitutionalanalysisassetforthinAdarandandCroson.Id.at1317.Accordingly,therace‐andethnicity‐basedclassificationsweresubjecttostrictscrutiny,meaningtheCountymustpresent“astrongbasisofevidence”indicatingtheMBE/WBEprogramwasnecessaryandthatitwas


narrowlytailoredtoitspurportedpurpose.Id.at1316.Thegender‐basedclassificationsweresubjecttointermediatescrutiny,requiringtheCountytoshowthe“gender‐basedclassificationservesanimportantgovernmentalobjective,andthatitissubstantiallyrelatedtotheachievementofthatobjective.”Id.at1317(internalcitationsomitted).Thecourtfoundthattheproponentofagender‐basedaffirmativeactionprogrammustpresent“sufficientprobativeevidence”ofdiscrimination.Id.(internalcitationsomitted).Thecourtfoundthatundertheintermediatescrutinyanalysis,theCountymust(1)demonstratepastdiscriminationagainstwomenbutnotnecessarilyatthehandsoftheCounty,and(2)thatthegender‐consciousaffirmativeactionprogramneednotbeusedonlyasa“lastresort.”Id.

TheCountypresentedbothstatisticalandanecdotalevidence.Id.at1318.ThestatisticalevidenceconsistedofDr.Carvajal’sreport,mostofwhichconsistedof“post‐enactment”evidence.Id.Dr.Carvajal’sanalysissoughttodiscovertheexistenceofracial,ethnicandgenderdisparitiesintheA&Eindustry,andthentodeterminewhetheranysuchdisparitiescouldbeattributedtodiscrimination.Id.Thestudyusedfourdatasets:threeweredesignedtoestablishthemarketplaceavailabilityoffirms(architecture,structuralengineering,andcivilengineering),andthefourthfocusedonawardsissuedbytheCounty.Id.Dr.Carvajalusedthephonebook,alistcompiledbyinfoUSA,andalistoffirmsregisteredfortechnicalcertificationwiththeCounty’sDepartmentofPublicWorkstocompilealistofthe“universe”offirmscompetinginthemarket.Id.Forthearchitecturalfirmsonly,healsousedalistoffirmsthathadbeenissuedanarchitectureprofessionallicense.Id.

Dr.Carvajalthenconductedaphonesurveyoftheidentifiedfirms.Basedonhisdata,Dr.CarvajalconcludedthatdisparitiesexistedbetweenthepercentageofA&Efirmsownedbyblacks,Hispanics,andwomen,andthepercentageofannualbusinesstheyreceived.Id.Dr.Carvajalconductedregressionanalyses“inordertodeterminetheeffectafirmowner’sgenderorracehadoncertaindependentvariables.”Id.Dr.Carvajalusedthefirm’sannualvolumeofbusinessasadependentvariableanddeterminedthedisparitiesweredueineachcasetothefirm’sgenderand/orethnicclassification.Id.at1320.Healsoperformedvariantstotheequationsincluding:(1)usingcertificationratherthansurveydatafortheexperience/capacityindicators,(2)withtheoutliersdeleted,(3)withpublicly‐ownedfirmsdeleted,(4)withthedummyvariablesreversed,and(5)usingonlycurrentlycertifiedfirms.”Id.Dr.Carvajal’sresultsremainedsubstantiallyunchanged.Id.

Basedonhisanalysisofthemarketplacedata,Dr.Carvajalconcludedthatthe“grossstatisticaldisparities”intheannualbusinessvolumeforHispanic‐andwomen‐ownedfirmscouldbeattributedtodiscrimination;he“didnotfindsufficientevidenceofdiscriminationagainstblacks.”Id.

ThecourtheldthatDr.Carvajal’sstudyconstitutedneithera“strongbasisinevidence”ofdiscriminationnecessarytojustifyrace‐andethnicity‐consciousmeasures,nordiditconstitute“sufficientprobativeevidence”necessarytojustifythegender‐consciousmeasures.Id.ThecourtmadeaninitialfindingthatnodisparityexistedtoindicateunderutilizationofMBE/WBEsintheawardofA&EcontractsbytheCounty,norwasthereunderutilizationofMBE/WBEsinthecontractstheywereawarded.Id.Thecourtfoundthatananalysisoftheawarddataindicated,“[i]fanything,thedataindicatesanoverutilizationofminority‐ownedfirmsbytheCountyinrelationtotheirnumbersinthemarketplace.”Id.

Withrespecttothemarketplacedata,theCountyconcededthattherewasinsufficientevidenceofdiscriminationagainstblackstosupporttheBBEprogram.Id.at1321.WithrespecttothemarketplacedataforHispanicsandwomen,thecourtfoundit“unreliableandinaccurate”for


threereasons:(1)thedatafailedtoproperlymeasurethegeographicmarket,(2)thedatafailedtoproperlymeasuretheproductmarket,and(3)themarketplacesurveywasunreliable.Id.at1321‐25.

ThecourtruledthatitwouldnotfollowtheTenthCircuitdecisionofConcreteWorksofColorado,Inc.v.CityandCountyofDenver,321F.3d950(10thCir.2003),astheburdenofproofenunciatedbytheTenthCircuitconflictswiththatoftheEleventhCircuit,andthe“TenthCircuit’sdecisionisflawedforthereasonsarticulatedbyJusticeScaliainhisdissentfromthedenialofcertiorari.”Id.at1325(internalcitationsomitted).

ThedefendantintervenorspresentedanecdotalevidencepertainingonlytodiscriminationagainstwomenintheCounty’sA&Eindustry.Id.TheanecdotalevidenceconsistedofthetestimonyofthreeA&Eprofessionalwomen,“nearlyall”ofwhichwasrelatedtodiscriminationintheawardofCountycontracts.Id.at1326.However,thedistrictcourtfoundthattheanecdotalevidencecontradictedDr.Carvajal’sstudyindicatingthatnodisparityexistedwithrespecttotheawardofCountyA&Econtracts.Id.

ThecourtquotedtheEleventhCircuitinEngineeringContractorsAssociationfortheproposition“thatonlyintherarecasewillanecdotalevidencesufficestandingalone.”Id.(internalcitationsomitted).Thecourtheldthat“[t]hisisnotoneofthoserarecases.”Thedistrictcourtconcludedthatthestatisticalevidencewas“unreliableandfail[ed]toestablishtheexistenceofdiscrimination,”andtheanecdotalevidencewasinsufficientasitdidnotevenreachthelevelofanecdotalevidenceinEngineeringContractorsAssociationwheretheCountyemployeesthemselvestestified.Id.

ThecourtmadeaninitialfindingthatanumberofminoritygroupsprovidedpreferentialtreatmentwereinfactmajoritiesintheCountyintermsofpopulation,votingcapacity,andrepresentationontheCountyCommission.Id.at1326‐1329.Forpurposesonlyofconductingthestrictscrutinyanalysis,thecourtthenassumedthatDr.Carvajal’sreportdemonstrateddiscriminationagainstHispanics(notetheCountyhadconcededithadinsufficientevidenceofdiscriminationagainstblacks)andsoughttodeterminewhethertheHBEprogramwasnarrowlytailoredtoremedyingthatdiscrimination.Id.at1330.However,thecourtfoundthatbecausethestudyfailedto“identifywhoisengaginginthediscrimination,whatformthediscriminationmighttake,atwhatstageintheprocessitistakingplace,orhowthediscriminationisaccomplished…itisvirtuallyimpossibletonarrowlytailoranyremedy,andtheHBEprogramfailsonthisfactalone.”Id.

ThecourtfoundthatevenaftertheCountyManagersinformedtheCommissionersthattheCountyhadreachedparityintheA&Eindustry,theCommissionersdeclinedtoenactaCSBEordinance,arace‐neutralmeasureutilizedintheconstructionindustryafterEngineeringContractorsAssociation.Id.Instead,theCommissionersvotedtocontinuetheHBEprogram.Id.ThecourtheldthattheCounty’sfailuretoevenexploreaprogramsimilartotheCSBEordinanceindicatedthattheHBEprogramwasnotnarrowlytailored.Id.at1331.

ThecourtalsofoundthattheCountyenactedabroadanti‐discriminationordinanceimposingharshpenaltiesforaviolationthereof.Id.However,“notasinglewitnessattrialknewofanyinstanceofacomplaintbeingbroughtunderthisordinanceconcerningtheA&Eindustry,”leadingthecourttoconcludethattheordinancewaseithernotbeingenforced,ornodiscriminationexisted.Id.Undereitherscenario,theHBEprogramcouldnotbenarrowlytailored.Id.


ThecourtfoundthewaiverprovisionsintheHBEprograminflexibleinpractice.Id.Additionally,thecourtfoundtheCountyhadfailedtocomplywiththeprovisionsintheHBEprogramrequiringadjustmentofparticipationgoalsbasedonannualstudies,becausetheCountyhadnotinfactconductedannualstudiesforseveralyears.Id.Thecourtfoundthiseven“moreproblematic”becausetheHBEprogramdidnothaveabuilt‐indurationallimit,andthusblatantlyviolatedSupremeCourtjurisprudencerequiringthatracialandethnicpreferences“mustbelimitedintime.”Id.at1332,citingGrutter,123S.Ct.at2346.Fortheforegoingreasons,thecourtconcludedtheHBEprogramwasnotnarrowlytailored.Id.at1332.

WithrespecttotheWBEprogram,thecourtfoundthat“thefailureoftheCountytoidentifywhoisdiscriminatingandwhereintheprocessthediscriminationistakingplaceindicates(thoughnotconclusively)thattheWBEprogramisnotsubstantiallyrelatedtoeliminatingthatdiscrimination.”Id.at1333.Thecourtfoundthattheexistenceoftheanti‐discriminationordinance,therefusaltoenactasmallbusinessenterpriseordinance,andtheinflexibilityinsettingtheparticipationgoalsrenderedtheWBEprogramunabletosatisfythesubstantialrelationshiptest.Id.

ThecourtheldthattheCountywasliableforanycompensatorydamages.Id.at1333‐34.ThecourtheldthattheCommissionershadabsoluteimmunityfortheirlegislativeactions;however,theywerenotentitledtoqualifiedimmunityfortheiractionsinvotingtoapplytherace‐,ethnicity‐,andgender‐consciousmeasuresoftheMBE/WBEprogramsiftheiractionsviolated“clearlyestablishedstatutoryorconstitutionalrightsofwhichareasonablepersonwouldhaveknown…Accordingly,thequestioniswhetherthestateofthelawatthetimetheCommissionersvotedtoapply[race‐,ethnicity‐,andgender‐consciousmeasures]gavethem‘fairwarning’thattheiractionswereunconstitutional.“Id.at1335‐36(internalcitationsomitted).

ThecourtheldthattheCommissionerswerenotentitledtoqualifiedimmunitybecausethey“hadbeforethematleastthreecasesthatgavethemfairwarningthattheirapplicationoftheMBE/WBEprograms…wereunconstitutional:Croson,Adarandand[EngineeringContractorsAssociation].”Id.at1137.ThecourtfoundthattheCommissionersvotedtoapplythecontractmeasuresaftertheSupremeCourtdecidedbothCrosonandAdarand.Id.Moreover,theEleventhCircuithadalreadystruckdowntheconstructionprovisionsofthesameMBE/WBEprograms.Id.Thus,thecaselawwas“clearlyestablished”andgavetheCommissionersfairwarningthattheMBE/WBEprogramswereunconstitutional.Id.

ThecourtalsofoundtheCommissionershadspecificinformationfromtheCountyManagerandotherinternalstudiesindicatingtheproblemswiththeMBE/WBEprogramsandindicatingthatparityhadbeenachieved.Id.at1338.Additionally,theCommissionersdidnotconducttheannualstudiesmandatedbytheMBE/WBEordinanceitself.Id.Foralltheforegoingreasons,thecourtheldtheCommissionersweresubjecttoindividualliabilityforanycompensatoryandpunitivedamages.

ThedistrictcourtenjoinedtheCounty,theCommissioners,andtheCountyManagerfromusing,orrequiringtheuseof,gender,racial,orethniccriteriaindeciding(1)whetheraresponsetoanRFPsubmittedforA&Eworkisresponsive,(2)whethersucharesponsewillbeconsidered,and(3)whetheracontractwillbeawardedtoaconsultantsubmittingsucharesponse.Thecourtawardedtheplaintiffs$100eachinnominaldamagesandreasonableattorneys’feesandcosts,forwhichitheldtheCountyandtheCommissionersjointlyandseverallyliable.


18. Florida A.G.C. Council, Inc. v. State of Florida, 303 F. Supp.2d 1307 (N.D. Fla. 2004)

ThiscaseisinstructivetothedisparitystudyastothemannerinwhichdistrictcourtswithintheEleventhCircuitareinterpretingandapplyingEngineeringContractorsAssociation.Itisalsoinstructiveintermsofthetypeoflegislationtobeconsideredbythelocalandstategovernmentsastowhatthecourtsconsidertobea“race‐conscious”programand/orlegislation,aswellastothesignificanceoftheimplementationofthelegislationtotheanalysis.

Theplaintiffs,A.G.C.Council,Inc.andtheSouthFloridaChapteroftheAssociatedGeneralContractorsbroughtthiscasechallengingtheconstitutionalityofcertainprovisionsofaFloridastatute(Section287.09451,etseq.).TheplaintiffscontendedthatthestatuteviolatedtheEqualProtectionClauseoftheFourteenthAmendmentbyinstitutingrace‐andgender‐conscious“preferences”inordertoincreasethenumericrepresentationof“MBEs”incertainindustries.

Accordingtothecourt,theFloridaStatuteenactedrace‐consciousandgender‐consciousremedialprogramstoensureminorityparticipationinstatecontractsforthepurchaseofcommoditiesandinconstructioncontracts.TheStatecreatedtheOfficeofSupplierDiversity(“OSD”)toassistMBEstobecomesuppliersofcommodities,servicesandconstructiontothestategovernment.TheOSDhadcertainresponsibilities,includingadoptingrulesmeanttoassesswhetherstateagencieshavemadegoodfaitheffortstosolicitbusinessfromMBEs,andtomonitorwhethercontractorshavemadegoodfaitheffortstocomplywiththeobjectiveofgreateroverallMBEparticipation.

Thestatuteenumeratedmeasuresthatcontractorsshouldundertake,suchasminority‐centeredrecruitmentinadvertisingasameansofadvancingthestatute’spurpose.ThestatuteprovidedthateachStateagencyis“encouraged”tospend21percentofthemoniesactuallyexpendedforconstructioncontracts,25percentofthemoniesactuallyexpendedforarchitecturalandengineeringcontracts,24percentofthemoniesactuallyexpendedforcommoditiesand50.5percentofthemoniesactuallyexpendedforcontractualservicesduringthefiscalyearforthepurposeofenteringintocontractswithcertifiedMBEs.ThestatutealsoprovidedthatstateagenciesareallowedtoallocatecertainpercentagesforblackAmericans,HispanicAmericansandforAmericanwomen,andthegoalsarebrokendownbyconstructioncontracts,architecturalandengineeringcontracts,commoditiesandcontractualservices.

TheStatetookthepositionthatthespendinggoalswere“precatory.”Thecourtfoundthattheplaintiffshadstandingtomaintaintheactionandtopursueprospectiverelief.Thecourtheldthatthestatutewasunconstitutionalbasedonthefindingthatthespendinggoalswerenotnarrowlytailoredtoachieveagovernmentalinterest.Thecourtdidnotspecificallyaddresswhetherthearticulatedreasonsforthegoalscontainedinthestatutehadsufficientevidence,butinsteadfoundthatthearticulatedreasonwould,“iftrue,”constituteacompellinggovernmentalinterestnecessitatingrace‐consciousremedies.Ratherthanexploretheevidence,thecourtfocusedonthenarrowlytailoredrequirementandheldthatitwasnotsatisfiedbytheState.

ThecourtfoundthattherewasnoevidenceintherecordthattheStatecontemplatedrace‐neutralmeanstoaccomplishtheobjectivessetforthinSection287.09451etseq.,suchas“‘simplificationofbiddingprocedures,relaxationofbondingrequirements,trainingorfinancialaidfordisadvantagedentrepreneursofallraces[which]wouldopenthepubliccontractingmarkettoallthosewhohavesufferedtheeffectsofpastdiscrimination.’”FloridaA.G.C.Council,


303F.Supp.2dat1315,quotingEng’gContractorsAss’n,122F.3dat928,quotingCroson,488U.S.at509‐10.

ThecourtnotedthatdefendantsdidnotseemtodisagreewiththereportissuedbytheStateofFloridaSenatethatconcludedtherewaslittleevidencetosupportthespendinggoalsoutlinedinthestatute.Rather,theStateofFloridaarguedthatthestatuteis“permissive.”Thecourt,however,heldthat“thereisnodistinctionbetweenastatutethatisprecatoryversusonethatiscompulsorywhenthechallengedstatute‘inducesanemployertohirewithaneyetowardmeeting…[a]numericaltarget.’FloridaA.G.C.Council,303F.Supp.2dat1316.

ThecourtfoundthattheStateappliespressuretoStateagenciestomeetthelegislativeobjectivesofthestatuteextendingbeyondsimpleoutreachefforts.TheStateagencies,accordingtothecourt,wererequiredtocoordinatetheirMBEprocurementactivitieswiththeOSD,whichincludesadoptingaMBEutilizationplan.IftheStateagencydeviatedfromtheutilizationplanintwoconsecutiveandthreeoutoffivetotalfiscalyears,thentheOSDcouldreviewanyandallsolicitationsandcontractawardsoftheagencyasdeemednecessaryuntilsuchtimeastheagencymetitsutilizationplan.Thecourtheldthatbasedonthesefactors,althoughallegedtobe“permissive,”thestatutetextuallywasnot.

Therefore,thecourtfoundthatthestatutewasnotnarrowlytailoredtoserveacompellinggovernmentalinterest,andconsequentlyviolatedtheEqualProtectionClauseoftheFourteenthAmendment.

19. The Builders Ass’n of Greater Chicago v. The City of Chicago, 298 F. Supp.2d 725 (N.D. Ill. 2003)

Thiscaseisinstructivebecauseofthecourt’sfocusandanalysisonwhethertheCityofChicago’sMBE/WBEprogramwasnarrowlytailored.Thebasisofthecourt’sholdingthattheprogramwasnotnarrowlytailoredisinstructiveforanyprogramconsideredbecauseofthereasonsprovidedastowhytheprogramdidnotpassmuster.

Theplaintiff,theBuildersAssociationofGreaterChicago,broughtthissuitchallengingtheconstitutionalityoftheCityofChicago’sconstructionMinority‐andWomen‐OwnedBusiness(“MWBE”)Program.ThecourtheldthattheCityofChicago’sMWBEprogramwasunconstitutionalbecauseitdidnotsatisfytherequirementthatitbenarrowlytailoredtoachieveacompellinggovernmentalinterest.Thecourtheldthatitwasnotnarrowlytailoredforseveralreasons,includingbecausetherewasno“meaningfulindividualizedreview”ofMBE/WBEs;ithadnoterminationdatenordidithaveanymeansfordeterminingatermination;the“graduation”revenueamountforfirmstograduateoutoftheprogramwasveryhigh,$27,500,000,andinfactveryfewfirmsgraduated;therewasnonetworththreshold;and,waiverswererarelyornevergrantedonconstructioncontracts.ThecourtfoundthattheCityprogramwasa“rigidnumericalquota,”notrelatedtothenumberofavailable,willingandablefirms.Formulisticpercentages,thecourtheld,couldnotsurvivethestrictscrutiny.

Thecourtheldthatthegoalsplandidnotaddressissuesraisedastodiscriminationregardingmarketaccessandcredit.Thecourtfoundthatagoalsprogramdoesnotdirectlyimpactprimecontractor’sselectionofsubcontractorsonnon‐goalsprivateprojects.Thecourtfoundthataset‐asideorgoalsprogramdoesnotdirectlyimpactdifficultiesinaccessingcredit,anddoesnotaddressdiscriminatoryloandenialsorhigherinterestrates.ThecourtfoundtheCityhasnotsoughttoattackdiscriminationbyprimesdirectly,“butitcould.”298F.2d725.“Tomonitorpossiblediscriminatoryconductitcouldmaintainitscertificationlistandrequirethose


contractingwiththeCitytoconsiderunsolicitedbids,tomaintainbiddingrecords,andtojustifyrejectionofanycertifiedfirmsubmittingthelowestbid.ItcouldalsorequirefirmsseekingCityworktopostprivatejobsaboveacertainminimumonawebsiteorotherwiseprovidepublicnotice…”Id.

Thecourtconcludedthatotherrace‐neutralmeanswereavailabletoimpactcredit,highinterestrates,andotherpotentialmarketplacediscrimination.Thecourtpointedtorace‐neutralmeansincludinglinkeddeposits,withtheCitybankingatinstitutionsmakingloanstostartupandsmallerfirms.Otherrace‐neutralprogramsreferencedincludedquickpayandcontractdownsizing;restrictingself‐performancebyprimecontractors;adirectloanprogram;waiverofbondsoncontractsunder$100,000;abankparticipationloanprogram;a2percentlocalbusinesspreference;outreachprogramsandtechnicalassistanceandworkshops;andseminarspresentedtonewconstructionfirms.

Thecourtheldthatraceandethnicitydomatter,butthatracialandethnicclassificationsarehighlysuspect,canbeusedonlyasalastresort,andcannotbemadebysomemechanicalformulation.Therefore,thecourtconcludedtheCity’sMWBEProgramcouldnotstandinitspresentguise.Thecourtheldthatthepresentprogramwasnotnarrowlytailoredtoremedypastdiscriminationandthediscriminationdemonstratedtonowexist.

Thecourtenteredaninjunction,butdelayedtheeffectivedateforsixmonthsfromthedateofitsOrder,December29,2003.ThecourtheldthattheCityhada“compellinginterestinnothavingitsconstructionprojectsslipbacktonearmonopolydominationbywhitemalefirms.”Thecourtruledabriefcontinuationoftheprogramforsixmonthswasappropriate“astheCityrethinksthemanytoolsofredressithasavailable.”Subsequently,thecourtdeclaredunconstitutionaltheCity’sMWBEProgramwithrespecttoconstructioncontractsandpermanentlyenjoinedtheCityfromenforcingtheProgram.2004WL757697(N.D.Ill2004).

20. Kornhass Construction, Inc. v. State of Oklahoma, Department of Central Services, 140 F.Supp.2d 1232 (W.D. OK. 2001)

Plaintiffs,non‐minoritycontractors,broughtthisactionagainsttheStateofOklahomachallengingminoritybidpreferenceprovisionsintheOklahomaMinorityBusinessEnterpriseAssistanceAct(“MBEAct”).TheOklahomaMBEActestablishedabidpreferenceprogrambywhichcertifiedminoritybusinessenterprisesaregivenfavorabletreatmentoncompetitivebidssubmittedtothestate.140F.Supp.2dat1235–36.UndertheMBEAct,thebidsofnon‐minoritycontractorswereraisedby5percent,placingthematacompetitivedisadvantageaccordingtothedistrictcourt.Id.at1235–1236.

Thenamedplaintiffsbidonstatecontractsinwhichtheirbidswereincreasedby5percentastheywerenon‐minoritybusinessenterprises.Althoughtheplaintiffsactuallysubmittedthelowestdollarbids,oncethe5percentfactorwasapplied,minoritybiddersbecamethesuccessfulbiddersoncertaincontracts.140F.Supp.at1237.

IndeterminingtheconstitutionalityorvalidityoftheOklahomaMBEAct,thedistrictcourtwasguidedinitsanalysisbytheTenthCircuitCourtofAppealsdecisioninAdarandConstructors,Inc.v.Slater,288F.3d1147(10thCir.2000).ThedistrictcourtpointedoutthatinAdarandVII,theTenthCircuitfoundcompellingevidenceofbarrierstobothminoritybusinessformationandexistingminoritybusinesses.Id.at1238.Insum,thedistrictcourtnotedthattheTenthCircuitconcludedthattheGovernmenthadmetitsburdenofpresentingastrongbasisinevidence


sufficienttosupportitsarticulated,constitutionallyvalid,compellinginterest.140F.Supp.2dat1239,citingAdarandVII,228F.3d1147,1174.

Compellingstateinterest. Thedistrictcourt,followingAdarandVII,appliedthestrictscrutinyanalysis,arisingoutoftheFourteenthAmendment’sEqualProtectionClause,inwhicharace‐basedaffirmativeactionprogramwithstandsstrictscrutinyonlyifitisnarrowlytailoredtoserveacompellinggovernmentalinterest.Id.at1239.ThedistrictcourtpointedoutthatitisclearfromSupremeCourtprecedent,theremaybeacompellinginterestsufficienttojustifyrace‐consciousaffirmativeactionmeasures.Id.TheFourteenthAmendmentpermitsrace‐consciousprogramsthatseekbothtoeradicatediscriminationbythegovernmentalentityitselfandtopreventthegovernmentalentityfrombecominga“passiveparticipant”inasystemofracialexclusionpracticedbyprivatebusinesses.Id.at1240.Therefore,thedistrictcourtconcludedthatboththefederalandstategovernmentshaveacompellinginterestassuringthatpublicdollarsdonotservetofinancetheevilofprivateprejudice.Id.

Thedistrictcourtstatedthata“merestatisticaldisparityintheproportionofcontractsawardedtoaparticulargroup,standingalone,doesnotdemonstratetheevilofprivateorpublicracialprejudice.”Id.Rather,thecourtheldthatthe“benchmarkforjudgingtheadequacyofastate’sfactualpredicateforaffirmativeactionlegislationiswhetherthereexistsastrongbasisintheevidenceofthestate’sconclusionthatremedialactionwasnecessary.”Id.ThedistrictcourtfoundthattheSupremeCourtmadeitclearthatthestatebearstheburdenofdemonstratingastrongbasisinevidenceforitsconclusionthatremedialactionwasnecessarybyprovingeitherthatthestateitselfdiscriminatedinthepastorwas“apassiveparticipant”inprivateindustry’sdiscriminatorypractices.Id.at1240,citingtoAssociatedGeneralContractorsofOhio,Inc.v.Drabik,214F.3d730,735(6thCir.2000)andCityofRichmondv.J.A.CrosonCompany,488U.S.469at486‐492(1989).

Withthisbackground,theStateofOklahomastatedthatitscompellingstateinterest“istopromotetheeconomyoftheStateandtoensurethatminoritybusinessenterprisesaregivenanopportunitytocompeteforstatecontracts.”Id.at1240.Thus,thedistrictcourtfoundtheStateadmittedthattheMBEAct’sbidpreference“isnotbasedonpastdiscrimination,”rather,itisbasedonadesireto“encourag[e]economicdevelopmentofminoritybusinessenterpriseswhichinturnwillbenefittheStateofOklahomaasawhole.”Id.InlightofAdarandVII,andprevailingSupremeCourtcaselaw,thedistrictcourtfoundthatthisarticulatedinterestisnot“compelling”intheabsenceofevidenceofpastorpresentracialdiscrimination.Id.

ThedistrictcourtconsideredtestimonypresentedbyIntervenorswhoparticipatedinthecaseforthedefendantsandassertedthattheOklahomalegislatureconductedaninterimstudypriortoadoptionoftheMBEAct,duringwhichtestimonyandevidencewerepresentedtomembersoftheOklahomaLegislativeBlackCaucusandotherparticipatinglegislators.Thestudywasconductedmorethan14yearspriortothecaseandtheIntervenorsdidnotactuallyofferanyoftheevidencetothecourtinthiscase.TheIntervenorssubmittedanaffidavitfromthewitnesswhoservesastheTitleVICoordinatorfortheOklahomaDepartmentofTransportation.Thecourtfoundthattheaffidavitfromthewitnessaverredingeneraltermsthatminoritybusinesseswerediscriminatedagainstintheawardingofstatecontracts.ThedistrictcourtfoundthattheIntervenorshavenotproduced—orindeedevendescribed—theevidenceofdiscrimination.Id.at1241.Thedistrictcourtfoundthatitcannotbediscernedfromthedocumentswhichminoritybusinesseswerethevictimsofdiscrimination,orwhichracialorethnicgroupsweretargetedbysuchallegeddiscrimination.Id.


ThecourtalsofoundthattheIntervenors’evidencedidnotindicatewhatdiscriminatoryactsorpracticesallegedlyoccurred,orwhentheyoccurred.Id.ThedistrictcourtstatedthattheIntervenorsdidnotidentify“asinglequalified,minority‐ownedbidderwhowasexcludedfromastatecontract.”Id.Thedistrictcourt,thus,heldthatbroadallegationsof“systematic”exclusionofminoritybusinesseswerenotsufficienttoconstituteacompellinggovernmentalinterestinremedyingpastorcurrentdiscrimination.Id.at1242.Thedistrictcourtstatedthatthiswasparticularlytrueinlightofthe“State’sadmissionherethattheState’sgovernmentalinterestwasnotinremedyingpastdiscriminationinthestatecompetitivebiddingprocess,butin‘encouragingeconomicdevelopmentofminoritybusinessenterpriseswhichinturnwillbenefittheStateofOklahomaasawhole.’”Id.at1242.

ThecourtfoundthattheStatedefendantsfailedtoproduceanyadmissibleevidenceofasingle,specificdiscriminatoryact,oranysubstantialevidenceshowingapatternofdeliberateexclusionfromstatecontractsofminority‐ownedbusinesses.Id.at1241‐1242,footnote11.

ThedistrictcourtalsonotedthattheSixthCircuitCourtofAppealsinDrabikrejectedOhio’sstatisticalevidenceofunderutilizationofminoritycontractorsbecausetheevidencedidnotreporttheactualuseofminorityfirms;rather,theyreportedonlytheuseofthoseminorityfirmsthathadgonetothetroubleofbeingcertifiedandlistedbythestate.Id.at1242,footnote12.Thedistrictcourtstatedthat,asinDrabik,theevidencepresentedinsupportoftheOklahomaMBEActfailedtoaccountforthepossibilitythatsomeminoritycontractorsmightnotregisterwiththestate,andthestatisticsdidnotaccountforanycontractsawardedtobusinesseswithminorityownershipoflessthan51percent,orforcontractsperformedinlargepartbyminority‐ownedsubcontractorswheretheprimecontractorwasnotacertifiedminority‐ownedbusiness.Id.

ThedistrictcourtfoundthattheMBEAct’sminoritybiddingpreferencewasnotpredicateduponafindingofdiscriminationinanyparticularindustryorregionofthestate,ordiscriminationagainstanyparticularracialorethnicgroup.Thecourtstatedthattherewasnoevidenceofferedofactualdiscrimination,pastorpresent,againstthespecificracialandethnicgroupstowhomthepreferencewasextended,otherthananattempttoshowahistoryofdiscriminationagainstAfricanAmericans.Id.at1242.

Narrowtailoring. ThedistrictcourtfoundthateveniftheState’sgoalscouldnotbeconsidered“compelling,”theStatedidnotshowthattheMBEActwasnarrowlytailoredtoservethosegoals.ThecourtpointedoutthattheTenthCircuitinAdarandVIIidentifiedsixfactorsthecourtmustconsiderindeterminingwhethertheMBEAct’sminoritypreferenceprovisionsweresufficientlynarrowlytailoredtosatisfyequalprotection:(1)theavailabilityofrace‐neutralalternativeremedies;(2)limitsonthedurationofthechallengedpreferenceprovisions;(3)flexibilityofthepreferenceprovisions;(4)numericalproportionality;(5)theburdenonthirdparties;and(6)over‐orunder‐inclusiveness.Id.at1242‐1243.

First,intermsofrace‐neutralalternativeremedies,thecourtfoundthattheevidenceofferedshowed,atmost,thatnominaleffortsweremadetoassistminority‐ownedbusinessespriortotheadoptionoftheMBEAct’sracialpreferenceprogram.Id.at1243.ThecourtconsideredevidenceregardingtheMinorityAssistanceProgram,butfoundthattobeprimarilyinformationalservicesonly,andwasnotdesignedtoactuallyassistminoritiesorotherdisadvantagedcontractorstoobtaincontractswiththeStateofOklahoma.Id.at1243.Incontrasttothis“informational”program,thecourtnotedtheTenthCircuitinAdarandVIIfavorablyconsideredthefederalgovernment’suseofraciallyneutralalternativesaimedatdisadvantagedbusinesses,includingassistancewithobtainingprojectbonds,assistancewith


securingcapitalfinancing,technicalassistance,andotherprogramsdesignedtoassiststart‐upbusinesses.Id.at1243citingAdarandVII,228F.3dat1178‐1179.

ThedistrictcourtfoundthatitdoesnotappearfromtheevidencethatOklahoma’sMinorityAssistanceProgramprovidedthetypeofrace‐neutralreliefrequiredbytheTenthCircuitinAdarandVII,intheSupremeCourtintheCrosondecision,nordoesitappearthattheProgramwasraciallyneutral.Id.at1243.ThecourtfoundthattheStateofOklahomadidnotshowanymeaningfulformofassistancetonewordisadvantagedbusinessespriortotheadoptionoftheMBEAct,andthus,thecourtfoundthatthestatedefendantshadnotshownthatOklahomaconsideredrace‐neutralalternativemeanstoachievethestate’sgoalpriortoadoptionoftheminoritybidpreferenceprovisions.Id.at1243.

Inafootnote,thedistrictcourtpointedoutthattheTenthCircuithasrecognizedraciallyneutralprogramsdesignedtoassistallneworfinanciallydisadvantagedbusinessesinobtaininggovernmentcontractstendtobenefitminority‐ownedbusinesses,andcanhelpalleviatetheeffectsofpastandpresent‐daydiscrimination.Id.at1243,footnote15citingAdarandVII.

Thecourtconsideredtheevidenceofferedofpost‐enactmenteffortsbytheStatetoincreaseminorityparticipationinStatecontracting.Thecourtfoundthatmostoftheseeffortsweredirectedtowardencouragingtheparticipationofcertifiedminoritybusinessenterprises,“andarethusnotraciallyneutral.ThisevidencefailstodemonstratethattheStateemployedrace‐neutralalternativemeasurespriortoorafteradoptingtheMinorityBusinessEnterpriseAssistanceAct.”Id.at1244.Someoftheeffortsthecourtfoundweredirectedtowardencouragingtheparticipationofcertifiedminoritybusinessenterprisesandthusnotraciallyneutral,includedmailingvendorregistrationformstominorityvendors,telephoningandmailingletterstominorityvendors,providingassistancetovendorsincompletingregistrationforms,assuringthevendorsreceivedbidinformation,preparingaminoritybusinessdirectoryanddistributingittoallstateagencies,periodicallymailingconstructionprojectinformationtominorityvendors,andprovidingcommodityinformationtominorityvendorsuponrequest.Id.at1244,footnote16.

Intermsofdurationallimitsandflexibility,thecourtfoundthatthe“goal”of10percentofthestate’scontractsbeingawardedtocertifiedminoritybusinessenterpriseshadneverbeenreached,orevenapproached,duringthethirteenyearssincetheMBEActwasimplemented.Id.at1244.Thecourtfoundthedefendantsofferednoevidencethatthebidpreferencewaslikelytoendatanytimeintheforeseeablefuture,orthatitisotherwiselimitedinitsduration.Id.UnlikethefederalprogramsatissueinAdarandVII,thecourtstatedtheOklahomaMBEActhasnoinherenttimelimit,andnoprovisionfordisadvantagedminority‐ownedbusinessesto“graduate”frompreferenceeligibility.Id.ThecourtfoundtheMBEActwasnotlimitedtothoseminority‐ownedbusinesseswhichareshowntobeeconomicallydisadvantaged.Id.

ThecourtstatedthattheMBEActmadenoattempttoaddressorremedyanyactual,demonstratedpastorpresentracialdiscrimination,andtheMBEAct’sdurationwasnottiedinanywaytotheeradicationofsuchdiscrimination.Id.Instead,thecourtfoundtheMBEActrestsonthe“questionableassumptionthat10percentofallstatecontractdollarsshouldbeawardedtocertifiedminority‐ownedandoperatedbusinesses,withoutanyshowingthatthisassumptionisreasonable.”Id.at1244.

BythetermsoftheMBEAct,theminoritypreferenceprovisionswouldcontinueinplaceforfiveyearsafterthegoalof10percentminorityparticipationwasreached,andthusthedistrictcourt


concludedthattheMBEAct’sminoritypreferenceprovisionslackedreasonabledurationallimits.Id.at1245.

Withregardtothefactorof“numericalproportionality”betweentheMBEAct’saspirationalgoalandthenumberofexistingavailableminority‐ownedbusinesses,thecourtfoundtheMBEAct’s10percentgoalwasnotbasedupondemonstrableevidenceoftheavailabilityofminoritycontractorswhowereeitherqualifiedtobidorwhowereready,willingandabletobecomequalifiedtobidonstatecontracts.Id.at1246–1247.ThecourtpointedoutthattheMBEActmadenoattempttodistinguishbetweenthefourminorityracialgroups,sothatcontractsawardedtomembersofallofthepreferredraceswereaggregatedindeterminingwhetherthe10percentaspirationalgoalhadbeenreached.Id.at1246.Inaddition,thecourtfoundtheMBEActaggregatedallstatecontractsforgoodsandservices,sothatminorityparticipationwasdeterminedbythetotalnumberofdollarsspentonstatecontracts.Id.

ThecourtstatedthatinAdarandVII,theTenthCircuitrejectedthecontentionthattheaspirationalgoalswererequiredtocorrespondtoanactualfindingastothenumberofexistingminority‐ownedbusinesses.Id.at1246.ThecourtnotedthatthegovernmentsubmittedevidenceinAdarandVII,thattheeffectsofpastdiscriminationhadexcludedminoritiesfromenteringtheconstructionindustry,andthatthenumberofavailableminoritysubcontractorsreflectedthatdiscrimination.Id.Inlightofthisevidence,thedistrictcourtsaidtheTenthCircuitheldthattheexistingpercentageofminority‐ownedbusinessesis“notnecessarilyanabsolutecap”onthepercentagethataremedialprogrammightlegitimatelyseektoachieve.Id.at1246,citingAdarandVII,228F.3dat1181.

UnlikeAdarandVII,thecourtfoundthattheOklahomaStatedefendantsdidnotoffer“substantialevidence”thattheminoritiesgivenpreferentialtreatmentundertheMBEActwereprevented,throughpastdiscrimination,fromenteringanyparticularindustry,orthatthenumberofavailableminoritysubcontractorsinthatindustryreflectsthatdiscrimination.140F.Supp.2dat1246.ThecourtconcludedthattheOklahomaStatedefendantsdidnotofferanyevidenceofthenumberofminority‐ownedbusinessesdoingbusinessinanyofthemanyindustriescoveredbytheMBEAct.Id.at1246–1247.

Withregardtotheimpactonthirdpartiesfactor,thecourtpointedouttheTenthCircuitinAdarandVIIstatedthemerepossibilitythatinnocentpartieswillsharetheburdenofaremedialprogramisitselfinsufficienttowarranttheconclusionthattheprogramisnotnarrowlytailored.Id.at1247.ThedistrictcourtfoundtheMBEAct’sbidpreferenceprovisionspreventednon‐minoritybusinessesfromcompetingonanequalbasiswithcertifiedminoritybusinessenterprises,andthatinsomeinstancesplaintiffshadbeenrequiredtolowertheirintendedbidsbecausetheyknewminorityfirmswerebidding.Id.Thecourtpointedoutthatthe5percentpreferenceisapplicabletoallcontractsawardedunderthestate’sCentralPurchasingActwithnotimelimitation.Id.

Intermsofthe“under‐andover‐inclusiveness”factor,thecourtobservedthattheMBEActextendeditsbiddingpreferencetoseveralracialminoritygroupswithoutregardtowhethereachofthosegroupshadsufferedfromtheeffectsofpastorpresentracialdiscrimination.Id.at1247.ThedistrictcourtreiteratedtheOklahomaStatedefendantsdidnotofferanyevidenceatallthattheminorityracialgroupsidentifiedintheActhadactuallysufferedfromdiscrimination.Id.

Second,thedistrictcourtfoundtheMBEAct’sbiddingpreferenceextendstoallcontractsforgoodsandservicesawardedundertheState’sCentralPurchasingAct,withoutregardto


whethermembersofthepreferredminoritygroupshadbeenthevictimsofpastorpresentdiscriminationwithinthatparticularindustryortrade.Id.

Third,thedistrictcourtnotedthepreferenceextendstoallbusinessescertifiedasminority‐ownedandcontrolled,withoutregardtowhetheraparticularbusinessiseconomicallyorsociallydisadvantaged,orhassufferedfromtheeffectsofpastorpresentdiscrimination.Id.Thecourtthusfoundthatthefactorofover‐inclusivenessweighsagainstafindingthattheMBEActwasnarrowlytailored.Id.

ThedistrictcourtinconclusionfoundthattheOklahomaMBEActviolatedtheConstitution’sFifthAmendmentguaranteeofequalprotectionandgrantedtheplaintiffs’MotionforSummaryJudgment.

21. Webster v. Fulton County, 51 F. Supp.2d 1354 (N.D. Ga. 1999), affirmed per curiam 218 F.3d 1267 (11th Cir. 2000)

Thiscaseisinstructiveasitisanotherinstanceinwhichacourthasconsidered,analyzed,andruleduponarace‐,ethnicity‐andgender‐consciousprogram,holdingthelocalgovernmentMBE/WBE‐typeprogramfailedtosatisfythestrictscrutinyconstitutionalstandard.ThecasealsoisinstructiveinitsapplicationoftheEngineeringContractorsAssociationcase,includingtoadisparityanalysis,theburdensofproofonthelocalgovernment,andthenarrowlytailoredprongofthestrictscrutinytest.

Inthiscase,plaintiffWebsterbroughtanactionchallengingtheconstitutionalityofFultonCounty’s(the“County”)minorityandfemalebusinessenterpriseprogram(“M/FBE”)program.51F.Supp.2d1354,1357(N.D.Ga.1999).[ThedistrictcourtfirstsetforththeprovisionsoftheM/FBEprogramandconductedastandinganalysisat51F.Supp.2dat1356‐62].

Thecourt,citingEngineeringContractorsAssociationofS.Florida,Inc.v.Metro.EngineeringContractorsAssociation,122F.3d895(11thCir.1997),heldthat“[e]xplicitracialpreferencesmaynotbeusedexceptasa‘lastresort.’”Id.at1362‐63.ThecourtthensetforththestrictscrutinystandardforevaluatingracialandethnicpreferencesandthefourfactorsenunciatedinEngineeringContractorsAssociation,andtheintermediatescrutinystandardforevaluatinggenderpreferences.Id.at1363.ThecourtfoundthatunderEngineeringContractorsAssociation,thegovernmentcouldutilizebothpost‐enactmentandpre‐enactmentevidencetomeetitsburdenofa“strongbasisinevidence”forstrictscrutiny,and“sufficientprobativeevidence”forintermediatescrutiny.Id.

Thecourtfoundthatthedefendantbearstheinitialburdenofsatisfyingtheaforementionedevidentiarystandard,andtheultimateburdenofproofremainswiththechallengingpartytodemonstratetheunconstitutionalityoftheM/FBEprogram.Id.at1364.Thecourtfoundthattheplaintiffhasatleastthreemethods“torebuttheinferenceofdiscriminationwithaneutralexplanation:(1)demonstratethatthestatisticsareflawed;(2)demonstratethatthedisparitiesshownbythestatisticsarenotsignificant;or(3)presentconflictingstatisticaldata.”Id.,citingEng’gContractorsAss’n,122F.3dat916.

[ThedistrictcourtthensetforththeEngineeringContractorsAssociationopinionindetail.]

ThecourtfirstnotedthattheEleventhCircuithasrecognizedthatdisparityindicesgreaterthan80percentaregenerallynotconsideredindicationsofdiscrimination.Id.at1368,citingEng’gContractorsAssoc.,122F.3dat914.ThecourtthenconsideredtheCounty’spre‐1994disparity


study(the“Brimmer‐MarshallStudy”)andfoundthatitfailedtoestablishastrongbasisinevidencenecessarytosupporttheM/FBEprogram.Id.at1368.

First,thecourtfoundthatthestudyrestedontheinaccurateassumptionthatastatisticalshowingofunderutilizationofminoritiesinthemarketplaceasawholewassufficientevidenceofdiscrimination.Id.at1369.ThecourtcitedCityofRichmondv.J.A.CrosonCo.,488U.S.496(1989)forthepropositionthatdiscriminationmustbefocusedoncontractingbytheentitythatisconsideringthepreferenceprogram.Id.BecausetheBrimmer‐MarshallStudycontainednostatisticalevidenceofdiscriminationbytheCountyintheawardofcontracts,thecourtfoundtheCountymustshowthatitwasa“passiveparticipant”indiscriminationbytheprivatesector.Id.ThecourtfoundthattheCountycouldtakeremedialactionifithadevidencethatprimecontractorsweresystematicallyexcludingminority‐ownedbusinessesfromsubcontractingopportunities,orifithadevidencethatitsspendingpracticesare“exacerbatingapatternofpriordiscriminationthatcanbeidentifiedwithspecificity.”Id.However,thecourtfoundthattheBrimmer‐MarshallStudycontainednosuchdata.Id.

Second,theBrimmer‐Marshallstudycontainednoregressionanalysistoaccountforrelevantvariables,suchasfirmsize.Id.at1369‐70.Attrial,Dr.Marshallsubmittedafollow‐uptotheearlierdisparitystudy.However,thecourtfoundthestudyhadthesameflawinthatitdidnotcontainaregressionanalysis.Id.ThecourtthusconcludedthattheCountyfailedtopresenta“strongbasisinevidence”ofdiscriminationtojustifytheCounty’sracialandethnicpreferences.Id.

ThecourtnextconsideredtheCounty’spost‐1994disparitystudy.Id.at1371.Thestudyfirstsoughttodeterminetheavailabilityandutilizationofminority‐andfemale‐ownedfirms.Id.Thecourtexplained:

Twomethodsmaybeusedtocalculateavailability:(1)bidanalysis;or(2)bidderanalysis.Inabidanalysis,theanalystcountsthenumberofbidssubmittedbyminorityorfemalefirmsoveraperiodoftimeanddividesitbythetotalnumberofbidssubmittedinthesameperiod.Inabidderanalysis,theanalystcountsthenumberofminorityorfemalefirmssubmittingbidsanddividesitbythetotalnumberoffirmswhichsubmittedbidsduringthesameperiod.

Id.ThecourtfoundthattheinformationprovidedinthestudywasinsufficienttoestablishafirmbasisinevidencetosupporttheM/FBEprogram.Id.at1371‐72.Thecourtalsofounditsignificanttoconductaregressionanalysistoshowwhetherthedisparitieswereeitherduetodiscriminationorotherneutralgrounds.Id.at1375‐76.

TheplaintiffandtheCountysubmittedstatisticalstudiesofdatacollectedbetween1994and1997.Id.at1376.ThecourtfoundthatthedatawerepotentiallyskewedduetotheoperationoftheM/FBEprogram.Id.Additionally,thecourtfoundthattheCounty’sstandarddeviationanalysisyieldednon‐statisticallysignificantresults(notingtheEleventhCircuithasstatedthatscientistsconsiderafindingoftwostandarddeviationssignificant).Id.(internalcitationsomitted).

ThecourtconsideredtheCounty’sanecdotalevidence,andquotedEngineeringContractorsAssociationforthepropositionthat“[a]necdotalevidencecanplayanimportantroleinbolsteringstatisticalevidence,butthatonlyintherarecasewillanecdotalevidencesufficestandingalone.”Id.,quotingEng’gContractorsAss’n,122F.3dat907.TheBrimmer‐Marshall


Studycontainedanecdotalevidence.Id.at1379.Additionally,theCountyheldhearingsbutafterreviewingthetaperecordingsofthehearings,thecourtconcludedthatonlytwoindividualstestifiedtodiscriminationbytheCounty;oneofthemcomplainedthattheCountyusedtheM/FBEprogramtoonlybenefitAfricanAmericans.Id.Thecourtfoundthemostcommoncomplaintsconcernedbarriersinbonding,financing,andinsuranceandslowpaymentbyprimecontractors.Id.ThecourtconcludedthattheanecdotalevidencewasinsufficientinandofitselftoestablishafirmbasisfortheM/FBEprogram.Id.

ThecourtalsoappliedanarrowtailoringanalysisoftheM/FBEprogram.“TheEleventhCircuithasmadeitclearthattheessenceofthisinquiryiswhetherracialpreferenceswereadoptedonlyasa‘lastresort.’”Id.at1380,citingEng’gContractorsAssoc.,122F.3dat926.ThecourtcitedtheEleventhCircuit’sfour‐parttestandconcludedthattheCounty’sM/FBEprogramfailedonseveralgrounds.First,thecourtfoundthatarace‐basedproblemdoesnotnecessarilyrequirearace‐basedsolution.“Ifarace‐neutralremedyissufficienttocurearace‐basedproblem,thenarace‐consciousremedycanneverbenarrowlytailoredtothatproblem.”Id.,quotingEng’gContractorsAss’n,122F.3dat927.ThecourtfoundthattherewasnoevidenceofdiscriminationbytheCounty.Id.at1380.

ThecourtfoundthateventhoughamajorityoftheCommissionersontheCountyBoardwereAfricanAmerican,theCountyhadcontinuedtheprogramfordecades.Id.ThecourtheldthattheCountyhadnotseriouslyconsideredrace‐neutralmeasures:

ThereisnoevidenceintherecordthatanyCommissionerhasofferedaresolutionduringthisperiodsubstitutingaprogramofrace‐neutralmeasuresasanalternativetonumericalset‐asidesbaseduponraceandethnicity.ThereisnoevidenceintherecordofanyproposalbythestaffofFultonCountyofsubstitutingaprogramofrace‐neutralmeasuresasanalternativetonumericalset‐asidesbaseduponraceandethnicity.TherehasbeennoevidenceofferedofanydebatewithintheCommissionaboutsubstitutingaprogramofrace‐neutralmeasuresasanalternativetonumericalset‐asidesbaseduponraceandethnicity….Id.

ThecourtfoundthattherandominclusionofethnicandracialgroupswhohadnotsuffereddiscriminationbytheCountyalsomitigatedagainstafindingofnarrowtailoring.Id.ThecourtfoundthattherewasnoevidencethattheCountyconsideredrace‐neutralalternativesasanalternativetorace‐consciousmeasuresnorthatrace‐neutralmeasureswereinitiatedandfailed.Id.at1381.ThecourtconcludedthatbecausetheM/FBEprogramwasnotadoptedasalastresort,itfailedthenarrowtailoringtest.Id.

Additionally,thecourtfoundthattherewasnosubstantialrelationshipbetweenthenumericalgoalsandtherelevantmarket.Id.ThecourtrejectedtheCounty’sargumentthatitsprogramwaspermissiblebecauseitset“goals”asopposedto“quotas,”becausetheprograminEngineeringContractorsAssociationalsoutilized“goals”andwasstruckdown.Id.

PertheM/FBEprogram’sgender‐basedpreferences,thecourtfoundthattheprogramwassufficientlyflexibletosatisfythesubstantialrelationshipprongoftheintermediatescrutinystandard.Id.at1383.However,thecourtheldthattheCountyfailedtopresent“sufficientprobativeevidence”ofdiscriminationnecessarytosustainthegender‐basedpreferencesportionoftheM/FBEprogram.Id.

ThecourtfoundtheCounty’sM/FBEprogramunconstitutionalandenteredapermanentinjunctioninfavoroftheplaintiff.Id.Onappeal,theEleventhCircuitaffirmedpercuriam,stating


onlythatitaffirmedonthebasisofthedistrictcourt’sopinion.Websterv.FultonCounty,Georgia,218F.3d1267(11thCir.2000).

22. Associated Gen. Contractors v. Drabik, 50 F. Supp.2d 741 (S.D. Ohio 1999)

ThedistrictcourtinthiscasepointedoutthatithadstruckdownOhio’sMBEstatutethatprovidedrace‐basedpreferencesintheawardofstateconstructioncontractsin1998.50F.Supp.2dat744.Twoweeksearlier,thedistrictcourtfortheNorthernDistrictofOhio,likewise,foundthesameOhiolawunconstitutionalwhenitwasreliedupontosupportastatemandatedset‐asideprogramadoptedbytheCuyahogaCommunityCollege.SeeF.BuddieContracting,Ltd.v.CuyahogaCommunityCollegeDistrict,31F.Supp.2d571(N.D.Ohio1998).Id.at741.

Thestatedefendant’sappealedthiscourt’sdecisiontotheUnitedStatescourtofAppealsfortheSixthCircuit.Id.Thereafter,theSupremeCourtofOhioheldinthecaseofRitcheyProduce,Co.,Inc.v.TheStateofOhio,DepartmentofAdministrative,704N.E.2d874(1999),thattheOhiostatute,whichprovidedrace‐basedpreferencesinthestate’spurchaseofnonconstruction‐relatedgoodsandservices,wasconstitutional.Id.at744.

Whilethiscourt’sdecisionrelatedtoconstructioncontractsandtheOhioSupremeCourt’sdecisionrelatedtoothergoodsandservices,thedecisionscouldnotbereconciled,accordingtothedistrictcourt.Id.at744.Subsequently,thestatedefendantsmovedthiscourttostayitsorderofNovember2,1998inlightoftheOhioStateSupremeCourt’sdecisioninRitcheyProduce.ThedistrictcourttooktheopportunityinthiscasetoreconsideritsdecisionofNovember2,1998,andtothereasonsgivenbytheSupremeCourtofOhioforreachingtheoppositeresultinRitcheyProduce,anddecideinthiscasethatitsoriginaldecisionwascorrect,andthatastayofitsorderwouldonlyservetoperpetuatea“blatantlyunconstitutionalprogramofrace‐basedbenefits.Id.at745.

Inthisdecision,thedistrictcourtreaffirmeditsearlierholdingthattheStateofOhio’sMBEprogramofconstructioncontractawardsisunconstitutional.ThecourtcitedtoF.BuddieContractingv.CuyahogaCommunityCollege,31F.Supp.2d571(N.D.Ohio1998),holdingasimilarlocalOhioprogramunconstitutional.ThecourtrepudiatedtheOhioSupremeCourt’sholdinginRitcheyProduce,707N.E.2d871(Ohio1999),whichheldthattheStateofOhio’sMBEprogramasappliedtothestate’spurchaseofnon‐construction‐relatedgoodsandserviceswasconstitutional.ThecourtfoundtheevidencetobeinsufficienttojustifytheOhioMBEprogram.ThecourtheldthattheprogramwasnotnarrowlytailoredbecausetherewasnoevidencethattheStatehadconsideredarace‐neutralalternative.

StrictScrutiny.ThedistrictcourtheldthattheSupremeCourtofOhiodecisioninRitcheyProducewaswronglydecidedforthefollowingreasons:

(1)Ohio’sMBEprogramofrace‐basedpreferencesintheawardofstatecontractswasunconstitutionalbecauseitisunlimitedinduration.Id.at745.

(2)aprogramofrace‐basedbenefitscannotbesupportedbyevidenceofdiscriminationwhichisover20yearsold.Id.

(3)thestateSupremeCourtfoundthattherewasaseverenumericalimbalanceintheamountofbusinesstheStatedidwithminority‐ownedenterprises,basedonitsuncriticalacceptanceofessentially“worthlesscalculationscontainedinatwenty‐one


year‐oldreport,whichmiscalculatedthepercentageofminority‐ownedbusinessesinOhioandmisrepresenteddataonthepercentageofstatepurchasecontractstheyhadreceived,allofwhichwaseasilydetectablebyexaminingthedatacitedbytheauthorsofthereport.”Id.at745.

(4)ThestateSupremeCourtfailedtorecognizethattheincorrectlycalculatedpercentageofminority‐ownedbusinessesinOhio(6.7percent)bearsnorelationshiptothe15percentset‐asidegoaloftheOhioAct.Id.

(5)thestateSupremeCourtappliedanincorrectruleoflawwhenitannouncedthatOhio’sprogrammustbeupheldunlessitisclearlyunconstitutionalbeyondareasonabledoubt,whereasaccordingtothedistrictcourtinthiscase,theSupremeCourtoftheUnitedStateshassaidthatallracialclassclassificationsarehighlysuspectandmustbesubjectedtostrictjudicialscrutiny.Id.

(6)theevidenceofpastdiscriminationthattheOhioGeneralAssemblyhadin1980didnotprovideafirmbasisinevidenceforarace‐basedremedy.Id.

Thus,thedistrictcourtdeterminedtheevidencecouldnotsupportacompellingstate‐interestforrace‐basedpreferencesforthestateofOhioMBEAct,inpartbasedonthefactevidenceofpastdiscriminationwasstaleandtwentyyearsold,andthestatisticalanalysiswasinsufficientbecausethestatedidnotknowhowmanyMBE’sintherelevantmarketarequalifiedtoundertakeprimeorsubcontractingworkinpublicconstructioncontracts.Id.at763‐771.ThestatisticalevidencewasfatallyflawedbecausetherelevantuniverseofminoritybuisnessesisnotallminoritybusinessesinthestateofOhio,butonlythosewillingandabletoenterintocontractswiththestateofOhio.Id.at761.Inthecaseofset‐asideprograminstateconstruction,therelevantuniverseisminority‐ownedconstructionfirmswillingandabletoenterintostateconstructioncontracts.Id.

NarrowTailoring.Thecourtaddressedthesecondprongofthestrictscrutinyanalysis,andfoundthattheOhioMBEprogramatissuewasnotnarrowlytailored.Thecourtconcludedthatthestatecouldnotsatisfythefourfactorstobeconsideredindeterminingwhetherrace‐consciousremediesareappropriate.Id.at763.First,thecourtstatedthattherewasnoconsiderationofrace‐neutralalternativestoincreaseminorityparticipationinstatecontractingbeforeresortingto“race‐basedquotas”.Id.at763‐764.Thecourtheldthatfailuretoconsiderrace‐neutralmeanswasfataltotheset‐asideprograminCroson,andthefailureoftheStateofOhiotoconsiderrace‐neutralmeansbeforeadoptingtheMBEActin1980likewise“doomsOhio’sprogramofrace‐basedquotas”.Id.at765.

Second,thecourtfoundtheOhioMBEActwasnotflexible.Thecourtstatedthatinsteadofallowingflexibilitytoameliorateharmfuleffectsoftheprogram,theimprecisionofthestatutorygoalshasbeenusedtojustifybureaucraticdecisionswhichincreaseitsimpactonnon‐minoritybusiness.”Id.at765.ThecourtsaidthewaiversystemforprimecontractsfocusessolelyontheavailabilityofMBEs.Id.at766.Thecourtnotedtheawardingagencymayremovethecontractfromthesetasideprogramandopenitupforbiddingbynon‐minoritycontractorsifnocertifiedMBEsubmitsabid,orifallbidssubmittedbyMBEsareconsideredunacceptablyhigh.Id.But,ineitherevent,thecourtpointedouttheagencyisthenrequiredtosetasideadditionalcontractstosatisfythenumericalquotarequiredbythestatute.Id.ThecourtconcludedthatthereisnoconsiderationgiventowhethertheparticularMBEseekingaracialpreferencehassufferedfromtheeffectsofpastdiscriminationbythestateorprimecontractors.Id.


Third,thecourtfoundtheOhioMBEActwasnotappropriatelylimitedsuchthatitwillnotlastlongerthanthediscriminatoryeffectsitwasdesignedtoeliminate.Id.at766.Thecourtstatedthe1980MBEActisunlimitedinduration,andthereisnoevidencethestatehaseverreconsideredwhetheracompellingstateinterestexiststhatwouldjustifythecontinuationofarace‐basedremedyatanytimeduringthetwodecadestheActhasbeenineffect.Id.

Fourth,thecourtfoundthegoalsoftheOhioMBEActwerenotrelatedtotherelevantmarketandthattheActfailedthiselementofthe“narrowlytailored”requirementofstrictscrutiny.Id.at767‐768.Thecourtsaidthegoalof15percentfarexceedsthepercentageofavailableminorityfirms,andthusbearsnorelationshiptotherelevantmarket.Id.

Fifth,thecourtfoundtheconclusionoftheOhioSupremeCourtthattheburdensimposedonnon‐MBEsbyvirtueoftheset‐asiderequirementswererelativelylightwasincorrect.Id.at768.Thecourtconcludednon‐minoritycontractorsinvarioustradeswereeffectivelyexcludedfromtheopportunitytobidonanyworkfromlargestateagencies,departments,andinstitutionssolelybecauseoftheirrace.Id.at678.

Sixth,thecourtfoundtheOhioMBEActprovidedrace‐basedbenefitsbasedonarandominclusionofminoritygroups.Id.at770‐771.Thecourtstatedtherewasnoevidenceaboutthenumberofeachracialorethnicgrouportherespectivesharesofthetotalcapitalimprovementexpenditurestheyreceived.Id.at770.Noneofthestatisticalinformation,thecourtsaid,brokedownthepercentageofallfirmsthatwereownedbyspecificminoritygroupsorthedollaramountsofcontractsreceivedbyfirmsinspecificminoritygroups.Id.Thecourt,thus,concludedthattheOhioMBEActincludedminoritygroupsrandomlywithoutanyspecificevidencethatanygroupsufferedfromdiscriminationintheconstructionindustryinOhio.Id.at771.

Conclusion.Thecourtthusdeniedthemotionofthestatedefendantstostaythecourt’spriororderholdingunconstitutionaltheOhioMBEActpendingtheappealofthecourt’sorder.Id.at771.Thisopinionunderscoredthatgovernmentsmustshowseveralfactorstodemonstratenarrowtailoring:(1)thenecessityforthereliefandtheefficacyofalternativeremedies,(2)flexibilityanddurationoftherelief,(3)relationshipofnumericalgoalstotherelevantlabormarket,and(4)impactofthereliefontherightsofthirdparties.ThecourtheldtheOhioMBEprogramfailedtosatisfythistest.

23. Phillips & Jordan, Inc. v. Watts, 13 F. Supp.2d 1308 (N.D. Fla. 1998)

ThiscaseisinstructivebecauseitaddressedachallengetoastateandlocalgovernmentMBE/WBE‐typeprogramandconsideredtherequisiteevidentiarybasisnecessarytosupporttheprogram.InPhillips&Jordan,thedistrictcourtfortheNorthernDistrictofFloridaheldthattheFloridaDepartmentofTransportation’s(“FDOT”)programof“settingaside”certainhighwaymaintenancecontractsforAfricanAmerican‐andHispanic‐ownedbusinessesviolatedtheEqualProtectionClauseoftheFourteenthAmendmenttotheUnitedStatesConstitution.Thepartiesstipulatedthattheplaintiff,anon‐minoritybusiness,hadbeenexcludedinthepastandmaybeexcludedinthefuturefromcompetingforcertainhighwaymaintenancecontracts“setaside”forbusinessenterprisesownedbyHispanicandAfricanAmericanindividuals.ThecourtheldthattheevidenceofstatisticaldisparitieswasinsufficienttosupporttheFloridaDOTprogram.

ThedistrictcourtpointedoutthatFloridaDOTdidnotclaimthatithadevidenceofintentionaldiscriminationintheawardofitscontracts.ThecourtstatedthattheessenceofFDOT’sclaimwasthatthetwoyeardisparitystudyprovidedevidenceofadisparitybetweentheproportion


ofminoritiesawardedFDOTroadmaintenancecontractsandaportionoftheminorities“supposedlywillingandabletodoroadmaintenancework,”andthatFDOTdidnotitselfengageinanyracialorethnicdiscrimination,soFDOTmusthavebeenapassiveparticipantin“somebody’s”discriminatorypractices.

SinceitwasagreedinthecasethatFDOTdidnotdiscriminateagainstminoritycontractorsbiddingonroadmaintenancecontracts,thecourtfoundthattherecordcontainedinsufficientproofofdiscrimination.ThecourtfoundtheevidenceinsufficienttoestablishactsofdiscriminationagainstAfricanAmerican‐andHispanic‐ownedbusinesses.

Thecourtraisedquestionsconcerningthechoiceanduseofthestatisticalpoolofavailablefirmsrelieduponbythedisparitystudy.ThecourtexpressedconcernaboutwhetheritwasappropriatetouseCensusdatatoanalyzeanddeterminewhichfirmswereavailable(qualifiedand/orwillingandable)tobidonFDOTroadmaintenancecontracts.

F. Recent Decisions Involving the Federal DBE Program and its Implementation by State and Local Governments

ThereareseveralrecentandpendingcasesinvolvingchallengestotheUnitedStatesFederalDBEProgramanditsimplementationbythestatesandtheirgovernmentalentitiesforfederally‐fundedprojects.Thesecasescouldhaveasignificantimpactonthenatureandprovisionsofcontractingandprocurementonfederally‐fundedprojects,includingandrelatingtotheutilizationofDBEs.Inaddition,thesecasesprovideaninstructiveanalysisoftherecentapplicationofthestrictscrutinytesttoMBE/WBE‐andDBE‐typeprograms.

Recent Decisions in Federal Circuit Courts of Appeal

1. Mountain West Holding Co., Inc. v. The State of Montana, Montana DOT, et al., 2017 WL 2179120 (9th Cir. May 16, 2017), Memorandum opinion, (Not for Publication) United States Court of Appeals for the Ninth Circuit, May 16, 2017, Docket Nos. 14‐26097 and 15‐35003, dismissing in part, reversing in part and remanding the U.S. District Court decision at 2014 WL 6686734 (D. Mont. Nov. 26, 2014)

Note: TheNinthCircuitCourtofAppealsMemorandumprovides:“ThisdispositionisnotappropriateforpublicationandisnotprecedentexceptasprovidedbyNinthCircuitRule36‐3.”

Introduction.MountainWestHoldingCompanyinstallssigns,guardrails,andconcretebarriersonhighwaysinMontana.ItcompetestowinsubcontractsfromprimecontractorswhohavecontractedwiththeState.Itisnotownedandcontrolledbywomenorminorities.Someofitscompetitorsaredisadvantagedbusinessenterprises(DBEs)ownedbywomenorminorities.InthiscaseitclaimsthatMontana’sDBEgoal‐settingprogramunconstitutionallyrequiredprimecontractorstogivepreferencetotheseminorityorfemale‐ownedcompetitors,whichMountainWestHoldingsCompanyarguesisaviolationoftheEqualProtectionClause,42U.S.C.§1983andTitleVIoftheCivilRightsActof1964,42U.S.C.§2000d,etseq.

Factualandproceduralbackground.InMountainWestHoldingCo.,Inc.v.TheStateofMontana,MontanaDOT,etal.,2014WL6686734(D.Mont.Nov.26,2014);CaseNo.1:13‐CV‐00049‐DLC,UnitedStatesDistrictCourtfortheDistrictofMontana,BillingsDivision,plaintiffMountainWestHoldingCo.,Inc.(“MountainWest”),allegeditisacontractorthatprovidesconstruction‐specifictrafficplanningandstaffingforconstructionprojectsaswellasthe


installationofsigns,guardrails,andconcretebarriers.MountainWestsuedtheMontanaDepartmentofTransportation(“MDT”)andtheStateofMontana,challengingtheirimplementationoftheFederalDBEProgram.MountainWestbroughtthisactionallegingviolationoftheEqualProtectionClauseoftheFourteenthAmendmentoftheUnitedStatesConstitution,TitleVIoftheCivilRightsAct,42USC§2000(d)(7),and42USC§1983.

FollowingtheNinthCircuit’s2005decisioninWesternStatesPavingv.WashingtonDOT,etal.,MDTcommissionedadisparitystudywhichwascompletedin2009.MDTutilizedtheresultsofthedisparitystudytoestablishitsoverallDBEgoal.MDTdeterminedthattomeetitsoverallgoal,itwouldneedtoimplementrace‐consciouscontractspecificgoals.Baseduponthedisparitystudy,MountainWestallegestheStateofMontanautilizedrace,nationalorigin,andgender‐consciousgoalsinhighwayconstructioncontracts.MountainWestclaimstheStatedidnothaveastrongbasisinevidencetoshowtherewaspastdiscriminationinthehighwayconstructionindustryinMontanaandthattheimplementationofrace,gender,andnationaloriginpreferenceswerenecessaryorappropriate.MountainWestalsoallegesthatMontanahasinstitutedpoliciesandpracticeswhichexceedtheUnitedStatesDepartmentofTransportationDBErequirements.

MountainWestassertsthatthe2009studyconcludedall“relevant”minoritygroupswereunderutilizedin“professionalservices”andAsianPacificAmericansandHispanicAmericanswereunderutilizedin“businesscategoriescombined,”butitalsoconcludedthatall“relevant”minoritygroupsweresignificantlyoverutilizedinconstruction.MountainWestthusallegesthatalthoughthedisparitystudydemonstratesthatDBEgroupsare“significantlyoverrepresented”inthehighwayconstructionfield,MDThasestablishedpreferencesforDBEconstructionsubcontractorfirmsovernon‐DBEconstructionsubcontractorfirmsintheawardofcontracts.

MountainWestalsoassertsthattheMontanaDBEProgramdoesnothaveavalidstatisticalbasisfortheestablishmentorinclusionofrace,nationalorigin,andgenderconsciousgoals,thatMDTinappropriatelyreliesuponthe2009studyasthebasisforitsDBEProgram,andthatthestudyisflawed.MountainWestclaimstheMontanaDBEProgramisnotnarrowlytailoredbecauseitdisregardslargedifferencesinDBEfirmutilizationinMDTcontractsasamongthreedifferentcategoriesofsubcontractors:businesscategoriescombined,construction,andprofessionalservices;theMDTDBEcertificationprocessdoesnotrequiretheapplicanttospecifyanyspecificracialorethnicprejudiceorculturalbiasthathadanegativeimpactuponhisorherbusinesssuccess;andthecertificationprocessdoesnotrequiretheapplicanttocertifythatheorshewasdiscriminatedagainstintheStateofMontanainhighwayconstruction.

MountainWestandtheStateofMontanaandtheMDTfiledcrossMotionsforSummaryJudgment.MountainWestassertsthattherewasnoevidencethatallrelevantminoritygroupshadsuffereddiscriminationinMontana’stransportationcontractingindustrybecause,whilethestudyhaddeterminedthereweresubstantialdisparitiesintheutilizationofallminoritygroupsinprofessionalservicescontracts,therewasnodisparityintheutilizationofminoritygroupsinconstructioncontracts.

AGC,SanDiegov.CaliforniaDOTandWesternStatesPavingCo.v.WashingtonDOT.TheNinthCircuitandthedistrictcourtinMountainWestappliedthedecisioninWesternStates,407F.3d983(9thCir.2005),andthedecisioninAGC,SanDiegov.CaliforniaDOT,713F.3d1187(9thCir.2013)asestablishingthelawtobefollowedinthiscase.ThedistrictcourtnotedthatinWesternStates,theNinthCircuitheldthatastate’simplementationoftheFederalDBEProgramcanbesubjecttoanas‐appliedconstitutionalchallenge,despitethefacialvalidityoftheFederalDBEProgram.2014WL6686734at*2(D.Mont.November26,2014).TheNinthCircuitandthe


districtcourtstatedtheNinthCircuithasheldthatwhetherastate’simplementationoftheDBEProgram“isnarrowlytailoredtofurtherCongress’sremedialobjectivedependsuponthepresenceorabsenceofdiscriminationintheState’stransportationcontractingindustry.”MountainWest,2014WL6686734at*2,quotingWesternStates,at997‐998,andMountainWest,2017WL2179120at*2(9thCir.May16,2017)Memorandum,May16,2017,at5‐6,quotingAGC,SanDiegov.CaliforniaDOT,713F.3d1187,1196.TheNinthCircuitinMountainWestalsopointedoutithadheldthat“evenwhendiscriminationispresentwithinaState,aremedialprogramisonlynarrowlytailoredifitsapplicationislimitedtothoseminoritygroupsthathaveactuallysuffereddiscrimination.”MountainWest,2017WL2179120at*2,Memorandum,May16,2017,at6,and2014WL6686734at*2,quotingWesternStates,407F.3dat997‐999.

MDTstudy.MDTobtainedafirmtoconductadisparitystudythatwascompletedin2009.ThedistrictcourtinMountainWeststatedthattheresultsofthestudyindicatedsignificantunderutilizationofDBEsinallminoritygroupsin“professionalservices”contracts,significantunderutilizationofAsianPacificAmericansandHispanicAmericansin“businesscategoriescombined,”slightunderutilizationofnonminoritywomenin“businesscategoriescombined,”andoverutilizationofallgroupsinsubcontractor“construction”contracts.MountainWest,2014WL6686734at*2.

Inadditiontothestatisticalevidence,the2009disparitystudygatheredanecdotalevidencethroughsurveysandothermeans.ThedistrictcourtstatedtheanecdotalevidencesuggestedvariousformsofdiscriminationexistedwithinMontana’stransportationcontractingindustry,includingevidenceofanexclusive“goodoleboynetwork”thatmadeitdifficultforDBEstobreakintothemarket.Id.at*3.Thedistrictcourtsaidthatdespitethesefindings,theconsultingfirmrecommendedthatMDTcontinuetomonitorDBEutilizationwhileemployingonlyrace‐neutralmeanstomeetitsoverallgoal.Id.TheconsultingfirmrecommendedthatMDTconsidertheuseofrace‐consciousmeasuresifDBEutilizationdecreasedordidnotimprove.

Montanafollowedtherecommendationsprovidedinthestudy,andcontinuedusingonlyrace‐neutralmeansinitsefforttoaccomplishitsoverallgoalforDBEutilization.Id.Basedonthestatisticalanalysisprovidedinthestudy,MontanaestablishedanoverallDBEutilizationgoalof5.83percent.Id.

Montana’sDBEutilizationafterceasingtheuseofcontractgoals.Thedistrictcourtfoundthatin2006,MontanaachievedaDBEutilizationrateof13.1percent,however,afterMontanaceasedusingcontractgoalstoachieveitsoverallgoal,therateofDBEutilizationdeclinedsharply.2014WL6686734at*3.Theutilizationratedropped,accordingtothedistrictcourt,to5percentin2007,3percentin2008,2.5percentin2009,0.8percentin2010,andin2011,itwas2.8percentId.Inresponsetothisdecline,forfiscalyears2011‐2014,thedistrictcourtsaidMDTemployedcontractgoalsoncertainUSDOTcontractsinordertoachieve3.27percentagepointsofMontana’soverallgoalof5.83percentDBEutilization.

MDTthenconductedandpreparedanewGoalMethodologyforDBEutilizationforfederalfiscalyears2014‐2016.Id.USDOTapprovedthenewandcurrentgoalmethodologyforMDT,whichdoesnotprovidefortheuseofcontractgoalstomeettheoverallgoal.Id.Thus,thenewoverallgoalistobemadeentirelythroughtheuseofrace‐neutralmeans.Id.

MountainWest’sclaimsforrelief.MountainWestsoughtdeclaratoryandinjunctiverelief,includingprospectiverelief,againsttheindividualdefendants,andsoughtmonetarydamagesagainsttheStateofMontanaandtheMDTforallegedviolationofTitleVI.2014WL6686734at*3.MountainWest’sclaimformonetarydamagesisbasedonitsclaimthatonthreeoccasionsit


wasalow‐quotingsubcontractortoaprimecontractorsubmittingabidtotheMDTonaprojectthatutilizedcontractgoals,andthatdespitebeingalow‐quotingbidder,MountainWestwasnotawardedthecontract.Id.MountainWestbringsanas‐appliedchallengetoMontana’sDBEprogram.Id.

Thetwo‐prongtesttodemonstratethataDBEprogramisnarrowlytailored.TheCourt,citingAGC,SanDiegov.CaliforniaDOT,713F.3d1187,1196,statedthatunderthetwo‐prongtestestablishedinWesternStates,inordertodemonstratethatitsDBEprogramisnarrowlytailored,(1)thestatemustestablishthepresenceofdiscriminationwithinitstransportationcontractingindustry,and(2)theremedialprogrammustbelimitedtothoseminoritygroupsthathaveactuallysuffereddiscrimination.MountainWest,2017WL2179120at*2,Memorandum,May16,2017,at6‐7.

DistrictCourtHoldingin2014andtheAppeal.ThedistrictcourtgrantedsummaryjudgmenttotheState,andMountainWestappealed.SeeMountainWestHoldingCo.,Inc.v.TheStateofMontana,MontanaDOT,etal.2014WL6686734(D.Mont.Nov.26,2014),dismissedinpart,reversedinpart,andremanded,U.S.CourtofAppeals,NinthCircuit,DocketNos.14‐36097and15‐35003,Memorandum2017WL2179120at**1‐4(9thCir.May16,2017).Montanaalsoappealedthedistrictcourt’sthresholddeterminationthatMountainWesthadaprivaterightofactionunderTitleVI,anditappealedthedistrictcourt’sdenialoftheState’smotiontostrikeanexpertreportsubmittedinsupportofMountainWest’smotion.

NinthCircuitHolding.TheNinthCircuitCourtofAppealsinitsMemornadumopiniondismissedMountainWest’sappealasmoottotheextentMountainWestpursuesequitableremedies,affirmedthedistrictcourt’sdeterminationthatMountainWesthasaprivaterighttoenforceTitleVI,affirmedthedistrictcourt’sdecisiontoconsiderthedisputedexpertreportbyMountainWest’sexpertwitness,andreversedtheordergrantingsummaryjudgmenttotheState.2017WL2179120at**1‐4(9thCir.May16,2017),U.S.CourtofAppeals,NinthCircuit,DocketNos.14‐36097and15‐35003,Memorandum,at3,5,11.

Mootness.TheNinthCircuitfoundthatMontanadoesnotcurrentlyemploygender‐orrace‐consciousgoals,andthedataitrelieduponasjustificationforitspreviousgoalsarenowseveralyearsold.TheCourtthusheldthatMountainWest’sclaimsforinjunctiveanddeclaratoryreliefarethereforemoot.MountainWest,2017WL2179120at*2(9thCir.),Memorandum,May16,2017,at4.

TheCourtalsoheld,however,thatMountainWest’sTitleVIclaimfordamagesisnotmoot.2017WL2179120at**1‐2.TheCourtstatedthataplaintiffmayseekdamagestoremedyviolationsofTitleVI,see42U.S.C.§2000d‐7(a)(1)‐(2);andMountainWesthassoughtdamages.Claimsfordamages,accordingtotheCourt,donotbecomemootevenifchangestoachallengedprogrammakeclaimsforprospectivereliefmoot.Id.

Theappeal,theNinthCircuitheld,isthereforedismissedwithrespecttoMountainWest’sclaimsforinjunctiveanddeclaratoryrelief;andonlytheclaimfordamagesunderTitleVIremainsinthecase.MountainWest,2017WL2179120at**1(9thCir.),Memorandum,May16,2017,at4.

PrivateRightofActionandDiscriminationunderTitleVI.TheCourtconcludedforthereasonsfoundinthedistrictcourt’sorderthatMountainWestmaystateaprivateclaimfordamagesagainstMontanaunderTitleVI.Id.at*2.ThedistrictcourthadgrantedsummaryjudgmenttoMontanaonMountainWest’sclaimsfordiscriminationunderTitleVI.


Montanadoesnotdisputethatitsprogramtookraceintoaccount.TheNinthCircuitheldthatclassificationsbasedonracearepermissible“onlyiftheyarenarrowlytailoredmeasuresthatfurthercompellinggovernmentalinterests.”MountainWest,2017WL2179120(9thCir.)at*2,Memorandum,May16,2017,at6‐7.W.StatesPaving,407F.3dat990(quotingAdarandConstructors,Inc.v.Peña,515U.S.200,227(1995)).AsinWesternStatesPaving,theCourtappliedthesametesttoclaimsofunconstitutionaldiscriminationanddiscriminationinviolationofTitleVI.MountainWest,2017WL2179120at*2,n.2,Memorandum,May16,2017,at6,n.2;see,407F.3dat987.

Montana,theCourtfoundbearstheburdentojustifyanyracialclassifications.Id.Inanas‐appliedchallengetoastate’sDBEcontractingprogram,“(1)thestatemustestablishthepresenceofdiscriminationwithinitstransportationcontractingindustry,and(2)theremedialprogrammustbe‘limitedtothoseminoritygroupsthathaveactuallysuffereddiscrimination.’”MountainWest,2017WL2179120at*2(9thCir.),Memorandum,May16,2017,at6‐7,quoting,Assoc.Gen.ContractorsofAm.v.Cal.Dep’tofTransp.,713F.3d1187,1196(9thCir.2013)(quotingW.StatesPaving,407F.3dat997‐99).Discriminationmaybeinferredfrom“asignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractorswillingandabletoperformaparticularserviceandthenumberofsuchcontractorsactuallyengagedbythelocalityorthelocality’sprimecontractors.”MountainWest,2017WL2179120at*2(9thCir.),Memorandum,May16,2017,at6‐7,quoting,CityofRichmondv.J.A.CrosonCo.,488U.S.469,509(1989).

Here,thedistrictcourtheldthatMontanahadsatisfieditsburden.Inreachingthisconclusion,thedistrictcourtreliedonthreetypesofevidenceofferedbyMontana.First,itcitedastudy,whichreporteddisparitiesinprofessionalservicescontractawardsinMontana.Second,thedistrictcourtnotedthatparticipationbyDBEsdeclinedafterMontanaabandonedrace‐consciousgoalsintheyearsfollowingthedecisioninWesternStatesPaving,407F.3d983.Third,thedistrictcourtcitedanecdotesofa“goodol’boys”networkwithintheState’scontractingindustry.MountainWest,2017WL2179120at*3(9thCir.),Memorandum,May16,2017,at7.

TheNinthCircuitreversedthedistrictcourtandheldthatsummaryjudgmentwasimproperinlightofgenuinedisputesofmaterialfactastothestudy’sanalysis,andbecausethesecondtwocategoriesofevidencewereinsufficienttoproveahistoryofdiscrimination.MountainWest,2017WL2179120at*3(9thCir.),Memorandum,May16,2017,at7.

Disputesoffactastostudy.MountainWest’sexperttestifiedthatthestudyreliedonseveralquestionableassumptionsandanopaquemethodologytoconcludethatprofessionalservicescontractswereawardedonadiscriminatorybasis.Id.at*3.TheNinthCircuitpointedoutafewexamplesthatitfoundillustratedtheareasinwhichtherearedisputesoffactastowhetherthestudysufficientlysupportedMontana’sactions:

1. NinthCircuitstatedthatitscasesrequirestatestoascertainwhetherlower‐than‐expectedDBEparticipationisattributabletofactorsotherthanraceorgender.W.StatesPaving,407F.3dat1000‐01.MountainWestarguesthatthestudydidnotexplainwhetherorhowitaccountedforagivenfirm’ssize,age,geography,orothersimilarfactors.Thereport’sauthorswereunabletoexplaintheiranalysisindepositionsforthiscase.Indeed,theCourtnoted,evenMontanaappearstohavequestionedthevalidityofthestudy’sstatisticalresultsMountainWest,2017WL2179120at*3(9thCir.),Memorandum,May16,2017,at8.

2. ThestudyreliedonatelephonesurveyofasampleofMontanacontractors.MountainWestarguedthat(a)itisunclearhowthestudyselectedthatsample,(b)onlyasmall


percentageofsurveyedcontractorsrespondedtoquestions,and(c)itisunclearwhetherresponsivecontractorswererepresentativeofnonresponsivecontractors.2017WL2179120at*3(9thCir.May16,2017),Memorandumat8‐9.

3. Thestudyreliedonverysmallsamplesizesbutdidnotestsforstatisticalsignificance,andthestudyconsultantadmittedthat“someofthepopulationsampleswereverysmallandtheresultmaynotbesignificantstatistically.”2017WL2179120at*3(9thCir.May16,2017),Memorandumat8‐9.

4. MountainWestarguedthatthestudygaveequalweighttoprofessionalservicescontractsandconstructioncontracts,butprofessionalservicescontractscomposedlessthantenpercentoftotalcontractvolumeintheState’stransportationcontractingindustry.2017WL2179120at*3(9thCir.May16,2017),Memorandumat9.

5. MountainWestarguedthatMontanaincorrectlycomparedtheproportionofavailablesubcontractorstotheproportionofprimecontractdollarsawarded.Thedistrictcourtdidnotaddressthiscriticismorexplainwhythestudy’scomparisonwasappropriate.2017WL2179120at*3(9thCir.May16,2017),Memorandumat9.

Thepost‐2005declineinparticipationbyDBEs.TheNinthCircuitwasunabletoaffirmthedistrictcourt’sorderinrelianceonthedecreaseinDBEparticipationafter2005.InWesternStatesPaving,itwasheldthatadeclineinDBEparticipationafterrace‐andgender‐basedpreferencesarehaltedisnotnecessarilyevidenceofdiscriminationagainstDBEs.MountainWest,2017WL2179120at*3(9thCir.),Memorandum,May16,2017,at9,quotingWesternStates,407F.3dat999(“If[minoritygroupshavenotsufferedfromdiscrimination],thentheDBEprogramprovidesminoritieswhohavenotencountereddiscriminatorybarrierswithanunconstitutionalcompetitiveadvantageattheexpenseofbothnon‐minoritiesandanyminoritygroupsthathaveactuallybeentargetedfordiscrimination.”);id.at1001(“ThedisparitybetweentheproportionofDBEperformanceoncontractsthatincludeaffirmativeactioncomponentsandonthosewithoutsuchprovisionsdoesnotprovideanyevidenceofdiscriminationagainstDBEs.”).Id.

TheNinthCircuitalsocitedtotheU.S.DOTstatementmadetotheCourtinWesternStates.MountainWest,2017WL2179120at*3(9thCir.),Memorandum,May16,2017,at10,quoting,U.S.Dep’tofTransp.,WesternStatesPavingCo.CaseQ&A(Dec.16,2014)(“IncalculatingavailabilityofDBEs,[astate’s]studyshouldnotrelyonnumbersthatmayhavebeeninflatedbyrace‐consciousprogramsthatmaynothavebeennarrowlytailored.”).

Anecdotalevidenceofdiscrimination.TheNinthCircuitsaidthatwithoutastatisticalbasis,theStatecannotrelyonanecdotalevidencealone.MountainWest,2017WL2179120at*3(9thCir.),Memorandum,May16,2017,at10,quoting,CoralConst.Co.v.KingCty.,941F.2d910,919(9thCir.1991)(“Whileanecdotalevidencemaysufficetoproveindividualclaimsofdiscrimination,rarely,ifever,cansuchevidenceshowasystemicpatternofdiscriminationnecessaryfortheadoptionofanaffirmativeactionplan.”);andquoting,Croson,488U.S.at509(“[E]videnceofapatternofindividualdiscriminatoryactscan,ifsupportedbyappropriatestatisticalproof,lendsupporttoalocalgovernment’sdeterminationthatbroaderremedialreliefisjustified.”).Id.

Insum,theNinthCircuitfoundthatbecauseitmustviewtherecordinthelightmostfavorabletoMountainWest’scase,itconcludedthattherecordprovidesaninadequatebasisforsummaryjudgmentinMontana’sfavor.2017WL2179120at*3.


Conclusion.TheNinthCircuitthusreversedandremandedforthedistrictcourttoconductwhateverfurtherproceedingsitconsidersmostappropriate,includingtrialortheresumptionofpretriallitigation.Thus,thecasewasdismissedinpart,reversedinpart,andremandedtothedistrictcourt.MountainWest,2017WL2179120at*4(9thCir.),Memorandum,May16,2017,at11.

2. Midwest Fence Corporation v. U.S. Department of Transportation, Illinois Department of Transportation, Illinois State Toll Highway Authority, 840 F.3d 932, 2016 WL 6543514 (7th Cir. 2016), cert. denied, 2017 WL 497345 (2017)

PlaintiffMidwestFenceCorporationisaguardrailsandfencingspecialtycontractorthatusuallybidsonprojectsasasubcontractor.2016WL6543514at*1.MidwestFenceisnotaDBE.Id.MidwestFenceallegesthatthedefendants’DBEprogramsviolateditsFourteenthAmendmentrighttoequalprotectionunderthelaw,andchallengestheUnitedStatesDOTFederalDBEProgramandtheimplementationoftheFederalDBEProgrambytheIllinoisDOT(IDOT).Id.MidwestFencealsochallengestheIllinoisStateTollHighwayAuthority(Tollway)anditsimplementationofitsDBEProgram.Id.

Thedistrictcourtgrantedallthedefendants’motionsforsummaryjudgment.Id.at*1.SeeMidwestFenceCorp.v.U.S.DepartmentofTransportation,etal.,84F.Supp.3d705(N.D.Ill.2015)(seediscussionofdistrictcourtdecisionbelow).TheSeventhCircuitCourtofAppealsaffirmedthegrantofsummaryjudgmentbythedistrictcourt.Id.ThecourtheldthatitjoinstheotherfederalcircuitcourtsofappealinholdingthattheFederalDBEProgramisfaciallyconstitutional,theprogramservesacompellinggovernmentinterestinremedyingahistoryofdiscriminationinhighwayconstructioncontracting,theprogramprovidesstateswithamplediscretiontotailortheirDBEprogramstotherealitiesoftheirownmarketsandrequirestheuseofrace–andgender‐neutralmeasuresbeforeturningtorace‐andgender‐consciousmeasures.Id.

ThecourtofappealsalsoheldtheIDOTandTollwayprogramssurvivestrictscrutinybecausethesestatedefendantsestablishasubstantialbasisinevidencetosupporttheneedtoremedytheeffectsofpastdiscriminationintheirmarkets,andtheprogramsarenarrowlytailoredtoservethatremedialpurpose.Id.at*1.

Proceduralhistory.MidwestFenceassertedthefollowingprimarytheoriesinitschallengetotheFederalDBEProgram,IDOT’simplementationofit,andtheTollway’sownprogram:

1. Thefederalregulationsprescribeamethodforsettingindividualcontractgoalsthatplacesanundueburdenonnon‐DBEsubcontractors,especiallycertainkindsofsubcontractors,includingguardrailandfencingcontractorslikeMidwestFence.

2. Thepresumptionofsocialandeconomicdisadvantageisnottailoredadequatelytoreflectdifferencesinthecircumstancesactuallyfacedbywomenandthevariousracialandethnicgroupswhoreceivethatpresumption.

3. Thefederalregulationsareunconstitutionallyvague,particularlywithrespecttogoodfaitheffortstojustifyafront‐endwaiver.

Id.at*3‐4.MidwestFencealsoassertedthatIDOT’simplementationoftheFederalDBEProgramisunconstitutionalforessentiallythesamereasons.And,MidwestFencechallengestheTollway’sprogramonitsfaceandasapplied.Id.at*4.


ThedistrictcourtfoundthatMidwestFencehadstandingtobringmostofitsclaimsandonthemerits,andthecourtupheldthefacialconstitutionalityoftheFederalDBEProgram.84F.Supp.3dat722‐23729;id.at*4.

ThedistrictcourtalsoconcludedMidwestFencedidnotrebuttheevidenceofdiscriminationthatIDOTofferedtojustifyitsprogram,andMidwestFencehadpresentedno“affirmativeevidence”thatIDOT’simplementationundulyburdenednon‐DBEs,failedtomakeuseofrace‐neutralalternatives,orlackedflexibility.84F.Supp.3dat733,737;id.at*4.

ThedistrictcourtnotedthatMidwestFence’schallengetotheTollway’sprogramparalleledthechallengetoIDOT’sprogram,andconcludedthattheTollway,likeIDOT,hadestablishedastrongbasisinevidenceforitsprogram.84F.Supp.3dat737,739;id.at*4.Inaddition,thecourtconcludedthat,likeIDOT’sprogram,theTollway’sprogramimposedaminimalburdenonnon‐DBEs,employedanumberofrace‐neutralmeasures,andofferedsubstantialflexibility.84F.Supp.3dat739‐740;id.at*4.

StandingtochallengetheDBEProgramsgenerally.ThedefendantsarguedthatMidwestFencelackedstanding.ThecourtofappealsheldthatthedistrictcourtcorrectlyfoundthatMidwestFencehasstanding.Id.at*5.Thecourtofappealsstatedthatbyallegingandthenofferingevidenceoflostbids,decreasedrevenue,difficultieskeepingitsbusinessafloatasaresultoftheDBEprogram,anditsinabilitytocompeteforcontractsonanequalfootingwithDBEs,MidwestFenceshowedbothcausationandredressability.Id.at*5.

ThecourtofappealsdistinguisheditsrulingintheDunnetBayConstructionCo.v.Borggren,799F.3d676(7thCir.2015),holdingthattherewasnostandingfortheplaintiffDunnetBaybasedonanunusualandcomplexsetoffactsunderwhichitwouldhavebeenimpossiblefortheplaintiffDunnetBaytohavewonthecontractitsoughtandforwhichitsoughtdamages.IDOTdidnotawardthecontracttoanyoneunderthefirstbidandhadre‐letthecontract,thusDunnetBaysufferednoinjurybecauseoftheDBEprograminthefirstbid.Id.at*5.ThecourtofappealsheldthiscaseisdistinguishablefromDunnetBaybecauseMidwestFenceseeksprospectivereliefthatwouldenableittocompetewithDBEsonanequalbasismoregenerallythaninDunnetBay.Id.at*5.

StandingtochallengetheIDOTTargetMarketProgram.ThedistrictcourthadcarvedoutonenarrowexceptiontoitsfindingthatMidwestFencehadstandinggenerally,findingthatMidwestFencelackedstandingtochallengetheIDOT“targetmarketprogram.”Id.at*6.ThecourtofappealsfoundthatnoevidenceintherecordestablishedMidwestFencebidonorlostanycontractssubjecttotheIDOTtargetmarketprogram.Id.at*6.ThecourtstatedthatIDOThadnotsetasideanyguardrailandfencingcontractsunderthetargetmarketprogram.Id.Therefore,MidwestFencedidnotshowthatithadsufferedfromaninabilitytocompeteonanequalfootinginthebiddingprocesswithrespecttocontractswithinthetargetmarketprogram.Id.

Facialversusas‐appliedchallengetotheUSDOTProgram.Inthisappeal,MidwestFencedidnotchallengewhetherUSDOThadestablisheda“compellinginterest”toremedytheeffectsofpastorpresentdiscrimination.Thus,itdidnotchallengethenationalcompellinginterestinremedyingpastdiscriminationinitsclaimsagainsttheFederalDBEProgram.Id.at*6.Therefore,thecourtofappealsfocusedonwhetherthefederalprogramisnarrowlytailored.Id.

First,thecourtaddressedapreliminaryissue,namely,whetherMidwestFencecouldmaintainanas‐appliedchallengeagainstUSDOTandtheFederalDBEProgramorwhether,asthedistrict


courtheld,theclaimagainstUSDOTislimitedtoafacialchallenge.Id.MidwestFencesoughtadeclarationthatthefederalregulationsareunconstitutionalasappliedinIllinois.Id.ThedistrictcourtrejectedtheattempttobringthatclaimagainstUSDOT,treatingitasapplyingonlytoIDOT.Id.at*6citingMidwestFence,84F.Supp.3dat718.Thecourtofappealsagreedwiththedistrictcourt.Id.

Thecourtofappealspointedoutthataprincipalfeatureofthefederalregulationsistheirflexibilityandadaptabilitytolocalconditions,andthatflexibilityisimportanttotheconstitutionalityoftheFederalDBEProgram,includingbecausearace‐andgender‐consciousprogrammustbenarrowlytailoredtoservethecompellinggovernmentalinterest.Id.at*6.Theflexibilityinregulations,accordingtothecourt,makesthestate,notUSDOT,primarilyresponsibleforimplementingtheirownprogramsinwaysthatcomplywiththeEqualProtectionClause.Id.at*6.Thecourtsaidthatastate,notUSDOT,isthecorrectpartytodefendachallengetoitsimplementationofitsprogram.Id.Thus,thecourtheldthedistrictcourtdidnoterrbytreatingtheclaimsagainstUSDOTasonlyafacialchallengetothefederalregulations.Id.

FederalDBEProgram:NarrowTailoring.TheSeventhCircuitnotedthattheEighth,Ninth,andTenthCircuitsallfoundtheFederalDBEProgramconstitutionalonitsface,andtheSeventhCircuitagreedwiththeseothercircuits.Id.at*7.Thecourtfoundthatnarrowtailoringrequires“aclosematchbetweentheevilagainstwhichtheremedyisdirectedandthetermsoftheremedy.”Id.Thecourtstateditlookstofourfactorsindeterminingnarrowtailoring:(a)“thenecessityforthereliefandtheefficacyofalternative[race‐neutral]remedies,”(b)“theflexibilityanddurationoftherelief,includingtheavailabilityofwaiverprovisions,”(c)“therelationshipofthenumericalgoalstotherelevantlabor[orhere,contracting]market,”and(d)“theimpactofthereliefontherightsofthirdparties.”Id.at*7quotingUnitedStatesv.Paradise,480U.S.149,171(1987).TheSeventhCircuitalsopointedoutthattheTenthCircuitaddedtothisanalysisthequestionofover‐orunder‐inclusiveness.Id.at*7.

Inapplyingthesefactorstodeterminenarrowtailoring,thecourtsaidthatfirst,theFederalDBEProgramrequiresstatestomeetasmuchaspossibleoftheiroverallDBEparticipationgoalsthroughrace‐andgender‐neutralmeans.Id.at*7,citing49C.F.R.§26.51(a).Next,onitsface,thefederalprogramisbothflexibleandlimitedinduration.Id.Quotasareflatlyprohibited,andstatesmayapplyforwaivers,includingwaiversof“anyprovisionsregardingadministrativerequirements,overallgoals,contractgoalsorgoodfaithefforts,”§26.15(b).Id.at*7.Theregulationsalsorequirestatestoremainflexibleastheyadministertheprogramoverthecourseoftheyear,includingcontinuallyreassessingtheirDBEparticipationgoalsandwhethercontractgoalsarenecessary.Id.

ThecourtpointedoutthatastateneednotsetacontractgoaloneveryUSDOT‐assistedcontract,normusttheysetthosegoalsatthesamepercentageastheoverallparticipationgoal.Id.at*7.Together,thecourtfound,alloftheseprovisionsallowforsignificantandongoingflexibility.Id.at*8.StatesarenotlockedintotheirinitialDBEparticipationgoals.Id.Theiruseofcontractgoalsismeanttoremainfluid,reflectingastate’sprogresstowardsoverallDBEgoal.Id.

Asforduration,thecourtsaidthatCongresshasrepeatedlyreauthorizedtheprogramaftertakingnewlooksattheneedforit.Id.at*8.And,asnoted,statesmustmonitorprogresstowardmeetingDBEgoalsonaregularbasisandalterthegoalsifnecessary.Id.Theymuststopusingrace‐andgender‐consciousmeasuresifthosemeasuresarenolongerneeded.Id.


Thecourtfoundthatthenumericalgoalsarealsotiedtotherelevantmarkets.Id.at*8.Inaddition,theregulationsprescribeaprocessforsettingaDBEparticipationgoalthatfocusesoninformationaboutthespecificmarket,andthatitisintendedtoreflectthelevelofDBEparticipationyouwouldexpectabsenttheeffectsofdiscrimination.Id.at*8,citing§26.45(b).ThecourtstatedthattheregulationsthusinstructstatestosettheirDBEparticipationgoalstoreflectactualDBEavailabilityintheirjurisdictions,asmodifiedbyotherrelevantfactorslikeDBEcapacity.Id.at*8.

MidwestFence“mismatch”argument:burdenonthirdparties.MidwestFence,thecourtsaid,focusesitscriticismontheburdenofthirdpartiesandarguestheprogramisover‐inclusive.Id.at*8.But,thecourtfound,theregulationsincludemechanismstominimizetheburdenstheprogramplacesonnon‐DBEthirdparties.Id.Aprimaryexample,thecourtpointsout,issuppliedin§26.33(a),whichrequiresstatestotakestepstoaddressoverconcentrationofDBEsincertaintypesofworkiftheoverconcentrationundulyburdensnon‐DBEstothepointthattheycannolongerparticipateinthemarket.Id.at*8.Thecourtconcludedthatstandardscanberelaxedifuncompromisingenforcementwouldyieldnegativeconsequences,forexample,statescanobtainwaiversifspecialcircumstancesmakethestate’scompliancewithpartofthefederalprogram“impractical,”andcontractorswhofailtomeetaDBEcontractgoalcanstillbeawardedthecontractiftheyhavedocumentedgoodfaitheffortstomeetthegoal.Id.at*8,citing§26.51(a)and§26.53(a)(2).

MidwestFencearguedthata“mismatch”inthewaycontractgoalsarecalculatedresultsinaburdenthatfallsdisproportionatelyonspecialtysubcontractors.Id.at*8.Underthefederalregulations,thecourtnoted,states’overallgoalsaresetasapercentageofalltheirUSDOT‐assistedcontracts.Id.However,statesmaysetcontractgoals“onlyonthose[USDOT]‐assistedcontractsthathavesubcontractingpossibilities.”Id.,quoting§26.51(e)(1)(emphasisadded).

MidwestFencearguedthatbecauseDBEsmustbesmall,theyaregenerallyunabletocompeteforprimecontracts,andthistheyargueisthe“mismatch.”Id.at*8.WherecontractgoalsarenecessarytomeetanoverallDBEparticipationgoal,thosecontractgoalsaremetalmostentirelywithsubcontractordollars,which,MidwestFenceasserts,placesaheavyburdenonnon‐DBEsubcontractorswhileleavingnon‐DBEprimecontractorsintheclear.Id.at*8.

ThecourtgoesthroughahypotheticalexampletoexplaintheissueMidwestFencehasraisedasamismatchthatimposesadisproportionateburdenonspecialtysubcontractorslikeMidwestFence.Id.at*8.Intheexampleprovidedbythecourt,theoverallparticipationgoalforastatecallsforDBEstoreceiveacertainpercentageoftotalfunds,butinpracticeinthehypotheticalitrequiresthestatetoawardDBEsforlessthanalloftheavailablesubcontractorfundsbecauseitdeterminesthattherearenosubcontractingpossibilitiesonhalfthecontracts,thusrenderingthemineligibleforcontractgoals.Id.Themismatchisthatthefederalprogramrequiresthestatetosetitsoverallgoalonallfundsitwillspendoncontracts,butatthesametimethecontractseligibleforcontractgoalsmustbeonesthathavesubcontractingpossibilities.Id.Therefore,accordingtoMidwestFence,inpracticetheparticipationgoalssetwouldrequirethestatetoawardDBEsfromtheavailablesubcontractorfundswhiletakingnobusinessawayfromtheprimecontractors.Id.

Thecourtstatedthatitfound“[t]hisprospectistroubling.”Id.at*9.ThecourtsaidthattheDBEprogramcanimposeadisproportionateburdenonsmall,specializednon‐DBEsubcontractors,especiallywhencomparedtolargerprimecontractorswithwhomDBEswouldcompetelessfrequently.Id.Thispotential,accordingtothecourt,foradisproportionateburden,however,


doesnotrendertheprogramfaciallyunconstitutional.Id.ThecourtsaidthattheconstitutionalityoftheFederalDBEProgramdependsonhowitisimplemented.Id.

Thecourtpointedoutthatsomeofthesuggestedrace‐andgender‐neutralmeansthatstatescanuseunderthefederalprogramaredesignedtoincreaseDBEparticipationinprimecontractingandotherfieldswhereDBEparticipationhashistoricallybeenlow,suchasspecificallyencouragingstatestomakecontractsmoreaccessibletosmallbusinesses.Id.at*9,citing§26.39(b).ThecourtalsonotedthatthefederalprogramcontemplatesDBEs’abilitytocompeteequallyrequiringstatestoreportDBEparticipationasprimecontractorsandmakeseffortstodevelopthatpotential.Id.at*9.

ThecourtstatedthatstateswillcontinuetoresorttocontractgoalsthatopenthedoortothetypeofmismatchthatMidwestFencedescribes,buttheprogramonitsfacedoesnotcompelanunfairdistributionofburdens.Id.at*9.SmallspecialtycontractorsmayhavetobearatleastsomeoftheburdenscreatedbyremedyingpastdiscriminationundertheFederalDBEProgram,buttheSupremeCourthasindicatedthatinnocentthirdpartiesmayconstitutionallyberequiredtobearatleastsomeoftheburdenoftheremedy.Id.at*9.

Over‐Inclusiveargument.MidwestFencealsoarguedthatthefederalprogramisover‐inclusivebecauseitgrantspreferencestogroupswithoutanalyzingtheextenttowhicheachgroupisactuallydisadvantaged.Id.at*9.Inresponse,thecourtmentionedtwofederal‐specificarguments,notingthatMidwestFence’scriticismsarebestanalyzedaspartofitsas‐appliedchallengeagainstthestatedefendants.Id.First,MidwestFencecontendsnothingprovesthatthedisparitiesrelieduponbythestudyconsultantwerecausedbydiscrimination.Id.at*9.Thecourtfoundthattojustifyitsprogram,USDOTdoesnotneeddefinitiveproofofdiscrimination,butmusthaveastrongbasisinevidencethatremedialactionisnecessarytoremedypastdiscrimination.Id.

Second,MidwestFenceattackswhatitperceivesastheone‐size‐fits‐allnatureoftheprogram,suggestingthattheregulationsoughttoprovidedifferentremediesfordifferentgroups,butinsteadthefederalprogramoffersasingleapproachtoallthedisadvantagedgroups,regardlessofthedegreeofdisparities.Id.at*9.ThecourtpointedoutMidwestFencedidnotarguethatanyofthegroupswerenotinfactdisadvantagedatall,andthatthefederalregulationsultimatelyrequireindividualizeddeterminations.Id.at*10.Eachpresumptivelydisadvantagedfirmownermustcertifythatheorsheis,infact,sociallyandeconomicallydisadvantaged,andthatpresumptioncanberebutted.Id.Inthisway,thecourtsaid,thefederalprogramrequiresstatestoextendbenefitsonlytothosewhoareactuallydisadvantaged.Id.

ThereforethecourtagreedwiththedistrictcourtthattheFederalDBEProgramisnarrowlytailoredonitsface,soitsurvivesstrictscrutiny.

ClaimsagainstIDOTandtheTollway:voidforvagueness.MidwestFencearguedthatthefederalregulationsareunconstitutionallyvagueasappliedbyIDOTbecausetheregulationsfailtospecifywhatgoodfaitheffortsacontractormustmaketoqualifyforawaiver,andfocusesitsattackontheprovisionsoftheregulations,whichaddresspossiblecostdifferentialsintheuseofDBEs.Id.at*11.MidwestFencearguedthatAppendixAof49C.F.R.,Part26at¶IV(D)(2)istoovagueinitslanguageonwhenadifferenceinpriceissignificantenoughtojustifyfallingshortoftheDBEcontractgoal.Id.Thecourtfoundifthestandardseemsvague,thatislikelybecauseitwasmeanttobeflexible,andamorerigidstandardcouldeasilybetooarbitraryandhinderprimecontractors’abilitytoadjusttheirapproachestothecircumstancesofparticularprojects.Id.at*11.


ThecourtsaidMidwestFence’srealargumentseemstobethatinpractice,primecontractorserrtoofaronthesideofcaution,grantingsignificantpricepreferencestoDBEsinsteadoftakingtheriskoflosingacontractforfailuretomeettheDBEgoal.Id.at*12.MidwestFencecontendsthiscreatesadefactosystemofquotasbecausecontractorsbelievetheymustmeettheDBEgoalorlosethecontract.Id.ButAppendixAtotheregulations,thecourtnoted,cautionsagainstthisveryapproach.Id.Thecourtfoundflexibilityandtheavailabilityofwaiversaffectwhetheraprogramisnarrowlytailored,andthattheregulationscautionagainstquotas,provideexamplesofgoodfaitheffortsprimecontractorscanmakeandstatescanconsider,andinstructabiddertousegoodbusinessjudgmenttodecidewhetherapricedifferenceisreasonableorexcessive.Id.Forpurposesofcontractawards,thecourtholdsthisisenoughtogivefairnoticeofconductthatisforbiddenorrequired.Id.at*12.

EqualProtectionchallenge:compellinginterestwithstrongbasisinevidence.InrulingonthemeritsofMidwestFence’sequalprotectionclaimsbasedontheactionsofIDOTandtheTollway,thefirstissuethecourtaddressesiswhetherthestatedefendantshadacompellinginterestinenactingtheirprograms.Id.at*12.Thecourtstatedthatit,alongwiththeothercircuitcourtsofappeal,haveheldastateagencyisentitledtorelyonthefederalgovernment’scompellinginterestinremedyingtheeffectsofpastdiscriminationtojustifyitsownDBEplanforhighwayconstructioncontracting.Id.But,sincenotallofIDOT’scontractsarefederallyfunded,andtheTollwaydidnotreceivefederalfundingatall,withrespecttothosecontracts,thecourtsaiditmustconsiderwhetherIDOTandtheTollwayestablishedastrongbasisinevidencetosupporttheirprograms.Id.

IDOTprogram.IDOTreliedonanavailabilityandadisparitystudytosupportitsprogram.ThedisparitystudyfoundthatDBEsweresignificantlyunderutilizedasprimecontractorscomparingfirmavailabilityofprimecontractorsintheconstructionfieldtotheamountofdollarstheyreceivedinprimecontracts.Thedisparitystudycollectedutilizationrecords,definedIDOT’smarketarea,identifiedbusinessesthatwerewillingandabletoprovideneededservices,weightedfirmavailabilitytoreflectIDOT’scontractingpatternwithweightsassignedtodifferentareasbasedonthepercentageofdollarsexpendedinthoseareas,determinedwhethertherewasastatisticallysignificantunder‐utilizationofDBEsbycalculatingthedollarseachgroupwouldbeexpectedtoreceivebasedonavailability,calculatedthedifferencebetweentheexpectedandactualamountofcontractdollarsreceived,andensuredthatresultswerenotattributabletochance.Id.at*13.

ThecourtsaidthatthedisparitystudydetermineddisparityratiosthatwerestatisticallysignificantandthestudyfoundthatDBEsweresignificantlyunderutilizedasprimecontractors,notingthatafigurebelow0.80isgenerallyconsidered“solidevidenceofsystematicunder‐utilizationcallingforaffirmativeactiontocorrectit.”Id.at*13.ThestudyfoundthatDBEsmadeup25.55%ofprimecontractorsintheconstructionfield,received9.13%ofprimecontractsvaluedbelow$500,000and8.25%oftheavailablecontractdollarsinthatrange,yieldingadisparityratioof0.32forprimecontractsunder$500,000.Id.

Intherealmofcontractionsubcontracting,thestudyshowedthatDBEsmayhave29.24%ofavailablesubcontractors,andintheconstructionindustrytheyreceive44.62%ofavailablesubcontracts,butthosesubcontractsamountedtoonly10.65%ofavailablesubcontractingdollars.Id.at*13.This,accordingtothestudy,yieldedastatisticallysignificantdisparityratioof0.36,whichthecourtfoundlowenoughtosignalsystemicunder‐utilization.Id.

IDOTreliedonadditionaldatatojustifyitsprogram,includingconductingazero‐goalexperimentin2002andin2003,whenitdidnotapplyDBEgoalstocontracts.Id.at*13.


Withoutcontractgoals,theshareofthecontracts’valuethatDBEsreceiveddroppeddramatically,tojust1.5%ofthetotalvalueofthecontracts.Id.at*13.AndinthosecontractsadvertisedwithoutaDBEgoal,theDBEsubcontractorparticipationratewas0.84%.

Tollwayprogram.TollwayalsoreliedonadisparitystudylimitedtotheTollway’scontractingmarketarea.Thestudyuseda“customcensus”process,creatingadatabaseofrepresentativeprojects,identifyinggeographicandproductmarkets,countingbusinessesinthosemarkets,identifyingandverifyingwhichbusinessesareminority‐andwomen‐owned,andverifyingtheownershipstatusofalltheotherfirms.Id.at*13.ThestudyexaminedtheTollway’shistoricalcontractdata,reporteditsDBEutilizationasapercentageofcontractdollars,andcomparedDBEutilizationandDBEavailability,comingupwithdisparityindicesdividedbyraceandsex,aswellasbyindustrygroup.Id.

Thestudyfoundthatoutof115disparityindices,80showedstatisticallysignificantunder‐utilizationofDBEs.Id.at*14.Thestudydiscussedstatisticaldisparitiesinearningsandtheformationofbusinessesbyminoritiesandwomen,andconcludedthatastatisticallysignificantadverseimpactonearningswasobservedinboththeeconomyatlargeandintheconstructionandconstruction‐relatedprofessionalservicessector.”Id.at*14.Thestudyalsofoundwomenandminoritiesarenotaslikelytostarttheirownbusiness,andthatminoritybusinessformationrateswouldlikelybesubstantiallyandsignificantlyhigherifmarketsoperatedinarace‐andsex‐neutralmanner.Id.

Thestudyusedregressionanalysistoassessdifferencesinwages,business‐ownerearnings,andbusiness‐formationratesbetweenwhitemenandminoritiesandwomeninthewiderconstructioneconomy.Id.at*14.Thestudyfoundstatisticallysignificantdisparitiesremainedbetweenwhitemenandothergroups,controllingforvariousindependentvariablessuchasage,education,location,industryaffiliation,andtime.Id.Thedisparities,accordingtothestudy,wereconsistentwithamarketaffectedbydiscrimination.Id.

TheTollwayalsopresentedadditionalevidence,includingthattheTollwaysetaspirationalparticipationgoalsonasmallnumberofcontracts,andthoseattemptsfailed.Id.at*14.In2004,thecourtnotedtheTollwaydidnotawardasingleprimecontractorsubcontracttoaDBE,andtheDBEparticipationratein2005was0.01%acrossallconstructioncontracts.Id.Inaddition,theTollwayalsoconsidered,likeIDOT,anecdotalevidencethatprovidedtestimonyofseveralDBEownersregardingbarriersthattheythemselvesfaced.Id.

MidwestFence’scriticisms.MidwestFence’sexpertconsultantarguedthatthestudyconsultantfailedtoaccountforDBEs’readiness,willingness,andabilitytodobusinesswithIDOTandtheTollway,andthatthemethodofassessingreadinessandwillingnesswasflawed.Id.at*14.Inaddition,theconsultantforMidwestFencearguedthatoneofthestudiesfailedtoaccountforDBEs’relativecapacity,“meaningafirm’sabilitytotakeonmorethanonecontractatatime.”Thecourtnotedthatoneofthestudyconsultantsdidnotaccountforfirmcapacityandtheotherstudyconsultantfoundnoeffectivewaytoaccountforcapacity.Id.at*14,n.2.Thecourtsaidonestudydidperformaregressionanalysistomeasurerelativecapacityandlimiteditsdisparityanalysistocontractsunder$500,000,whichwas,accordingtothestudyconsultant,totakecapacityintoaccounttotheextentpossible.Id.

ThecourtpointedoutthatonemajorproblemwithMidwestFence’sreportisthattheconsultantdidnotperformanysubstantiveanalysisofhisown.Id.at*15.TheevidenceofferedbyMidwestFenceanditsconsultantwas,accordingtothecourt,“speculativeatbest.”Id.at*15.Thecourtsaidtheconsultant’srelativecapacityanalysiswassimilarlyspeculative,arguingthat


theassumptionthatfirmshavethesameabilitytoprovideservicesupto$500,000maynotbetrueinpractice,andthatiftheestimatesofcapacityaretoolowtheresultingdisparityindexoverstatesthedegreeofdisparitythatexists.Id.at*15.

ThecourtstatedMidwestFence’sexpertsimilarlyarguedthattheexistenceoftheDBEprogram“may”causeanupwardbiasinavailability,thatanyobservationsofthepublicsectoringeneral“may”beaffectedbytheDBEprogram’sexistence,andthatdatabecomelessrelevantastimepasses.Id.at*15.ThecourtfoundthatgiventhesubstantialutilizationdisparityasshowninthereportsbyIDOTandtheTollwaydefendants,MidwestFence’sspeculativecritiquesdidnotraiseagenuineissueoffactastowhetherthedefendantshadasubstantialbasisinevidencetobelievethatactionwasneededtoremedydiscrimination.Id.at*15.

ThecourtrejectedMidwestFence’sargumentthatrequiringittoprovideanindependentstatisticalanalysisplacesanimpossibleburdenonitduetothetimeandexpensethatwouldberequired.Id.at*15.Thecourtnotedthattheburdenisinitiallyonthegovernmenttojustifyitsprograms,andthatsincethestatedefendantsofferedevidencetodoso,theburdenthenshiftedtoMidwestFencetoshowagenuineissueofmaterialfactastowhetherthestatedefendantshadasubstantialbasisinevidenceforadoptingtheirDBEprograms.Id.Speculativecriticismaboutpotentialproblems,thecourtfound,willnotcarrythatburden.Id.

Withregardtothecapacityquestion,thecourtnoteditwasMidwestFence’sstrongestcriticismandthatcourtshadrecognizeditasaseriousprobleminothercontexts.Id.at*15.Thecourtsaidthefailuretoaccountforrelativecapacitydidnotunderminethesubstantialbasisinevidenceinthisparticularcase.Id.at*15.MidwestFencedidnotexplainhowtoaccountforrelativecapacity.Id.Inaddition,ithasbeenrecognized,thecourtstated,thatdefectsincapacityanalysesarenotfatalinandofthemselves.Id.at*15.

Thecourtconcludedthatthestudiesshowstrikingutilizationdisparitiesinspecificindustriesintherelevantgeographicmarketareas,andtheyareconsistentwiththeanecdotalandlessformalevidencedefendantshadoffered.Id.at*15.ThecourtfoundMidwestFence’sexpert’s“speculation”thatfailuretoaccountforrelativecapacitymighthavebiasedDBEavailabilityupwarddoesnotunderminethestatisticalcoreofthestrongbasisinevidencerequired.Id.

Inaddition,thecourtrejectedMidwestFence’sargumentthatthedisparitystudiesdonotprovediscrimination,notingagainthatastateneednotconclusivelyprovetheexistenceofdiscriminationtoestablishastrongbasisinevidenceforconcludingthatremedialactionisnecessary,andthatwheregrossstatisticaldisparitiescanbeshown,theyalonemayconstituteprimafacieproofofapatternorpracticeofdiscrimination.Id.at*15.ThecourtalsorejectedMidwestFence’sattackontheanecdotalevidencestatingthattheanecdotalevidencebolstersthestatedefendants’statisticalanalyses.Id.at*15.

InconnectionwithMidwestFence’sargumentrelatingtotheTollwaydefendant,MidwestFencearguedthattheTollway’ssupportingdatawasfrombeforeitinstituteditsDBEprogram.Id.at*16.TheTollwayrespondedbyarguingthatitusedthebestdataavailableandthatinanyeventitsdatasetsshowdisparities.Id.at*16.ThecourtfoundthispointpersuasiveevenassumingsomeoftheTollway’sdatawerenotexact.Id.ThecourtsaidthatwhileeverysinglenumberintheTollway’s“arsenalofevidence”maynotbeexact,theoverallpicturestillshowsbeyondreasonabledisputeamarketplacewithsystemicunder‐utilizationofDBEsfarbelowthedisparityindexlowerthan80asanindicationofdiscrimination,andthatMidwestFence’s“abstractcriticisms”donotunderminethatcoreofevidence.Id.at*16.


NarrowTailoring.ThecourtappliedthenarrowtailoringfactorstodeterminewhetherIDOT’sandtheTollway’simplementationoftheirDBEprogramsyieldedaclosematchbetweentheevilagainstwhichtheremedyisdirectedandthetermsoftheremedy.Id.at*16.Firstthecourtaddressedthenecessityforthereliefandtheefficacyofalternativerace‐neutralremediesfactor.Id.ThecourtreiteratedthatMidwestFencehasnotunderminedthedefendants’strongcombinationofstatisticalandotherevidencetoshowthattheirprogramsareneededtoremedydiscrimination.Id.

BothIDOTandtheTollway,accordingtothecourt,userace‐andgender‐neutralalternatives,andtheundisputedfactsshowthatthosealternativeshavenotbeensufficienttoremedydiscrimination.Id.ThecourtnotedthattherecordshowsIDOTusesnearlyallofthemethodsdescribedinthefederalregulationstomaximizeaportionofthegoalthatwillbeachievedthroughrace‐neutralmeans.Id.

Asforflexibility,bothIDOTandtheTollwaymakefront‐endwaiversavailablewhenacontractorhasmadegoodfaitheffortstocomplywithaDBEgoal.Id.at*17.ThecourtrejectedMidwestFence’sargumentsthattherewerealownumberofwaiversgranted,andthatcontractorsfearofhavingawaiverdeniedshowedthesystemwasadefactoquotasystem.Id.ThecourtfoundthatIDOTandtheTollwayhavenotgrantedlargenumbersofwaivers,buttherewasalsonoevidencethattheyhavedeniedlargenumbersofwaivers.Id.ThecourtpointedoutthattheevidencefromMidwestFencedoesnotshowthatdefendantsareresponsibleforfailingtograntfront‐endwaiversthatthecontractorsdonotrequest.Id.

Thecourtstatedintheabsenceofevidencethatdefendantsfailedtoadheretothegeneralgoodfaitheffortguidelinesandarbitrarilydenyordiscouragefront‐endwaiverrequests,MidwestFence’scontentionthatcontractorsfearlosingcontractsiftheyaskforawaiverdoesnotmakethesystemaquotasystem.Id.at*17.MidwestFence’sownevidence,thecourtstated,showsthatIDOTgrantedin2007,57of63front‐endwaiverrequests,andin2010,itgranted21of35front‐endwaiverrequests.Id.at*17.Inaddition,theTollwaygrantedatleastsomefront‐endwaiversinvolving1.02%ofcontractdollars.Id.Withoutevidencethatfarmorewaiverswererequested,thecourtwassatisfiedthateventhislowtotalbytheTollwaydoesnotraiseagenuinedisputeoffact.Id.

Thecourtalsorejectedas“underdeveloped”MidwestFence’sargumentthatthecourtshouldlookatthedollarvalueofwaiversgrantedratherthantherawnumberofwaiversgranted.Id.at*17.Thecourtfoundthatthisargumentdoesnotsupportadifferentoutcomeinthiscasebecausethedefendantsgrantmorefront‐endwaiverrequeststhantheydeny,regardlessofthedollaramountsthoserequestsencompass.MidwestFencepresentednoevidencethatIDOTandtheTollwayhaveanunwrittenpolicyofgrantingonlylow‐valuewaivers.Id.

ThecourtstatedthatMidwest’s“bestargument”againstnarrowedtailoringisits“mismatch”argument,whichwasdiscussedabove.Id.at*17.ThecourtsaidMidwest’sbroadcondemnationoftheIDOTandTollwayprogramsasfailingtocreatea“light”and“diffuse”burdenforthirdpartieswasnotpersuasive.Id.ThecourtnotedthattheDBEprograms,whichsetDBEgoalsononlysomecontractsandallowthosegoalstobewaivedifnecessary,mayendupforeclosingoneofseveralopportunitiesforanon‐DBEspecialtysubcontractorlikeMidwestFence.Id.But,therewasnoevidencethattheyimposetheentireburdenonthatsubcontractorbyshuttingitoutofthemarketentirely.Id.However,thecourtfoundthatMidwestFence’spointthatsubcontractorsappeartobearadisproportionateshareoftheburdenascomparedtoprimecontractors“istroubling.”Id.at*17.


Althoughtheevidenceshoweddisparitiesinboththeprimecontractingandsubcontractingmarkets,underthefederalregulations,individualcontractgoalsaresetonlyforcontractsthathavesubcontractingpossibilities.Id.ThecourtpointedoutthatsomeDBEsareabletobidonprimecontracts,butthenecessarilysmallsizeofDBEsmakesthatdifficultinmostcases.Id.

But,accordingtothecourt,intheendtherecordshowsthattheproblemMidwestFenceraisesislargely“theoretical.”Id.at*18.NotallcontractshaveDBEgoals,sosubcontractorsareonanevenfootingforthosecontractswithoutsuchgoals.Id.IDOTandtheTollwaybothuseneutralmeasuresincludingsomedesignedtomakeprimecontractsmoreassessabletoDBEs.Id.ThecourtnotedthatDBEtruckingandmaterialsupplierscounttowardfulfillmentofacontract’sDBEgoal,eventhoughtheyarenotusedaslineitemsincalculatingthecontractgoalinthefirstplace,whichopensupcontractswithDBEgoalstonon‐DBEsubcontractors.Id.

ThecourtstatedthatifMidwestFence“hadpresentedevidenceratherthantheoryonthispoint,theresultmightbedifferent.”Id.at*18.“EvidencethatsubcontractorswerebeingfrozenoutofthemarketorbearingtheentireburdenoftheDBEprogramwouldlikelyrequireatrialtodetermineataminimumwhetherIDOTortheTollwaywereadheringtotheirresponsibilitytoavoidoverconcentrationinsubcontracting.”Id.at*18.ThecourtconcludedthatMidwestFence“hasshownhowtheIllinoisprogramcouldyieldthatresultbutnotthatitactuallydoesso.”Id.

InlightoftheIDOTandTollwayprograms’mechanismstopreventsubcontractorsfromhavingtobeartheentireburdenoftheDBEprograms,includingtheuseofDBEmaterialsandtruckingsuppliersinsatisfyinggoals,effortstodrawDBEsintoprimecontracting,andothermechanisms,accordingtothecourt,MidwestFencedidnotestablishagenuinedisputeoffactonthispoint.Id.at*18.Thecourtstatedthatthe“theoreticalpossibilityofa‘mismatch’couldbeaproblem,butwehavenoevidencethatitactuallyis.”Id.at*18.

Therefore,thecourtconcludedthatIDOTandtheTollwayDBEprogramsarenarrowlytailoredtoservethecompellingstateinterestinremedyingdiscriminationinpubliccontracting.Id.at*18.Theyincluderace‐andgender‐neutralalternatives,setgoalswithreferencetoactualmarketconditions,andallowforfront‐endwaivers.Id.“Sofarastherecordbeforeusshows,theydonotundulyburdenthirdpartiesinserviceofremedyingdiscrimination”,accordingtothecourt.Therefore,MidwestFencefailedtopresentagenuinedisputeoffact“onthispoint.”Id.

PetitionforaWritofCertiorari.MidwestFencefiledaPetitionforaWritofCertioraritotheUnitedStatesSupremeCourtin2017,andCertiorariwasdenied.2017WL497345(2017).

3. Dunnet Bay Construction Company v. Borggren, Illinois DOT, et al., 799 F.3d 676, 2015 WL 4934560 (7th Cir. 2015), cert. denied, Dunnet Bay Construction Co. v. Blankenhorn, Randall S., et al., 2016 WL 193809 (Oct. 3, 2016).

DunnetBayConstructionCompanysuedtheIllinoisDepartmentofTransportation(IDOT)assertingthattheIllinoisDOT’sDBEProgramdiscriminatesonthebasisofrace.ThedistrictcourtgrantedsummaryjudgementtoIllinoisDOT,concludingthatDunnetBaylackedstandingtoraiseanequalprotectionchallengebasedonrace,andheldthattheIllinoisDOTDBEProgramsurvivedtheconstitutionalandotherchallenges.799F.3dat679.(See2014WL552213,C.D.Ill.Fed.12,2014)(SeesummaryofdistrictdecisioninSectionE.below).TheCourtofAppealsaffirmedthegrantofsummaryjudgmenttoIDOT.

DunnetBayengagesingeneralhighwayconstructionandisownedandcontrolledbytwowhitemales.799F.3dat679.Itsaverageannualgrossreceiptsbetween2007and2009wereover


$52million.Id.IDOTadministersitsDBEProgramimplementingtheFederalDBEProgram.IDOTestablishedastatewideaspirationalgoalforDBEparticipationof22.77%.Id.at680.UnderIDOT’sDBEProgram,ifabidderfailstomeettheDBEcontractgoal,itmayrequestamodificationofthegoal,andprovidedocumentationofitsgoodfaitheffortstomeetthegoal.Id.at681.Theserequestsformodificationarealsoknownas“waivers.”Id.

TherecordshowedthatIDOThistoricallygrantedgoalmodificationrequestorwaivers:in2007,itgranted57of63pre‐awardgoalmodificationrequests;thesixotherbiddersultimatelymetthecontractgoalwithpost‐bidassistance.Id.at681.In2008,IDOTgranted50ofthe55pre‐awardgoalmodificationrequests;theotherfivebiddersultimatelymettheDBEgoal.Incalendaryear2009,IDOTgranted32of58goalmodificationrequests;theothercontractorsultimatelymetthegoals.Incalendaryear2010,IDOTreceived35goalmodificationrequests;itgranted21ofthemanddeniedtherest.Id.

DunnetBayallegedthatIDOThadtakenthepositionnowaiverswouldbegranted.Id.at697‐698.IDOTrespondedthatitwasnotitspolicytonotgrantwaivers,butinsteadIDOTwouldaggressivelypursueobtainingtheDBEparticipationintheircontractgoals,includingthatwaiversweregoingtobereviewedatahighleveltomakesuretheappropriatedocumentationwasprovidedinorderforawaivertobeissued.Id.

TheU.S.FHWAapprovedthemethodologyIDOTusedtoestablishastatewideoverallDBEgoalof22.77%.Id.at683,698.TheFHWAreviewedandapprovedtheindividualcontractgoalssetforworkonaprojectknownastheEisenhowerprojectthatDunnetBaybidonin2010.Id.DunnetBaysubmittedtoIDOTabidthatwasthelowestbidontheproject,butitwassubstantiallyoverthebudgetestimatefortheproject.Id.at683‐684.DunnetBaydidnotachievethegoalof22%,butthreeotherbidderseachmettheDBEgoal.Id.at684.DunnetBayrequestedawaiverbasedonitsgoodfaitheffortstoobtaintheDBEgoal.Id.at684.Ultimately,IDOTdeterminedthatDunnetBaydidnotproperlyexercisegoodfaitheffortsanditsbidwasrejected.Id.at684‐687,699.

Becauseallthebidswereoverbudget,IDOTdecidedtorebidtheEisenhowerproject.Id.at687.TherewerefourseparateEisenhowerprojectsadvertisedforbids,andIDOTgrantedoneofthefourgoalmodificationrequestsfromthatbidletting.DunnetBaybidononeoftherebidprojects,butitwasnotthelowestbid;itwasthethirdoutoffivebidders.Id.at687.DunnetBaydidmeetthe22.77%contractDBEgoal,ontherebidprospect,butwasnotawardedthecontractbecauseitwasnotthelowest.Id.

DunnetBaythenfileditslawsuitseekingdamagesaswellasadeclaratoryjudgementthattheIDOTDBEProgramisunconstitutionalandinjunctivereliefagainstitsenforcement.

ThedistrictcourtgrantedtheIDOTDefendants’motionforsummaryjudgementanddeniedDunnetBay’smotion.Id.at687.ThedistrictcourtconcludedthatDunnetBaylackedArticleIIIstandingtoraiseanequalprotectionchallengebecauseithasnotsufferedaparticularizedinjurythatwascalledbyIDOT,andthatDunnetBaywasnotdeprivedoftheabilitytocompeteonanequalbasis.Id.DunnetBayConstructionCompanyv.Hannig,2014WL552213,at*30(C.D.Ill.Feb.12,2014).

EvenifDunnetBayhadstandingtobringanequalprotectionclaim,thedistrictcourtheldthatIDOTwasentitledtosummaryjudgment.ThedistrictcourtconcludedthatDunnetBaywasheldtothesamestandardsaseveryotherbidder,andthuscouldnotestablishthatitwasthevictimofracialdiscrimination.Id.at687.Inaddition,thedistrictcourtdeterminedthatIDOThadnot


exceededitsfederalauthorityunderthefederalrulesandthatDunnetBay’schallengetotheDBEProgramfailedundertheSeventhCircuitCourtofAppealsdecisioninNorthernContracting,Inc.v.Illinois,473F.3d715,721(7thCir.2007),whichinsulatesastateDBEProgramfromaconstitutionalattackabsentashowingthatthestateexceededitsfederalauthority.Id.at688.(SeediscussionofthedistrictcourtdecisioninDunnetBaybelowinSectionE).

DunnetBaylacksstandingtoraiseanequalprotectionclaim.ThecourtfirstaddressedtheissuewhetherDunnetBayhadstandingtochallengeIDOT’sDBEProgramonthegroundthatitdiscriminatedonthebasisofraceintheawardofhighwayconstructioncontracts.

ThecourtfoundthatDunnetBayhadnotestablishedthatitwasexcludedfromcompetitionorotherwisedisadvantagedbecauseofrace‐basedmeasures.Id.at690.NothinginIDOT’sDBEProgram,thecourtstated,excludedDunnetBayfromcompetitionforanycontract.Id.IDOT’sDBEProgramisnota“setasideprogram,”inwhichnon‐minorityownedbusinessescouldnotevenbidoncertaincontracts.Id.UnderIDOT’sDBEProgram,allcontractors,minorityandnon‐minoritycontractors,canbidonallcontracts.Id.at690‐691.

Thecourtsaidtheabsenceofcompleteexclusionfromcompetitionwithminority‐orwomen‐ownedbusinessesdistinguishedtheIDOTDBEProgramfromothercasesinwhichthecourtruledtherewasstandingtochallengeaprogram.Id.at691.DunnetBay,thecourtfound,hasnotallegedandhasnotproducedevidencetoshowthatitwastreatedlessfavorablythananyothercontractorbecauseoftheraceofitsowners.Id.Thislackofanexplicitpreferencefromminority‐ownedbusinessesdistinguishestheIDOTDBEProgramfromothercases.Id.UnderIDOT’sDBEProgram,allcontractorsaretreatedalikeandsubjecttothesamerules.Id.

Inaddition,thecourtdistinguishedothercasesinwhichthecontractorswerefoundtohavestandingbecauseinthosecasesstandingwasbasedinpartonthefacttheyhadlostanawardofacontractforfailingtomeettheDBEgoalorfailingtoshowgoodfaithefforts,despitebeingthelowbiddersonthecontract,andthesecondlowestbidderwasawardedthecontract.Id.at691.Incontrastwiththesecaseswheretheplaintiffshadstanding,thecourtsaidDunnetBaycouldnotestablishthatitwouldhavebeenawardedthecontractbutforitsfailuretomeettheDBEgoalordemonstrategoodfaithefforts.Id.at692.

TheevidenceestablishedthatDunnetBay’sbidwassubstantiallyovertheprogramestimatedbudget,andIDOTrebidthecontractbecausethelowbidwasovertheprojectestimate.Id.Inaddition,DunnetBayhadbeenleftofftheForBiddersListthatissubmittedtoDBEs,whichwasanotherreasonIDOTdecidedtorebidthecontract.Id.

ThecourtfoundthatevenassumingDunnetBaycouldestablishitwasexcludedfromcompetitionwithDBEsorthatitwasdisadvantagedascomparedtoDBEs,itcouldnotshowthatanydifferenceintreatmentwasbecauseofrace.Id.at692.Forthethreeyearspreceding2010,theyearitbidontheproject,DunnetBay’saveragegrossreceiptswereover$52million.Id.Therefore,thecourtfoundDunnetBay’ssizemakesitineligibletoqualifyasaDBE,regardlessoftheraceofitsowners.Id.DunnetBaydidnotshowthatanyadditionalcostsorburdensthatitwouldincurarebecauseofrace,buttheadditionalcostsandburdensareequallyattributabletoDunnetBay’ssize.Id.DunnetBayhadnotestablished,accordingtothecourt,thatthedenialofequaltreatmentresultedfromtheimpositionofaracialbarrier.Id.at693.

DunnetBayalsoallegedthatitwasforcedtoparticipateinadiscriminatoryschemeandwasrequiredtoconsiderraceinsubcontracting,andthusarguedthatitmayassertthird‐partyrights.Id.at693.Thecourtstatedthatithasnotadoptedthebroadviewofstandingregarding


assertingthird‐partyrights.Id.ThecourtconcludedthatDunnetBay’sclaimedinjuryofbeingforcedtoparticipateinadiscriminatoryschemeamountstoachallengetothestate’sapplicationofafederallymandatedprogram,whichtheSeventhCircuitCourtofAppealshasdetermined“mustbelimitedtothequestionofwhetherthestateexceededitsauthority.”Id.at694,quoting,NorthernContracting,473F.3dat720‐21.ThecourtfoundDunnetBaywasnotdeniedequaltreatmentbecauseofracialdiscrimination,butinsteadanydifferenceintreatmentwasequallyattributabletoDunnetBay’ssize.Id.

ThecourtstatedthatDunnetBaydidnotestablishcausationalorredressability.Id.at695.ItfailedtodemonstratethattheDBEProgramcauseditanyinjuryduringthefirstbidprocess.Id.IDOTdidnotawardthecontracttoanyoneunderthefirstbidandre‐letthecontract.Id.Therefore,DunnetBaysufferednoinjurybecauseoftheDBEProgram.Id.ThecourtalsofoundthatDunnetBaycouldnotestablishredressabilitybecauseIDOT’sdecisiontore‐letthecontractredressedanyinjury.Id.

Inaddition,thecourtconcludedthatprudentiallimitationsprecludeDunnetBayfrombringingitsclaim.Id.at695.Thecourtsaidthatalitigantgenerallymustasserthisownlegalrightsandinterests,andcannotresthisclaimtoreliefonthelegalrightsorinterestsofthirdparties.Id.ThecourtrejectedDunnetBay’sattempttoasserttheequalprotectionrightsofanon‐minority‐ownedsmallbusiness.Id.at695‐696.

DunnetBaydidnotproducesufficientevidencethatIDOT’simplementationoftheFederalDBEProgramconstitutesracediscriminationasitdidnotestablishthatIDOTexceededitsfederalauthority.ThecourtsaidthatinthealternativetodenyingDunnetBaystanding,evenifDunnetBayhadstanding,IDOTwasstillentitledtosummaryjudgment.Id.at696.ThecourtstatedthattoestablishanequalprotectionclaimundertheFourteenthAmendment,DunnetBaymustshowthatIDOT“actedwithdiscriminatoryintent.”Id.

ThecourtestablishedthestandardbasedonitspreviousrulingintheNorthernContractingv.IDOTcasethatinimplementingitsDBEProgram,IDOTmayproperlyrelyon“thefederalgovernment’scompellinginterestinremedyingtheeffectsofpastdiscriminationinthenationalconstructionmarket.”Id.,at697,quotingNorthernContracting,473F.3dat720.Significantly,thecourtheldfollowingitsNorthernContractingdecisionasfollows:“[A]stateisinsulatedfrom[aconstitutionalchallengeastowhetheritsprogramisnarrowlytailoredtoachievethiscompellinginterest],absentashowingthatthestateexceededitsfederalauthority.”Id.quotingNorthernContracting,473F.3dat721.

DunnetBaycontendsthatIDOTexceededitsfederalauthoritybyeffectivelycreatingracialquotasbydesigningtheEisenhowerprojecttomeetapre‐determinedDBEgoalandeliminatingwaivers.Id.at697.DunnetBayassertsthatIDOTexceedsitsauthorityby:(1)settingthecontract’sDBEparticipationgoalat22%withouttherequiredanalysis;(2)implementinga“no‐waiver”policy;(3)preliminarilydenyingitsgoalmodificationrequestwithoutassessingitsgoodfaithefforts;(4)denyingitameaningfulreconsiderationhearing;(5)determiningthatitsgoodfaitheffortswereinadequate;and(6)providingnowrittenorotherexplanationofthebasisforitsgood‐faith‐effortsdetermination.Id.

InchallengingtheDBEcontractgoal,DunnetBayassertsthatthe22%goalwas“arbitrary”andthatIDOTmanipulatedtheprocesstojustifyapreordainedgoal.Id.at698.ThecourtstatedDunnetBaydidnotidentifyanyregulationorotherauthoritythatsuggestspoliticalmotivationsmatter,providedIDOTdidnotexceeditsfederalauthorityinsettingthecontractgoal.Id.DunnetBaydoesnotactuallychallengehowIDOTwentaboutsettingitsDBEgoalonthe


contract.Id.DunnetBaydidnotpointtoanyevidencetoshowthatIDOTfailedtocomplywiththeapplicableregulationprovidingonlygeneralguidanceoncontractgoalsetting.Id.

TheFHWAapprovedIDOT’smethodologytoestablishitsstatewideDBEgoalandapprovedtheindividualcontractgoalsfortheEisenhowerproject.Id.at698.DunnetBaydidnotidentifyanypartoftheregulationthatIDOTallegedlyviolatedbyreevaluatingandthenincreasingitsDBEcontractgoal,byexpandingthegeographicareausedtodetermineDBEavailability,byaddingpavementpatchingandlandscapingworkintothecontractgoal,byincludingitemsthathadbeensetasideforsmallbusinessenterprises,orbyanyothermeansbywhichitincreasedtheDBEcontractgoal.Id.

Thecourtagreedwiththedistrictcourt’sconclusionthatbecausethefederalregulationsdonotspecifyaprocedureforarrivingatcontractgoals,itisnotapparenthowIDOTcouldhaveexceededitsfederalauthority.Id.at698.

ThecourtfoundDunnetBaydidnotpresentsufficientevidencetoraiseareasonableinferencethatIDOThadactuallyimplementedano‐waiverpolicy.Id.at698.ThecourtnotedIDOThadgrantedwaiversin2009andin2010thatamountedto60%ofthewaiverrequests.Id.ThecourtstatedthatIDOT’srecordofgrantingwaiversrefutesanysuggestionofano‐waiverpolicy.Id.at699.

ThecourtdidnotagreewithDunnetBay’schallengethatIDOTrejecteditsbidwithoutdeterminingwhetherithadmadegoodfaithefforts,pointingoutthatIDOTinfactdeterminedthatDunnetBayfailedtodocumentadequategoodfaithefforts,andthusithadcompliedwiththefederalregulations.Id.at699.ThecourtfoundIDOT’sdeterminationthatDunnetBayfailedtoshowgoodfaitheffortswassupportedintherecord.Id.ThecourtnotedthereasonsprovidedbyIDOT,includedDunnetBaydidnotutilizeIDOT’ssupportiveservices,andthattheotherbiddersallmettheDBEgoal,whereasDunnetBaydidnotcomeclosetothegoalinitsfirstbid.Id.at699‐700.

ThecourtsaidtheperformanceofotherbiddersinmeetingthecontractgoalislistedinthefederalregulationsasaconsiderationwhendecidingwhetherabidderhasmadegoodfaitheffortstoobtainDBEparticipationgoals,andwasaproperconsideration.Id.at700.ThecourtsaidDunnetBay’seffortstosecuretheDBEparticipationgoalmayhavebeenhinderedbytheomissionofDunnetBayfromtheForBidList,butfoundtherebiddingofthecontractremediedthatoversight.Id.

Conclusion.Thecourtaffirmedthedistrictcourt’sgrantofsummaryjudgementtotheIllinoisDOT,concludingthatDunnetBaylacksstanding,andthattheIllinoisDBEProgramimplementingtheFederalDBEProgramsurvivedtheconstitutionalandotherchallengesmadebyDunnetBay.

PetitionforaWritofCertiorariDenied.DunnetBayfiledaPetitionforaWritofCertioraritotheUnitedStatesSupremeCourtinJanuary2016.TheSupremeCourtdeniedthePetitiononOctober3,2016.

4. Associated General Contractors of America, San Diego Chapter, Inc. v. California Department of Transportation, et al., 713 F.3d 1187 (9th Cir. 2013)

TheAssociatedGeneralContractorsofAmerica,Inc.,SanDiegoChapter,Inc.,(“AGC”)soughtdeclaratoryandinjunctivereliefagainsttheCaliforniaDepartmentofTransportation


(“Caltrans”)anditsofficersonthegroundsthatCaltrans’DisadvantagedBusinessinitialEnterprise(“DBE”)programunconstitutionallyprovidedrace‐andsex‐basedpreferencestoAfricanAmerican,NativeAmerican‐,Asian‐PacificAmerican‐,andwomen‐ownedfirmsoncertaintransportationcontracts.ThefederaldistrictcourtupheldtheconstitutionalityofCaltrans’DBEprogramimplementingtheFederalDBEProgramandgrantedsummaryjudgmenttoCaltrans.ThedistrictcourtheldthatCaltrans’DBEprogramimplementingtheFederalDBEProgramsatisfiedstrictscrutinybecauseCaltranshadastrongbasisinevidenceofdiscriminationintheCaliforniatransportationcontractingindustry,andtheprogramwasnarrowlytailoredtothosegroupsthatactuallysuffereddiscrimination.ThedistrictcourtheldthatCaltrans’substantialstatisticalandanecdotalevidencefromadisparitystudyconductedbyBBCResearchandConsulting,providedastrongbasisinevidenceofdiscriminationagainstthefournamedgroups,andthattheprogramwasnarrowlytailoredtobenefitonlythosegroups.713F.3dat1190.

TheAGCappealedthedecisiontotheNinthCircuitCourtofAppeals.TheNinthCircuitinitiallyheldthatbecausetheAGCdidnotidentifyanyofthememberswhohavesufferedorwillsufferharmasaresultofCaltrans’program,theAGCdidnotestablishthatithadassociationalstandingtobringthelawsuit.Id.Mostsignificantly,theNinthCircuitheldthateveniftheAGCcouldestablishstanding,itsappealfailedbecausetheCourtfoundCaltrans’DBEprogramimplementingtheFederalDBEProgramisconstitutionalandsatisfiedtheapplicablelevelofstrictscrutinyrequiredbytheEqualProtectionClauseoftheUnitedStatesConstitution.Id.at1194‐1200.

CourtAppliesWesternStatesPavingCo.v.WashingtonStateDOTdecision.In2005theNinthCircuitCourtofAppealdecidedWesternStatesPavingCo.v.WashingtonStateDepartmentofTransportation,407F.3d.983(9thCir.2005),whichinvolvedafacialchallengetotheconstitutionalvalidityofthefederallawauthorizingtheUnitedStatesDepartmentofTransportationtodistributefundstoStatesfortransportation‐relatedprojects.Id.at1191.ThechallengeintheWesternStatesPavingcasealsoincludedanas‐appliedchallengetotheWashingtonDOTprogramimplementingthefederalmandate.Id.Applyingstrictscrutiny,theNinthCircuitupheldtheconstitutionalityofthefederalstatuteandthefederalregulations(theFederalDBEProgram),butstruckdownWashingtonDOT’sprogrambecauseitwasnotnarrowlytailored.Id.,citingWesternStatesPavingCo.,407F.3dat990‐995,999‐1002.

InWesternStatesPaving,theNinthCircuitannouncedatwo‐prongedtestfor“narrowtailoring”:

“(1)thestatemustestablishthepresenceofdiscriminationwithinitstransportationcontractingindustry,and(2)theremedialprogrammustbelimitedtothoseminoritygroupsthathaveactuallysuffereddiscrimination.”Id.1191,citingWesternStatesPavingCo.,407F.3dat997‐998.

Evidencegatheringandthe2007DisparityStudy.OnMay1,2006,Caltransceasedtouserace‐andgender‐consciousmeasuresinimplementingtheirDBEprogramonfederallyassistedcontractswhileitgatheredevidenceinanefforttocomplywiththeWesternStatesPavingdecision.Id.at1191.CaltranscommissionedadisparitystudybyBBCResearchandConsultingtodeterminewhethertherewasevidenceofdiscriminationinCalifornia’stransportationcontractingindustry.Id.TheCourtnotedthatdisparityanalysisinvolvesmakingacomparisonbetweentheavailabilityofminority‐andwomen‐ownedbusinessesandtheiractualutilization,producinganumbercalleda“disparityindex.”Id.Anindexof100representsstatisticalparitybetweenavailabilityandutilization,andanumberbelow100indicatesunderutilization.Id.An


indexbelow80isconsideredasubstantialdisparitythatsupportsaninferenceofdiscrimination.Id.

TheCourtfoundtheresearchfirmandthedisparitystudygatheredextensivedatatocalculatedisadvantagedbusinessavailabilityintheCaliforniatransportationcontractingindustry.Id.at1191.TheCourtstated:“Basedonreviewofpublicrecords,interviews,assessmentsastowhetherafirmcouldbeconsideredavailable,forCaltranscontracts,aswellasnumerousotheradjustments,thefirmconcludedthatminority‐andwomen‐ownedbusinessesshouldbeexpectedtoreceive13.5percentofcontactdollarsfromCaltransadministeredfederallyassistedcontracts.”Id.at1191‐1192.

TheCourtsaidtheresearchfirm“examinedover10,000transportation‐relatedcontractsadministeredbyCaltransbetween2002and2006todetermineactualDBEutilization.Thefirmassesseddisparitiesacrossavarietyofcontracts,separatelyassessingcontractsbasedonfundingsource(stateorfederal),typeofcontract(primeorsubcontract),andtypeofproject(engineeringorconstruction).”Id.at1192.

TheCourtpointedoutakeydifferencebetweenfederallyfundedandstatefundedcontractsisthatrace‐consciousgoalswereinplaceforthefederallyfundedcontractsduringthe2002–2006period,butnotforthestatefundedcontracts.Id.at1192.Thus,theCourtstated:“statefundedcontractsfunctionedasacontrolgrouptohelpdeterminewhetherpreviousaffirmativeactionprogramsskewedthedata.”Id.

Moreover,theCourtfoundtheresearchfirmmeasureddisparitiesinalltwelveofCaltrans’administrativedistricts,andcomputedaggregatedisparitiesbasedonstatewidedata.Id.at1192.Thefirmevaluatedstatisticaldisparitiesbyraceandgender.TheCourtstatedthatwithinandacrossmanycategoriesofcontracts,theresearchfirmfoundsubstantialstatisticaldisparitiesforAfricanAmerican,Asian–Pacific,andNativeAmericanfirms.Id.However,theresearchfirmfoundthattherewerenotsubstantialdisparitiesfortheseminoritiesineverysubcategoryofcontract.Id.TheCourtnotedthatthedisparitystudyalsofoundsubstantialdisparitiesinutilizationofwomen‐ownedfirmsforsomecategoriesofcontracts.Id.Afterpublicationofthedisparitystudy,theCourtpointedouttheresearchfirmcalculateddisparityindicesforallwomen‐ownedfirms,includingfemaleminorities,showingsubstantialdisparitiesintheutilizationofallwomen‐ownedfirmssimilartothosemeasuredforwhitewomen.Id.

TheCourtfoundthatthedisparitystudyandCaltransalsodevelopedextensiveanecdotalevidence,by(1)conductingtwelvepublichearingstoreceivecommentsonthefirm’sfindings;(2)receivinglettersfrombusinessownersandtradeassociations;and(3)interviewingrepresentativesfromtwelvetradeassociationsand79owners/managersoftransportationfirms.Id.at1192.TheCourtstatedthatsomeoftheanecdotalevidenceindicateddiscriminationbasedonraceorgender.Id.

Caltrans’DBEProgram.CaltransconcludedthattheevidencefromthedisparitystudysupportedaninferenceofdiscriminationintheCaliforniatransportationcontractingindustry.Id.at1192‐1193.Caltransconcludedthatithadsufficientevidencetomakerace‐andgender‐consciousgoalsforAfricanAmerican‐,Asian–PacificAmerican‐,NativeAmerican‐,andwomen‐ownedfirms.Id.TheCourtstatedthatCaltransadoptedtherecommendationsofthedisparityreportandsetanoverallgoalof13.5percentfordisadvantagedbusinessparticipation.Caltransexpectedtomeetone‐halfofthe13.5percentgoalusingrace‐neutralmeasures.Id.


CaltranssubmitteditsproposedDBEprogramtotheUSDOTforapproval,includingarequestforawaivertoimplementtheprogramonlyforthefouridentifiedgroups.Id.at1193.TheCaltrans’DBEprogramincluded66race‐neutralmeasuresthatCaltransalreadyoperatedorplannedtoimplement,andsubsequentproposalsincreasedthenumberofrace‐neutralmeasuresto150.Id.TheUSDOTgrantedthewaiver,butinitiallydidnotapproveCaltrans’DBEprogramuntilin2009,theDOTapprovedCaltrans’DBEprogramforfiscalyear2009.

DistrictCourtproceedings.AGCthenfiledacomplaintallegingthatCaltrans’implementationoftheFederalDBEProgramviolatedtheFourteenthAmendmentoftheU.S.Constitution,TitleVIoftheCivilRightsAct,andotherlaws.Ultimately,theAGConlyarguedanas‐appliedchallengetoCaltrans’DBEprogram.ThedistrictcourtonmotionsofsummaryjudgmentheldthatCaltrans’programwas“clearlyconstitutional,”asit“wassupportedbyastrongbasisinevidenceofdiscriminationintheCaliforniacontractingindustryandwasnarrowlytailoredtothosegroupswhichhadactuallysuffereddiscrimination.Id.at1193.

SubsequentCaltransstudyandprogram.WhiletheappealbytheAGCwaspending,CaltranscommissionedanewdisparitystudyfromBBCtoupdateitsDBEprogramasrequiredbythefederalregulations.Id.at1193.InAugust2012,BBCpublisheditsseconddisparityreport,andCaltransconcludedthattheupdatedstudyprovidedevidenceofcontinuingdiscriminationintheCaliforniatransportationcontractingindustryagainstthesamefourgroupsandHispanicAmericans.Id.CaltranssubmittedamodifiedDBEprogramthatisnearlyidenticaltotheprogramapprovedin2009,exceptthatitnowincludesHispanicAmericansandsetsanoverallgoalof12.5percent,ofwhich9.5percentwillbeachievedthroughrace‐andgender‐consciousmeasures.Id.TheUSDOTapprovedCaltrans’updatedprograminNovember2012.Id.

Jurisdictionissue.Initially,theNinthCircuitCourtofAppealsconsideredwhetherithadjurisdictionovertheAGC’sappealbasedonthedoctrinesofmootnessandstanding.TheCourtheldthattheappealisnotmootbecauseCaltrans’newDBEprogramissubstantiallysimilartothepriorprogramandisallegedtodisadvantageAGC’smembers“inthesamefundamentalway”asthepreviousprogram.Id.at1194.

TheCourt,however,heldthattheAGCdidnotestablishassociationalstanding.Id.at1194‐1195:TheCourtfoundthattheAGCdidnotidentifyanyaffectedmembersbynamenorhasitsubmitteddeclarationsbyanyofitsmembersattestingtoharmtheyhavesufferedorwillsufferunderCaltrans’program.Id.at1194‐1195.BecauseAGCfailedtoestablishstanding,theCourthelditmustdismisstheappealduetolackofjurisdiction.Id.at1195.

Caltrans’DBEProgramheldconstitutionalonthemerits.TheCourtthenheldthatevenifAGCcouldestablishstanding,itsappealwouldfail.Id.at1194‐1195.TheCourtheldthatCaltrans’DBEprogramisconstitutionalbecauseitsurvivestheapplicablelevelofscrutinyrequiredbytheEqualProtectionClauseandjurisprudence.Id.at1195‐1200.

TheCourtstatedthatrace‐consciousremedialprogramsmustsatisfystrictscrutinyandthatalthoughstrictscrutinyisstringent,itisnot“fatalinfact.”Id.at1194‐1195(quotingAdarandConstructors,Inc.v.Peña,515U.S.200,237(1995)(AdarandIII)).TheCourtquotedAdarandIII:“Theunhappypersistenceofboththepracticeandthelingeringeffectsofracialdiscriminationagainstminoritygroupsinthiscountryisanunfortunatereality,andgovernmentisnotdisqualifiedfromactinginresponsetoit.”Id.(quotingAdarandIII,515U.S.at237.)


TheCourtpointedoutthatgender‐consciousprogramsmustsatisfyintermediatescrutinywhichrequiresthatgender‐consciousprogramsbesupportedbyan‘exceedinglypersuasivejustification’andbesubstantiallyrelatedtotheachievementofthatunderlyingobjective.Id.at1195(citingWesternStatesPaving,407F.3dat990n.6.).

TheCourtheldthatCaltrans’DBEprogramcontainsbothrace‐andgender‐consciousmeasures,andthatthe“entireprogrampassesstrictscrutiny.”Id.at1195.

A.ApplicationofstrictscrutinystandardarticulatedinWesternStatesPaving.TheCourtheldthattheframeworkforAGC’sas‐appliedchallengetoCaltrans’DBEprogramisgovernedbyWesternStatesPaving.TheNinthCircuitinWesternStatesPavingdevisedatwo‐prongedtestfornarrowtailoring:(1)thestatemustestablishthepresenceofdiscriminationwithinitstransportationcontractingindustry,and(2)theremedialprogrammustbe“limitedtothoseminoritygroupsthathaveactuallysuffereddiscrimination.”Id.at1195‐1196(quotingWesternStatesPaving,407F.3dat997–99).

1.EvidenceofdiscriminationinCaliforniacontractingindustry.TheCourtheldthatinEqualProtectioncases,courtsconsiderstatisticalandanecdotalevidencetoidentifytheexistenceofdiscrimination.Id.at1196.TheU.S.SupremeCourthassuggestedthata“significantstatisticaldisparity”couldbesufficienttojustifyrace‐consciousremedialprograms.Id.at*7(citingCityofRichmondv.J.A.CrosonCo.,488U.S.469,509(1989)).TheCourtstatedthatalthoughgenerallynotsufficient,anecdotalevidencecomplementsstatisticalevidencebecauseofitsabilitytobring“thecoldnumbersconvincinglytolife.”Id.(quotingInt’lBhd.ofTeamstersv.UnitedStates,431U.S.324,339(1977)).

TheCourtpointedoutthatWashingtonDOT’sDBEprogramintheWesternStatesPavingcasewasheldinvalidbecauseWashingtonDOThadperformednostatisticalstudiesanditofferednoanecdotalevidence.Id.at1196.TheCourtalsostatedthattheWashingtonDOTusedanoversimplifiedmethodologyresultinginlittleweightbeinggivenbytheCourttothepurporteddisparitybecauseWashington’sdata“didnotaccountfortherelativecapacityofdisadvantagedbusinessestoperformwork,nordiditcontrolforthefactthatexistingaffirmativeactionprogramsskewedthepriorutilizationofminoritybusinessesinthestate.”Id.(quotingWesternStatesPaving,407F.3dat999‐1001).TheCourtsaidthatitstruckdownWashington’sprogramafterdeterminingthattherecordwasdevoidofanyevidencesuggestingthatminoritiescurrentlysuffer–orhaveeversuffered–discriminationintheWashingtontransportationcontractingindustry.”Id.

Significantly,theCourtheldinthiscaseasfollows:“Incontrast,Caltrans’affirmativeactionprogramissupportedbysubstantialstatisticalandanecdotalevidenceofdiscriminationintheCaliforniatransportationcontractingindustry.”Id.at1196.TheCourtnotedthatthedisparitystudydocumenteddisparitiesinmanycategoriesoftransportationfirmsandtheutilizationofcertainminority‐andwomen‐ownedfirms.Id.TheCourtfoundthedisparitystudy“accountedforthefactorsmentionedinWesternStatesPavingaswellasothers,adjustingavailabilitydatabasedoncapacitytoperformworkandcontrollingforpreviouslyadministeredaffirmativeactionprograms.”Id.(citingWesternStates,407F.3dat1000).

TheCourtalsoheld:“Moreover,thestatisticalevidencefromthedisparitystudyisbolsteredbyanecdotalevidencesupportinganinferenceofdiscrimination.Thesubstantialstatisticaldisparitiesalonewouldgiverisetoaninferenceofdiscrimination,seeCroson,488U.S.at509,andcertainlyCaltrans’statisticalevidencecombinedwithanecdotalevidencepassesconstitutionalmuster.”Id.at1196.


TheCourtspecificallyrejectedtheargumentbyAGCthatstrictscrutinyrequiresCaltranstoprovideevidenceof“specificacts”of“deliberate”discriminationbyCaltransemployeesorprimecontractors.Id.at1196‐1197.TheCourtfoundthattheSupremeCourtinCrosonexplicitlystatesthat“[t]hedegreeofspecificityrequiredinthefindingsofdiscrimination…mayvary.”Id.at1197(quotingCroson,488U.S.at489).TheCourtconcludedthatarulerequiringastatetoshowspecificactsofdeliberatediscriminationbyidentifiedindividualswouldruncontrarytothestatementinCrosonthatstatisticaldisparitiesalonecouldbesufficienttosupportrace‐consciousremedialprograms.Id.(citingCroson,488U.S.at509).TheCourtrejectedAGC’sargumentthatCaltrans’programdoesnotsurvivestrictscrutinybecausethedisparitystudydoesnotidentifyindividualactsofdeliberatediscrimination.Id.

TheCourtrejectedasecondargumentbyAGCthatthisstudyshowedinconsistentresultsforutilizationofminoritybusinessesdependingonthetypeandnatureofthecontract,andthuscannotsupportaninferenceofdiscriminationintheentiretransportationcontractingindustry.Id.at1197.AGCarguedthateachofthesesubcategoriesofcontractsmustbeviewedinisolationwhenconsideringwhetheraninferenceofdiscriminationarises,whichtheCourtrejected.Id.TheCourtfoundthatAGC’sargumentoverlookstherationaleunderpinningtheconstitutionaljustificationforremedialrace‐consciousprograms:theyaredesignedtorootout“patternsofdiscrimination.”Id.quotingCroson,488U.S.at504.

TheCourtstatedthattheissueisnotwhetherCaltranscanshowunderutilizationofdisadvantagedbusinessesineverymeasuredcategoryofcontract.Butrather,theissueiswhetherCaltranscanmeettheevidentiarystandardrequiredbyWesternStatesPavingif,lookingattheevidenceinitsentirety,thedatashowsubstantialdisparitiesinutilizationofminorityfirmssuggestingthatpublicdollarsarebeingpouredinto“asystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry.”Id.at1197quotingCroson488U.S.at492.

TheCourtconcludedthatthedisparitystudyandanecdotalevidencedocumentapatternofdisparitiesforthefourgroups,andthatthestudyfoundsubstantialunderutilizationofthesegroupsinnumerouscategoriesofCaliforniatransportationcontracts,whichtheanecdotalevidenceconfirms.Id.at1197.TheCourtheldthisissufficienttoenableCaltranstoinferthatthesegroupsaresystematicallydiscriminatedagainstinpublicly‐fundedcontracts.Id.

Third,theCourtconsideredandrejectedAGC’sargumentthattheanecdotalevidencehaslittleornoprobativevalueinidentifyingdiscriminationbecauseitisnotverified.Id.at*9.TheCourtnotedthattheFourthandTenthCircuitshaverejectedtheneedtoverifyanecdotalevidence,andtheCourtstatedtheAGCmadenopersuasiveargumentthattheNinthCircuitshouldholdotherwise.Id.

TheCourtpointedoutthatAGCattemptedtodiscounttheanecdotalevidencebecausesomeaccountsascribeminorityunderutilizationtofactorsotherthanovertdiscrimination,suchasdifficultieswithobtainingbondingandbreakingintothe“goodolboy”networkofcontractors.Id.at1197‐1198.TheCourtheld,however,thatthefederalcourtsandregulationshaveidentifiedpreciselythesefactorsasbarriersthatdisadvantageminorityfirmsbecauseofthelingeringeffectsofdiscrimination.Id.at1198,citingWesternStatesPaving,407andAGCCII,950F.2dat1414.

TheCourtfoundthatAGCignoresthemanyincidentsofracialandgenderdiscriminationpresentedintheanecdotalevidence.Id.at1198.TheCourtsaidthatCaltransdoesnotclaim,andtheanecdotalevidencedoesnotneedtoprove,thateveryminority‐ownedbusinessis


discriminatedagainst.Id.TheCourtconcluded:“ItisenoughthattheanecdotalevidencesupportsCaltrans’statisticaldatashowingapervasivepatternofdiscrimination.”Id.TheindividualaccountsofdiscriminationofferedbyCaltrans,accordingtotheCourt,metthisburden.Id.

Fourth,theCourtrejectedAGC’scontentionthatCaltrans’evidencedoesnotsupportaninferenceofdiscriminationagainstallwomenbecausegender‐baseddisparitiesinthestudyarelimitedtowhitewomen.Id.at1198.AGC,theCourtsaid,misunderstandsthestatisticaltechniquesusedinthedisparitystudy,andthatthestudycorrectlyisolatestheeffectofgenderbylimitingitsdatapooltowhitewomen,ensuringthatstatisticalresultsforgender‐baseddiscriminationarenotskewedbydiscriminationagainstminoritywomenonaccountoftheirrace.Id.

Inaddition,afterAGC’searlyincorrectobjectionstothemethodology,theresearchfirmconductedafollow‐upanalysisofallwomen‐ownedfirmsthatproducedadisparityindexof59.Id.at1198.TheCourtheldthatthisindexisevidenceofasubstantialdisparitythatraisesaninferenceofdiscriminationandissufficienttosupportCaltrans’decisiontoincludeallwomeninitsDBEprogram.Id.at1195.

2.Programtailoredtogroupswhoactuallysuffereddiscrimination.TheCourtpointedoutthatthesecondprongofthetestarticulatedinWesternStatesPavingrequiresthataDBEprogrambelimitedtothosegroupsthatactuallysuffereddiscriminationinthestate’scontractingindustry.Id.at1198.TheCourtfoundCaltrans’DBEprogramislimitedtothoseminoritygroupsthathaveactuallysuffereddiscrimination.Id.TheCourtheldthatthe2007disparitystudyshowedsystematicandsubstantialunderutilizationofAfricanAmerican‐,NativeAmerican‐,Asian‐PacificAmerican‐,andwomen‐ownedfirmsacrossarangeofcontractcategories.Id.at1198‐1199.Id.Thesedisparities,accordingtotheCourt,supportaninferenceofdiscriminationagainstthosegroups.Id.

CaltransconcludedthatthestatisticalevidencedidnotsupportaninferenceofapatternofdiscriminationagainstHispanicorSubcontinentAsianAmericans.Id.at1199.CaliforniaappliedforandreceivedawaiverfromtheUSDOTinordertolimitits2009programtoAfricanAmerican,NativeAmerican,Asian‐PacificAmerican,andwomen‐ownedfirms.Id.TheCourtheldthatCaltrans’program“adherespreciselytothenarrowtailoringrequirementsofWesternStates.”Id.

TheCourtrejectedtheAGCcontentionthattheDBEprogramisnotnarrowlytailoredbecauseitcreatesrace‐basedpreferencesforalltransportation‐relatedcontracts,ratherthandistinguishingbetweenconstructionandengineeringcontracts.Id.at1199.TheCourtstatedthatAGCcitednocasethatrequiresastatepreferenceprogramtoprovideseparategoalsfordisadvantagedbusinessparticipationonconstructionandengineeringcontracts.Id.TheCourtnotedthattothecontrary,thefederalguidelinesforimplementingthefederalprograminstructstatesnottoseparatedifferenttypesofcontracts.Id.TheCourtfoundthereare“soundpolicyreasonstonotrequiresuchparsing,includingthefactthatthereissubstantialoverlapinfirmscompetingforconstructionandengineeringcontracts,asprimeandsubcontractors.”Id.

B.Considerationofrace–neutralalternatives.TheCourtrejectedtheAGCassertionthatCaltrans’programisnotnarrowlytailoredbecauseitfailedtoevaluaterace‐neutralmeasuresbeforeimplementingthesystemofracialpreferences,andstatedthelawimposesnosuchrequirement.Id.at1199.TheCourtheldthatWesternStatesPavingdoesnotrequirestatesto


independentlymeetthisaspectofnarrowtailoring,andinsteadfocusesonwhetherthefederalstatutesufficientlyconsideredrace‐neutralalternatives.Id.

Second,theCourtfoundthatevenifthisrequirementdoesapplytoCaltrans’program,narrowtailoringonlyrequires“serious,goodfaithconsiderationofworkablerace‐neutralalternatives.”Id.at1199,citingGrutterv.Bollinger,539U.S.306,339(2003).TheCourtfoundthattheCaltransprogramhasconsideredanincreasingnumberofrace‐neutralalternatives,anditrejectedAGC’sclaimthatCaltrans’programdoesnotsufficientlyconsiderrace‐neutralalternatives.Id.at1199.

C.CertificationaffidavitsforDisadvantagedBusinessEnterprises.TheCourtrejectedtheAGCargumentthatCaltrans’programisnotnarrowlytailoredbecauseaffidavitsthatapplicantsmustsubmittoobtaincertificationasDBEsdonotrequireapplicantstoasserttheyhavesuffereddiscriminationinCalifornia.Id.at1199‐1200.TheCourtheldthecertificationprocessemployedbyCaltransfollowstheprocessdetailedinthefederalregulations,andthatthisisanimpermissiblecollateralattackonthefacialvalidityoftheCongressionalActauthorizingtheFederalDBEProgramandthefederalregulationspromulgatedbytheUSDOT(TheSafe,Accountable,Flexible,EfficientTransportationEquityAct:ALegacyforUsers,Pub.L.No.109‐59,§1101(b),119Sect.1144(2005)).Id.at1200.

D.Applicationofprogramtomixedstate‐andfederally‐fundedcontracts.TheCourtalsorejectedAGC’schallengethatCaltransappliesitsprogramtotransportationcontractsfundedbybothfederalandstatemoney.Id.at1200.TheCourtheldthatthisisanotherimpermissiblecollateralattackonthefederalprogram,whichexplicitlyrequiresgoalstobesetformix‐fundedcontracts.Id.

Conclusion.TheCourtconcludedthattheAGCdidnothavestanding,andthatfurther,Caltrans’DBEprogramsurvivesstrictscrutinyby:1)havingastrongbasisinevidenceofdiscriminationwithintheCaliforniatransportationcontractingindustry,and2)beingnarrowlytailoredtobenefitonlythosegroupsthathaveactuallysuffereddiscrimination.Id.at1200.TheCourtthendismissedtheappeal.Id.

5. Braunstein v. Arizona DOT, 683 F.3d 1177 (9th Cir. 2012)

BraunsteinisanengineeringcontractorthatprovidedsubsurfaceutilitylocationservicesforADOT.BraunsteinsuedtheArizonaDOTandothersseekingdamagesundertheCivilRightsAct,pursuantto§§1981and1983,andchallengingtheuseofArizona’sformeraffirmativeactionprogram,orrace‐andgender‐consciousDBEprogramimplementingtheFederalDBEProgram,allegingviolationoftheequalprotectionclause.

Factualbackground.ADOTsolicitedbidsforanewengineeringanddesigncontract.Sixfirmsbidontheprimecontract,butBraunsteindidnotbidbecausehecouldnotsatisfyarequirementthatprimecontractorscomplete50percentofthecontractworkthemselves.Instead,Braunsteincontactedthebiddingfirmstoaskaboutsubcontractingfortheutilitylocationwork.683F.3dat1181.AllsixfirmsrejectedBraunstein’sovertures,andBraunsteindidnotsubmitaquoteorsubcontractingbidtoanyofthem.Id.

Aspartofthebid,theprimecontractorswererequiredtocomplywithfederalregulationsthatprovidestatesreceivingfederalhighwayfundsmaintainaDBEprogram.683F.3dat1182.Underthiscontract,theprimecontractorwouldreceiveamaximumof5pointsforDBEparticipation.Id.at1182.Allsixfirmsthatbidontheprimecontractreceivedthemaximum5


pointsforDBEparticipation.AllsixfirmscommittedtohiringDBEsubcontractorstoperformatleast6percentofthework.OnlyoneofthesixbiddingfirmsselectedaDBEasitsdesiredutilitylocationsubcontractor.ThreeofthebiddingfirmsselectedanothercompanyotherthanBraunsteintoperformtheutilitylocationwork.Id.DMJMwonthebidforthe2005contractusingAztectoperformtheutilitylocationwork.AztecwasnotaDBE.Id.at1182.

DistrictCourtrulings.BraunsteinbroughtthissuitinfederalcourtagainstADOTandemployeesoftheDOTallegingthatADOTviolatedhisrighttoequalprotectionbyusingraceandgenderpreferencesinitssolicitationandawardofthe2005contract.ThedistrictcourtdismissedasmootBraunstein’sclaimsforinjunctiveanddeclaratoryreliefbecauseADOThadsuspendeditsDBEprogramin2006followingtheNinthCircuitdecisioninWesternStatesPavingCo.v.WashingtonStateDOT,407F.3d9882(9thCir.2005).ThisleftonlyBraunstein’sdamagesclaimsagainsttheStateandADOTunder§2000d,andagainstthenamedindividualdefendantsintheirindividualcapacitiesunder§§1981and1983.Id.at1183.

ThedistrictcourtconcludedthatBraunsteinlackedArticleIIIstandingtopursuehisremainingclaimsbecausehehadfailedtoshowthatADOT’sDBEprogramhadaffectedhimpersonally.Thecourtnotedthat“Braunsteinwasaffordedtheopportunitytobidonsubcontractingwork,andtheDBEgoaldidnotserveasabarriertodoingso,norwasitanimpedimenttohissecuringasubcontract.”Id.at1183.ThedistrictcourtfoundthatBraunstein’sinabilitytosecureutilitylocationworkstemmedfromhispastunsatisfactoryperformance,nothisstatusasanon‐DBE.Id.

Lackofstanding.TheNinthCircuitCourtofAppealsheldthatBraunsteinlackedArticleIIIstandingandaffirmedtheentryofsummaryjudgmentinfavorofADOTandtheindividualemployeesofADOT.TheCourtfoundthatBraunsteinhadnotprovidedanyevidenceshowingthatADOT’sDBEprogramaffectedhimpersonallyorthatitimpededhisabilitytocompeteforutilitylocationworkonanequalbasis.Id.at1185.TheCourtnotedthatBraunsteindidnotsubmitaquoteorabidtoanyoftheprimecontractorsbiddingonthegovernmentcontract.Id.

TheCourtalsopointedoutthatBraunsteindidnotseekprospectivereliefagainstthegovernment“affirmativeaction”program,notingthedistrictcourtdismissedasmoothisclaimsfordeclaratoryandinjunctivereliefsinceADOThadsuspendeditsDBEprogrambeforehebroughtthesuit.Id.at1186.Thus,Braunstein’ssurvivingclaimswerefordamagesbasedonthecontractatissueratherthanprospectiverelieftoenjointheDBEProgram.Id.Accordingly,theCourtheldhemustshowmorethanthatheis“ableandready”toseeksubcontractingwork.Id.

TheCourtfoundBraunsteinpresentednoevidencetodemonstratethathewasinapositiontocompeteequallywiththeothersubcontractors,noevidencecomparinghimselfwiththeothersubcontractorsintermsofpriceorothercriteria,andnoevidenceexplainingwhythesixprospectiveprimecontractorsrejectedhimasasubcontractor.Id.at1186.TheCourtstatedthattherewasnothingintherecordindicatingtheADOTDBEprogramposedabarrierthatimpededBraunstein’sabilitytocompeteforworkasasubcontractor.Id.at1187.TheCourtheldthattheexistenceofaracialorgenderbarrierisnotenoughtoestablishstanding,withoutaplaintiff’sshowingthathehasbeensubjectedtosuchabarrier.Id.at1186.

TheCourtnotedBraunsteinhadexplicitlyacknowledgedpreviouslythatthewinningbidderonthecontractwouldnothirehimasasubcontractorforreasonsunrelatedtotheDBEprogram.Id.at1186.Atthesummaryjudgmentstage,theCourtstatedthatBraunsteinwasrequiredtosetforthspecificfactsdemonstratingtheDBEprogramimpededhisabilitytocompeteforthesubcontractingworkonanequalbasis.Id.at1187.


SummaryjudgmentgrantedtoADOT.TheCourtconcludedthatBraunsteinwasunabletopointtoanyevidencetodemonstratehowtheADOTDBEprogramadverselyaffectedhimpersonallyorimpededhisabilitytocompeteforsubcontractingwork.Id.TheCourtthusheldthatBraunsteinlackedArticleIIIstandingandaffirmedtheentryofsummaryjudgmentinfavorofADOT.

6. Northern Contracting, Inc. v. Illinois, 473 F.3d 715 (7th Cir. 2007)

InNorthernContracting,Inc.v.Illinois,theSeventhCircuitaffirmedthedistrictcourtdecisionupholdingthevalidityandconstitutionalityoftheIllinoisDepartmentofTransportation’s(“IDOT”)DBEProgram.PlaintiffNorthernContractingInc.(“NCI”)wasawhitemale‐ownedconstructioncompanyspecializingintheconstructionofguardrailsandfencesforhighwayconstructionprojectsinIllinois.473F.3d715,717(7thCir.2007).Initially,NCIchallengedtheconstitutionalityofboththefederalregulationsandtheIllinoisstatuteimplementingtheseregulations.Id.at719.ThedistrictcourtgrantedtheUSDOT’sMotionforSummaryJudgment,concludingthatthefederalgovernmenthaddemonstratedacompellinginterestandthatTEA‐21wassufficientlynarrowlytailored.NCIdidnotchallengethisrulingandtherebyforfeitedtheopportunitytochallengethefederalregulations.Id.at720.NCIalsoforfeitedtheargumentthatIDOT’sDBEprogramdidnotserveacompellinggovernmentinterest.Id.ThesoleissueonappealtotheSeventhCircuitwaswhetherIDOT’sprogramwasnarrowlytailored.Id.

IDOTtypicallyadoptedanewDBEplaneachyear.Id.at718.InpreparingforFiscalYear2005,IDOTretainedaconsultingfirmtodetermineDBEavailability.Id.Theconsultantfirstidentifiedtherelevantgeographicmarket(Illinois)andtherelevantproductmarket(transportationinfrastructureconstruction).Id.Theconsultantthendeterminedavailabilityofminority‐andwomen‐ownedfirmsthroughanalysisofDun&Bradstreet’sMarketplacedata.Id.ThisinitiallistwascorrectedforerrorsinthedatabysurveyingtheD&Blist.Id.Inlightofthesesurveys,theconsultantarrivedataDBEavailabilityof22.77percent.Id.Theconsultantthenranaregressionanalysisonearningsandbusinessinformationandconcludedthatintheabsenceofdiscrimination,relativeDBEavailabilitywouldbe27.5percent.Id.IDOTconsideredthis,alongwithotherdata,includingDBEutilizationonIDOTs“zerogoal”experimentconductedin2002to2003,inwhichIDOTdidnotuseDBEgoalson5percentofitscontracts(1.5%utilization)anddataofDBEutilizationonprojectsfortheIllinoisStateTollHighwayAuthoritywhichdoesnotreceivefederalfundingandwhosegoalsarecompletelyvoluntary(1.6%utilization).Id.at719.Onthebasisofallofthisdata,IDOTadopteda22.77percentgoalfor2005.Id.

DespitethefacttheNCIforfeitedtheargumentthatIDOT’sDBEprogramdidnotserveacompellingstateinterest,theSeventhCircuitbrieflyaddressedthecompellinginterestprongofthestrictscrutinyanalysis,notingthatIDOThadsatisfieditsburden.Id.at720.Thecourtnotedthat,post‐Adarand,twoothercircuitshaveheldthatastatemayrelyonthefederalgovernment’scompellinginterestinimplementingalocalDBEplan.Id.at720‐21,citingWesternStatesPavingCo.,Inc.v.WashingtonStateDOT,407F.3d983,987(9thCir.2005),cert.denied,126S.Ct.1332(Feb.21,2006)andSherbrookeTurf,Inc.v.MinnesotaDOT,345F.3d964,970(8thCir.2003),cert.denied,541U.S.1041(2004).ThecourtstatedthatNCIhadnotarticulatedanyreasontobreakranksfromtheothercircuitsandexplainedthat“[i]nsofarasthestateismerelycomplyingwithfederallawitisactingastheagentofthefederalgovernment….Ifthestatedoesexactlywhatthestatuteexpectsittodo,andthestatuteisconcededforpurposesoflitigationtobeconstitutional,wedonotseehowthestatecanbethoughttohaveviolatedtheConstitution.”Id.at721,quotingMilwaukeeCountyPaversAssociationv.Fielder,922F.2d419,423(7thCir.1991).ThecourtdidnotaddresswhetherIDOThadanindependentinterestthatcouldhavesurvivedconstitutionalscrutiny.


InaddressingthenarrowlytailoredprongwithrespecttoIDOT’sDBEprogram,thecourtheldthatIDOThadcomplied.Id.ThecourtconcludeditsholdinginMilwaukeethatastateisinsulatedfromaconstitutionalattackabsentashowingthatthestateexceededitsfederalauthorityremainedapplicable.Id.at721‐22.ThecourtnotedthattheSupremeCourtinAdarandConstructorsv.Pena,515U.S.200(1995)didnotseizetheopportunitytooverrulethatdecision,explainingthattheCourtdidnotinvalidateitsconclusionthatachallengetoastate’sapplicationofafederallymandatedprogrammustbelimitedtothequestionofwhetherthestateexceededitsauthority.Id.at722.

ThecourtfurtherclarifiedtheMilwaukeeopinioninlightoftheinterpretationsoftheopinionsofferedinbytheNinthCircuitinWesternStatesandEighthCircuitinSherbrooke.Id.ThecourtstatedthattheNinthCircuitinWesternStatesmisreadtheMilwaukeedecisioninconcludingthatMilwaukeedidnotaddressthesituationofanas‐appliedchallengetoaDBEprogram.Id.at722,n.5.Relatedly,thecourtstatedthattheEighthCircuit’sopinioninSherbrooke(thattheMilwaukeedecisionwascompromisedbythefactthatitwasdecidedunderthepriorlaw“whenthe10percentfederalset‐asidewasmoremandatory”)wasunconvincingsinceallrecipientsoffederaltransportationfundsarestillrequiredtohavecompliantDBEprograms.Id.at722.FederallawmakesmoreclearnowthatthecompliancecouldbeachievedevenwithnoDBEutilizationifthatweretheresultofagoodfaithuseoftheprocess.Id.at722,n.5.ThecourtstatedthatIDOTinthiscasewasactingasaninstrumentoffederalpolicyandNCI’scollateralattackonthefederalregulationswasimpermissible.Id.at722.

Theremainderofthecourt’sopinionaddressedthequestionofwhetherIDOTexceededitsgrantofauthorityunderfederallaw,andheldthatallofNCI’sargumentsfailed.Id.First,NCIchallengedthemethodbywhichthelocalbasefigurewascalculated,thefirststepinthegoal‐settingprocess.Id.NCIarguedthatthenumberofregisteredandprequalifiedDBEsinIllinoisshouldhavesimplybeencounted.Id.Thecourtstatedthatwhilethefederalregulationslistseveralexamplesofmethodsfordeterminingthelocalbasefigure,Id.at723,theseexamplesarenotintendedasanexhaustivelist.Thecourtpointedoutthatthefifthiteminthelistisentitled“AlternativeMethods,”andstates:“Youmayuseothermethodstodetermineabasefigureforyouroverallgoal.AnymethodologyyouchoosemustbebasedondemonstrableevidenceoflocalmarketconditionsandbedesignatedtoultimatelyattainagoalthatisrationallyrelatedtotherelativeavailabilityofDBEsinyourmarket.”Id.(citing49CFR§26.45(c)(5)).Accordingtothecourt,theregulationsmakeclearthat“relativeavailability”means“theavailabilityofready,willingandableDBEsrelativetoallbusinessready,willing,andabletoparticipate”onDOTcontracts.Id.ThecourtstatedNCIpointedtonothinginthefederalregulationsthatindicatedthatarecipientmustsonarrowlydefinethescopeoftheready,willing,andavailablefirmstoasimplecountofthenumberofregisteredandprequalifiedDBEs.Id.ThecourtagreedwiththedistrictcourtthattheremedialnatureofthefederalschememilitatesinfavorofamethodofDBEavailabilitycalculationthatcastsabroadernet.Id.

Second,NCIarguedthattheIDOTfailedtoproperlyadjustitsgoalbasedonlocalmarketconditions.Id.Thecourtnotedthatthefederalregulationsdonotrequireanyadjustmentstothebasefigure,butsimplyproviderecipientswithauthoritytomakesuchadjustmentsifnecessary.Id.Accordingtothecourt,NCIfailedtoidentifyanyaspectoftheregulationsrequiringIDOTtoseparateprimecontractoravailabilityfromsubcontractoravailability,andpointedoutthattheregulationsrequirethelocalgoaltobefocusedonoverallDBEparticipation.Id.

Third,NCIcontendedthatIDOTviolatedthefederalregulationsbyfailingtomeetthemaximumfeasibleportionofitsoverallgoalthroughrace‐neutralmeansoffacilitatingDBEparticipation.Id.at723‐24.NCIarguedthatIDOTshouldhaveconsideredDBEswhohadwonsubcontractson


goalprojectswheretheprimecontractordidnotconsiderDBEstatus,insteadofonlyconsideringDBEswhowoncontractsonno‐goalprojects.Id.at724.ThecourtheldthatwhiletheregulationsindicatethatwhereDBEswinsubcontractsongoalprojectsstrictlythroughlowbidthiscanbecountedasrace‐neutralparticipation,theregulationsdidnotrequireIDOTtosearchforthisdata,forthepurposeofcalculatingpastlevelsofrace‐neutralDBEparticipation.Id.Accordingtothecourt,therecordindicatedthatIDOTusednearlyallthemethodsdescribedintheregulationstomaximizetheportionofthegoalthatwillbeachievedthroughrace‐neutralmeans.Id.

ThecourtaffirmedthedecisionofthedistrictcourtupholdingthevalidityoftheIDOTDBEprogramandfoundthatitwasnarrowlytailoredtofurtheracompellinggovernmentalinterest.Id.

7. Western States Paving Co. v. Washington State DOT, 407 F.3d 983 (9th Cir. 2005), cert. denied, 546 U.S. 1170 (2006)

ThiscaseoutoftheNinthCircuitstruckdownastate’simplementationoftheFederalDBEProgramforfailuretopassconstitutionalmuster.InWesternStatesPaving,theNinthCircuitheldthattheStateofWashington’simplementationoftheFederalDBEProgramwasunconstitutionalbecauseitdidnotsatisfythenarrowtailoringelementoftheconstitutionaltest.TheNinthCircuitheldthattheStatemustpresentitsownevidenceofpastdiscriminationwithinitsownboundariesinordertosurviveconstitutionalmusterandcouldnotmerelyrelyupondatasuppliedbyCongress.TheUnitedStatesSupremeCourtdeniedcertiorari.Theanalysisinthedecisionalsoisinstructiveinparticularastotheapplicationofthenarrowlytailoredprongofthestrictscrutinytest.

PlaintiffWesternStatesPavingCo.(“plaintiff”)wasawhitemale‐ownedasphaltandpavingcompany.407F.3d983,987(9thCir.2005).InJulyof2000,plaintiffsubmittedabidforaprojectfortheCityofVancouver;theprojectwasfinancedwithfederalfundsprovidedtotheWashingtonStateDOT(“WSDOT”)undertheTransportationEquityActforthe21stCentury(“TEA‐21”).Id.

CongressenactedTEA‐21in1991andaftermultiplerenewals,itwassettoexpireonMay31,2004.Id.at988.TEA‐21establishedminimumminority‐ownedbusinessparticipationrequirements(10%)forcertainfederally‐fundedprojects.Id.TheregulationsrequireeachstateacceptingfederaltransportationfundstoimplementaDBEprogramthatcomportswiththeTEA‐21.Id.TEA‐21indicatesthe10percentDBEutilizationrequirementis“aspirational,”andthestatutorygoal“doesnotauthorizeorrequirerecipientstosetoverallorcontractgoalsatthe10percentlevel,oranyotherparticularlevel,ortotakeanyspecialadministrativestepsiftheirgoalsareaboveorbelow10percent.”Id.

TEA‐21setsforthatwo‐stepprocessforastatetodetermineitsownDBEutilizationgoal:(1)thestatemustcalculatetherelativeavailabilityofDBEsinitslocaltransportationcontractingindustry(onewaytodothisistodividethenumberofready,willingandableDBEsinastatebythetotalnumberofready,willingandablefirms);and(2)thestateisrequiredto“adjustthisbasefigureupwardordownwardtoreflecttheprovencapacityofDBEstoperformwork(asmeasuredbythevolumeofworkallocatedtoDBEsinrecentyears)andevidenceofdiscriminationagainstDBEsobtainedfromstatisticaldisparitystudies.”Id.at989(citingregulation).Astateisalsopermittedtoconsiderdiscriminationinthebondingandfinancingindustriesandthepresenteffectsofpastdiscrimination.Id.(citingregulation).TEA‐21requiresageneralized,“undifferentiated”minoritygoalandastateisprohibitedfromapportioningtheir


DBEutilizationgoalamongdifferentminoritygroups(e.g.,betweenHispanics,blacks,andwomen).Id.at990(citingregulation).

“Astatemustmeetthemaximumfeasibleportionofthisgoalthroughrace‐[andgender‐]neutralmeans,includinginformationalandinstructionalprogramstargetedtowardallsmallbusinesses.”Id.(citingregulation).Race‐andgender‐consciouscontractgoalsmustbeusedtoachieveanyportionofthecontractgoalsnotachievablethroughrace‐andgender‐neutralmeasures.Id.(citingregulation).However,TEA‐21doesnotrequirethatDBEparticipationgoalsbeusedoneverycontractoratthesameleveloneverycontractinwhichtheyareused;rather,theoveralleffectmustbeto“obtainthatportionoftherequisiteDBEparticipationthatcannotbeachievedthroughrace‐[andgender‐]neutralmeans.”Id.(citingregulation).

Aprimecontractormustuse“goodfaithefforts”tosatisfyacontract’sDBEutilizationgoal.Id.(citingregulation).However,astateisprohibitedfromenactingrigidquotasthatdonotcontemplatesuchgoodfaithefforts.Id.(citingregulation).

UndertheTEA‐21minorityutilizationrequirements,theCitysetagoalof14percentminorityparticipationonthefirstprojectplaintiffbidon;theprimecontractorthusrejectedplaintiff’sbidinfavorofahigherbiddingminority‐ownedsubcontractingfirm.Id.at987.InSeptemberof2000,plaintiffagainsubmittedabidonaprojectfinancedwithTEA‐21fundsandwasagainrejectedinfavorofahigherbiddingminority‐ownedsubcontractingfirm.Id.Theprimecontractorexpresslystatedthatherejectedplaintiff’sbidduetotheminorityutilizationrequirement.Id.

PlaintifffiledsuitagainsttheWSDOT,ClarkCounty,andtheCity,challengingtheminoritypreferencerequirementsofTEA‐21asunconstitutionalbothfaciallyandasapplied.Id.Thedistrictcourtrejectedbothofplaintiff’schallenges.ThedistrictcourtheldtheprogramwasfaciallyconstitutionalbecauseitfoundthatCongresshadidentifiedsignificantevidenceofdiscriminationinthetransportationcontractingindustryandtheTEA‐21wasnarrowlytailoredtoremedysuchdiscrimination.Id.at988.Thedistrictcourtrejectedtheas‐appliedchallengeconcludingthatWashington’simplementationoftheprogramcomportedwiththefederalrequirementsandthestatewasnotrequiredtodemonstratethatitsminoritypreferenceprogramindependentlysatisfiedstrictscrutiny.Id.PlaintiffappealedtotheNinthCircuitCourtofAppeals.Id.

TheNinthCircuitconsideredwhethertheTEA‐21,whichauthorizestheuseofrace‐andgender‐basedpreferencesinfederally‐fundedtransportationcontracts,violatedequalprotection,eitheronitsfaceorasappliedbytheStateofWashington.

Thecourtappliedastrictscrutinyanalysistoboththefacialandas‐appliedchallengestoTEA‐21.Id.at990‐91.Thecourtdidnotapplyaseparateintermediatescrutinyanalysistothegender‐basedclassificationsbecauseitdeterminedthatit“wouldnotyieldadifferentresult.”Id.at990,n.6.

Facialchallenge(FederalGovernment).Thecourtfirstnotedthatthefederalgovernmenthasacompellinginterestin“ensuringthatitsfundingisnotdistributedinamannerthatperpetuatestheeffectsofeitherpublicorprivatediscriminationwithinthetransportationcontractingindustry.”Id.at991,citingCityofRichmondv.J.A.CrosonCo.,488U.S.469,492(1989)andAdarandConstructors,Inc.v.Slater(“AdarandVII”),228F.3d1147,1176(10thCir.2000).Thecourtfoundthat“[b]othstatisticalandanecdotalevidencearerelevantinidentifyingtheexistenceofdiscrimination.”Id.at991.ThecourtfoundthatalthoughCongressdidnothave


evidenceofdiscriminationagainstminoritiesineverystate,suchevidencewasunnecessaryfortheenactmentofnationwidelegislation.Id.However,citingboththeEighthandTenthCircuits,thecourtfoundthatCongresshadampleevidenceofdiscriminationinthetransportationcontractingindustrytojustifyTEA‐21.Id.ThecourtalsofoundthatbecauseTEA‐21setforthflexiblerace‐consciousmeasurestobeusedonlywhenrace‐neutraleffortswereunsuccessful,theprogramwasnarrowlytailoredandthussatisfiedstrictscrutiny.Id.at992‐93.Thecourtaccordinglyrejectedplaintiff’sfacialchallenge.Id.

As‐applied challenge (State of Washington).PlaintiffallegedTEA‐21wasunconstitutionalas‐appliedbecausetherewasnoevidenceofdiscriminationinWashington’stransportationcontractingindustry.Id.at995.TheStateallegedthatitwasnotrequiredtoindependentlydemonstratethatitsapplicationofTEA‐21satisfiedstrictscrutiny.Id.TheUnitedStatesintervenedtodefendTEA‐21’sfacialconstitutionality,and“unambiguouslyconcededthatTEA‐21’sraceconsciousmeasurescanbeconstitutionallyappliedonlyinthosestateswheretheeffectsofdiscriminationarepresent.”Id.at996;seealsoBr.fortheUnitedStatesat28(April19,2004)(“DOT’sregulations…aredesignedtoassistStatesinensuringthatrace‐consciousremediesarelimitedtoonlythosejurisdictionswherediscriminationoritseffectsareaproblemandonlyasalastresortwhenrace‐neutralreliefisinsufficient.”(emphasisinoriginal)).

ThecourtfoundthattheEighthCircuitwastheonlyothercourttoconsideranas‐appliedchallengetoTEA‐21inSherbrookeTurf,Inc.v.MinnesotaDOT,345F.3d964(8thCir.2003),cert.denied124S.Ct.2158(2004).Id.at996.TheEighthCircuitdidnotrequireMinnesotaandNebraskatoidentifyacompellingpurposefortheirprogramsindependentofCongress’snationwideremedialobjective.Id.However,theEighthCircuitdidconsiderwhetherthestates’implementationofTEA‐21wasnarrowlytailoredtoachieveCongress’sremedialobjective.Id.TheEighthCircuitthuslookedtothestates’independentevidenceofdiscriminationbecause“tobenarrowlytailored,anationalprogrammustbelimitedtothosepartsofthecountrywhereitsrace‐basedmeasuresaredemonstrablyneeded.”Id.(internalcitationsomitted).TheEighthCircuitreliedonthestates’statisticalanalysesoftheavailabilityandcapacityofDBEsintheirlocalmarketsconductedbyoutsideconsultingfirmstoconcludethatthestatessatisfiedthenarrowtailoringrequirement.Id.at997.

ThecourtconcurredwiththeEighthCircuitandfoundthatWashingtondidnotneedtodemonstrateacompellinginterestforitsDBEprogram,independentfromthecompellingnationwideinterestidentifiedbyCongress.Id.However,thecourtdeterminedthatthedistrictcourterredinholdingthatmerecompliancewiththefederalprogramsatisfiedstrictscrutiny.Id.Rather,thecourtheldthatwhetherWashington’sDBEprogramwasnarrowlytailoredwasdependentonthepresenceorabsenceofdiscriminationinWashington’stransportationcontractingindustry.Id.at997‐98.“IfnosuchdiscriminationispresentinWashington,thentheState’sDBEprogramdoesnotservearemedialpurpose;itinsteadprovidesanunconstitutionalwindfalltominoritycontractorssolelyonthebasisoftheirraceorsex.”Id.at998.ThecourtheldthataSixthCircuitdecisiontothecontrary,TennesseeAsphaltCo.v.Farris,942F.2d969,970(6thCir.1991),misinterpretedearliercaselaw.Id.at997,n.9.

Thecourtfoundthatmoreover,evenwherediscriminationispresentinastate,aprogramisnarrowlytailoredonlyifitappliesonlytothoseminoritygroupswhohaveactuallysuffereddiscrimination.Id.at998,citingCroson,488U.S.at478.ThecourtalsofoundthatinMontereyMechanicalCo.v.Wilson,125F.3d702,713(9thCir.1997),ithad“previouslyexpressedsimilarconcernsaboutthehaphazardinclusionofminoritygroupsinaffirmativeactionprogramsostensiblydesignedtoremedytheeffectsofdiscrimination.”Id.InMontereyMechanical,the


courtheldthat“theoverlyinclusivedesignationofbenefitedminoritygroupswasa‘redflagsignalingthatthestatuteisnot,astheEqualProtectionClauserequires,narrowlytailored.’”Id.,citingMontereyMechanical,125F.3dat714.Thecourtfoundthatothercourtsareinaccord.Id.at998‐99,citingBuildersAss’nofGreaterChi.v.CountyofCook,256F.3d642,647(7thCir.2001);AssociatedGen.ContractorsofOhio,Inc.v.Drabik,214F.3d730,737(6thCir.2000);O’DonnellConstr.Co.v.DistrictofColumbia,963F.2d420,427(D.C.Cir.1992).Accordingly,thecourtfoundthateachoftheprincipalminoritygroupsbenefitedbyWSDOT’sDBEprogrammusthavesuffereddiscriminationwithintheState.Id.at999.

ThecourtfoundthatWSDOT’sprogramcloselytrackedthesampleUSDOTDBEprogram.Id.WSDOTcalculateditsDBEparticipationgoalbyfirstcalculatingtheavailabilityofready,willingandableDBEsintheState(dividingthenumberoftransportationcontractingfirmsintheWashingtonStateOfficeofMinority,WomenandDisadvantagedBusinessEnterprisesDirectorybythetotalnumberoftransportationcontractingfirmslistedintheCensusBureau’sWashingtondatabase,whichequaled11.17%).Id.WSDOTthenupwardlyadjustedthe11.17percentbasefigureto14percent“toaccountfortheprovencapacityofDBEstoperformwork,asreflectedbythevolumeofworkperformedbyDBEs[duringacertaintimeperiod].”Id.AlthoughDBEsperformed18percentofworkonStateprojectsduringtheprescribedtimeperiod,Washingtonsetthefinaladjustedfigureat14percentbecauseTEA‐21reducedthenumberofeligibleDBEsinWashingtonbyimposingmorestringentcertificationrequirements.Id.at999,n.11.WSDOTdidnotmakeanadjustmenttoaccountfordiscriminatorybarriersinobtainingbondingandfinancing.Id.WSDOTsimilarlydidnotmakeanyadjustmenttoreflectpresentorpastdiscrimination“becauseitlackedanystatisticalstudiesevidencingsuchdiscrimination.”Id.

WSDOTthendeterminedthatitneededtoachieve5percentofits14percentgoalthroughrace‐consciousmeansbasedona9percentDBEparticipationrateonstate‐fundedcontractsthatdidnotincludeaffirmativeactioncomponents(i.e.,9%participationcouldbeachievedthroughrace‐neutralmeans).Id.at1000.TheUSDOTapprovedWSDOTgoal‐settingprogramandthetotalityofits2000DBEprogram.Id.

Washingtonconcededthatitdidnothavestatisticalstudiestoestablishtheexistenceofpastorpresentdiscrimination.Id.Itargued,however,thatithadevidenceofdiscriminationbecauseminority‐ownedfirmshadthecapacitytoperform14percentoftheState’stransportationcontractsin2000butreceivedonly9percentofthesubcontractingfundsoncontractsthatdidnotincludeanaffirmativeaction’scomponent.Id.ThecourtfoundthattheState’smethodologywasflawedbecausethe14percentfigurewasbasedontheearlier18percentfigure,discussedsupra,whichincludedcontractswithaffirmativeactioncomponents.Id.Thecourtconcludedthatthe14percentfiguredidnotaccuratelyreflecttheperformancecapacityofDBEsinarace‐neutralmarket.Id.ThecourtalsofoundtheStateconcededasmuchtothedistrictcourt.Id.

ThecourtheldthatadisparitybetweenDBEperformanceoncontractswithanaffirmativeactioncomponentandthosewithout“doesnotprovideanyevidenceofdiscriminationagainstDBEs.”Id.ThecourtfoundthattheonlyevidenceuponwhichWashingtoncouldrelywasthedisparitybetweentheproportionofDBEfirmsintheState(11.17%)andthepercentageofcontractsawardedtoDBEsonrace‐neutralgrounds(9%).Id.However,thecourtdeterminedthatsuchevidencewasentitledto“littleweight”becauseitdidnottakeintoaccountamultitudeofotherfactorssuchasfirmsize.Id.

Moreover,thecourtfoundthattheminimalstatisticalevidencewasinsufficientevidence,standingalone,ofdiscriminationinthetransportationcontractingindustry.Id.at1001.The


courtfoundthatWSDOTdidnotpresentanyanecdotalevidence.Id.ThecourtrejectedtheState’sargumentthattheDBEapplicationsthemselvesconstitutedevidenceofpastdiscriminationbecausetheapplicationswerenotproperlyintherecord,andbecausetheapplicantswerenotrequiredtocertifythattheyhadbeenvictimsofdiscriminationinthecontractingindustry.Id.Accordingly,thecourtheldthatbecausetheStatefailedtoprofferevidenceofdiscriminationwithinitsowntransportationcontractingmarket,itsDBEprogramwasnotnarrowlytailoredtoCongress’scompellingremedialinterest.Id.at1002‐03.

Thecourtaffirmedthedistrictcourt’sgrantonsummaryjudgmenttotheUnitedStatesregardingthefacialconstitutionalityofTEA‐21,reversedthegrantofsummaryjudgmenttoWashingtonontheas‐appliedchallenge,andremandedtodeterminetheState’sliabilityfordamages.

ThedissentarguedthatwheretheStatecompliedwithTEA‐21inimplementingitsDBEprogram,itwasnotsusceptibletoanas‐appliedchallenge.

8. Sherbrooke Turf, Inc. v. Minnesota DOT, and Gross Seed Company v. Nebraska Department of Roads, 345 F.3d 964 (8th Cir. 2003), cert. denied, 541 U.S. 1041 (2004)

ThiscaseisinstructiveinitsanalysisofstateDOTDBE‐typeprogramsandtheirevidentiarybasisandimplementation.ThiscasealsoisinstructiveinitsanalysisofthenarrowlytailoredrequirementforstateDBEprograms.InupholdingthechallengedFederalDBEProgramatissueinthiscasetheEighthCircuitemphasizedtherace‐,ethnicity‐andgender‐neutralelements,theultimateflexibilityoftheProgram,andthefacttheProgramwastiedcloselyonlytolabormarketswithidentifieddiscrimination.

InSherbrookeTurf,Inc.v.MinnesotaDOT,andGrossSeedCompanyv.NebraskaDepartmentofRoads,theU.S.CourtofAppealsfortheEighthCircuitupheldtheconstitutionalityoftheFederalDBEProgram(49CFRPart26).ThecourtheldtheFederalProgramwasnarrowlytailoredtoremedyacompellinggovernmentalinterest.Thecourtalsoheldthefederalregulationsgoverningthestates’implementationoftheFederalDBEProgramwerenarrowlytailored,andthestateDOT’simplementationoftheFederalDBEProgramwasnarrowlytailoredtoserveacompellinggovernmentinterest.

SherbrookeandGrossSeedbothcontendedthattheFederalDBEProgramonitsfaceandasappliedinMinnesotaandNebraskaviolatedtheEqualProtectioncomponentoftheFifthAmendment’sDueProcessClause.TheEighthCircuitengagedinareviewoftheFederalDBEProgramandtheimplementationoftheProgrambytheMinnesotaDOTandtheNebraskaDepartmentofRoads(“NebraskaDOR”)underastrictscrutinyanalysisandheldthattheFederalDBEProgramwasvalidandconstitutionalandthattheMinnesotaDOT’sandNebraskaDOR’simplementationoftheProgramalsowasconstitutionalandvalid.Applyingthestrictscrutinyanalysis,thecourtfirstconsideredwhethertheFederalDBEProgramestablishedacompellinggovernmentalinterest,andfoundthatitdid.ItconcludedthatCongresshadastrongbasisinevidencetosupportitsconclusionthatrace‐basedmeasureswerenecessaryforthereasonsstatedbytheTenthCircuitinAdarand,228F.3dat1167‐76.Althoughthecontractorspresentedevidencethatchallengedthedata,theyfailedtopresentaffirmativeevidencethatnoremedialactionwasnecessarybecauseminority‐ownedsmallbusinessesenjoynon‐discriminatoryaccesstoparticipationinhighwaycontracts.Thus,thecourtheldtheyfailedtomeettheirultimateburdentoprovethattheDBEProgramisunconstitutionalonthisground.


Finally,SherbrookeandGrossSeedarguedthattheMinnesotaDOTandNebraskaDORmustindependentlysatisfythecompellinggovernmentalinteresttestaspectofstrictscrutinyreview.Thegovernmentargued,andthedistrictcourtsbelowagreed,thatparticipatingstatesneednotindependentlymeetthestrictscrutinystandardbecauseundertheDBEProgramthestatemuststillcomplywiththeDOTregulations.TheEighthCircuitheldthatthisissuewasnotaddressedbytheTenthCircuitinAdarand.TheEighthCircuitconcludedthatneitherside’spositionisentirelysound.

ThecourtrejectedthecontentionofthecontractorsthattheirfacialchallengestotheDBEProgrammustbeupheldunlesstherecordbeforeCongressincludedstrongevidenceofracediscriminationinconstructioncontractinginMinnesotaandNebraska.Ontheotherhand,thecourtheldavalidrace‐basedprogrammustbenarrowlytailored,andtobenarrowlytailored,anationalprogrammustbelimitedtothosepartsofthecountrywhereitsrace‐basedmeasuresaredemonstrablyneededtotheextentthatthefederalgovernmentdelegatesthistailoringfunction,asastate’simplementationbecomesrelevanttoareviewingcourt’sstrictscrutiny.Thus,thecourtleftthequestionofstateimplementationtothenarrowtailoringanalysis.

Thecourtheldthatareviewingcourtapplyingstrictscrutinymustdetermineiftherace‐basedmeasureisnarrowlytailored.Thatis,whetherthemeanschosentoaccomplishthegovernment’sassertedpurposearespecificallyandnarrowlyframedtoaccomplishthatpurpose.ThecontractorshavetheultimateburdenofestablishingthattheDBEProgramisnotnarrowlytailored.Id.ThecompellinginterestanalysisfocusedontherecordbeforeCongress;thenarrow‐tailoringanalysislooksattherolesoftheimplementinghighwayconstructionagencies.

Fordeterminingwhetherarace‐consciousremedyisnarrowlytailored,thecourtlookedatfactorssuchastheefficacyofalternativeremedies,theflexibilityanddurationoftherace‐consciousremedy,therelationshipofthenumericalgoalstotherelevantlabormarket,andtheimpactoftheremedyonthirdparties.Id.UndertheDBEProgram,astatereceivingfederalhighwayfundsmust,onanannualbasis,submittoUSDOTanoverallgoalforDBEparticipationinitsfederally‐fundedhighwaycontracts.See,49CFR§26.45(f)(1).Theoverallgoal“mustbebasedondemonstrableevidence”astothenumberofDBEswhoareready,willing,andabletoparticipateascontractorsorsubcontractorsonfederally‐assistedcontracts.49CFR§26.45(b).Thenumbermaybeadjustedupwardtoreflectthestate’sdeterminationthatmoreDBEswouldbeparticipatingabsenttheeffectsofdiscrimination,includingrace‐relatedbarrierstoentry.See,49CFR§26.45(d).

Thestatemustmeetthe“maximumfeasibleportion”ofitsoverallgoalbyrace‐neutralmeansandmustsubmitforapprovalaprojectionoftheportionitexpectstomeetthroughrace‐neutralmeans.See,49CFR§26.45(a),(c).Ifrace‐neutralmeansareprojectedtofallshortofachievingtheoverallgoal,thestatemustgivepreferencetofirmsithascertifiedasDBEs.However,suchpreferencesmaynotincludequotas.49CFR§26.45(b).Duringthecourseoftheyear,ifastatedeterminesthatitwillexceedorfallshortofitsoverallgoal,itmustadjustitsuseofrace‐consciousandrace‐neutralmethods“[t]oensurethatyourDBEprogramcontinuestobenarrowlytailoredtoovercometheeffectsofdiscrimination.”49CFR§26.51(f).

Absentbadfaithadministrationoftheprogram,astate’sfailuretoachieveitsoverallgoalwillnotbepenalized.See,49CFR§26.47.Ifthestatemeetsitsoverallgoalfortwoconsecutiveyearsthroughrace‐neutralmeans,itisnotrequiredtosetanannualgoaluntilitdoesnotmeetitsprioroverallgoalforayear.See,49CFR§26.51(f)(3).Inaddition,DOTmaygrantanexemptionorwaiverfromanyandallrequirementsoftheProgram.See,49CFR§26.15(b).


Likethedistrictcourtsbelow,theEighthCircuitconcludedthattheUSDOTregulations,ontheirface,satisfytheSupremeCourt’snarrowingtailoringrequirements.First,theregulationsplacestrongemphasisontheuseofrace‐neutralmeanstoincreaseminoritybusinessparticipationingovernmentcontracting.345F.3dat972.Narrowtailoringdoesnotrequireexhaustionofeveryconceivablerace‐neutralalternative,butitdoesrequireseriousgoodfaithconsiderationofworkablerace‐neutralalternatives.345F.3dat971,citingGrutterv.Bollinger,539U.S.306.

Second,therevisedDBEprogramhassubstantialflexibility.Astatemayobtainwaiversorexemptionsfromanyrequirementsandisnotpenalizedforagoodfaithefforttomeetitsoverallgoal.Inaddition,theprogramlimitspreferencestosmallbusinessesfallingbeneathanearningsthreshold,andanyindividualwhosenetworthexceeds$750,000.00cannotqualifyaseconomicallydisadvantaged.See,49CFR§26.67(b).Likewise,theDBEprogramcontainsbuilt‐indurationallimits.345F.3dat972.AstatemayterminateitsDBEprogramifitmeetsorexceedsitsannualoverallgoalthroughrace‐neutralmeansfortwoconsecutiveyears.Id.;49CFR§26.51(f)(3).

Third,thecourtfound,theUSDOThastiedthegoalsforDBEparticipationtotherelevantlabormarkets.Theregulationsrequirestatestosetoverallgoalsbaseduponthelikelynumberofminoritycontractorsthatwouldhavereceivedfederalassistedhighwaycontractsbutfortheeffectsofpastdiscrimination.See,49CFR§26.45(c)‐(d)(Steps1and2).Thoughtheunderlyingestimatesmaybeinexact,theexerciserequiresstatestofocusonestablishingrealisticgoalsforDBEparticipationintherelevantcontactingmarkets.Id.at972.

Finally,CongressandDOThavetakensignificantsteps,thecourtheld,tominimizetherace‐basednatureoftheDBEProgram.Itsbenefitsaredirectedatallsmallbusinessesownedandcontrolledbythesociallyandeconomicallydisadvantaged.WhileTEA‐21createsapresumptionthatmembersofcertainracialminoritiesfallwithinthatclass,thepresumptionisrebuttable,wealthyminorityownersandwealthyminority‐ownedfirmsareexcluded,andcertificationisavailabletopersonswhoarenotpresumptivelydisadvantagedthatdemonstrateactualsocialandeconomicdisadvantage.Thus,raceismaderelevantintheProgram,butitisnotadeterminativefactor.345F.3dat973.Forthesereasons,thecourtagreedwiththedistrictcourtsthattherevisedDBEProgramisnarrowlytailoredonitsface.

SherbrookeandGrossSeedalsoarguedthattheDBEProgramasappliedinMinnesotaandNebraskaisnotnarrowlytailored.UndertheFederalProgram,statessettheirowngoals,basedonlocalmarketconditions;theirgoalsarenotimposedbythefederalgovernment;nordorecipientshavetotiethemtoanyuniformnationalpercentage.345F.3dat973,citing64Fed.Reg.at5102.

ThecourtanalyzedwhatMinnesotaandNebraskadidinconnectionwiththeirimplementationoftheFederalDBEProgram.MinnesotaDOTcommissionedadisparitystudyofthehighwaycontractingmarketinMinnesota.ThestudygroupdeterminedthatDBEsmadeup11.4percentoftheprimecontractorsandsubcontractorsinahighwayconstructionmarket.Ofthisnumber,0.6percentwereminority‐ownedand10.8percentwomen‐owned.Baseduponitsanalysisofbusinessformationstatistics,theconsultantestimatedthatthenumberofparticipatingminority‐ownedbusinesswouldbe34percenthigherinarace‐neutralmarket.Therefore,theconsultantadjusteditsDBEavailabilityfigurefrom11.4percentto11.6percent.Basedonthestudy,MinnesotaDOTadoptedanoverallgoalof11.6percentDBEparticipationforfederally‐assistedhighwayprojects.MinnesotaDOTpredictedthatitwouldneedtomeet9percentofthatoverallgoalthroughraceandgender‐consciousmeans,basedonthefactthatDBEparticipationinStatehighwaycontractsdroppedfrom10.25percentin1998to2.25percentin1999whenits


previousDBEProgramwassuspendedbytheinjunctionbythedistrictcourtinanearlierdecisioninSherbrooke.MinnesotaDOTrequiredeachprimecontractbiddertomakeagoodfaithefforttosubcontractaprescribedportionoftheprojecttoDBEs,anddeterminedthatportionbasedonseveralindividualizedfactors,includingtheavailabilityofDBEsintheextentofsubcontractingopportunitiesontheproject.

Thecontractorpresentedevidenceattackingthereliabilityofthedatainthestudy,butitfailedtoestablishthatbetterdatawereavailableorthatMinnesotaDOTwasotherwiseunreasonableinundertakingthisthoroughanalysisandrelyingonitsresults.Id.TheprecipitousdropinDBEparticipationwhennorace‐consciousmethodswereemployed,thecourtconcluded,supportsMinnesotaDOT’sconclusionthatasubstantialportionofitsoverallgoalcouldnotbemetwithrace‐neutralmeasures.Id.Onthatrecord,thecourtagreedwiththedistrictcourtthattherevisedDBEProgramservesacompellinggovernmentinterestandisnarrowlytailoredonitsfaceandasappliedinMinnesota.

InNebraska,theNebraskaDORcommissionedadisparitystudyalsotoreviewavailabilityandcapabilityofDBEfirmsintheNebraskahighwayconstructionmarket.Theavailabilitystudyfoundthatbetween1995and1999,whenNebraskafollowedthemandatory10percentset‐asiderequirement,9.95percentofallavailableandcapablefirmswereDBEs,andDBEfirmsreceived12.7percentofthecontractdollarsonfederallyassistedprojects.AfterapportioningpartofthisDBEcontractingtorace‐neutralcontractingdecisions,NebraskaDORsetanoverallgoalof9.95percentDBEparticipationandpredictedthat4.82percentofthisoverallgoalwouldhavetobeachievedbyrace‐and‐genderconsciousmeans.TheNebraskaDORrequiredthatprimecontractorsmakeagoodfaithefforttoallocateasetportionofeachcontract’sfundstoDBEsubcontractors.TheEighthCircuitconcludedthatGrossSeed,likeSherbrooke,failedtoprovethattheDBEProgramisnotnarrowlytailoredasappliedinNebraska.Therefore,thecourtaffirmedthedistrictcourts’decisionsinGrossSeedandSherbrooke.(Seedistrictcourtopinionsdiscussedinfra.).

9. Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000) cert. granted then dismissed as improvidently granted sub nom. Adarand Constructors, Inc. v. Mineta, 532 U.S. 941, 534 U.S. 103 (2001)

ThisistheAdaranddecisionbytheUnitedStatesCourtofAppealsfortheTenthCircuit,whichwasonremandfromtheearlierSupremeCourtdecisionapplyingthestrictscrutinyanalysistoanyconstitutionalchallengetotheFederalDBEProgram.SeeAdarandConstructors,Inc.v.Pena,515U.S.200(1995).ThedecisionoftheTenthCircuitinthiscasewasconsideredbytheUnitedStatesSupremeCourt,afterthatcourtgrantedcertioraritoconsidercertainissuesraisedonappeal.TheSupremeCourtsubsequentlydismissedthewritofcertiorari“asimprovidentlygranted”withoutreachingthemeritsofthecase.ThecourtdidnotdecidetheconstitutionalityoftheFederalDBEProgramasitappliestostateDOTsorlocalgovernments.

TheSupremeCourtheldthattheTenthCircuithadnotconsideredtheissuebeforetheSupremeCourtoncertiorari,namelywhetherarace‐basedprogramapplicabletodirectfederalcontractingisconstitutional.ThisissueisdistinguishedfromtheissueoftheconstitutionalityoftheUSDOTDBEProgramasitpertainstoprocurementoffederalfundsforhighwayprojectsletbystates,andtheimplementationoftheFederalDBEProgrambystateDOTs.Therefore,theSupremeCourthelditwouldnotreachthemeritsofachallengetofederallawsrelatingtodirectfederalprocurement.


TurningtotheTenthCircuitdecisioninAdarandConstructors,Inc.v.Slater,228F.3d1147(10thCir.2000),theTenthCircuitupheldingeneralthefacialconstitutionalityoftheFederalDBEProgram.Thecourtfoundthatthefederalgovernmenthadacompellinginterestinnotperpetuatingtheeffectsofracialdiscriminationinitsowndistributionoffederalfundsandinremediatingtheeffectsofpastdiscriminationingovernmentcontracting,andthattheevidencesupportedtheexistenceofpastandpresentdiscriminationsufficienttojustifytheFederalDBEProgram.ThecourtalsoheldthattheFederalDBEProgramis“narrowlytailored,”andthereforeupheldtheconstitutionalityoftheFederalDBEProgram.

FollowingtheSupremeCourt’svacationoftheTenthCircuit’sdismissalonmootnessgrounds,thecourtaddressedthemeritsofthisappeal,namely,thefederalgovernment’schallengetothedistrictcourt’sgrantofsummaryjudgmenttoplaintiff‐appelleeAdarandConstructors,Inc.Insodoing,thecourtresolvedtheconstitutionalityoftheuseinfederalsubcontractingprocurementoftheSubcontractorCompensationClause(“SCC”),whichemploysrace‐consciouspresumptionsdesignedtofavorminorityenterprisesandother“disadvantagedbusinessenterprises”(“DBEs”).Thecourt’sevaluationoftheSCCprogramutilizesthe“strictscrutiny”standardofconstitutionalreviewenunciatedbytheSupremeCourtinanearlierdecisioninthiscase.Idat1155.

ThecourtaddressedtheconstitutionalityoftherelevantstatutoryprovisionsasappliedintheSCCprogram,aswellastheirfacialconstitutionality.Id.at1160.ItwasthejudgmentofthecourtthattheSCCprogramandtheDBEcertificationprogramsascurrentlystructured,thoughnotastheywerestructuredin1997whenthedistrictcourtlastrenderedjudgment,passedconstitutionalmuster:Thecourtheldtheywerenarrowlytailoredtoserveacompellinggovernmentalinterest.Id.

“CompellingInterest”inrace–consciousmeasuresdefined.Thecourtstatedthattheremaybeacompellinginterestthatsupportstheenactmentofrace‐consciousmeasures.JusticeO’Connorexplicitlystates:“Theunhappypersistenceofboththepracticeandthelingeringeffectsofracialdiscriminationagainstminoritygroupsinthiscountryisanunfortunatereality,andgovernmentisnotdisqualifiedfromactinginresponsetoit.”AdarandIII,515U.S.at237;seealsoShawv.Hunt,517U.S.899,909,(1996)(statingthat“remedyingtheeffectsofpastorpresentracialdiscriminationmayinthepropercasejustifyagovernment’suseofracialdistinctions”(citingCroson,488U.S.at498–506)).InterpretingCroson,thecourtrecognizedthat“theFourteenthAmendmentpermitsrace‐consciousprogramsthatseekbothtoeradicatediscriminationbythegovernmentalentityitselfandtopreventthepublicentityfromactingasa‘“passiveparticipant”inasystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry’byallowingtaxdollars‘tofinancetheevilofprivateprejudice.’“ConcreteWorksofColo.,Inc.v.City&CountyofDenver,36F.3d1513,1519(10thCir.1994)(quotingCroson,488U.S.at492,109S.Ct.706).Id.at1164.

ThegovernmentidentifiedthecompellinginterestatstakeintheuseofracialpresumptionsintheSCCprogramas“remedyingtheeffectsofracialdiscriminationandopeningupfederalcontractingopportunitiestomembersofpreviouslyexcludedminoritygroups.”Id.

Evidencerequiredtoshowcompellinginterest.Whilethegovernment’sarticulatedinterestwascompellingasatheoreticalmatter,thecourtdeterminedwhethertheactualevidenceprofferedbythegovernmentsupportedtheexistenceofpastandpresentdiscriminationinthepublicly‐fundedhighwayconstructionsubcontractingmarket.Id.at1166.


The“benchmarkforjudgingtheadequacyofthegovernment’sfactualpredicateforaffirmativeactionlegislation[i]swhetherthereexistsa‘strongbasisinevidencefor[thegovernment’s]conclusionthatremedialactionwasnecessary.’“ConcreteWorks,36F.3dat1521(quotingCroson,488U.S.at500,(quoting(plurality)))(emphasisinConcreteWorks).Bothstatisticalandanecdotalevidenceareappropriateinthestrictscrutinycalculus,althoughanecdotalevidencebyitselfisnot.Id.at1166,citingConcreteWorks,36F.3dat1520–21.

Afterthegovernment’sinitialshowing,theburdenshiftedtoAdarandtorebutthatshowing:“Notwithstandingtheburdenofinitialproductionthatrests”withthegovernment,“[t]heultimateburden[ofproof]remainswith[thechallengingparty]todemonstratetheunconstitutionalityofanaffirmative‐actionprogram.”Id.(quotingWygant,476U.S.at277–78,(plurality)).“[T]henonminority[challengers]...continuetobeartheultimateburdenofpersuadingthecourtthat[thegovernmententity’s]evidencedidnotsupportaninferenceofpriordiscriminationandthusaremedialpurpose.”Id.at1166,quoting,ConcreteWorks,at1522–23.

Inaddressingthequestionofwhatevidenceofdiscriminationsupportsacompellinginterestinprovidingaremedy,thecourtconsideredbothdirectandcircumstantialevidence,includingpost‐enactmentevidenceintroducedbydefendantsaswellastheevidenceinthelegislativehistoryitself.Id.at1166,citing,ConcreteWorks,36F.3dat1521,1529n.23(consideringpost‐enactmentevidence).Thecourtstateditmayconsiderpublicandprivatediscriminationnotonlyinthespecificareaofgovernmentprocurementcontractsbutalsointheconstructionindustrygenerally;thus,anyfindingsCongresshasmadeastotheentireconstructionindustryarerelevant.Idat1166‐67citing,ConcreteWorks,at1523,1529,andCroson,488U.S.at492(Op.ofO’Connor,J.).

Evidenceinthepresentcase.Therecanbenodoubt,thecourtfound,thatCongressrepeatedlyhasconsideredtheissueofdiscriminationingovernmentconstructionprocurementcontracts,findingthatracialdiscriminationanditscontinuingeffectshavedistortedthemarketforpubliccontracts—especiallyconstructioncontracts—necessitatingarace‐consciousremedy.Id.at1167,citing,Appendix—TheCompellingInterestforAffirmativeActioninFederalProcurement,61Fed.Reg.26,050,26,051–52&nn.12–21(1996)(“TheCompellingInterest“)(citingapproximatelythirtycongressionalhearingssince1980concerningminority‐ownedbusinesses).But,thecourtsaid,thequestionisnotmerelywhetherthegovernmenthasconsideredevidence,butratherthenatureandextentoftheevidenceithasconsidered.Id.

InConcreteWorks,thecourtnotedthat:

NeitherCrosonnoritsprogenyclearlystatewhetherprivatediscriminationthatis innowayfundedwithpublic taxdollarscan,by itself,providetherequisitestrongbasis inevidencenecessarytojustifyamunicipality’saffirmativeactionprogram.ApluralityinCrosonsimplysuggestedthatremedialmeasurescouldbejustifieduponamunicipality’sshowingthat“ithadessentiallybecomea‘passiveparticipant’ in a system of racial exclusion practiced by elements of the localconstructionindustry.”Croson,488U.S.at492,109S.Ct.706.AlthoughwedonotreadCrosonasrequiringthemunicipalitytoidentifyanexactlinkagebetweenitsaward of public contracts and private discrimination, such evidencewould atleast enhance the municipality’s factual predicate for a race‐ and gender‐consciousprogram.


Id.at1167,quoting,ConcreteWorks,36F.3dat1529.UnlikeConcreteWorks,theevidencepresentedbythegovernmentinthepresentcasedemonstratedtheexistenceoftwokindsofdiscriminatorybarrierstominoritysubcontractingenterprises,bothofwhichshowastronglinkbetweenracialdisparitiesinthefederalgovernment’sdisbursementsofpublicfundsforconstructioncontractsandthechannelingofthosefundsduetoprivatediscrimination.Id.at1168.Thefirstdiscriminatorybarriersaretotheformationofqualifiedminoritysubcontractingenterprisesduetoprivatediscrimination,precludingfromtheoutsetcompetitionforpublicconstructioncontractsbyminorityenterprises.Theseconddiscriminatorybarriersaretofaircompetitionbetweenminorityandnon‐minoritysubcontractingenterprises,againduetoprivatediscrimination,precludingexistingminorityfirmsfromeffectivelycompetingforpublicconstructioncontracts.Thegovernmentalsopresentedfurtherevidenceintheformoflocaldisparitystudiesofminoritysubcontractingandstudiesoflocalsubcontractingmarketsaftertheremovalofaffirmativeactionprograms.Id.at1168.

a.Barrierstominoritybusinessformationinconstructionsubcontracting.Astothefirstkindofbarrier,thegovernment’sevidenceconsistedofnumerouscongressionalinvestigationsandhearingsaswellasoutsidestudiesofstatisticalandanecdotalevidence—citedanddiscussedinTheCompellingInterest,61Fed.Reg.26,054–58—anddemonstratedthatdiscriminationbyprimecontractors,unions,andlendershaswoefullyimpededtheformationofqualifiedminoritybusinessenterprisesinthesubcontractingmarketnationwide.Id.at1168.Theevidencedemonstratedthatprimecontractorsintheconstructionindustryoftenrefusetoemployminoritysubcontractorsdueto“oldboy”networks—basedonafamilialhistoryofparticipationinthesubcontractingmarket—fromwhichminorityfirmshavetraditionallybeenexcluded.Id.

Also,thecourtfound,subcontractors’unionsplacedbeforeminorityfirmsaplethoraofbarrierstomembership,therebyeffectivelyblockingthemfromparticipationinasubcontractingmarketinwhichunionmembershipisanimportantconditionforsuccess.Id.at1169.Thecourtstatedthatthegovernment’sevidencewasparticularlystrikingintheareaoftherace‐baseddenialofaccesstocapital,withoutwhichtheformationofminoritysubcontractingenterprisesisstymied.Id.at1169.

b.Barrierstocompetitionbyexistingminorityenterprises.Withregardtobarriersfacedbyexistingminorityenterprises,thegovernmentpresentedevidencetendingtoshowthatdiscriminationbyprimecontractors,privatesectorcustomers,businessnetworks,suppliers,andbondingcompaniesfostersadecidedlyunevenplayingfieldforminoritysubcontractingenterprisesseekingtocompeteintheareaoffederalconstructionsubcontracts.Id.at1170.ThecourtsaiditwasclearthatCongressdevotedconsiderableenergytoinvestigatingandconsideringthissystematicexclusionofexistingminorityenterprisesfromopportunitiestobidonconstructionprojectsresultingfromtheinsularityandsometimesoutrightracismofnon‐minorityfirmsintheconstructionindustry.Id.at1171.

Thegovernment’sevidence,thecourtfound,stronglysupportedthethesisthatinformal,raciallyexclusionarybusinessnetworksdominatethesubcontractingconstructionindustry,shuttingoutcompetitionfromminorityfirms.Id.Minoritysubcontractingenterprisesintheconstructionindustry,thecourtpointedout,foundthemselvesunabletocompetewithnon‐minorityfirmsonanequalplayingfieldduetoracialdiscriminationbybondingcompanies,withoutwhomthoseminorityenterprisescannotobtainsubcontractingopportunities.Thegovernmentpresentedevidencethatbondingisanessentialrequirementofparticipationinfederalsubcontractingprocurement.Id.Finally,thegovernmentpresentedevidenceofdiscriminationbysuppliers,theresultofwhichwasthatnonminoritysubcontractorsreceived


specialpricesanddiscountsfromsuppliersnotavailabletominoritysubcontractors,drivingup“anticipatedcosts,andthereforethebid,forminority‐ownedbusinesses.”Id.at1172.

ContrarytoAdarand’scontentions,onthebasisoftheforegoingsurveyofevidenceregardingminoritybusinessformationandcompetitioninthesubcontractingindustry,thecourtfoundthegovernment’sevidenceastothekindsofobstaclesminoritysubcontractingbusinessesfaceconstitutedastrongbasisfortheconclusionthatthoseobstaclesarenot“thesameproblemsfacedbyanynewbusiness,regardlessoftheraceoftheowners.”Id.at1172.

c.Localdisparitystudies.ThecourtnotedthatfollowingtheSupremeCourt’sdecisioninCroson,numerousstateandlocalgovernmentsundertookstatisticalstudiestoassessthedisparity,ifany,betweenavailabilityandutilizationofminority‐ownedbusinessesingovernmentcontracting.Id.at1172.Thegovernment’sreviewofthosestudiesrevealedthatalthoughsuchdisparitywasleastglaringinthecategoryofconstructionsubcontracting,eveninthatarea“minorityfirmsstillreceiveonly87centsforeverydollartheywouldbeexpectedtoreceive”basedontheiravailability.TheCompellingInterest,61Fed.Reg.at26,062.Id.Inthatregard,theCrosonmajoritystatedthat“[w]herethereisasignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractorswillingandabletoperformaparticularserviceandthenumberofsuchcontractorsactuallyengagedbythe[government]orthe[government’s]primecontractors,aninferenceofdiscriminatoryexclusioncouldarise.”Id.quoting,488U.S.at509(Op.ofO’Connor,J.)(citationsomitted).

Thecourtsaidthatitwasmindfulthat“wherespecialqualificationsarenecessary,therelevantstatisticalpoolforpurposesofdemonstratingdiscriminatoryexclusionmustbethenumberofminoritiesqualifiedtoundertaketheparticulartask.”Id.at1172,quoting,Crosonat501–02.Butthecourtfoundthathere,itwasunawareofsuch“specialqualifications”asidefromthegeneralqualificationsnecessarytooperateaconstructionsubcontractingbusiness.Id.Ataminimum,thedisparityindicatedthattherehadbeenunder‐utilizationoftheexistingpoolofminoritysubcontractors;andthereisnoevidenceeitherintherecordonappealorinthelegislativehistorybeforethecourtthatthoseminoritysubcontractorswhohavebeenutilizedhaveperformedinadequatelyorotherwisedemonstratedalackofnecessaryqualifications.Id.at1173.

ThecourtfoundthedisparitybetweenminorityDBEavailabilityandmarketutilizationinthesubcontractingindustryraisedaninferencethatthevariousdiscriminatoryfactorsthegovernmentciteshavecreatedthatdisparity.Id.at1173.InConcreteWorks,thecourtstatedthat“[w]eagreewiththeothercircuitswhichhaveinterpretedCrosonimpliedlytopermitamunicipalitytorely...ongeneraldatareflectingthenumberofMBEsandWBEsinthemarketplacetodefeatthechallenger’ssummaryjudgmentmotion,”andthecourtheresaiditdidnotseeanydifferentstandardinthecaseofananalogoussuitagainstthefederalgovernment.Id.at1173,citing,ConcreteWorks,36F.3dat1528.Althoughthegovernment’saggregatefigureofa13%disparitybetweenminorityenterpriseavailabilityandutilizationwasnotoverwhelmingevidence,thecourtstateditwassignificant.Id.

Itwasmademoresignificantbytheevidenceshowingthatdiscriminatoryfactorsdiscouragebothenterpriseformationofminoritybusinessesandutilizationofexistingminorityenterprisesinpubliccontracting.Id.at1173.Thecourtsaidthatitwouldbe“sheerspeculation”toevenattempttoattachaparticularfiguretothehypotheticalnumberofminorityenterprisesthatwouldexistwithoutdiscriminatorybarrierstominorityDBEformation.Id.at1173,quoting,Croson,488U.S.at499.However,theexistenceofevidenceindicatingthatthenumberofminorityDBEswouldbesignificantly(butunquantifiably)higherbutforsuchbarriers,thecourt


foundwasneverthelessrelevanttotheassessmentofwhetheradisparitywassufficientlysignificanttogiverisetoaninferenceofdiscriminatoryexclusion.Id.at1174.

d.Resultsofremovingaffirmativeactionprograms.Thecourttooknoticeofanadditionalsourceofevidenceofthelinkbetweencompellinginterestandremedy.Therewasampleevidencethatwhenrace‐consciouspubliccontractingprogramsarestruckdownordiscontinued,minoritybusinessparticipationintherelevantmarketdropssharplyorevendisappears.Id.at1174.Althoughthatevidencestandingalonethecourtfoundwasnotdispositive,itstronglysupportedthegovernment’sclaimthattherearesignificantbarrierstominoritycompetitioninthepublicsubcontractingmarket,raisingthespecterofracialdiscrimination.Id.“Wherethereisasignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractorswillingandabletoperformaparticularserviceandthenumberofsuchcontractorsactuallyengagedbythelocalityorthelocality’sprimecontractors,aninferenceofdiscriminatoryexclusioncouldarise.”Id.at1174,quoting,Croson,488U.S.at509(Op.ofO’Connor,J.)(citationsomitted).

Insum,onthebasisoftheforegoingbodyofevidence,thecourtconcludedthatthegovernmenthadmetitsinitialburdenofpresentinga“strongbasisinevidence”sufficienttosupportitsarticulated,constitutionallyvalid,compellinginterest.Id.at1175,citing,Croson,488U.S.at500(quotingWygant,476U.S.at277).

Adarand’srebuttalfailedtomeettheirburden.Adarand,thecourtfoundutterlyfailedtomeettheir“ultimateburden”ofintroducingcredible,particularizedevidencetorebutthegovernment’sinitialshowingoftheexistenceofacompellinginterestinremedyingthenationwideeffectsofpastandpresentdiscriminationinthefederalconstructionprocurementsubcontractingmarket.Id.at1175.ThecourtrejectedAdarand’scharacterizationofvariouscongressionalreportsandfindingsasconclusoryanditshighlygeneralcriticismofthemethodologyofnumerous“disparitystudies”citedbythegovernmentanditsamicicuriaeassupplementalevidenceofdiscrimination.Id.Theevidencecitedbythegovernmentanditsamicicuriaeandexaminedbythecourtonlyreinforcedtheconclusionthat“racialdiscriminationanditseffectscontinuetoimpairtheabilityofminority‐ownedbusinessestocompeteinthenation’scontractingmarkets.”Id.

Thegovernment’sevidencepermittedafindingthatasamatteroflawCongresshadtherequisitestrongbasisinevidencetotakeactiontoremedyracialdiscriminationanditslingeringeffectsintheconstructionindustry.Id.at1175.Thisevidencedemonstratedthatboththerace‐basedbarrierstoentryandtheongoingrace‐basedimpedimentstosuccessfacedbyminoritysubcontractingenterprises—bothdiscussedabove—werecausedeitherbycontinuingdiscriminationorthelingeringeffectsofpastdiscriminationontherelevantmarket.Id.at1176.Congresswasnotlimitedtosimplyproscribingfederaldiscriminationagainstminoritycontractors,asithadalreadydone.ThecourtheldthattheConstitutiondoesnotobligateCongresstostandidlybyandcontinuetopourmoneyintoanindustrysoshapedbytheeffectsofdiscriminationthattheprofitstobederivedfromcongressionalappropriationsaccrueexclusivelytothebeneficiaries,howeverpersonallyinnocent,oftheeffectsofracialprejudice.Id.at1176.

ThecourtalsorejectedAdarand’scontentionthatCongressmustmakespecificfindingsregardingdiscriminationagainsteverysinglesub‐categoryofindividualswithinthebroadracialandethniccategoriesdesignatedbystatuteandaddressedbytherelevantlegislativefindings.Id.at1176.IfCongresshadvalidevidence,forexamplethatAsian–AmericanindividualsaresubjecttodiscriminationbecauseoftheirstatusasAsian–Americans,thecourtnoteditmakes


nosensetorequiresub‐findingsthatsubcategoriesofthatclassexperienceparticularizeddiscriminationbecauseoftheirstatusas,forexample,AmericansfromBhutan.Id.“Race”thecourtsaidisoftenaclassificationofdubiousvalidity—scientifically,legally,andmorally.Thecourtdidnotimpartexcesslegitimacytoracialclassificationsbytakingnoticeoftheharshfactthatracialdiscriminationcommonlyoccursalongthelinesofthebroadcategoriesidentified:“BlackAmericans,HispanicAmericans,NativeAmericans,AsianPacificAmericans,andotherminorities.”Id.at1176,note18,citing,15U.S.C.§637(d)(3)(C).

Thecourtstatedthatitwasnotsuggestingthattheevidencecitedbythegovernmentwasunrebuttable.Id.at1176.Rather,thecourtindicateditwaspointingoutthatunderprecedentitisforAdarandtorebutthatevidence,andithasnotdonesototheextentrequiredtoraiseagenuineissueofmaterialfactastowhetherthegovernmenthasmetitsevidentiaryburden.Id.Thecourtreiteratedthat“[t]heultimateburden[ofproof]remainswith[thechallengingparty]todemonstratetheunconstitutionalityofanaffirmative‐actionprogram.”Id.at1522(quotingWygant,476U.S.at277–78,106S.Ct.1842(plurality)).“[T]henonminority[challengers]...continuetobeartheultimateburdenofpersuadingthecourtthat[thegovernmententity’s]evidencedidnotsupportaninferenceofpriordiscriminationandthusaremedialpurpose.”Id.(quotingWygant,476U.S.at293,106S.Ct.1842(O’Connor,J.,concurring)).BecauseAdarandhadfailedutterlytomeetitsburden,thecourtheldthegovernment’sinitialshowingstands.Id.

Insum,guidedbyConcreteWorks,thecourtconcludedthattheevidencecitedbythegovernmentanditsamici,particularlythatcontainedinTheCompellingInterest,61Fed.Reg.26,050,morethansatisfiedthegovernment’sburdenofproductionregardingthecompellinginterestforarace‐consciousremedy.Id.at1176.Congresshadacompellinginterestineradicatingtheeconomicrootsofracialdiscriminationinhighwaytransportationprogramsfundedbyfederalmonies.Id.Thecourtthereforeaffirmedthedistrictcourt’sfindingofacompellinginterest.Id.

NarrowTailoring.ThecourtstateditwasguidedinitsinquirybytheSupremeCourtcasesthathaveappliedthenarrow‐tailoringanalysistogovernmentaffirmativeactionprograms.Id.at1177.Inapplyingstrictscrutinytoacourt‐orderedprogramremedyingthefailuretopromoteblackpoliceofficers,apluralityoftheCourtstatedthat

[i]ndeterminingwhetherrace‐consciousremediesareappropriate,we looktoseveralfactors,includingthenecessityforthereliefandtheefficacyofalternativeremedies; the flexibility anddurationof the relief, including theavailabilityofwaiverprovisions;therelationshipofthenumericalgoalstotherelevantlabormarket;andtheimpactofthereliefontherightsofthirdparties.

Id.at1177,quoting,Paradise,480U.S.at171(1986)(pluralityop.ofBrennan,J.)(citationsomitted).

Regardingflexibility,“theavailabilityofwaiver”isofparticularimportance.Id.Asfornumericalproportionality,Crosonadmonishedthecourtstobewareofthecompletelyunrealisticassumptionthatminoritieswillchooseaparticulartradeinlockstepproportiontotheirrepresentationinthelocalpopulation.”Id.,quoting,Croson,488U.S.at507(quotingSheetMetalWorkers’,478U.S.at494(O’Connor,J.,concurringinpartanddissentinginpart)).Inthatcontext,a“rigidnumericalquota,”thecourtnotedparticularlydisservesthecauseofnarrowtailoring.Id.at1177,citing,Croson,508,Asforburdensimposedonthirdparties,thecourtpointedtoapluralityoftheCourtinWygantthatstated:


AspartofthisNation’sdedicationtoeradicatingracialdiscrimination,innocentpersonsmaybecalledupontobearsomeoftheburdenoftheremedy.“Wheneffectuatinga limitedandproperlytailoredremedytocuretheeffectsofpriordiscrimination, such a ‘sharing of the burden’ by innocent parties is notimpermissible.”476U.S.at280–81(Op.ofPowell,J.)(quotingFullilove,448U.S.at484(plurality))(furtherquotationsandfootnoteomitted).Weareguidedbythatbenchmark.

Id.at1177.

JusticeO’Connor’smajorityopinioninCrosonaddedafurtherfactortothecourt’sanalysis:under–orover‐inclusivenessoftheDBEclassification.Id.at1177.InCroson,theSupremeCourtstruckdownanaffirmativeactionprogramasinsufficientlynarrowlytailoredinpartbecause“thereisnoinquiryintowhetherornottheparticularMBEseekingaracialpreferencehassufferedfromtheeffectsofpastdiscrimination....[T]heinterestinavoidingthebureaucraticeffortnecessarytotailorremedialrelieftothosewhotrulyhavesufferedfromtheeffectsofpriordiscriminationcannotjustifyarigidlinedrawnonthebasisofasuspectclassification.”Id.,quoting,Croson,488U.S.at508(citationomitted).Thus,thecourtsaiditmustbeespeciallycarefultoinquireintowhethertherehasbeenanefforttoidentifyworthyparticipantsinDBEprogramsorwhethertheprogramsinquestionpaintwithtoobroad—ortoonarrow—abrush.Id.

ThecourtstatedmorespecificguidancewasfoundinAdarandIII,whereinremandingforstrictscrutiny,theSupremeCourtidentifiedtwoquestionsapparentlyofparticularimportanceintheinstantcase:(1)“[c]onsiderationoftheuseofrace‐neutralmeans;”and(2)“whethertheprogram[is]appropriatelylimited[soas]nottolastlongerthanthediscriminatoryeffectsitisdesignedtoeliminate.”Id.at1177,quoting,AdarandIII,515U.S.at237–38(internalquotationsandcitationsomitted).ThccourtthusengagedinathoroughanalysisofthefederalprograminlightofAdarandIII’sspecificquestionsonremand,andtheforegoingnarrow‐tailoringfactors:(1)theavailabilityofrace‐neutralalternativeremedies;(2)limitsonthedurationoftheSCCandDBEcertificationprograms;(3)flexibility;(4)numericalproportionality;(5)theburdenonthirdparties;and(6)over–orunder‐inclusiveness.Id.at1178.

ItissignificanttonotethatthecourtindeterminingtheFederalDBEProgramis“narrowlytailored”focusedonthefederalregulations,49CFRPart26,andinparticular§26.1(a),(b),and(f).Thecourtpointedoutthatthefederalregulationsinstructrecipientsasfollows:

[y]oumustmeetthemaximumfeasibleportionofyouroverallgoalbyusingrace‐neutralmeansoffacilitatingDBEparticipation,49CFR§26.51(a)(2000);seealso49CFR§26.51(f)(2000)(ifarecipientcanmeetitsoverallgoalthroughrace‐neutralmeans,itmustimplementitsprogramwithouttheuseofrace‐consciouscontractingmeasures),andenumeratealistofrace‐neutralmeasures,see49CFR§26.51(b)(2000).Thecurrentregulationsalsooutlineseveralrace‐neutralmeansavailabletoprogramrecipientsincludingassistanceinovercomingbondingandfinancingobstacles,providingtechnicalassistance,establishingprogramstoassiststart‐upfirms,andothermethods.See49CFR§26.51(b).Wethereforearedealingherewithrevisionsthatemphasizethecontinuingneedtoemploynon‐race‐consciousmethodsevenastheneedforrace‐consciousremediesisrecognized.228F.3dat1178‐1179.


InconsideringwhethertheFederalDBEProgramisnarrowlytailored,thecourtalsoaddressedtheargumentmadebythecontractorthattheprogramisover‐andunder‐inclusiveforseveralreasons,includingthatCongressdidnotinquireintodiscriminationagainsteachparticularminorityracialorethnicgroup.Thecourtheldthatinsofarasthescopeofinquirysuggestedwasaparticularstate’sconstructionindustryalone,thiswouldbeatoddswithitsholdingregardingthecompellinginterestinCongress’spowertoenactnationwidelegislation.Id.at1185‐1186.

Thecourtstatedthatbecauseofthe“unreliabilityofracialandethniccategoriesandthefactthatdiscriminationcommonlyoccursbasedonmuchbroaderracialclassifications,”extrapolatingfindingsofdiscriminationagainstthevariousethnicgroups“ismoreaquestionofnomenclaturethanofnarrowtailoring.”Id.Thecourtfoundthatthe“Constitutiondoesnoterectabarriertothegovernment’sefforttocombatdiscriminationbasedonbroadracialclassificationsthatmightpreventitfromenumeratingparticularethnicoriginsfallingwithinsuchclassifications.”Id.

Holding.MindfuloftheSupremeCourt’smandatetoexerciseparticularcareinexamininggovernmentalracialclassifications,thecourtconcludedthatthe1996SCCwasinsufficientlynarrowlytailoredasappliedinthiscase,andwasthusunconstitutionalunderAdarandIII‘sstrictstandardofscrutiny.Nonetheless,afterexaminingthecurrent(post1996)SCCandDBEcertificationprograms,thecourtheldthatthe1996defectshavebeenremedied,andthecurrentfederalDBEprogramsnowmettherequirementsofnarrowtailoring.Id.at1178.

Finally,theTenthCircuitdidnotspecificallyaddressachallengetothelettingoffederally‐fundedconstructioncontractsbystatedepartmentsoftransportation.ThecourtpointedoutthatplaintiffAdarand“concededthatitschallengeintheinstantcaseisto‘thefederalprogram,implementedbyfederalofficials,’andnottothelettingoffederally‐fundedconstructioncontractsbystateagencies.”228F.3dat1187.ThecourtheldthatitdidnothavebeforeitasufficientrecordtoenableittoevaluatetheseparatequestionofColoradoDOT’simplementationofrace‐consciouspolicies.Id.at1187‐1188.Therefore,thecourtdidnotaddresstheconstitutionalityofanasappliedattackontheimplementationofthefederalprogrambytheColoradoDOTorotherlocalorstategovernmentsimplementingtheFederalDBEProgram.

Thecourtthusreversedthedistrictcourtandremandedthecase.

Recent District Court Decisions

10. Midwest Fence Corporation v. United States DOT and Federal Highway Administration, the Illinois DOT, the Illinois State Toll Highway Authority, et al., 84 F. Supp. 3d 705, 2015 WL 1396376 (N.D. Ill, 2015), affirmed, 840 F.3d 932 (7th Cir. 2016).187

InMidwestFenceCorporationv.USDOT,theFHWA,theIllinoisDOTandtheIllinoisStateTollHighwayAuthority,CaseNo.1:10‐3‐CV‐5627,UnitedStatesDistrictCourtfortheNorthern 18749CFRPart26(ParticipationbyDisadvantagedBusinessEnterprisesinDepartmentofTransportationFinancialAssistance

Programs(“FederalDBEProgram”).SeetheTransportationEquityActforthe21stCentury(TEA‐21)asamendedandreauthorized(“MAP‐21,”“SAFETEA”and“SAFETEA‐LU”),andtheUnitedStatesDepartmentofTransportation(“USDOT”or“DOT”)regulationspromulgatedtoimplementTEA‐21theFederalregulationsknownasMovingAheadforProgressinthe21stCenturyAct(“MAP‐21”),PubL.112‐141,H.R.4348,§1101(b),July6,2012,126Stat405.;precededbyPubL.109‐59,TitleI,§1101(b),August10,2005,119Stat.1156;precededbyPubL.105‐178,TitleI,§1101(b),June9,1998,112Stat.107.


DistrictofIllinois,EasternDivision,PlaintiffMidwestFenceCorporation,whichisaguardrail,bridgerailandfencingcontractorownedandcontrolledbywhitemaleschallengedtheconstitutionalityandtheapplicationoftheUSDOT,DisadvantagedBusinessEnterprise(“DBE”)Program.Inaddition,MidwestFencesimilarlychallengedtheIllinoisDepartmentofTransportation’s(“IDOT”)implementationoftheFederalDBEProgramforfederally‐fundedprojects,IDOT’simplementationofitsownDBEProgramforstate‐fundedprojectsandtheIllinoisStateTollwayHighwayAuthority’s(“Tollway”)separateDBEProgram.

Thefederaldistrictcourtin2011issuedanOpinionandOrderdenyingtheDefendants’MotiontoDismissforlackofstanding,denyingtheFederalDefendants’MotiontoDismisscertainCountsoftheComplaintasamatteroflaw,grantingIDOTDefendants’MotiontoDismisscertainCountsandgrantingtheTollwayDefendants’MotiontoDismisscertainCounts,butgivingleavetoMidwesttorepleadsubsequenttothisOrder.MidwestFenceCorp.v.UnitedStatesDOT,IllinoisDOT,etal.,2011WL2551179(N.D.Ill.June27,2011).

MidwestFenceinitsThirdAmendedComplaintchallengedtheconstitutionalityoftheFederalDBEProgramonitsfaceandasapplied,andchallengedtheIDOT’simplementationoftheFederalDBEProgram.MidwestFencealsosoughtadeclarationthattheUSDOTregulationshavenotbeenproperlyauthorizedbyCongressandadeclarationthatSAFETEA‐LUisunconstitutional.MidwestFencesoughtrelieffromtheIDOTDefendants,includingadeclarationthatstatestatutesauthorizingIDOT’sDBEProgramforState‐fundedcontractsareunconstitutional;adeclarationthatIDOTdoesnotfollowtheUSDOTregulations;adeclarationthattheIDOTDBEProgramisunconstitutionalandotherreliefagainsttheIDOT.TheremainingCountssoughtreliefagainsttheTollwayDefendants,includingthattheTollway’sDBEProgramisunconstitutional,andarequestforpunitivedamagesagainsttheTollwayDefendants.Thecourtin2012grantedtheTollwayDefendants’MotiontoDismissMidwestFence’srequestforpunitivedamages.

Equalprotectionframework,strictscrutinyandburdenofproof.Thecourtheldthatunderastrictscrutinyanalysis,theburdenisonthegovernmenttoshowbothacompellinginterestandnarrowlytailoring.84F.Supp.3dat720.Thegovernmentmustdemonstrateastrongbasisinevidenceforitsconclusionthatremedialactionisnecessary.Id.SincetheSupremeCourtdecisioninCroson,numerouscourtshaverecognizedthatdisparitystudiesprovideprobativeevidenceofdiscrimination.Id.Thecourtstatedthataninferenceofdiscriminationmaybemadewithempiricalevidencethatdemonstratesasignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractorsandthenumberofsuchcontractorsactuallyengagedbythelocalityorthelocality’sprimecontractors.Id.Thecourtsaidthatanecdotalevidencemaybeusedincombinationwithstatisticalevidencetoestablishacompellinggovernmentalinterest.Id.

Inadditiontoproviding“hardproof”tobackitscompellinginterest,thecourtstatedthatthegovernmentmustalsoshowthatthechallengedprogramisnarrowlytailored.Id.at720.Whilenarrowtailoringrequires“serious,goodfaithconsiderationofworkablerace‐neutralalternatives,”thecourtsaiditdoesnotrequire“exhaustionofeveryconceivablerace‐neutralalternative.”Id.,citingGrutterv.Bollinger,539U.S.306,339(2003);Fischerv.Univ.ofTexasatAustin,133S.Ct.2411,2420(2013).

Oncethegovernmentalentityhasshownacceptableproofofacompellinginterestinremedyingpastdiscriminationandillustratedthatitsplanisnarrowlytailoredtoachievethisgoal,thepartychallengingtheaffirmativeactionplanbearstheultimateburdenofprovingthattheplan


isunconstitutional.84F.Supp.3dat721.Tosuccessfullyrebutthegovernment’sevidence,achallengermustintroduce“credible,particularizedevidence”ofitsown.Id.

Thiscanbeaccomplished,accordingtothecourt,byprovidinganeutralexplanationforthedisparitybetweenDBEutilizationandavailability,showingthatthegovernment’sdataisflawed,demonstratingthattheobserveddisparitiesarestatisticallyinsignificant,orpresentingcontrastingstatisticaldata.Id.Conjectureandunsupportedcriticismsofthegovernment’smethodologyareinsufficient.Id.

Standing.ThecourtfoundthatMidwesthadstandingtochallengetheFederalDBEProgram,IDOT’simplementationofit,andtheTollwayProgram.Id.at722.Thecourt,however,didnotfindthatMidwesthadpresentedanyfactssuggestingitsinabilitytocompeteonanequalfootingfortheTargetMarketProgramcontracts.TheTargetMarketProgramidentifiedavarietyofremedialactionsthatIDOTwasauthorizedtotakeincertainDistricts,whichincludedindividualcontractgoals,DBEparticipationincentives,aswellasset‐asides.Id.at722‐723.

ThecourtnotedthatMidwestdidnotidentifyanycontractsthatweresubjecttotheTargetMarketProgram,noridentifyanyset‐asidesthatwereinplaceinthesedistrictsthatwouldhavehindereditsabilitytocompeteforfencingandguardrailswork.Id.at723.MidwestdidnotallegethatitwouldhavebidoncontractssetasidepursuanttotheTargetMarketProgramhaditnotbeenpreventedfromdoingso.Id.BecausenothingintherecordMidwestprovidedsuggestedthattheTargetMarketProgramimpededMidwest’sabilitytocompeteforworkintheseDistricts,thecourtdismissedMidwest’sclaimrelatingtotheTargetMarketProgramforlackofstanding.Id.

FacialchallengetotheFederalDBEProgram.Thecourtfoundthatremedyingtheeffectsofraceandgenderdiscriminationwithintheroadconstructionindustryisacompellinggovernmentalinterest.ThecourtalsofoundthattheFederalDefendantshavesupportedtheircompellinginterestwithastrongbasisinevidence.Id.at725.TheFederalDefendants,thecourtsaid,presentedanextensivebodyoftestimony,reports,andstudiesthattheyclaimprovidedthestrongbasisinevidencefortheirconclusionthatraceandgender‐basedclassificationsarenecessary.Id.ThecourttookjudicialnoticeoftheexistenceofCongressionalhearingsandreportsandthecollectionofevidencepresentedtoCongressinsupportoftheFederalDBEProgram’s2012reauthorizationunderMAP‐21,includingbothstatisticalandanecdotalevidence.Id.

Thecourtalsoconsideredareportfromaconsultantwhoreviewed95disparityandavailabilitystudiesconcerningminority‐andwomen‐ownedbusinesses,aswellasanecdotalevidence,thatwerecompletedfrom2000to2012.Id.at726.Sixty‐fourofthestudieshadpreviouslybeenpresentedtoCongress.Id.Thestudiesexamineprocurementforover100publicentitiesandfundingsourcesacross32states.Id.Theconsultant’sreportopinedthatmetricssuchasfirmrevenue,numberofemployees,andbondinglimitsshouldnotbeconsideredwhendeterminingDBEavailabilitybecausetheyareall“likelytobeinfluencedbythepresenceofdiscriminationifitexists”andcouldpotentiallyresultinabuilt‐indownwardbiasintheavailabilitymeasure.Id.

Tomeasuredisparity,theconsultantdividedDBEutilizationbyavailabilityandmultipliedby100tocalculatea“disparityindex”foreachstudy.Id.at726.Thereportfound66percentofthestudiesshowedadisparityindexof80orbelow,thatis,significantlyunderutilizedrelativetotheiravailability.Id.Thereportalsoexamineddatathatshowedlowerearningsandbusinessformationratesamongwomenandminorities,evenwhenvariablessuchasageandeducationwereheldconstant.Id.Thereportconcludedthatthedisparitieswerenotattributabletofactors


otherthanraceandsexandwereconsistentwiththepresenceofdiscriminationinconstructionandrelatedprofessionalservices.Id.

ThecourtdistinguishedtheFederalCircuitdecisioninRotheDev.Corp.v.Dep’t.ofDef.,545F.3d1023(Fed.Cir.2008)wheretheFederalCircuitCourtheldinsufficienttherelianceononlysixdisparitystudiestosupportthegovernment’scompellinginterestinimplementinganationalprogram.Id.at727,citingRothe,545F.3dat1046.ThecourtherenotedtheconsultantreportsupplementsthetestimonyandreportspresentedtoCongressinsupportoftheFederalDBEProgram,whichcourtshavefoundtoestablisha“strongbasisinevidence”tosupporttheconclusionthatrace‐andgender‐consciousactionisnecessary.Id.

ThecourtfoundthroughtheevidencepresentedbytheFederalDefendantssatisfiedtheirburdeninshowingthattheFederalDBEProgramstandsonastrongbasisinevidence.Id.at727.TheMidwestexpert’ssuggestionthatthestudiesusedinconsultant’sreportdonotproperlyaccountforcapacity,thecourtstated,doesnotcompelthecourttofindotherwise.ThecourtquotingAdarandVII,228F.3dat1173(10thCir.2000)saidthatgeneralcriticismofdisparitystudies,asopposedtoparticularevidenceunderminingthereliabilityoftheparticulardisparitystudiesrelieduponbythegovernment,isoflittlepersuasivevalueanddoesnotcompelthecourttodiscountthedisparityevidence.Id.Midwestfailedtopresent“affirmativeevidence”thatnoremedialactionwasnecessary.Id.

FederalDBEProgramisnarrowlytailored.Oncethegovernmenthasestablishedacompellinginterestforimplementingarace‐consciousprogram,itmustshowthattheprogramisnarrowlytailoredtoachievethisinterest.Id.at727.Indeterminingwhetheraprogramisnarrowlytailored,courtsexamineseveralfactors,including(a)thenecessityforthereliefandefficacyofalternativerace‐neutralmeasures,(b)theflexibilityanddurationoftherelief,includingtheavailabilityofwaiverprovisions,(c)therelationshipofthenumericalgoalstotherelevantlabormarket,and(d)theimpactofthereliefontherightsofthirdparties.Id.Thecourtstatedthatcourtsmayalsoassesswhetheraprogramis“overinclusive.”Id.at728.ThecourtfoundthateachoftheabovefactorssupportstheconclusionthattheFederalDBEProgramisnarrowlytailored.Id.

First,thecourtsaidthatunderthefederalregulations,recipientsoffederalfundscanonlyturntorace‐andgender‐consciousmeasuresaftertheyhaveattemptedtomeettheirDBEparticipationgoalthroughrace‐neutralmeans.Id.at728.Thecourtnotedthatrace‐neutralmeansincludemakingcontractingopportunitiesmoreaccessibletosmallbusinesses,providingassistanceinobtainingbondingandfinancing,andofferingtechnicalandothersupportservices.Id.Thecourtfoundthattheregulationsrequireserious,goodfaithconsiderationofworkablerace‐neutralalternatives.Id.

Second,thefederalregulationscontainprovisionsthatlimittheFederalDBEProgram’sdurationandensureitsflexibility.Id.at728.ThecourtfoundthattheFederalDBEProgramlastsonlyaslongasitscurrentauthorizingactallows,notingthatwitheachreauthorization,CongressmustreevaluatetheFederalDBEPrograminlightofsupportingevidence.Id.ThecourtalsofoundthattheFederalDBEProgramaffordsrecipientsoffederalfundsandprimecontractorssubstantialflexibility.Id.at728.Recipientsmayapplyforexemptionsorwaivers,releasingthemfromprogramrequirements.Id.PrimecontractorscanapplytoIDOTfora“goodfaitheffortswaiver”onanindividualcontractgoal.Id.

Thecourtstatedtheavailabilityofwaiversisparticularlyimportantinestablishingflexibility.Id.at728.ThecourtrejectedMidwest’sargumentthatthefederalregulationsimposeaquotain


lightoftheProgram’sexplicitwaiverprovision.Id.Basedontheavailabilityofwaivers,coupledwithregularcongressionalreview,thecourtfoundthattheFederalDBEProgramissufficientlylimitedandflexible.Id.

Third,thecourtsaidthattheFederalDBEProgramemploysatwo‐stepgoal‐settingprocessthattiesDBEparticipationgoalsbyrecipientsoffederalfundstolocalmarketconditions.Id.at728.ThecourtpointedoutthattheregulationsdelegategoalsettingtorecipientsoffederalfundswhotailorDBEparticipationtolocalDBEavailability.Id.ThecourtfoundthattheFederalDBEProgram’sgoal‐settingprocessrequiresstatestofocusonestablishingrealisticgoalsforDBEparticipationthatarecloselytiedtotherelevantlabormarket.Id.

Fourth,thefederalregulations,accordingtothecourt,containprovisionsthatseektominimizetheProgram’sburdenonnon‐DBEs.Id.at729.Thecourtpointedoutthefollowingprovisionsaimtokeeptheburdenonnon‐DBEsminimal:theFederalDBEProgram’spresumptionofsocialandeconomicdisadvantageisrebuttable;raceisnotadeterminativefactor;intheeventDBEsbecome“overconcentrated”inaparticularareaofcontractwork,recipientsmusttakeappropriatemeasurestoaddresstheoverconcentration;theuseofrace‐neutralmeasures;andtheavailabilityofgoodfaitheffortswaivers.Id.

ThecourtsaidMidwest’sprimaryargumentisthatthepracticeofstatestoawardprimecontractstothelowestbidder,andthefactthefederalregulationsprescribethatDBEparticipationgoalsbeappliedtothevalueoftheentirecontract,undulyburdensnon‐DBEsubcontractors.Id.at729.MidwestarguedthatbecausemostDBEsaresmallsubcontractors,settinggoalsasapercentageofallcontractdollars,whilerequiringaremedytocomeonlyfromsubcontractingdollars,undulyburdenssmaller,specializednon‐DBEs.Id.ThecourtfoundthatthefactinnocentpartiesmaybearsomeoftheburdenofaDBEprogramisitselfinsufficienttowarranttheconclusionthataprogramisnotnarrowlytailored.Id.ThecourtalsofoundthatstrongpolicyreasonssupporttheFederalDBEProgram’sapproach.Id.

ThecourtstatedthatcongressionaltestimonyandtheexpertreportfromtheFederalDefendantsprovideevidencethattheFederalDBEProgramisnotoverlyinclusive.Id.at729.Thecourtnotedthereportobservedstatisticallysignificantdisparitiesinbusinessformationandearningsratesinall50statesforallminoritygroupsandfornon‐minoritywomen.Id.

ThecourtsaidthatMidwestdidnotattempttorebuttheFederalDefendants’evidence.Idat729.Therefore,becausetheFederalDBEProgramstandsonastrongbasisinevidenceandisnarrowlytailoredtoachievethegoalofremedyingdiscrimination,thecourtfoundtheProgramisconstitutionalonitsface.Id.at729.ThecourtthusgrantedsummaryjudgmentinfavoroftheFederalDefendants.Id.

As‐appliedchallengetoIDOT’simplementationoftheFederalDBEProgram.InadditiontochallengingtheFederalDBEProgramonitsface,Midwestalsoarguedthatitisunconstitutionalasapplied.Id.at730.ThecourtstatedbecausetheFederalDBEProgramisappliedtoMidwestthroughIDOT,thecourtmustexamineIDOT’simplementationoftheFederalDBEProgram.Id.FollowingtheSeventhCircuit’sdecisioninNorthernContractingv.IllinoisDOT,thecourtsaidthatwhethertheFederalDBEProgramisunconstitutionalasappliedisaquestionofwhetherIDOTexceededitsauthorityinimplementingit.Id.at730,citingNorthernContracting,Inc.v.Illinois,473F.3d715at722(7thCir.2007).Thecourt,quotingNorthernContracting,heldthatachallengetoastate’sapplicationofafederallymandatedprogrammustbelimitedtothequestionofwhetherthestateexceededitsauthority.Id.


IDOTnotonlyappliestheFederalDBEProgramtoUSDOT‐assistedprojects,butitalsoappliestheFederalDBEProgramtostate‐fundedprojects.Id.at730.Thecourt,therefore,helditmustdeterminewhethertheIDOTDefendantshaveestablishedacompellingreasontoapplytheIDOTProgramtostate‐fundedprojectsinIllinois.Id.

ThecourtpointedoutthattheFederalDBEProgramdelegatesthenarrowtailoringfunctiontothestate,andthus,IDOTmustdemonstratethatthereisademonstrableneedfortheimplementationoftheFederalDBEProgramwithinitsjurisdiction.Id.at730.Accordingly,thecourtassessedwhetherIDOThasestablishedevidenceofdiscriminationinIllinoissufficientto(1)supportitsapplicationoftheFederalDBEProgramtostate‐fundedcontracts,and(2)demonstratethatIDOT’simplementationoftheFederalDBEProgramislimitedtoaplacewhererace‐basedmeasuresaredemonstrablyneeded.Id.

IDOT’sevidenceofdiscriminationandDBEavailabilityinIllinois.TheevidencethatIDOThaspresentedtoestablishtheexistenceofdiscriminationinIllinoisincludedtwostudies,onethatwasdonein2004andtheotherin2011.Id.at730.Thecourtsaidthatthe2004studyuncovereddisparitiesinearningsandbusinessformationratesamongwomenandminoritiesintheconstructionandengineeringfieldsthatthestudyconcludedwereconsistentwithdiscrimination.IDOTmaintainedthatthe2004studyandthe2011studymustbereadinconjunctionwithoneanother.Id.Thecourtfoundthatthe2011studyprovidedevidencetoestablishthedisparityfromwhichIDOT’sinferenceofdiscriminationprimarilyarises.Id.

The2011studycomparedtheproportionofcontractingdollarsawardedtoDBEs(utilization)withtheavailabilityofDBEs.Id.at730.Thestudydeterminedavailabilitythroughmultiplesources,includingbidderslists,prequalifiedbusinesslists,andothermethodsrecommendedinthefederalregulations.Id.ThestudyappliedNAICScodestodifferenttypesofcontractwork,assigninggreaterweighttocategoriesofworkinwhichIDOThadexpendedthemostmoney.Id.at731.Thisresultedina“weighted”DBEavailabilitycalculation.Id.

The2011studyexaminedprimeandsubcontractsandanecdotalevidenceconcerningraceandgenderdiscriminationintheIllinoisroadconstructionindustry,includingone‐on‐oneinterviewsandasurveyofmorethan5,000contractors.Id.at731.The2011study,thecourtsaid,containedaregressionanalysisofprivatesectordataandfounddisparitiesinearningsandbusinessownershipratesamongminoritiesandwomen,evenwhencontrollingforrace‐andgender‐neutralvariables.Id.

ThestudyconcludedthattherewasastatisticallysignificantunderutilizationofDBEsintheawardofbothprimeandsubcontractsinIllinois.Id.at731.Forexample,thecourtnotedthedifferencethestudyfoundinthepercentageofavailableprimeconstructioncontractorstothepercentageofprimeconstructioncontractsunder$500,000,andthepercentageofavailableconstructionsubcontractorstotheamountofpercentageofdollarsreceivedofconstructionsubcontracts.Id.

IDOTpresentedcertainevidencetomeasureDBEavailabilityinIllinois.Thecourtpointedoutthatthe2004studyandtwosubsequentGoal‐SettingReportswereusedinestablishingIDOT’sDBEparticipationgoal.Id.at731.The2004studyarrivedatIDOT’s22.77percentDBEparticipationgoalinaccordancewiththetwo‐stepprocessdefinedinthefederalregulations.Id.Thecourtstatedthe2004studyemployedaseven‐step“customcensus”approachtocalculatebaselineDBEavailabilityundersteponeoftheregulations.Id.


TheprocessbeginsbyidentifyingtherelevantmarketsinwhichIDOToperatesandthecategoriesofbusinessesthataccountforthebulkofIDOTspending.Id.at731.TheindustriesandcountiesinwhichIDOTexpendsrelativelymorecontractdollarsreceiveproportionatelyhigherweightsintheultimatecalculationofstatewideDBEavailability.Id.Thestudythencountsthenumberofbusinessesintherelevantmarkets,andidentifieswhichareminority‐andwomen‐owned.Id.Toensuretheaccuracyofthisinformation,thestudyprovidesthatittakesadditionalstepstoverifytheownershipstatusofeachbusiness.Id.Understeptwooftheregulations,thestudyadjustedthisfigureto27.51percentbasedonCensusBureaudata.Id.Accordingtothestudy,theadjustmenttakesintoaccountitsconclusionthatbaselinenumbersareartificiallylowerthanwhatwouldbeexpectedinarace‐neutralmarketplace.Id.

IDOTusedseparateGoal‐SettingReportsthatcalculatedIDOT’sDBEparticipationgoalpursuanttothetwo‐stepprocessinthefederalregulations,drawingfrombidderslists,DBEdirectories,andthe2011studytocalculatebaselineDBEavailability.Id.at731.ThestudyandtheGoal–SettingReportsgavegreaterweighttothetypesofcontractworkinwhichIDOThadexpendedrelativelymoremoney.Id.at732.

CourtrejectedMidwestargumentsastothedataandevidence.ThecourtrejectedthechallengesbyMidwesttotheaccuracyofIDOT’sdata.Forexample,Midwestarguedthattheanecdotalevidencecontainedinthe2011studydoesnotprovediscrimination.Id.at732.Thecourtstated,however,whereanecdotalevidencehasbeenofferedinconjunctionwithstatisticalevidence,itmaylendsupporttothegovernment’sdeterminationthatremedialactionisnecessary.Id.Thecourtnotedthatanecdotalevidenceonitsowncouldnotbeusedtoshowageneralpolicyofdiscrimination.Id.

ThecourtrejectedanotherargumentbyMidwestthatthedatacollectedafterIDOT’simplementationoftheFederalDBEProgrammaybebiasedbecauseanythingobservedaboutthepublicsectormaybeaffectedbytheDBEProgram.Id.at732.Thecourtrejectedthatargumentfindingpost‐enactmentevidenceofdiscriminationpermissible.Id.

Midwest’smainobjectiontotheIDOTevidence,accordingtothecourt,isthatitfailedtoaccountforcapacitywhenmeasuringDBEavailabilityandunderutilization.Id.at732.MidwestarguedthatIDOT’sdisparitystudiesfailedtoruleoutcapacityasapossibleexplanationfortheobserveddisparities.Id.

IDOTarguedthatonprimecontractsunder$500,000,capacityisavariablethatmakeslittledifference.Id.at732‐733.Primecontractsofvaryingsizesunder$500,000weredistributedtoDBEsandnon‐DBEsalikeatapproximatelythesamerate.Id.at733.IDOTalsoarguedthatthroughregressionanalysis,the2011studydemonstratedfactorsotherthandiscriminationdidnotaccountforthedisparitybetweenDBEutilizationandavailability.Id.

ThecourtstatedthatdespiteMidwest’sargumentthatthe2011studytookinsufficientmeasurestoruleoutcapacityasarace‐neutralexplanationfortheunderutilizationofDBEs,theSupremeCourthasindicatedthataregressionanalysisneednottakeintoaccount“allmeasurablevariables”toruleoutrace‐neutralexplanationsforobserveddisparities.Id.at733,quotingBazemorev.Friday,478U.S.385,400(1986).

Midwestcriticismsinsufficient,speculativeandconjecture–noindependentstatisticalanalysis;IDOTfollowedNorthernContractinganddidnotexceedthefederalregulations.ThecourtfoundMidwest’scriticismsinsufficienttorebutIDOT’sevidenceofdiscriminationordiscreditIDOT’smethodsofcalculatingDBEavailability.Id.at733.


First,thecourtsaid,the“evidence”offeredbyMidwest’sexpertreports“isspeculativeatbest.”Id.ThecourtfoundthatforareasonablejurytofindinfavorofMidwest,Midwestwouldhavetocomeforwardwith“credible,particularizedevidence”ofitsown,suchasaneutralexplanationforthedisparity,orcontrastingstatisticaldata.Id.ThecourtheldthatMidwestfailedtomaketheshowinginthiscase.Id.

Second,thecourtstatedthatIDOT’smethodofcalculatingDBEavailabilityisconsistentwiththefederalregulationsandhasbeenendorsedbytheSeventhCircuit.Id.at733.Thefederalregulations,thecourtsaid,approveavarietyofmethodsforaccuratelymeasuringready,willing,andavailableDBEs,suchastheuseofDBEdirectories,CensusBureaudata,andbidderslists.Id.Thecourtfoundthatthesearethemethodsthe2011studyadoptedincalculatingDBEavailability.Id.

ThecourtsaidthattheSeventhCircuitCourtofAppealsapprovedthe“customcensus”approachasconsistentwiththefederalregulations.Id.at733,citingtoNorthernContractingv.IllinoisDOT,473F.3dat723.ThecourtnotedtheSeventhCircuitrejectedtheargumentthatavailabilityshouldbebasedonasimplecountofregisteredandprequalifiedDBEsunderIllinoislaw,findingnorequirementinthefederalregulationsthatarecipientmustsonarrowlydefinethescopeofready,willing,andavailablefirms.Id.Thecourtalsorejectedthenotionthatanavailabilitymeasureshoulddistinguishbetweenprimeandsubcontractors.Id.at733‐734.

Thecourtheldthatthroughthe2004and2011studies,andGoal–SettingReports,IDOTprovidedevidenceofdiscriminationintheIllinoisroadconstructionindustryandamethodofDBEavailabilitycalculationthatisconsistentwithboththefederalregulationsandtheSeventhCircuitdecisioninNorthernContractv.IllinoisDOT.Id.at734.ThecourtsaidthatinresponsetotheSeventhCircuitdecisionandIDOT’sevidence,Midwestofferedonlyconjectureabouthowthesestudiessupposedfailuretoaccountforcapacitymayormaynothaveimpactedthestudies’result.Id.

ThecourtpointedoutthatalthoughMidwest’sexpert’sreports“castdoubtonthevalidityofIDOT’smethodology,theyfailedtoprovideanyindependentstatisticalanalysisorotherevidencedemonstratingactualbias.”Id.at734.Withoutthisshowing,thecourtstated,therecordfailstodemonstratealackofevidenceofdiscriminationoractualflawsinIDOT’savailabilitycalculations.Id.

Burdenonnon–DBEsubcontractors;overconcentration.Thecourtaddressedthenarrowtailoringfactorconcerningwhetheraprogram’sburdenonthirdpartiesisundueorunreasonable.ThepartiesdisagreedaboutwhethertheIDOTprogramresultedinanoverconcentrationofDBEsinthefencingandguardrailindustry.Id.at734‐735.IDOTpreparedanoverconcentrationstudycomparingthetotalnumberofprequalifiedfencingandguardrailcontractorstothenumberofDBEsthatalsoperformthattypeofworkanddeterminedthatnooverconcentrationproblemexisted.Midwestpresenteditsevidencerelatingtooverconcentration.Id.at735.ThecourtfoundthatMidwestdidnotshowIDOT’sdeterminationthatoverconcentrationdoesnotexistamongfencingandguardrailcontractorstobeunreasonable.Id.at735.

ThecourtstatedthefactIDOTsetscontractgoalsasapercentageoftotalcontractdollarsdoesnotdemonstratethatIDOTimposesanundueburdenonnon‐DBEsubcontractors,buttothecontrary,IDOTisactingwithinthescopeofthefederalregulationsthatrequiresgoalstobesetinthismanner.Id.at735.Thecourtnotedthatitrecognizessettinggoalsasapercentageoftotalcontractvalueaddressesthewidespread,indirecteffectsofdiscriminationthatmayprevent


DBEsfromcompetingasprimesinthefirstplace,andthatasharingoftheburdenbyinnocentparties,herenon‐DBEsubcontractors,ispermissible.Id.ThecourtheldthatIDOTcarrieditsburdeninprovidingpersuasiveevidenceofdiscriminationinIllinois,andfoundthatsuchsharingoftheburdenispermissiblehere.Id.

Useofrace–neutralalternatives.ThecourtfoundthatIDOTidentifiedseveralrace‐neutralprogramsitusedtoincreaseDBEparticipation,includingitsSupportiveServices,Mentor–Protégé,andModelContractorPrograms.Id.at735.Theprogramsprovideworkshopsandtrainingthathelpsmallbusinessesbuildbondingcapacity,gainaccesstofinancialandprojectmanagementresources,andlearnaboutspecificprocurementopportunities.Id.IDOTconductedseveralstudiesincludingzero‐participationgoalscontractsinwhichtherewasnoDBEparticipationgoal,andfoundthatDBEsreceivedonly0.84percentofthetotaldollarvalueawarded.Id.

ThecourtheldIDOTwascompliantwiththefederalregulations,notingthatintheNorthernContractingv.IllinoisDOTcase,theSeventhCircuitfoundIDOTemployedalmostallofthemethodssuggestedintheregulationstomaximizeDBEparticipationwithoutresortingtorace,includingprovidingassistanceinobtainingbondingandfinancing,implementingasupportiveservicesprogram,andprovidingtechnicalassistance.Id.at735.ThecourtagreedwiththeSeventhCircuit,andfoundthatIDOThasmadeserious,goodfaithconsiderationofworkablerace‐neutralalternatives.Id.

Durationandflexibility.ThecourtpointedoutthatthestatestatutethroughwhichtheFederalDBEProgramisimplementedislimitedindurationandmustbereauthorizedeverytwotofiveyears.Id.at736.ThecourtreviewedevidencethatIDOTgranted270ofthe362goodfaithwaiverrequeststhatitreceivedfrom2006to2014,andthatIDOTgranted1,002post‐awardwaiversonover$36millionincontractingdollars.Id.ThecourtnotedthatIDOTgrantedtheonlygoodfaitheffortswaiverthatMidwestrequested.Id.

ThecourtheldtheundisputedfactsestablishedthatIDOTdidnothavea“no‐waiverpolicy.”Id.at736.Thecourtfoundthatitcouldnotconcludethatthewaiverprovisionswereimpermissiblyvague,andthatIDOTtookintoconsiderationthesubstantialguidanceprovidedinthefederalregulations.Id.at736‐737.BecauseMidwest’sownexperiencedemonstratedtheflexibilityoftheFederalDBEPrograminpractice,thecourtsaiditcouldnotconcludethattheIDOTprogramamountstoanimpermissiblequotasystemthatisunconstitutionalonitsface.Id.at737.

ThecourtagainstatedthatMidwesthadnotpresentedanyaffirmativeevidenceshowingthatIDOT’simplementationoftheFederalDBEProgramimposesanundueburdenonnon‐DBEs,failstoemployrace‐neutralmeasures,orlacksflexibility.Id.at737.Accordingly,thecourtgrantedIDOT’smotionforsummaryjudgment.

Facialandas–appliedchallengestotheTollwayprogram.TheIllinoisTollwayProgramexistsindependentlyoftheFederalDBEProgram.MidwestchallengedtheTollwayProgramasunconstitutionalonitsfaceandasapplied.Id.at737.LiketheFederalandIDOTDefendants,theTollwaywasrequiredtoshowthatitscompellinginterestinremedyingdiscriminationintheIllinoisroadconstructionindustryrestsonastrongbasisinevidence.Id.TheTollwayreliedona2006disparitystudy,whichexaminedthedisparitybetweentheTollway’sutilizationofDBEsandtheiravailability.Id.


Thestudyemployeda“customcensus”approachtocalculateDBEavailability,andexaminedtheTollway’scontractdatatodetermineutilization.Id.at737..The2006studyreportedstatisticallysignificantdisparitiesforallraceandsexcategoriesexamined.Id.Thestudyalsoconductedan“economy‐wideanalysis”examiningotherraceandsexdisparitiesinthewiderconstructioneconomyfrom1979to2002.Id.Controllingforrace‐andgender‐neutralvariables,thestudyshowedasignificantnegativecorrelationbetweenaperson’sraceorsexandtheirearningpowerandabilitytoformabusiness.Id.

Midwest’schallengestotheTollwayevidenceinsufficientandspeculative.In2013,theTollwaycommissionedanewstudy,whichthecourtnotedwasnotcomplete,buttherewasan“economy‐wideanalysis”similartotheanalysisdonein2006thatupdatedcensusdatagatheredfrom2007to2011.Id.at737‐738.Theupdatedcensusanalysis,accordingtothecourt,controlledforvariablessuchaseducation,ageandoccupationandfoundlowerearningsandratesofbusinessformationamongwomenandminoritiesascomparedtowhitemen.Id.at738.

MidwestattackedtheTollway’s2006studysimilartohowitattackedtheotherstudieswithregardtoIDOT’sDBEProgram.Id.at738.Forexample,Midwestattackedthe2006studyasbeingbiasedbecauseitfailedtotakeintoaccountcapacityindeterminingthedisparities.Id.TheTollwaydefendedthe2006studyarguingthatcapacitymetricsshouldnotbetakenintoaccountbecausetheTollwayassertedtheyarethemselvesaproductofindirectdiscrimination,theconstructionindustryiselasticinnature,andthatfirmscaneasilyrampuporratchetdowntoaccommodatethesizeofaproject.Id.TheTollwayalsoarguedthatthe“economy‐wideanalysis”revealedanegativecorrelationbetweenanindividual’sraceandsexandtheirearningpowerandabilitytoownorformabusiness,showingthattheunderutilizationofDBEsisconsistentwithdiscrimination.Id.at738.

TosuccessfullyrebuttheTollway’sevidenceofdiscrimination,thecourtstatedthatMidwestmustcomeforwardwithaneutralexplanationforthedisparity,showthattheTollway’sstatisticsareflawed,demonstratethattheobserveddisparitiesareinsignificant,orpresentcontrastingdataofitsown.Id.at738‐739.Again,thecourtfoundthatMidwestfailedtomakethisshowing,andthattheevidenceofferedthroughtheexpertreportsforMidwestwasfartoospeculativetocreateadisputedissueoffactsuitablefortrial.Id.at739.Accordingly,thecourtfoundtheTollwayDefendantsestablishedastrongbasisinevidencefortheTollwayProgram.Id.

TollwayProgramisnarrowlytailored.AstodeterminingwhethertheTollwayProgramisnarrowlytailored,MidwestalsoarguedthattheTollwayProgramimposedanundueburdenonnon‐DBEsubcontractors.LikeIDOT,theTollwaysetsindividualcontractgoalsasapercentageofthevalueoftheentirecontractbasedontheavailabilityofDBEstoperformparticularlineitems.Id.at739.

Thecourtreiteratedthatsettinggoalsasapercentageoftotalcontractdollarsdoesnotdemonstrateanundueburdenonnon‐DBEsubcontractors,andthattheTollway’smethodofgoalsettingisidenticaltothatprescribedbythefederalregulations,whichthecourtalreadyfoundtobesupportedbystrongpolicyreasons.Id.at739.Thecourtstatedthatthesharingofaremedialprogram’sburdenisitselfinsufficienttowarranttheconclusionthattheprogramisnotnarrowlytailored.Id.at739.ThecourtheldtheTollwayProgram’sburdenonnon‐DBEsubcontractorstobepermissible.Id.

Inaddressingtheefficacyofrace‐neutralmeasures,thecourtfoundtheTollwayimplementedrace‐neutralprogramstoincreaseDBEparticipation,includingaprogramthatallowssmaller


contractstobeunbundledfromlargerones,aSmallBusinessInitiativethatsetsasidecontractsforsmallbusinessesonarace‐neutralbasis,partnershipswithagenciesthatprovidesupportservicestosmallbusinesses,andotherprogramsdesignedtomakeiteasierforsmallercontractorstodobusinesswiththeTollwayingeneral.Id.at739‐740.ThecourtheldtheTollway’srace‐neutralmeasuresareconsistentwiththosesuggestedunderthefederalregulationsandfoundthattheavailabilityoftheseprograms,whichmirrorIDOT’s,demonstratesserious,goodfaithconsiderationofworkablerace‐neutralalternatives.Id.at740.

Inconsideringtheissueofflexibility,thecourtfoundtheTollwayProgram,liketheFederalDBEProgram,providesforwaiverswhereprimecontractorsareunabletomeetDBEparticipationgoals,buthavemadegoodfaitheffortstodoso.Id.at740.LikeIDOT,thecourtsaidtheTollwayadherestothefederalregulationsindeterminingwhetherabidderhasmadegoodfaithefforts.Id.AsundertheFederalDBEProgram,theTollwayProgramalsoallowsbidderswhohavebeendeniedwaiverstoappeal.Id.

From2006to2011,thecourtstated,theTollwaygrantedwaiversonapproximately20percentofthe200primeconstructioncontractsitawarded.Id.at740.BecausetheTollwaydemonstratedthatwaiversareavailable,routinelygranted,andawardedordeniedbasedonguidancefoundinthefederalregulations,thecourtfoundtheTollwayProgramsufficientlyflexible.Id.

Midwestpresentednoaffirmativeevidence.ThecourtheldtheTollwayDefendantsprovidedastrongbasisinevidencefortheirDBEProgram,whereasMidwest,didnotcomeforwardwithanyconcrete,affirmativeevidencetoshakethisfoundation.Id.at740.ThecourtthusheldtheTollwayProgramwasnarrowlytailoredandgrantedtheTollwayDefendants’motionforsummaryjudgment.Id.

NoticeofAppeal.MidwestFenceCorporationfiledaNoticeofAppealtotheUnitedStatesCourtofAppealsfortheSeventhCircuit.See,840F.3d932(7thCir.2016)discussedabove.

11. Geyer Signal, Inc. v. Minnesota, DOT, 2014 WL 1309092 (D. Minn. March 31, 2014)

InGeyerSignal,Inc.,etal.v.MinnesotaDOT,USDOT,FederalHighwayAdministration,etal.,CaseNo.11‐CV‐321,UnitedStatesDistrictCourtfortheDistrictCourtofMinnesota,theplaintiffsGeyerSignal,Inc.anditsownerfiledthislawsuitagainsttheMinnesotaDOT(MnDOT)seekingapermanentinjunctionagainstenforcementandadeclarationofunconstitutionalityoftheFederalDBEProgramandMinnesotaDOT’simplementationoftheDBEProgramonitsfaceandasapplied.GeyerSignalsoughtaninjunctionagainsttheMinnesotaDOTprohibitingitfromenforcingtheDBEProgramor,alternatively,fromimplementingtheProgramimproperly;adeclaratoryjudgmentdeclaringthattheDBEProgramviolatestheEqualprotectionelementoftheFifthAmendmentoftheUnitedStatesConstitutionand/ortheEqualProtectionclauseoftheFourteenthAmendmenttotheUnitedStatesConstitutionandisunconstitutional,or,inthealternativethatMinnesotaDOT’simplementationoftheProgramisanunconstitutionalviolationoftheEqualProtectionClause,and/orthattheProgramisvoidforvagueness;andotherrelief.

Proceduralbackground.PlaintiffGeyerSignalisasmall,family‐ownedbusinessthatperformstrafficcontrolworkgenerallyonroadconstructionprojects.GeyerSignalisafirmownedbyaCaucasianmale,whoalsoisanamedplaintiff.


SubsequenttothelawsuitfiledbyGeyerSignal,theUSDOTandtheFederalHighwayAdministrationfiledtheirMotiontopermitthemtointerveneasdefendantsinthiscase.TheFederalDefendant‐IntervenorsrequestedinterventiononthecaseinordertodefendtheconstitutionalityoftheFederalDBEProgramandthefederalregulationsatissue.TheFederalDefendant‐IntervenorsandtheplaintiffsfiledaStipulationthattheFederalDefendant‐Intervenorshavetherighttointerveneandshouldbepermittedtointerveneinthematter,andconsequentlytheplaintiffsdidnotcontesttheFederalDefendant‐Intervenor’sMotionforIntervention.TheCourtissuedanOrderthattheStipulationofIntervention,agreeingthattheFederalDefendant‐Intervenorsmayinterveneinthislawsuit,beapprovedandthattheFederalDefendant‐Intervenorsarepermittedtointerveneinthiscase.

TheFederalDefendantsmovedforsummaryjudgmentandtheStatedefendantsmovedtodismiss,orinthealternativeforsummaryjudgment,arguingthattheDBEProgramonitsfaceandasimplementedbyMnDOTisconstitutional.TheCourtconcludedthattheplaintiffs,GeyerSignalanditswhitemaleowner,KevinKissner,raisednogenuineissueofmaterialfactwithrespecttotheconstitutionalityoftheDBEProgramfaciallyorasapplied.Therefore,theCourtgrantedtheFederalDefendantsandtheStatedefendants’motionsforsummaryjudgmentintheirentirety.

PlaintiffsallegedthatthereisinsufficientevidenceofacompellinggovernmentalinteresttosupportaracebasedprogramforDBEuseinthefieldsoftrafficcontrolorlandscaping.(2014WL1309092at*10)Additionally,plaintiffsallegedthattheDBEProgramisnotnarrowlytailoredbecauseit(1)treatstheconstructionindustryasmonolithic,leadingtoanoverconcentrationofDBEparticipationintheareasoftrafficsignalandlandscapingwork;(2)allowsrecipientstosetcontractgoals;and(3)setsgoalsbasedonthenumberofDBEsthereare,nottheamountofworkthoseDBEscanactuallyperform.Id.*10.PlaintiffsalsoallegedthattheDBEProgramisunconstitutionallyvaguebecauseitallowsprimecontractorstousebidsfromDBEsthatarehigherthanthebidsofnon‐DBEs,providedtheincreaseinpriceisnotunreasonable,withoutdefiningwhatincreasedcostsare“reasonable.”Id.

Constitutionalclaims.TheCourtstatesthatthe“heartofplaintiffs’claimsisthattheDBEProgramandMnDOT’simplementationofitareunconstitutionalbecausetheimpactofcuringdiscriminationintheconstructionindustryisoverconcentratedinparticularsub‐categoriesofwork.”Id.at*11.TheCourtnotedthatbecauseDBEsare,bydefinition,smallbusinesses,plaintiffscontendthey“simplycannotperformthevastmajorityofthetypesofworkrequiredforfederally‐fundedMnDOTprojectsbecausetheylackthefinancialresourcesandequipmentnecessarytoconductsuchwork.Id.

Asaresult,plaintiffsclaimedthatDBEsonlycompeteincertainsmallareasofMnDOTwork,suchastrafficcontrol,trucking,andsupply,buttheDBEgoalsthatprimecontractorsmustmeetarespreadoutovertheentirecontract.Id.PlaintiffsassertedthatprimecontractorsareforcedtodisproportionatelyuseDBEsinthosesmallareasofwork,andthatnon–DBEsinthoseareasofworkareforcedtobeartheentireburdenof“correctingdiscrimination”,whilethevastmajorityofnon‐DBEsinMnDOTcontractinghaveessentiallynoDBEcompetition.Id.

PlaintiffsthereforearguedthattheDBEProgramisnotnarrowlytailoredbecauseitmeansthatanyDBEgoalsareonlybeingmetthroughafewareasofworkonconstructionprojects,whichburdennon‐DBEsinthosesectorsanddonotalleviateanyproblemsinothersectors.Id.at#11.

PlaintiffsbroughttwofacialchallengestotheFederalDBEProgram.Id.PlaintiffsallegethattheDBEProgramisfaciallyunconstitutionalbecauseitis“fatallypronetooverconcentration”


whereDBEgoalsaremetdisproportionatelyinareasofworkthatrequirelittleoverheadandcapital.Id.at11.Second,plaintiffsallegedthattheDBEProgramisunconstitutionallyvaguebecauseitrequiresprimecontractorstoacceptDBEbidseveniftheDBEbidsarehigherthanthosefromnon‐DBEs,providedtheincreasedcostis“reasonable”withoutdefiningareasonableincreaseincost.Id.

Plaintiffsalsobroughtthreeas‐appliedchallengesbasedonMnDOT’simplementationoftheDBEProgram.Id.at12.First,plaintiffscontendedthatMnDOThasunconstitutionallyappliedtheDBEProgramtoitscontractingbecausethereisnoevidenceofdiscriminationagainstDBEsingovernmentcontractinginMinnesota.Id.Second,theycontendedthatMnDOThassetimpermissiblyhighgoalsforDBEparticipation.Finally,plaintiffsarguedthattotheextenttheDBEFederalProgramallowsMnDOTtocorrectforoverconcentration,ithasfailedtodoso,renderingitsimplementationoftheProgramunconstitutional.Id.

A.Strictscrutiny.ItisundisputedthatstrictscrutinyappliedtotheCourt’sevaluationoftheFederalDBEProgram,whetherthechallengeisfacialoras‐applied.Id.at*12.Understrictscrutiny,a“statute’srace‐basedmeasures‘areconstitutionalonlyiftheyarenarrowlytailoredtofurthercompellinggovernmentalinterests.’”Id.at*12,quotingGrutterv.Bollinger,539U.S.306,326(2003).

TheCourtnotesthattheDBEProgramalsocontainsagenderconsciousprovision,aclassificationtheCourtsaysthatwouldbesubjecttointermediatescrutiny.Id.at*12,atn.4.BecauseraceisalsousedbytheFederalDBEProgram,however,theProgrammustultimatelymeetstrictscrutiny,andtheCourtthereforeanalyzestheentireProgramforitscompliancewithstrictscrutiny.Id.

B.Facialchallengebasedonoverconcentration.TheCourtsaysthatinordertoprevailonafacialchallenge,theplaintiffmustestablishthatnosetofcircumstancesexistunderwhichtheFederalDBEProgramwouldbevalid.Id.at*12.TheCourtstatesthatplaintiffsbeartheultimateburdentoprovethattheDBEProgramisunconstitutional.Idat*.

1.Compellinggovernmentalinterest.TheCourtpointsoutthattheEighthCircuitCourtofAppealshasalreadyheldthefederalgovernmenthasacompellinginterestinnotperpetuatingtheeffectsofracialdiscriminationinitsowndistributionoffederalfundsandinremediatingtheeffectsofpastdiscriminationinthegovernmentcontractingmarketscreatedbyitsdisbursements.Id.*13,quotingAdarandConstructors,Inc.v.Slater,228F.3d1147,1165(10thCir.2000).Theplaintiffsdidnotdisputethatremedyingdiscriminationinfederaltransportationcontractingisacompellinggovernmentalinterest.Id.at*13.Inaccessingtheevidenceofferedinsupportofafindingofdiscrimination,theCourtconcludedthatdefendantshavearticulatedacompellinginterestunderlyingenactmentoftheDBEProgram.Id.

Second,theCourtstatesthatthegovernmentmustdemonstrateastrongbasisintheevidencesupportingitsconclusionthatrace‐basedremedialactionwasnecessarytofurtherthecompellinginterest.Id.at*13.Inassessingtheevidenceofferedinsupportofafindingofdiscrimination,theCourtconsidersbothdirectandcircumstantialevidence,includingpost‐enactmentevidenceintroducedbydefendantsaswellastheevidenceinthelegislativehistoryitself.Id.ThepartychallengingtheconstitutionalityoftheDBEProgrambearstheburdenofdemonstratingthatthegovernment’sevidencedidnotsupportaninferenceofpriordiscrimination.Id.


Congressionalevidenceofdiscrimination:disparitystudiesandbarriers.PlaintiffsarguedthattheevidencerelieduponbyCongressinreauthorizingtheDBEProgramisinsufficientandgenerallycritiquethereports,studies,andevidencefromtheCongressionalrecordproducedbytheFederalDefendants.Id.at*13.But,theCourtfoundthatplaintiffsdidnotraiseanyspecificissueswithrespecttotheFederalDefendants’profferedevidenceofdiscrimination.Id.*14.PlaintiffshadarguedthatnopartycouldeveraffordtoretainanexperttoanalyzethenumerousstudiessubmittedasevidencebytheFederalDefendantsandfindalloftheflaws.Id.*14.FederalDefendantshadproffereddisparitystudiesfromthroughouttheUnitedStatesoveraperiodofyearsinsupportoftheFederalDBEProgram.Id.at*14.Basedonthesestudies,theFederalDefendants’consultantconcludedthatminoritiesandwomenformedbusinessesatdisproportionatelylowerratesandtheirbusinessesearnstatisticallylessthanbusinessesownedbymenornon‐minorities.Id.at*6.

TheFederalDefendants’consultantalsodescribedstudiessupportingtheconclusionthatthereiscreditdiscriminationagainstminority‐andwomen‐ownedbusinesses,concludedthatthereisaconsistentandstatisticallysignificantunderutilizationofminority‐andwomen‐ownedbusinessesinpubliccontracting,andspecificallyfoundthatdiscriminationexistedinMnDOTcontractingwhennorace‐consciouseffortswereutilized.Id.*6.TheCourtnotesthatCongresshadconsideredaplethoraofevidencedocumentingthecontinuedpresenceofdiscriminationintransportationprojectsutilizingFederaldollars.Id.at*5.

TheCourtconcludedthatneitheroftheplaintiffs’contentionsestablishedthatCongresslackedasubstantialbasisintheevidencetosupportitsconclusionthatrace‐basedremedialactionwasnecessarytoaddressdiscriminationinpublicconstructioncontracting.Id.at*14.TheCourtrejectedplaintiffs’argumentthatbecauseCongressfoundmultipleformsofdiscriminationagainstminority‐andwomen‐ownedbusiness,thatevidenceshowedCongressfailedtoalsofindthatsuchbusinessesspecificallyfacediscriminationinpubliccontracting,orthatsuchdiscriminationisnotrelevanttotheeffectthatdiscriminationhasonpubliccontracting.Id.

TheCourtreferencedthedecisioninAdarandConstructors,Inc.228F.3dat1175‐1176.InAdarand,theCourtfoundevidencerelevanttoCongressionalenactmentoftheDBEProgramtoincludethatbothrace‐basedbarrierstoentryandtheongoingrace‐basedimpedimentstosuccessfacedbyminoritysubcontractingenterprisesarecausedeitherbycontinuingdiscriminationorthelingeringeffectsofpastdiscriminationontherelevantmarket.Id.at*14.

TheCourt,citingagainwithapprovalthedecisioninAdarandConstructors,Inc.,foundtheevidencepresentedbythefederalgovernmentdemonstratestheexistenceoftwokindsofdiscriminatorybarrierstominoritysubcontractingenterprises,bothofwhichshowastronglinkbetweenracialdisparitiesinthefederalgovernment’sdisbursementsofpublicfundsforconstructioncontractsandthechannelingofthosefundsduetoprivatediscrimination.Id.at*14,quoting,AdarandConstructors,Inc.228F.3dat1167‐68.Thefirstdiscriminatorybarriersaretotheformationofqualifiedminoritysubcontractingenterprisesduetoprivatediscrimination.Id.Theseconddiscriminatorybarriersaretofaircompetitionbetweenminorityandnon‐minoritysubcontractingenterprises,againduetoprivatediscrimination.Id.Bothkindsofdiscriminatorybarriersprecludeexistingminorityfirmsfromeffectivelycompetingforpublicconstructioncontracts.Id.

Accordingly,theCourtfoundthatCongress’considerationofdiscriminatorybarrierstoentryforDBEsaswellasdiscriminationinexistingpubliccontractingestablishastrongbasisintheevidenceforreauthorizationoftheFederalDBEProgram.Id.at*14.


CourtrejectsPlaintiffs’generalcritiqueofevidenceasfailingtomeettheirburdenofproof.TheCourtheldthatplaintiffs’generalcritiqueofthemethodologyofthestudiesrelieduponbytheFederalDefendantsissimilarlyinsufficienttodemonstratethatCongresslackedasubstantialbasisintheevidence.Id.at*14.TheCourtstatedthattheEighthCircuitCourtofAppealshasalreadyrejectedplaintiffs’argumentthatCongresswasrequiredtofindspecificevidenceofdiscriminationinMinnesotainordertoenactthenationalProgram.Id.at*14.

Finally,theCourtpointedoutthatplaintiffshavefailedtopresentaffirmativeevidencethatnoremedialactionwasnecessarybecauseminority‐ownedsmallbusinessesenjoynon‐discriminatoryaccesstoandparticipationinhighwaycontracts.Id.at*15.Thus,theCourtconcludedthatplaintiffsfailedtomeettheirultimateburdentoprovethattheFederalDBEProgramisunconstitutionalonthisground.Id.at*15,quotingSherbrookeTurf,Inc.,345F.3dat971–73.

Therefore,theCourtheldthatplaintiffsdidnotmeettheirburdenofraisingagenuineissueofmaterialfactastowhetherthegovernmentmetitsevidentiaryburdeninreauthorizingtheDBEFederalProgram,andgrantedsummaryjudgmentinfavoroftheFederalDefendantswithrespecttothegovernment’scompellinginterest.Id.at*15.

2.Narrowlytailored.TheCourtstatesthatseveralfactorsareexaminedindeterminingwhetherrace‐consciousremediesarenarrowlytailored,andthatnumerousFederalCourtshavealreadyconcludedthattheDBEFederalProgramisnarrowlytailored.Id.at*15.PlaintiffsinthiscasedidnotdisputethevariousaspectsoftheFederalDBEProgramthatcourtshavepreviouslyfoundtodemonstratenarrowlytailoring.Id.Instead,plaintiffsargueonlythattheFederalDBEProgramisnotnarrowlytailoredonitsfacebecauseofoverconcentration.

Overconcentration.Plaintiffsarguedthatiftherecipientsoffederalfundsuseoverallindustryparticipationofminoritiestosetgoals,yetlimitactualDBEparticipationtoonlydefinedsmallbusinessesthatarelimitedintheworktheycanperform,thereisnowaytoavoidoverconcentrationofDBEparticipationinafew,limitedareasofMnDOTwork.Id.at*15.Plaintiffsassertedthatsmallbusinessescannotperformmostofthetypesofworkneededornecessaryforlargehighwayprojects,andiftheyhadthecapitaltodoit,theywouldnotbesmallbusinesses.Id.at*16.Therefore,plaintiffsarguedtheDBEProgramwillalwaysbeoverconcentrated.Id.

TheCourtstatesthatinorderforplaintiffstoprevailonthisfacialchallenge,plaintiffsmustestablishthattheoverconcentrationitidentifiesisunconstitutional,andthattherearenocircumstancesunderwhichtheFederalDBEProgramcouldbeoperatedwithoutoverconcentration.Id.TheCourtconcludesthatplaintiffs’claimfailsonthebasisthattherearecircumstancesunderwhichtheFederalDBEProgramcouldbeoperatedwithoutoverconcentration.Id.

First,theCourtfoundthatplaintiffsfailtoestablishthattheDBEProgramgoalswillalwaysbefulfilledinamannerthatcreatesoverconcentration,becausetheymisapprehendthenatureofthegoalsettingmandatedbytheDBEProgram.Id.at*16.TheCourtstatesthatrecipientssetgoalsforDBEparticipationbasedonevidenceoftheavailabilityofready,willingandableDBEstoparticipateonDOT‐assistedcontracts.Id.TheDBEProgram,accordingtotheCourt,necessarilytakesintoaccount,whendetermininggoals,thattherearecertaintypesofworkthatDBEsmayneverbeabletoperformbecauseofthecapitalrequirements.Id.Inotherwords,ifthereisatypeofworkthatnoDBEcanperform,therewillbenodemonstrableevidenceoftheavailabilityofready,willingandableDBEsinthattypeofwork,andthosenon‐existentDBEs


willnotbefactoredintothelevelofDBEparticipationthatalocalitywouldexpectabsenttheeffectsofdiscrimination.Id.

Second,theCourtfoundthateveniftheDBEProgramcouldhavetheincidentaleffectofoverconcentrationinparticularareas,theDBEProgramfaciallyprovidesamplemechanismsforarecipientoffederalfundstoaddresssuchaproblem.Id.at*16.TheCourtnotesthatarecipientretainssubstantialflexibilityinsettingindividualcontractgoalsandspecificallymayconsiderthetypeofworkinvolved,thelocationofthework,andtheavailabilityofDBEsfortheworkoftheparticularcontract.Id.Ifoverconcentrationpresentsitselfasaproblem,theCourtpointsoutthatarecipientcanaltercontractgoalstofocuslessoncontractsthatrequireworkinanalreadyoverconcentratedareaandinsteadinvolveothertypesofworkwhereoverconcentrationofDBEsisnotpresent.Id.

ThefederalregulationsalsorequirecontractorstoengageingoodfaitheffortsthatrequirebreakingoutthecontractworkitemsintoeconomicallyfeasibleunitstofacilitateDBEparticipation.Id.Therefore,theCourtfound,theregulationsanticipatethepossibleissueidentifiedbyplaintiffsandrequireprimecontractorstosubdivideprojectsthatwouldotherwisetypicallyrequiremorecapitalorequipmentthanasingleDBEcanacquire.Id.Also,theCourt,statesthatrecipientsmayobtainwaiversoftheDBEProgram’sprovisionspertainingtooverallgoals,contractgoals,orgoodfaithefforts,if,forexample,localconditionsofoverconcentrationthreatenoperationoftheDBEProgram.Id.

TheCourtalsorejectsplaintiffsclaimthat49CFR§26.45(h),whichprovidesthatrecipientsarenotallowedtosubdividetheirannualgoalsinto“group‐specificgoals”,butrathermustprovideforparticipationbyallcertifiedDBEs,asevidencethattheDBEProgramleadstooverconcentration.Id.at*16.TheCourtnotesthatothercourtshaveinterpretedthisprovisiontomeanthatrecipientscannotapportionitsDBEgoalamongdifferentminoritygroups,andthereforetheprovisiondoesnotappeartoprohibitrecipientsfromidentifyingparticularoverconcentratedareasandremedyingoverconcentrationinthoseareas.Id.at*16.And,eveniftheprovisionoperatedasplaintiffssuggested,thatprovisionissubjecttowaiveranddoesnotaffectarecipient’sabilitytotailorspecificcontractgoalstocombatoverconcentration.Id.at*16,n.5.

TheCourtstateswithrespecttooverconcentrationspecifically,thefederalregulationsprovidethatrecipientsmayuseincentives,technicalassistance,businessdevelopmentprograms,mentor‐protégéprograms,andotherappropriatemeasuresdesignedtoassistDBEsinperformingworkoutsideofthespecificfieldinwhichtherecipienthasdeterminedthatnon‐DBEsareundulyburdened.Id.at*17.AllofthesemeasurescouldbeusedbyrecipientstoshiftDBEsfromareasinwhichtheyareoverconcentratedtootherareasofwork.Id.at*17.

Therefore,theCourtheldthatbecausetheDBEProgramprovidesnumerousavenuesforrecipientsoffederalfundstocombatoverconcentration,theCourtconcludedthatplaintiffs’facialchallengetotheProgramfails,andgrantedtheFederalDefendants’motionforsummaryjudgment.Id.

C.Facialchallengedbasedonvagueness.TheCourtheldthatplaintiffscouldnotmaintainafacialchallengeagainsttheFederalDBEProgramforvagueness,astheirconstitutionalchallengestotheProgramarenotbasedintheFirstAmendment.Id.at*17.TheCourtstatesthattheEighthCircuitCourtofAppealshasheldthatcourtsneednotconsiderfacialvaguenesschallengesbaseduponconstitutionalgroundsotherthantheFirstAmendment.Id.


TheCourtthusgrantedFederalDefendants’motionforsummaryjudgmentwithrespecttoplaintiffs’facialclaimforvaguenessbasedontheallegationthattheFederalDBEProgramdoesnotdefine“reasonable”forpurposesofwhenaprimecontractorisentitledtorejectaDBEs’bidonthebasisofpricealone.Id.

D.As‐AppliedChallengestoMnDOT’sDBEProgram:MnDOT’sprogramheldnarrowlytailored.Plaintiffsbroughtthreeas‐appliedchallengesagainstMnDOT’simplementationoftheFederalDBEProgram,allegingthatMnDOThasfailedtosupportitsimplementationoftheProgramwithevidenceofdiscriminationinitscontracting,setsinappropriategoalsforDBEparticipation,andhasfailedtorespondtooverconcentrationinthetrafficcontrolindustry.Id.at*17.

1.Allegedfailuretofindevidenceofdiscrimination.TheCourtheldthatastate’simplementationoftheFederalDBEProgrammustbenarrowlytailored.Id.at*18.ToshowthatastatehasviolatedthenarrowtailoringrequirementoftheFederalDBEProgram,theCourtsaysachallengermustdemonstratethat“betterdatawasavailable”andtherecipientoffederalfunds“wasotherwiseunreasonableinundertaking[its]thoroughanalysisandinrelyingonitsresults.”Id.,quotingSherbrookTurf,Inc.at973.

Plaintiffs’expertcritiquedthestatisticalmethodsusedandconclusionsdrawnbytheconsultantforMnDOTinfindingthatdiscriminationagainstDBEsexistsinMnDOTcontractingsufficienttosupportoperationoftheDBEProgram.Id.at*18.Plaintiffs’expertalsocritiquedthemeasuresofDBEavailabilityemployedbytheMnDOTconsultantandthefacthemeasureddiscriminationinbothprimeandsubcontractingmarkets,insteadofsolelyinsubcontractingmarkets.Id.

Plaintiffspresentnoaffirmativeevidencethatdiscriminationdoesnotexist.TheCourtheldthatplaintiffs’disputeswithMnDOT’sconclusionthatdiscriminationexistsinpubliccontractingareinsufficienttoestablishthatMnDOT’simplementationoftheFederalDBEProgramisnotnarrowlytailored.Id.at*18.First,theCourtfoundthatitisinsufficienttoshowthat“datawassusceptibletomultipleinterpretations,”instead,plaintiffsmust“presentaffirmativeevidencethatnoremedialactionwasnecessarybecauseminority‐ownedsmallbusinessesenjoynon‐discriminatoryaccesstoandparticipationinhighwaycontracts.”Id.at*18,quotingSherbrookeTurf,Inc.,345F.3dat970.Here,theCourtfound,plaintiffs’experthasnotpresentedaffirmativeevidenceuponwhichtheCourtcouldconcludethatnodiscriminationexistsinMinnesota’spubliccontracting.Id.at*18.

Asforthemeasuresofavailabilityandmeasurementofdiscriminationinbothprimeandsubcontractingmarkets,bothofthesepracticesareincludedinthefederalregulationsaspartofthemechanismsforgoalsetting.Id.at*18.TheCourtfoundthatitwouldmakelittlesensetoseparateprimecontractorandsubcontractoravailability,whenDBEswillalsocompeteforprimecontractsandanysuccesswillbereflectedintherecipient’scalculationofsuccessinmeetingtheoverallgoal.Id.at*18,quotingNorthernContracting,Inc.v.Illinois,473F.3d715,723(7thCir.2007).BecausethesefactorsarepartofthefederalregulationsdefiningstategoalsettingthattheEighthCircuitCourtofAppealshasalreadyapprovedinassessingMnDOT’scompliancewithnarrowtailoringinSherbrookeTurf,theCourtconcludedthesecriticismsdonotestablishthatMnDOThasviolatedthenarrowtailoringrequirement.Id.at*18.

Inaddition,theCourtheldthesecriticismsfailtoestablishthatMnDOTwasunreasonableinundertakingitsthoroughanalysisandrelyingonitsresults,andconsequentlydonotshowlackofnarrowtailoring.Id.at*18.Accordingly,theCourtgrantedtheStatedefendants’motionforsummaryjudgmentwithrespecttothisclaim.


2.Allegedinappropriategoalsetting.PlaintiffssecondchallengewastotheaspirationalgoalsMnDOThassetforDBEperformancebetween2009and2015.Id.at*19.TheCourtfoundthatthegoalsettingviolationstheplaintiffsallegedarenotthetypesofviolationsthatcouldreasonablybeexpectedtorecur.Id.PlaintiffsraisednumerousargumentsregardingthedataandmethodologyusedbyMnDOTinsettingitsearliergoals.Id.But,plaintiffsdidnotdisputethateverythreeyearsMnDOTconductsanentirelynewanalysisofdiscriminationintherelevantmarketandestablishesnewgoals.Id.Therefore,disputesoverthedatacollectionandcalculationsusedtosupportgoalsthatarenolongerineffectaremoot.Id.Thus,theCourtonlyconsideredplaintiffs’challengestothe2013–2015goals.Id.

Plaintiffsraisedthesamechallengestothe2013–2015goalsasitdidtoMnDOT’sfindingofdiscrimination,namelythatthegoalsrelyonmultipleapproachestoascertaintheavailabilityofDBEsandrelyonameasurementofdiscriminationthataccountsforbothprimeandsubcontractingmarkets.Id.at*19.BecausethesechallengesidentifyonlyadifferentinterpretationofthedataanddonotestablishthatMnDOTwasunreasonableinrelyingontheoutcomeoftheconsultants’studies,plaintiffshavefailedtodemonstrateamaterialissueoffactrelatedtoMnDOT’snarrowtailoringasitrelatestogoalsetting.Id.

3.Allegedoverconcentrationinthetrafficcontrolmarket.Plaintiffs’finalargumentwasthatMnDOT’simplementationoftheDBEProgramviolatestheEqualProtectionClausebecauseMnDOThasfailedtofindoverconcentrationinthetrafficcontrolmarketandcorrectforsuchoverconcentration.Id.at*20.MnDOTpresentedanexpertreportthatreviewedfourdifferentindustriesintowhichplaintiffs’workfallsbasedonNAICscodesthatfirmsconductingtrafficcontrol‐typeworkidentifythemselvesby.Id.Afterconductingadisproportionalitycomparison,theconsultantconcludedthattherewasnotstatisticallysignificantoverconcentrationofDBEsinplaintiffs’typeofwork.

Plaintiffs’expertfoundthatthereisoverconcentration,butrelieduponsixothercontractorsthathavepreviouslybidonMnDOTcontracts,whichplaintiffsbelieveperformthesametypeofworkasplaintiff.Id.at*20.But,theCourtfoundplaintiffshaveprovidednoauthorityforthepropositionthatthegovernmentmustconformitsimplementationoftheDBEProgramtoeveryindividualbusiness’self‐assessmentofwhatindustrygrouptheyfallintoandwhatotherbusinessesaresimilar.Id.

TheCourtheldthattorequiretheStatetorespondtoandadjustitscalculationsonaccountofsuchachallengebyasinglebusinesswouldplaceanimpossibleburdenonthegovernmentbecauseanindividualbusinesscouldalwaysmakeanargumentthatsomeoftheotherentitiesintheworkareathegovernmenthasgroupeditintoarenotalike.Id.at*20.This,theCourtstates,wouldrequirethegovernmenttorunendlessiterationsofoverconcentrationanalysestosatisfyeachbusinessthatnon‐DBEsarenotbeingundulyburdenedinitsself‐definedgroup,whichwouldbequiteburdensome.Id.

BecauseplaintiffsdidnotshowthatMnDOT’srelianceonitsoverconcentrationanalysisusingNAICscodeswasunreasonableorthatoverconcentrationexistsinitstypeofworkasdefinedbyMnDOT,ithasnotestablishedthatMnDOThasviolatednarrowtailoringbyfailingtoidentifyoverconcentrationorfailingtoaddressit.Id.at*20.Therefore,theCourtgrantedtheStatedefendants’motionforsummaryjudgmentwithrespecttothisclaim.

III.ClaimsUnder42U.S.C.§1981and42U.S.C.§2000.BecausetheCourtconcludedthatMnDOT’sactionsareincompliancewiththeFederalDBEProgram,itsadherencetothatProgramcannotconstituteabasisforaviolationof§1981.Id.at*21.Inaddition,becausethe


CourtconcludedthatplaintiffsfailedtoestablishaviolationoftheEqualProtectionClause,itgrantedthedefendants’motionsforsummaryjudgmentonthe42U.S.C.§2000dclaim.

Holding.Therefore,theCourtgrantedtheFederalDefendants’motionforsummaryjudgmentandtheStates’defendants’motiontodismiss/motionforsummaryjudgment,anddismissedalltheclaimsassertedbytheplaintiffs.

12. Dunnet Bay Construction Company v. Gary Hannig, in its official capacity as Secretary of Transportation for the Illinois DOT and the Illinois DOT, 2014 WL 552213 (C.D. Ill. 2014), affirmed, Dunnet Bay Construction Co. v. Borggren, Illinois DOT, et al., 799 F.3d 676, 2015 WL 4934560 (7th Cir. 2015).

InDunnetBayConstructionCompanyv.GaryHannig,initsofficialcapacityasSecretaryoftheIllinoisDOTandtheIllinoisDOT,2014WL552213(C.D.Ill.Feb.12,2014),plaintiffDunnetBayConstructionCompanybroughtalawsuitagainsttheIllinoisDepartmentofTransportation(IDOT)andtheSecretaryofIDOTinhisofficialcapacitychallengingtheIDOTDBEProgramanditsimplementationoftheFederalDBEProgram,includinganallegedunwritten“nowaiver”policy,andclaimingthattheIDOT’sprogramisnotnarrowlytailored.

MotiontoDismisscertainclaimsgranted.IDOTinitiallyfiledaMotiontoDismisscertainCountsoftheComplaint.TheUnitedStatesDistrictCourtgrantedtheMotiontoDismissCountsI,IIandIIIagainstIDOTprimarilybasedonthedefenseofimmunityundertheEleventhAmendmenttotheUnitedStatesConstitution.TheOpinionheldthatclaimsinCountsIandIIagainstSecretaryHannigofIDOTinhisofficialcapacityremainedinthecase.

Inaddition,theotherCountsoftheComplaintthatremainedinthecasenotsubjecttotheMotiontoDismiss,soughtdeclaratoryandinjunctivereliefanddamagesbasedonthechallengetotheIDOTDBEProgramanditsapplicationbyIDOT.PlaintiffDunnetBayallegedtheIDOTDBEProgramisunconstitutionalbasedontheunwrittenno‐waiverpolicy,requiringDunnetBaytomeetDBEgoalsanddenyingDunnetBayawaiverofthegoalsdespiteitsgoodfaithefforts,andbasedonotherallegations.DunnetBaysoughtadeclaratoryjudgmentthatIDOT’sDBEprogramdiscriminatesonthebasisofraceintheawardoffederal‐aidhighwayconstructioncontractsinIllinois.

MotionsforSummaryJudgment.SubsequenttotheCourt’sOrdergrantingthepartialMotiontoDismiss,DunnetBayfiledaMotionforSummaryJudgment,assertingthatIDOThaddepartedfromthefederalregulationsimplementingtheFederalDBEProgram,thatIDOT’simplementationoftheFederalDBEProgramwasnotnarrowlytailoredtofurtheracompellinggovernmentalinterest,andthattherefore,theactionsofIDOTcouldnotwithstandstrictscrutiny.2014WL552213at*1.IDOTalsofiledaMotionforSummaryJudgment,allegingthatallapplicableguidelinesfromthefederalregulationswerefollowedwithrespecttotheIDOTDBEProgram,andbecauseIDOTisfederallymandatedanddidnotabuseitsfederalauthority,IDOT’sDBEProgramisnotsubjecttoattack.Id.

IDOTfurtherassertedinitsMotionforSummaryJudgmentthatthereisnoEqualProtectionviolation,claimingthatneithertherejectionofthebidbyDunnetBay,northedecisiontore‐bidtheproject,wasbaseduponDunnetBay’srace.IDOTalsoassertedthat,becauseDunnetBaywasrelyingontherightsofothersandwasnotdeniedequalopportunitytocompeteforgovernmentcontracts,DunnetBaylackedstandingtobringaclaimforracialdiscrimination.


Factualbackground.PlaintiffDunnetBayConstructionCompanyisownedbytwowhitemalesandisengagedinthebusinessofgeneralhighwayconstruction.IthasbeenqualifiedtoworkonIDOThighwayconstructionprojects.Inaccordancewiththefederalregulations,IDOTpreparedandsubmittedtotheUSDOTforapprovalaDBEProgramgoverningfederallyfundedhighwayconstructioncontracts.Forfiscalyear2010,IDOTestablishedanoverallaspirationalDBEgoalof22.77percentforDBEparticipation,anditprojectedthat4.12percentoftheoverallgoalcouldbemetthroughraceneutralmeasuresandtheremaining18.65percentwouldrequiretheuseofrace‐consciousgoals.2014WL552213at*3.IDOTnormallyachievedsomewherebetween10and14percentparticipationbyDBEs.Id.TheoverallaspirationalgoalwasbaseduponastatewidedisparitystudyconductedonbehalfofIDOTin2004.

UtilizationgoalsundertheIDOTDBEProgramDocumentaredeterminedbaseduponanassessmentforthetypeofwork,locationofthework,andtheavailabilityofDBEcompaniestodoapartofthework.Id.at*4.Eachpayitemforaproposedcontractisanalyzedtodetermineifthereareatleasttwoready,willing,andableDBEstoperformthepayitem.Id.ThecapacityoftheDBEs,theirwillingnesstoperformtheworkintheparticulardistrict,andtheirpossessionofthenecessaryworkforceandequipmentarealsofactorsintheoveralldetermination.Id.

Initially,IDOTcalculatedtheDBEgoalfortheEisenhowerProjecttobe8percent.WhengoalswerefirstsetontheEisenhowerProject,takingintoaccounteveryitemlistedforwork,themaximumpotentialgoalforDBEparticipationfortheEisenhowerProjectwas20.3percent.Eventually,anoverallgoalofapproximately22percentwasset.Id.at*4.

Atthebidopening,DunnetBay’sbidwasthelowestreceivedbyIDOT.ItslowbidwasoverIDOT’sestimatefortheproject.DunnetBay,initsbid,identified8.2percentofitsbidforDBEs.ThesecondlowbidderprojectedDBEparticipationof22percent.DunnetBay’sDBEparticipationbiddidnotmeetthepercentageparticipationinthebiddocuments,andthusIDOTconsideredDunnetBay’sgoodfaitheffortstomeettheDBEgoal.IDOTrejectedDunnetBay’sbiddeterminingthatDunnetBayhadnotdemonstratedagoodfaithefforttomeettheDBEgoal.Id.at*9.

TheCourtfoundthatalthoughitwasthelowbidderfortheconstructionproject,DunnetBaydidnotmeetthegoalforparticipationofDBEsdespiteitsallegedgoodfaithefforts.IDOTcontendeditfollowedallapplicableguidelinesinhandlingtheDBEProgram,andthatbecauseitdidnotabuseitsfederalauthorityinadministeringtheProgram,theIDOTDBEProgramisnotsubjecttoattack.Id.at*23.IDOTfurtherassertedthatneitherrejectionofDunnetBay’sbidnorthedecisiontore‐bidtheProjectwasbasedonitsraceorthatofitsowners,andthatDunnetBaylackedstandingtobringaclaimforracialdiscriminationonbehalfofothers(i.e.,smallbusinessesoperatedbywhitemales).Id.at*23.

TheCourtfoundthatthefederalregulationsrecommendanumberofnon‐mandatory,non‐exclusiveandnon‐exhaustiveactionswhenconsideringabidder’sgoodfaitheffortstoobtainDBEparticipation.Id.at*25.ThefederalregulationsalsoprovidethestateDOTmayconsidertheabilityofotherbidderstomeetthegoal.Id.

IDOTimplementingtheFederalDBEProgramisactingasanagentofthefederalgovernmentinsulatedfromconstitutionalattackabsentshowingthestateexceededfederalauthority.TheCourtheldthatastateentitysuchasIDOTimplementingacongressionallymandatedprogrammayrely“onthefederalgovernment’scompellinginterestinremedyingtheeffectsofpassdiscriminationinthenationalconstructionmarket.”Id.at*26,quotingNorthernContractingCo.,Inc.v.Illinois,473F.3d715at720‐21(7thCir.2007).Inthese


instances,theCourtstated,thestateisactingasanagentofthefederalgovernmentandis“insulatedfromthissortofconstitutionalattack,absentashowingthatthestateexceededitsfederalauthority.“Id.at*26,quotingNorthernContracting,Inc.,473F.3dat721.TheCourtheldthataccordingly,any“challengetoastate’sapplicationofafederallymandatedprogrammustbelimitedtothequestionofwhetherthestateexceededitsauthority.“Id.at*26,quotingNorthernContracting,Inc.,473.F.3dat722.Therefore,theCourtidentifiedthekeyissueasdeterminingifIDOTexceededitsauthoritygrantedunderthefederalrulesorifDunnetBay’schallengesareforeclosedbyNorthernContracting.Id.at*26.

TheCourtfoundthatIDOTdidinfactemployathoroughprocessbeforearrivingatthe22percentDBEparticipationgoalfortheEisenhowerProject.Id.at*26.TheCourtalsoconcluded“becausethefederalregulationsdonotspecifyaprocedureforarrivingatcontractgoals,itisnotapparenthowIDOTcouldhaveexceededitsfederalauthority.AnychallengeonthisfactorfailsunderNorthernContracting.”Id.at*26.Therefore,theCourtconcludedthereisnobasisforfindingthattheDBEgoalwasarbitrarilysetorthatIDOTexceededitsfederalauthoritywithrespecttothisfactor.Id.at*27.

The“no‐waiver”policy.TheCourtheldthattherewasnotano‐waiverpolicyconsideringallthetestimonyandfactualevidence.Inparticular,theCourtpointedoutthatawaiverwasinfactgrantedinconnectionwiththesamebidlettingatissueinthiscase.Idat*27.TheCourtfoundthatIDOTgrantedawaiveroftheDBEparticipationgoalforanotherconstructioncontractoronadifferentcontract,butunderthesamebidlettinginvolvedinthismatter.Id.

Thus,theCourtheldthatDunnetBay’sassertionthatIDOTadopteda“no‐waiver”policywasunsupportedandcontrarytotherecordevidence.Id.at*27.TheCourtfoundtheundisputedfactsestablishedthatIDOTdidnothavea“no‐waiver”policy,andthatIDOTdidnotexceeditsfederalauthoritybecauseitdidnotadopta“no‐waiver”policy.Id.Therefore,theCourtagainconcludedthatanychallengebyDunnetBayonthisfactorfailedpursuanttotheNorthernContractingdecision.

IDOT’sdecisiontorejectDunnetBay’sbidbasedonlackofgoodfaitheffortsdidnotexceedIDOT’sauthorityunderfederallaw.TheCourtfoundthatIDOThassignificantdiscretionunderfederalregulationsandisoftencalledupontomakea“judgmentcall”regardingtheeffortsofthebidderintermsofestablishinggoodfaithattempttomeettheDBEgoals.Id.at*28.TheCourtstateditwasunabletoconcludethatIDOTerredindeterminingDunnetBaydidnotmakeadequategoodfaithefforts.Id.TheCourtsurmisedthatthestrongestevidencethatDunnetBaydidnottakeallnecessaryandreasonablestepstoachievetheDBEgoalisthatitsDBEparticipationwasunder9percentwhileotherbidderswereabletoreachthe22percentgoal.Id.Accordingly,theCourtconcludedthatIDOT’sdecisionrejectingDunnetBay’sbidwasconsistentwiththeregulationsanddidnotexceedIDOT’sauthorityunderthefederalregulations.Id.

TheCourtalsorejectedDunnetBay’sargumentthatIDOTfailedtoprovideDunnetBaywithawrittenexplanationastowhyitsgoodfaitheffortswerenotsufficient,andthusthereweredeficiencieswiththereconsiderationofDunnetBay’sbidandeffortsasrequiredbythefederalregulations.Id.at*29.TheCourtfounditwasunabletoconcludethatatechnicalviolationsuchastoprovideDunnetBaywithawrittenexplanationwillprovideanyrelieftoDunnetBay.Id.Additionally,theCourtfoundthatbecauseIDOTrebidtheproject,DunnetBaywasnotprejudicedbyanydeficiencieswiththereconsideration.Id.


TheCourtemphasizedthatbecauseofthedecisiontorebidtheproject,IDOTwasnotevenrequiredtoholdareconsiderationhearing.Id.at*24.BecausethedecisiononreconsiderationastogoodfaitheffortsdidnotexceedIDOT’sauthorityunderfederallaw,theCourtheldDunnetBay’sclaimfailedundertheNorthernContractingdecision.Id.

DunnetBaylackedstandingtoraiseanequalprotectionclaim.TheCourtfoundthatDunnetBaywasnotdisadvantagedinitsabilitytocompeteagainstaraciallyfavoredbusiness,andneitherIDOT’srejectionofDunnetBay’sbidnorthedecisiontorebidwasbasedontheraceofDunnetBay’sownersoranyclass‐basedanimus.Idat*29.TheCourtstatedthatDunnetBaydidnotpointtoanyotherbusinessthatwasgivenacompetitiveadvantagebecauseoftheDBEgoals.Id.DunnetBaydidnotciteanycaseswhichinvolveplaintiffsthataresimilarlysituatedtoit‐businessesthatarenotatacompetitivedisadvantageagainstminority‐ownedcompaniesorDBEs‐andhavebeendeterminedtohavestanding.Id.at*30.

TheCourtconcludedthatanycompanysimilarlysituatedtoDunnetBayhadtomeetthesameDBEgoalunderthecontract.Id.DunnetBay,theCourtheld,wasnotatacompetitivedisadvantageand/orunabletocompeteequallywiththosegivenpreferentialtreatment.Id.

DunnetBaydidnotpointtoanothercontractorthatdidnothavetomeetthesamerequirementsitdid.TheCourtthusconcludedthatDunnetBaylackedstandingtoraiseanequalprotectionchallengebecauseithadnotsufferedaparticularizedinjurythatwascausedbyIDOT.Id.at*30.DunnetBaywasnotdeprivedoftheabilitytocompeteonanequalbasis.Id.Also,basedontheamountofitsprofits,DunnetBaydidnotqualifyasasmallbusiness,andtherefore,itlackedstandingtovindicatetherightsofahypotheticalwhite‐ownedsmallbusiness.Id.at*30.BecausetheCourtfoundthatDunnetBaywasnotdeniedtheabilitytocompeteonanequalfootinginbiddingonthecontract,DunnetBaylackedstandingtochallengetheDBEProgrambasedontheEqualProtectionClause.Id.at*30.

DunnetBaydidnotestablishequalprotectionviolationevenifithadstanding.TheCourtheldthatevenifDunnetBayhadstandingtobringanequalprotectionclaim,IDOTstillisentitledtosummaryjudgment.TheCourtstatedtheSupremeCourthasheldthatthe“injuryinfact”inanequalprotectioncasechallengingaDBEProgramisthedenialofequaltreatmentresultingfromtheimpositionofthebarrier,nottheultimateinabilitytoobtainthebenefit.Id.at*31.DunnetBay,theCourtsaid,impliedthatbutforthealleged“no‐waiver”policyandDBEgoalswhichwerenotnarrowlytailoredtoaddressdiscrimination,itwouldhavebeenawardedthecontract.TheCourtagainnotedtherecordestablishedthatIDOTdidnothavea“no‐waiver”policy.Id.at*31.

TheCourtalsofoundthatbecausethegravamenofequalprotectionliesnotinthefactofdeprivationofarightbutintheinvidiousclassificationofpersons,itdoesnotappearDunnetBaycanassertaviableclaim.Id.at*31.TheCourtstateditisunawareofanyauthoritywhichsuggeststhatDunnetBaycanestablishanequalprotectionviolationevenifitcouldshowthatIDOTfailedtocomplywiththeregulationsrelatingtotheDBEProgram.Id.TheCourtsaidthatevenifIDOTdidemploya“no‐waiverpolicy,”suchapolicywouldnotconstituteanequalprotectionviolationbecausethefederalregulationsdonotconferspecificentitlementsuponanyindividuals.Id.at*31.

Inordertosupportanequalprotectionclaim,theplaintiffwouldhavetoestablishitwastreatedlessfavorablythananotherentitywithwhichitwassimilarlysituatedinallmaterialrespects.Id.at*51.Basedontherecord,theCourtstateditcouldonlyspeculatewhetherDunnetBayoranotherentitywouldhavebeenawardedacontractwithoutIDOT’sDBEProgram.But,theCourt


founditneednotspeculateastowhetherDunnetBayoranothercompanywouldhavebeenawardedthecontract,becausewhatisimportantforequalprotectionanalysisisthatDunnetBaywastreatedthesameasotherbidders.Id.at*31.EverybidderhadtomeetthesamepercentagegoalforsubcontractingtoDBEsormakegoodfaithefforts.Id.BecauseDunnetBaywasheldtothesamestandardsaseveryotherbidder,itcannotestablishitwasthevictimofdiscriminationpursuanttotheEqualProtectionClause.Id.Therefore,IDOT,theCourtheld,isentitledtosummaryjudgmentonDunnetBay’sclaimsundertheEqualProtectionClauseandunderTitleVI.

Conclusion.TheCourtconcludedIDOTisentitledtosummaryjudgment,holdingDunnetBaylackedstandingtoraiseanequalprotectionchallengebasedonrace,andthatevenifDunnetBayhadstanding,DunnetBaywasunabletoshowthatitwouldhavebeenawardedthecontractintheabsenceofanyviolation.Id.at*32.Anyotherfederalclaims,theCourtheld,wereforeclosedbytheNorthernContractingdecisionbecausethereisnoevidenceIDOTexceededitsauthorityunderfederallaw.Id.Finally,theCourtfoundDunnetBayhadnotestablishedthelikelihoodoffutureharm,andthuswasnotentitledtoinjunctiverelief.

13. M.K. Weeden Construction v. State of Montana, Montana Department of Transportation, et al., 2013 WL 4774517 (D. Mont.) (September 4, 2013)

Thiscaseinvolvedachallengebyaprimecontractor,M.K.WeedenConstruction,Inc.(“Weeden”)againsttheStateofMontana,MontanaDepartmentofTransportationandothers,totheDBEProgramadoptedbyMDTimplementingtheFederalDBEProgramat49CFRPart26.WeedensoughtanapplicationforTemporaryRestrainingOrderandPreliminaryInjunctionagainsttheStateofMontanaandtheMDT.

Factualbackgroundandclaims.Weedenwasthelowdollarbidderwithabidof$14,770,163.01ontheArrowCreekSlideProject.Theprojectreceivedfederalfunding,andassuch,wasrequiredtocomplywiththeUSDOT’sDBEProgram.2013WL4774517at*1.MDThadestablishedanoverallgoalof5.83percentDBEparticipationinMontana’shighwayconstructionprojects.OntheArrowCreekSlideProject,MDTestablishedaDBEgoalof2percent.Id.

PlaintiffWeeden,althoughitsubmittedthelowdollarbid,didnotmeetthe2percentDBErequirement.2013WL4774517at*1.Weedenclaimedthatitsbidreliedupononly1.87percentDBEsubcontractors(althoughthecourtpointsoutthatWeeden’sbidactuallyidentifiedonly.81percentDBEsubcontractors).Weedenwastheonlybidderoutofthesixbidderswhodidnotmeetthe2percentDBEgoal.Theotherfivebiddersexceededthe2percentgoal,withbidsrangingfrom2.19percentDBEparticipationto6.98percentDBEparticipation.Id.at*2.

WeedenattemptedtoutilizeagoodfaithexceptiontotheDBErequirementundertheFederalDBEProgramandMontana’sDBEProgram.MDT’sDBEParticipationReviewCommitteeconsideredWeeden’sgoodfaithdocumentationandfoundthatWeeden’sbidwasnon‐compliantastotheDBErequirement,andthatWeedenfailedtodemonstrategoodfaitheffortstosolicitDBEsubcontractorparticipationinthecontract.2013WL4774517at*2.WeedenappealedthatdecisiontotheMDTDBEReviewBoardandappearedbeforetheBoardatahearing.TheDBEReviewBoardaffirmedtheCommitteedecisionfindingthatWeeden’sbidwasnotincompliancewiththecontractDBEgoalandthatWeedenhadfailedtomakeagoodfaithefforttocomplywiththegoal.Id.at*2.TheDBEReviewBoardfoundthatWeedenhadreceivedaDBEbidfortrafficcontrol,butWeedendecidedtoperformthatworkitselfinordertoloweritsbidamount.Id.at*2.Additionally,theDBEReviewBoardfoundthatWeeden’smassemailto


158DBEsubcontractorswithoutanyfollowupwasaproformaeffortnotcreditedbytheReviewBoardasanactiveandaggressiveefforttoobtainDBEparticipation.Id.

PlaintiffWeedensoughtaninjunctioninfederaldistrictcourtagainstMDTtopreventitfromlettingthecontracttoanotherbidder.WeedenclaimedthatMDT’sDBEProgramviolatedtheEqualProtectionClauseoftheU.S.ConstitutionandtheMontanaConstitution,assertingthattherewasnosupportingevidenceofdiscriminationintheMontanahighwayconstructionindustry,andtherefore,therewasnogovernmentinterestthatwouldjustifyfavoringDBEentities.2013WL4774517at*2.WeedenalsoclaimedthatitsrighttoDueProcessundertheU.S.ConstitutionandMontanaConstitutionhadbeenviolated.Specifically,WeedenclaimedthatMDTdidnotprovidereasonablenoticeofthegoodfaitheffortrequirements.Id.

NoproofofirreparableharmandbalanceofequitiesfavorMDT.First,theCourtfoundthatWeedendidnotproveforacertaintythatitwouldsufferirreparableharmbasedontheCourt’sconclusionthatinthepastfouryears,Weedenhadobtainedsixstatehighwayconstructioncontractsvaluedatapproximately$26million,andthatMDThad$50millionmoreinhighwayconstructionprojectstobeletduringtheremainderof2013alone.2013WL4774517at*3.Thus,theCourtconcludedthatasdemonstratedbyitspastperformance,WeedenhasthecapacitytoobtainotherhighwayconstructioncontractsandthusthereislittleriskofirreparableinjuryintheeventMDTawardstheProjecttoanotherbidder.Id.

Second,theCourtfoundthebalanceoftheequitiesdidnottipinWeeden’sfavor.2013WL4774517at*3.WeedenhadassertedthatMDTandUSDOTrulesregardinggoodfaitheffortstoobtainDBEsubcontractorparticipationareconfusing,non‐specificandcontradictory.Id.TheCourtheldthatitisobvioustheotherfivebidderswereabletomeetandexceedthe2percentDBErequirementwithoutanydifficultywhatsoever.Id.TheCourtfoundthatWeeden’sbidisnotresponsivetotherequirements,thereforeisnotandcannotbethelowestresponsiblebid.Id.Thebalanceoftheequities,accordingtotheCourt,donottiltinfavorofWeeden,whodidnotmeettherequirementsofthecontract,especiallywhennumerousotherbiddersablydemonstratedanabilitytomeetthoserequirements.Id.

Nostanding.TheCourtalsoquestionedwhetherWeedenraisedanyseriousissuesonthemeritsofitsequalprotectionclaimbecauseWeedenisaprimecontractorandnotasubcontractor.SinceWeedenisaprimecontractor,theCourthelditisclearthatWeedenlacksArticleIIIstandingtoassertitsequalprotectionclaim.Id.at*3.TheCourtheldthataprimecontractor,suchasWeeden,isnotpermittedtochallengeMDT’sDBEProjectasifitwereanon‐DBEsubcontractorbecauseWeedencannotshowthatitwassubjectedtoaracialorgender‐basedbarrierinitscompetitionfortheprimecontract.Id.at*3.BecauseWeedenwasnotdeprivedoftheabilitytocompeteonequalfootingwiththeotherbidders,theCourtfoundWeedensufferednoequalprotectioninjuryandlacksstandingtoassertanequalprotectionclaimasitwereanon‐DBEsubcontractor.Id.

CourtappliesAGCv.CaliforniaDOTcase;evidencesupportsnarrowlytailoredDBEprogram.Significantly,theCourtfoundthatevenifWeedenhadstandingtopresentanequalprotectionclaim,MDTpresentedsignificantevidenceofunderutilizationofDBE’sgenerally,evidencethatsupportsanarrowlytailoredraceandgenderpreferenceprogram.2013WL4774517at*4.Moreover,theCourtnotedthatalthoughWeedenpointsoutthatsomebusinesscategoriesinMontana’shighwayconstructionindustrydonothaveahistoryofdiscrimination(namely,thecategoryofconstructionbusinessesincontrasttothecategoryofprofessionalbusinesses),theNinthCircuit“hasrecentlyrejectedasimilarargumentrequiringtheevidenceofdiscriminationineverysinglesegmentofthehighwayconstructionindustrybeforea


preferenceprogramcanbeimplemented.”Id.,citingAssociatedGeneralContractorsv.CaliforniaDept.ofTransportation,713F.3d1187(9thCir.2013)(holdingthatCaltrans’DBEprogramsurvivedstrictscrutiny,wasnarrowlytailored,didnotviolateequalprotection,andwassupportedbysubstantialstatisticalandanecdotalevidenceofdiscrimination).

TheCourtstatedthatparticularlyrelevantinthiscase,“theNinthCircuitheldthatCalifornia’sDBEprogramneednotisolateconstructionfromengineeringcontractsorprimefromsubcontractstodeterminewhethertheevidenceineachandeverycategorygivesrisetoaninferenceofdiscrimination.”Id.at4,citingAssociatedGeneralContractorsv.CaliforniaDOT,713F.3dat1197.Instead,accordingtotheCourt,California–and,byextension,Montana–“isentitledtolookattheevidence‘initsentirety’todeterminewhetherthereare‘substantialdisparitiesinutilizationofminorityfirms’practicedbysomeelementsoftheconstructionindustry.”2013WL4774517at*4,quotingAGCv.CaliforniaDOT,713F.3dat1197.TheCourt,alsoquotingthedecisioninAGCv.CaliforniaDOT,said:“ItisenoughthattheanecdotalevidencesupportsCaltrans’statisticaldatashowingapervasivepatternofdiscrimination.”Id.at*4,quotingAGCv.CaliforniaDOT,713F.3dat1197.

TheCourtpointedoutthatthereisnoallegationthatMDThasexceededanyfederalrequirementordoneotherthancompliedwithUSDOTregulations.2013WL4774517at*4.Therefore,theCourtconcludedthatgiventhesimilaritiesbetweenWeeden’sclaimandAGC’sequalprotectionclaimagainstCaliforniaDOTintheAGCv.CaliforniaDOTcase,itdoesnotappearlikelythatWeedenwillsucceedonthemeritsofitsequalprotectionclaim.Id.at*4.

DueProcessclaim.TheCourtalsorejectedWeeden’sbaldassertionthatithasaprotectedpropertyrightinthecontractthathasnotbeenawardedtoitwherethegovernmentagencyretainsdiscretiontodeterminetheresponsivenessofthebid.TheCourtfoundthatMontanalawrequiresthatanawardofapubliccontractforconstructionmustbemadetothelowestresponsiblebidderandthattheapplicableMontanastatuteconfersuponthegovernmentagencybroaddiscretionintheawardofapublicworkscontract.Thus,alowerbiddersuchasWeedenrequiresnovestedpropertyrightinacontractuntilthecontracthasbeenawarded,whichhereobviouslyhadnotyetoccurred.2013WL4774517at*5.Inanyevent,theCourtnotedthatWeedenwasgrantednotice,hearingandappealforMDT’sdecisiondenyingthegoodfaithexceptiontotheDBEcontractrequirement,andthereforeitdoesnotappearlikelythatWeedenwouldsucceedonitsdueprocessclaim.Id.at*5.

HoldingandVoluntaryDismissal.TheCourtdeniedplaintiffWeeden’sapplicationforTemporaryRestrainingOrderandPreliminaryInjunction.Subsequently,WeedenfiledaNoticeofVoluntaryDismissalWithoutPrejudiceonSeptember10,2013.

14. Associated General Contractors of America, San Diego Chapter, Inc. v. California Department of Transportation, et al., U.S.D.C., E.D. Cal. Civil Action No. S‐09‐1622, Slip Opinion (E.D. Cal. April 20, 2011), appeal dismissed based on standing, on other grounds Ninth Circuit held Caltrans’ DBE Program constitutional, Associated General Contractors of America, San Diego Chapter, Inc. v. California Department of Transportation, et al., 713 F.3d 1187 (9th Cir. 2013)

ThiscaseinvolvedachallengebytheAssociatedGeneralContractorsofAmerica,SanDiegoChapter,Inc.(“AGC”)againsttheCaliforniaDepartmentofTransportation(“Caltrans”),totheDBEprogramadoptedbyCaltransimplementingtheFederalDBEProgramat49CFRPart26.


TheAGCsoughtaninjunctionagainstCaltransenjoiningitsuseoftheDBEprogramanddeclaratoryrelieffromthecourtdeclaringtheCaltransDBEprogramtobeunconstitutional.

Caltrans’DBEprogramseta13.5percentDBEgoalforitsfederally‐fundedcontracts.The13.5percentgoal,asimplementedbyCaltrans,includedutilizinghalfrace‐neutralmeansandhalfrace‐consciousmeanstoachievethegoal.SlipOpinionTranscriptat42.Caltransdidnotincludeallminoritiesintherace‐consciouscomponentofitsgoal,excludingHispanicmalesandSubcontinentAsianAmericanmales.Id.at42.Accordingly,therace‐consciouscomponentoftheCaltransDBEprogramappliedonlytoAfricanAmericans,NativeAmericans,AsianPacificAmericans,andwhitewomen.Id.

CaltransestablishedthisgoalanditsDBEprogramfollowingadisparitystudyconductedbyBBCResearch&Consulting,whichincludedgatheringstatisticalandanecdotalevidenceofraceandgenderdisparitiesintheCaliforniaconstructionindustry.SlipOpinionTranscriptat42.

Thepartiesfiledmotionsforsummaryjudgment.ThedistrictcourtissueditsrulingatthehearingonthemotionsforsummaryjudgmentgrantingCaltrans’motionforsummaryjudgmentinsupportofitsDBEprogramanddenyingthemotionforsummaryjudgmentfiledbytheplaintiffs.SlipOpinionTranscriptat54.ThecourtheldCaltrans’DBEprogramapplyingandimplementingtheprovisionsoftheFederalDBEProgramisvalidandconstitutional.Id.at56.

ThedistrictcourtanalyzedCaltrans’implementationoftheDBEprogramunderthestrictscrutinydoctrineandfoundtheburdenofjustifyingdifferenttreatmentbyethnicityorgenderisonthegovernment.ThedistrictcourtappliedtheNinthCircuitCourtofAppealsrulinginWesternStatesPavingCompanyv.WashingtonStateDOT,407F.3d983(9thCir.2005).Thecourtstatedthatthefederalgovernmenthasacompellinginterest“inensuringthatitsfundingisnotdistributedinamannerthatperpetuatestheeffectsofeitherpublicorprivatediscriminationwithinthetransportationcontractingindustry.”SlipOpinionTranscriptat43,quotingWesternStatesPaving,407F.3dat991,citingCityofRichmondv.J.A.CrosonCompany,488U.S.469(1989).

ThedistrictcourtpointedoutthattheNinthCircuitinWesternStatesPavingandtheTenthCircuitCourtofAppealsandtheEighthCircuitCourtofAppealshaveupheldthefacialvalidityoftheFederalDBEProgram.

ThedistrictcourtstatedthatbasedonWesternStatesPaving,thecourtisrequiredtolookattheCaltransDBEprogramitselftoseeifthereisastrongbasisinevidencetoshowthatCaltransisactingforaproperpurposeandiftheprogramitselfhasbeennarrowlytailored.SlipOpinionTranscriptat45.Thecourtconcludedthatnarrowtailoring“doesnotrequireexhaustionofeveryconceivablerace‐neutralalternative,butitdoesrequireserious,good‐faithconsiderationofworkablerace‐neutralalternatives.”SlipOpinionTranscriptat45.

ThedistrictcourtidentifiedtheissuesaswhetherCaltranshasestablishedacompellinginterestsupportedbyastrongbasisinevidenceforitsprogram,anddoesCaltrans’race‐consciousprogrammeetthestrictscrutinyrequired.SlipOpinionTranscriptat51‐52.ThecourtalsophrasedtheissueaswhethertheCaltransDBEprogram,“whichdoesgivepreferencebasedonraceandsex,whetherthatprogramisnarrowlytailoredtoremedytheeffectsofidentifieddiscrimination…”,andwhetherCaltranshascompliedwiththeNinthCircuit’sguidanceinWesternStatesPaving.SlipOpinionTranscriptat52.


Thedistrictcourtheld“thatCaltranshasdonewhattheNinthCircuithasrequiredittodo,whatthefederalgovernmenthasrequiredittodo,andthatitclearlyhasimplementedaprogramwhichissupportedbyastrongbasisinevidencethatgivesrisetoacompellinginterest,andthatitsrace‐consciousprogram,theaspectoftheprogramthatdoesimplementrace‐consciousalternatives,itdoesunderastrict‐scrutinystandardmeettherequirementthatitbenarrowlytailoredassetforthinthecaselaw.”SlipOpinionTranscriptat52.

Thecourtrejectedtheplaintiff’sargumentsthatanecdotalevidencefailedtoidentifyspecificactsofdiscrimination,finding“therearenumerousinstancesofspecificdiscrimination.”SlipOpinionTranscriptat52.ThedistrictcourtfoundthataftertheWesternStatesPavingcase,Caltranswenttoaraciallyneutralprogram,andtheevidenceshowedthattheprogramwouldnotmeetthegoalsofthefederally‐fundedprogram,andthefederalgovernmentbecameconcernedaboutwhatwasgoingonwithCaltrans’programapplyingonlyrace‐neutralalternatives.Id.at52‐53.ThecourtthenpointedoutthatCaltransengagedinan“extensivedisparitystudy,anecdotalevidence,bothofwhichiswhatwasmissing”intheWesternStatesPavingcase.Id.at53.

ThecourtconcludedthatCaltrans“didexactlywhattheNinthCircuitrequired”andthatCaltranshasgone“asfarasisrequired.”SlipOpinionTranscriptat53.

Thecourtheldthatasamatteroflaw,theCaltransDBEprogramis,underWesternStatesPavingandtheSupremeCourtcases,“clearlyconstitutional,”and“narrowlytailored.”SlipOpinionTranscriptat56.ThecourtfoundtherearesignificantdifferencesbetweenCaltrans’programandtheprogramintheWesternStatesPavingcase.Id.at54‐55.InWesternStatesPaving,thecourtsaidtherewerenostatisticalstudiesperformedtotryandestablishthediscriminationinthehighwaycontractingindustry,andthatWashingtonsimplycomparedtheproportionofDBEfirmsinthestatewiththepercentageofcontractingfundsawardedtoDBEsonrace‐neutralcontractstocalculateadisparity.Id.at55.

ThedistrictcourtstatedthattheNinthCircuitinWesternStatesPavingfoundthistobeoversimplifiedandentitledtolittleweight“becauseitdidnottakeintoaccountfactorsthatmayaffecttherelativecapacityofDBEstoundertakecontractingwork.”SlipOpinionTranscriptat55.Whereas,thedistrictcourtheldthe“disparitystudyusedbyCaltranswasmuchmorecomprehensiveandaccountedforthisandotherfactors.”Id.at55.ThedistrictnotedthattheStateofWashingtondidnotintroduceanyanecdotalinformation.Thedifferenceinthiscase,thedistrictcourtfound,“isthatthedisparitystudyincludesbothextensivestatisticalevidence,aswellasanecdotalevidencegatheredthroughsurveysandpublichearings,whichsupportthestatisticalfindingsoftheunderutilizationfacedbyDBEswithouttheDBEprogram.Addtothattheanecdotalevidencesubmittedinsupportofthesummaryjudgmentmotionaswell.AndthisevidencebeforetheCourtclearlysupportsafindingthatthisprogramisconstitutional.”Id.at56.

Thecourtheldthatbecause“Caltrans’DBEprogramisbasedonsubstantialstatisticalandanecdotalevidenceofdiscriminationintheCaliforniacontractingindustryandbecausetheCourtfindsthatitisnarrowlytailored,theCourtupholdstheprogramasconstitutional.”SlipOpinionTranscriptat56.

ThedecisionofthedistrictcourtwasappealedtotheNinthCircuitCourtofAppeals.TheNinthCircuitdismissedtheappealbasedonlackofstandingbytheAGC,SanDiegoChapter,butruledonthemeritsonalternativegroundsholdingconstitutionalCaltrans’DBEProgram.SeediscussionaboveofAGC,SDCv.Cal.DOT.


15. Geod Corporation v. New Jersey Transit Corporation, et al., 746 F. Supp.2d 642, 2010 WL 4193051 (D. N. J. October 19, 2010)

Plaintiffs,whitemaleownersofGeodCorporation(“Geod”),broughtthisactionagainsttheNewJerseyTransitCorporation(“NJT”)allegingdiscriminatorypracticesbyNJTindesigningandimplementingtheFederalDBEProgram.746F.Supp2dat644.TheplaintiffsallegedthattheNJT’sDBEprogramviolatedtheUnitedStatesConstitution,42U.S.C.§1981,TitleVIoftheCivilRightsActof1964,42U.S.C.§2000(d)andstatelaw.ThedistrictcourtpreviouslydismissedthecomplaintagainstallDefendantsexceptforNJTandconcludedthatagenuineissuematerialfactexistedonlyastowhetherthemethodusedbyNJTtodetermineitsDBEgoalsduring2010weresufficientlynarrowlytailored,andthusconstitutional.Id.

NewJerseyTransitProgramandDisparityStudy.NJTreliedontheanalysisofconsultantsfortheestablishmentoftheirgoalsfortheDBEprogram.Thestudyestablishedtheeffectsofpastdiscrimination,thedistrictcourtfound,bylookingatthedisparityandutilizationofDBEscomparedtotheiravailabilityinthemarket.Id.at648.Thestudyusedseveraldatasetsandaveragedthefindingsinordertocalculatethisratio,including:(1)theNewJerseyDBEvendorList;(2)aSurveyofMinority‐OwnedBusinessEnterprises(SMOBE)andaSurveyofWomen‐OwnedEnterprises(SWOBE)asdeterminedbytheU.S.CensusBureau;and(3)detailedcontractfilesforeachracialgroup.Id.

Thecourtfoundthestudydeterminedanaverageannualutilizationof23percentforDBEs,andtoexaminepastdiscrimination,severalanalyseswereruntomeasurethedisparityamongDBEsbyrace.Id.at648.TheStudyfoundthatallbutonecategorywasunderutilizedamongtheracialandethnicgroups.Id.AllgroupsotherthanAsianDBEswerefoundtobeunderutilized.Id.

Thecourtheldthatthetestutilizedbythestudy,“conductedtoestablishapatternofdiscriminationagainstDBEs,provedthatdiscriminationoccurredagainstDBEsduringthepre‐qualificationprocessandinthenumberofcontractsthatareawardedtoDBEs.Id.at649.ThecourtfoundthatDBEsaremorelikelythannon‐DBEstobepre‐qualifiedforsmallconstructioncontracts,butarelesslikelytopre‐qualifyforlargerconstructionprojects.Id.

Forfiscalyear2010,thestudyconsultantfollowedthe“three‐stepprocesspursuanttoUSDOTregulationstoestablishtheNJTDBEgoal.”Id.at649.First,theconsultantdetermined“thebasefigurefortherelativeavailabilityofDBEsinthespecificindustriesandgeographicalmarketfromwhichDBEandnon‐DBEcontractorsaredrawn.”Id.Indeterminingthebasefigure,theconsultant(1)definedthegeographicmarketplace,(2)identified“therelevantindustriesinwhichNJTransitcontracts,”and(3)calculated“theweightedavailabilitymeasure.”Id.at649.

Thecourtfoundthatthestudyconsultantusedpoliticaljurisdictionalmethodsandvirtualmethodstopinpointthelocationofcontractsand/orcontractorsforNJT,anddeterminedthatthegeographicalmarketplaceforNJTcontractsincludedNewJersey,NewYorkandPennsylvania.Id.at649.TheconsultantusedcontractfilesobtainedfromNJTanddataobtainedfromDun&BradstreettoidentifytheindustrieswithwhichNJTcontractsinthesegeographicalareas.Id.TheconsultantthenusedexistingandestimatedexpendituresintheseparticularindustriestodetermineweightscorrespondingtoNJTcontractingpatternsinthedifferentindustriesforuseintheavailabilityanalysis.Id.

TheavailabilityofDBEswascalculatedbyusingthefollowingdata:UnifiedCertificationProgramBusinessDirectoriesforthestatesofNewJersey,NewYorkandPennsylvania;NJTVendorList;Dun&Bradstreetdatabase;2002SurveyofSmallBusinessOwners;andNJTPre‐


QualificationList.Id.at649‐650.Theavailabilityrateswerethen“calculatedbycomparingthenumberofready,willing,andableminorityandwomen‐ownedfirmsinthedefinedgeographicmarketplacetothetotalnumberofready,willing,andablefirmsinthesamegeographicmarketplace.Id.TheavailabilityratesineachindustrywereweighedinaccordancewithNJTexpenditurestodetermineabasefigure.Id.

Second,theconsultantadjustedthebasefigureduetoevidenceofdiscriminationagainstDBEprimecontractorsanddisparitiesinsmallpurchasesandconstructionpre‐qualification.Id.at650.Thediscriminationanalysisexamineddiscriminationinsmallpurchases,discriminationinpre‐qualification,tworegressionanalyses,anEssexCountydisparitystudy,marketdiscrimination,andpreviousutilization.Id.at650.

TheFinalRecommendationsReportnotedthatthereweresizeabledifferencesinthesmallpurchasesawardstoDBEsandnon‐DBEswiththeawardstoDBEsbeingsignificantlysmaller.Id.at650.DBEswerealsofoundtobelesslikelytobepre‐qualifiedforcontractsover$1millionincomparisontosimilarlysituatednon‐DBEs.Id.Theregressionanalysisusingthedummyvariablemethodyieldedanaverageestimateofadiscriminatoryeffectof‐28.80percent.Id.Thediscriminationregressionanalysisusingtheresidualdifferencemethodshowedthatonaverage12.2percentofthecontractamountdisparityawardedtoDBEsandnon‐DBEswasunexplained.Id.

Theconsultantalsoconsideredevidenceofdiscriminationinthelocalmarketinaccordancewith49CFR§26.45(d).TheFinalRecommendationsReportcitedinthe2005EssexCountyDisparityStudysuggestedthatdiscriminationinthelabormarketcontributedtotheunexplainedportionoftheself‐employment,employment,unemployment,andwagegapsinEssexCounty,NewJersey.Id.at650.

TheconsultantrecommendedthatNJTfocusonincreasingthenumberofDBEprimecontractors.Becausequalitativeevidenceisdifficulttoquantify,accordingtotheconsultant,onlytheresultsfromtheregressionanalyseswereusedtoadjustthebasegoal.Id.Thebasegoalwasthenadjustedfrom19.74percentto23.79percent.Id.

Third,inordertopartitiontheDBEgoalbyrace‐neutralandrace‐consciousmethods,theconsultantanalyzedtheshareofallDBEcontractdollarswonwithnogoals.Id.at650.Healsoperformedtwodifferentregressionanalyses:oneinvolvingpredictedDBEcontractdollarsandDBEreceiptsifthegoalwassetatzero.Id.at651.ThesecondmethodutilizedpredictedDBEcontractdollarswithgoalsandpredictedDBEcontractdollarswithoutgoalstoforecasthowmuchfirmswithgoalswouldreceivehadtheynotincludedthegoals.Id.Theconsultantaveragedhisresultsfromallthreemethodstoconcludethatthefiscalyear2010NJTaportionoftherace‐neutralDBEgoalshouldbe11.94percentandaportionoftherace‐consciousDBEgoalshouldbe11.84percent.Id.at651.

Thedistrictcourtappliedthestrictscrutinystandardofreview.Thedistrictcourtalreadydecided,inthecourseofthemotionsforsummaryjudgment,thatcompellinginterestwassatisfiedasNewJerseywasentitledtoadoptthefederalgovernment’scompellinginterestinenactingTEA‐21anditsimplementingregulations.Id.at652,citingGeodv.N.J.TransitCorp.,678F.Supp.2d276,282(D.N.J.2009).Therefore,thecourtlimiteditsanalysistowhetherNJT’sDBEprogramwasnarrowlytailoredtofurtherthatcompellinginterestinaccordancewith“itsgrantofauthorityunderfederallaw.”Id.at652citingNorthernContracting,Inc.v.IllinoisDepartmentofTransportation,473F.3d715,722(7thCir.2007).


ApplyingNorthernContractingv.Illinois.Thedistrictcourtclarifieditspriorrulingin2009(see678F.Supp.2d276)regardingsummaryjudgment,thatthecourtagreedwiththeholdinginNorthernContracting,Inc.v.Illinois,that“achallengetoastate’sapplicationofafederallymandatedprogrammustbelimitedtothequestionofwhetherthestateexceededitsauthority.”Id.at652quotingNorthernContracting,473F.3dat721.ThedistrictcourtinGeodfollowedtheSeventhCircuitexplanationthatwhenastatedepartmentoftransportationisactingasaninstrumentoffederalpolicy,aplaintiffcannotcollaterallyattackthefederalregulationsthroughachallengetoastate’sprogram.Id.at652,citingNorthernContracting,473F.3dat722.Therefore,thedistrictcourtheldthattheinquiryislimitedtothequestionofwhetherthestatedepartmentoftransportation“exceededitsgrantofauthorityunderfederallaw.”Id.at652‐653,quotingNorthernContracting,473F.3dat722andcitingalsoTennesseeAsphaltCo.v.Farris,942F.2d969,975(6thCir.1991).

ThedistrictcourtfoundthattheholdingandanalysisinNorthernContractingdoesnotcontradicttheEighthCircuit’sanalysisinSherbrookeTurf,Inc.v.MinnesotaDepartmentofTransportation,345F.3d964,970‐71(8thCir.2003).Id.at653.ThecourtheldthattheEighthCircuit’sdiscussionofwhethertheDBEprogramsasimplementedbytheStateofMinnesotaandtheStateofNebraskawerenarrowlytailoredfocusedonwhetherthestateswerefollowingtheUSDOTregulations.Id.at653citingSherbrookeTurf,345F.3d973‐74.Therefore,“onlywhenthestateexceedsitsfederalauthorityisitsusceptibletoanas‐appliedconstitutionalchallenge.”Id.at653quotingWesternStatesPavingCo.,Inc.v.WashingtonStateDepartmentofTransportation,407F.3d983(9thCir.2005)(McKay,C.J.)(concurringinpartanddissentinginpart)andcitingSouthFloridaChapteroftheAssociatedGeneralContractorsv.BrowardCounty,544F.Supp.2d1336,1341(S.D.Fla.2008).

Thecourtheldtheinitialburdenofprooffallsonthegovernment,butoncethegovernmenthaspresentedproofthatitsaffirmativeactionplanisnarrowlytailored,thepartychallengingtheaffirmativeactionplanbearstheultimateburdenofprovingthattheplanisunconstitutional.Id.at653.

InanalyzingwhetherNJT’sDBEprogramwasconstitutionallydefective,thedistrictcourtfocusedonthebasisofplaintiffs’argumentthatitwasnotnarrowlytailoredbecauseitincludesinthecategoryofDBEsracialorethnicgroupsastowhichtheplaintiffsallegedNJThadnoevidenceofpastdiscrimination.Id.at653.Thecourtfoundthatmostofplaintiffs’argumentscouldbesummarizedasquestioningwhetherNJTpresenteddemonstrableevidenceoftheavailabilityofready,willingandableDBEsasrequiredby49CFR§26.45.Id.ThecourtheldthatNJTfollowedthegoalsettingprocessrequiredbythefederalregulations.Id.ThecourtstatedthatNJTbeganthisprocesswiththe2002disparitystudythatexaminedpastdiscriminationandfoundthatallofthegroupslistedintheregulationswereunderutilizedwiththeexceptionofAsians.Id.at654.Incalculatingthefiscalyear2010goals,theconsultantusedcontractfilesanddatafromDun&BradstreettodeterminethegeographicallocationcorrespondingtoNJTcontractsandthenfurtherfocusedthatinformationbyweightingtheindustriesaccordingtoNJT’suse.Id.

TheconsultantusedvariousmethodstocalculatetheavailabilityofDBEs,including:theUCPBusinessDirectoriesforthestatesofNewJersey,NewYorkandPennsylvania;NJTVendorList;Dun&Bradstreetdatabase;2002SurveyofSmallBusinessOwners;andNJTPre‐QualificationList.Id.at654.ThecourtstatedthatNJTonlyutilizedoneoftheexampleslistedin49CFR§26.45(c),theDBEdirectoriesmethod,informulatingthefiscalyear2010goals.Id.


Thedistrictcourtpointedout,however,theregulationsstatethatthe“examplesareprovidedasastartingpointforyourgoalsettingprocessandthattheexamplesarenotintendedasanexhaustivelist.Id.at654,citing46CFR§26.45(c).Thecourtconcludedtheregulationsclarifythatothermethodsorcombinationsofmethodstodetermineabasefiguremaybeused.Id.at654.

ThecourtstatedthatNJThadusedthesemethodsinsettinggoalsforprioryearsasdemonstratedbythereportsfor2006and2009.Id.at654.Inaddition,thecourtnotedthattheSeventhCircuitheldthatacustomcensus,theDun&Bradstreetdatabase,andtheIDOT’slistofDBEswereanacceptablecombinationofmethodswithwhichtodeterminethebasefigureforTEA‐21purposes.Id.at654,citingNorthernContracting,473F.3dat718.

Thedistrictcourtfoundthattheexpertwitnessforplaintiffshadnotconvincedthecourtthatthedatawerefaulty,andthetestimonyattrialdidnotpersuadethecourtthatthedataorregressionanalysesrelieduponbyNJTwereunreliableorthatanothermethodwouldprovidemoreaccurateresults.Id.at654‐655.

Thecourtindiscussingsteptwoofthegoalssettingprocesspointedoutthatthedataexaminedbytheconsultantislistedintheregulationsasproperevidencetobeusedtoadjustthebasefigure.Id.at655,citing49CFR§26.45(d).ThesedataincludedevidencefromdisparitystudiesandstatisticaldisparitiesintheabilityofDBEstogetpre‐qualification.Id.at655.Theconsultantstatedthatevidenceofsocietaldiscriminationwasnotusedtoadjustthebasegoalandthattheadjustmenttothegoalwasbasedonthediscriminationanalysis,whichcontrolsforsizeoffirmandeffectofhavingaDBEgoal.Id.at655.

ThedistrictcourtthenanalyzedNJT’sdivisionoftheadjustedgoalintorace‐consciousandrace‐neutralportions.Id.at655.Thecourtnotedthatnarrowlytailoringdoesnotrequireexhaustionofeveryconceivablerace‐neutralalternative,butinsteadrequiresserious,goodfaithconsiderationofworkablerace‐neutralalternatives.Id.at655.ThecourtagreedwithWesternStatesPavingthatonly“whenrace‐neutraleffortsproveinadequatedotheseregulationsauthorizeaStatetoresorttorace‐consciousmeasurestoachievetheremainderofitsDBEutilizationgoal.”Id.at655,quotingWesternStatesPaving,407F.3dat993‐94.

ThecourtfoundthatthemethodsutilizedbyNJThadbeenusedbyitonpreviousoccasions,whichwereapprovedbytheUSDOT.Id.at655.ThemethodsusedbyNJT,thecourtfound,alsocompliedwiththeexampleslistedin49CFR§26.51,includingarrangingsolicitations,timesforthepresentationofbids,quantities,specifications,anddeliveryschedulesinwaysthatfacilitateDBEparticipation;providingpre‐qualificationassistance;implementingsupportiveservicesprograms;andensuringdistributionofDBEdirectories.Id.at655.ThecourtheldthatbasedonthesereasonsandfollowingtheNorthernContracting,Inc.v.Illinoislineofcases,NJT’sDBEprogramdidnotviolatetheConstitutionasitdidnotexceeditsfederalauthority.Id.at655.

However,thedistrictcourtalsofoundthatevenundertheWesternStatesPavingCo.,Inc.v.WashingtonStateDOTstandard,theNJTprogramstillwasconstitutional.Id.at655.AlthoughthecourtfoundthattheappropriateinquiryiswhetherNJTexceededitsfederalauthorityasdetailedinNorthernContracting,Inc.v.Illinois,thecourtalsoexaminedtheNJTDBEprogramunderWesternStatesPavingCo.v.WashingtonStateDOT.Id.at655‐656.ThecourtstatedthatunderWesternStatesPaving,aCourtmust“undertakeanas‐appliedinquiryintowhether[thestate’s]DBEprogramisnarrowlytailored.”Id.at656,quotingWesternStatesPaving,407F.3dat997.


ApplyingWesternStatesPaving.ThedistrictcourtthenanalyzedwhethertheNJTprogramwasnarrowlytailoredapplyingWesternStatesPaving.Underthefirstprongofthenarrowlytailoringanalysis,aremedialprogramisonlynarrowlytailoredifitsapplicationislimitedtothoseminoritygroupsthathaveactuallysuffereddiscrimination.Id.at656,citingWesternStatesPaving,407F.3dat998.Thecourtacknowledgedthataccordingtothe2002FinalReport,theratiosofDBEutilizationtoDBEavailabilitywas1.31.Id.at656.However,thecourtfoundthattheplaintiffs’argumentfailedasthefactsinWesternStatesPavingweredistinguishablefromthoseofNJT,becauseNJTdidreceivecomplaints,i.e.,anecdotalevidence,ofthelackofopportunitiesforAsianfirms.Id.at656.NJTemployeestestifiedthatAsianfirmsinformallyandformallycomplainedofalackofopportunitytogrowandindicatedthattheDBEProgramwasassistingwiththisissue.Id.Inaddition,plaintiff’sexpertconcededthatAsianfirmshavesmalleraveragecontractamountsincomparisontonon‐DBEfirms.Id.

TheplaintiffreliedsolelyontheutilizationrateasevidencethatAsiansarenotdiscriminatedagainstinNJTcontracting.Id.at656.Thecourtheldthiswasinsufficienttoovercometheconsultant’sdeterminationthatdiscriminationdidexistagainstAsians,andthusthisgroupwasproperlyincludedintheDBEprogram.Id.at656.

ThedistrictcourtrejectedPlaintiffs’argumentthatthefirststepofthenarrowtailoringanalysiswasnotmetbecauseNJTfocusesitsprogramonsub‐contractorswhenNJT’sexpertidentified“primecontracting”astheareainwhichNJTprocurementsevidencediscrimination.Id.at656.Thecourtheldthatnarrowtailoringdoesnotrequireexhaustionofeveryconceivablerace‐neutralalternativebutitdoesrequireserious,goodfaithconsiderationofworkablerace‐neutralalternatives.Id.at656,citingSherbrookTurf,345F.3dat972(quotingGrutterv.Bollinger,539U.S.306,339,(2003)).Initseffortstoimplementrace‐neutralalternatives,thecourtfoundNJTattemptedtobreaklargercontractsupinordertomakethemavailabletosmallercontractorsandcontinuestodosowhenlogisticallypossibleandfeasibletotheprocurementdepartment.Id.at656‐657.

ThedistrictcourtfoundNJTsatisfiedthethirdprongofthenarrowlytailoredanalysis,the“relationshipofthenumericalgoalstotherelevantlabormarket.”Id.at657.Finally,underthefourthprong,thecourtaddressedtheimpactonthird‐parties.Id.at657.Thecourtnotedthatplacingaburdenonthirdpartiesisnotimpermissibleaslongasthatburdenisminimized.Id.at657,citingWesternStatesPaving,407F.3dat995.Thecourtstatedthatinstanceswillinevitablyoccurwherenon‐DBEswillbebypassedforcontractsthatrequireDBEgoals.However,TEA‐21anditsimplementingregulationscontainprovisionsintendedtominimizetheburdenonnon‐DBEs.Id.at657,citingWesternStatesPaving,407F.3dat994‐995.

ThecourtpointedouttheNinthCircuitinWesternStatesPavingfoundthatinclusionofregulationsallowingfirmsthatwerenotpresumedtobeDBEstodemonstratethattheyweresociallyandeconomicallydisadvantaged,andthusqualifiedforDBEprograms,aswellasthenetworthlimitations,weresufficienttominimizetheburdenonDBEs.Id.at657,citingWesternStatesPaving,407F.3dat955.ThecourtheldthattheplaintiffsdidnotprovideevidencethatNJTwasnotcomplyingwithimplementingregulationsdesignedtominimizeharmtothirdparties.Id.

Therefore,evenifthedistrictcourtutilizedtheas‐appliednarrowtailoringinquirysetforthinWesternStatesPaving,NJT’sDBEprogramwouldnotbefoundtoviolatetheConstitution,asthecourthelditwasnarrowlytailoredtofurtheracompellinggovernmentalinterest.Id.at657.


16. Geod Corporation v. New Jersey Transit Corporation, et seq. 678 F.Supp.2d 276, 2009 WL 2595607 (D.N.J. August 20, 2009)

PlaintiffsGeodanditsofficers,whoarewhitemales,suedtheNJTandstateofficialsseekingadeclarationthatNJT’sDBEprogramwasunconstitutionalandinviolationoftheUnitedStates5thand14thAmendmenttotheUnitedStatesConstitutionandtheConstitutionoftheStateofNewJersey,andseekingapermanentinjunctionagainstNJTforenforcingorutilizingitsDBEprogram.TheNJT’sDBEprogramwasimplementedinaccordancewiththeFederalDBEProgramandTEA‐21and49CFRPart26.

ThepartiesfiledcrossMotionsforSummaryJudgment.TheplaintiffGeodchallengedtheconstitutionalityofNJT’sDBEprogramformultiplereasons,includingallegingNJTcouldnotjustifyestablishingaprogramusingrace‐andsex‐basedpreferences;theNJT’sdisparitystudydidnotprovideasufficientfactualpredicatetojustifytheDBEProgram;NJT’sstatisticalevidencedidnotestablishdiscrimination;NJTdidnothaveanecdotaldataevidencinga“strongbasisinevidence”ofdiscriminationwhichjustifiedarace‐andsex‐basedprogram;NJT’sprogramwasnotnarrowlytailoredandover‐inclusive;NJTcouldnotshowanexceedinglypersuasivejustificationforgenderpreferences;andthatNJT’sprogramwasnotnarrowlytailoredbecauserace‐neutralalternativesexisted.Inopposition,NJTfiledaMotionforSummaryJudgmentassertingthatitsDBEprogramwasnarrowlytailoredbecauseitfullycompliedwiththerequirementsoftheFederalDBEProgramandTEA‐21.

Thedistrictcourtheldthatstatesandtheiragenciesareentitledtoadoptthefederalgovernments’compellinginterestinenactingTEA‐21anditsimplementingregulations.2009WL2595607at*4.Thecourtstatedthatplaintiff’sargumentthatNJTcannotestablishtheneedforitsDBEprogramwasa“redherring,whichisunsupported.”TheplaintiffdidnotquestiontheconstitutionalityofthecompellinginterestoftheFederalDBEProgram.Thecourtheldthatallstates“inheritthefederalgovernments’compellinginterestinestablishingaDBEprogram.”Id.

ThecourtfoundthatestablishingaDBEprogram“isnotcontingentuponastateagencydemonstratinganeedforsame,asthefederalgovernmenthasalreadydoneso.”Id.Thecourtconcludedthatthisreasoningrenderedplaintiff’sassertionsthatNJT’sdisparitystudydidnothavesufficientfactualpredicateforestablishingitsDBEprogram,andthatnoexceedinglypersuasivejustificationwasfoundtosupportgenderbasedpreferences,aswithoutmerit.Id.ThecourtheldthatNJTdoesnotneedtojustifyestablishingitsDBEprogram,asithasalreadybeenjustifiedbythelegislature.Id.

Thecourtnotedthatbothplaintiff’sanddefendant’sargumentswerebasedonanallegedsplitintheFederalCircuitCourtsofAppeal.PlaintiffGeodreliesonWesternStatesPavingCompanyv.WashingtonStateDOT,407F.3d983(9thCir.2005)forthepropositionthatanas‐appliedchallengetotheconstitutionalityofaparticularDBEprogramrequiresademonstrationbytherecipientoffederalfundsthattheprogramisnarrowlytailored.Idat*5.Incontrast,theNJTreliedprimarilyonNorthernContracting,Inc.v.StateofIllinois,473F.3d715(7thCir.2007)forthepropositionthatifaDBEprogramcomplieswithTEA‐21,itisnarrowlytailored.Id.

ThecourtviewedthevariousFederalCircuitCourtofAppealsdecisionsasfactspecificdeterminationswhichhaveledtothepartiesdistinguishingcaseswithoutanysubstantivedifferenceintheapplicationoflaw.Id.

ThecourtreviewedthedecisionsbytheNinthCircuitinWesternStatesPavingandtheSeventhCircuitofNorthernContracting.InWesternStatesPaving,thedistrictcourtstatedthattheNinth


CircuitheldforaDBEprogramtopassconstitutionalmuster,itmustbenarrowlytailored;specifically,therecipientoffederalfundsmustevidencepastdiscriminationintherelevantmarketinordertoutilizeraceconsciousDBEgoals.Id.at*5.TheNinthCircuit,accordingtodistrictcourt,madeafactspecificdeterminationastowhethertheDBEprogramcompliedwithTEA‐21inordertodecideiftheprogramwasnarrowlytailoredtomeetthefederalregulation’srequirements.Thedistrictcourtstatedthattherequirementthatarecipientmustevidencepastdiscrimination“isnothingmorethanarequirementoftheregulation.”Id.

ThecourtstatedthattheSeventhCircuitinNorthernContractingheldarecipientmustdemonstratethatitsprogramisnarrowlytailored,andthatgenerallyarecipientisinsulatedfromthissortofconstitutionalattackabsentashowingthatthestateexceededitsfederalauthority.Id.,citingNorthernContracting,473F.3dat721.ThedistrictcourtheldthatimplicitinNorthernContractingisthefactonemaychallengetheconstitutionalityofaDBEprogram,asitisapplied,totheextentthattheprogramexceedsitsfederalauthority.Id.

Thecourt,therefore,concludedthatitmustdeterminefirstwhetherNJT’sDBEprogramcomplieswithTEA‐21,thenwhetherNJTexceededitsfederalauthorityinitsapplicationofitsDBEprogram.Inotherwords,thedistrictcourtstateditmustdeterminewhethertheNJTDBEprogramcomplieswithTEA‐21inordertodeterminewhethertheprogram,asimplementedbyNJT,isnarrowlytailored.Id.

ThecourtpointedoutthattheEighthCircuitCourtofAppealsinSherbrookTurf,Inc.v.MinnesotaDOT,345F.3d964(8thCir.2003)foundMinnesota’sDBEprogramwasnarrowlytailoredbecauseitwasincompliancewithTEA‐21’srequirements.TheEighthCircuitinSherbrook,accordingtothedistrictcourt,analyzedtheapplicationofMinnesota’sDBEprogramtoensurecompliancewithTEA‐21’srequirementstoensurethattheDBEprogramimplementedbyMinnesotaDOTwasnarrowlytailored.Id.at*5.

ThecourtheldthatTEA‐21delegatestoeachstatethatacceptsfederaltransportationfundstheresponsibilityofimplementingaDBEprogramthatcomportswithTEA‐21.InordertocomportwithTEA‐21,thedistrictcourtstatedarecipientmust(1)determineanappropriateDBEparticipationgoal,(2)examineallevidenceandevaluatewhetheranadjustment,ifany,isneededtoarriveattheirgoal,and(3)iftheadjustmentisbasedoncontinuingeffectsofpastdiscrimination,providedemonstrableevidencethatislogicallyanddirectlyrelatedtotheeffectforwhichtheadjustmentissought.Id.at*6,citingWesternStatesPavingCompany,407F.3dat983,988.

First,thedistrictcourtstatedarecipientoffederalfundsmustdetermine,atthelocallevel,thefigurethatwouldconstituteanappropriateDBEinvolvementgoal,basedontheirrelativeavailabilityofDBEs.Id.at*6,citing49CFR§26.45(c).Inthiscase,thecourtfoundthatNJTdiddetermineabasefigurefortherelativeavailabilityofDBEs,whichaccountedfordemonstrableevidenceoflocalmarketconditionsandwasdesignedtoberationallyrelatedtotherelativeavailabilityofDBEs.Id.ThecourtpointedoutthatNJTconductedadisparitystudy,andthedisparitystudyutilizedNJT’sDBElistsfromfiscalyears1995‐1999andCensusDatatodetermineitsbaseDBEgoal.Thecourtnotedthattheplaintiffs’argumentthatthedatausedinthedisparitystudywerestalewaswithoutmeritandhadnobasisinlaw.Thecourtfoundthatthedisparitystudytookintoaccounttheprimaryindustries,primarygeographicmarket,andraceneutralalternatives,thenadjusteditsgoaltoencompassthesecharacteristics.Id.at*6.

ThecourtstatedthattheuseofDBEdirectoriesandCensusdataarewhatthelegislatureintendedforstateagenciestoutilizeinmakingabaseDBEgoaldetermination.Id.Also,thecourt


statedthat“perhapsmoreimportantly,NJT’sDBEgoalwasapprovedbytheUSDOTeveryyearfrom2002until2008.”Id.at*6.Thus,thecourtfoundNJTappropriatelydeterminedtheirDBEavailability,whichwasapprovedbytheUSDOT,pursuantto49CFR§26.45(c).Id.at*6.ThecourtheldthatNJTdemonstrateditsoverallDBEgoalisbasedondemonstrableevidenceoftheavailabilityofready,willing,andableDBEsrelativetoallbusinessesready,willing,andabletoparticipateinDOTassistedcontractsandreflectsitsdeterminationofthelevelofDBEparticipationitwouldexpectabsenttheeffectsofdiscrimination.Id.

Alsoofsignificance,thecourtpointedoutthatplaintiffsdidnotprovideanyevidencethatNJTdidnotsetaDBEgoalbasedupon49C.F.§26.45(c).ThecourtthusheldthatgenuineissuesofmaterialfactremainonlyastowhetherareasonablejurymayfindthatthemethodusedbyNJTtodetermineitsDBEgoalwassufficientlynarrowlytailored.Id.at*6.

Thecourtpointedoutthattodeterminewhatadjustmenttomake,thedisparitystudyexaminedqualitativedatasuchasfocusgroupsonthepre‐qualificationstatusofDBEs,workingwithprimecontractors,securingcredit,anditseffectonDBEparticipation,aswellasprocurementofficerinterviewstoanalyze,andcompareandcontrasttheirrelationshipswithnon‐DBEvendorsandDBEvendors.Id.at*7.ThisqualitativeinformationwasthencomparedtoDBEbidsandDBEgoalsforeachyearinquestion.NJT’sadjustmenttoitsDBEgoalalsoincludedananalysisoftheoveralldisparityratio,aswellas,DBEutilizationbasedonrace,genderandethnicity.Id.Adecompositionanalysiswasalsoperformed.Id.

ThecourtconcludedthatNJTprovidedevidencethatit,ataminimum,examinedthecurrentcapacityofDBEstoperformworkinitsDOT‐assistedcontractingprogram,asmeasuredbythevolumeofworkDBEshaveperformedinrecentyears,aswellasutilizingthedisparitystudyitself.Thecourtpointedoutthereweretwomethodsspecificallyapprovedby49CFR§26.45(d).Id.

ThecourtalsofoundthatNJTtookintoaccountraceneutralmeasurestoensurethatthegreatestpercentageofDBEparticipationwasachievedthroughraceandgenderneutralmeans.Thedistrictcourtconcludedthat“critically,”plaintiffsfailedtoprovideevidenceofanother,moreperfect,methodthatcouldhavebeenutilizedtoadjustNJT’sDBEgoal.Id.at*7.ThecourtheldthatgenuineissuesofmaterialfactremainonlyastowhetherNJT’sadjustmenttoitsDBEgoalissufficientlynarrowlytailoredandthusconstitutional.Id.

NJT,thecourtfound,adjusteditsDBEgoaltoaccountfortheeffectsofpastdiscrimination,notingthedisparitystudytookintoaccounttheeffectsofpastdiscriminationinthepre‐qualificationprocessofDBEs.Id.at*7.Thecourtquotedthedisparitystudyasstatingthatitfoundnon‐trivialandstatisticallysignificantmeasuresofdiscriminationincontractamountsawardedduringthestudyperiod.Id.at*8.

Thecourtfound,however,thatwhatwas“gravelycritical”aboutthefindingofthepasteffectsofdiscriminationisthatitonlytookintoaccountsixgroupsincludingAmericanIndian,Hispanic,Asian,blacks,womenand“unknown,”butdidnotincludeananalysisofpastdiscriminationfortheethnicgroup“Iraqi,”whichisnowagroupconsideredtobeaDBEbytheNJT.Id.Becausethedisparityreportincludedacategoryentitled“unknown,”thecourtheldagenuineissueofmaterialfactremainsastowhether“Iraqi”islegitimatelywithinNJT’sdefinedDBEgroupsandwhetherademonstrablefindingofdiscriminationexistsforIraqis.Therefore,thecourtdeniedbothplaintiffs’anddefendants’MotionsforSummaryJudgmentastotheconstitutionalityofNJT’sDBEprogram.


ThecourtalsoheldthatbecausethelawwasnotclearlyestablishedatthetimeNJTestablisheditsDBEprogramtocomplywithTEA‐21,theindividualstatedefendantswereentitledtoqualifiedimmunityandtheirMotionforSummaryJudgmentastothestateofficialswasgranted.Thecourt,inaddition,heldthatplaintiff’sTitleVIclaimsweredismissedbecausetheindividualdefendantswerenotrecipientsoffederalfunds,andthattheNJTasaninstrumentalityoftheStateofNewJerseyisentitledtosovereignimmunity.Therefore,thecourtheldthattheplaintiff’sclaimsbasedontheviolationof42U.S.C.§1983weredismissedandNJT’sMotionforSummaryJudgmentwasgrantedastothatclaim.

17. South Florida Chapter of the Associated General Contractors v. Broward County, Florida, 544 F. Supp.2d 1336 (S.D. Fla. 2008)

Plaintiff,theSouthFloridaChapteroftheAssociatedGeneralContractors,broughtsuitagainsttheDefendant,BrowardCounty,FloridachallengingBrowardCounty’simplementationoftheFederalDBEProgramandBrowardCounty’sissuanceofcontractspursuanttotheFederalDBEProgram.PlaintifffiledaMotionforaPreliminaryInjunction.ThecourtconsideredonlythethresholdlegalissueraisedbyplaintiffintheMotion,namelywhetherornotthedecisioninWesternStatesPavingCompanyv.WashingtonStateDepartmentofTransportation,407F.3d983(9thCir.2005)shouldgoverntheCourt’sconsiderationofthemeritsofplaintiffs’claim.544F.Supp.2dat1337.Thecourtidentifiedthethresholdlegalissuepresentedasessentially,“whethercompliancewiththefederalregulationsisallthatisrequiredofDefendantBrowardCounty.”Id.at1338.

TheDefendantCountycontendedthatasarecipientoffederalfundsimplementingtheFederalDBEProgram,allthatisrequiredoftheCountyistocomplywiththefederalregulations,relyingoncaselawfromtheSeventhCircuitinsupportofitsposition.544F.Supp.2dat1338,citingNorthernContractingv.Illinois,473F.3d715(7thCir.2007).Theplaintiffsdisagreed,andcontendedthattheCountymusttakeadditionalstepsbeyondthoseexplicitlyprovidedforinthefederalregulationstoensuretheconstitutionalityoftheCounty’simplementationoftheFederalDBEProgram,asadministeredintheCounty,citingWesternStatesPaving,407F.3d983.ThecourtfoundthattherewasnocaselawonpointintheEleventhCircuitCourtofAppeals.Id.at1338.

NinthCircuitApproach:WesternStates.ThedistrictcourtanalyzedtheNinthCircuitCourtofAppealsapproachinWesternStatesPavingandtheSeventhCircuitapproachinMilwaukeeCountyPaversAssociationv.Fiedler,922F.2d419(7thCir.1991)andNorthernContracting,473F.3d715.ThedistrictcourtinBrowardCountyconcludedthattheNinthCircuitinWesternStatesPavingheldthatwhetherWashington’sDBEprogramisnarrowlytailoredtofurtherCongress’sremedialobjectivedependsuponthepresenceorabsenceofdiscriminationintheState’stransportationcontractingindustry,andthatitwaserrorforthedistrictcourtinWesternStatesPavingtoupholdWashington’sDBEprogramsimplybecausethestatehadcompliedwiththefederalregulations.544F.Supp.2dat1338‐1339.ThedistrictcourtinBrowardCountypointedoutthattheNinthCircuitinWesternStatesPavingconcludeditwouldbenecessarytoundertakeanas‐appliedinquiryintowhetherthestate’sprogramisnarrowlytailored.544F.Supp.2dat1339,citingWesternStatesPaving,407F.3dat997.

Inafootnote,thedistrictcourtinBrowardCountynotedthattheUSDOT“appearsnottobeofonemindonthisissue,however.”544F.Supp.2dat1339,n.3.Thedistrictcourtstatedthatthe“UnitedStatesDOThas,inanalysispostedonitsWebsite,implicitlyinstructedstatesandlocalitiesoutsideoftheNinthCircuittoignoretheWesternStatesPavingdecision,whichwouldtendtoindicatethatthisagencymaynotconcurwiththe‘opinionoftheUnitedStates’as


representedinWesternStates.”544F.Supp.2dat1339,n.3.ThedistrictcourtnotedthattheUnitedStatestookthepositionintheWesternStatesPavingcasethatthe“statewouldhavetohaveevidenceofpastorcurrenteffectsofdiscriminationtouserace‐consciousgoals.”544F.Supp.2dat1338,quotingWesternStatesPaving.

TheCourtalsopointedoutthattheEighthCircuitCourtofAppealsinSherbrookeTurf,Inc.v.MinnesotaDepartmentofTransportation,345F.3d964(8thCir.2003)reachedasimilarconclusionasinWesternStatesPaving.544F.Supp.2dat1339.TheEighthCircuitinSherbrooke,likethecourtinWesternStatesPaving,“concludedthatthefederalgovernmenthaddelegatedthetaskofensuringthatthestateprogramsarenarrowlytailored,andlookedtotheunderlyingdatatodeterminewhetherthoseprogramswere,infact,narrowlytailored,ratherthansimplyrelyingonthestates’compliancewiththefederalregulations.”544F.Supp.2dat1339.

SeventhCircuitApproach:MilwaukeeCountyandNorthernContracting.ThedistrictcourtinBrowardCountynextconsideredtheSeventhCircuitapproach.TheDefendantsinBrowardCountyagreedthattheCountymustmakealocalfindingofdiscriminationforitsprogramtobeconstitutional.544F.Supp.2dat1339.TheCounty,however,tookthepositionthatitmustmakethisfindingthroughtheprocessspecifiedinthefederalregulations,andshouldnotbesubjecttoalawsuitifthatprocessisfoundtobeinadequate.Id.Insupportofthisposition,theCountyreliedprimarilyontheSeventhCircuit’sapproach,firstarticulatedinMilwaukeeCountyPaversAssociationv.Fiedler,922F.2d419(7thCir.1991),thenreaffirmedinNorthernContracting,473F.3d715(7thCir.2007).544F.Supp.2dat1339.

BasedontheSeventhCircuitapproach,insofarasthestateismerelydoingwhatthestatuteandfederalregulationsenvisageandpermit,theattackonthestateisanimpermissiblecollateralattackonthefederalstatuteandregulations.544F.Supp.2dat1339‐1340.Thisapproachconcludesthatastate’sroleinthefederalprogramissimplyasanagent,andinsofar“asthestateismerelycomplyingwithfederallawitisactingastheagentofthefederalgovernmentandisnomoresubjecttobeingenjoinedonequalprotectiongroundsthanthefederalcivilservantswhodraftedtheregulations.”544F.Supp.2dat1340,quotingMilwaukeeCountyPavers,922F.2dat423.

TheNinthCircuitaddressedtheMilwaukeeCountyPaverscaseinWesternStatesPaving,andattemptedtodistinguishthatcase,concludingthattheconstitutionalityofthefederalstatuteandregulationswerenotatissueinMilwaukeeCountyPavers.544F.Supp.2dat1340.In2007,theSeventhCircuitfollowedupthecritiquesmadeinWesternStatesPavingintheNorthernContractingdecision.Id.TheSeventhCircuitinNorthernContractingconcludedthatthemajorityinWesternStatesPavingmisreaditsdecisioninMilwaukeeCountyPaversasdidtheEighthCircuitCourtofAppealsinSherbrooke.544F.Supp.2dat1340,citingNorthernContracting,473F.3dat722,n.5.ThedistrictcourtinBrowardCountypointedoutthattheSeventhCircuitinNorthernContractingemphasizedagainthatthestateDOTisactingasaninstrumentoffederalpolicy,andaplaintiffcannotcollaterallyattackthefederalregulationsthroughachallengetothestateDOT’sprogram.544F.Supp.2dat1340,citingNorthernContracting,473F.3dat722.

ThedistrictcourtinBrowardCountystatedthatothercircuitshaveconcurredwiththisapproach,includingtheSixthCircuitCourtofAppealsdecisioninTennesseeAsphaltCompanyv.Farris,942F.2d969(6thCir.1991).544F.Supp.2dat1340.ThedistrictcourtinBrowardCountyheldthattheTenthCircuitCourtofAppealstookasimilarapproachinEllisv.Skinner,961F.2d912(10thCir.1992).544F.Supp.2dat1340.ThedistrictcourtinBrowardCountyheldthattheseCircuitCourtsofAppealhaveconcludedthat“whereastateorcountyfullycomplieswiththefederalregulations,itcannotbeenjoinedfromcarryingoutitsDBEprogram,becauseanysuch


attackwouldsimplyconstituteanimpropercollateralattackontheconstitutionalityoftheregulations.”544F.Supp.2dat1340‐41.

ThedistrictcourtinBrowardCountyheldthatitagreedwiththeapproachtakenbytheSeventhCircuitCourtofAppealsinMilwaukeeCountyPaversandNorthernContractingandconcludedthat“theappropriatefactualinquiryintheinstantcaseiswhetherornotBrowardCountyhasfullycompliedwiththefederalregulationsinimplementingitsDBEprogram.”544F.Supp.2dat1341.Itissignificanttonotethattheplaintiffsdidnotchallengetheas‐appliedconstitutionalityofthefederalregulationsthemselves,butratherfocusedtheirchallengeontheconstitutionalityofBrowardCounty’sactionsincarryingouttheDBEprogram.544F.Supp.2dat1341.ThedistrictcourtinBrowardCountyheldthatthistypeofchallengeis“simplyanimpermissiblecollateralattackontheconstitutionalityofthestatuteandimplementingregulations.”Id.

ThedistrictcourtconcludedthatitwouldapplythecaselawassetoutintheSeventhCircuitCourtofAppealsandconcurringcircuits,andthatthetrialinthiscasewouldbeconductedsolelyforthepurposeofestablishingwhetherornottheCountyhascompliedfullywiththefederalregulationsinimplementingitsDBEprogram.544F.Supp.2dat1341.

Subsequently,therewasaStipulationofDismissalfiledbyallpartiesinthedistrictcourt,andanOrderofDismissalwasfiledwithoutatrialofthecaseinNovember2008.

18. Western States Paving Co. v. Washington DOT, USDOT & FHWA, 2006 WL 1734163 (W.D. Wash. June 23, 2006) (unpublished opinion)

ThiscasewasbeforethedistrictcourtpursuanttotheNinthCircuit’sremandorderinWesternStatesPavingCo.WashingtonDOT,USDOT,andFHWA,407F.3d983(9thCir.2005),cert.denied,546U.S.1170(2006).Inthisdecision,thedistrictcourtadjudicatedcrossMotionsforSummaryJudgmentonplaintiff’sclaimforinjunctionandfordamagesunder42U.S.C.§§1981,1983,and§2000d.

BecausetheWSDOTvoluntarilydiscontinueditsDBEprogramaftertheNinthCircuitdecision,supra,thedistrictcourtdismissedplaintiff’sclaimforinjunctivereliefasmoot.Thecourtfound“itisabsolutelyclearinthiscasethatWSDOTwillnotresumeorcontinuetheactivitytheNinthCircuitfoundunlawfulinWesternStates,”andcitedspecificallytotheinformationallettersWSDOTsenttocontractorsinformingthemoftheterminationoftheprogram.

Second,thecourtdismissedWesternStatesPaving’sclaimsunder42U.S.C.§§1981,1983,and2000dagainstClarkCountyandtheCityofVancouverholdingneithertheCityortheCountyactedwiththerequisitediscriminatoryintent.ThecourtheldtheCountyandtheCityweremerelyimplementingtheWSDOT’sunlawfulDBEprogramandtheiractionsinthisrespectwereinvoluntaryandrequirednoindependentactivity.ThecourtalsonotedthattheCountyandtheCitywerenotpartiestotheprecisediscriminatoryactionsatissueinthecase,whichoccurredduetotheconductofthe“Statedefendants.”Specifically,theWSDOT—andnottheCountyortheCity—developedtheDBEprogramwithoutsufficientanecdotalandstatisticalevidence,andimproperlyreliedontheaffidavitsofcontractorsseekingDBEcertification“whoaverredthattheyhadbeensubjectto‘generalsocietaldiscrimination.’”

Third,thecourtdismissedplaintiff’s42U.S.C.§§1981and1983claimsagainstWSDOT,findingthembarredbytheEleventhAmendmentsovereignimmunitydoctrine.However,thecourtallowedplaintiff’s42U.S.C.§2000dclaimtoproceedagainstWSDOTbecauseitwasnotsimilarlybarred.ThecourtheldthatCongresshadconditionedthereceiptoffederalhighway


fundsoncompliancewithTitleVI(42U.S.C.§2000detseq.)andthewaiverofsovereignimmunityfromclaimsarisingunderTitleVI.Section2001specificallyprovidesthat“aStateshallnotbeimmuneundertheEleventhAmendmentoftheConstitutionoftheUnitedStatesfromsuitinFederalcourtforaviolationof…TitleVI.”ThecourtheldthatthislanguageputtheWSDOTonnoticethatitfacedprivatecausesofactionintheeventofnoncompliance.

ThecourtheldthatWSDOT’sDBEprogramwasnotnarrowlytailoredtoserveacompellinggovernmentinterest.Thecourtstressedthatdiscriminatoryintentisanessentialelementofaplaintiff’sclaimunderTitleVI.TheWSDOTarguedthatevenifsovereignimmunitydidnotbarplaintiff’s§2000dclaim,WSDOTcouldbeheldliablefordamagesbecausetherewasnoevidencethatWSDOTstaffknewoforconsciouslyconsideredplaintiff’sracewhencalculatingtheannualutilizationgoal.Thecourtheldthatsincethepolicywasnot“faciallyneutral”—andwasinfact“specificallyraceconscious”—anyresultingdiscriminationwasthereforeintentional,whetherthereasonfortheclassificationwasbenignoritspurposeremedial.Assuch,WSDOT’sprogramwassubjecttostrictscrutiny.

InorderforthecourttoupholdtheDBEprogramasconstitutional,WSDOThadtoshowthattheprogramservedacompellinginterestandwasnarrowlytailoredtoachievethatgoal.ThecourtfoundthattheNinthCircuithadalreadyconcludedthattheprogramwasnotnarrowlytailoredandtherecordwasdevoidofanyevidencesuggestingthatminoritiescurrentlysufferorhavesuffereddiscriminationintheWashingtontransportationcontractingindustry.ThecourtthereforedeniedWSDOT’sMotionforSummaryJudgmentonthe§2000dclaim.TheremedyavailabletoWesternStatesremainsforfurtheradjudicationandthecaseiscurrentlypending.

19. Northern Contracting, Inc. v. Illinois, 2005 WL 2230195 (N.D. Ill., 2005), affirmed, 473 F.3d 715 (7th Cir. 2007)

Thisdecisionisthedistrictcourt’sorderthatwasaffirmedbytheSeventhCircuitCourtofAppeals.ThisdecisionisinstructiveinthatitisoneoftherecentcasestoaddressthevalidityoftheFederalDBEProgramandlocalandstategovernments’implementationoftheprogramasrecipientsoffederalfunds.Thecasealsoisinstructiveinthatthecourtsetforthadetailedanalysisofrace‐,ethnicity‐,andgender‐neutralmeasuresaswellasevidentiarydatarequiredtosatisfyconstitutionalscrutiny.

Thedistrictcourtconductedatrialafterdenyingtheparties’MotionsforSummaryJudgmentinNorthernContracting,Inc.v.StateofIllinois,IllinoisDOT,andUSDOT,2004WL422704(N.D.Ill.March3,2004),discussedinfra.Thefollowingsummarizestheopinionofthedistrictcourt.

NorthernContracting,Inc.(the“plaintiff”),anIllinoishighwaycontractor,suedtheStateofIllinois,theIllinoisDOT,theUnitedStatesDOT,andfederalandstateofficialsseekingadeclarationthatfederalstatutoryprovisions,thefederalimplementingregulations(“TEA‐21”),thestatestatuteauthorizingtheDBEprogram,andtheIllinoisDBEprogramitselfwereunlawfulandunconstitutional.2005WL2230195at*1(N.D.Ill.Sept,8,2005).

UnderTEA‐21,arecipientoffederalfundsisrequiredtomeetthe“maximumfeasibleportion”ofitsDBEgoalthroughrace‐neutralmeans.Id.at*4(citingregulations).IfarecipientprojectsthatitcannotmeetitsoverallDBEgoalthroughrace‐neutralmeans,itmustestablishcontractgoalstotheextentnecessarytoachievetheoverallDBEgoal.Id.(citingregulation).[ThecourtprovidedanoverviewofthepertinentregulationsincludingcompliancerequirementsandqualificationsforDBEstatus.]


Statisticalevidence. Tocalculateits2005DBEparticipationgoals,IDOTfollowedthetwo‐stepprocesssetforthinTEA‐21:(1)calculationofabasefigurefortherelativeavailabilityofDBEs,and(2)considerationofapossibleadjustmentofthebasefiguretoreflecttheeffectsoftheDBEprogramandthelevelofparticipationthatwouldbeexpectedbutfortheeffectsofpastandpresentdiscrimination.Id.at*6.IDOTengagedinastudytocalculateitsbasefigureandconductacustomcensustodeterminewhetheramorereliablemethodofcalculationexistedasopposedtoitspreviousmethodofreviewingabidder’slist.Id.

IncompliancewithTEA‐21,IDOTusedastudytoevaluatethebasefigureusingasix‐partanalysis:(1)thestudyidentifiedtheappropriateandrelevantgeographicmarketforitscontractingactivityanditsprimecontractors;(2)thestudyidentifiedtherelevantproductmarketsinwhichIDOTanditsprimecontractorscontract;(3)thestudysoughttoidentifyallavailablecontractorsandsubcontractorsintherelevantindustrieswithinIllinoisusingDun&Bradstreet’sMarketplace;(4)thestudycollectedlistsofDBEsfromIDOTand20otherpublicandprivateagencies;(5)thestudyattemptedtocorrectforthepossibilitythatcertainbusinesseslistedasDBEswerenolongerqualifiedor,alternatively,businessesnotlistedasDBEsbutqualifiedassuchunderthefederalregulations;and(6)thestudyattemptedtocorrectforthepossibilitythatnotallDBEbusinesseswerelistedinthevariousdirectories.Id.at*6‐7.Thestudyutilizedastandardstatisticalsamplingproceduretocorrectforthelattertwobiases.Id.at*7.Thestudythuscalculatedaweightedaveragebasefigureof22.7percent.Id.

IDOTthenadjustedthebasefigurebasedupontwodisparitystudiesandsomereportsconsideringwhethertheDBEavailabilityfigureswereartificiallylowduetotheeffectsofpastdiscrimination.Id.at*8.OnestudyexamineddisparitiesinearningsandbusinessformationratesasbetweenDBEsandtheirwhitemale‐ownedcounterparts.Id.AnotherstudyincludedasurveyreportingthatDBEsarerarelyutilizedinnon‐goalsprojects.Id.

IDOTconsideredthreereportspreparedbyexpertwitnesses.Id.at*9.Thefirstreportconcludedthatminority‐andwomen‐ownedbusinesseswereunderutilizedrelativetotheircapacityandthatsuchunderutilizationwasduetodiscrimination.Id.Thesecondreportconcluded,aftercontrollingforrelevantvariablessuchascreditworthiness,“thatminoritiesandwomenarelesslikelytoformbusinesses,andthatwhentheydoformbusinesses,thosebusinessesachievelowerearningsthandidbusinessesownedbywhitemales.”Id.Thethirdreport,againcontrollingforrelevantvariables(education,age,maritalstatus,industryandwealth),concludedthatminority‐andfemale‐ownedbusinesses’formationratesarelowerthanthoseoftheirwhitemalecounterparts,andthatsuchbusinessesengageinadisproportionateamountofgovernmentworkandcontractsasaresultoftheirinabilitytoobtainprivatesectorwork.Id.

IDOTalsoconductedaseriesofpublichearingsinwhichanumberofDBEownerswhotestifiedthatthey“wererarely,ifever,solicitedtobidonprojectsnotsubjecttodisadvantaged‐firmhiringgoals.”Id.Additionally,witnessesidentified20primecontractorsinIDOTDistrict1alonewhorarelyorneversolicitedbidsfromDBEsonnon‐goalsprojects.Id.TheprimecontractorsdidnotrespondtoIDOT’srequestsforinformationconcerningtheirutilizationofDBEs.Id.

Finally,IDOTreviewedunremediatedmarketdatafromfourdifferentmarkets(theIllinoisStateTollHighwayAuthority,theMissouriDOT,CookCounty’spublicconstructioncontracts,anda“non‐goals”experimentconductedbyIDOTbetween2001and2002),andconsideredpastutilizationofDBEsonIDOTprojects.Id.at*11.Afteranalyzingallofthedata,thestudyrecommendedanupwardadjustmentto27.51percent.However,IDOTdecidedtomaintainitsfigureat22.77percent.Id.


IDOT’srepresentativetestifiedthattheDBEprogramwasadministeredona“contract‐by‐contractbasis.”Id.ShetestifiedthatDBEgoalshavenoeffectontheawardofprimecontractsbutthatcontractsareawardedexclusivelytothe“lowestresponsiblebidder.”IDOTalsoallowedcontractorstopetitionforawaiverofindividualcontractgoalsincertainsituations(e.g.,wherethecontractorhasbeenunabletomeetthegoaldespitehavingmadereasonablegoodfaithefforts).Id.at*12.Between2001and2004,IDOTreceivedwaiverrequestson8.53percentofitscontractsandgrantedthreeoutoffour;IDOTalsoprovidedanappealprocedureforadenialfromawaiverrequest.Id.

IDOTimplementedanumberofrace‐andgender‐neutralmeasuresbothinitsfiscalyear2005planandinresponsetothedistrictcourt’searliersummaryjudgmentorder,including:

1. A“promptpaymentprovision”initscontracts,requiringthatsubcontractorsbepaidpromptlyaftertheycompletetheirwork,andprohibitingprimecontractorsfromdelayingsuchpayments;

2. AnextensiveoutreachprogramseekingtoattractandassistDBEandothersmallfirmsenterandachievesuccessintheindustry(includingretaininganetworkofconsultantstoprovidemanagement,technicalandfinancialassistancetosmallbusinesses,andsponsoringnetworkingsessionsthroughoutthestatetoacquaintsmallfirmswithlargercontractorsandtoencouragetheinvolvementofsmallfirmsinmajorconstructionprojects);

3. Reviewingthecriteriaforprequalificationtoreduceanyunnecessaryburdens;

4. “Unbundling”largecontracts;and

5. AllocatingsomecontractsforbiddingonlybyfirmsmeetingtheSBA’sdefinitionofsmallbusinesses.

Id.(internalcitationsomitted).IDOTwasalsointheprocessofimplementingbondingandfinancinginitiativestoassistemergingcontractorsobtainguaranteedbondingandlinesofcredit,andestablishingamentor‐protégéprogram.Id.

ThecourtfoundthatIDOTattemptedtoachievethe“maximumfeasibleportion”ofitsoverallDBEgoalthroughrace‐andgender‐neutralmeasures.Id.at*13.ThecourtfoundthatIDOTdeterminedthatrace‐andgender‐neutralmeasureswouldaccountfor6.43percentofitsDBEgoal,leaving16.34percenttobereachedusingrace‐andgender‐consciousmeasures.Id.

Anecdotalevidence. AnumberofDBEownerstestifiedtoinstancesofperceiveddiscriminationandtothebarrierstheyface.Id.TheDBEownersalsotestifiedtodifficultiesinobtainingworkintheprivatesectorand“unanimouslyreportedthattheywererarelyinvitedtobidonsuchcontracts.”Id.TheDBEownerstestifiedtoareluctancetosubmitunsolicitedbidsduetotheexpenseinvolvedandidentifiedspecificfirmsthatsolicitedbidsfromDBEsforgoalsprojectsbutnotfornon‐goalsprojects.Id.Anumberofthewitnessesalsotestifiedtospecificinstancesofdiscriminationinbidding,onspecificcontracts,andinthefinancingandinsurancemarkets.Id.at*13‐14.Onewitnessacknowledgedthatallsmallfirmsfacedifficultiesinthefinancingandinsurancemarkets,buttestifiedthatitisespeciallyburdensomeforDBEswho“frequentlyareforcedtopayhigherinsuranceratesduetoracialandgenderdiscrimination.”Id.at*14.TheDBEwitnessesalsotestifiedtheyhaveobstaclesinobtainingpromptpayment.Id.


Theplaintiffcalledanumberofnon‐DBEbusinessownerswhounanimouslytestifiedthattheysolicitbusinessequallyfromDBEsandnon‐DBEsonnon‐goalsprojects.Id.Somenon‐DBEfirmownerstestifiedthattheysolicitbidsfromDBEsonagoalsprojectforworktheywouldotherwisecompletethemselvesabsentthegoals;otherstestifiedthatthey“occasionallyawardworktoaDBEthatwasnotthelowbidderinordertoavoidscrutinyfromIDOT.”Id.Anumberofnon‐DBEfirmownersaccusedoffailingtosolicitbidsfromDBEsonnon‐goalsprojectstestifiedanddeniedtheallegations.Id.at*15.

Strictscrutiny. Thecourtappliedstrictscrutinytotheprogramasawhole(includingthegender‐basedpreferences).Id.at*16.Thecourt,however,setforthadifferentburdenofproof,findingthatthegovernmentmustdemonstrateidentifieddiscriminationwithspecificityandmusthavea“‘strongbasisinevidence’toconcludethatremedialactionwasnecessary,beforeitembarksonanaffirmativeactionprogram…Ifthegovernmentmakessuchashowing,thepartychallengingtheaffirmativeactionplanbearsthe‘ultimateburden’ofdemonstratingtheunconstitutionalityoftheprogram.”Id.Thecourtheldthatchallengingparty’sburden“canonlybemetbypresentingcredibleevidencetorebutthegovernment’sproffereddata.”Id.at*17.

Tosatisfystrictscrutiny,thecourtfoundthatIDOTdidnotneedtodemonstrateanindependentcompellinginterest;however,aspartofthenarrowlytailoredprong,IDOTneededtoshow“thatthereisademonstrableneedfortheimplementationoftheFederalDBEProgramwithinitsjurisdiction.”Id.at*16.

ThecourtfoundthatIDOTpresented“anabundance”ofevidencedocumentingthedisparitiesbetweenDBEsandnon‐DBEsintheconstructionindustry.Id.at*17.Theplaintiffarguedthatthestudywas“erroneousbecauseitfailedtolimititsDBEavailabilityfigurestothosefirms…registeredandpre‐qualifiedwithIDOT.”Id.TheplaintiffalsoallegedthecalculationsoftheDBEutilizationratewereincorrectbecausethedataincludedIDOTsubcontractsandprimecontracts,despitethefactthatthelatterareawardedtothelowestbidderasamatteroflaw.Id.Accordingly,theplaintiffallegedthatIDOT’scalculationofDBEavailabilityandutilizationrateswasincorrect.Id.

Thecourtfoundthatotherjurisdictionshadutilizedthecustomcensusapproachwithoutsuccessfulchallenge.Id.at*18.Additionally,thecourtfound“thattheremedialnatureofthefederalstatutescounselsforthecastingofabroadernetwhenmeasuringDBEavailability.”Id.at*19.ThecourtfoundthatIDOTpresented“anarrayofstatisticalstudiesconcludingthatDBEsfacedisproportionatehurdlesinthecredit,insurance,andbondingmarkets.”Id.at*21.Thecourtalsofoundthatthestatisticalstudieswereconsistentwiththeanecdotalevidence.Id.Thecourtdidfind,however,that“therewasnoevidenceofevenasingleinstanceinwhichaprimecontractorfailedtoawardajobtoaDBEthatofferedthelowbid.This…is[also]supportedbythestatisticaldata…whichshowsthatatleastatthelevelofsubcontracting,DBEsaregenerallyutilizedatarateinlinewiththeirability.”Id.at*21,n.31.Additionally,IDOTdidnotverifytheanecdotaltestimonyofDBEfirmownerswhotestifiedtobarriersinfinancingandbonding.However,thecourtfoundthatsuchverificationwasunnecessary.Id.at*21,n.32.

Thecourtfurtherfound:

ThatsuchdiscriminationindirectlyaffectstheabilityofDBEstocompeteforprimecontracts,despitethefactthattheyareawardedsolelyonthebasisoflowbid,cannotbedoubted:‘[E]xperienceandsizearenotrace‐andgender‐neutralvariables…[DBE]constructionfirmsaregenerallysmallerandlessexperiencedbecauseofindustrydiscrimination.’


Id.at*21,citingConcreteWorksofColorado,Inc.v.CityandCountyofDenver,321F.3d950(10thCir.2003).

ThepartiesstipulatedtothefactthatDBEutilizationgoalsexceedDBEavailabilityfor2003and2004.Id.at*22.IDOTalleged,andthecourtsofound,thatthehighutilizationongoalsprojectswasduetothesuccessoftheDBEprogram,andnottoanabsenceofdiscrimination.Id.ThecourtfoundthatthestatisticaldisparitiescoupledwiththeanecdotalevidenceindicatedthatIDOT’sfiscalyear2005goalwasa“‘plausiblelower‐boundestimate’ofDBEparticipationintheabsenceofdiscrimination.”Id.ThecourtfoundthattheplaintiffdidnotpresentpersuasiveevidencetocontradictorexplainIDOT’sdata.Id.

Theplaintiffarguedthatevenifacceptedatfacevalue,IDOT’smarketplacedatadidnotsupporttheimpositionofrace‐andgender‐consciousremediesbecausetherewasnoevidenceofdirectdiscriminationbyprimecontractors.Id.ThecourtfoundfirstthatIDOT’sindirectevidenceofdiscriminationinthebonding,financing,andinsurancemarketswassufficienttoestablishacompellingpurpose.Id.Second,thecourtfound:

[M]oreimportantly,plaintifffailstoacknowledgethat,inenactingitsDBEprogram,IDOTactednottoremedyitsownpriordiscriminatorypractices,butpursuanttofederallaw,whichbothauthorizedandrequiredIDOTtoremediatetheeffectsofprivatediscriminationonfederally‐fundedhighwaycontracts.Thisisafundamentaldistinction…[A]stateorlocalgovernmentneednotindependentlyidentifyacompellinginterestwhenitsactionscomeinthecourseofenforcingafederalstatute.

Id.at*23.ThecourtdistinguishedBuildersAss’nofGreaterChicagov.CountyofCook,123F.Supp.2d1087(N.D.Ill.2000),aff’d256F.3d642(7thCir.2001),notingthattheprograminthatcasewasnotfederally‐funded.Id.at*23,n.34.

Thecourtalsofoundthat“IDOThasdoneitsbesttomaximizetheportionofitsDBEgoal”throughrace‐andgender‐neutralmeasures,includinganti‐discriminationenforcementandsmallbusinessinitiatives.Id.at*24.Theanti‐discriminationeffortsincluded:aninternetwebsitewhereaDBEcanfileanadministrativecomplaintifitbelievesthataprimecontractorisdiscriminatingonthebasisofraceorgenderintheawardofsub‐contracts;andrequiringcontractorsseekingprequalificationtomaintainandproducesolicitationrecordsonallprojects,bothpublicandprivate,withandwithoutgoals,aswellasrecordsofthebidsreceivedandaccepted.Id.Thesmallbusinessinitiativeincluded:“unbundling”largecontracts;allocatingsomecontractsforbiddingonlybyfirmsmeetingtheSBA’sdefinitionofsmallbusinesses;a“promptpaymentprovision”initscontracts,requiringthatsubcontractorsbepaidpromptlyaftertheycompletetheirwork,andprohibitingprimecontractorsfromdelayingsuchpayments;andanextensiveoutreachprogramseekingtoattractandassistDBEandothersmallfirmsDBEandothersmallfirmsenterandachievesuccessintheindustry(includingretaininganetworkofconsultantstoprovidemanagement,technicalandfinancialassistancetosmallbusinesses,andsponsoringnetworkingsessionsthroughoutthestatetoacquaintsmallfirmswithlargercontractorsandtoencouragetheinvolvementofsmallfirmsinmajorconstructionprojects).Id.

Thecourtfound“[s]ignificantly,plaintiffdidnotquestiontheefficacyorsincerityoftheserace‐andgender‐neutralmeasures.”Id.at*25.Additionally,thecourtfoundtheDBEprogramhadsignificantflexibilityinthatutilizedcontract‐by‐contractgoalsetting(withoutafixedDBEparticipationminimum)andcontainedwaiverprovisions.Id.ThecourtfoundthatIDOTapproved70percentofwaiverrequestsalthoughwaiverswererequestedononly8percentof


allcontracts.Id.,citingAdarandConstructors,Inc.v.Slater“AdarandVII”,228F.3d1147,1177(10thCir.2000)(citingforthepropositionthatflexibilityandwaiverarecriticallyimportant).

ThecourtheldthatIDOT’sDBEplanwasnarrowlytailoredtothegoalofremedyingtheeffectsofracialandgenderdiscriminationintheconstructionindustry,andwasthereforeconstitutional.

20. Northern Contracting, Inc. v. State of Illinois, Illinois DOT, and USDOT, 2004 WL 422704 (N.D. Ill. March 3, 2004)

ThisistheearlierdecisioninNorthernContracting,Inc.,2005WL2230195(N.D.Ill.Sept.8,2005),seeabove,whichresultedintheremandofthecasetoconsidertheimplementationoftheFederalDBEProgrambytheIDOT.ThiscaseinvolvesthechallengetotheFederalDBEProgram.TheplaintiffcontractorsuedtheIDOTandtheUSDOTchallengingthefacialconstitutionalityoftheFederalDBEProgram(TEA‐21and49CFRPart26)aswellastheimplementationoftheFederalProgrambytheIDOT(i.e.,theIDOTDBEProgram).ThecourtheldvalidtheFederalDBEProgram,findingthereisacompellinggovernmentalinterestandthefederalprogramisnarrowlytailored.ThecourtalsoheldthereareissuesoffactregardingwhetherIDOT’sDBEProgramisnarrowlytailoredtoachievethefederalgovernment’scompellinginterest.ThecourtdeniedtheMotionsforSummaryJudgmentfiledbytheplaintiffandbyIDOT,findingtherewereissuesofmaterialfactrelatingtoIDOT’simplementationoftheFederalDBEProgram.

ThecourtinNorthernContracting,heldthatthereisanidentifiedcompellinggovernmentalinterestforimplementingtheFederalDBEProgramandthattheFederalDBEProgramisnarrowlytailoredtofurtherthatinterest.Therefore,thecourtgrantedtheFederaldefendants’MotionforSummaryJudgmentchallengingthevalidityoftheFederalDBEProgram.Inthisconnection,thedistrictcourtfollowedthedecisionsandanalysisinSherbrookeTurf,Inc.v.MinnesotaDepartmentofTransportation,345F.3d964(8thCir.2003)andAdarandConstructors,Inc.v.Slater,228F.3d1147(10thCir.2000)(“AdarandVII”),cert.grantedthendismissedasimprovidentlygranted,532U.S.941,534U.S.103(2001).Thecourtheld,likethesetwoCourtsofAppealsthathaveaddressedthisissue,thatCongresshadastrongbasisinevidencetoconcludethattheDBEProgramwasnecessarytoredressprivatediscriminationinfederally‐assistedhighwaysubcontracting.ThecourtagreedwiththeAdarandVIIandSherbrookeTurfcourtsthattheevidencepresentedtoCongressissufficienttoestablishacompellinggovernmentalinterest,andthatthecontractorshadnotmettheirburdenofintroducingcredibleparticularizedevidencetorebuttheGovernment’sinitialshowingoftheexistenceofacompellinginterestinremedyingthenationwideeffectsofpastandpresentdiscriminationinthefederalconstructionprocurementsubcontractingmarket.2004WL422704at*34,citingAdarandVII,228F.3dat1175.

Inaddition,thecourtanalyzedthesecondprongofthestrictscrutinytest,whetherthegovernmentprovidedsufficientevidencethatitsprogramisnarrowlytailored.Inmakingthisdetermination,thecourtlookedatseveralfactors,suchastheefficacyofalternativeremedies;theflexibilityanddurationoftherace‐consciousremedies,includingtheavailabilityofwaiverprovisions;therelationshipsbetweenthenumericalgoalsandrelevantlabormarket;theimpactoftheremedyonthirdparties;andwhethertheprogramisover‐or‐under‐inclusive.Thenarrowtailoringanalysiswithregardtotheas‐appliedchallengefocusedonIDOT’simplementationoftheFederalDBEProgram.

First,thecourtheldthattheFederalDBEProgramdoesnotmandatetheuseofrace‐consciousmeasuresbyrecipientsoffederaldollars,butinfactrequiresonlythatthegoalreflectthe


recipient’sdeterminationofthelevelofDBEparticipationitwouldexpectabsenttheeffectsofthediscrimination.49CFR§26.45(b).Thecourtrecognized,asfoundintheSherbrookeTurfandAdarandVIIcases,thattheFederalRegulationsplacestrongemphasisontheuseofrace‐neutralmeanstoincreaseminoritybusinessparticipationingovernmentcontracting,thatalthoughnarrowtailoringdoesnotrequireexhaustionofeveryconceivablerace‐neutralalternative,itdoesrequire“serious,goodfaithconsiderationofworkablerace‐neutralalternatives.”2004WL422704at*36,citingandquotingSherbrookeTurf,345F.3dat972,quotingGrutterv.Bollinger,539U.S.306(2003).ThecourtheldthattheFederalregulations,whichprohibittheuseofquotasandseverelylimittheuseofset‐asides,meetthisrequirement.ThecourtagreedwiththeAdarandVIIandSherbrookeTurfcourtsthattheFederalDBEProgramdoesrequirerecipientstomakeaseriousgoodfaithconsiderationofworkablerace‐neutralalternativesbeforeturningtorace‐consciousmeasures.

Second,thecourtfoundthatbecausetheFederalDBEProgramissubjecttoperiodicreauthorization,andrequiresrecipientsofFederaldollarstoreviewtheirprogramsannually,theFederalDBEschemeisappropriatelylimitedtolastnolongerthannecessary.

Third,thecourtheldthattheFederalDBEProgramisflexibleformanyreasons,includingthatthepresumptionthatwomenandminorityaresociallydisadvantagedisdeemedrebuttedifanindividual’spersonalnetworthexceeds$750,000.00,andafirmownedbyindividualwhoisnotpresumptivelydisadvantagedmayneverthelessqualifyforsuchstatusifthefirmcandemonstratethatitsownersaresociallyandeconomicallydisadvantaged.49CFR§26.67(b)(1)(d).ThecourtfoundotheraspectsoftheFederalRegulationsprovideampleflexibility,includingrecipientsmayobtainwaiversorexemptionsfromanyrequirements.RecipientsarenotrequiredtosetacontractgoaloneveryUSDOT‐assistedcontract.Ifarecipientestimatesthatitcanmeettheentiretyofitsoverallgoalsforagivenyearthroughrace‐neutralmeans,itmustimplementtheProgramwithoutsettingcontractgoalsduringtheyear.Ifduringthecourseofanyyearinwhichitisusingcontractgoalsarecipientdeterminesthatitwillexceeditsoverallgoals,itmustadjusttheuseofrace‐consciouscontractgoalsaccordingly.49CFR§26.51(e)(f).RecipientsalsoadministeringaDBEProgramingoodfaithcannotbepenalizedforfailingtomeettheirDBEgoals,andarecipientmayterminateitsDBEProgramifitmeetsitsannualoverallgoalthroughrace‐neutralmeansfortwoconsecutiveyears.49CFR§26.51(f).Further,arecipientmayawardacontracttoabidder/offerorthatdoesnotmeettheDBEParticipationgoalssolongasthebidderhasmadeadequategoodfaitheffortstomeetthegoals.49CFR§26.53(a)(2).Theregulationsalsoprohibittheuseofquotas.49CFR§26.43.

Fourth,thecourtagreedwiththeSherbrookeTurfcourt’sassessmentthattheFederalDBEProgramrequiresrecipientstobaseDBEgoalsonthenumberofready,willingandabledisadvantagedbusinessinthelocalmarket,andthatthisexerciserequiresrecipientstoestablishrealisticgoalsforDBEparticipationintherelevantlabormarkets.

Fifth,thecourtfoundthattheDBEProgramdoesnotimposeanunreasonableburdenonthirdparties,includingnon‐DBEsubcontractorsandtaxpayers.ThecourtfoundthattheFederalDBEProgramisalimitedandproperlytailoredremedytocuretheeffectsofpriordiscrimination,asharingoftheburdenbypartiessuchasnon‐DBEsisnotimpermissible.

Finally,thecourtfoundthattheFederalDBEProgramwasnotover‐inclusivebecausetheregulationsdonotprovidethateverywomenandeverymemberofaminoritygroupisdisadvantaged.Preferencesarelimitedtosmallbusinesseswithaspecificaverageannualgrossreceiptsoverthreefiscalyearsof$16.6millionorless(atthetimeofthisdecision),andbusinesseswhoseowners’personalnetworthexceed$750,000.00areexcluded.49CFR§


26.67(b)(1).Inaddition,afirmownedbyawhitemalemayqualifyassociallyandeconomicallydisadvantaged.49CFR§26.67(d).

ThecourtanalyzedtheconstitutionalityoftheIDOTDBEProgram.ThecourtadoptedthereasoningoftheEighthCircuitinSherbrookeTurf,thatarecipient’simplementationoftheFederalDBEProgrammustbeanalyzedunderthenarrowtailoringanalysisbutnotthecompellinginterestinquiry.Therefore,thecourtagreedwithSherbrookeTurfthatarecipientneednotestablishadistinctcompellinginterestbeforeimplementingtheFederalDBEProgram,butdidconcludethatarecipient’simplementationoftheFederalDBEProgrammustbenarrowlytailored.ThecourtfoundthatissuesoffactremainintermsofthevalidityoftheIDOT’sDBEProgramasimplementedintermsofwhetheritwasnarrowlytailoredtoachievetheFederalGovernment’scompellinginterest.Thecourt,therefore,deniedthecontractorplaintiff’sMotionforSummaryJudgmentandtheIllinoisDOT’sMotionforSummaryJudgment.

21. Sherbrooke Turf, Inc. v. Minnesota DOT, 2001 WL 1502841, No. 00‐CV‐1026 (D. Minn. 2001) (unpublished opinion), affirmed 345 F.3d 964 (8th Cir. 2003)

SherbrookeinvolvedalandscapingservicecontractorownedandoperatedbyCaucasianmales.ThecontractorsuedtheMinnesotaDOTclaimingtheFederalDBEprovisionsoftheTEA‐21areunconstitutional.Sherbrookechallengedthe“federalaffirmativeactionprograms,”theUSDOTimplementingregulations,andtheMinnesotaDOT’sparticipationintheDBEProgram.TheUSDOTandtheFHWAintervenedasFederaldefendantsinthecase.Sherbrooke,2001WL1502841at*1.

TheUnitedStatesDistrictCourtinSherbrookereliedsubstantiallyontheTenthCircuitCourtofAppealsdecisioninAdarandConstructors,Inc.v.Slater,228F.3d1147(10thCir.2000),inholdingthattheFederalDBEProgramisconstitutional.Thedistrictcourtaddressedtheissueof“randominclusion”ofvariousgroupsasbeingwithinthePrograminconnectionwithwhethertheFederalDBEProgramis“narrowlytailored.”ThecourtheldthatCongresscannotenactanationalprogramtoremedydiscriminationwithoutrecognizingclassesofpeoplewhosehistoryhasshownthemtobesubjecttodiscriminationandallowingstatestoincludethosepeopleinitsDBEProgram.

ThecourtheldthattheFederalDBEProgramattemptstoavoidthe“potentiallyinvidiouseffectsofprovidingblanketbenefitstominorities”inpart,

byrestrictingastate’sDBEpreferencetoidentifiedgroupsactuallyappearinginthetargetstate.Inpractice,thismeansMinnesotacanonlycertifymembersofoneoranothergroupaspotentialDBEsiftheyarepresentinthelocalmarket.Thisminimizesthechancethatindividuals—simplyonthebasisoftheirbirth—willbenefitfromMinnesota’sDBEprogram.Ifagroupisnotpresentinthelocalmarket,oriftheyarefoundinsuchsmallnumbersthattheycannotbeexpectedtobeabletoparticipateinthekindsofconstructionworkTEA‐21covers,thatgroupwillnotbeincludedintheaccountingusedtosetMinnesota’soverallDBEcontractinggoal.

Sherbrooke,2001WL1502841at*10(D.Minn.).

Thecourtrejectedplaintiff’sclaimthattheMinnesotaDOTmustindependentlydemonstratehowitsprogramcomportswithCroson’sstrictscrutinystandard.Thecourtheldthatthe“Constitutioncallsoutfordifferentrequirementswhenastateimplementsafederalaffirmative


actionprogram,asopposedtothoseoccasionswhenastateorlocalityinitiatestheProgram.”Id.at*11(emphasisadded).ThecourtinafootnoteruledthatTEA‐21,beingafederalprogram,“relievesthestateofanyburdentoindependentlycarrythestrictscrutinyburden.”Id.at*11n.3.ThecourtheldstatesthatestablishDBEprogramsunderTEA‐21and49CFRPart26areimplementingaCongressionally‐requiredprogramandnotestablishingalocalone.Assuch,thecourtconcludedthatthestateneednotindependentlyproveitsDBEprogrammeetsthestrictscrutinystandard.Id.

22. Gross Seed Co. v. Nebraska Department of Roads, Civil Action File No. 4:00CV3073 (D. Neb. May 6, 2002), affirmed 345 F.3d 964 (8th Cir. 2003)

TheUnitedStatesDistrictCourtfortheDistrictofNebraskaheldinGrossSeedCo.v.Nebraska(withtheUSDOTandFHWAasInterveners),thattheFederalDBEProgram(codifiedat49CFRPart26)isconstitutional.ThecourtalsoheldthattheNebraskaDepartmentofRoads(“NebraskaDOR”)DBEProgramadoptedandimplementedsolelytocomplywiththeFederalDBEProgramis“approved”bythecourtbecausethecourtfoundthat49CFRPart26andTEA‐21wereconstitutional.

Thecourtconcluded,similartothecourtinSherbrookeTurf,thattheStateofNebraskadidnotneedtoindependentlyestablishthatitsprogrammetthestrictscrutinyrequirementbecausetheFederalDBEProgramsatisfiedthatrequirement,andwasthereforeconstitutional.ThecourtdidnotengageinathoroughanalysisorevaluationoftheNebraskaDORProgramoritsimplementationoftheFederalDBEProgram.ThecourtpointsoutthattheNebraskaDORProgramisadoptedincompliancewiththeFederalDBEProgram,andthattheUSDOTapprovedtheuseofNebraskaDOR’sproposedDBEgoalsforfiscalyear2001,pendingcompletionofUSDOT’sreviewofthosegoals.Significantly,however,thecourtinitsfindingsdoesnotethattheNebraskaDORestablisheditsoverallgoalsforfiscalyear2001baseduponanindependentavailability/disparitystudy.

ThecourtupheldtheconstitutionalityoftheFederalDBEProgrambyfindingtheevidencepresentedbythefederalgovernmentandthehistoryofthefederallegislationaresufficienttodemonstratethatpastdiscriminationdoesexist“intheconstructionindustry”andthatracialandgenderdiscrimination“withintheconstructionindustry”issufficienttodemonstrateacompellinginterestinindividualareas,suchashighwayconstruction.ThecourtheldthattheFederalDBEProgramwassufficiently“narrowlytailored”tosatisfyastrictscrutinyanalysisbasedagainontheevidencesubmittedbythefederalgovernmentastotheFederalDBEProgram.

23. Klaver Construction, Inc. v. Kansas DOT, 211 F. Supp.2d 1296 (D. Kan. 2002)

ThisisanothercasethatinvolvedachallengetotheUSDOTRegulationsthatimplementTEA‐21(49CFRPart26),inwhichtheplaintiffcontractorsoughttoenjointheKansasDepartmentofTransportation(“DOT”)fromenforcingitsDBEProgramonthegroundsthatitviolatestheEqualProtectionClauseundertheFourteenthAmendment.Thiscaseinvolvesadirectconstitutionalchallengetoracialandgenderpreferencesinfederally‐fundedstatehighwaycontracts.ThiscaseconcernedtheconstitutionalityoftheKansasDOT’simplementationoftheFederalDBEProgram,andtheconstitutionalityofthegender‐basedpoliciesofthefederalgovernmentandtherace‐andgender‐basedpoliciesoftheKansasDOT.Thecourtgrantedthefederalandstatedefendants’(USDOTandKansasDOT)MotionstoDismissbasedonlackof


standing.ThecourtheldthecontractorcouldnotshowthespecificaspectsoftheDBEProgramthatitcontendsareunconstitutionalhavecauseditsallegedinjuries.

G. Recent Decisions and Authorities Involving Federal Procurement That May Impact DBE and MBE/WBE Programs

1. Rothe Development, Inc. v. U.S. Dept. of Defense, U.S. Small Business Administration, et al., 836 F3d 57, 2016 WL 4719049 (D.C. Cir. 2016), cert. denied, 2017 WL 1375832 (2017), affirming on other grounds, Rothe Development, Inc. v. U.S. Dept. of Defense, U.S. Small Business Administration, et al., 107 F.Supp. 3d 183 (D.D.C. 2015)

Inasplitdecision,themajorityofathreejudgepaneloftheUnitedStatesCourtofAppealsfortheDistrictofColumbiaCircuitupheldtheconstitutionalityofsection8(a)oftheSmallBusinessAct,whichwaschallengedbyPlaintiff‐AppellantRotheDevelopmentInc.(Rothe).RotheallegedthatthestatutorybasisoftheUnitedStatesSmallBusinessAdministration’s8(a)businessdevelopmentprogram(codifiedat15U.S.C.§637),violateditsrighttoequalprotectionundertheDueProcessClauseoftheFifthAmendment.836F.3d57,2016WL4719049,at*1.Rothecontendsthestatutecontainsaracialclassificationthatpresumescertainracialminoritiesareeligiblefortheprogram.Id.Thecourtheld,however,thatCongressconsideredandrejectedstatutorylanguagethatincludedaracialpresumption.Id.Congress,accordingtothecourt,choseinsteadtohingeparticipationintheprogramonthefaciallyrace‐neutralcriterionofsocialdisadvantage,whichitdefinedashavingsufferedracial,ethnic,orculturalbias.Id.

ThechallengedstatuteauthorizestheSmallBusinessAdministration(SBA)toenterintocontractswithotherfederalagencies,whichtheSBAthensubcontractstoeligiblesmallbusinessesthatcompeteforthesubcontractsinashelteredmarket.Id*1.Businessesownedby“sociallyandeconomicallydisadvantaged”individualsareeligibletoparticipateinthe8(a)program.Id.Thestatutedefinessociallydisadvantagedindividualsaspersons“whohavebeensubjectedtoracialorethnicprejudiceorculturalbiasbecauseoftheiridentityasamemberofagroupwithoutregardtotheirindividualqualities.”Id.,quoting15U.S.C.§627(a)(5).

TheSection8(a)statuteisrace‐neutral.ThecourtrejectedRothe’sallegations,findinginsteadthattheprovisionsoftheSmallBusinessActthatRothechallengesdonotontheirfaceclassifyindividualsbyrace.Id*1.ThecourtstatedthatSection8(a)usesfaciallyrace‐neutraltermsofeligibilitytoidentifyindividualvictimsofdiscrimination,prejudice,orbias,withoutpresumingthatmembersofcertainracial,ethnic,orculturalgroupsqualifyassuch.Id.Thecourtsaidthatmakesthisstatutedifferentfromotherstatutes,whichexpresslylimitparticipationincontractingprogramstoracialorethnicminoritiesorspecificallydirectthirdpartiestopresumethatmembersofcertainracialorethnicgroups,orminoritiesgenerally,areeligible.Id.

Incontrasttothestatute,thecourtfoundthattheSBA’sregulationimplementingthe8(a)programdoescontainaracialclassificationintheformofapresumptionthatanindividualwhoisamemberofoneoffivedesignatedracialgroupsissociallydisadvantaged.Id*2,citing13C.F.R.§124.103(b).Thiscase,thecourtheld,doesnotpermitittodecidewhethertherace‐basedregulatorypresumptionisconstitutionallysound,becauseRothehaselectedtochallengeonlythestatute.Id.Rothe’sdefinitionoftheracialclassificationitattacksinthiscase,accordingtothecourt,doesnotincludetheSBA’sregulation.Id.


Becausethecourtheldthestatute,unliketheregulation,lacksaracialclassification,andbecauseRothehasnotallegedthatthestatuteisotherwisesubjecttostrictscrutiny,thecourtappliedrational‐basisreview.Idat*2.Thecourtstatedthestatute“readilysurvives”therationalbasisscrutinystandards.Id*2.Thecourt,therefore,affirmedthejudgmentofthedistrictcourtgrantingsummaryjudgmenttotheSBAandtheDepartmentofDefense,albeitondifferentgrounds.Id.

Thus,thecourtheldthecentralquestiononappealiswhetherSection8(a)warrantsstrictjudicialscrutiny,whichthecourtnotedthepartiesandthedistrictcourtbelievethatitdid.Id*2.Rothe,thecourtsaid,advancedonlythetheorythatthestatute,onitsface,Section8(a)oftheSmallBusinessAct,containsaracialclassification.Id*2.

Thecourtfoundthatthedefinitionoftheterm“sociallydisadvantaged”doesnotcontainaracialclassificationbecauseitdoesnotdistributeburdensorbenefitsonthebasisofindividualclassifications,itisrace‐neutralonitsface,anditspeaksofindividualvictimsofdiscrimination.Id*3.Onitsface,thecourtstatedthetermenvisionsaindividual‐basedapproachthatfocusesonexperienceratherthanonagroupcharacteristic,andthestatuterecognizesthatnotallmembersofaminoritygrouphavenecessarilybeensubjectedtoracialorethnicprejudiceorculturalbias.Id.Thecourtsaidthatthestatutedefinitionoftheterm“socialdisadvantaged”doesnotprovideforpreferentialtreatmentbasedonanapplicant’srace,butratheronanindividualapplicant’sexperienceofdiscrimination.Id*3.

Thecourtdistinguishedcasesinvolvingsituationsinwhichdisadvantagednon‐minorityapplicantscouldnotparticipate,butthecourtsaidtheplaintermsofthestatutepermitindividualsinanyracetobeconsidered“sociallydisadvantaged.”Id*3.Thecourtnoteditskeypointisthatthestatuteiseasilyreadnottorequireanygroup‐basedracialorethnicclassification,statingthestatutedefinessociallydisadvantagedindividualsasthoseindividualswhohavebeensubjectedtoracialorethnicprejudiceorculturalbias,notthoseindividualswhoaremembersorgroupsthathavebeensubjectedtoprejudiceorbias.Id.

ThecourtpointedoutthattheSBA’simplementationofthestatute’sdefinitionmaybebasedonaracialclassificationiftheregulationscarryitoutinamannerthatgivespreferencebasedonraceinsteadofindividualexperience.Id*4.But,thecourtfound,RothehasexpresslydisclaimedanychallengetotheSBA’simplementationofthestatute,andasaresult,theonlyquestionbeforethemiswhetherthestatuteitselfclassifiesbasedonrace,whichthecourtheldmakesnosuchclassification.Id*4.Thecourtdeterminedthestatutorylanguagedoesnotcreateapresumptionthatamemberofaparticularracialorethnicgroupisnecessarilysociallydisadvantaged,northatawhitepersonisnot.Id*5.

Thedefinitionofsocialdisadvantage,accordingtothecourt,doesnotamounttoaracialclassification,foritultimatelyturnsonabusinessowner’sexperienceofdiscrimination.Id*6.Thestatutedoesnotinstructtheagencytolimitthefieldtocertainracialgroups,ortoracialgroupsingeneral,nordoesittelltheagencytopresumethatanyonewhoisamemberofanyparticulargroupis,bythatmembershipalone,sociallydisadvantaged.Id.

ThecourtnotedthattheSupremeCourtandthiscourt’sdiscussionsofthe8(a)programhaveidentifiedtheregulations,notthestatute,asthesourceofitsracialpresumption.Id*8.ThecourtdistinguishedSection8(d)oftheSmallBusinessActascontainingarace‐basedpresumption,butfoundinthe8(a)programtheSupremeCourthasexplainedthattheagency(notCongress)presumesthatcertainracialgroupsaresociallydisadvantaged.Id.at*7.


TheSBAstatutedoesnottriggerstrictscrutiny.Thecourtheldthatthestatutedoesnottriggerstrictscrutinybecauseitisrace‐neutral.Id*10.ThecourtpointedoutthatRothedoesnotarguethatthestatutecouldbesubjectedtostrictscrutiny,evenifitisfaciallyneutral,onthebasisthatCongressenacteditwithadiscriminatorypurpose.Id*9.IntheabsenceofsuchaclaimbyRothe,thecourtdetermineditwouldnotsubjectafaciallyrace‐neutralstatutetostrictscrutiny.Id.Theforeseeabilityofraciallydisparateimpact,withoutinvidiouspurpose,thecourtstated,doesnottriggerstrictconstitutionalscrutiny.Id.

Becausethestatutedoesnottriggerstrictscrutiny,thecourtfoundthatitneednotanddoesnotdecidewhetherthedistrictcourtcorrectlyconcludedthatthestatuteisnarrowlytailoredtomeetacompellinginterest.Id*10.Instead,thecourtconsideredwhetherthestatuteissupportedbyarationalbasis.Id.Thecourtheldthatitplainlyissupportedbyarationalbasis,becauseitbearsarationalrelationtosomelegitimateend.Id*10.

Thestatute,thecourtstated,aimstoremedytheeffectsofprejudiceandbiasthatimpedebusinessformationanddevelopmentandsuppressfaircompetitionforgovernmentcontracts.Id.Counteractingdiscrimination,thecourtfound,isalegitimateinterest,andincertaincircumstancesqualifiesascompelling.Id*11.Thestatutoryscheme,thecourtsaid,isrationallyrelatedtothatend.Id.

Thecourtdeclinedtoreviewthedistrictcourt’sadmissibilitydeterminationsastotheexpertwitnessesbecauseitstatedthatitwouldaffirmthedistrictcourt’sgrantofsummaryjudgmentevenifthedistrictcourtabuseditsdiscretioninmakingthosedeterminations.Id*11.Thecourtnotedtheexpertwitnesstestimonyisnotnecessaryto,norinconflictwith,itsconclusionthatSection8(a)issubjecttoandsurvivesrational‐basisreview.Id.

Otherissues.Thecourtdeclinedtoreviewthedistrictcourt’sadmissibilitydeterminationsastotheexpertwitnessesbecauseitstatedthatitwouldaffirmthedistrictcourt’sgrantofsummaryjudgmentevenifthedistrictcourtabuseditsdiscretioninmakingthosedeterminations.Id*11.Thecourtnotedtheexpertwitnesstestimonyisnotnecessaryto,norinconflictwith,itsconclusionthatSection8(a)issubjecttoandsurvivesrational‐basisreview.Id.

Inaddition,thecourtrejectedRothe’scontentionthatSection8(a)isanunconstitutionaldelegationoflegislativepower.Id*11.BecausetheargumentispremisedontheideathatCongresscreatedaracialclassification,whichthecourthashelditdidnot,Rothe’salternativeargumentondelegationalsofails.Id.

DissentingOpinion.Therewasadissentingopinionbyoneofthethreemembersofthecourt.ThedissentingjudgestatedinherviewthattheprovisionsoftheSmallBusinessActatissuearenotfaciallyrace‐neutral,butcontainaracialclassification.Id*12.ThedissentingjudgesaidthattheactprovidesmembersofcertainracialgroupsanadvantageinqualifyingforSection8(a)’scontractpreferencebyvirtueoftheirrace.Id*13.

ThedissentingopinionpointedoutthatallthepartiesandthedistrictcourtfoundthatstrictscrutinyshouldbeappliedindeterminingwhethertheSection8(a)programviolatesRothe’srighttoequalprotectionofthelaws.Id*16.Intheviewofthedissentingopinionthestatutorylanguageincludesaracialclassification,andtherefore,thestatuteshouldbesubjecttostrictscrutiny.Id*22.


2. Rothe Development Corp. v. U.S. Dept. of Defense, et al., 545 F.3d 1023 (Fed. Cir. 2008)

AlthoughthiscasedoesnotinvolvetheFederalDBEProgram(49CFRPart26),itisananalogouscasethatmayimpactthelegalanalysisandlawrelatedtothevalidityofprogramsimplementedbyrecipientsoffederalfunds,includingtheFederalDBEProgram.Additionally,itunderscorestherequirementthatrace‐,ethnic‐andgender‐basedprogramsofanynaturemustbesupportedbysubstantialevidence.InRothe,anunsuccessfulbidderonafederaldefensecontractbroughtsuitallegingthattheapplicationofanevaluationpreference,pursuanttoafederalstatute,toasmalldisadvantagedbidder(SDB)towhomacontractwasawarded,violatedtheEqualProtectionclauseoftheU.S.Constitution.ThefederalstatutechallengedisSection1207oftheNationalDefenseAuthorizationActof1987andasreauthorizedin2003.Thestatuteprovidesagoalthat5percentofthetotaldollaramountofdefensecontractsforeachfiscalyearwouldbeawardedtosmallbusinessesownedandcontrolledbysociallyandeconomicallydisadvantagesindividuals.10U.S.C.§2323.CongressauthorizedtheDepartmentofDefense(“DOD”)toadjustbidssubmittedbynon‐sociallyandeconomicallydisadvantagedfirmsupwardsby10percent(the“PriceEvaluationAdjustmentProgram”or“PEA”).

Thedistrictcourtheldthefederalstatute,asreauthorizedin2003,wasconstitutionalonitsface.Thecourtheldthe5percentgoalandthePEAprogramasreauthorizedin1992andappliedin1998wasunconstitutional.ThebasisofthedecisionwasthatCongressconsideredstatisticalevidenceofdiscriminationthatestablishedacompellinggovernmentalinterestinthereauthorizationofthestatuteandPEAprogramin2003.CongresshadnotdocumentedorconsideredsubstantialstatisticalevidencethattheDODdiscriminatedagainstminoritysmallbusinesseswhenitenactedthestatutein1992andreauthorizeditin1998.Theplaintiffappealedthedecision.

TheFederalCircuitfoundthatthe“analysisofthefacialconstitutionalityofanactislimitedtoevidencebeforeCongresspriortothedateofreauthorization.”413F.3d1327(Fed.Cir.2005)(affirminginpart,vacatinginpart,andremanding324F.Supp.2d840(W.D.Tex.2004).ThecourtlimiteditsreviewtowhetherCongresshadsufficientevidencein1992toreauthorizetheprovisionsin1207.Thecourtheldthatforevidencetoberelevanttoastrictscrutinyanalysis,“theevidencemustbeproventohavebeenbeforeCongresspriortoenactmentoftheracialclassification.”TheFederalCircuitheldthatthedistrictcourterredinrelyingonthestatisticalstudieswithoutfirstdeterminingwhetherthestudieswerebeforeCongresswhenitreauthorizedsection1207.TheFederalCircuitremandedthecaseanddirectedthedistrictcourttoconsiderwhetherthedatapresentedwassooutdatedthatitdidnotprovidetherequisitestrongbasisinevidencetosupportthereauthorizationofsection1207.

OnAugust10,2007theFederalDistrictCourtfortheWesternDistrictofTexasinRotheDevelopmentCorp.v.U.S.Dept.ofDefense,499F.Supp.2d775(W.D.Tex.Aug10,2007)issueditsOrderonremandfromtheFederalCircuitCourtofAppealsdecisioninRothe,413F.3d1327(FedCir.2005).Thedistrictcourtupheldtheconstitutionalityofthe2006ReauthorizationofSection1207oftheNationalDefenseAuthorizationActof1987(10USC§2323),whichpermitstheU.S.DepartmentofDefensetoprovidepreferencesinselectingbidssubmittedbysmallbusinessesownedbysociallyandeconomicallydisadvantagedindividuals(“SDBs”).Thedistrictcourtfoundthe2006Reauthorizationofthe1207Programsatisfiedstrictscrutiny,holdingthatCongresshadacompellinginterestwhenitreauthorizedthe1207Programin2006,thattherewassufficientstatisticalandanecdotalevidencebeforeCongresstoestablishacompellinginterest,andthatthereauthorizationin2006wasnarrowlytailored.


Thedistrictcourt,amongitsmanyfindings,foundcertainevidencebeforeCongresswas“stale,”thattheplaintiff(Rothe)failedtorebutotherevidencewhichwasnotstale,andthatthedecisionsbytheEighth,NinthandTenthCircuitsinthedecisionsinConcreteWorks,AdarandConstructors,SherbrookeTurfandWesternStatesPaving(discussedaboveandbelow)wererelevanttotheevaluationofthefacialconstitutionalityofthe2006Reauthorization.

2007OrderoftheDistrictCourt(499F.Supp.2d775). IntheSection1207Act,Congresssetagoalthat5percentofthetotaldollaramountofdefensecontractsforeachfiscalyearwouldbeawardedtosmallbusinessesownedandcontrolledbysociallyandeconomicallydisadvantagedindividuals.Inordertoachievethatgoal,CongressauthorizedtheDODtoadjustbidssubmittedbynon‐sociallyandeconomicallydisadvantagedfirmsupto10percent.10U.S.C.§2323(e)(3).Rothe,499F.Supp.2d.at782.PlaintiffRothedidnotqualifyasanSDBbecauseitwasownedbyaCaucasianfemale.AlthoughRothewastechnicallythelowestbidderonaDODcontract,itsbidwasadjustedupwardby10percent,andathirdparty,whoqualifiedasaSDB,becamethe“lowest”bidderandwasawardedthecontract.Id.Rotheclaimsthatthe1207ProgramisfaciallyunconstitutionalbecauseittakesraceintoconsiderationinviolationoftheEqualProtectioncomponentoftheDueProcessClauseoftheFifthAmendment.Id.at782‐83.Thedistrictcourt’sdecisiononlyreviewedthefacialconstitutionalityofthe2006Reauthorizationofthe2007Program.

ThedistrictcourtinitiallyrejectedsixlegalargumentsmadebyRotheregardingstrictscrutinyreviewbasedontherejectionofthesameargumentsbytheEighth,Ninth,andTenthCircuitCourtsofAppealintheSherbrookeTurf,WesternStatesPaving,ConcreteWorks,AdarandVIIcases,andtheFederalCircuitCourtofAppealinRothe.Rotheat825‐833.

ThedistrictcourtdiscussedandcitedthedecisionsinAdarandVII(2000),SherbrookeTurf(2003),andWesternStatesPaving(2005),asholdingthatCongresshadacompellinginterestineradicatingtheeconomicrootsofracialdiscriminationinhighwaytransportationprogramsfundedbyfederalmonies,andconcludingthattheevidencecitedbythegovernment,particularlythatcontainedinTheCompellingInterest(a.k.a.theAppendix),morethansatisfiedthegovernment’sburdenofproductionregardingthecompellinginterestforarace‐consciousremedy.Rotheat827.BecausetheUrbanInstituteReport,whichpresenteditsanalysisof39stateandlocaldisparitystudies,wascross‐referencedintheAppendix,thedistrictcourtfoundthecourtsinAdarandVII,SherbrookeTurf,andWesternStatesPaving,alsoreliedonitinsupportoftheircompellinginterestholding.Id.at827.

ThedistrictcourtalsofoundthattheTenthCircuitdecisioninConcreteWorksIV,321F.3d950(10thCir.2003),establishedlegalprinciplesthatarerelevanttothecourt’sstrictscrutinyanalysis.First,Rothe’sclaimsfordeclaratoryjudgmentontheracialconstitutionalityoftheearlier1999and2002Reauthorizationsweremoot.Second,thegovernmentcanmeetitsburdenofproductionwithoutconclusivelyprovingtheexistenceofpastorpresentracialdiscrimination.Third,thegovernmentmayestablishitsowncompellinginterestbypresentingevidenceofitsowndirectparticipationinracialdiscriminationoritspassiveparticipationinprivatediscrimination.Fourth,oncethegovernmentmeetsitsburdenofproduction,Rothemustintroduce“credible,particularized”evidencetorebutthegovernment’sinitialshowingoftheexistenceofacompellinginterest.Fifth,Rothemayrebutthegovernment’sstatisticalevidencebygivingarace‐neutralexplanationforthestatisticaldisparities,showingthatthestatisticsareflawed,demonstratingthatthedisparitiesshownarenotsignificantoractionable,orpresentingcontrastingstatisticaldata.Sixth,thegovernmentmayrelyondisparitystudiestosupportitscompellinginterest,andthosestudiesmaycontrolfortheeffectthatpre‐existingaffirmativeactionprogramshaveonthestatisticalanalysis.Id.at829‐32.


BasedonConcreteWorksIV,thedistrictcourtdidnotrequirethegovernmenttoconclusivelyprovethatthereispervasivediscriminationintherelevantmarket,thateachpresumptivelydisadvantagedgroupsufferedequallyfromdiscrimination,orthatprivatefirmsintentionallyandpurposefullydiscriminatedagainstminorities.Thecourtfoundthattheinferenceofdiscriminatoryexclusioncanarisefromstatisticaldisparities.Id.at830‐31.

ThedistrictcourtheldthatCongresshadacompellinginterestinthe2006Reauthorizationofthe1207Program,whichwassupportedbyastrongbasisintheevidence.ThecourtreliedinsignificantpartuponsixstateandlocaldisparitystudiesthatwerebeforeCongresspriortothe2006Reauthorizationofthe1207Program.ThecourtbasedthisevidenceonitsfindingthatSenatorKennedyhadreferencedthesedisparitystudies,discussedandsummarizedfindingsofthedisparitystudies,andRepresentativeCynthiaMcKinneyalsocitedthesamesixdisparitystudiesthatSenatorKennedyreferenced.Thecourtstatedthatbasedonthecontentofthefloordebate,itfoundthatthesestudieswereputbeforeCongresspriortothedateoftheReauthorizationofSection1207.Id.at838.

Thedistrictcourtfoundthatthesesixstateandlocaldisparitystudiesanalyzedevidenceofdiscriminationfromadiversecross‐sectionofjurisdictionsacrosstheUnitedStates,and“theyconstituteprimafacieevidenceofanation‐widepatternorpracticeofdiscriminationinpublicandprivatecontracting.”Id.at838‐39.Thecourtfoundthatthedatausedinthesesixdisparitystudiesisnot“stale”forpurposesofstrictscrutinyreview.Id.at839.ThecourtdisagreedwithRothe’sargumentthatallthedatawerestale(datainthestudiesfrom1997through2002),“becausethisdatawasthemostcurrentdataavailableatthetimethatthesestudieswereperformed.”Id.Thecourtfoundthatthegovernmentalentitiesshouldbeabletorelyonthemostrecentlyavailabledatasolongasthosedataarereasonablyup‐to‐date.Id.Thecourtdeclinedtoadopta“bright‐linerulefordeterminingstaleness.”Id.

ThecourtreferredtothereliancebytheNinthCircuitandtheEighthCircuitontheAppendixtoaffirmtheconstitutionalityoftheUSDOTMBE[nowDBE]Program,andrejectedfiveyearsasabright‐lineruleforconsideringwhetherdataare“stale.”Id.atn.86.Thecourtalsostatedthatit“acceptsthereasoningoftheAppendix,whichthecourtfoundstatedthatforthemostpart“thefederalgovernmentdoesbusinessinthesamecontractingmarketsasstateandlocalgovernments.Therefore,theevidenceinstateandlocalstudiesoftheimpactofdiscriminatorybarrierstominorityopportunityincontractingmarketsthroughoutthecountryisrelevanttothequestionofwhetherthefederalgovernmenthasacompellinginteresttotakeremedialactioninitsownprocurementactivities.”Id.at839,quoting61Fed.Reg.26042‐01,26061(1996).

ThedistrictcourtalsodiscussedadditionalevidencebeforeCongressthatitfoundinCongressionalCommitteeReportsandHearingRecords.Id.at865‐71.ThecourtnotedSBAReportsthatwerebeforeCongresspriortothe2006Reauthorization.Id.at871.

ThedistrictcourtfoundthatthedatacontainedintheAppendix,theBenchmarkStudy,andtheUrbanInstituteReportwere“stale,”andthecourtdidnotconsiderthosereportsasevidenceofacompellinginterestforthe2006Reauthorization.Id.at872‐75.ThecourtstatedthattheEighth,NinthandTenthCircuitsreliedontheAppendixtoupholdtheconstitutionalityoftheFederalDBEProgram,citingtothedecisionsinSherbrookeTurf,AdarandVII,andWesternStatesPaving.Id.at872.ThecourtpointedoutthatalthoughitdoesnotrelyonthedatacontainedintheAppendixtosupportthe2006Reauthorization,thefacttheEighth,Ninth,andTenthCircuitsreliedonthesedatatoupholdtheconstitutionalityoftheFederalDBEProgramasrecentlyas2005,convincedthecourtthatabright‐linestalenessruleisinappropriate.Id.at874.


AlthoughthecourtfoundthatthedatacontainedintheAppendix,theUrbanInstituteReport,andtheBenchmarkStudywerestaleforpurposesofstrictscrutinyreviewregardingthe2006Reauthorization,thecourtfoundthatRotheintroducednoconcrete,particularizedevidencechallengingthereliabilityofthemethodologyorthedatacontainedinthesixstateandlocaldisparitystudies,andotherevidencebeforeCongress.ThecourtfoundthatRothefailedtorebutthedata,methodologyoranecdotalevidencewith“concrete,particularized”evidencetothecontrary.Id.at875.Thedistrictcourtheldthatbasedonthestudies,thegovernmenthadsatisfieditsburdenofproducingevidenceofdiscriminationagainstAfricanAmericans,AsianAmericans,HispanicAmericans,andNativeAmericansintherelevantindustrysectors.Id.at876.

ThedistrictcourtfoundthatCongresshadacompellinginterestinreauthorizingthe1207Programin2006,whichwassupportedbyastrongbasisofevidenceforremedialaction.Id.at877.Thecourtheldthattheevidenceconstitutedprimafacieproofofanationwidepatternorpracticeofdiscriminationinbothpublicandprivatecontracting,thatCongresshadsufficientevidenceofdiscriminationthroughouttheUnitedStatestojustifyanationwideprogram,andtheevidenceofdiscriminationwassufficientlypervasiveacrossraciallinestojustifygrantingapreferencetoallfivepurportedlydisadvantagedracialgroups.Id.

Thedistrictcourtalsofoundthatthe2006Reauthorizationofthe1207Programwasnarrowlytailoredanddesignedtocorrectpresentdiscriminationandtocounterthelingeringeffectsofpastdiscrimination.Thecourtheldthatthegovernment’sinvolvementinbothpresentdiscriminationandthelingeringeffectsofpastdiscriminationwassopervasivethattheDODandtheDepartmentofAirForcehadbecomepassiveparticipantsinperpetuatingit.Id.ThecourtstateditwaslawofthecaseandcouldnotbedisturbedonremandthattheFederalCircuitinRotheIIIhadheldthatthe1207Programwasflexibleinapplication,limitedindurationanditdidnotundulyimpactontherightsofthirdparties.Id.,quotingRotheIII,262F.3dat1331.

Thedistrictcourtthusconductedanarrowlytailoredanalysisthatreviewedthreefactors:

1. Theefficacyofrace‐neutralalternatives;

2. Evidencedetailingtherelationshipbetweenthestatednumericalgoalof5percentandtherelevantmarket;and

3. Over‐andunder‐inclusiveness.

Id.ThecourtfoundthatCongressexaminedtheefficacyofrace‐neutralalternativespriortotheenactmentofthe1207Programin1986andthattheseprogramswereunsuccessfulinremedyingtheeffectsofpastandpresentdiscriminationinfederalprocurement.Id.ThecourtconcludedthatCongresshadattemptedtoaddresstheissuesthroughrace‐neutralmeasures,discussedthosemeasures,andfoundthatCongress’adoptionofrace‐consciousprovisionswerejustifiedbytheineffectivenessofsuchrace‐neutralmeasuresinhelpingminority‐ownedfirmsovercomebarriers.Id.Thecourtfoundthatthegovernmentseriouslyconsideredandenactedrace‐neutralalternatives,buttheserace‐neutralprogramsdidnotremedythewidespreaddiscriminationthataffectedthefederalprocurementsector,andthatCongresswasnotrequiredtoimplementorexhausteveryconceivablerace‐neutralalternative.Id.at880.Rather,thecourtfoundthatnarrowtailoringrequiresonly“serious,goodfaithconsiderationofworkablerace‐neutralalternatives.”Id.


Thedistrictcourtalsofoundthatthe5percentgoalwasrelatedtotheminoritybusinessavailabilityidentifiedinthesixstateandlocaldisparitystudies.Id.at881.Thecourtconcludedthatthe5percentgoalwasaspirational,notmandatory.Id.at882.Thecourtthenexaminedandfoundthattheregulationsimplementingthe1207Programwerenotover‐inclusiveforseveralreasons.

November4,2008decisionbytheFederalCircuitCourtofAppeals. OnNovember4,2008,theFederalCircuitCourtofAppealsreversedthejudgmentofthedistrictcourtinpart,andremandedwithinstructionstoenterajudgment(1)denyingRotheanyreliefregardingthefacialconstitutionalityofSection1207asenactedin1999or2002,(2)declaringthatSection1207asenactedin2006(10U.S.C.§2323)isfaciallyunconstitutional,and(3)enjoiningapplicationofSection1207(10U.S.C.§2323).

TheFederalCircuitCourtofAppealsheldthatSection1207,onitsface,asreenactedin2006,violatedtheEqualProtectioncomponentoftheFifthAmendmentrighttodueprocess.ThecourtfoundthatbecausethestatuteauthorizedtheDODtoaffordpreferentialtreatmentonthebasisofrace,thecourtappliedstrictscrutiny,andbecauseCongressdidnothavea“strongbasisinevidence”uponwhichtoconcludethattheDODwasapassiveparticipantinpervasive,nationwideracialdiscrimination—atleastnotontheevidenceproducedbytheDODandreliedonbythedistrictcourtinthiscase—Section1207failedtomeetthisstrictscrutinytest.545F.3dat1050.

Strictscrutinyframework.TheFederalCircuitCourtofAppealsrecognizedthattheSupremeCourthasheldagovernmentmayhaveacompellinginterestinremedyingtheeffectsofpastorpresentracialdiscrimination.545F.3dat1036.ThecourtcitedthedecisioninCroson,488U.S.at492,thatitis“beyonddisputethatanypublicentity,stateorfederal,hasacompellinginterestinassuringthatpublicdollars,drawnfromthetaxcontributionsofallcitizens,donotservetofinancetheevilofprivateprejudice.”545F.3d.at1036,quotingCroson,488U.S.at492.

Thecourtheldthatbeforeresortingtorace‐consciousmeasures,thegovernmentmustidentifythediscriminationtoberemedied,publicorprivate,withsomespecificity,andmusthaveastrongbasisofevidenceuponwhichtoconcludethatremedialactionisnecessary.545F.3dat1036,quotingCroson,488U.S.at500,504.Althoughthepartychallengingthestatutebearstheultimateburdenofpersuadingthecourtthatitisunconstitutional,theFederalCircuitstatedthatthegovernmentfirstbearsaburdentoproducestrongevidencesupportingthelegislature’sdecisiontoemployrace‐consciousaction.545F.3dat1036.

Evenwherethereisacompellinginterestsupportedbystrongbasisinevidence,thecourtheldthestatutemustbenarrowlytailoredtofurtherthatinterest.Id.Thecourtnotedthatanarrowtailoringanalysiscommonlyinvolvessixfactors:(1)thenecessityofrelief;(2)theefficacyofalternative,race‐neutralremedies;(3)theflexibilityofrelief,includingtheavailabilityofwaiverprovisions;(4)therelationshipwiththestatednumericalgoaltotherelevantlabormarket;(5)theimpactofreliefontherightsofthirdparties;and(6)theoverinclusivenessorunderinclusivenessoftheracialclassification.Id.

Compellinginterest–strongbasisinevidence. TheFederalCircuitpointedoutthatthestatisticalandanecdotalevidencereliefuponbythedistrictcourtinitsrulingbelowincludedsixdisparitystudiesofstateorlocalcontracting.TheFederalCircuitalsopointedoutthatthedistrictcourtfoundthatthedatacontainedintheAppendix,theUrbanInstituteReport,andtheBenchmarkStudywerestaleforpurposesofstrictscrutinyreviewofthe2006Authorization,andtherefore,thedistrictcourtconcludedthatitwouldnotrelyonthosethreereportsas


evidenceofacompellinginterestforthe2006reauthorizationofthe1207Program.545F.3d1023,citingtoRotheVI,499F.Supp.2dat875.SincetheDODdidnotchallengethisfindingonappeal,theFederalCircuitstatedthatitwouldnotconsidertheAppendix,theUrbanInstituteReport,ortheDepartmentofCommerceBenchmarkStudy,andinsteaddeterminedwhethertheevidencereliedonbythedistrictcourtwassufficienttodemonstrateacompellinginterest.Id.

Sixstateandlocaldisparitystudies. TheFederalCircuitfoundthatdisparitystudiescanberelevanttothecompellinginterestanalysisbecause,asexplainedbytheSupremeCourtinCroson,“[w]herethereisasignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractorswillingandabletoperformaparticularserviceandthenumberofsuchcontractorsactuallyengagedby[a]localityorthelocality’sprimecontractors,aninferenceofdiscriminatoryexclusioncouldarise.”545F.3dat1037‐1038,quotingCroson,488U.S.C.at509.TheFederalCircuitalsocitedtothedecisionbytheFifthCircuitCourtofAppealsinW.H.ScottConstr.Co.v.CityofJackson,199F.3d206(5thCir.1999)thatgivenCroson’semphasisonstatisticalevidence,othercourtsconsideringequalprotectionchallengestominority‐participationprogramshavelookedtodisparityindices,ortocomputationsofdisparitypercentages,indeterminingwhetherCroson’sevidentiaryburdenissatisfied.545F.3dat1038,quotingW.H.Scott,199F.3dat218.

TheFederalCircuitnotedthatadisparitystudyisastudyattemptingtomeasurethedifference‐ordisparity‐betweenthenumberofcontractsorcontractdollarsactuallyawardedminority‐ownedbusinessesinaparticularcontractmarket,ontheonehand,andthenumberofcontractsorcontractdollarsthatonewouldexpecttobeawardedtominority‐ownedbusinessesgiventheirpresenceinthatparticularcontractmarket,ontheotherhand.545F.3dat1037.

Staleness. TheFederalCircuitdeclinedtoadoptaperserulethatdatamorethanfiveyearsoldarestaleperse,whichrejectedtheargumentputforthbyRothe.545F.3dat1038.Thecourtpointedoutthatthedistrictcourtnotedothercircuitcourtshavereliedonstudiescontainingdatamorethanfiveyearsoldwhenconductingcompellinginterestanalyses,citingtoWesternStatesPavingv.WashingtonStateDepartmentofTransportation,407F.3d983,992(9thCir.2005)andSherbrookeTurf,Inc.v.MinnesotaDepartmentofTransportation,345F.3d964,970(8thCir.2003)(relyingontheAppendix,publishedin1996).

TheFederalCircuitagreedwiththedistrictcourtthatCongress“shouldbeabletorelyonthemostrecentlyavailabledatasolongasthatdataisreasonablyup‐to‐date.”545F.3dat1039.TheFederalCircuitaffirmedthedistrictcourt’sconclusionthatthedataanalyzedinthesixdisparitystudieswerenotstaleattherelevanttimebecausethedisparitystudiesanalyzeddatapertainedtocontractsawardedasrecentlyas2000oreven2003,andbecauseRothedidnotpointtomorerecent,availabledata.Id.

BeforeCongress. TheFederalCircuitfoundthatforevidencetoberelevantinthestrictscrutinyanalysis,it“mustbeproventohavebeenbeforeCongresspriortoenactmentoftheracialclassification.”545F.3dat1039,quotingRotheV,413F.3dat1338.TheFederalCircuithadissueswithdeterminingwhetherthesixdisparitystudieswereactuallybeforeCongressforseveralreasons,includingthattherewasnoindicationthatthesestudiesweredebatedorreviewedbymembersofCongressorbyanywitnesses,andbecauseCongressmadenofindingsconcerningthesestudies.545F.3dat1039‐1040.However,thecourtdetermineditneednotdecidewhetherthesixstudieswereputbeforeCongress,becausethecourtheldinanyeventthatthestudiesdidnotprovideasubstantiallyprobativeandbroad‐basedstatisticalfoundationnecessaryforthestrongbasisinevidencethatmustbethepredicatefornation‐wide,race‐consciousaction.Id.at1040.


ThecourtdidnotethatfindingsregardingdisparitystudiesaretobedistinguishedfromformalfindingsofdiscriminationbytheDOD“whichCongresswasemphaticallynotrequiredtomake.”Id.at1040,footnote11(emphasisinoriginal).TheFederalCircuitcitedtheDeanv.CityofShreveportcasethatthe“governmentneednotincriminateitselfwithaformalfindingofdiscriminationpriortousingarace‐consciousremedy.”545F.3dat1040,footnote11quotingDeanv.CityofShreveport,438F.3d448,445(5thCir.2006).

Methodology. TheFederalCircuitfoundthatthereweremethodologicaldefectsinthesixdisparitystudies.Thecourtfoundthattheobjectionstotheparametersusedtoselecttherelevantpoolofcontractorswasoneofthemajordefectsinthestudies.545F.3dat1040‐1041.

Thecourtstatedthatingeneral,“[a]disparityratiolessthan0.80”—i.e.,afindingthatagivenminoritygroupreceivedlessthan80percentoftheexpectedamount—“indicatesarelevantdegreeofdisparity,”and“mightsupportaninferenceofdiscrimination.”545F.3dat1041,quotingthedistrictcourtopinioninRotheVI,499F.Supp.2dat842;andcitingEngineeringContractorsAssociationofSouthFlorida,Inc.v.MetropolitanDadeCounty,122F.3d895,914(11thCir.1997).Thecourtnotedthatthisdisparityratioattemptstocalculatearatiobetweentheexpectedcontractamountofagivenrace/gendergroupandtheactualcontractamountreceivedbythatgroup.545F.3dat1041.

Thecourtconsideredtheavailabilityanalysis,orbenchmarkanalysis,whichisutilizedtoensurethatonlythoseminority‐ownedcontractorswhoarequalified,willingandabletoperformtheprimecontractsatissueareconsideredwhenperformingthedenominatorofadisparityratio.545F.3dat1041.Thecourtcitedtoanexpertusedinthecasethata“crucialquestion”indisparitystudiesistodevelopacrediblemethodologytoestimatethisbenchmarkshareofcontractsminoritieswouldreceiveintheabsenceofdiscriminationandthetouchstoneformeasuringthebenchmarkistodeterminewhetherthefirmisready,willing,andabletodobusinesswiththegovernment.545F.3dat1041‐1042.

ThecourtconcludedthecontentionbyRothe,thatthesixstudiesmisappliedthis“touchstone”ofCrosonanderroneouslyincludedminority‐ownedfirmsthatweredeemedwillingorpotentiallywillingandable,withoutregardtowhetherthefirmwasqualified,wasnotadefectthatsubstantiallyundercuttheresultsoffourofthesixstudies,because“thebulkofthebusinessesconsideredinthesestudieswereidentifiedinwaysthatwouldtendtoestablishtheirqualifications,suchasbytheirpresenceoncitycontractrecordsandbidderlists.”545F.3dat1042.Thecourtnotedthatwithregardtothesestudiesavailableprimecontractorswereidentifiedviacertificationlists,willingnesssurveyofchambermembershipandtradeassociationmembershiplists,publicagencyandcertificationlists,utilizedprimecontractor,bidderlists,countyandothergovernmentrecordsandothertypelists.Id.

Thecourtstateditwaslessconfidentinthedeterminationofqualifiedminority‐ownedbusinessesbythetwootherstudiesbecausetheavailabilitymethodologyemployedinthosestudies,thecourtfound,appearedlesslikelytohaveweededoutunqualifiedbusinesses.Id.However,thecourtstateditwasmoretroubledbythefailureoffiveofthestudiestoaccountofficiallyforpotentialdifferencesinsize,or“relativecapacity,”ofthebusinessincludedinthosestudies.545F.3dat1042‐1043.

Thecourtnotedthatqualifiedfirmsmayhavesubstantiallydifferentcapacitiesandthusmightbeexpectedtobringinsubstantiallydifferentamountsofbusinessevenintheabsenceofdiscrimination.545F.3dat1043.TheFederalCircuitreferredtotheEleventhCircuitexplanationsimilarlythatbecausefirmsarebigger,biggerfirmshaveabiggerchancetowin


biggercontracts,andthusonewouldexpectthebigger(onaverage)non‐MWBEfirmstogetadisproportionatelyhigherpercentageoftotalconstructiondollarsawardedthanthesmallerMWBEfirms.545F.3dat1043quotingEngineeringContractorsAssociation,122F.3dat917.Thecourtpointedoutitsissueswiththestudiesaccountingfortherelativesizesofcontractsawardedtominority‐ownedbusinesses,butnotconsideringtherelativesizesofthebusinessesthemselves.Id.at1043.

Thecourtnotedthatthestudiesmeasuredtheavailabilityofminority‐ownedbusinessesbythepercentageoffirmsinthemarketownedbyminorities,insteadofbythepercentageoftotalmarketplacecapacitythosefirmscouldprovide.Id.Thecourtsaidthatforadisparityratiotohaveasignificantprobativevalue,thesametimeperiodandmetric(dollarsornumbers)shouldbeusedinmeasuringtheutilizationandavailabilityshares.545F.3dat1044,n.12.

Thecourtstatedthatwhiletheseparametersrelatingtothefirmsizemayhaveensuredthateachminority‐ownedbusinessinthestudiesmetacapacitythreshold,theseparametersdidnotaccountfortherelativecapacitiesofbusinessestobidformorethanonecontractatatime,whichfailurerenderedthedisparityratioscalculatedbythestudiessubstantiallylessprobativeontheirown,ofthelikelihoodofdiscrimination.Id.at1044.Thecourtpointedoutthatthestudiescouldhaveaccountedforfirmsizeevenwithoutchangingthedisparityratiomethodologiesbyemployingregressionanalysistodeterminewhethertherewasastatisticallysignificantcorrelationbetweenthesizeofafirmandtheshareofcontractdollarsawardedtoit.545F.3dat1044citingtoEngineeringContractorsAssociation,122F.3dat917.Thecourtnotedthatonlyoneofthestudiesconductedthistypeofregressionanalysis,whichincludedtheindependentvariablesofafirm‐ageofacompany,ownereducationlevel,numberofemployees,percentofrevenuefromtheprivatesectorandownerexperienceforindustrygroupings.Id.at1044‐1045.

Thecourtstated,to“beclear,”thatitdidnotholdthatthedefectsintheavailabilityandcapacityanalysesinthesesixdisparitystudiesrenderthestudieswhollyunreliableforanypurpose.Id.at1045.Thecourtsaidthatwherethecalculateddisparityratiosarelowenough,thecourtdoesnotforeclosethepossibilitythataninferenceofdiscriminationmightstillbepermissibleforsomeoftheminoritygroupsinsomeofthestudiedindustriesinsomeofthejurisdictions.Id.Thecourtrecognizedthataminority‐ownedfirm’scapacityandqualificationsmaythemselvesbeaffectedbydiscrimination.Id.Thecourtheld,however,thatthedefectsitnoteddetracteddramaticallyfromtheprobativevalueofthesixstudies,andinconjunctionwiththeirlimitedgeographiccoverage,renderedthestudiesinsufficienttoformthestatisticalcoreofthestrongbasisandevidencerequiredtoupholdthestatute.Id.

Geographiccoverage. Thecourtpointedoutthatwhereasmunicipalitiesmustnecessarilyidentifydiscriminationintheimmediatelocalitytojustifyarace‐basedprogram,thecourtdoesnotthinkthatCongressneedstohavehadevidencebeforeitofdiscriminationinall50statesinordertojustifythe1207program.Id.Thecourtstressed,however,thatinholdingthesixstudiesinsufficientinthisparticularcase,“wedonotnecessarilydisapproveofdecisionsbyothercircuitcourtsthathaverelied,directlyorindirectly,onmunicipaldisparitystudiestoestablishafederalcompellinginterest.”545F.3dat1046.Thecourtstatedinparticular,theAppendixreliedonbytheNinthandTenthCircuitsinthecontextofcertainrace‐consciousmeasurespertainingtofederalhighwayconstruction,referencestheUrbanInstituteReport,whichitselfanalyzedover50disparitystudiesandreliedforitsconclusionsonover30ofthosestudies,afarbroaderbasisthanthesixstudiesprovidedinthiscase.Id.


Anecdotalevidence. Thecourtheldthatgivenitsholdingregardingstatisticalevidence,itdidnotreviewtheanecdotalevidencebeforeCongress.Thecourtdidpointout,however,thattherewasnotevidencepresentedofasingleinstanceofallegeddiscriminationbytheDODinthecourseofawardingaprimecontract,ortoasingleinstanceofallegeddiscriminationbyaprivatecontractoridentifiedastherecipientofaprimedefensecontract.545F.3dat1049.ThecourtnotedthislackofevidenceinthecontextoftheopinioninCrosonthatifagovernmenthasbecomeapassiveparticipantinasystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry,thenthatgovernmentmaytakeaffirmativestepstodismantletheexclusionarysystem.545F.3dat1048,citingCroson,488U.S.at492.

TheFederalCircuitpointedoutthattheTenthCircuitinConcreteWorksnotedtheCityofDenverofferedmorethandollaramountstolinkitsspendingtoprivatediscrimination,butinsteadprovidedtestimonyfromminoritybusinessownersthatgeneralcontractorswhousethemincityconstructionprojectsrefusetousethemonprivateprojects,withtheresultthatDenverhadpaidtaxdollarstosupportfirmsthatdiscriminatedagainstotherfirmsbecauseoftheirrace,ethnicityandgender.545F.3dat1049,quotingConcreteWorks,321F.3dat976‐977.

Inconcluding,thecourtstatedthatitstresseditsholdingwasgroundedintheparticularitemsofevidenceofferedbytheDOD,and“shouldnotbeconstruedasstatingblanketrules,forexampleaboutthereliabilityofdisparitystudies.AstheFifthCircuithasexplained,thereisno‘precisemathematicalformula’toassessthequantumofevidencethatrisestotheCroson‘strongbasisinevidence’benchmark.’”545F.3dat1049,quotingW.H.ScottConstr.Co.,199F.3dat218n.11.

Narrowlytailoring. TheFederalCircuitonlymadetwoobservationsaboutnarrowlytailoring,becauseitheldthatCongresslackedtheevidentiarypredicateforacompellinginterest.First,itnotedthatthe1207Programwasflexibleinapplication,limitedinduration,andthatitdidnotundulyimpactontherightsofthirdparties.545F.3dat1049.Second,thecourtheldthattheabsenceofstronglyprobativestatisticalevidencemakesitimpossibletoevaluateatleastoneoftheothernarrowlytailoringfactors.WithoutsolidbenchmarksfortheminoritygroupscoveredbytheSection1207,thecourtsaiditcouldnotdeterminewhetherthe5percentgoalisreasonablyrelatedtothecapacityoffirmsownedbymembersofthoseminoritygroups—i.e.,whetherthatgoaliscomparabletotheshareofcontractsminoritieswouldreceiveintheabsenceofdiscrimination.”545F.3dat1049‐1050.

3. Rothe Development, Inc. v. U.S. Dept. of Defense and Small Business Administration, 107 F. Supp. 3d 183, 2015 WL 3536271 (D.D.C. 2015), affirmed on other grounds, 836 F.3d 57, 2016 WL 4719049 (D.C. Cir. 2016).

PlaintiffRotheDevelopment,Inc.isasmallbusinessthatfiledthisactionagainsttheU.S.DepartmentofDefense(“DOD”)andtheU.S.SmallBusinessAdministration(“SBA”)(collectively,“Defendants”)challengingtheconstitutionalityoftheSection8(a)Programonitsface.

TheconstitutionalchallengethatRothebringsinthiscaseisnearlyidenticaltothechallengebroughtinthecaseofDynaLanticCorp.v.UnitedStatesDepartmentofDefense,885F.Supp.2d237(D.D.C.2012).TheplaintiffinDynaLanticsuedtheDOD,theSBA,andtheDepartmentofNavyallegingthatSection8(a)wasunconstitutionalbothonitsfaceandasappliedtothemilitarysimulationandtrainingindustry.SeeDynaLantic,885F.Supp.2dat242.DynaLantic’scourtdisagreedwiththeplaintiff’sfacialattackandheldtheSection8(a)Programasfacially


constitutional.SeeDynaLantic,885F.Supp.2dat248‐280,283‐291.(SeealsodiscussionofDynaLanticinthisAppendixbelow.)

ThecourtinRothestatesthattheplaintiffRothereliesonsubstantiallythesamerecordevidenceandnearlyidenticallegalargumentsasintheDynaLanticcase,andurgesthecourttostrikedowntherace‐consciousprovisionsofSection8(a)ontheirface,andthustodepartfromDynaLantic’sholdinginthecontextofthiscase.2015WL3536271at*1.BoththeplaintiffRotheandtheDefendantsfiledcross‐motionsforsummaryjudgmentaswellasmotionstolimitorexcludetestimonyofeachother’sexpertwitnesses.ThecourtconcludesthatDefendants’expertsmeettherelevantqualificationstandardsundertheFederalRules,andthereforedeniesplaintiffRothe’smotiontoexcludeDefendants’experttestimony.Id.Bycontrast,thecourtfoundsufficientreasontodoubtthequalificationsofoneofplaintiff’sexpertsandtoquestionthereliabilityofthetestimonyoftheother;consequently,thecourtgrantstheDefendants’motionstoexcludeplaintiff’sexperttestimony.

Inaddition,thecourtinRotheagreeswiththecourt’sreasoninginDynaLantic,andthusthecourtinRothealsoconcludesthatSection8(a)isconstitutionalonitsface.Accordingly,thecourtdeniesplaintiff’smotionforsummaryjudgmentandgrantsDefendants’cross‐motionforsummaryjudgment.

DynaLantic Corp. v. Department of Defense. ThecourtinRotheanalyzedtheDynaLanticcase,andagreedwiththefindings,holdingandconclusionsofthecourtinDynaLantic.See2015WL3536271at*4‐5.ThecourtinRothenotedthatthecourtinDynaLanticengagedinadetailedexaminationofSection8(a)andtheextensiverecordevidence,includingdisparitystudiesonracialdiscriminationinfederalcontractingacrossvariousindustries.Id.at*5.ThecourtinDynaLanticconcludedthatCongresshadacompellinginterestineliminatingtherootsofracialdiscriminationinfederalcontracting,fundedbyfederalmoney,andalsothatthegovernmenthadestablishedastrongbasisinevidencetosupportitsconclusionthatremedialactionwasnecessarytoremedythatdiscrimination.Id.at*5.Thisconclusionwasbasedonthefindingthegovernmentprovidedextensiveevidenceofdiscriminatorybarrierstominoritybusinessformationandminoritybusinessdevelopment,aswellassignificantevidencethat,evenwhenminoritybusinessesarequalifiedandeligibletoperformcontractsinbothpublicandprivatesectors,theyareawardedthesecontractsfarlessoftenthantheirsimilarlysituatednon‐minoritycounterparts.Id.at*5,citingDynaLantic,885F.Supp.2dat279.

ThecourtinDynaLanticalsofoundthatDynaLantichadfailedtopresentcredible,particularizedevidencethatunderminedthegovernment’scompellinginterestorthatdemonstratedthatthegovernment’sevidencedidnotsupportaninferenceofpriordiscriminationandthusaremedialpurpose.2015WL3536271at*5,citingDynaLantic,at279.

Withrespecttonarrowtailoring,thecourtinDynaLanticconcludedthattheSection8(a)Programisnarrowlytailoredonitsface,andthatsinceSection8(a)race‐consciousprovisionswerenarrowlytailoredtofurtheracompellingstateinterest,strictscrutinywassatisfiedinthecontextoftheconstructionindustryandinotherindustriessuchasarchitectureandengineering,andprofessionalservicesaswell.Id.ThecourtinRothealsonotedthatthecourtinDynaLanticfoundthatDynaLantichadthusfailedtomeetitsburdentoshowthatthechallengeprovisionswereunconstitutionalinallcircumstancesandheldthatSection8(a)wasconstitutionalonitsface.Id.

Defendants’expertevidence.OneofDefendants’expertsusedregressionanalysis,claimingtohaveisolatedtheeffectinminorityownershiponthelikelihoodofasmallbusinessreceiving


governmentcontracts,specificallyusinga“logitmodel”toexaminegovernmentcontractingdatainordertodeterminewhetherthedatashowanydifferenceintheoddsofcontractsbeingwonbyminority‐ownedsmallbusinessesrelativetoothersmallbusinesses.2015WL3536271at*9.Theexpertcontrolledforothervariablesthatcouldinfluencetheoddsofwhetherornotagivenfirmwinsacontract,suchasbusinesssize,age,andlevelofsecurityclearance,andconcludedthattheoddsofminority‐ownedsmallfirmsandnon‐8(a)SDBfirmswinningcontractswerelowerthansmallnon‐minorityandnon‐SDBfirms.Id.Inaddition,theDefendants’expertfoundthatnon‐8(a)minority‐ownedSDBsarestatisticallysignificantlylesslikelytowinacontractinindustriesaccountingfor94.0%ofcontractactions,93.0%ofdollarsawarded,andinwhich92.2%ofnon‐8(a)minority‐ownedSDBsareregistered.Id.Also,theexpertfoundthatthereisnoindustrywherenon‐8(a)minority‐ownedSDBshaveastatisticallysignificantadvantageintermsofwinningacontractfromthefederalgovernment.Id.

ThecourtrejectedRothe’scontentionthattheexpertopinionisbasedoninsufficientdata,andthatitsanalysisofdatarelatedtoasubsetoftherelevantindustrycodesistoonarrowtosupportitsscientificconclusions.Id.at*10.Thecourtfoundconvincingtheexpert’sresponsetoRothe’scritiqueabouthisdataset,explainingthat,fromamathematicalperspective,excludingcertainNAICScodesandanalyzingdataatthethree‐digitlevelactuallyincreasesthereliabilityofhisresults.Theexpertoptedtousecodesatthethree‐digitlevelasacompromise,balancingtheneedtohavesufficientdataineachindustrygroupingandtherecognitionthatmanyfirmscanswitchproductionwithinthebroaderthree‐digitcategory.Id.TheexpertalsoexcludedcertainNAICSindustrygroupsfromhisregressionanalysesbecauseofincompletedata,irrelevance,orbecausedataissuesinagivenNAICSgrouppreventedtheregressionmodelfromproducingreliableestimates.Id.Thecourtfoundthattheexpert’sreasoningwithrespecttotheexclusionsandassumptionshemakesintheanalysisarefullyexplainedandscientificallysound.Id.

Inaddition,thecourtfoundthatpost‐enactmentevidencewasproperlyconsideredbytheexpertandthecourt.Id.Thecourtfoundthatnearlyeverycircuittoconsiderthequestionoftherelevanceofpost‐enactmentevidencehasheldthatreviewingcourtsneednotlimitthemselvestotheparticularevidencethatCongressrelieduponwhenitenactedthestatuteatissue.Id.,citingDynaLantic,885F.Supp.2dat257.

Thus,thecourtheldthatpost‐enactmentevidenceisrelevanttoconstitutionalreview,inparticular,followingthecourtinDynaLantic,whenthestatuteisover30yearsoldandtheevidenceusedtojustifySection8(a)isstaleforpurposesofdeterminingacompellinginterestinthepresent.Id.,citingDynaLanticat885F.Supp.2dat258.ThecourtalsopointsoutthatthestatuteitselfcontemplatesthatCongresswillreviewthe8(a)Programonacontinuingbasis,whichrenderstheuseofpost‐enactmentevidenceproper.Id.

ThecourtalsofoundDefendants’additionalexpert’stestimonyasadmissibleinconnectionwiththatexpert’sreviewoftheresultsofthe107disparitystudiesconductedthroughouttheUnitedStatessincetheyear2000,allbut32ofwhichweresubmittedtoCongress.Id.at*11.ThisexperttestifiedthatthedisparitystudiessubmittedtoCongress,takenasawhole,providestrongevidenceoflarge,adverse,andoftenstatisticallysignificantdisparitiesbetweenminorityparticipationinbusinessenterpriseactivityandtheavailabilityofthosebusinesses;thedisparitiesarenotexplainedsolelybydifferencesinfactorsotherthanraceandsexthatareuntaintedbydiscrimination;andthedisparitiesareconsistentwiththepresenceofdiscriminationinthebusinessmarket.Id.at*12.


ThecourtrejectsRothe’scontentionstoexcludethisexperttestimonymerelybasedontheargumentbyRothethatthefactualbasisfortheexpert’sopinionisunreliablebasedonallegedflawsinthedisparitystudiesorthatthefactualbasisfortheexpert’sopinionsareweak.Id.ThecourtstatesthatevenifRothe’scontentionsarecorrect,anattackontheunderlyingdisparitystudiesdoesnotnecessitatetheremedyofexclusion.Id.

Plaintiff’sexpert’stestimonyrejected.Thecourtfoundthatoneofplaintiff’sexpertswasnotqualifiedbasedonhisownadmissionsregardinghislackoftraining,education,knowledge,skillandexperienceinanystatisticaloreconometricmethodology.Id.at*13.Plaintiff’sotherexpertthecourtdeterminedprovidedtestimonythatwasunreliableandinadmissibleashispreferredmethodologyforconductingdisparitystudies“appearstobewelloutsideofthemainstreaminthisparticularfield.”Id.at*14.Theexpert’smethodologyincludedhisassertionthattheonlyproperwaytodeterminetheavailabilityofminority‐ownedbusinessesistocountthosecontractorsandsubcontractorsthatactuallyperformorbidoncontracts,whichthecourtrejectedasnotreliable.Id.

TheSection8(a)Programisconstitutionalonitsface.ThecourtfoundpersuasivethecourtdecisioninDynaLantic,andheldthatinasmuchasRotheseekstore‐litigatethelegalissuespresentedinthatcase,thiscourtdeclinesRothe’sinvitationtodepartfromtheDynaLanticcourt’sconclusionthatSection8(a)isconstitutionalonitsface.Id.at*15.

ThecourtreiterateditsagreementwiththeDynaLanticcourtthatracialclassificationsareconstitutionalonlyiftheyarenarrowlytailoredmeasuresthatfurthercompellinggovernmentalinterest.Id.at*17.Todemonstrateacompellinginterest,thegovernmentdefendantsmustmaketwoshowings:firstthegovernmentmustarticulatealegislativegoalthatisproperlyconsideredacompellinggovernmentalinterest,andsecondthegovernmentmustdemonstrateastrongbasisinevidencesupportingitsconclusionthatrace‐basedremedialactionwasnecessarytofurtherthatinterest.Id.at*17.Insodoing,thegovernmentneednotconclusivelyprovetheexistenceofracialdiscriminationinthepastorpresent.Id.Thegovernmentmayrelyonbothstatisticalandanecdotalevidence,althoughanecdotalevidencealonecannotestablishastrongbasisinevidenceforthepurposesofstrictscrutiny.Id.

Ifthegovernmentmakesbothshowings,theburdenshiftstotheplaintifftopresentcredible,particularizedevidencetorebutthegovernment’sinitialshowingofacompellinginterest.Id.Onceacompellinginterestisestablished,thegovernmentmustfurthershowthatthemeanschosentoaccomplishthegovernment’sassertedpurposearespecificallyandnarrowlyframedtoaccomplishthatpurpose.Id.

ThecourtheldthatthegovernmentarticulatedandestablishedcompellinginterestfortheSection8(a)Program,namely,remedyingrace‐baseddiscriminationanditseffects.Id.Thecourtheldthegovernmentalsoestablishedastrongbasisinevidencethatfurtheringthisinterestrequiresrace‐basedremedialaction–specifically,evidenceregardingdiscriminationingovernmentcontracting,whichconsistedofextensiveevidenceofdiscriminatorybarrierstominoritybusinessformationandforcefulevidenceofdiscriminatorybarrierstominoritybusinessdevelopment.Id.at*17,citingDynaLantic,885F.Supp.2dat279.

ThegovernmentdefendantsinthiscaserelieduponthesameevidenceasintheDynaLanticcaseandthecourtfoundthatthegovernmentprovidedsignificantevidencethatevenwhenminoritybusinessesarequalifiedandeligibletoperformcontractsinboththeprivateandpublicsectors,theyareawardedthesecontractsfarlessoftenthantheirsimilarlysituatednon‐minoritycounterparts.Id.at*17.ThecourtheldthatRothehasfailedtorebuttheevidenceofthe


governmentwithcredibleandparticularizedevidenceofitsown.Id.at*17.Furthermore,thecourtfoundthatthegovernmentdefendantsestablishedthattheSection8(a)Programisnarrowlytailoredtoachievetheestablishedcompellinginterest.Id.at*18.

Thecourtfound,citingagreementwiththeDynaLanticcourt,thattheSection8(a)Programsatisfiesallsixfactorsofnarrowtailoring.Id.First,alternativerace‐neutralremedieshaveprovedunsuccessfulinaddressingthediscriminationtargetedwiththeProgram.Id.Second,theSection8(a)Programisappropriatelyflexible.Id.Third,Section8(a)isneitherovernorunder‐inclusive.Id.Fourth,theSection8(a)Programimposestemporallimitsoneveryindividual’sparticipationthatfulfilledthedurationalaspectofnarrowtailoring.Id.Fifth,therelevantaspirationalgoalsforSDBcontractingparticipationarenumericallyproportionate,inpartbecausetheevidencepresentedestablishedthatminorityfirmsareready,willingandabletoperformworkequaltotwotofivepercentofgovernmentcontractsinindustriesincludingbutnotlimitedtoconstruction.Id.Andsix,thefactthattheSection8(a)Programreservescertaincontractsforprogramparticipantsdoesnot,onitsface,createanimpermissibleburdenonnon‐participatingfirms.Id.;citingDynaLantic,885F.Supp.2dat283‐289.

Accordingly,thecourtconcurredcompletelywiththeDynaLanticcourt’sconclusionthatthestrictscrutinystandardhasbeenmet,andthattheSection8(a)Programisfaciallyconstitutionaldespiteitsrelianceonrace‐consciouscriteria.Id.at*18.Thecourtfoundthatonbalancethedisparitystudiesonwhichthegovernmentdefendantsrelyreveallarge,statisticallysignificantbarrierstobusinessformationamongminoritygroupsthatcannotbeexplainedbyfactorsotherthanrace,anddemonstratethatdiscriminationbyprimecontractors,privatesectorcustomers,suppliersandbondingcompaniescontinuestolimitminoritybusinessdevelopment.Id.at*18,citingDynaLantic,885F.Supp.2dat261,263.

Moreover,thecourtfoundthattheevidenceclearlyshowsthatqualified,eligibleminority‐ownedfirmsareexcludedfromcontractingmarkets,andaccordinglyprovidespowerfulevidencefromwhichaninferenceofdiscriminatoryexclusioncouldarise.Id.at*18.ThecourtconcurredwiththeDynaLanticcourt’sconclusionthatbasedontheevidencebeforeCongress,ithadastrongbasisinevidencetoconcludetheuseofrace‐consciousmeasureswasnecessaryin,atleast,somecircumstances.Id.at*18,citingDynaLantic,885F.Supp.2dat274.

Inaddition,inconnectionwiththenarrowtailoringanalysis,thecourtrejectedRothe’sargumentthatSection8(a)race‐consciousprovisionscannotbenarrowlytailoredbecausetheyapplyacrosstheboardinequalmeasures,forallpreferredraces,inallmarketsandsectors.Id.at*19.ThecourtstatedthepresumptionthataminorityapplicantissociallydisadvantagedmayberebuttediftheSBAispresentedwithcredibleevidencetothecontrary.Id.at*19.Thecourtpointedoutthatanypersonmaypresentcredibleevidencechallenginganindividual’sstatusassociallyoreconomicallydisadvantaged.Id.ThecourtsaidthatRothe’sargumentisincorrectbecauseitisbasedonthemisconceptionthatnarrowtailoringnecessarilymeansaremedythatislaser‐focusedonasinglesegmentofaparticularindustryorarea,ratherthanthecommonunderstandingthatthe“narrowness”ofthenarrow‐tailoringmandaterelatestotherelationshipbetweenthegovernment’sinterestandtheremedyitprescribes.Id.

Conclusion.Thecourtconcludedthatplaintiff’sfacialconstitutionalchallengetotheSection8(a)Programfailed,thatthegovernmentdefendantsdemonstratedacompellinginterestforthegovernment’sracialclassification,thepurportedneedforremedialactionissupportedbystrongandunrebuttedevidence,andthattheSection8(a)programisnarrowlytailoredtofurtheritscompellinginterest.Id.at*20.


4. DynaLantic Corp. v. United States Dept. of Defense, et al., 885 F.Supp.2d 237, 2012 WL 3356813 (D.D.C., 2012), appeals voluntarily dismissed, United States Court of Appeals, District of Columbia, Docket Numbers 12‐5329 and 12‐5330 (2014)

Plaintiff,theDynaLanticCorporation(“DynaLantic”),isasmallbusinessthatdesignsandmanufacturesaircraft,submarine,ship,andothersimulatorsandtrainingequipment.DynaLanticsuedtheUnitedStatesDepartmentofDefense(“DoD”),theDepartmentoftheNavy,andtheSmallBusinessAdministration(“SBA”)challengingtheconstitutionalityofSection8(a)oftheSmallBusinessAct(the“Section8(a)program”),onitsfaceandasapplied:namely,theSBA’sdeterminationthatitisnecessaryorappropriatetosetasidecontractsinthemilitarysimulationandtrainingindustry.2012WL3356813,at*1,*37.

TheSection8(a)programauthorizesthefederalgovernmenttolimittheissuanceofcertaincontractstosociallyandeconomicallydisadvantagedbusinesses.Id.at*1.DynaLanticclaimedthattheSection8(a)isunconstitutionalonitsfacebecausetheDoD’suseoftheprogram,whichisreservedfor“sociallyandeconomicallydisadvantagedindividuals,”constitutesanillegalracialpreferenceinviolationoftheequalprotectioninviolatingitsrighttoequalprotectionundertheDueProcessClauseoftheFifthAmendmenttotheConstitutionandotherrights.Id.at*1.DynaLanticalsoclaimedtheSection8(a)programisunconstitutionalasappliedbythefederaldefendantsinDynaLantic’sspecificindustry,definedasthemilitarysimulationandtrainingindustry.Id.

AsdescribedinDynaLanticCorp.v.UnitedStatesDepartmentofDefense,503F.Supp.2d262(D.D.C.2007)(seebelow),thecourtpreviouslyhaddeniedMotionsforSummaryJudgmentbythepartiesanddirectedthemtoproposefutureproceedingsinordertosupplementtherecordwithadditionalevidencesubsequentto2007beforeCongress.503F.Supp.2dat267.

TheSection8(a)Program.TheSection8(a)programisabusinessdevelopmentprogramforsmallbusinessesownedbyindividualswhoarebothsociallyandeconomicallydisadvantagedasdefinedbythespecificcriteriasetforthinthecongressionalstatuteandfederalregulationsat15U.S.C.§§632,636and637;see13CFR§124.“Sociallydisadvantaged”individualsarepersonswhohavebeen“subjectedtoracialorethnicprejudiceorculturalbiaswithinAmericansocietybecauseoftheiridentitiesasmembersofgroupswithoutregardtotheirindividualqualities.”13CFR§124.103(a);seealso15U.S.C.§637(a)(5).“Economicallydisadvantaged”individualsarethosesociallydisadvantagedindividuals“whoseabilitytocompeteinthefreeenterprisesystemhasbeenimpairedduetodiminishedcapitalandcreditopportunitiesascomparedtoothersinthesameorsimilarlineofbusinesswhoarenotsociallydisadvantaged.”13CFR§124.104(a);seealso15U.S.C.§637(a)(6)(A).DynaLanticCorp.,2012WL3356813at*2.

Individualswhoaremembersofcertainracialandethnicgroupsarepresumptivelysociallydisadvantaged;suchgroupsinclude,butarenotlimitedto,BlackAmericans,HispanicAmericans,NativeAmericans,Indiantribes,AsianPacificAmericans,NativeHawaiianOrganizations,andotherminorities.Id.at*2quoting15U.S.C.§631(f)(1)(B)‐(c);seealso13CFR§124.103(b)(1).Allprospectiveprogramparticipantsmustshowthattheyareeconomicallydisadvantaged,whichrequiresanindividualtoshowanetworthoflessthan$250,000uponenteringtheprogram,andashowingthattheindividual’sincomeforthreeyearspriortotheapplicationandthefairmarketvalueofallassetsdonotexceedacertainthreshold.2012WL3356813at*3;see13CFR§124.104(c)(2).


Congresshasestablishedan“aspirationalgoal”forprocurementfromsociallyandeconomicallydisadvantagedindividuals,whichincludesbutisnotlimitedtotheSection8(a)program,offivepercentofprocurementsdollarsgovernmentwide.See15U.S.C.§644(g)(1).DynaLantic,at*3.Congresshasnot,however,establishedanumericalgoalforprocurementfromtheSection8(a)programspecifically.SeeId.EachfederalagencyestablishesitsowngoalbyagreementbetweentheagencyheadandtheSBA.Id.DoDhasestablishedagoalofawardingapproximatelytwopercentofprimecontractdollarsthroughtheSection8(a)program.DynaLantic,at*3.TheSection8(a)programallowstheSBA,“wheneveritdeterminessuchactionisnecessaryandappropriate,”toenterintocontractswithothergovernmentagenciesandthensubcontractwithqualifiedprogramparticipants.15U.S.C.§637(a)(1).Section8(a)contractscanbeawardedona“solesource”basis(i.e.,reservedtoonefirm)orona“competitive”basis(i.e.,betweentwoormoreSection8(a)firms).DynaLantic,at*3‐4;13CFR124.501(b).

Plaintiff’sbusinessandthesimulationandtrainingindustry.DynaLanticperformscontractsandsubcontractsinthesimulationandtrainingindustry.Thesimulationandtrainingindustryiscomposedofthoseorganizationsthatdevelop,manufacture,andacquireequipmentusedtotrainpersonnelinanyactivitywherethereisahuman‐machineinterface.DynaLanticat*5.

Compellinginterest.TheCourtrulesthatthegovernmentmustmaketwoshowingstoarticulateacompellinginterestservedbythelegislativeenactmenttosatisfythestrictscrutinystandardthatracialclassificationsareconstitutionalonlyiftheyarenarrowlytailoredmeasuresthatfurthercompellinggovernmentalinterests.”DynaLantic,at*9.First,thegovernmentmust“articulatealegislativegoalthatisproperlyconsideredacompellinggovernmentinterest.”Id.quotingSherbrookeTurfv.Minn.DOT.,345F.3d964,969(8thCir.2003).Second,inadditiontoidentifyingacompellinggovernmentinterest,“thegovernmentmustdemonstrate‘astrongbasisinevidence’supportingitsconclusionthatrace‐basedremedialactionwasnecessarytofurtherthatinterest.”DynaLantic,at*9,quotingSherbrooke,345F.3d969.

Afterthegovernmentmakesaninitialshowing,theburdenshiftstoDynaLantictopresent“credible,particularizedevidence”torebutthegovernment’s“initialshowingofacompellinginterest.”DynaLantic,at*10quotingConcreteWorksofColorado,Inc.v.CityandCountyofDenver,321F.3d950,959(10thCir.2003).ThecourtpointsoutthatalthoughCongressisentitledtonodeferenceinitsultimateconclusionthatrace‐consciousactioniswarranted,itsfact‐findingprocessisgenerallyentitledtoapresumptionofregularityanddeferentialreview.DynaLantic,at*10,citingRotheDev.Corp.v.U.S.Dep’tofDef.(“RotheIII“),262F.3d1306,1321n.14(Fed.Cir.2001).

ThecourtheldthatthefederalDefendantsstateacompellingpurposeinseekingtoremediateeitherpublicdiscriminationorprivatediscriminationinwhichthegovernmenthasbeena“passiveparticipant.”DynaLantic,at*11.TheCourtrejectedDynaLantic’sargumentthatthefederalDefendantscouldonlyseektoremedydiscriminationbyagovernmentalentity,ordiscriminationbyprivateindividualsdirectlyusinggovernmentfundstodiscriminate.DynaLantic,at*11.TheCourtheldthatitiswellestablishedthatthefederalgovernmenthasacompellinginterestinensuringthatitsfundingisnotdistributedinamannerthatperpetuatestheeffectofeitherpublicorprivatediscriminationwithinanindustryinwhichitprovidesfunding.DynaLantic,at*11,citingWesternStatesPavingv.WashingtonStateDOT,407F.3d983,991(9thCir.2005).

TheCourtnotedthatanypublicentity,stateorfederal,hasacompellinginterestinassuringthatpublicdollars,drawnfromthetaxdollarsofallcitizens,donotservetofinancetheevilsof


privateprejudice,andsuchprivateprejudicemaytaketheformofdiscriminatorybarrierstotheformationofqualifiedminoritybusinesses,precludingfromtheoutsetcompetitionforpubliccontractsbyminorityenterprises.DynaLanticat*11quotingCityofRichmondv.J.A.CrosonCo.,488U.S.469,492(1995),andAdarandConstructors,Inc.v.Slater,228F.3d1147,1167‐68(10thCir.2000).Inaddition,privateprejudicemayalsotaketheformof“discriminatorybarriers”to“faircompetitionbetweenminorityandnon‐minorityenterprises...precludingexistingminorityfirmsfromeffectivelycompetingforpublicconstructioncontracts.”DynaLantic,at*11,quotingAdarandVII,228F.3dat1168.

Thus,theCourtconcludedthatthegovernmentmayimplementrace‐consciousprogramsnotonlyforthepurposeofcorrectingitsowndiscrimination,butalsotopreventitselffromactingasa“passiveparticipant”inprivatediscriminationintherelevantindustriesormarkets.DynaLantic,at*11,citingConcreteWorksIV,321F.3dat958.

EvidencebeforeCongress.TheCourtanalyzedthelegislativehistoryoftheSection8(a)program,andthenaddressedtheissueastowhethertheCourtislimitedtotheevidencebeforeCongresswhenitenactedSection8(a)in1978andreviseditin1988,orwhetheritcouldconsiderpost‐enactmentevidence.DynaLantic,at*16‐17.TheCourtfoundthatnearlyeverycircuitcourttoconsiderthequestionhasheldthatreviewingcourtsmayconsiderpost‐enactmentevidenceinadditiontoevidencethatwasbeforeCongresswhenitembarkedontheprogram.DynaLantic,at*17.TheCourtnotedthatpost‐enactmentevidenceisparticularlyrelevantwhenthestatuteisoverthirtyyearsold,andevidenceusedtojustifySection8(a)isstaleforpurposesofdeterminingacompellinginterestinthepresent.Id.TheCourtthenfollowedthe10thCircuitCourtofAppeals’approachinAdarandVII,andreviewedthepost‐enactmentevidenceinthreebroadcategories:(1)evidenceofbarrierstotheformationofqualifiedminoritycontractorsduetodiscrimination,(2)evidenceofdiscriminatorybarrierstofaircompetitionbetweenminorityandnon‐minoritycontractors,and(3)evidenceofdiscriminationinstateandlocaldisparitystudies.DynaLantic,at*17.

TheCourtfoundthatthegovernmentpresentedsufficientevidenceofbarrierstominoritybusinessformation,includingevidenceonrace‐baseddenialofaccesstocapitalandcredit,lendingdiscrimination,routineexclusionofminoritiesfromcriticalbusinessrelationships,particularlythroughclosedor“oldboy”businessnetworksthatmakeitespeciallydifficultforminority‐ownedbusinessestoobtainwork,andthatminoritiescontinuetoexperiencebarrierstobusinessnetworks.DynaLantic,at*17‐21.TheCourtconsideredaspartoftheevidentiarybasisbeforeCongressmultipledisparitystudiesconductedthroughouttheUnitedStatesandsubmittedtoCongress,andqualitativeandquantitativetestimonysubmittedatCongressionalhearings.Id.

TheCourtalsofoundthatthegovernmentsubmittedsubstantialevidenceofbarrierstominoritybusinessdevelopment,includingevidenceofdiscriminationbyprimecontractors,privatesectorcustomers,suppliers,andbondingcompanies.DynaLantic,at*21‐23.TheCourtagainbasedthisfindingonrecentevidencesubmittedbeforeCongressintheformofdisparitystudies,reportsandCongressionalhearings.Id.

Stateandlocaldisparitystudies.AlthoughtheCourtnotedtherehavebeenhundredsofdisparitystudiesplacedbeforeCongress,theCourtconsidersinparticularstudiessubmittedbythefederalDefendantsof50disparitystudies,encompassingevidencefrom28statesandtheDistrictofColumbia,whichhavebeenbeforeCongresssince2006.DynaLantic,at*25‐29.TheCourtstateditreviewedthestudieswithafocusontwoindicatorsthatothercourtshavefoundrelevantinanalyzingdisparitystudies.First,theCourtconsideredthedisparityindices


calculated,whichwasadisparityindex,calculatedbydividingthepercentageofMBE,WBE,and/orDBEfirmsutilizedinthecontractingmarketbythepercentageofM/W/DBEfirmsavailableinthesamemarket.DynaLantic,at*26.TheCourtsaidthatnormally,adisparityindexof100demonstratesfullM/W/DBEparticipation;theclosertheindexistozero,thegreatertheM/W/DBEdisparityduetounderutilization.DynaLantic,at*26.

Second,theCourtreviewedthemethodbywhichstudiescalculatedtheavailabilityandcapacityofminorityfirms.DynaLantic,at*26.TheCourtnotedthatsomecourtshavelookedcloselyatthesefactorstoevaluatethereliabilityofthedisparityindices,reasoningthattheindicesarenotprobativeunlesstheyarerestrictedtofirmsofsignificantsizeandwithsignificantgovernmentcontractingexperience.DynaLantic,at*26.TheCourtpointedoutthatalthoughdiscriminatorybarrierstoformationanddevelopmentwouldimpactcapacity,theSupremeCourtdecisioninCrosonandtheCourtofAppealsdecisioninO’DonnellConstructionCo.v.DistrictofColumbia,etal.,963F.2d420(D.C.Cir.1992)“requiretheadditionalshowingthateligibleminorityfirmsexperiencedisparities,notwithstandingtheirabilities,inordertogiverisetoaninferenceofdiscrimination.”DynaLantic,at*26,n.10.

Analysis:Strongbasisinevidence.Basedonananalysisofthedisparitystudiesandotherevidence,theCourtconcludedthatthegovernmentarticulatedacompellinginterestfortheSection8(a)programandsatisfieditsinitialburdenestablishingthatCongresshadastrongbasisinevidencepermittingrace‐consciousmeasurestobeusedundertheSection8(a)program.DynaLantic,at*29‐37.TheCourtheldthatDynaLanticdidnotmeetitsburdentoestablishthattheSection8(a)programisunconstitutionalonitsface,findingthatDynaLanticcouldnotshowthatCongressdidnothaveastrongbasisinevidenceforpermittingrace‐consciousmeasurestobeusedunderanycircumstances,inanysectororindustryintheeconomy.DynaLantic,at*29.

TheCourtdiscussedandanalyzedtheevidencebeforeCongress,whichincludedextensivestatisticalanalysis,qualitativeandquantitativeconsiderationoftheuniquechallengesfacingminoritiesfromallbusinesses,andanexaminationoftheirrace‐neutralmeasuresthathavebeenenactedbypreviousCongresses,buthadfailedtoreachtheminorityownedfirms.DynaLantic,at*31.TheCourtsaidCongresshadspentdecadescompilingevidenceofracediscriminationinavarietyofindustries,includingbutnotlimitedtoconstruction.DynaLantic,at*31.TheCourtalsofoundthatthefederalgovernmentproducedsignificantevidencerelatedtoprofessionalservices,architectureandengineering,andotherindustries.DynaLantic,at*31.TheCourtstatedthatthegovernmenthastherefore“establishedthatthereareatleastsomecircumstanceswhereitwouldbe‘necessaryorappropriate’fortheSBAtoawardcontractstobusinessesundertheSection8(a)program.DynaLantic,at*31,citing15U.S.C.§637(a)(1).

Therefore,theCourtconcludedthatinresponsetoplaintiff’sfacialchallenge,thegovernmentmetitsinitialburdentopresentastrongbasisinevidencesufficienttosupportitsarticulated,constitutionallyvalid,compellinginterest.DynaLantic,at*31.TheCourtalsofoundthattheevidencefromaroundthecountryissufficientforCongresstoauthorizeanationwideremedy.DynaLantic,at*31,n.13.

RejectionofDynaLantic’srebuttalarguments.TheCourtheldthatsincethefederalDefendantsmadetheinitialshowingofacompellinginterest,theburdenshiftedtotheplaintifftoshowwhytheevidencereliedonbyDefendantsfailstodemonstrateacompellinggovernmentalinterest.DynaLantic,at*32.TheCourtrejectedeachofthechallengesbyDynaLantic,includingholdingthat:thelegislativehistoryissufficient;thegovernmentcompiledsubstantialevidencethatidentifiedprivateracialdiscriminationwhichaffectedminority


utilizationinspecificindustriesofgovernmentcontracting,bothbeforeandaftertheenactmentoftheSection8(a)program;anyflawsintheevidence,includingthedisparitystudies,DynaLantichasidentifiedinthedatadonotrisetothelevelofcredible,particularizedevidencenecessarytorebutthegovernment’sinitialshowingofacompellinginterest;DynaLanticcitednoauthorityinsupportofitsclaimthatfraudintheadministrationofrace‐consciousprogramsissufficienttoinvalidateSection8(a)programonitsface;andCongresshadstrongevidencethatthediscriminationissufficientlypervasiveacrossraciallinestojustifygrantingapreferenceforallfivegroupsincludedinSection8(a).DynaLantic,at*32‐36.

Inthisconnection,theCourtstateditagreedwithCrosonanditsprogenythatthegovernmentmayproperlybedeemeda“passiveparticipant”whenitfailstoadjustitsprocurementpracticestoaccountfortheeffectsofidentifiedprivatediscriminationontheavailabilityandutilizationofminority‐ownedbusinessesingovernmentcontracting.DynaLantic,at*34.Intermsofflawsintheevidence,theCourtpointedoutthattheproponentoftherace‐consciousremedialprogramisnotrequiredtounequivocallyestablishtheexistenceofdiscrimination,norisitrequiredtonegateallevidenceofnon‐discrimination.DynaLantic,at*35,citingConcreteWorkIV,321F.3dat991.Rather,astrongbasisinevidenceexists,theCourtstated,whenthereisevidenceapproachingaprimafaciecaseofaconstitutionalorstatutoryviolation,notirrefutableordefinitiveproofofdiscrimination.Id,citingCroson,488U.S.500.Accordingly,theCourtstatedthatDynaLantic’sclaimthatthegovernmentmustindependentlyverifytheevidencepresentedtoitisunavailing.Id.DynaLantic,at*35.

AlsointermsofDynaLantic’sargumentsaboutflawsintheevidence,theCourtnotedthatDefendantsplacedintherecordapproximately50disparitystudieswhichhadbeenintroducedordiscussedinCongressionalHearingssince2006,whichDynaLanticdidnotrebutorevendiscussanyofthestudiesindividually.DynaLantic,at*35.DynaLanticassertedgenerallythatthestudiesdidnotcontrolforthecapacityofthefirmsatissue,andwerethereforeunreliable.Id.TheCourtpointedoutthatCongressneednothaveevidenceofdiscriminationinall50statestodemonstrateacompellinginterest,andthatinthiscase,thefederalDefendantspresentedrecentevidenceofdiscriminationinasignificantnumberofstatesandlocalitieswhich,takentogether,representsabroadcross‐sectionofthenation.DynaLantic,at*35,n.15.TheCourtstatedthatwhilenotallofthedisparitystudiesaccountedforthecapacityofthefirms,manyofthemdidcontrolforcapacityandstillfoundsignificantdisparitiesbetweenminorityandnon‐minorityownedfirms.DynaLantic,at*35.Inshort,theCourtfoundthatDynaLantic’s“generalcriticism”ofthemultitudeofdisparitystudiesdoesnotconstituteparticularevidenceunderminingthereliabilityoftheparticulardisparitystudiesandthereforeisoflittlepersuasivevalue.DynaLantic,at*35.

IntermsoftheargumentbyDynaLanticastorequiringproofofevidenceofdiscriminationagainsteachminoritygroup,theCourtstatedthatCongresshasastrongbasisinevidenceifitfindsevidenceofdiscriminationissufficientlypervasiveacrossraciallinestojustifygrantingapreferencetoallfivedisadvantagedgroupsincludedinSection8(a).TheCourtfoundCongresshadstrongevidencethatthediscriminationissufficientlypervasiveacrossraciallinestojustifyapreferencetoallfivegroups.DynaLantic,at*36.Thefactthatspecificevidencevaries,tosomeextent,withinandbetweenminoritygroups,wasnotabasistodeclarethisstatutefaciallyinvalid.DynaLantic,at*36.

Facialchallenge:Conclusion.TheCourtconcludedCongresshadacompellinginterestineliminatingtherootsofracialdiscriminationinfederalcontractingandhadestablishedastrongbasisofevidencetosupportitsconclusionthatremedialactionwasnecessarytoremedythatdiscriminationbyprovidingsignificantevidenceinthreedifferentarea.First,itprovided


extensiveevidenceofdiscriminatorybarrierstominoritybusinessformation.DynaLantic,at*37.Second,itprovided“forceful”evidenceofdiscriminatorybarrierstominoritybusinessdevelopment.Id.Third,itprovidedsignificantevidencethat,evenwhenminoritybusinessesarequalifiedandeligibletoperformcontractsinboththepublicandprivatesectors,theyareawardedthesecontractsfarlessoftenthantheirsimilarlysituatednon‐minoritycounterparts.Id.TheCourtfoundtheevidencewasparticularlystrong,nationwide,intheconstructionindustry,andthattherewassubstantialevidenceofwidespreaddisparitiesinotherindustriessuchasarchitectureandengineering,andprofessionalservices.Id.

As‐appliedchallenge.DynaLanticalsochallengedtheSBAandDoD’suseoftheSection8(a)programasapplied:namely,theagencies’determinationthatitisnecessaryorappropriatetosetasidecontractsinthemilitarysimulationandtrainingindustry.DynaLantic,at*37.Significantly,theCourtpointsoutthatthefederalDefendants“concedethattheydonothaveevidenceofdiscriminationinthisindustry.”Id.Moreover,theCourtpointsoutthatthefederalDefendantsadmittedthatthere“isnoCongressionalreport,hearingorfindingthatreferences,discussesormentionsthesimulationandtrainingindustry.”DynaLantic,at*38.ThefederalDefendantsalsoadmitthattheyare“unawareofanydiscriminationinthesimulationandtrainingindustry.”Id.Inaddition,thefederalDefendantsadmitthatnoneofthedocumentstheyhavesubmittedasjustificationfortheSection8(a)programmentionsoridentifiesinstancesofpastorpresentdiscriminationinthesimulationandtrainingindustry.DynaLantic,at*38.

ThefederalDefendantsmaintainthatthegovernmentneednottieevidenceofdiscriminatorybarrierstominoritybusinessformationanddevelopmenttoevidenceofdiscriminationinanyparticularindustry.DynaLantic,at*38.TheCourtconcludesthatthefederalDefendants’positionisirreconcilablewithbindingauthorityupontheCourt,specifically,theUnitedStatesSupremeCourt’sdecisioninCroson,aswellastheFederalCircuit’sdecisioninO’DonnellConstructionCompany,whichadoptedCroson’sreasoning.DynaLantic,at*38.TheCourtholdsthatCrosonmadeclearthegovernmentmustprovideevidencedemonstratingtherewereeligibleminoritiesintherelevantmarket.DynaLantic,at*38.TheCourtheldthatabsentanevidentiaryshowingthat,inahighlyskilledindustrysuchasthemilitarysimulationandtrainingindustry,thereareeligibleminoritieswhoarequalifiedtoundertakeparticulartasksandareneverthelessdeniedtheopportunitytothrivethere,thegovernmentcannotcomplywithCroson’sevidentiaryrequirementtoshowaninferenceofdiscrimination.DynaLantic,at*39,citingCroson,488U.S.501.TheCourtrejectsthefederalgovernment’spositionthatitdoesnothavetomakeanindustry‐basedshowinginordertoshowstrongevidenceofdiscrimination.DynaLantic,at*40.

TheCourtnotesthattheDepartmentofJusticehasrecognizedthatthefederalgovernmentmusttakeanindustry‐basedapproachtodemonstratingcompellinginterest.DynaLantic,at*40,citingCortezIIIServiceCorp.v.NationalAeronautics&SpaceAdministration,950F.Supp.357(D.D.C.1996).InCortez,theCourtfoundtheSection8(a)programconstitutionalonitsface,butfoundtheprogramunconstitutionalasappliedtotheNASAcontractatissuebecausethegovernmenthadprovidednoevidenceofdiscriminationintheindustryinwhichtheNASAcontractwouldbeperformed.DynaLantic,at*40.TheCourtpointedoutthattheDepartmentofJusticehadadvisedfederalagenciestomakeindustry‐specificdeterminationsbeforeofferingset‐asidecontractsandspecificallycautionedthemthatwithoutsuchparticularizedevidence,set‐asideprogramsmaynotsurviveCrosonandAdarand.DynaLantic,at*40.

TheCourtrecognizedthatlegislationconsideredinCroson,AdarandandO’Donnellwereallrestrictedtooneindustry,whereasthiscasepresentsadifferentfactualscenario,becauseSection8(a)isnotindustry‐specific.DynaLantic,at*40,n.17.TheCourtnotedthatthe


governmentdidnotproposeanalternativeframeworktoCrosonwithinwhichtheCourtcananalyzetheevidence,andthatinfact,theevidencethegovernmentpresentedinthecaseisindustryspecific.Id.

TheCourtconcludedthatagencieshavearesponsibilitytodecideiftherehasbeenahistoryofdiscriminationintheparticularindustryatissue.DynaLantic,at*40.AccordingtotheCourt,itneednottakeaparty’sdefinitionof“industry”atfacevalue,andmaydeterminetheappropriateindustrytoconsiderisbroaderornarrowerthanthatproposedbytheparties.Id.However,theCourtstated,inthiscasethegovernmentdidnotarguewithplaintiff’sindustrydefinition,andmoresignificantly,itprovidednoevidencewhatsoeverfromwhichaninferenceofdiscriminationinthatindustrycouldbemade.DynaLantic,at*40.

Narrowlytailoring.Inadditiontoshowingstrongevidencethatarace‐consciousprogramservesacompellinginterest,thegovernmentisrequiredtoshowthatthemeanschosentoaccomplishthegovernment’sassertedpurposearespecificallyandnarrowlyframedtoaccomplishthatpurpose.DynaLantic,at*41.TheCourtconsideredseveralfactorsinthenarrowlytailoringanalysis:theefficacyofalternative,race‐neutralremedies,flexibility,over‐orunder‐inclusivenessoftheprogram,duration,therelationshipbetweennumericalgoalsandtherelevantlabormarket,andtheimpactoftheremedyonthirdparties.Id.

TheCourtanalyzedeachofthesefactorsandfoundthatthefederalgovernmentsatisfiedallsixfactors.DynaLantic,at*41‐48.TheCourtfoundthatthefederalgovernmentpresentedsufficientevidencethatCongressattemptedtouserace‐neutralmeasurestofosterandassistminorityownedbusinessesrelatingtotherace‐consciouscomponentinSection8(a),andthattheserace‐neutralmeasuresfailedtoremedytheeffectsofdiscriminationonminoritysmallbusinessowners.DynaLantic,at*42.TheCourtfoundthattheSection8(a)programissufficientlyflexibleingrantingrace‐consciousreliefbecauseraceismaderelevantintheprogram,butitisnotadeterminativefactororarigidracialquotasystem.DynaLantic,at*43.TheCourtnotedthattheSection8(a)programcontainsawaiverprovisionandthattheSBAwillnotacceptaprocurementforawardasan8(a)contractifitdeterminesthatacceptanceoftheprocurementwouldhaveanadverseimpactonsmallbusinessesoperatingoutsidetheSection8(a)program.DynaLantic,at*44.

TheCourtfoundthattheSection8(a)programwasnotover‐andunder‐inclusivebecausethegovernmenthadstrongevidenceofdiscriminationwhichissufficientlypervasiveacrossraciallinestoallfivedisadvantagedgroups,andSection8(a)doesnotprovidethateverymemberofaminoritygroupisdisadvantaged.DynaLantic,at*44.Inaddition,theprogramisnarrowlytailoredbecauseitisbasednotonlyonsocialdisadvantage,butalsoonanindividualizedinquiryintoeconomicdisadvantage,andthatafirmownedbyanon‐minoritymayqualifyassociallyandeconomicallydisadvantaged.DynaLantic,at*44.

TheCourtalsofoundthattheSection8(a)programplacesanumberofstrictdurationallimitsonaparticularfirm’sparticipationintheprogram,placestemporallimitsoneveryindividual’sparticipationintheprogram,andthataparticipant’seligibilityiscontinuallyreassessedandmustbemaintainedthroughoutitsprogramterm.DynaLantic,at*45.Section8(a)’sinherenttimelimitandgraduationprovisionsensurethatitiscarefullydesignedtoendureonlyuntilthediscriminatoryimpacthasbeeneliminated,andthusitisnarrowlytailored.DynaLantic,at*46.

Inlightofthegovernment’sevidence,theCourtconcludedthattheaspirationalgoalsatissue,allofwhichwerelessthanfivepercentofcontractdollars,arefaciallyconstitutional.DynaLantic,at*46‐47.Theevidence,theCourtnoted,establishedthatminorityfirmsareready,willing,and


abletoperformworkequaltotwotofivepercentofgovernmentcontractsinindustriesincludingbutnotlimitedtoconstruction.Id.TheCourtfoundtheeffectsofpastdiscriminationhaveexcludedminoritiesfromformingandgrowingbusinesses,andthenumberofavailableminoritycontractorsreflectsthatdiscrimination.DynaLantic,at*47.

Finally,theCourtfoundthattheSection8(a)programtakesappropriatestepstominimizetheburdenonthirdparties,andthattheSection8(a)programisnarrowlytailoredonitsface.DynaLantic,at*48.TheCourtconcludedthatthegovernmentisnotrequiredtoeliminatetheburdenonnon‐minoritiesinordertosurvivestrictscrutiny,butalimitedandproperlytailoredremedytocuretheeffectsofpriordiscriminationispermissibleevenwhenitburdensthirdparties.Id.TheCourtpointstoanumberofprovisionsdesignedtominimizetheburdenonnon‐minorityfirms,includingthepresumptionthataminorityapplicantissociallydisadvantagedmayberebutted,anindividualwhoisnotpresumptivelydisadvantagedmayqualifyforsuchstatus,the8(a)programrequiresanindividualizeddeterminationofeconomicdisadvantage,anditisnotopentoindividualswhosenetworthexceeds$250,000regardlessofrace.Id.

Conclusion.TheCourtconcludedthattheSection8(a)programisconstitutionalonitsface.TheCourtalsoheldthatitisunabletoconcludethatthefederalDefendantshaveproducedevidenceofdiscriminationinthemilitarysimulationandtrainingindustrysufficienttodemonstrateacompellinginterest.Therefore,DynaLanticprevailedonitsas‐appliedchallenge.DynaLantic,at*51.Accordingly,theCourtgrantedthefederalDefendants’MotionforSummaryJudgmentinpart(holdingtheSection8(a)programisvalidonitsface)anddenieditinpart,andgrantedtheplaintiff’sMotionforSummaryJudgmentinpart(holdingtheprogramisinvalidasappliedtothemilitarysimulationandtrainingindustry)anddenieditinpart.TheCourtheldthattheSBAandtheDoDareenjoinedfromawardingprocurementsformilitarysimulatorsundertheSection8(a)programwithoutfirstarticulatingastrongbasisinevidencefordoingso.

Appealsvoluntarilydismissed,andStipulationandAgreementofSettlementApprovedandOrderedbyDistrictCourt.ANoticeofAppealandNoticeofCrossAppealwerefiledinthiscasetotheUnitedStatesCourtofAppealsfortheDistrictofColumbiabytheUnitedStatusandDynaLantic:DocketNumbers12‐5329and12‐5330.Subsequently,theappealswerevoluntarilydismissed,andthepartiesenteredintoaStipulationandAgreementofSettlement,whichwasapprovedbytheDistrictCourt(Jan.30,2014).Thepartiesstipulatedandagreedinteralia,asfollows:(1)theFederalDefendantswereenjoinedfromawardingprimecontractsundertheSection8(a)programforthepurchaseofmilitarysimulationandmilitarysimulationtrainingcontractswithoutfirstarticulatingastrongbasisinevidencefordoingso;(2)theFederalDefendantsagreedtopayplaintiffthesumof$1,000,000.00;and(3)theFederalDefendantsagreedtheyshallrefrainfromseekingtovacatetheinjunctionenteredbytheCourtforatleasttwoyears.

TheDistrictCourtonJanuary30,2014approvedtheStipulationandAgreementofSettlement,andSoOrderedthetermsoftheoriginal2012injunctionmodifiedasprovidedintheStipulationandAgreementofSettlement.

5. DynaLantic Corp. v. United States Dept. of Defense, et al., 503 F. Supp.2d 262 (D.D.C. 2007)

DynaLanticCorp.involvedachallengetotheDOD’sutilizationoftheSmallBusinessAdministration’s(“SBA”)8(a)BusinessDevelopmentProgram(“8(a)Program”).InitsOrderofAugust23,2007,thedistrictcourtdeniedbothparties’MotionsforSummaryJudgmentbecausetherewasnoinformationintherecordregardingtheevidencebeforeCongresssupportingits


2006reauthorizationoftheprograminquestion;thecourtdirectedthepartiestoproposefutureproceedingstosupplementtherecord.503F.Supp.2d262,263(D.D.C.2007).

Thecourtfirstexplainedthatthe8(a)Programsetsagoalthatnolessthan5percentoftotalprimefederalcontractandsubcontractawardsforeachfiscalyearbeawardedtosociallyandeconomicallydisadvantagedindividuals.Id.Eachfederalgovernmentagencyisrequiredtoestablishitsowngoalforcontractingbutthegoalsarenotmandatoryandthereisnosanctionforfailingtomeetthegoal.Uponapplicationandadmissionintothe8(a)Program,smallbusinessesownedandcontrolledbydisadvantagedindividualsareeligibletoreceivetechnological,financial,andpracticalassistance,andsupportthroughpreferentialawardofgovernmentcontracts.Forthepastfewyears,the8(a)ProgramwastheprimarypreferentialtreatmentprogramtheDODusedtomeetits5percentgoal.Id.at264.

ThiscasearosefromaNavycontractthattheDODdecidedtoawardexclusivelythroughthe8(a)Program.Theplaintiffownedasmallcompanythatwouldhavebidonthecontractbutforthefactitwasnotaparticipantinthe8(a)Program.AftermultiplejudicialproceedingstheD.C.Circuitdismissedtheplaintiff’sactionforlackofstandingbutgrantedtheplaintiff’smotiontoenjointhecontractprocurementpendingtheappealofthedismissalorder.TheNavycancelledtheproposedprocurementbuttheD.C.Circuitallowedtheplaintifftocircumventthemootnessargumentbyamendingitspleadingstoraiseafacialchallengetothe8(a)programasadministeredbytheSBAandutilizedbytheDOD.TheD.C.Circuitheldtheplaintiffhadstandingbecauseoftheplaintiff’sinabilitytocompeteforDODcontractsreservedto8(a)firms,theinjurywastraceabletotherace‐consciouscomponentofthe8(a)Program,andtheplaintiff’sinjurywasimminentduetothelikelihoodthegovernmentwouldinthefuturetrytoprocureanothercontractunderthe8(a)Programforwhichtheplaintiffwasready,willing,andabletobid.Id.at264‐65.

Onremand,theplaintiffamendeditscomplainttochallengetheconstitutionalityofthe8(a)Programandsoughtaninjunctiontopreventthemilitaryfromawardinganycontractformilitarysimulatorsbasedupontheraceofthecontractors.Id.at265.Thedistrictcourtfirstheldthattheplaintiff’scomplaintcouldbereadonlyasachallengetotheDOD’simplementationofthe8(a)Program[pursuantto10U.S.C.§2323]asopposedtoachallengetotheprogramasawhole.Id.at266.Thepartiesagreedthatthe8(a)Programusesrace‐consciouscriteriasothedistrictcourtconcludeditmustbeanalyzedunderthestrictscrutinyconstitutionalstandard.Thecourtfoundthatinordertoevaluatethegovernment’sproffered“compellinggovernmentinterest,”thecourtmustconsidertheevidencethatCongressconsideredatthepointofauthorizationorreauthorizationtoensurethatithadastrongbasisinevidenceofdiscriminationrequiringremedialaction.ThecourtcitedtoWesternStatesPavinginsupportofthisproposition.Id.ThecourtconcludedthatbecausetheDODprogramwasreauthorizedin2006,thecourtmustconsidertheevidencebeforeCongressin2006.

ThecourtcitedtotherecentRothedecisionasdemonstratingthatCongressconsideredsignificantevidentiarymaterialsinitsreauthorizationoftheDODprogramin2006,includingsixrecentlypublisheddisparitystudies.Thecourtheldthatbecausetherecordbeforeitinthepresentcasedidnotcontaininformationregardingthis2006evidencebeforeCongress,itcouldnotruleontheparties’MotionsforSummaryJudgment.Thecourtdeniedbothmotionsanddirectedthepartiestoproposefutureproceedingsinordertosupplementtherecord.Id.at267.

APPENDIX C.

Quantitative Analysis

BBC RESEARCH & CONSULTING – FINAL REPORT APPENDIX C, PAGE 1

APPENDIX C. Quantitative Analysis

Figure C‐1. Percentage of all workers 25 and older with at least a four‐year degree, Virginia Beach and the United States, 2012‐2016

Note:

**/++ Denotes statistically significant differences from non‐Hispanic whites (for minority groups), and from men (for women), at the 95% confidence level for the United States as a whole and Virginia Beach, respectively.

The Virginia Beach marketplace is defined in this study as Chesapeake City, Norfolk City, Portsmouth City, and Virginia Beach City.

Source:


FigureC‐1indicatesthat,comparedtonon‐HispanicwhiteAmericansworkingintheVirginiaBeachmarketplace,smallerpercentagesofBlackAmericansandHispanicAmericanshavefour‐yearcollegedegrees.Incontrast,alargerpercentageofAsianAmericanshavefour‐yearcollegedegrees.Inaddition,alargerpercentageofwomenthanmenworkingintheVirginiaBeachmarketplacehavefour‐yearcollegedegrees.


Figure C‐2. Percent representation of minorities in various industries in Virginia Beach, 2012‐2016

Note: ** Denotes that the difference in proportions between minority workers in the specified industry and all industries is statistically significant at the 95% confidence level.

The representation of minorities among all Virginia Beach workers is 29% for Black Americans, 7% for Hispanic Americans, 6% for Asian Americans, 1% for Native Americans, 0% for Other race minorities and 43% for all minorities considered together.

"Other race minority" includes Census respondents who do not identify with the racial categories defined by the U.S. Census Bureau.



FigureC‐2indicatesthattheindustriesintheVirginiaBeachmarketplacewiththehighestrepresentationsofminorityworkersarechildcare,hair,andnails;healthcare;andotherservices.IndustriesintheVirginiaBeachmarketplacewiththelowestrepresentationsofminorityworkersareconstruction;wholesaletrade;andextractionandagriculture.


Figure C‐3. Percent representation of women in various industries in Virginia Beach, 2012‐2016

Note: ** Denotes that the difference in proportions between women workers in the specified industry and all industries is statistically significant at the 95% confidence level.

The representation of women among all Virginia Beach workers is 46%.

Workers in the finance, insurance, real estate, legal services, accounting, advertising, architecture, management, scientific research, and veterinary services industries were combined to one category of Architecture & Engineering; Workers in the rental and leasing, travel, investigation, waste remediation, arts, entertainment, recreation, accommodations, food services, and select other services were combined into one category of Other services; Workers in child day care services, barber shops, beauty salons, nail salons, and other personal services were combined into one category of childcare, hair, and nails.


FigureC‐3indicatesthattheindustriesintheVirginiaBeachmarketplacewiththehighestrepresentationsofwomenworkersarechildcare,hair,andnails;healthcare;andeducation.IndustriesintheVirginiaBeachmarketplacewiththelowestrepresentationsofwomenworkersaremanufacturing;extractionandagriculture;andconstruction.


Figure C‐4. Demographic characteristics of workers in study‐related industries and all industries, Virginia Beach and the United States, 2012‐2016

Note: ** Denotes that the difference in proportions between workers in each study‐related industry and workers in all industries is statistically significant at the 95% confidence level. * Denotes that the difference in proportions between workers in each study‐related industry and workers in all industries is statistically significant at the 90% confidence level.


FigureC‐4indicatesthatcomparedtoallindustriesconsideredtogether,therearesmallerpercentagesofBlackAmericans,AsianAmericans,andwomenworkingintheVirginiaBeachmarketplace’sconstructionindustry.Similarly,therearesmallerpercentagesofBlackAmericans,HispanicAmericans,andwomenworkinginthearchitectureandengineeringindustry.ThereisalsoasmallerpercentageofHispanicAmericansworkingintheprofessionalservicesindustry,andasmallerpercentageofwomenworkinginthegoodsandservices

Virginia Beach

Race/ethnicity

Black American 29.4 % 17.7 % ** 12.4 % ** 40.9 % ** 31.4 % **

Asian American 5.7 2.5 ** 5.0 7.4 6.5 **

Hispanic American 6.5 13.6 ** 4.5 * 3.6 ** 6.3

Native American 0.8 0.4 0.7 0.4 1.1

Other race minority 0.2 0.0 0.3 0.7 0.2

Total minority 42.5 % 34.1 % 22.8 % 53.0 % 45.6 %

Non‐Hispanic white 57.5 % 65.9 % ** 77.2 % ** 47.0 % ** 54.4 % **

Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Gender

Women 46.4 % 10.4 % ** 32.3 % ** 68.5 % ** 41.2 % **

Men 53.6 89.6 ** 67.7 ** 31.5 ** 58.8 **

Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

United States

Race/ethnicity

Black American 12.3 % 5.9 % ** 6.3 % ** 15.9 % ** 12.3 % *

Asian American 6.1 1.9 ** 9.5 ** 6.3 ** 6.8 **

Hispanic American 16.4 26.2 ** 8.4 ** 13.4 ** 20.4 **

Native American 1.2 1.3 ** 0.8 ** 1.0 ** 1.1 **

Other race minority 0.2 0.2 0.2 0.2 0.2

Total minority 36.1 % 35.7 % 25.2 % 36.8 % 40.8 %

Non‐Hispanic white 63.9 % 64.3 % ** 74.8 % ** 63.2 % ** 59.2 % **

Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Gender

Women 47.2 % 9.1 % ** 37.6 % ** 66.0 % ** 37.1 % **

Men 52.8 90.9 ** 62.4 ** 34.0 ** 62.9 **

Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

(n=225,700)

Architecture &

Engineering

(n=205,446)

Goods &

Services

(n=4,004)

Goods &

Services

(n=1,204,538)

Architecture &

Engineering

(n=839)

Professional

Services

(n=744)

Professional

Services

All Industries Construction

(n=7,643,801) (n=461,045)

All Industries Construction

(n=26,889) (n=1,467)


industry.Incontrast,comparedtoallindustriescombined,thereisalargerpercentageofHispanicAmericansworkingintheconstructionindustryintheVirginiaBeachmarketplace.Inaddition,largerpercentagesofBlackAmericansworkintheprofessionalservicesandgoodsandservicesindustriesintheVirginiaBeachmarketplacethaninallindustriescombined.ThereisalsoalargerpercentageofwomenworkingintheprofessionalservicessectorandalargerpercentageofAsianAmericansworkinginthegoodsandservicesindustry.

Figure C‐5. Percent representation of minorities in selected construction occupations in Virginia Beach, 2012‐2016

Note: ** Denotes that the difference in proportions between minority workers in the specified occupation and all construction occupations considered together is statistically significant at the 95% confidence level.


The representation of minorities among all Virginia Beach construction workers is 18% for Black Americans, 14% for Hispanic Americans, 2% for Asian Americans, 0% for Native Americans, 0% for Other race minorities, and 34% for all minorities considered together.

"Other race minority" includes Census respondents who do not identify with the racial categories provided by the U.S. Census Bureau.

Plasterers and stucco masons; iron and steel workers; and glaziers had no minority representation within Virginia Beach.

Crane and tower operators, dredge, excavating and loading machine operators, paving, surfacing and tamping equipment operators and other construction equipment operators were combined into the single category of miscellaneous construction equipment operators.

Source: BBC Research & Consulting from 2012‐2016 ACS 5% sample. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/..


FigureC‐5indicatesthattheconstructionoccupationswiththehighestrepresentationsofminorityworkersintheVirginiaBeachmarketplacearecementmasonsandterrazzoworkers;drywallinstallers,ceilingtileinstallersandtapers;andhelpers.

Figure C‐6. Percent representation of women in selected construction occupations in Virginia Beach, 2012‐2016

Note: ** Denotes that the difference in proportions between women workers in the specified occupation and all construction occupations considered together is statistically significant at the 95% confidence level.


The representation of women among all Virginia Beach construction workers is 10%.

Crane and tower operators, dredge, excavating and loading machine operators, paving, surfacing and tamping equipment operators and other construction equipment operators were combined into the single category of miscellaneous construction equipment operators.

Roofers; electricians; brickmasons, blockmasons, and stonemasons; pipelayers, plumbers, pipefitters, and steamfitters; iron and steel workers; miscellaneous construction equipment operators; cement masons and terrazzo workers; drywall installers, ceiling tile installers, and tapers; helpers; plasterers and stucco masons; carpet, floor, and tile installers and finishers; and glaziers had no representation of women in Virginia Beach.

Source: BBC Research & Consulting from 2012‐2016 ACS 5% sample. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/..

FigureC‐6indicatesthattheconstructionoccupationsintheVirginiaBeachmarketplacewiththehighestrepresentationsofwomenworkersaresecretaries;drivers,salesworkers,andtruckdrivers;andsheetmetalworkers.


Figure C‐7. Percentage of workers who worked as a manager in each study‐related industry, Virginia Beach and the United States, 2012‐2016

Note:

*, ** Denotes that the difference in proportions between the minority group and non‐Hispanic whites (or between women and men) is statistically significant at the 90% and 95% confidence level, respectively.


Source:


C‐7indicatesthat,comparedtonon‐HispanicwhiteAmericans,smallerpercentagesofBlackAmericansworkasmanagersintheconstructionandgoodsandservicesindustries;andasmallerpercentageofHispanicAmericansworkasmanagersintheconstructionindustry.Comparedtomen,asmallerpercentageofwomenworkasmanagersinthearchitectureandengineeringindustry.Incontrast,alargerpercentageofnon‐Hispanicwhitewomenthanmenworkasmanagersintheconstructionindustry.

Virginia Beach

Race/ethnicity

Black American 2.8 % ** 8.3 % 2.4 % 5.8 % **

Asian American 6.6 3.3 7.9 12.7

Hispanic American 4.5 ** 2.9 0.0 7.0

Native American 10.7 † 0.0 † 39.3 † 7.4



Gender

Women 14.6 % * 2.4 % ** 4.1 % 8.2 %

Men 8.5 7.0 3.7 7.8

All individuals 9.1 % 5.5 % 4.0 % 7.9 %

United States

Race/ethnicity

Black American 5.0 % ** 2.2 % ** 2.6 % ** 4.3 % **

Asian American 11.0 2.7 ** 6.0 ** 9.8 **

Hispanic American 3.1 ** 2.9 ** 3.3 ** 4.5 **

Native American 5.8 ** 3.7 3.6 ** 5.5 **

Other Race Minority 6.3 ** 2.5 * 5.7 5.7 **


Gender

Women 10.0 % ** 2.4 % ** 4.4 % ** 7.0 % **

Men 8.0 4.5 8.6 7.1

All individuals 9.1 % 3.7 % 5.8 % 7.1 %

Construction

Goods &

Services

Goods &

Services

Construction

Professional

Services

Professional

Services

Architecture &

Engineering

Architecture &

Engineering


Figure C‐8. Mean annual wages, Virginia Beach and the United States, 2012‐2016

Note:


**/++ Denotes statistically significant differences from non‐Hispanic whites (for minority groups) or from men (for women) at the 95% confidence level for Virginia Beach and the United States as a whole, respectively.

Source:


FigureC‐8indicatesthat,comparedtonon‐HispanicwhiteAmericans,BlackAmericans,AsianAmericans,HispanicAmericans,NativeAmericans,andotherraceminoritiesintheVirginiaBeachmarketplacehavelowermeanannualwages.Inaddition,non‐HispanicwhitewomenintheVirginiaBeachmarketplaceexhibitlowermeanannualwagesthanmen.


Figure C‐9. Predictors of annual wages (regression), Virginia Beach, 2012‐2016

Note:

The regression includes 12,699 observations.


For ease of interpretation, the exponentiated form of the coefficients is displayed in the figure.

*, ** Denotes statistical significance at the 90% and 95% confidence levels, respectively.

For comparison, Asian Pacific American and Subcontinent Asian American were combined into the Asian American group due to small sample size.

The referent for each set of categorical variables is as follows: non‐Hispanic whites for the race variables, male for the gender variable, high school diploma for the education variables, manufacturing for industry variables, and Northeast for the region variables.

Source:


FigureC‐9indicatesthat,comparedtobeinganon‐HispanicwhiteAmericanintheVirginiaBeachmarketplace,beingBlackAmerican,AsianAmerican,HispanicAmericanorotherraceminorityisrelatedtolowerannualwages,evenafteraccountingforvariousotherpersonalcharacteristics.(Forexample,themodelindicatesthatbeingBlackAmericanisassociatedwithmakingapproximately$0.81foreverydollarthatanon‐HispanicwhiteAmericanmakes,allelsebeingequal.)Inaddition,beingawomanisrelatedtolowerannualwagescomparedtobeingamanintheVirginiaBeachmarketplace,evenafteraccountingforvariousotherpersonalcharacteristics.

Variable

Constant 9466.553 **

Black American 0.813 **

Asian American 0.852 **

Hispanic American 0.879 **


Other minority group 0.613 **

Women 0.781 **

Less than high school education 0.853 **

Some college 1.122 **

Four‐year degree 1.442 **

Advanced degree 2.016 **

Disabled 0.862 **

Military experience 1.002

Speaks English well 1.289 *

Age 1.050 **

Age‐squared 1.000 **

Married 1.086 **

Children 1.007

Number of people over 65 in household 0.910 **

Public sector worker 1.171 **

Manager 1.308 **

Part time worker 0.361 **

Extraction and agriculture 0.768

Construction 0.805 **

Wholesale trade 0.897 **

Retail trade 0.714 **

Transportation, warehouse, & information 1.020

Professional services 1.051 **

Education 0.652 **

Health care 1.061 **

Other services 0.682 **

Public administration and social services 0.908 **

Exponentiated

Coefficient


Figure C‐10. Predictors of annual wages (regression), United States, 2012‐2016

Note:

The regression includes 4,032,836 observations.



** Denotes statistical significance at the 95% confidence level.

The referent for each set of categorical variables is as follows: non‐Hispanic whites for the race variables, male for the gender variable, high school diploma for the education variables, manufacturing for industry variables, and Northeast for the region variables.

Source:


FigureC‐10indicatesthat,comparedtobeinganon‐HispanicwhiteAmericanintheUnitedStates,beingBlackAmerican,AsianAmerican,HispanicAmerican,NativeAmerican,orotherraceminorityisrelatedtolowerannualwages,evenafteraccountingforvariousotherpersonalcharacteristics.(Forexample,themodelindicatesthatbeingBlackAmericanisassociatedwithmakingapproximately$0.85foreverydollarthatanon‐HispanicwhiteAmericanmakes,allelsebeingequal.)Inaddition,beingawomanisrelatedtolowerannualwages,comparedtobeingaman,evenafteraccountingforvariousotherpersonalcharacteristics.

Variable

Constant 7166.063 **




Native American 0.889 **

Other minority group 0.929 **

Women 0.779 **

Less than high school education 0.853 **




Disabled 0.792 **

Military experience 0.994 **

Speaks English well 1.347 **

Age 1.058 **


Married 1.117 **

Children 1.011 **


Midwest 0.881 **

South 0.895 **

West 0.986 **

Public sector worker 1.109 **

Manager 1.306 **

Part time worker 0.365 **

Extraction and agriculture 0.963 **

Construction 0.936 **

Wholesale trade 0.974 **

Retail trade 0.756 **

Transportation, warehouse, & information 1.041 **

Professional services 1.073 **

Education 0.662 **

Health care 1.008 **

Other services 0.716 **

Public administration and social services 0.832 **

Exponentiated

Coefficient


Figure C‐11. Home Ownership Rates, Virginia Beach and the United States, 2012‐2016

Note:

The sample universe is all households.

*,** Denotes statistically significant differences from non‐Hispanic whites at the 90% and 95% confidence levels for the Virginia Beach marketplace

++ Denotes statistically significant differences from non‐Hispanic whites at the 95% confidence level for the United States as a whole.

Source:


FigureC‐11indicatesthat,comparedtonon‐HispanicwhiteAmericans,smallerpercentagesofBlackAmericans,HispanicAmericans,andNativeAmericansownhomesintheVirginiaBeachmarketplace.

Figure C‐12. Median home values, Virginia Beach and the United States, 2012‐2016

Note:

The sample universe is all owner‐occupied housing units.

Source:


FigureC‐12indicatesthatBlackAmerican,HispanicAmerican,NativeAmericanandotherminorityhomeownersintheVirginiaBeachmarketplaceownhomesoflowermedianvaluethannon‐HispanicwhiteAmericanhomeowners.Incontrast,AsianAmericanhomeownersintheVirginiaBeachmarketplaceownhomesofequalvaluetonon‐HispanicwhiteAmericanhomeowners.


Figure C‐13. Denial rates of conventional purchase loans for high‐income households, Virginia Beach and the United States, 2007 and 2016

Note:

High‐income borrowers are those households with 120% or more of the HUD area median family income (MFI).


Source:


FigureC‐13indicatesthatin2016,BlackAmericans;AsianAmericans,HispanicAmericans;andNativeAmericansorOtherPacificIslandersintheVirginiaBeachmarketplaceweredeniedconventionalhomepurchaseloansathigherratesthannon‐HispanicwhiteAmericans.


Figure C‐14. Percent of conventional home purchase loans that were subprime, Virginia Beach and the United States, 2007 and 2016

Note:


Source:


FigureC‐14indicatesthatin2016,BlackAmericans,AsianAmericans,andHispanicAmericansintheVirginiaBeachmarketplacewereawardedsubprimeconventionalhomepurchaseloansatgreaterratesthannon‐HispanicwhiteAmericans.

Figure C‐15. Business loan denial rates, South Atlantic Division and the United States, 2003

Note:

**, ++ Denotes statistically significant differences from non‐Hispanic white men (for minority groups and women) at the 95% confidence level for the United States as a whole and the South Atlantic Division, respectively.

The South Atlantic Division comprises North Carolina, South Carolina, Delaware, the District of Columbia, Florida, Georgia, Maryland, Virginia, and West Virginia.

Source:

BBC Research & Consulting from 2003 Survey of Small Business Finance.

FigureC‐15indicatesthat,in2003,minority‐andwoman‐ownedbusinessesintheSouthAtlanticDivisionweredeniedbusinessloansatagreaterratethanbusinessesownedbynon‐Hispanicwhitemen.IntheUnitedStatesasawhole,BlackAmerican‐ownedbusinessesweredeniedbusinessloansatagreaterratethanbusinessesownedbynon‐Hispanicwhitemen.


Figure C‐16. Businesses that did not apply for loans due to fear of denial, South Atlantic Division and the United States, 2003

Note:



Source:


FigureC‐16indicatesthat,in2003,minority‐andwoman‐ownedbusinessesintheSouthAtlanticDivisionweremorelikelythanbusinessesownedtonotapplyforbusinessloansbyduetoafearadenial.IntheUnitedStatesasawhole,BlackAmerican‐,HispanicAmerican‐andnon‐Hispanicwhitewoman‐ownedbusinessesweremorelikelythanbusinessesownedbynon‐Hispanicwhitementonotapplyforbusinessloansduetoafearofdenial.

Figure C‐17. Mean values of approved business loans, South Atlantic Division and the United States, 2003

Note:



Source:


FigureC‐17indicatesthat,in2003,minority‐andwoman‐ownedbusinessesintheUnitedStateswhoreceivedbusinessloanswereapprovedforloansthatwereworthlessthanloansthatbusinessesownedbynon‐Hispanicwhitemenreceived.


Figure C‐18. Self‐employment rates in study‐related industries, Virginia Beach and the United States, 2012‐2016

Note:

** Denotes that the difference in proportions between the minority group and non‐Hispanic whites (or between women and men) is statistically significant at the 95% confidence level.


Source:

BBC Research & Consulting from 2012‐2016 ACS 5% Public Use Microdata samples. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.

FigureC‐18indicatesthatBlackAmericansworkingacrossallindustriesintheVirginiaBeachmarketplace(construction,architectureandengineering,professionalservices,andgoodsandservices)exhibitedlowerratesofself‐employment(i.e.,businessownership)thannon‐HispanicwhiteAmericans.Inaddition,HispanicAmericansinthearchitectureandengineeringindustryexhibitedlowerratesofself‐employmentthannon‐HispanicwhiteAmericans.WomenworkingintheprofessionalservicesindustryintheVirginiaBeachmarketplacealsoexhibitedlowerratesofself‐employmentthanmen.

Virginia Beach

Race/ethnicity

Black American 14.3 % ** 2.8 % ** 6.4 % ** 4.9 % **

Asian American 17.0 13.2 13.5 10.3

Hispanic American 19.6 2.9 ** 10.8 5.3

Native American 43.4 † 0.0 † 0.0 † 1.5



Gender

Women 17.8 % 12.7 % 8.5 % ** 6.4 %

Men 22.9 9.7 14.8 7.4

All individuals 22.3 % 10.7 % 10.4 % 7.0 %

United States

Race/ethnicity

Black American 17.8 % ** 15.5 % ** 7.0 % ** 4.9 % **

Asian American 23.1 ** 12.7 ** 12.5 ** 10.2

Hispanic American 17.7 ** 16.3 ** 10.1 ** 7.6 **

Native American 18.4 ** 21.4 13.7 ** 7.6 **

Other Race Minority 23.1 14.9 ** 14.8 * 8.2 **


Gender

Women 16.1 % ** 20.8 % * 12.5 % ** 7.1 % **

Men 24.0 21.2 19.0 9.9

All individuals 23.2 % 21.1 % 14.7 % 8.8 %

Construction

Construction

Goods &

Services

Goods &

Services

Professional

Services

Professional

Services

Architecture &

Engineering

Architecture &

Engineering


Figure C‐19. Predictors of business ownership in construction (probit regression), Virginia Beach, 2012‐2016

Note:


*,** Denote statistical significance at the 90% and 95% confidence levels, respectively.



Source:

BBC Research & Consulting from 2012‐2016 ACS 5% Public Use Microdata samples. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa.

FigureC‐19indicatesthat,comparedtobeinganon‐HispanicwhiteAmerican,beingaBlackAmericanintheVirginiaBeachmarketplaceisrelatedtoalowerlikelihoodofowningaconstructionbusiness,evenafteraccountingforvariousotherpersonalcharacteristics.Inaddition,beingawomanintheVirginiaBeachmarketplace(ascomparedtoaman)isrelatedtoalowerlikelihoodofowningaconstructionbusiness,evenafteraccountingforvariousotherpersonalcharacteristics.

Variable

Constant ‐1.3672 *

Age 0.0002

Age‐squared 0.0002

Married 0.0852

Disabled 0.0874


Number of people over 65 in household ‐0.1195

Owns home 0.1821

Home value ($000s) 0.0001

Monthly mortgage payment ($000s) 0.0314


Income of spouse or partner ($0000s) ‐0.0002




Four‐year degree ‐0.4149 **


Black American ‐0.3077 **




Women ‐0.3270 **

Coefficient


Figure C‐20. Disparities in business ownership rates for Virginia Beach construction workers, 2012‐2016

Note: The benchmark figure can only be estimated for records with observed (rather than imputed) dependent variable values. Thus, the study team made comparisons between actual and benchmark self‐employment rates only for the subset of the sample for which the dependent variable was observed.

Analyses are limited to those groups that showed negative coefficients that were statistically significant in the regression model.

Source: BBC Research & Consulting from 2012‐2016 ACS 5% Public Use Microdata samples. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.

FigureC‐20indicatesthatBlackAmericansownconstructionbusinessesintheVirginiaBeachmarketplaceataratethatis65percentthatofsimilarly‐situatednon‐HispanicwhiteAmericans(i.e.,non‐HispanicwhiteAmericanswhosharethesamepersonalcharacteristics).Similarly,non‐HispanicwhitewomenownconstructionbusinessesintheVirginiaBeachmarketplaceataratethatis64percentthatofsimilarly‐situatednon‐Hispanicwhitemen.

Figure C‐21. Predictors of business ownership in Architecture & Engineering (probit regression), Virginia Beach, 2012‐2016

Note:

The regression includes 766 observations.

*, ** Denote statistical significance at the 90% and 95% confidence levels, respectively.

Other race minority and Native American omitted from the regression due to small sample size.


Source:


FigureC‐21indicatesthatbeingaminorityorbeingawomanisnotrelatedtothelikelihoodofowninganarchitectureandengineeringbusinessintheVirginiaBeachmarketplaceafteraccountingforvariousotherpersonalcharacteristics.

Group

Black American 15.3% 23.4% 65

Non‐Hispanic white women 19.5% 30.7% 64

Self‐Employment Rate Disparity Index

Actual Benchmark (100 = Parity)

Variable

Constant ‐2.0259

Age 0.0381

Age‐squared ‐0.0002

Married ‐0.2022

Disabled ‐0.0784

Number of children in household 0.0899


Owns home 0.2399

Home value ($000s) 0.0006 *

Monthly mortgage payment ($000s) ‐0.0149


Income of spouse or partner ($0000s) 0.0002

Speaks English well ‐0.7902



Four‐year degree 0.0324


Black American ‐0.6699


Hispanic American ‐0.6939

Women 0.2183

Coefficient


Figure C‐22. Predictors of business ownership in professional services (regression), Virginia Beach, 2012‐2016

Note:



Other race minority, Native American and speaks English well omitted from the regression due to small sample size.


Source:


FigureC‐22indicatesthatbeingaminorityorbeingawomanisnotrelatedtothelikelihoodofowningaprofessionalservicesbusinessintheVirginiaBeachmarketplaceafteraccountingforvariousotherpersonalcharacteristics.

Variable

Constant ‐3.4555 **

Age 0.0725 **

Age‐squared ‐0.0006 *

Married 0.1961

Disabled 0.2293


Number of people over 65 in household 0.1617

Owns home ‐0.0380

Home value ($000s) 0.0012 *

Monthly mortgage payment ($000s) ‐0.2213 *

Interest and dividend income ($000s) ‐0.0033

Income of spouse or partner ($0000s) 0.0026 *




Advanced degree 0.3269

Black American 0.0436



Women ‐0.2005

Coefficient


Figure C‐23. Predictors of business ownership in goods and services (regression), Virginia Beach, 2012‐2016

Note:




Source:


FigureC‐23indicatesthatbeingaminorityorbeingawomanisnotrelatedtothelikelihoodofowningagoodsandservicesbusinessintheVirginiaBeachmarketplaceafteraccountingforvariousotherpersonalcharacteristics.

Variable

Constant ‐3.6654 **

Age 0.0991 **

Age‐squared ‐0.0009 **

Married 0.2554 **

Disabled 0.2496 *

Number of children in household 0.1069 **

Number of people over 65 in household 0.0387

Owns home ‐0.3428 **

Home value ($000s) 0.0005 **

Monthly mortgage payment ($000s) 0.1338 **


Income of spouse or partner ($0000s) 0.0001

Speaks English well ‐0.4685 **

Less than high school education 0.1070

Some college 0.0721



Black American ‐0.1758



Native American ‐0.5593

Other minority group 1.1272

Women ‐0.0064

Coefficient


Figure C‐24. Rates of business closure, expansion, and contraction, Virginia and the United States, 2002‐2006

Note:

Data only include only privately‐held businesses.

Equal Gender Ownership refers to those businesses for which ownership is split evenly between women and men.

Statistical significance of these results cannot be determined, because sample sizes were not reported.

Source:

Lowrey, Ying. 2010. “Race/Ethnicity and Establishment Dynamics, 2002‐2006.” U.S. Small Business Administration Office of Advocacy. Washington D.C.

Lowrey, Ying. 2014. "Gender and Establishment Dynamics, 2002‐2006." U.S. Small Business Administration Office of Advocacy. Washington D.C.

FigureC‐24indicatesthatBlackAmerican‐,AsianAmerican‐,andHispanicAmerican‐ownedbusinessesinVirginiashowhigherclosureratesthanwhiteAmerican‐ownedbusinesses.Woman‐ownedbusinessesinVirginiaalsoshowhigherclosureratesthanbusinessesownedbymen.BlackAmerican‐andAsianAmerican‐ownedbusinessesinVirginiashowlowerexpansionratesthanwhiteAmerican‐ownedbusinesses.


Figure C‐25. Mean annual business receipts (in thousands), Virginia Beach‐Norfolk‐Newport News, VA‐NC Metro Area and the United States, 2012

Note:

Includes employer and non‐employer firms. Does not include publicly‐traded companies or other firms not classifiable by race/ethnicity and gender.

All race/ethnicity and gender categories include Hispanic Americans. Estimates for Non‐Hispanic race/ethnic groups are not available for metropolitan statistical areas. Those estimates are only available at the state level.

Source:

2012 Survey of Business Owners, part of the U.S. Census Bureau’s 2012 Economic Census.

FigureC‐25indicatesthat,in2012,BlackAmerican‐;AsianAmerican‐;HispanicAmerican‐;AmericanIndianandAlaskanNative‐;andNativeHawaiianandotherPacificIslander‐ownedbusinessesintheVirginiaBeach‐Norfolk‐NewportNewsMetroAreashowedlowermeanannualbusinessreceiptsthannon‐HispanicwhiteAmerican‐ownedbusinesses.Inaddition,woman‐ownedbusinessesintheregionshowedlowermeanannualbusinessreceiptsthanbusinessesownedbymen.


Figure C‐26. Mean annual business owner earnings, Virginia Beach and the United States, 2012‐2016

Note:


**, ++ Denotes statistically significant differences from non‐Hispanic whites (for minority groups) or from men (for women) at the 95% confidence level for Virginia Beach and the United States as a whole, respectively.


Other race minority omitted due to small sample size.

Source:


FigureC‐26indicatesthattheownersofBlackAmerican‐ownedbusinessesandHispanicAmerican‐ownedbusinessesintheVirginiaBeachmarketplaceearnlessonaveragethantheownersofnon‐HispanicwhiteAmerican‐ownedbusinesses.Inaddition,theownersofwoman‐ownedbusinessesintheVirginiaBeachmarketplaceearnlessonaveragethantheownersofbusinessesownedbymen.


Figure C‐27. Predictors of business owner earnings (regression), Virginia Beach, 2012‐2016

Note:




*, ** Denotes statistical significance at the 90% and 95% confidence level, respectively.


The referent for each set of categorical variables is as follows: high school diploma for the education variables, non‐Hispanic whites for the race variables and men for the gender variable.

Source:


FigureC‐27indicatesthat,comparedtobeingtheownerofamale‐ownedbusinessintheVirginiaBeachmarketplace,beingtheownerofafemale‐ownedbusinessisrelatedtolowerbusinessearnings,evenafteraccountingforvariousotherbusinessandpersonalcharacteristics.

Figure C‐28. Predictors of business owner earnings (regression), United States, 2012‐2016

Note:



The sample universe is business owners age 16 and over who reported positive earnings. All amounts in 2015 dollars.

*, ** Denotes statistical significance at the 90% and 95% confidence level, respectively.


Source:


FigureC‐28indicatesthat,comparedtobeingtheownerofanon‐HispanicwhiteAmerican‐ownedbusinessintheUnitedStates,beinganownerofaBlackAmerican‐orNativeAmerican‐ownedbusinessisrelatedtolowerearnings,evenafteraccountingforvariousotherbusinessandpersonalcharacteristics.Inaddition,comparedtobeingtheownerofamale‐ownedbusinessintheUnitedStates,beingtheownerofafemale‐ownedbusinessisrelatedtolowerearnings,evenafteraccountingforvariousotherbusinessandpersonalcharacteristics.

Variable

Constant 777.253 **

Age 1.136 **


Married 1.110


Disabled 0.910

Less than high school 1.001

Some college 0.919


Advanced degree 1.579 *

Black American 0.785

Asian American 0.702



Women 0.635 **

Exponentiated

Coefficient

Variable

Constant 533.957 **

Age 1.149 **


Married 1.241 **

Speaks English well 1.144 **

Disabled 0.580 **

Less than high school 0.749 **







Native American 0.681 **

Other race minority 1.115 *

Women 0.533 **

Exponentiated

Coefficient

APPENDIX D.

Qualitative Information about Marketplace Conditions

BBC RESEARCH & CONSULTING—FINAL REPORT APPENDIX D, PAGE 1

APPENDIX D. Qualitative Information about Marketplace Conditions

AppendixDpresentsqualitativeinformationthatthestudyteamcollectedthroughin‐depthinterviews,publicmeetings,andtelephonesurveysconductedaspartofthedisparitystudy.AppendixDispresentedin10parts:A. Introduction and backgrounddescribeswithwhomthestudyteammettocollectthe

informationsummarizedinAppendixDandhowthatinformationwascollected.

B. Background on the contracting industry summarizesinformationabouthowbusinessesbecomeestablishedandtheirsize.PartBalsopresentsinformationabouttheeffectsofthelocaleconomyandbusinessowners’experiencespursingpublicandprivatesectorwork.

C. Working as a prime contractor or subcontractorsummarizesinformationaboutthemixofbusinesses’primecontractandsubcontractworkandhowtheyobtainthatwork.PartCalsopresentsinformationonbusinessowners’experiencesworkingwithminority‐andwoman‐ownedbusinessesandotherbusinesses.

D. Keys to business successsummarizesinformationaboutcertainbarrierstodoingbusinessandkeystosuccess,includingaccesstofinancing.

E. Potential barriers to doing business in the regionpresentsinformationaboutpotentialbarrierstodoingworkintheVirginiaBeacharea,includingbonding,insurance,andexperienceswiththeCityofVirginiaBeach(City)processes.

F. Allegations of unfair treatmentpresentsinformationaboutexperienceswithunfairtreatment,includingbidshopping;treatmentduringperformanceofwork;andallegationsofunfavorableworkenvironmentforminoritiesandwomen.

G. Additional information regarding any race ‐ or gender‐based discriminationincludesadditionalinformationconcerningpotentialracial/ethnic‐orgender‐baseddiscrimination.Topicsincludestereotypicalattitudesaboutminoritiesandwomenandallegationsofclosedor“goodol’boy”networksthatadverselyaffectopportunitiesforminority‐andwoman‐ownedbusinesses.

H. Insights regarding neutral measures presentsinformationaboutbusinessassistanceprograms,effortstoopencontractingprocesses,andotherstepstoremovebarriersforsmallbusinesses.

I. Insights regarding race ‐ or gender‐based measures presentscommentsaboutassistanceprogramsbasedontheraceorgenderofbusinessowners.

J. MBE /WBE/SWaM certification presentsinformationaboutminority‐andwoman‐ownedbusinessenterprise(MBE/WBE)certificationandSmall,Women‐ownedandMinority‐ownedBusinesses(SWaM)certificationandthecertificationprocess.Italsopresents


informationaboutadvantagesanddisadvantagesthatbusinessesexperiencebecauseoftheircertificationasanMBE,WBE,orSWaMbusiness.

A. Introduction and Background

Businessownersandmanagers;tradeassociationrepresentatives;andotherinterestedpartieshadtheopportunitytodiscusstheirexperiencesworkingintheVirginiaBeachmarketplacebyparticipatinginoneormoreofthefollowing:

In‐depthinterviews;

Availabilitysurveys;and

Publicmeetings.

Thestudyteamconductedpublicmeetings,in‐depthinterviews,andtelephonesurveysbetweenFebruary2018andJuly2018.Duringtheinterviews,surveys,andmeetings,participantshadopportunitiestodiscusstheirexperiencesworkinginthelocalcontractingindustry;experiencesworkingwiththeCityandotherpublicagencies;experienceswithpotentialbarriersordiscriminationbasedonraceorgender;andothermattersrelevanttodoingbusinessintheVirginiaBeachmarketplace.Throughoutthestudyprocess,theCityandthestudyteamencouragedbusinessownerstosubmitwrittentestimonyandcommentsconcerningthesematters.

In‐depth interviews. Thestudyteamconductedin‐depthinterviewswith45businessesbasedintherelevantgeographicmarketarea.1Mostoftheinterviewswereconductedwiththeownerorotherofficerofthebusiness.Intervieweesincludedindividualsrepresentingconstructionbusinesses;architectureandengineeringbusinesses;professionalservicesbusinesses;goodsandcommoditiesbusinesses;andotherservicesbusinesses.Thestudyteamidentifiedinterviewparticipantsprimarilyfromarandomsampleofbusinessesthatwasstratifiedbybusinesstypeandtheraceandgenderofthebusinessowners.Theinterviewsincludeddiscussionsaboutinterviewees’perceptionsandexperiencesregardingthelocalcontractingindustry;theCity’scontractingpoliciesandpractices;anyallegationsofunfairtreatmentofminoritiesandwomen;andexperienceswithcertificationprograms(e.g.,theSWaMProgram).

Ofthebusinessesinterviewed,someworkexclusivelyorprimarilyasprimecontractorsorsubcontractors,whereasothersworkinbothcapacities.Thebusinessesinterviewedrepresentedminority‐ownedbusinesses,woman‐ownedbusinesses,service‐disabledveteran‐ownedbusinesses,SWaMbusinesses,andbusinessesownedbynon‐Hispanicwhitemen.SomeofthosebusinesseswereMBE‐certified,WBE‐certified,SWaM‐certified,orheldothercertifications.EachbusinessthatthestudyteaminterviewedhadconductedworkintheVirginiaBeacharea.AllintervieweesareidentifiedinAppendixDbyrandomintervieweenumbers(i.e.,#1,#2,#3,etc.).

Becauseintervieweeswereoftenquitespecificintheircomments,inmanycasesthestudyteamreportsintervieweecommentsinaggregatetominimizethechancethatinterviewees(orother 1TherelevantgeographicmarketareaincludesChesapeake.Norfolk,Portsmouth,andVirginiaBeachinVirginia.


individualsorbusinessesmentionedduringtheinterviews)couldbeidentified.ThestudyteamreportstheraceandgenderofeachbusinessownerandwhethereachintervieweerepresentsanMBE‐certifiedbusiness,aWBE‐certifiedbusiness,aSWaM‐certifiedbusiness,orabusinessthatdidnotreporthavinganytypeofcertification.

Availability surveys.Asapartoftheavailabilitysurveysthatthestudyteamconductedforthedisparitystudy,businessownersandmanagerswereaskedwhethertheircompanieshaveexperiencedbarriersordifficultiesassociatedwithbusinessstartuporexpansionwithintheindustryorwhetherthecompanyhasencounteredbarriersinobtainingwork.Atotalof106businessesprovidedcomments.ThestudyteamanalyzedresponsestothosequestionsandprovidedexamplesofdifferenttypesofcommentsinAppendixD.AvailabilitysurveycommentsareindicatedthroughoutAppendixDbytheprefix“AS.”Fordetailsaboutavailabilitysurveys,seeChapter5andAppendixE.

Public meetings. Aspartofthedisparitystudy,thestudyteamconductedthreepublicmeetingsinVirginiaBeach,Virginia.Thepublicmeetingswereheldattwolocationsoverthreedays:

MeyeraE.OberndorfCentralLibraryAuditorium(October16,2018andOctober18,2018;commentsidentifiedwiththeprefix“MOC”);and

KempsvilleHighSchoolCafeteria(October17,2018;commentsidentifiedwiththeprefix“KHS”).

PublicmeetingparticipantsrepresentedbusinessesandorganizationsthroughouttheCity.Thenumberingofcommentsfromaparticularpublichearing(e.g.,MOC#1,MOC#2)indicatestheorderinwhichparticipantsgaveoraltestimonyatthehearing.Forsimplicity,AppendixDreferstobothpublicmeetingparticipantsandthoseprovidingwrittentestimonyas“interviewees”inthesamewayasindividualswhoparticipatedinin‐depthinterviews.TheCityandthestudyteamalsoencouragedbusinessownerstosubmitwrittentestimonytothestudyteamthroughoutthecourseofthestudy.Thestudyteamreceivedwrittentestimonyfromthreebusinesses.

B. Background on the Contracting Industry

PartBsummarizesinformationrelatedto:

Howbusinessesbecomeestablished;

Employmentsizeofbusinesses;

Sizesandlocationsofcontractsthatbusinessesperform;

Effectsofthelocaleconomyonbusinesses;

Currentmarketplaceconditions;and

Businessowners’experiencespursuingpublicandprivatesectorwork.


How businesses become established. Manyintervieweesreportedthattheircompanieswerestarted(orpurchased)byindividualswithpreviouslyestablishedconnectionsintheirrespectiveindustries.

In2007,aBlackAmericanmaleownerofanMBE‐,VBE‐,andSWaM‐certifiedmedicalservicesfirmboughttheNorfolkofficeofnon‐minoritymedicalservicesfirmwherehehadworkedfor11.5years.[#1]

Whenaskedhowandwhenthefirmwasfounded,afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmstated,“Twoofthefoundershaveretiredandoneisstillthere.Thefirmwasfoundedbythreemen33yearsago.”[#9]

TheHispanicAmericanfemalerepresentativeofanewspapercompanynotedthatsheknewthepreviousowners,aHispanicmarriedcouple,andthattheyhadstarteditasaretirementbusiness.Later,thecoupledecidedtopursueotherthingsandin1999soldthecompanytothecurrentowner,whowasalsoseekingaretirementbusiness.“Wethoughtitwasareallygoodproduct.Itwasaverygoodnewspaperandwedidn’twantittogobythewayside.”[#18]

Whenaskedaboutthecircumstancesinwhichthecompanywasformed,theHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatthefirmwaspurchasedfromthepreviousownersin2011,andhethenacquired51percentownership.Heexplained,“Whatspurredmewasanopportunitytobuildandgrowanoperationalbusinessinourarea.Iwasjustcomingoutofthemilitary,andIwantedtomakeagoofownershipandtrytobuildagreatteamandgivegreatservicetoourcustomers.”[#28]

Anon‐HispanicwhitemalerepresentativeofanelectricaldistributioncompanyindicatedthattheelectricalportionofthefirmwasfoundedinFrancein1955.Heexplained,“In1989thecompanymadeitsfirstpurchaseofaU.S.‐ownedelectricaldistributor,whichwaslocatedinMaryland.Thefirmcontinuedtopurchasecompaniesoverthelast43years,makingtheparentcompanythelargestwholesaleelectricaldistributorintheU.S.,whichincludesatotalof19operatingcompanies.”[#35]

Anon‐HispanicwhitemalerepresentativeofanelevatorcompanyreportedthatthefirmwasfoundedinSwitzerlandin1890byaman.[#36]

Whenaskedaboutthecircumstancesinwhichthecompanywasformed,theBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanyrespondedthatitwasfoundedbyaBlackAmericanmaninearly1970,asheneededtosupporthisfamily.[#39]

Many firm owners worked in the industry before starting their own businesses.Examplesfromthein‐depthinterviewsincludethefollowing:

TheBlackAmericanmaleownerofaminority‐ownedrealestatedevelopmentfirmstated,“[We]firstgotstartedin1995andstartedinvestinginrealestateandwantedtolearnanddomoreprojects,sowebegantolearnabouttherealestatedevelopmentbusinessbyworkingalongsideaprominentmajority‐ownedfirm,theneventuallylaunchedmyownfirm.”[#2]


Whenaskedaboutthehistoryandbywhomthefirmwasfoundedandthecircumstancesinwhichitwasformed,anon‐HispanicwhitefemaleownerofaSWaM‐certifiedwoman‐ownedcivilengineeringfirmnoted,“Iworkedforalarge,nationalfirmandwasjustlookingforsomemoreflexibility,andtherewasanicheforqualifiedDBEsinmymarket.Well,notonlydidVDOThaveDBErequirements,alotofmunicipalitiesweregoingtowardsgoalsandlotsofthemarealittlebitmorestringentuponthat.”[#3]

Whengivingabriefhistoryofthefirm,thenon‐HispanicwhitefemaleownerofanAsianAmericanWBE‐andSWaM‐certifiedengineeringandtestingfirmreportedthatpreviouslyshehadbeenworkingwithalargemajoritymediaandcommunicationsfirmandbyemployeecontractwasnotallowedtoworkforaprofitableboard.Shewasalwayswiththecompanyfromthebeginningin2002andhelpedfinancethebusiness.SheisalsoaClassAcertifiedcontractorandisnowpresidentofthefirm.[#5]

Amalerepresentativeofanon‐Hispanicwhite‐ownedlandscapematerialsfirmstatedthattheowneroriginallyfoundedhislandscapingbusinessandneededtofindagoodsupplierofmulchmaterialandequipment,sohestartedhisownlandscapematerialscompany.[#6]

Whengivingabriefhistoryofthefirm,theBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmreportedthathehadbeeninthegeotechnicalindustryforover20years.HegraduatedfromVirginiaTechandmanagedconstructionforacoupleofyearsandrelocatedtoMarylandwhereheearnedhisP.E.HeworkedinVirginiaBeachforaboutnineyearswithaprivatefirmdoinggeotechnicalengineeringandmaterialtesting.Afterwards,hestartedhisfirm.[#7]

TheBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmnotedthathestartedasaconsultantandearnedhislicensein2006.Hetaughtforanumberofyearsandhasworkedwiththelocalhousingauthorityintheirdraftingandgraphics.Healsoworkedwithalocalminority‐ownedarchitecturalfirmfor15years.Helefttoworkforamajorityfirmashestudiedandpreparedtotakethelicenseexam.[#8]

Themalerepresentativeofanon‐Hispanicwhite‐ownedenvironmentalremediationfirmmentionedthecompanywasstartedbyaJohnsHopkinsprofessorwhospecializedintoxicology.Thepowercompanyknewabouthisspecialtyandhelpedhimdevelopthecompanyanditgrewintoapubliccompany.Thefounderwassemi‐retiredbythenandboughtoutthepublicsideandmadeitanemployee‐ownedcompany.[#10]

Thenon‐HispanicwhitefemalerepresentativeofanMBE‐,DBE‐,SBE‐,andSWaM‐certifiedNativeAmerican‐ownedenvironmentalengineeringfirmmentioned,“Thecompanywasstartedaftertheywentoutofbusiness,previouslytheydidmajorrepairstotanksonalargescale.Thesameownersstartedanewbusinessfocusingoninspections.Theyjustwantedtogosmallerinsizeandinscopeofwork.Thefirstcompanywasverylargeandtheyrepairedtanksandpipelines.Nowwecleanandinspect.”[#11]

TheHispanicAmericanfemaleownerofatranslationagencyreportedshehadherowninsuranceagencyinanotherstate.Shenoticedseveralclientsneededinterpretationandtranslationhelp.Shevoluntarilyprovidedherassistanceandthendecidedtosellherinsuranceagencyandstartherinterpreterandtranslatorbusinessin2007.[#13]


Thenon‐Hispanicwhitefemaleownerofacomputersupportfirmstatedshelostherjob10yearsago.Shelookedintoacomputersoftwareprogramcompanyownedbyaformerschoolteacher.Shebecamealicenseeofthesoftware.Thefirmstartedoutwithjustherandfivecomputers,andnowshehas75laptopsandasmanyastenpeople.Themarketblewupfasterthanshecouldmanageit.Shedidn’tmakeaprofitforthefirstfiveyearsandcouldn’tgetaloan.Allthemoneywentbackintothebusiness.Thebusinesswasparent‐funded,theeconomytankedandparentsweremorejudiciousaboutspendingextrafortheprogramabovethecostofchildcare.Thenon‐Hispanicwhitefemaleownerthefirmthenwenttoprivatepreschoolsdirectlyasacurriculumoptionforthem.Sheworkedwithallthestudentsinthepreschools.Theworkhasbeensteady.[#14]

Thenon‐Hispanicwhitefemaleownerofapublicrelationsandmarketingfirmnotedthathercurrentmaleco‐ownerleftjournalisminSeptember1991.Hepartneredwithanotherbroadcastjournalistandstartedtheagency27yearsago.Thatpartnershiplasted2years,thenthefemalepartnerlefttodootherthings.Thenon‐HispanicwhitefemaleownerofapublicrelationsandmarketingfirmlefthercareertojointheagencyinFebruaryof1993.[#15]

TheBlackAmericanmaleownerofabusinessmanagementconsultingfirmnotedhewasaskedbyseveralbusinessownersabouthowtomanagetheirbusinessesaswellasdevelopmentofstrategicplans.Hewasofferinghisexpertiseatnochargeinitially,thenheformedhisfirmin2017.[#17]

Thenon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmnotedthatthenon‐HispanicwhitemalefounderemigratedfromNorthernIrelandafterworkingintheMiddleEast.Hisdegreewasinstructuralengineering.Thefirmthefounderworkedforwasstructuralengineeringandthefirmwasrequestedtoconductinspectionsbutdidnotwanttoprovidethoseservices.Thenon‐Hispanicwhitemalefounderstartedhisownfirmin1984,providingconstruction,testing,andinspectionservices.Theownerstartedwithjusthimselfthenhiredanotherperson.“Our[firm]wasthefirstfirminthemetroDCareaconcentratingonthispartofthebusiness.OurfootprintisnowPhiladelphia,Maryland,DC,NorthernVirginia,Richmond,andNorfolk.We’vebeenhere20yearsinHamptonRoads;wealsohaveofficesdownintheCarolinasandalongtheCentralGulfCoast.Over50percentofourtotalcompanyvolume,whichruns10or12milliondollarsayear,isrighthereRichmond,Norfolk,DC.”[#19]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmindicatedthatthefirmwasfoundedin1997byoneHispanicAmericanmaninVirginiaBeach,Virginia.Shealsoindicatedthataround2010theownerincorporatedajanitorialdivisionwhichwaslatersoldin2017.Afterthesaleofthejanitorialdivision,theownerwentbacktothecommercialrenovationbusinessonly.[#25]

Whenaskedhowthefirmwasformed,anon‐HispanicwhitemalerepresentativeofaWBE‐andSWaM‐certifiedmechanicalcontractingfirmexplainedthathehasbeendoingthistypeofworksince1973sohedecidedtostarthisownbusiness.In2010therewasachangeofownershipandhiswife,anon‐Hispanicwhitewoman,becametheownerofthefirm.Hefurtherindicatedthatthischangewasmadesothatthecompanycouldhaveaccesstocontracts.“Itwastosetupawoman‐ownedbusinessforgovernmentcontracts.”[#26]


Whenaskedaboutthecircumstancesinwhichthecompanywasformed,anon‐Hispanicwhitemalerepresentativeofapubliclyheldmanufacturingequipmentfirmstated,“Thefirmwasfoundedbyonemanbackin1976duetoaneedforportablepumpingequipmentonarentalbasis.”[#29]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanyworkedforadoorcompanyandlikedwhathewasdoing.Hebelievedhecoulddothesame,sohelefthisjobandstartedhisowncompanyin2004doingthesamethingasthecompanyheworkedfor,providingconstructiondoors.[#30]

Whenaskedthecircumstancesinwhichthecompanywasformed,theBlackAmericanmaleownerofaplumbingcompanystated,"Iwasworkingforaplumbingcompanyanddecidedtoleavein2007tostartmyownplumbingcompany.Iwantedtheexperienceofbeingmyownemployer."[#31]

TheBlackAmericanmaleownerofanHVACcompanystartedinjuniorhighschoolwithabusinessfirst,thenwasalocksmith.Healwayswantedhisownbusiness.Beingalocksmithwasnotenoughtosucceedbecauseofnothavingenoughcustomerstosustainhisbusiness.Consequently,hetookclassesatTidewaterCommunityCollege(TCC)forHVACandcompletedclassestobeaJourneymanTradesman.AfterayearworkingatanHVACcompany,hereceivedhisMastersandgotajobsubbingforafewyears,thenwentoutonhisown.[#33]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanywenttoschoolandreceivedadegreeinblueprintandgraphicsthatputhimonthepathtostartinghiscompany.Heworkedforacompanyandmadeallofthegrowth[advancements]hecould,thendecidedtoleaveandbuildhisowncompanyin1990.[#38]

A few firm owners indicated that relationships among family members were instrumental in

establishing their businesses. Forexample:

Thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmjustsoldabigengineeringcompanytothepublic.Hisbrotherleftanotherlargeengineeringfirm.Heandhisbrotherstartedthecompanydoingsimilarservices.“Wefelttherewasaneedinthemarketplaceforadifferenttypeofengineeringcompany.”[#16]

TheAsian‐PacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmworkedinamajorcorporation:alargefurnituremanufacturerinWashington,D.C.Herhusbandpassedaway,andsheleftthatexecutivepositionandmovedbacktoVirginiaBeach.Shehadsomeofheroldclientscallhertoprovideservicesforthem.Shedidn’thaveanyonetolandthecontractson.Shestartedherbusinessandstartedworkingwithheroldclients.[#20]

TheBlackAmericanmaleownerofaDBE‐,WBE‐,MBE‐,andSWaM‐certifiedconstructionfirmstated,"I'mamechanicalengineerbytrade.Iwasbuildingsubmarinesforabout16yearsatalocalshipyard,gotintoconstructiononmyown[ontheside].Atthetimethehousingmarketwascrazy;weweremakinggoodmoney.Isaidtomyself,well,doIwanttostayandbuildsubmarinesandmakesomebodyelsewealthyortryandmakemyselfwealthy?Mywifeismypartner;sheknowsthebusinessinandoutfrommarketingandsoforth,sowebecamecertifiedandthat'showwegotstarted."[#21]


TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanywascuttinggrasssincehighschoolandlovedit.HebecameapartnerwithhisBlackAmericanmalebrotherin1987,thentookthebusinessoverbyhimself.HeservicesPortsmouth,NewportNews,Chesapeake,andVirginiaBeach.HestartedinSuffolkwithlargeapartmentcomplexesandanythingthatwouldgeneratemoney.[#23]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatthefirmwasfoundedin2012byherselfandherhusband.Shealsoreportedthatbothsheandherhusbandhaveconstructionindustrybackgrounds.“WhenmyhusbandandIdecidedthatweweregoingtogoaftersomegovernmentcontracts,wethoughtthatitwouldprobablybenefitourcompanytohavemeasthemajorityownersothatwecouldgoafterthesecontractsasawoman‐owned/minority‐ownedbusiness.Westartedoutasasoleproprietorandin2012wedecidedtomakeitaS‐Corporation.”[#34]

Whenaskedaboutthecircumstancesinwhichthecompanywasformed,theBlackAmericanmaleownerofaflooringcompanystatedhehadwatchedhisfatherrunhisflooringcompanyanddecidedtodothesameandhaveaflooringinstallationcompanyalso.HeoriginallyhadasoleproprietorshipbutneededtoseparatehispersonalfinancesfrombusinessfinancessohechangedthenameandbecameanLLC.[#37]

Other firm owners were going into retirement or leaving the military and wanted to open their

own businesses. Forexample:

TheBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicatedthatafterspending21yearsintheNavyandtimeasanelectronicsconsultantwithanHVACbackground,hedecidedheneededtobemorehands‐onandbeganhisowncompany.Hehadbeenlaidoffandspentayearseekingworkbeforedecidingtostarthisowncompany.[#4]

Thenon‐HispanicwhitefemaleownerofastaffingagencyrecalledthatthefirmstartedafterherhusbandretiredfromtheNavy.Shewasaformerdentalhygienist.Bothwerelookingforsomethingtodo,andtheydecidedtostartabusiness.TheystartedthefranchiseaftermeetingthefranchisorinTexasthroughastaffingagency.[#12]

Thenon‐Hispanicwhitemaleownerofaservicedisabledveteran‐owned(SDVO)andSWaM‐certifiedgeneralcontractingfirmsaidthat,afterbeingoutofthemilitaryfor15years,heworkedforacompany.Heeventuallyquitthatcompanyandstartedhisownbusinessin2010.[#22]

TheminorityfemaleownerofanMBE‐,WBE‐,SBE‐,andSWaM‐certifiedconstructionstaffingcompanystatedshefoundedthecompanyin2014asanLLCinNorfolk,Virginia,toprovidejobstoothers,especiallyveterans,intheconstructionfield.[#24]

Anon‐HispanicwhitemalerepresentativeofaWBE‐certifiedtruckingcompanyindicatedthatthefirmwasfoundedbyaDepartmentofTransportation(DOT)firefighterin2009.Heexplainedthatitwasfirststartedasasidebusinesstogivetheownersomethingtodoonhistimeoff.Hestated,“Itwentfromhim,twoemployees,andtwotruckstoalargerwarehouse,adozenvehicles,andtenemployees.”[#27]

TheBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanyfoundedhisbusinessin2012afterretiringfromthemilitary.Hestated,"IdecidedIwanted


toworkoutsideaftermymilitaryduty.Iwantedtodostreetsweepingandoutsidecleaningofsidewalksandstreets."[#32]

Employment size of businesses. Mostofthefirmsthatthestudyteaminterviewedaresmallbusinessesthathavefull‐timeandpart‐timeemployees.

Manyfirmsthatthestudyteaminterviewedhadlessthan15full‐timeemployees.[Forexample,#5,#8,#21,#22,#30,#31,#32,#37,#39]

Somefirmsreportedhavingmorethan15full‐timeemployees[Forexample,#1,#4,#6,#25,#28,#29,#36,#38]

Afewintervieweesreportedthatthebusinessowneristheonlyemployeeofthecompany.[Forexample,#2,#24,#33]

Somefirmsreportedhavingfull‐timeandpart‐timeemployees[Forexample,#3,#23,#26,#27,#34,#35]

Sizes and locations of contracts businesses perform. IntervieweesdiscussedthesizesofcontractstheyperformandthelocationswheretheirfirmsbidonorperformcontractsintheVirginiaBeachareaandinotherstates.

Some business owners reported that their firms typically perform small contracts.Forexample:

Whenaskedwhatsizecontractsherfirmbidson,thenon‐HispanicwhitefemaleownerofaSWaM‐certifiedwoman‐ownedcivilengineeringfirmstated,“Beinganengineeringfirm,wedon’tbidoncontracts;theyarequalification‐based.Iwouldsay50percentofmyworkisprobablycontractsthatareunder$10,000.Another20to30percentareunder$50,000andtheremainingare$50,000‐$150,000.”[#3]

TheBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicatedthecontractshisfirmworksonarenothighdollarcontracts,frequentlymentioningprojectslessthan$5,000andashighas$20,000.MostlargejobsarenotHVACjobs.[#4]

Whenaskedhowfarawaythefirmtypicallyseeksorobtainsbusiness,themalerepresentativeofanon‐Hispanicwhite‐ownedlandscapematerialsfirmreported,“Fiftymilesisasfaraswewouldgo.Wereallydon’tdoprojects.Wesupplythematerialsandthat’sit.Thesizeoftheordersvaries.”[#6]

Whenaskedwhatsizeofcontractsorordersthefirmbidsorperformson,andhowfarawaythefirmtypicallyseeksorobtainsbusiness,thenon‐Hispanicwhitefemaleownerofapublicrelationsandmarketingfirmnotedthata$2500to$5000permonthretaineristhesizeofcontractsherbusinessnormallypursues.Theywillpickupsmallerprojectsthatareshort‐term.TheynormallyworkinHamptonRoads,ormaybeRichmond;theywanttobealocalfirm.[#15]

TheHispanicAmericanfemalerepresentativeofanewspapercompanynotedthattheydonotbidforcontracts.Theyseekadsintherangeof$30forclassifiedads,upto$1500forafull‐pagead,andwouldgoasfarasNorthCarolinaandRichmondforadvertisingrevenue.[#18]


Anon‐HispanicwhitemalerepresentativeofaWBE‐andSWaM‐certifiedmechanicalcontractingfirmindicatedthatthefirmtypicallyseeksorobtainsbusinesswithintheTidewaterareaandtypicallybidsonaverage$10,000to$15,000,orless,oncontracts.[#26]

Whenaskedwhatsizesofcontractsorordershisfirmbidsonorperforms,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanynotedthathedoesservicecallsstartingat$100,withto$50,000anduponcontracts.ThecompanytravelsasfarasToano,VA;Elizabeth,NC;andthroughoutHamptonRoadsforcontracts.[#30]

TheBlackAmericanmaleownerofaplumbingcompanytravelsasfarasWilliamsburg,VAandthroughouttheHamptonRoadsareatoseekorobtainbusiness.Thecontractsandordersonwhichthefirmwillbidorperformcanbeworthupto$10,000.[#31]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmstatedthatthefirmcurrentlyhasnogovernmentcontracts.Sheexplainedthatthefirmistryingtostartthreedivisions.Thefirstdivisionisservicingrealestateagentsorsmallrepairswhichaverageabout$1,000.Theseconddivisionisresidentialremodelingwhichaveragesabout$20,000.Thethirddivisioniscommercialwhichaveragesabout$10,000.ThefirmtypicallyseeksorobtainsbusinessasfarawayasNewportNewsandSuffolk,VA.[#34]

Whenaskedthesizesofcontractsorordersthathisfirmbidsonorperforms,theBlackAmericanmaleownerofaflooringcompanynotedthathedoesnothaveaClassCcontractor’slicense,sohecanonlybidonjobs$1,000orlessinVirginia.ThefirmtypicallyseeksorobtainsbusinessasfarasNorthDakota;Detroit,MI;andanywherewithinthecontinentalU.S.[#37]

Mostintervieweesindicatedthattheircompaniesperformbothsmallandlargecontracts.Forexample:

Whenaskedhowfarawaythefirmtypicallyseeksorobtainsbusiness,theAsianAmericanmaleownerofaWBE‐andSWaM‐certifiedengineeringandtestingfirmreported,“WewentasfarasDelaware.”Thenon‐HispanicwhitefemaleownerofanAsianAmericanWBE‐andSWaM‐certifiedengineeringandtestingfirmstated,“We’recertifiedinMarylandandDelawareaswellasVirginia.Ourcontractsrangefrom$500tofourmillion.”[#5]

Whenaskedwhatsizecontractsthefirmbidson,theBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmreported,“Anywherefrom$10,000to$1million.”Hehasbeenfocusingmoreonfederalcontractssincehavinglittlesuccesswithlocalopportunities.[#7]

Whenaskedhowfarawaythefirmtypicallyseeksorobtainsbusinessandwhatsizecontractsthefirmbidsorperformson,afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmnoted,“Wetrytostayregional—mostlyHamptonRoads—andthesizeofcontractsvaries.”[#9]

Whenaskedhowfarawaythefirmtypicallyseeksorobtainsbusinessandwhatsizecontractsthefirmbidson,themalerepresentativeofanon‐Hispanicwhite‐owned


environmentalremediationfirmstated,“Wehave27to28officesthroughoutthecountryandGuam.Thesizeofcontractsdependsonthetypeofjob:federal,commercial,ormunicipal."Hegavearangeof$20,000to$240million.Henotedthepercentagesofcontractsare65percentfederal;15to20percentcommercial;and15to20percentmunicipal.[#10]

Whenaskedwhatsizecontractsorordersthefirmbidsonandhowfarthefirmtypicallyseeksorobtainsbusiness,thenon‐HispanicwhitefemalerepresentativeofanMBE‐,DBE‐,SBE‐,andSWaM‐certifiedNativeAmerican‐ownedenvironmentalengineeringfirmnoted,“Itvaries.Theprivatesectorrangeisacouplethousanddollarsto40to50thousand.Inthegovernmentsector,wegouptoamillion.Wegoworldwide[toobtainbusiness].”[#11]

Whenaskedwhatsizecontractsthefirmperformsorbidsonandhowfarawaythefirmtypicallyseeksorobtainsbusiness,theHispanicAmericanfemaleownerofatranslationagencynoted,"Contractpursuitscouldrangefrom$2500andup.Italldependsonhavingtimeandthestafftofulfillthecontract.Icouldhandleajobanywhereinthestateiftheprojectdoesn’trequiremetobeonsiteandtranslationcanbecompletedviacomputer,andlocallyforinterpretationservicestheagencywillgoasfarasWilliamsburgandElizabethCity.”[#13]

Thenon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmnotedthefirmbidsoncontractsrangingfrom$1500to$3million.One‐thirdtoone‐quarteroftheirworkisinthefederalsector.ThosecontractsareinHawaii,Denver,Texas,Illinois,Wyoming,andsomeprojectsoverseasareintheMiddleEastorNearEast.[#19]

TheAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmnotedthefirmbidsoncontractsrangingfrom$10,000to$15,000upto$135million.Shewillgoanywheretoseekorobtainbusiness.Shehasworkedinall50statesandGuantanamoBay,Cuba.[#20]

Whenaskedwhatsizesofcontractsorordersthefirmbidsorperformsonandhowfarawaythefirmtypicallyseeksorobtainsbusiness,anon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaid,"Contractsrangebetween$200,000andupto$15million.WewillgofarnorthofRichmond,VAandsouthtoElizabethCity,NCandCharleston,SC."[#22]

Whenaskedwhatsizesofcontractsorordershisfirmbidsonorperformsandthelocationshisfirmseeksorobtainsbusiness,theBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanynotedthatcontractsandordersvaryannually.ThecompanywilltravelasfarasRichmond,VAforbusiness.[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmindicated,"Thefirmbidsonanythingfromacouplethousandto$2millionandtypicallywilltravelasfarasWilliamsburg,Windsor,andFranklin,Virginia.Idon’tknowifwe’vedoneanythingsouthoftheborderinNorthCarolina.”[#25]

Whenaskedaboutthesizeofcontractsorordersthefirmbidsorperformsandhowfarawaythefirmtypicallyseeksorobtainsbusiness,anon‐HispanicwhitemalerepresentativeofaWBE‐certifiedtruckingcompanyindicated,"Wetypicallyseekorobtainbusiness


withina600‐to700‐mileradius.DuetoDOTregulationswetrytostaywithinan11‐hourdrivetime(FL,GA,NC,SC,PA,etc.).We'renotinanyspecificcontractswithanycompany;it'susuallydoneonaper‐loadbasiscalculatedbymiles."[#27]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmreportedthatthefirmtypicallyseeksorobtainsbusinessthroughouttheU.S.HeindicatedthatthefirmmainlyobtainsbusinessinVirginiaandNorthCarolina.Thefirmbidsoneverythingfrom$500upto$15million.[#28]

Whenaskedwhatsizesofcontractsorordersthefirmbidsonorperformsandhowfarawaythefirmtypicallyseeksorobtainsbusiness,anon‐Hispanicwhitemalerepresentativeofapublicly‐heldmanufacturingequipmentfirmreportedthatthereisnominimumormaximum.Hestated,“Differentjobswillvaryinsize.Theminimumisonedollar,themaxcouldbeuptoorinexcessofonemilliondollars.Wehave44locationsacrosstheU.S.”[#29]

Anon‐Hispanicwhitemalerepresentativeofanelectricaldistributioncompanystatedthatthefirmbidsorperformsoncontractsandordersfrom$10to$1million.ThefirmtypicallyseeksorobtainsbusinessfromElizabethCity,NCtoSuffolkandNewportNews,VA.[#35]

Anon‐Hispanicwhitemalerepresentativeofanelevatorcompanystatedthatthefirmbidsonorperformsonprojectsfrom$1000tomultiplemillionsofdollars.Thefirmtypicallyseeksorobtainsbusinessinternationally.[#36]

Whenaskedwhatsizesofcontractsorordersherfirmbidsorperformson,theBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanynotedthattheydonotdoalotofbidding.Privatesectorbusinessis95percentoftheirtotal.Theydid$1millionofbusinessin2010.ThefirmtypicallyseeksorobtainsbusinessasfarasWilliamsburg,VAanddownasfarasthenorthernpartofNorthCarolina.[#39]

A few interviewees reported that their companies typically perform large contracts. Forexample:

Thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmnoted,“Wedon’thavemanyongoingcontracts.”TheyhaveonewiththeCityandonewiththeNavy.Thesizerangeofcontractsonwhichhisfirmwillbidorperformwasahalfamillionupto$1million.“Wewouldn’tgooutsideofVirginiatopursuebusiness,butwedoworkallovertheworld.WeworkmostlyforlargeA&Efirms;we’reaspecialtyengineeringcompanyandmostlargeA&Efirmsdon’thaveourspecialtyengineeringinhouse.Theydon’tuseitenough.So,theycallusforthesespecialprojects.”[#16]

Whenaskedwhatsizeofcontractsorordersthecompanyhasbidorperformedon,theBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanynotedthathishighestcontractjobwasa28,000sq.ft.buildinginGaffney,S.C.for$180,000.ThecompanytypicallytravelsthroughoutthecontinentalU.S.,toseekorobtainbusiness.[#38]

Effects of the local economy on businesses. Duringin‐depthinterviews,bothsmallandlargefirmsdiscussedwhethertheirfirmshadgrownordeclinedinresponsetolocalmarketconditionsandthereasonsforthismarketresponse.


Many interviewees indicated increasing business opportunities and income growth for their

companies.Forexample:

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,anAsianAmericanmaleownerofaWBE‐andSWaM‐certifiedengineeringandtestingfirmstated,“We’regrowingatabout20to25percentsincewestarted.”[#5]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,themalerepresentativeofanon‐Hispanicwhite‐ownedlandscapematerialsfirmstated,“Steady.It’ssloweddownandchangedwithabout10percentgrowth.Weaddedmoretothebusinessevents,likeweddings,about10yearsagotoaddtoour10percentgrowth.”[#6]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,theBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmstatedthatheisontargetwiththeyearshehasinthebusiness.Hereportedthatheisstartingtogetmorecontracts.[#7]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,themalerepresentativeofanon‐Hispanicwhite‐ownedenvironmentalremediationfirmstated,“Wehavehadphenomenalgrowthsince2004.Weattributethegrowthtostayingintheenvironmentalindustryinsteadofotherindustries.Wehaveamentor‐protégéjointventurewithaNativeAmericanwoman‐ownedsmallbusiness.Shewasan8Aandweworkedwithherfirmforthelastfouryears.Shegraduatedfrom8Aandtheyrenewedwithanotherwoman‐ownedSBEjointventureunderthenewSBArules.”[#10]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,theAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmnoted,“IthinkI’mintheverybeginningofmygrowth.It’sbeenthreeyears;stillearly.IwentfromsmallprojectswhereI’mprojectmanagingthebackendofjobs,butthenIranthisbigcontract.Iwasthesubcontractorastheprogrammanagerforthisbigorganization.I’mkindofclimbingthecurve.”[#20]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,theBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanynotedthathisrevenuesareintherangeof$800,000to$1,200,000peryear.Itisagoodmid‐sizedlandscapingcompanythatrecyclesclientsoften.Growthhasbeenverygood.[#23]

Whenaskedhowthefirmhasgrowncomparedtotheindustryaverage,anon‐HispanicwhitemalerepresentativeofaWBE‐certifiedtruckingcompanyexplainedthatthefirmisprettyaverage.Hesaid,“ForthecoupleofyearsthatI’vebeenherewehavegained.Ouryearlyrevenuehasgoneup.We’vecontinuedtogrowbusiness‐wise.Asamatterofafact,wearelookingfortwomoreemployees.”[#27]

Whenaskedtodescribethegrowthofhisfirm,theHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmsaid,“Weareconstantlylookingfornewopportunities.We’retryingtocompeteinachallengingenvironment.Wearefightingforresources,butourgoalistocontinuetogrowandexpand


yearoveryearandwe’veaccomplishedthatoverthepastfivetosixyearssuccessfully.”[#28]

TheBlackAmericanmaleownerofanHVACcompanynoted,“IwentbacktoschooltotakebusinesscoursessoIcouldgrowmybusiness.Irealizethatthingslikeeducationcanholdyoubackifyoudonotknowwhattodo;educationisimportant.Buildinggoodcreditiskeytogrowth;distributorsdonotreporttoD&Bwhereyoucanestablishagoodcredithistory.Nothavingthatfromdistributorsdoesnothelpmebuildmycreditandultimatelythesuccessofmybusiness.”[#33]

Most interviewees indicated that their firms had not grown or had become smaller. Forexample:

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmreplied,“Ithinktheyhavemaintainedthesamenumberofemployees,offandon,mostlythroughoutthe33years.”[#9]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,thenon‐HispanicwhitefemalerepresentativeofanMBE‐,DBE‐,SBE‐,andSWaM‐certifiedNativeAmerican‐ownedenvironmentalengineeringfirmnoted,“Wewanttostaysmall.Nomorethan25to30employees.Theownerswanttohaveexistingstafffocusongettingtheircertificationsandgettingpromoted.Weknowwhatwedo,wedoitwell,sowejustkindofsticktothat.”[#11]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,thenon‐HispanicwhitefemaleownerofastaffingagencynotedtheyboughtaVirginiaBeachfranchiseofficeinaseamlessprocess.“We’vebeenbig,we’vebeensmall,rightnowwe’remanageable.Comparedtotheindustryrightnow,we’rejustoneinthepack.”[#12]

Whenaskedhowthegrowthordeclineoftheagencycomparestotheaveragefortheindustry,theHispanicAmericanfemaleownerofatranslationagencynoted,“Thereismuchgrowthinthearea.There’salotofworkaround.Youjusthavetobepersistent,connectwiththerightcontractorsothatyoucanstillbeindependent.IthinkI’minthemiddleofthepackrightnow.”[#13]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,thenon‐Hispanicwhitefemaleownerofapublicrelationsandmarketingfirmnoted,“We’restable.Somethingshavebeenverylong‐term,somethingscomeandgo,someprojectscomebackyearafteryear.”[#15]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmnoted,“We’renotgrowingsignificantly.Wehaven’ttriedtogrowthiscompanywithmorethansevenpeople.Tenpeoplewasthemaxwehadbefore;there’sonlyalimitedamountofbusinesswecandowith10people.So,wehaven’tmadeaninvestmentinhiringpeopletotrytogrowincapacity.”[#16]


Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,theHispanicAmericanfemalerepresentativeofanewspapernoted,“Ithinkthatwe’vesortofhitthetopandwe’resortofonthedownunlesswedothingsthataregoingtochange.”Theyhavegrownthepaperfromeightpagesto20pagesandfromonceamonthtotwiceamonth.Shementionedthattheyhavemademanycontactsandsharedalotofinformationinthecommunity.[#18]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanynoted,“Growthisslowbutincreasing.Itishardtofindemployeesthataredependableandskilled.”[#30]

Whenaskedhowthegrowthofthefirmhascomparedtotheaveragefortheindustry,theBlackAmericanmaleownerofaplumbingcompanynotedthathisrevenuesarebelowthestandard.[#31]

Other business owners commented on the growth or decline of their firms compared to the

average for their industry. Whenthestudyteamaskedintervieweeshowthegrowthordeclineoftheirfirmscomparedtotheaveragefortheindustry,businessownerssharedthesecomments:

Whenaskedhowthegrowthofthefirmcomparestotheaveragefortheindustry,theBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmstated,“Growthisgradual.”[#4]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,theBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmstated,“I’mdefinitelynotaheadofthecurve.Whenotherfirmsgetsomuchwork,wegetthecrumbs.We’reinthegrowthmodewhenitcomestotheprivatesector.Wearecurrentlybelowtheindustryaverage.Afirmofmymagnitudeshouldbeatleastsomewherebetweenhalfamilliontothreequartersofamillionannually.We’relikeone‐thirdofthat.”[#8]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,thenon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmnoted,“We’vebeeninthemiddleofthepackuntilthelastfewyears.We’reaheadoftheindustry.We’vehadgoodyears.Wemadeapurchaselastyearthatstrengthenedourservicelines.”[#19]

Whenaskedhowthefirmhasgrowncomparedtotheindustryaverage,anAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmexplainedthatthereissuchalargegapbetweenthebigcompaniesandthesmallercompanies.Shesaid,“Ithinkourgrowthisverygoodcomparedtoyouraveragesmallbusiness.WhenIsaysmallbusiness,Iknowsomeofthesebigfirmsarestillconsideredsmallbusinessintermsofwhattheyclassifyassmallbusiness.Lastyearwewerejustshortofhittingamilliondollarsinprofits.ThisyearI’mhopingwe’llhitthatandgoover.”[#34]

Whenaskedhowthefirmhasgrowncomparedtotheindustryaverage,anon‐Hispanicwhitemalerepresentativeofanelectricaldistributioncompanystated,“Thefirmisaheadoftheindustryaverage.”[#35]


Whenaskedhowthefirmhasgrowncomparedtotheindustryaverage,anon‐Hispanicwhitemalerepresentativeofanelevatorcompanystated,“Wearesecondamongstthetopfour.”[#36]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanynoted,“Growthisaveragebecauseofthecompetitionthatsurroundsthearea.Itcouldbebetter.”[#38]

Whenaskedhowthegrowthordeclineofthefirmcomparestotheaveragefortheindustry,theBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanynoted,“Icannotdoanaveragebecauseofdiscriminationagainstwomenintheindustry.”[#39]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,arepresentativefromaprintandsignshopstated,“Thelocaleconomyhasmadeittough.Whenthebottomfelloutintheconstructionindustrywefeltitbecausewedoalotofsignagepertainingtothat,andwedoallofthecopyingforthem.”[AS#28]

Current marketplace conditions. Manyintervieweesdescribedcurrentmarketplaceconditionsandhowtheseconditionsdifferintheprivateandpublicsectors.Intervieweesalsodescribedchangestheyhadseeninmarketplaceconditionsovertime.

Many interviewees indicated that current marketplace conditions are good. Examplesofthosecommentsincludedthefollowing:

Whenaskedaboutwhatchangesinthemarketplaceconditionsthefirmhasseen,afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmnoted,“It’spickedupbigtime.”[#9]

Whenaskedaboutwhatchangesinthemarketplaceconditionsthefirmhasseen,amalerepresentativeofanon‐Hispanicwhite‐ownedenvironmentalremediationfirmrepliedthathisfirmseesthisareaasonefortheirfirm’sgrowth.Theyplantohavemoreofapresenceinthelocalarea.Theconditionsarethesameinthepublicandprivatesectorsforthem.[#10]

Thenon‐Hispanicwhitefemaleownerofastaffingagencynoted,“MarketplaceconditionsareprettyrobustforseniorITpositionsbecausethatskillsetisinhugedemand.There’sashortageofpeopletofillthedemandforseniorIT,whichisthechangeinmarketconditions.Wehavetogooutsideofthestatetoenticepeopletorelocatetothisareatotakethesepositions.”[#12]

Thenon‐Hispanicwhitefemaleownerofacomputersupportfirmnoted,"Themarketplaceconditionisrightformybusiness.Theeconomyhaschangedintheprivatesectorforthebetter.Parentshavemoremoneytospend."[#14]

AHispanicAmericanfemalerepresentativeofanewspapercompanynotedthemarketisgoodforthoselookingtohire.“AlotofHispanicshaveleftthearea,someforjobs.Ithinkofitasimmigrationtoo.Theopportunitiesarebetteronthepublicside;Iwouldliketopursuethatalotmore.”[#18]


Anon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmnotedthemarketisgood.Heexpressed,“Wedoalotofworkdownhere,onboththegovernmentsideandprivateside.”Henotedthefactorsinthelocalmarketplaceinclude,“Economicdevelopmentdownhere.Therearemarketsthathavedrivers.TidewaterorCoastalVirginiahasthemilitary.Ofcourse,militaryconstructionhasbeendownsincesequestration.Andit’sbeendownsofarunderthisCongressthoughthereisthemilitaryfundingbill,butwehaven’tseenthatfundingtranslateintomilitaryconstruction.We’rehopefulsincesequestration;allofthesefacilityneedsthatthemilitaryhashavenotgottenbetter.It’snotonlyrenovationandrepairthat’sbeingdeferred,butit’snewconstructiontomeetincreasingdemands,alotofprojectsontheshelf.”[#19]

Anon‐Hispanicwhitemalerepresentativeofapublicly‐heldmanufacturingequipmentfirmindicated,“Themarketconditionsarecompetitiveinthelocalarea.”[#29]

Whenaskedtodescribethecurrentmarketplaceconditionsinthelocalarea,anon‐Hispanicwhitemalerepresentativeofanelectricaldistributioncompanystatedthatconditionsareexcellent.[#35]

Whenaskedaboutchangesinmarketplaceconditions,anon‐Hispanicwhitemalerepresentativeofanelevatorcompanystated,“Theonlythingisthatpriceisamuchmoredrivenfactor.Marketplaceconditionsareverycompetitive.”[#36]

Some interviewees indicated that changes in marketplace conditions affected minorities or

their companies. Forexample:

Whenaskedtodescribethecurrentmarketplaceconditionsinthelocalarea,aBlackAmericanmaleownerofanMBE‐,VBE‐,andSWaM‐certifiedmedicalservicesfirmreported,“[Iam]concernedaboutthehealthcare/insuranceissue.Iamwaitingtoseehowitshakesout.Insurancewantspatientstopaymoreofthecost.Smallbusinessownersaregettingleftoutwhodon’thaveenoughemployeestogetongroupplans.”[#1]

Whenaskedwhatchangesinmarketplaceconditionshasheseen,theBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicated,“Overtheyears,governmentworkhasbecomeless.”[#4]

Whenaskedaboutchangesinthemarketplaceconditionsthefirmhasseen,theBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmreportedthattheconditionshaveflattenedoutsome.Structuralengineershavecombinedtheirskillsettobenamedthespecialinspector.Thischangehastakenthethird‐partyinspectionfromhisindustry.[#7]

Thenon‐Hispanicwhitefemaleownerofapublicrelationsandmarketingfirmnoted,"Marketplaceconditionsmakeitharderwiththemediatogetstoriescovered.It’shardertogetweekendcoverage.Therearemoreonlineopportunities.Therearemorenewscaststoday,andtheyhavetofillmorecontent.So,you’relikelytogetyourstorytoaironmultiplebroadcasts,sothat’sagoodthing.So,wehavetriedtobemorecreativeovertheyears.Wetrytocomeupideasthatwillgenerateattention.Therearepositivesandnegativestothecurrentmarketplace.”[#15]


Thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmnotedhisbusinessdoesnotchangebymarketconditionsbutbyregulations.“Whenthingsarebuilt,certainregulationshavetobefollowed,sothat’showalotofourbusinessworksout.”[#16]

Whenaskedtodescribethecurrentmarketplaceconditionsinthelocalarea,theBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysaysthatprocessesneedtobeupdatedinthisareainordertohavelesspaperwork,consumelesstimedoingpaperwork,andstreamlinetheprocesses.[#23]

Whenaskedtodescribethecurrentmarketplaceconditionsinthelocalarea,anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstated,“Thereseemstobealargeselectiontochoosefromcurrently.We’vebeenextremelybusyforoverayearnon‐stopandhonestly,Idon’tseeanendinsight.Themarketplaceisveryactiverightnow.”[#25]

Whenaskedwhatchangesinmarketplaceconditionsshehasseen,anAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmstated,“Thereisreallyalotofemphasisintargetednetworking.Ihearitfromalotofprocurementdirectorsandmanagers,thatifyouputyourselfinfrontofthebuyersthenthey’remorelikelytothinkofyouwhenajobiscomingup.”[#34]

Whenaskedaboutchangesinmarketplaceconditions,theBlackAmericanmaleownerofaflooringcompanynotedthatthepriceforinstallationhasgonedownwhileeverythingelseisup,forexamplegasandmaterials.[#37]

Whenaskedtodescribethecurrentmarketplaceconditionsinthelocalarea,theBlackAmericanfemaleowneranSBE‐certifiedconcretecompanysaid,“Itseemslikewhenitcomestominorities,everythingisgiventothewhites,andnowLatinosareworkingforalittlebitofmoney.ThismakesithardonBlackAmericanfirms.”[#39]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofacateringserviceexpressed,“Wehaveafoodtruck,andtheregulationsarestrictandhurtsourbusiness.”[AS#2]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,thesalesmanagerforanautomobiledealershipexpressed,“Ruleschangedandmadeitharderonthelocationofmybusiness.”[AS#3]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofacateringservicenoted,“StartingthebusinessinVirginiahasbeenalittledifficult.”[AS#5]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,thepresidentofalocksmithshopexpressed,“Wehavehadtroubleduetobuildingandfirecodesrelatedtothetypeofworkwedo.”[AS#6]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofanautomobiledealershipexpressed,“Wehavehaddifficultieswithexpanding.Thecityhastoomanyrulesandregulations.”[AS#7]


WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofacateringcompanynoted,“VirginiaBeachisverydifficulttostartabusinessinandcomplywiththeunknownregulations.”[AS#10]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,thegeneralmanagerofasecurityguardservicescompanyexpressed,“Abusinessthatisnotminority‐ownedorwoman‐ownedisnon‐competitive.AlargecompanydoesnotdowellinVirginiaBeach.”[AS#11]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofanoutdoorlawncareandemploymentagencystated,“There’ssomanylawsthatIneedtoknowofthatIalmostneedtohiresomebodyfull‐timejusttomanagethat.Allofthelittlerulesandregulationsandaspeciallicensejusttoputdowngrassseed,whenJoeHomeownercanputdownwhatevergrassseedhewants.Anotherthingisitiscoveredunderpesticide[that]ifIwantputanythingdownIhavetohavealicense.Icanunderstandthat,butthelicensingprocessisajoke.Theydonothingtoproperlyteachpeopleonwhatchemicalsyouuse,andIcandoitillegallyforayear,whichIcanthenuseasmyexperiencetohaveajob.Imeanthat’scoolonthatsideofthings.”[AS#16]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofaconstructionmaterialsagencyexpressed,“Theydon’tawardcontractstonon‐minoritiesveryoften,makingithardforanormalwhitepersoninthecountry.”AS#34

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,arepresentativeofageotechnicalengineeringfirmstated,“WehadtroubleworkingwiththeCityofVirginiaBeach;theyseemtoworkwithlargercompaniesratherthansmallerones.”[AS#39]

TheBlackAmericanmaleownerofanMBE‐certifiedrealestatedevelopmentfirmstated,“InareaswherethereisarealopportunitytoinvitequalifiedminoritybusinesstooccupyspaceintheCity’seconomicpowerstructure,VirginiaBeacheffectivelyclosesitsdoors.Ifmy11‐yeareffortasaprominentBlackAmericanbusinessmanwithaccesstopowerhasbeendifficult,forothersthechallengewillremainanimpossibility.Bytheverymandateofitsdiversecitizens,theCityofVirginiaBeachmustbetakentotaskandmadeaccountableforitsperpetuationofstructuralandinstitutionalbias.”[WT#2]

ThemaleownerofanSBE‐certifiedhospitalitycompanystated,“Publicdistrustofcityleadership.Transparencyofthedealscouldrevivepublictrust.LackofpublictrustgivesCouncilanexcusetodenyprojectsthatcanbegoodforthecommunity.Ultimatelyauditsandvotinginnewleadershipistheonlywaytogetoutofthismess.Thankfully,italreadystartedwiththemayorleaving.”[WT#3]

Theownerofadentalpracticestated,“IamconcernedaboutaccountabilityandthattheCityofVirginiaBeachpolicymakerstreatpeopleofcolorappropriatelyasundertheguidelinesofwhatwasimportantforrelocationissues.Wedidnothaveapositiveexperience,IjustwanttobeproactiveandsuggestthattheCitywritepoliciesforsmallbusinessownerslikeourselves.”[MOC#1]


Business owners’ experiences pursuing public and private sector work. Intervieweesdiscusseddifferencesbetweenpublicandprivatesectorwork.

A majority of the interviewees indicated that their firms conduct both public sector and private

sector work. [Forexample,#1,#2,#3,#4,#6,#7,#8,#11,#12,#15,#16,#18,#19,#20,#23,#24,#25,#26,#27,#28,#29,#30,#32,#34,#35,#36,#38]

Some interviewees reported that all of their work is conducted in the private sector. [Forexample,#17,#37,#39]

Someintervieweesreportedthatalloftheirworkisconductedinthepublicsector.[Forexample,#22,#31]

Many owners and managers reported that they preferred private sector work over public

sector work. Somecommentersindicatedthatprivatesectorcontractswereeasiertoperform,moreprofitable,andmorestraightforwardthanpublicsectorcontracts.Examplesofthesecommentsinclude:

Afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmnoted,“It’seasiertogetmorebusinessontheprivatesidebecauseoftherelationshipsandalotofrespectforthefirm.Ourpresidenthasbeenaroundalongtimeandisverywellrespected.”Shenotedprofitmarginsarebetterintheprivatesector.[#9]

Thenon‐HispanicwhitefemalerepresentativeofanMBE‐,DBE‐,SBE‐,andSWaM‐certifiedNativeAmerican‐ownedenvironmentalengineeringfirmnotedtheirpublicprofitmarginisbetterwiththegovernment.“We’reabletonegotiatealittlebitmorewiththegovernment.Governmenthasrigorouscertificationsbeforeyoucanbid.Theprivatefirmsareallaboutthebottomline.Theydon’thavetoputoutanRFP.Theydon’thavetoqualifyyou.Themoneyisbasicallywhatmakestheirdecision.Theyareverymoney‐driven.Wecangetprivatejobsfaster,versusgovernmentwhichcantakemonths.”[#11]

Thenon‐Hispanicwhitefemaleownerofacomputersupportfirmnoted,“Thereisalotofredtapeinthepublicschools.Theprivateschoolswereeasy;Igettotalktothedirectordirectly.Withthepublicschools,Ihavetobeinsomesystem.Itbecameoverwhelmingtome.Thepublicschoolsusuallydidn’thavethefundingformytypeofservice."[#14]

Several interviewees described differences in profitability between the private and public

sectors. Examplesofthosecommentsincludethefollowing:

TheBlackAmericanmaleownerofamechanicalcontractingfirmindicatedoftentimesthepublicsectorwilllimithispotentialforprofitability.Hehasworkedhardforyearstogetgoodpricingforparts,andhisexperienceisthatthepublicsectorwouldnotallowpricemarkupsonparts,requiringacopyofpartsinvoices.So,tocoveroverhead,hemustrelyonlaborchargesandsometimesthenumbersdon’taddup.Headded“Thethingtheysayis‘Playthegame’.Idon’tbelieveinplayingthegamewiththegovernment.That’llgetyouintroublereallyquick.”[#4]


TheAsianAmericanmaleownerandthenon‐HispanicwhitefemaleownerofaWBE‐andSWaM‐certifiedengineeringandtestingfirmbothnotedthatitisproject‐specificbutthatpublicsectorprofitabilityismoreconsistent.[#5]

Whenaskedwhetherprofitabilitydiffersbetweentheprivateandpublicsectors,amalerepresentativeofanon‐Hispanicwhite‐ownedlandscapematerialsfirmnoted,“Wehaveonlybeenableto[competeon]thematerialssideofthebusiness,nottheequipmentside.Wecompeteagainstthelargerequipmentmanufacturersinthearea.Thelargerfirmscanjustgiveitaway.”[#6]

Whenaskedwhetherprofitabilitydiffersbetweentheprivateandpublicsectors,theBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmnoted,“Yes,thepublicsectorisbetterforDBEsbecauseoftherequirementsincontracts.”[#7]

TheHispanicAmericanfemaleownerofatranslationagencynoted,“Thepublicsectoringeneral,ifyouknowwheretogo,it’saprocess.Yougottolearnhowtogothroughandunderstand.Justkeepgoingthroughtheprocessuntilyoulearnhowgovernmentcontractingworks.Profitmarginisbetterinthepublicsector.Theprivatesectorisaboutrelationships.Theprivatesectorisalittletighterwithfunds.Iftheydon’tlikeyourprice,they’llwalkaway.”[#13]

Thenon‐Hispanicwhitefemaleownerofapublicrelationsandmarketingfirmnoted,“It’shardertogetthegovernmentwork.It’soften[a]morelabor‐intensiveprocess.RFPsaregoingtobevery,veryspecific.Whenyou’resubmittingproposalstotheprivatesector,there’snoformat.Withtheprivatesector,especiallywhentheycometous,it’samatterof‘Doesthismeetyourbudget?’”[#15]

Thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmnoted,“Withthepublicsectorthere’sjustabiggerlearningcurveinteractingwiththecustomers,becauseinalotofcasestherearelotsofdifferentcustomers.Withthedifferentdepartments,differentpersonhere,differentpersonthere,that’salittlebitofachallengeinthebeginningstages.Theprivatesectoriseasierbecauseyouarejustdealingwithonepointofcontact.Idon’tthinktheprofitmarginsaresignificantlydifferentbetweenthetwo.”[#16]

Whenaskedaboutanyprofitabilitydifferencesbetweenworkinginthepublicsectorversustheprivatesector,theHispanicAmericanfemalerepresentativeofanewspapernoted,“Ithinkthepublicisaloteasier.Onceyougetin,iftheyadvertise,it’salotmorestraightforward.Theydon’thavetobidfortheadvertising.Thepublicsectorsimplybuystheadsoutright.Theprofitmarginisbetterwiththepublicsectorbecausethere’slessgoingbackandforth.Theprivatesectorismainlycomprisedofsmallbusinesses,andthere’smorechurningofrevenueinthatsector.[#18]

TheAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmstatedthatinthepublicsector,thegovernmentdoesnotwanttohavearelationship.Itismostlyperformance‐basedandstrictlybytherules.Thereisnogiveinthecontracts.Theprofitmarginsareless,andtheymustcompeteforthebusiness.Intheprivatesector,thereismoregiveinthecontracts.Theycanmaketheirowndecisions.Onceyougetintotheprivatesectororcorporation,itiseasiertogetthework.Theywillnotcompetefortheworklikeinthepublicsector.Onceyoubuildtherelationshipinthe


corporateworld,youcanmakealittlemoremoney.Thatisnotthecaseinthegovernmentsector.[#20]

Whenaskedifprofitabilitydiffersbetweentheprivateandpublicsectors,theBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysays,“Itdoesdiffermarkedly.Publicsectorsarelowbiddersanddoallinsidecontractwork.Privatesectorpaysmoremoneywitheasierchangeorderswhenneeded.Itismostoftendifficulttogetchangeordersapprovedingovernmentsector.”[#23]

Whenaskedifprofitabilitydiffersbetweentheprivateandpublicsectors,theminorityfemaleownerofanMBE‐,WBE‐,SBE‐,andSWaM‐certifiedconstructionstaffingcompanyexpressed,“Itdoesdiffermarkedly.Publicsectordependsonthedollaramountwonandthebudgetneeds.Privatesectorpaysmoreofapercentagebutusuallyisdollarcapped.”[#24]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatprofitabilitymaybeslightlyhigherinprivatesectorwork.[#25]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmstatedthatprofitabilitybetweenthepublicandprivatesectorsdiffers.Hesaid,“Yes,theprivatesectorworkisalotmoreefficient,andthereisalotlessredtapeyouhavetogothrough.Youcanseeahigherprofitabilityinmostcases.”[#28]

Whenaskedifprofitabilitydiffersbetweentheprivateandpublicsectors,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Itdoesdiffer.Thepublicsectorhasmoremoneytospendthantheprivatesector.WehavetofollowOSHArulesandguidelines.Theprivatesectorhasmoreprofitbutthereismoretotackleduetosafetyguidelines.”[#30]

Whenaskedifprofitabilitydiffersbetweentheprivateandpublicsectors,anon‐Hispanicwhitemalerepresentativeofanelevatorcompanyindicatedthatitdoes;thegovernmenthasastandingrate.[#36]

Whenaskedifprofitabilitydiffersbetweentheprivateandpublicsectors,theBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanystated,“Definitely,thereisadifference.Inthepublicsectoryoucanchargewhatyouwant.Thepriceislockedinforthegeneralcontractor.”[#39]

C. Working as a Prime Contractor or Subcontractor

Businessownersandmanagersdiscussed:

Mixofprimecontractandsubcontractwork;

Primecontractors’decisionstosubcontractwork;

Preferencestodobusinessasaprimecontractor;and

Subcontractors’methodsforobtainingworkfromprimecontractors.


Mix of prime contract and subcontract work. Mostfirmsthatthestudyteaminterviewedreportedthattheyworkasbothprimecontractorsandassubcontractors.Theyalsodescribedhowtheyobtainworkandreasonstheypreferredprivatesectorworkoverpublicsectorwork.

Thestudyteaminterviewedafewfirmsthatprimarilyworkassubcontractorsbutonoccasionalsoworkasprimecontractors.[Forexample,#3,#7,#12,#13,#19,#20,#22,#24,#27,#32,#39]

Otherfirmsreportedthattheyusuallyworkasprimecontractorsbutwillalsoserveassubcontractors.[Forexample,#1,#4,#5,#11,#23,#25,#26,#30,#37]

Afewfirmsreportedthattheyalwaysworkasprimecontractors.[Forexample,#8,#9,#28,#31,#33,#34,#36]

Prime contractors’ decisions to subcontract work. Thestudyteamaskedbusinessownerswhetherandhowtheysubcontractoutworkwhentheyaretheprimecontractor.

One prime contractor expressed that they usually perform all of the work or rarely subcontract

work. Forexample,aBlackAmericanmaleowneroftheminority‐ownedcommercialrealestatedevelopmentfirmdoesnotusesubcontractorsduetothenatureofhisbusiness.[#2]

Interviewees from companies that use subcontractors indicated that they use firms with which

they have an existing relationship.Bothmajority‐ownedfirmsandminority‐andwoman‐ownedbusinessesthatusesubcontractorsmadesuchcomments.

Whenaskedhowsheselectssubcontractors,anon‐HispanicwhitefemaleownerofaSWaM‐certifiedwoman‐ownedcivilengineeringfirmnoted,“UsuallyIlookattheDBEwebsitebasedonthecriteria,thenIgobypastperformanceorrelationships.”[#3]

Whenaskedhowtheyselectsub‐contractors,afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmreported,“It’swhowelikedealingwith.It’spersonalpreference.”[#9]

Whenaskedifthereweresubcontractorswithwhomthefirmhasestablishedrelationshipsandpreferstowork,anon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaid,“Yes.”[#22]

TheminorityfemaleownerofanMBE‐,WBE‐,SBE‐,andSWaM‐certifiedconstructionstaffingcompanyexpressed,“TherearesubsthatIhaveestablishedrelationshipswithandwilluseallofthetimewhentheyareavailable.”[#24]

Whenaskedhowthefirmselectssubcontractors,anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmexplainedthatthefirmhasestablishedrelationshipswithsubcontractors.Shealsoreportedthatselectioniscontingentuponavailability,location,andskill.[#25]

A few of the interviewees expressed they rarely solicit or do not solicit MBE/WBE/DBE/SBE

subcontractors for bids or quotes because of established business relationships or a variety of

other reasons. Examplesofthesecommentsinclude:


WhenaskedifthefirmsolicitsMBE/WBE/DBE/SBEsubcontractorsforbidsandquotes,aBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmnoted,“Ihaven’tgottentothepointwhereIneedthem.”[#8]

WhenaskedifthefirmsolicitsMBE/WBE/DBE/SBEsubcontractorsforbidsandquotes,afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmrespondedno.[#9]

TheBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanysaysherarelysolicitsMBE/WBE/SWaM/DBE/SBEsubcontractorsforbids.[#32]

A few of the interviewees discussed a variety of reasons that there are subcontractors they

will not work with. Forexample:

Whenaskediftherearesubcontractorshewouldnotworkwith,theBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmreplied,“Yes,becauseofthequalityoftheworkandcontractualconfusionabouttheirroleontheproject.”[#7]

TheBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmstatedthattherearesubcontractorshewon’tworkwithbecausetheyinsistongettingaportionoftheirfeeupfrontandhedoesn’thavethatkindofcashflow.[#8]

Preferences to do business as a prime contractor.Afewintervieweessaidthattheircompaniesmostlyworkasprimecontractorsandprefertodoso.Examplesofthosecommentsincludethefollowing:

Whenaskedwhythefirmpreferstodoworkasaprimecontractor,theBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicated,“IamreluctanttopartnerwithotherfirmsunlessIreallyknowthepeople.Ithinkthereisalotofliabilitywiththat.”[#4]

Whenaskedwhythefirmtypicallyservesasaprimecontractor,anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmreportedthatthecompanyisageneralcontractorwithanestablishedclientbaseandthefirmrarelyhastheneedtobidasasubcontractor.Shedidindicatethatthefirmisonafewlistsasasubcontractorbuthaveonlyservedinthatcapacityonetimeinthepasttwoyears.[#25]

Whenaskedwhythefirmpreferstodoworkasaprimecontractor,theBlackAmericanmaleownerofaplumbingcompanystated,"Weareprimesduetothelackofemployees,andImostlydealwithhomeowners."[#31]

Whenaskedwhyhepreferstodoprimecontractingwork,theBlackAmericanmaleownerofanHVACcompanynotedthathedoesnothavetodosubcontractinganymore.[#33]

Whenaskedwhythefirmtypicallyservesasaprimecontractor,theAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatitgivesthefirmmorecontrolovertheproject.[#34]


Whenaskedwhythefirmprimarilyservesasaprimecontractor,anon‐Hispanicwhitemalerepresentativeofanelevatorcompanystated,“Wearekindofourownseparateentity;therereallyisn’tanyonetosubcontract[to].”[#36]

Subcontractors’ methods for obtaining work from prime contractors. Intervieweeswhoworkedassubcontractorshadvaryingmethodsofmarketingtoandobtainingworkfromprimecontractors.Someintervieweessaidthatthereareprimestheywouldnotworkwithforavarietyofreasons.

Many business owners and managers rely on existing relationships and word‐of‐mouth to

obtain work from prime contractors.Examplesofthosecommentsinclude:

Whenaskedhowtheyobtainprojectsasasubcontractor,themalerepresentativeofanon‐Hispanicwhite‐ownedenvironmentalremediationfirmmentionedtheyknowthelocalfirmswellandwillcallthem.Thoserelationshipsarecultivatedthroughnetworking.Theymaybeabletoutilizetheirjointventurearrangementwithawoman‐ownedsmallbusinesstohelpthemmeettheirSBEandWBEgoals.[#10]

TheHispanicAmericanfemaleownerofatranslationagencynotedsheobtainsworkasasubcontractorthroughpreviousprofessionalrelationships.Shestated,“Iknowsomebodythatknowsme,andtheyhaveaprojectcomingupandthey’llapproachme.It’sthesameforboththeprivateandpublicsectors.”[#13]

Whenaskedhowthefirmmarketstoprimes,thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmnotedhemarketshisfirmtoprimes.“Westayintouchwiththem;Icallthem.Weworkforthem,andIvisitthem.”[#16]

TheAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmnotedshemarketstoprimes.Withherlongevityinthebusinessworld,sheknowswhichprimestogotoforworkthroughhernetwork.[#20]

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanygetsonprojectsbyword‐of‐mouth,jobboards,andbymovingsuperintendentswhogofromonejobtoanother.[#23]

Whenaskedhowhisfirmgetsonprojectsasasubcontractor,anon‐HispanicwhitemalerepresentativeofaWBE‐certifiedtruckingcompanyreportedthathisfirmgetsonprojectsduetoword‐of‐mouthandreputation.[#27]

Whenaskedhowthecompanygetsonprojectsasasubcontractor,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Wegetonprojectsbyword‐of‐mouth,primecontractorsrequest,emailsforbids,andrelationshipswithothercontractors.”[#30]

Some business owners said they solicit to prime contractors to obtain work. Forexample:

Whenaskedhowhemarketshisfirmtoprimes,theBlackAmericanmaleownerofanMBE‐,VBE‐,andSWaM‐certifiedmedicalservicesfirmnoted,“Togetonprojectsasasub[wemake]phonecalls,attendmeetings,reachouttowinningcontractor,andmatchmakingeventspriortobidcomingout.”[#1]


Whenaskedhowthefirmgetsworkfromprimecontractors,thenon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmnotedthattheygetonprojectsasasubcontractorbyworkingdirectlywiththeownerorforthecontractor.Theygetsalesleadsandotherleadresources.Theprojectsarealldoneinbothpublicandprivatesectorssimilarly.Theymarkettoprimesmostlybyphonecalls,handshakes,face‐to‐faces,occasionalemails,alsowithtargetandstrategysheets.[#19]

Whenaskedifhemarketshisfirmtoprimes,anon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaid,“Wemarketbyjustcallingthem[theprimes]andgoingintotalktothem.”[#22]

Whenaskedhowthefirmfindsoutwhichprimesarebiddingonaproject,theminorityfemaleownerofanMBE‐,WBE‐,SBE‐,andSWaM‐certifiedconstructionstaffingcompanysaidshereceivesemailalerts,SWaMemails,andgoestowebsitestofindopportunities.Shealsogoestovendorappsonwebsitesandprocurementdepartments,sendingherinformationsothatherfirmcanbeconsidered.[#24]

TheBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanygetsonprojectsbydoor‐to‐doorsolicitation,reachingouttoprimecontractorstogetsomeofthework.Hesaystherearenominorityset‐asidesinthisbusiness.[#32]

ABlackAmericanmaleownerofaflooringcompanysaidhegetscallsfromprimestodoworkonprojects.Healsomarketstoprimesviaword‐of‐mouth.Hewillgotodifferentcompaniesthatarehiringandapplyforjobsorprojects.[#37]

Some business owners said that they are routinely solicited for bids from prime contractors or do not need to proactively market to them. Forexample:

Whenaskedhowsheobtainsprojectsasasubconsultant,anon‐HispanicwhitefemaleownerofaSWaM‐certifiedwoman‐ownedcivilengineeringfirmstatedthatinthefirstcoupleofyearsofbusiness,shepickedupthephone,seekingtobeonateamwhenshewasawareofaproject.Nowthatlargerfirmsareawareofherfirm,shesimplygetsthecalltobeonteamsasasubconsultant.[#3]

Whenaskedhowthefirmgetsonprojectsasasubcontractor,thenon‐Hispanicwhitefemaleownerofapublicrelationsandmarketingfirmnotedthatcompaniescallthemtooffersubcontractingopportunities.[#15]

Whenaskedhowthefirmmarketstoprimes,anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatherfirmtypicallyknowsbecausetheyreceiveaninvitationtobid.Sheexplainedthattheownerattendsfocusandnetworkinggroupswherehehashisfingeronthepulseastowhatconstructionprojectsareunfoldinginthearea.Shestatedthattheydon’tmarkettoanyone.Shesaid,“Wearereviewingandtrackingwhat’sgoingon.”[#25]

Whenaskedhowhisfirmlandsprojectsasasubcontractor,aHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmreportedthathisfirmreceivesaninvitationtobidorissometimesaskedbytheowners.[#28]


A few of the interviewees indicated that there are primes they will not work with. Examplesoftheircommentsincluded:

Afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmnotedthereareprimestheywon’tworkwithbecauseofpoorpastperformance,qualityoftheirdrawings,orpaymentproblems.[#9]

Themalerepresentativeofanon‐Hispanicwhite‐ownedenvironmentalremediationfirmnotedthereareprimestheywon’tworkwithbecauseofpaymentrecord,safetyrecord,orethicalproblemsliketryingtotaketheircustomersawayfromthem.[#10]

TheAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmnoted,“ThereareprimesIwon’tworkwithbecauseIhadtospendmoneytogetmymoney.Iftheyeveraskmeagain,I’llaskforadeposit.”[#20]

Whenaskedifthereareprimesthatthefirmwillnotworkwith,thenon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaid,“Yes,becausetheyusedmynameandstatustomeetaquota,butdidn’tgivemeanywork.”[#22]

In general, interviewees reported that they have never been denied the opportunity to submit

a bid or price quote to a prime. [Forexample,#7,#13,#16,#17,#19,#22,#23,#25,#27,#28,#30,#32,#34,#38]

Some interviewees reported they have been denied the opportunity to submit a bid or price

quote to a prime.Examplesoftheircommentsincludethefollowing:

Whenaskedifthefirmhadeverbeendeniedtheopportunitytosubmitabidorpricequotetoaprime,theBlackAmericanmaleownerofanMBE‐,VBE‐,andSWaM‐certifiedmedicalservicesfirmreportedthathisfirmhadbeendeniedworkwithprimesbecausetheprimeswouldperformtheworkaloneandwithoutsubcontractors.[#1]

Whenaskedifshehadeverbeendeniedtheopportunitytosubmitabidtoaprime,thenon‐HispanicwhitefemaleownerofaSWaM‐certifiedwoman‐ownedcivilengineeringfirmstated,“I’vegotten‘Thankyou,ourteam’sfull.’Idon’tbid.It’sbasedoffqualifications.”[#3]

Whenaskedifthefirmhadeverbeendeniedtheopportunitytosubmitabidtoaprime,theAsianAmericanmaleownerofaWBE‐andSWaM‐certifiedengineeringandtestingfirmnoted,“Sometimes,yes.Theysay,‘Wedon’tneedhelponthisone.We’llletyouknow.Wegotitcovered.’”[#5]

Whenaskedifthefirmwaseverdeniedtheopportunitytosubmitabidorpricequotetoaprime,amalerepresentativeofanon‐Hispanicwhite‐ownedenvironmentalremediationfirmresponded,“Yes,thatiswhenthefirmdoesn’tbringanyvaluetotheteam.”[#10]

Whenaskedifthefirmhadeverbeendeniedtheopportunitytosubmitabidorpricequotetoaprime,theBlackAmericanmaleownerofaDBE‐,WBE‐,MBE‐,andSWaM‐certifiedconstructionfirmstated,“Yeah,absolutely.Whentheygoinandchecktheboxes,ifyoudon’thaveanyoneofthose,you’relikelybeingdenied.Itdoesn’tmeanyou’renotqualified,itjustmeansyou’rebeingdeniedbecauseyou’renotacertifiedcompany.”[#21]


TheBlackAmericanmaleownerofaflooringcompanysaysthathewasdeniedtheopportunitytobidbecausehewastoldthathispricewastoohigh.[#37]

D. Keys to Business Success

Thestudyteamaskedfirmownersandmanagersaboutbarrierstodoingbusinessandwhatittakestobecompetitive.Topicsthatinterviewersdiscussedwithbusinessownersandmanagersincluded:

Personnelandlabor;

Equipment;

Accesstomaterials;

Financing;and

Otherfactors.

Personnel and labor. Manybusinessownersandmanagersindicatedthattheyhadexperiencedbarriersorwereawareofbarriersinobtainingpersonnelorthelaborneededfortheircompanies.Forexample:

Whenaskedwhatittakestobecompetitiveintheirlineofbusiness,aBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmresponded,“Certifiedpersonnelbydifferentagenciesandsizeofyourstaff.”[#7]

Whenaskedwhatittakesforafirmtobecompetitiveintheirlineofbusiness,thenon‐HispanicwhitefemalerepresentativeofanMBE‐,DBE‐,SBE‐,andSWaM‐certifiedNativeAmerican‐ownedenvironmentalengineeringfirmnotedthatitisdependentonpricingandcertificationsofthestaff.[#11]

TheHispanicAmericanfemaleownerofatranslationagencynotedthat,tobecompetitiveinherlineofbusiness,afirmmustshowprofessionalismandwhenyoudeliver,peoplewillpaywhatyouaskfor.[#13]

Whenaskedwhatittakesforafirmtobecompetitiveinthislineofbusiness,theBlackAmericanmaleownerofaDBE‐,WBE‐,MBE‐,andSWaM‐certifiedconstructionfirmstated,“Oneword,‘Teaming.’Youhavetohaveagoodteam.Youhavetohaveamarketingteam,financialteam,businessdevelopmentteam,trainingteam,andpersonnel.Ifyoudon'thaveateamaroundandyoutrytodoeverythingyourselfthat'swherethefailurecomes.Itcan'tbedonebyoneperson."[#21]

Whenaskedwhatittakesforafirmtobecompetitiveinhislineofbusiness,aHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmstated,“Youhavetohavethebestpeople.It’samandatoryrequirement;it’sthesecretsaucetobeingsuccessfulineitherthecommercialorthesecurityintegration.Youhavetohavethebestpeople.Getthemtrained,keepthemtrained,andretainthem.Youwantpositive,upbeatpeoplethataredriven.”[#28]


Whenaskedwhatittakesforafirmtobecompetitiveinthislineofbusiness,anon‐Hispanicwhitemalerepresentativeofapublicly‐heldmanufacturingequipmentfirmstated,“Theyhavetobeproperlystaffedwithmanpowerandequipment.”[#29]

Whenaskedwhatittakestobecompetitiveinhislineofbusiness,theBlackAmericanmaleownerofanHVACcompanysaid,“Advertising,finances,andemployeestodotheworkonceyougetit.[They]arewhatittakestobecompetitive.”[#33]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,thepresidentofanHVACcompanyexpressed,“Unavailabilityofqualifiedpersonnelhasbeenahugebarrier.”[AS#29]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,arepresentativeofalandscapingcompanystated,“Wehaveissuestryingtofindemployees,settinginterviews,andhavingthemshowup.”[AS#32]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofalandscapingcompanyexpressed,“There’salwaysproblemsfindinggoodemployees.Toomanylazypeople.Thistypeofworkisdirty,wet,sweaty,andhot.”[AS#41]

Arepresentativeofanarchitectureandengineeringfirmexpressed,“Fromanemploymentpointofviewwegooutandtrytofindwomenandminoritiestoenterintoengineeringandarchitecturecareers.InthestateofVirginia,thereisnotanengineeringprograminthehistoricallyblackcollegesanduniversitiesofVirginia.So,itcreatesahurdleforthoseindividualstoevengetintotheprofession.”[MOC#2]

Equipment. Mostbusinesseshadnotexperiencedbarriersinobtainingequipmentanddidnotthinksuchbarriersexisted.

A few of the interviewees expressed barriers with obtaining equipment.Forexample:

Whenaskedifobtainingequipmentwasapotentialbarrier,theBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmstated,“Yes,asanewbusinessobtainingequipmenthasbeenahugebarrierforus.”[#7]

Whenaskedifobtainingequipmentwasapotentialbarrier,thenon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmexpressed,“Yes,obtainingequipmentisdifficultforastart‐upbusiness.Itmakesitevenharderwhenyouareunabletogetthecorrectfinancing.”[#22]

Whenaskedifequipmentisapotentialbarrier,theBlackAmericanmaleownerofaplumbingcompanystated,“Yes,sometimeswecan’taffordtheequipmentweneedsowemakedowithwhatwehave.”[#31]

Whenaskedifobtainingequipmentwasapotentialbarrier,theBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanystated,“Ihadtousemyowncapitaltogetequipment.Yes,itcanbeabarrierifyoudon’thaveenoughcapital.”[#32]


Access to materials. Aswithotherpotentialbarriers,intervieweesreportedarangeofexperienceswithaccesstomaterials.Forexample:

Amalerepresentativeofanon‐Hispanicwhite‐ownedenvironmentalremediationfirmstatedthattobecompetitiveintheirlineofworktheymusthaveagreatsafetyrecordandhighevaluations,quality,management,andcostcontrols.[#10]

Whenaskedwhatittakestobecompetitiveinhislineofbusiness,theBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanysaysthathehadnobondingcapacity.Hecouldnotfindanyonetohelpwithbonding,sohecouldnotgetteamingopportunities.[#32]

Whenaskedwhatittakesforafirmtobecompetitiveinthislineofbusiness,anon‐Hispanicwhitemalerepresentativeofanelectricaldistributioncompanystated,“Youjusthavetobuyrightsothatyoucansellright.”[#35]

Whenaskedwhatittakestobecompetitiveinhislineofbusiness,theBlackAmericanmaleownerofaflooringcompanysaid,"Findingadistributortopurchaseandsellmyownproducttoandforpeoplewhohireme."[Inotherwords,beingabletopurchasehisproductatwholesalepricesandthensellthemtohiscustomersatmarked‐upprices.][#37]

Financing. Aswithotherissues,interviewees’perceptionsoffinancingasabarrierdependedontheirexperiences.Tosomeitwasabarrier,andtoothersitwasnot.

Most interviewees indicated that financing is a barrier for small and minority‐ and woman‐

owned firms.Examplesoftheircommentsincludethefollowing:

Whenaskedifobtainingfinancingwasapotentialbarrier,theBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmexpressed,“Yes,we’vehadahardtimeobtainingfinancing.”[#7]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanysaid,“Yes,ofcourseobtainingfinancingisabarrier.”[#39]

Whenaskedifobtainingfinancingwasapotentialbarrier,theBlackAmericanmaleownerofaDBE‐,WBE‐,MBE‐,andSWaM‐certifiedconstructionfirmexpressed,“Welldefinitely,ofcoursefinancingisalwaysanissue.Ifyoudon’thavemoney,youdon’thaveaworkforce,thenyougotaproblem.”[#21]

Whenaskedifobtainingfinancingwasapotentialbarrier,thenon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaid,“Yes,financingisdifficultforastart‐up.”[#22]

TheBlackAmericanmaleownerofaplumbingcompanystated,“Yes,obtainingfinancialbackingisapotentialbarrierduetothehighratestoborrow.”[#31]

Whenaskedifobtainingfinancingisapotentialbarrier,theBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanyexpressed,“Yes,regardingobtainingfinancialbackingisabarrierespeciallyforperformancebonds.”[#32]

Whenaskedifobtainingfinancingwasapotentialbarrier,theBlackAmericanmaleownerofanHVACcompanysaid,“Therecouldbe.Itisoutthere.ClassCcontractsmusthave


collateraltobecomeClassBcontractor.Ittakesupto$10,000inbusinessmoneyscaleineachclassifiedcategorytogetit.”[#33]

TheBlackAmericanmaleownerofaflooringcompanysaid,“Yes,obtainingfinancinghasbeenabarrier.Iamalwaysdeniedornotabletofindfinancingopportunities.”[#37]

Whenaskedifobtainingfinancingwasapotentialbarrier,theBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,“Yes,whypeopledonotbelieveblackcompaniescandoworkbecausetheyareblackamazesme.Manyblackcompaniesdonothavefinancesandcannotcarry120days.”[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanysaid,“Yes,ofcourseobtainingfinancingisabarrier.”[#39]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,arepresentativeofaprintingcompanynoted,“Wehaven’treallytriedtodostufflocally.So,ourbarrierswouldbefunding.Wehaven’tbeenmeetingwiththerightpeople.”[AS#42]

Some interviewees indicated that financing has not been a barrier for their companies. [Forexample:#1,#4,#5,#24,#25,#30,#34,#35]

Other factors. Beyondthefactorsdiscussedabove,manybusinessownersdescribedotherfactorsconcerningwhatittakestobecompetitive.

Some business owners specifically mentioned relationships and relationship‐building as

factors to be competitive in their line of business.Examplesofsuchcommentsincludethefollowing:

Afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmstatedthat,tobecompetitiveintheirlineofwork,“Wedesignbasedonconstructability.Weworkcloselywiththegeneralcontractorsasopposedtofightingthem.Thereisalotofrespecttherebetweenthetwo.Ifyoucanbuilditthewayitwasdesignedorclosetoorfindawaytosavemoney,wecancomewiththesameproductorbetter.”[#9]

Tobecompetitiveinherlineofwork,thenon‐Hispanicwhitefemaleownerofacomputersupportfirmindicated,“Networking,beingabletoknowwhototalkto,andbeingabletogetpeopletoanswerthephone.”[#14]

Tobecompetitiveinthislineofwork,thenon‐Hispanicwhitefemaleownerofapublicrelationsandmarketingfirmnoted,"Youhavetobecurrentonallmediaopportunities.Youhavetohavestrongrelationshipswiththemediatokeepupwiththat,notonlywithlong‐standingjournalistsandbroadcasters,butnewpeople.Iwilloftensetupmeetingswithpeoplewewanttogettoknowbetter,sothattheyknowuswhenwe’repitchingtothem.”[#15]

TheHispanicAmericanfemalerepresentativeofanewspapercompanynotedthattobecompetitiveinherbusiness,“Youhavetostayontopofmeetingpeople,followingthroughwiththosepeople,callingthemback,emailingthem,stayingintouch,andcontinuetobeatevents.”Shenotedonehastokeepthingsfreshandstayencouraged.[#18]


Some business owners cited qualifications, reputation, quality work, and other factors to be

competitive in their line of business.Examplesofsuchcommentsincludethefollowing:

TheBlackAmericanmaleownerofabusinessmanagementconsultingfirmnoted,“SinceI’vedonethistypeofworkforsolong,experienceiswhatittakestobecompetitiveinmylineofbusiness:mybackgroundandmyexperience.I’vedonethisyearinandyearout.Notjusttheday‐to‐dayoperationsofthesebusinesses,butalsothestrategicplanningthatittakes.Ifyou’renotplanningfor60months,it’shardtodeterminethatthisdecisionyou’remakingtodayistherightone.”[#17]

Whenaskedwhatittakestobecompetitiveinherlineofbusiness,theAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmsaid,“Experienceandthemoney.TheexperienceforthetypeofworkIdoishuge.”[#20]

Whenaskedwhatittakesforafirmtobecompetitiveinthislineofbusiness,anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthattheymustbereliable,fairlypriced,providequalitycraftsmanshipconsistently,andhavegoodcustomerservice.Shesaid,“Ifyouarenotconsistentandifyouarenotreliableandofferqualitycraftsmanship,youwillnotbecalledonagain.”[#25]

Whenaskedwhatittakeforafirmtobecompetitiveinthislineofbusiness,anon‐HispanicwhitemalerepresentativeofaWBE‐certifiedtruckingcompanyindicatedthatreliabilityandcomparablepricingisnecessarytobecompetitive.[#27]

Whenaskedwhatittakesforafirmtobecompetitiveinthislineofbusiness,theAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmstatedthatittakestargetedmarketing,gettinginfrontofthepeoplewhomakethedecisions,gettingcertified,andatrackrecord.[#34]

Whenaskedwhatittakestobecompetitiveinhislineofbusiness,theBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanycommented,“Goodqualitywork;itisallaboutquality.Ifyouareaminoritybusiness,youhavetobeontopofyourgamealldownthelinefromthetoptothebottom.”[#38]

Other interviewees said that pricing is a competitiveness factor in their line of business.Forexample:

Themalerepresentativeofanon‐Hispanicwhite‐ownedlandscapematerialsfirmnoted,“[The]marketplaceisgood.Tobecompetitiveinourindustry,thepricehastoberight.”[#6]

Whenaskedwhatittakesforafirmtobecompetitiveintheirlineofbusiness,thenon‐Hispanicwhitefemaleownerofastaffingagencynoted,“Probablypricingandobviouslygoodservice.”[#12]

Thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmnotedthatpriceiswhatittakestobecompetitiveinhislineofbusiness.Hisserviceshavenotgainedanyvaluesincehestarted.Hechargesthesamepricesnowashedid26yearsago.[#16]


Whenaskedwhatittakestobecompetitiveinhislineofbusiness,thenon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmnoted,“Forthegeotechtestingandinspection,that’sprettycommoditized.That’sgoingtobeinpartexperience‐driven,butit’llbescoredmostheavilyonpricetowhichwearebuilttobeverycompetitive.Nowthereareservices[onwhich]weprovidecommissioning,whichisalittlemorespecialized,andthat’sgotalittlebettermarginbecauseit’sallprofessionals.It’sallgraduateengineersandpeoplewith20plusyearsofexperience.”Henotedthathisfirmisbuilttobalanceprivateandpublicsectorsandtodiversifytheirclientbase,especiallyduringrecessions.[#19]

Whenaskedwhatittakesforafirmtobecompetitiveinthislineofbusiness,thenon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaid,“Ifyoudon’talreadyhavecontractsandprofits,noonewilluseyou,butyoudon’tgetprofitsunlessyougetthosecontracts.Bythetimewefoundoutaboutabid,it’salreadybeendecidedwhowon.Maxresponsetimeis30days,fivedays,and10days.Ifyou’rejustfindingoutaboutaproject30daysbeforethebid,it’stoolate.Lowbiddersgetbids,butthenchangeordersraisethecosthigherthanwhattheoriginalbidwas,andhigherthanthosewholostthebid.Youjusthavetoplaythegame.”[#22]

Whenaskedwhatittakesforafirmtobecompetitiveinthislineofbusiness,anon‐Hispanicwhitemalerepresentativeofanelevatorcompanyindicatedthatitwouldtakeexpertiseandpricepoint.[#36]

A few business owners reported a variety of other factors to be competitive in their line of

business.Examplesofsuchcommentsincludethefollowing:

Whenaskedwhatittakesforafirmtobecompetitiveinthislineofbusiness,theBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicated,“Itcomesdowntoacompanymarketingitself.Theworkwon’tcometoyou.Youhavetogogetit.”[#4]

Whenaskedwhatittakesforafirmtobecompetitiveinthislineofbusiness,theBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmnoted,“Toprobablybecomesuccessfulsomewhereelseandcomeback.You’renotgoingtobesuccessfulhere.IhavehadinternstoleavehereandbecomeverysuccessfulinCharlotteandAtlanta.Youstayhere[inVirginia]andit’snotgoingtohappen.”[#8]

Whenaskedwhatittakestobecompetitiveinhislineofbusiness,theBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysaysthatafirmneedstojustdowhattheyaregoodatandgetpaidthemostfordoingagoodjob.[#23]

Whenaskedwhatittakestobecompetitiveinhislineofbusiness,theBlackAmericanmaleownerofaplumbingcompanystated,“Acompanyneedstobetechnicallyadvancedwithgreatcustomerserviceskillsandup‐to‐datewithproceduresandtechnology.”[#31]

E. Potential Barriers to Doing Business in the Region

Thestudyteamaskedintervieweesaboutpotentialbarriersthatfirmsmightfaceinthelocalmarketplacewhentheyarestartingintheirlineofbusinessortryingtogroworstayinbusiness.Topicsincluded:


Learningaboutworkandmarketing;

Bondingrequirementsandobtainingbonds;

Insurancerequirementsandobtaininginsurance;

Prequalificationrequirements;

Licensesandpermits;

Otherunnecessarilyrestrictivecontractspecifications;

Biddingprocesses;

Non‐pricefactorspublicagenciesorothersusetomakecontractawards;

Timelypaymentbythecustomerorprimecontractor;and

ExperiencewithCityprocesses.

Learning about work and marketing. Duringthein‐depthanecdotalinterviewsandpublichearings,intervieweesdiscussedopportunitiesforfirmownersandmanagerstoidentifypublicsectorworkandothercontractopportunities.Manybusinessownerssaidthatitwasmoredifficultforsmallerfirmstomarketandidentifycontractopportunities.Examplesofsuchcommentsincludethefollowing:

Numerous interviewees described difficulties learning about work and contract opportunities,

including contract opportunities with the City of Virginia Beach.Examplesofthosecommentsincludedthefollowing:

TheBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmnotedthatitwasmoredifficulttofindoutaboutprojectsintheVirginiaBeachDepartmentofPublicWorksandDepartmentofPublicUtilitiesthanotherpublicagencies.[#7]

Thenon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmsuggested,“Thecityshoulddosomethingthatfeelsmoreopenandfeelsmoretransparentforustohaveanopportunitytomeetandgettoknow.Forajurisdiction,muchofitisprescribedabouthowtheyhavetomoveforwardinaprocurementprocess.Ialsoknowthatduringthecourseofprocurement,peoplewilltendtowanttoworkwithpeoplethattheyknowandhaveworkedwithbefore.So,ifyouhaven’tworkedwithmebefore,givemeanopportunitytogettoknowyousothatIcanhaveanopportunitytoshowyouwhatwecando.We’renotayoungbusiness.Wehaveaskedtocomedownandtalkandwehavenotbeengiventhatopportunity.Theyhavenotreplied.It’sfrustrating:in10years,wehavenotbeensuccessfulgettingintoseeanybody.We’redoingworkinYorktown,Norfolk,HamptonRoads.WehaveatrackrecordinVirginiaBeachontheprivateside.”[#19]

TheAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmhasnotbidonanycontractswiththeCity.ShementionedthatVirginiaBeachbidsdonotshowupineVA[Virginia’seProcurementMarketplace].TheprocurementsitetheCityusesisverydifficulttonavigate.ShenotedshedoesnotseemanybidopportunitieswiththeCity.[#20]


Whenaskedhowthefirmlearnsaboutworkwithpublicagencies,theBlackAmericamaleownerofaplumbingcompanyindicated,"IamnotawareofanyVirginiaBeachworkopportunitiesoffered.Ihavenoknowledgeofhowtobecomeawareofthoseopportunitiesastheycomeup.Theremustbesomekindofcontactviaemailormailtobeabletoknowwhenopportunitiescomeup."[#31]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofapestcontrolcompanystated,“Obtainingworkistoughbecauseofpricingandthelackofunderstandinginpricingbycustomers.”[AS#1]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,thepresidentofanofficefurniturestorenoted,“Ifeellikewehavenotbeengivenenoughopportunities.Wehaven’thadachancetoworkwithVirginia.Therereallyhaven’tbeenalotofadvantageswhenhavingtodoworkforVirginiaBeach.”[AS#4]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,thepresidentofacomputersoftwaredevelopmentcompanynoted,“ItisveryhardtogetattentionasanewcompanyintheCityofVirginiaBeach.Wearetheonlycompanyinthestatethatdoeswhatwedo.Wedoworkwithothercitiesandit’sveryhardtogetworkinVirginiaBeach.Ourproductischeaperthantheonecurrentlybeingused.”[AS#13]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofanadvertisingagencyexpressed,“IthinkVirginiaBeachisatoughercityinregardstogettingcontractworkasaminoritybusiness.IdoknowVirginiaBeachisnotfulfillingthevoidthey’remeanttofillinregardstominoritybusinesses,andI’dliketoaidinthatortoknowhowtobestgoaboutthat.”[AS#18]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofanenvironmentalconsultingagencyexpressed,“Youcannotgetjobsunlessyouareaminority.”[AS#19]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,arepresentativeofabuildingconstructioncompanystated,“WehaveexperiencedsomedifficultybreakingintogovernmentcontractworkwiththeCityofVirginiaBeach.”[AS#31]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofaconstructionfencingcompanynoted,“Obtainingworkhasbeenabarrier.It’shardtofindopportunitiesforveterans.”[AS#36]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofabuildingconstructioncompanystated,“AllofthesurroundingcitiesthattheycallHamptonRoad,eachhavetheirownwayofdoingbusiness.So,itmakesitdifficultforavendortodotheirbusiness.WeneedsomethingforsmallbusinessessothatIcanmakerevenue.”[AS#38]

Many interviewees, including minorities and women, indicated that they were not aware of,

had not experienced, or did not believe that there are barriers based on race/ethnicity/gender


related to learning about work or marketing their companies. Examplesofsuchcommentsincluded:

WhenaskedwhetheritwaseasierorhardertofindoutaboutPublicWorksworkopportunities,relativetootherpublicagencies,theAsianAmericanmaleownerandthenon‐HispanicwhitefemaleownerofaWBE‐andSWaM‐certifiedengineeringandtestingfirmreportedthattheydon’thavetroublefindingoutaboutopportunities.Theysimplyaren’tawardedanycontractsfromPublicWorks.[#5]

Whenaskedifhehasexperiencedbarrierswithlearningaboutworkduetogenderorracediscrimination,theBlackAmericanmaleownerofabusinessmanagementconsultingfirmstatedthathestronglybelievesthatthereisracialdiscrimination.“Thereareanumberoffactorsthere;it’snotjustsimplyaracefactor.Ithinktheissueisalotofwhatwesee,particularlyinthecommercialB2Bspace,isnotnecessarilybasedonthemeritsbut[rather]basedonwhoyouknow.Inotherwords,ifyouaren’tevenawarethatthere’sanopportunity,howdoyoutakeadvantageoftheopportunity?Bythetimetheopportunityispublic,thedecisionisprobablyalreadymadebecausethepeoplewhohavehadaccesstowhatthisthingisgoingtolooklikeandwhattheparticularsare,they’vealreadylinedup.Theygottheirpricing.Everythingisinline.You’renotstartingatthesamestartingpoint.Ithinkthat’stheissue.”[#17]

Whenaskedifthereisapotentialbarrierinlearningaboutworkormarketing,anon‐Hispanicwhitemalerepresentativeofapublicly‐heldmanufacturingequipmentfirmstated,“Wehavein‐housemarketingandthepotentialprojectsarebroadcasted.”[#29]

Bonding requirements and obtaining bonds. Onebusinessmanagerreportedlittleornoproblemobtainingbonds,orthatbondingwasnotanissue.Thatcommentincludedanon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthattheonlybarrierherfirmhasexperiencedisafinancialbarrier.Sheexplainedthatherfirmobtainedthebond,butitwasalittlemoredifficult.Shestatedithadnothingtodowiththeowners’gender,race,orethnicity.Shesaid,“Iguessitwouldbethesameforanyonewhowalkedintoabankwantingtoobtainabondoraloan.They’regoingtolookatyourcredithistory,andthey’regoingtolookatyourfinancialabilitytorepayshouldsomethinghappen.”[#25]

Someintervieweesindicatedthattheirfirmshadwitnessedpotentialbarriersforsmallbusinessownerstoobtainbonding.Forexample:

Whenaskedifbondingrequirementsarepotentialbarriers,theBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanystated,“Yes,forbondingrequirementsandobtainingbonds,becausewehavetohavethemoneybeforegettingawarded.Itshouldonlybearequirementiftheyouhavebeenawardedtheproject.”[#23]

Whenaskedifthereareanypotentialbarriersregardingbondingrequirementsandobtainingbonds,theHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmsaid,“Bondingitselfisdiscriminatorytoeverybody.Idon’tcarewhoitis,bondingsucks.It’saverychallengingdifferentbeastthat


wantsatotallydifferentrequirementfromanybodyelseinreality.It’shardforeverybodytoget.Wefinallygotourownbondingprogram,butwe’reusingtheSBAonitanditcostmoremoney,whichmakesitharderforustowinwork.”[#28]

TheBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanystated,“Yes,bondingrequirementsandobtainingbondsareapotentialbarrierbecauseitisverydifficulttoget.Ireceiveda$200,000bondbutitwasnotenough.Thebondrequirementsweretoohightobeabletogetwork.”[#32]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,thepresidentofastreetsweepingagencynoted,“Wehavedifficultyinobtainingsecuritybonds.”[AS#30]

Insurance requirements and obtaining insurance. Duringthein‐depthanecdotalinterviews,intervieweesdiscussedwhetherinsurancerequirementsandobtaininginsurancewerebarriers.

One business owner reported little or no problem obtaining insurance, or that insurance was not an issue. Forexample,whenaskedifinsurancerequirementsandobtaininginsurancewereapotential barrier, the Black Americanmale owner of a plumbing company stated, “Obtaininginsuranceisfairlyeasy.”[#31]

Most interviewees indicated that they were not aware of, had not had any personal

experience with or believe there is not discrimination with insurance requirements or

obtaining insurance. [Forexample,#1,#4,#22,#24,#32,#34,#35]

Prequalification requirements. Oneintervieweeindicatedthatprequalificationrequirementswerenotanissue.[Forexample,#16]

Most business owners reported that prequalification requirements presented a barrier to

bidding on public contracts.Examplesofthosecommentsincludethefollowing:

TheBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmnotedthattheVirginiaBeachDepartmentofPublicWorksandDepartmentofPublicUtilitiesdidrequireprequalificationlikesizeandpastworkhistory.“Thosethingstieyourhandsespeciallyasanewbusiness.”[#7]

Whenaskedifprequalificationrequirementsareapotentialbarrier,theBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanystatedthatsometimesthisisaproblem.“Therecanbealotofregulationchangesthatcanaffectprequalificationrequirements.”[#23]

Whenaskedifthereareanybarrierspertainingtoprequalificationrequirements,theHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmstated,“It’snotdiscriminatory.Thehardestthingaboutprequalificationisthatyouhavetohavetheexperiencetoprovethatyoucandothejob,butyoucan’tdothejobwithoutexperience.”[#28]

TheBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanysaid,"Iranintoprequalificationrequirementsalot,likeexperiencelevelforsweepingand


janitorialworkandnumberofyearsinbusiness.Thiscandefinitelybeabarrierfornewbusinesses."[#32]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofaconsultingengineeringfirmstated,“MeetingcriteriaforpriorworkhistorywiththeCityhasbeenachallenge.”[AS#24]

TheownerofaSWaM‐certifiedarchitecturefirmexpressed,“Iamoftheopinionitboilsdowntodefactoexclusion.Whenhiringcommitteesaremadeupofprojectmanagerswhohavepreviouslyworkedforthefirmapplyingfortheposition.Whenthemajorityofpointsweightedareon‘experience’minorityfirmshavehistoricallybeenexcludedfromgainingviathewinningbids.Whenthereviewcommitteesaremadeupofallmalememberswherethescoringisexclusivelysubjectivewithnowrittenguidelines,I’moftheopinionthe‘GoodOl’Boys’willalwayscomeoutontop.”[WT#1]

Licenses and permits. Certainlicenses,permits,andcertificationsarerequiredforbothpublicandprivatesectorprojects.Duringin‐depthinterviews,thestudyteamaskedintervieweeswhetherobtaininglicensesandpermitswasabarrier.Examplesofthosecommentsincludethefollowing:

Whenaskedaboutbarrierspertainingtolicensesandpermits,anon‐HispanicwhitemalerepresentativeofaWBE‐certifiedtruckingcompanystated,“It’sallamoneygame.We’vehadsomeissueswiththegovernmentbecausefromoneyeartothenexttheychangewhatIDtheywillaccept.They’vechangedtheirsystemthreetimesoverthepastfiveyears,andeachtimeyouhavetogogetnewcredentials.”Hefurtherindicateditismoreofanissuewithourgovernmentanditisverycostly.HeexplainedthatmostofthedriversforhisfirmhaveaTWICcard(transportationworker’sIDcard).Heindicatedthatthecostforeachcardis$150,andifitneedstobereplaceditcanbeveryexpensivetodoso.[#27]

Whenaskedaboutbarrierspertainingtolicensesandpermits,theBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanyexpressedhehasexperiencedbarriersgettinglicensesandpermits.[#32]

Whenaskediflicensesandpermitshavebeenabarrier,theBlackAmericanmaleownerofaflooringcompanystated,“NothavingaC‐Classlicensehasstoppedmefromgettingcontractsover$1,000inVirginia.”[#37]

Most business owners and managers reported that obtaining licenses and permits was not a

barrier to doing business in the City of Virginia Beach or did not apply to their company.[Forexample,#1,#2,#3,#4,#5,#7,#8,#20,#22,#23,#25,#28,#29,#31,#33,#34,#36]

Other unnecessarily restrictive contract specifications. Thestudyteamaskedbusinessownersandmanagersifcontractspecifications,particularlyonpublicsectorcontracts,restrictopportunitiestoobtainingwork.

Some owners indicated that some specifications are overly restrictive and present barriers. Itappearsthatsomebusinesseschoosenottobidorareprecludedfrombiddingduetowhatbusinessownersandmanagersperceivetobeoverly‐restrictivecontractrequirements.Examplesofthosecommentsincludethefollowing:


Whenaskediftherewereanyrestrictivebarriersonthecontractingside,theBlackAmericanmaleownerofaDBE‐,WBE‐,MBE‐,andSWaM‐certifiedconstructionfirmstated,"Theydoifit'sasecuredareatogointo.Therearealsoeducationrestrictionstobeaprojectmanagerorworkonamilitarybaseoratagovernmentfacility:youarerequiredtohaveafour‐yeardegree.Therearealsocertificationrequirementsforjobsthathaveset‐asidegoals,ifyoudon'thavecertificationyoucan'tbetheprime.Sothat'saproblemthere."[#21]

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanyexpressedheisconfrontedallthetimewithrestrictivecontractspecificationsandbiddingproceduresdesignedtokeepminoritiesfrombiddingorgettingtheawards.[#23]

TheBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanyexpressed,“Pre‐bidrequirementswilldoyouin.Ineedsomeonewhocouldwritetobidoncontracts.”[#32]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanynotedtherehasbeenaproblemwithunnecessarilyrestrictivecontractspecificationsandbiddingprocedures.[#39]

Many business owners and managers reported that they had not experienced or witnessed

unnecessarily restrictive contract specifications or bidding procedures. [Forexample,#1,#4,#22,#34,#35,#36]

Bidding processes. Intervieweessharedanumberofcommentsaboutbiddingprocesses.

Most business owners shared a variety reasons that bidding processes presented a barrier to

obtaining work.Examplesofthosecommentsincludethefollowing:

Whenaskedaboutbiddingprocessesbeingabarrierforsmallbusinesses,theBlackAmericanmaleownerofaminority‐ownedcommercialrealestatedevelopmentfirmnoted,"TheCityshouldnotlet[the]Cityworkwithadeveloperthenbidit.That’sbid‐riggingandcreatesahugebarrierforsmallbusinesses.”[#2]

TheBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicated,“TheCitycouldbemorespecificinthescopeofwork.Atonepoint,Ithoughttherewasa‘goodol’boys’system.”Hedidrealizehehadtomarkethimselfandprovehimself.Hisrecommendationistospreadtheworkouttoeveryone.“TheCityhasimprovedovertheyearsinusingtheMinorityBusinessCouncilandconsolidatinginformation.Knowingwhomtotalktohasalwaysbeenachallenge.Itshouldbeeasiertoseewhatthewinningbidsareandhowmuchthebidsweresore‐bidderscanhavesomeidea[of]howtheyneedtocompete.”Healsoindicatedhesometimeswondersifsomeworkisfashionedtofavoraparticularcompanyevenifitwasn’tthelowbidder.Hehasfrequentlybenefitedfromthatwhengovernments,includingVirginiaBeach,wouldcallhimforaquote,andevenifhecouldn’tofferthelowestbid,hewouldbeaskedtogiveanumberandtheagencywouldseeiftheycouldjustifyitbecausetheyknewhiswork.[#4]

TheAsianAmericanmaleownerandthenon‐HispanicwhitefemaleownerofaWBE‐andSWaM‐certifiedengineeringandtestingfirmreportedthattheprocessisn’thard,theyjust


don’tgetafairopportunitytobeawardedPublicWorksjobs.Theynotedthatit’sthesamePublicWorksstaffpersonthatistheproblem.Asanengineeringfirm,theydon’tbid.Theyonlysubmitqualifications.Threefirmsareinvitedforinterviews.Theagencywillpickoneforcontractthennegotiatetheirprice.“Sometimeswe’retheonlyDBEthat’sthere.It’sfavoritism.”[#5]

TheBlackAmericanmaleownerofabusinessmanagementconsultingfirmnotedthatallarefactorsthatcanbebarriersrelatedtobusinessesbeingunder‐capitalized.“Thereareinefficiencies.Itistoughtocompeteagainstsomecompaniesthatareverticallyintegrated.”Healsomentionedthatsomebidsarewrittentosuchspecificitythatitseemstheyhavealreadymadetheirchoice.Henotedthatitishardtogetexperienceifyoudon’tgetthebusiness,butyoucan’tgetthebusinesswithoutexperience.[#17]

Anon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmnotedtheyhavenothadanycontractswiththeCityofVirginiaBeachinatleast10years.Whenaskedwhichagencieshe’sreachedoutto,hesaid“Itwasalonglist,adozenorso:Parks&Rec,PublicWorks,PublicUtilities,andPlanning.”Thenatureoftheprojectsincludedgeotechnical,greenorbrownprojects,pre‐development,ordevelopment.“Wewouldbidasaprimeforthose.Thosearenormallycontractedbytheagencydirectlywithus.”Theyarebiddingonprojectsbutarenotgettingthework,andtherepresentativestatedthatthesamefirmhaswonthebusinesseachtime.Hisfirmhasnotreceivedanydebriefsordirection;theyhaverequesteddebriefsbuthaveyettoreceiveanyreplies.[#19]

WhenaskedwhatotherrecommendationsshemayhavefortheCityorotherpublicagenciesintheVirginiaBeacharea(includingexperiencesworkingwiththeCity),anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstated,“ElectroniccommunicationishugeandtheCitymaymissoutonsomeexcellentopportunitiesbynotparticipating.Bymakingthebidprocessandthecontractingprocessastransparentaspossible[it]wouldmakeiteasierandlessfrustratingforeveryoneinvolved.TherehavebeentimesI’vehadtomakephonecallsandthepeopleI’mspeakingwitharejustasfrustratedasIambecausethingsjustaren’tasstreamlinedastheymaybecouldbe.”[#25]

Whenaskedifheisawareofpotentialbarriersordiscriminationbeingaproblemforhisfirminthelocalmarketplace,eitherintheprivatesectororthepublicsector,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Minorityfirmsareputonbidstofulfillrequirements,butwhentheprimegetsthecontracttheydonotgivetheminoritycompanyanyoftheworkorawardeddollarsfortheworkbidon.Theminorityfirmhelpedtowinthecontractbutprimedoesnotfollowthroughwithusingtheminoritysubcontractorthathelpedtowinthebid.”[#30]

Whenaskedaboutbiddingprocesses,theBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanystated,“Yes,thepublicsectorisopentoeverybodybutmustbidlowtogetjob,thenlosebecausepricewastoolow.Ihavetoknowhowtobidontheseopportunities.Theprivatesectorhasbiggercompaniestoworkwith.Itishardbecauseyoumustknowthecontractlanguage.Ifyoudonot,itmakesithardertobidbecauseitwillnotbewritteninthelanguagethatwillwin,whichmakesitevenharder.”[#32]


Whenaskedaboutthebiddingprocesses,theBlackAmericanmaleownerofaflooringcompanysaid,“Thereshouldbemoreaccessibilityforsmallerbusinessesandcontractors[forbiddingopportunities].”[#37]

WhenaskedifshehadanyrecommendationsrelatedtoimprovingtheParks&Recreation’sadministrationofcontractsorpaymentmethods,theBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanysaid,“Thereisaneedtochangesomeofthelaws.Administrationcan’tkeepbiddingtheamountofmoneytheywant.Makeitafairplayingfield.Thebiddingprocessistoodifficult;[ittakes]toomuchtimeandtoomuchmoneywithoutanROI.”[#39]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,thepresidentofasecurityguardservicescompanynoted,“Inregardstothestandingofthebusiness,therearealotofsecuritycompaniesinthearea.Weareasmallbusiness,anditisdifficultforustostayincompetitionbecausethebiggercompaniescanofferlowerrates.”[AS#9]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,thepresidentofabusinessplanningcompanyexpressed,“VirginiaBeachgoesoutsideoftheareatogiveawards.”[AS#14]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,arepresentativeofaninteriordesigncompanyexpressed,“Iwouldthinkwe’reatadisadvantagebecauseofthesizeofourorganizationandthepricing.Wecan’tcompetewithlargercompanies.”[AS#21]

ThemaleownerofanSBE‐certifiedhospitalitycompanynoted,“Behind‐doordealsthatcreatedisplacement.Theseverebendingandviolatingtherulesofeconomicincentiveprogramsbehindcloseddoorsnotonlygivesdistinctadvantagestothepreferreddeveloperwhencompeting,butthenegativeeffectstoexistingbusinessesisharmful.Createbidprocesscommissionthatdealswithprocessandprocurement.”[WT#3]

Other interviewees reported that they were not aware of or had not experienced barriers

related to race, ethnicity or gender regarding the bidding process.[Forexample,#4,#16,#22]

Non‐price factors public agencies or others use to make contract awards. Duringin‐depthinterviews,manyfirmownersandmanagersmadeobservationsaboutthosenon‐pricefactors.

A few business owners reported that experience requirements were a barrier to doing business

for a variety of reasons. Others did not think so. Examplesofthosecommentswereasfollows.

Whenaskedaboutnon‐pricefactorspublicagenciesorothersusetomakecontractawards,theBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmnoted,“It’smoreculture.”Heexpressedthatalotofthefirmsarelargerthataresuccessfulare“so‐calledminoritybusinessesthathavethewifelistedas[the]ownerinordertowinthecontracts.”HehasnotfoundasuccessfulpathtowinningcontractswithVirginiaBeach.Hesuggested,"[Theagencyshould]packagecontractsinawaythatsmallerfirmshavearealisticchanceofwinningandbreakingitupinsmallerpieces.TheCityshouldhavemore


match‐makingeventslikeVDOTandChesapeake.ItseemsthattheCityistryingtoimprovealacklusterreputation.”HebelievestheCityistryingtogetmoreparticipation.Hehasnotseenanythingrelevantforhimtobidonasaprimeorasub.[#7]

Whenaskedifthereanypotentialbarrierspertainingtofactorspublicagenciesorothersusetomakecontractawards,theHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmsaid,“Therearegoals,butthereisnomandate,soattheendoftheday,whytry?It’sbasedonlowprice.”[#28]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanystated,“Youmustbefairlyrecognized.Changelawssominoritiescangetin.Donotmakestipulationsforbiddingsohighyoucannotmeetthem.Thereshouldbenoin‐housecollaborationforyourfavoritecontractortogetbids.”[#39]

Other business owners were not aware of, had not had experience with, or believed that there

are not any barriers or discrimination in getting or gaining experience or expertise.[Forexample,#1,#4,#22,#32]

Timely payment by the customer or prime. Slowpaymentornon‐paymentbythecustomerorprimecontractorwereoftenmentionedbyintervieweesasbarrierstosuccessinbothpublicandprivatesectorwork.Examplesofsuchcommentsincludethefollowing:

TheBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicated,“Sometimespaymentcandragonduetolostinvoicesandotherdelays,butforthemostpartVirginiaBeachisprompt.Idon’tunderstandwhyworkthatisalreadyapprovedtakesweekstoprocesspayment.ThelargerproblemsarethelistofthingsIcan’tchargefor,likeparts,equipment,andmileage,andmultipleopinionsaboutwhetherajobissatisfactorilycompleted.”[#4]

Whenaskediftimelypaymentbythecustomerorprimeisapotentialbarrier,theBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmstated,“Yes,majorityfirmswouldholdaportionofmypayment.Theyholditinthebankbecauseit’scashonhand.Theywillholdyourmoney,andtheywillputitinthebankinescrow.”[#8]

Whenaskedifthefirmhasexperiencedbarriersinpaymentsasfarasslowpaymentornonpayment,anon‐HispanicwhitemalerepresentativeofaWBE‐certifiedtruckingcompanyreportedthattherearesomechallengeswithafewcustomersregardingtimelypayments.[#27]

TheBlackAmericanmaleownerofanHVACcompanyhashadsomeslowpaymentsbecausesometimesthecustomerjustdoesnothaveit[money]atthetimeofservice,soheworkswiththemtopaybysettingupapaymentarrangement.[#33]

Whenaskedifthecompanyhasexperienceddiscriminationinpaymentsasfarasslowpaymentornonpayment,theBlackAmericanmaleownerofaflooringcompanysaid,“Ihavehadafew.IdidahotelinStanton,VAonasubcontractingjobwhereIwaspartiallypaid.Theystilloweme$3,000fromFebruary[2018].”[#37]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanynotedthatpeopleheworksforonaregularbasispayslowly,andhehashadtousea


collectionagency.Privatesectorsometimesputsmoneyinescrow,butittakesalongtimetogetthepaymentbecausethehousemustbesold.Theydonottellthecontractorthatthemoneytopaythemisinanescrowaccountthatcannotbeallocateduntilafterthejobisdoneandhebillsthem.[#38]

Whenaskediftimelypaymentbythecustomerorprimehasbeenapotentialbarrier,theBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanynotedthatpaymentisslow,usually30days.[#39]

A few interviewees said that they typically do not have difficulty getting paid in a timely

manner, because the timeframe was specified in their contracts.Forexample:

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanygetshispaymentagreementsstraightup‐frontsothattherearenoissues.Hegetshispayontimewithoutanyhassles.[#23]

TheBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanyreceiveshispaymentsontime.[#32]

Most interviewees said they were not aware of, had not had personal experience with, or did

not believe there are barriers in timely payment by a customer or prime.[Forexample,#1,#2,#3,#5,#6,#22,#24,#25,#27,#28,#29,#30,#31,#33,#34,#35,#36]

Experience with City processes. InadditiontofactorscommontocontractingamongpublicagenciesinVirginiaBeach,intervieweeshadmanycommentsspecifictotheCity’sprocesses.

A few interviewees described difficulty navigating or understanding the procurement process.Examplesofthosecommentsincludethefollowing:

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,themarketingmanagerofaconsultingengineeringfirmnoted,“IamnotfamiliarwithwheretogoinVirginiaBeachforprocurements.”[AS#25]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,arepresentativeofacontractingagencynoted,“OurexperienceinworkingwiththeCityhasbeenverylimited.Theydon’tsubcontractdirectlytosmallbusinesssincetheyhaveafive‐yearwaitinglist.”[AS#40]

A few interviewees expressed concern that the same companies receive City contracts

repeatedly.Forexample:

AnAsianAmericanmaleownerofaWBE‐andSWaM‐certifiedengineeringandtestingfirmstated,“WehaveworkedwithVirginiaBeachCityPublicSchools,CityofVirginiaBeachPublicUtilities.WehadnoluckwithPublicWorks.For15yearswe’vegoneinforaninterviewandhavelosttothesamecompany.WehavegottennocontractswithPublicWorksfor15outtheir18‐yearexistence.Wedon’tgetanyfeedback.Thelasttwointerviews,weneverheardbackfromthemforadebrief.IwouldsayPublicWorksistheworst,inmyopinion.”[#5]


ThemaleownerofanSBE‐certifiedhospitalitycompanynoted,“ToomuchfocusonafewdevelopersleadstolackofinvestmentininfrastructuretocreateanenvironmentthatcandrivenewandinnovativecompaniestoVirginiaBeach.TheCityisverybusyworkingdealswithdevelopers,thereforecreatingunfaircompetition.Thisdoesnotenablebusinessestogroworganically.Givethebusinessesthetoolstosucceedandletcompetitionpickthewinnersandlosers,notthepoliticians.”[WT#3]

Other interviewees recommended changes in, or more oversight of, City payment policies. Forexample:

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatitischallenging.Hestated,“It’sbidworld.Theyreallydon’tcareaboutanythingelseotherthanlowestprice.Everybodyfightsforthebottom.Unlessyouwanttodosomethingforfreeorclosetoit,it’sarealchallenge.WedidaprojectinNorfolkwherewewerecloseandlosttoanout‐of‐statecompany.”Hesaid,“Ithinkit’skindofmessedupbecausewewereverymuchneck‐and‐neckonpricing,andwewerethelocalteamthatthetaxrevenuescouldgobackintotheCity.TheygaveittoacompanyoutofAlabama.Wemakedecisionslikethatallthetimeinthemunicipalities,anditdoesn’tmakesense.”[#28]

Whenaskedwhatelse,ifanything,shouldbedonetoenhancetheavailabilityandparticipationofsmallbusinesses,includingMBE/WBE/SWaM/DBE/SBEs,theAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmstatedthattheCityshouldgetintouchwithacompanyassoonastheirbusinesslicenseapplicationiscomplete.Sheexplainedthataprecursororacheck‐offboxaskingiftheirfirmisinterestedinworkingwiththeCitymaybehelpful.Shesaid,“Rightnowit’slikeIgotabusinesslicensefromtheCityandI’monmyown.It’suptometofindoutallofthisinformation.Itwouldhavebeenniceifitwasintroduced.ItcouldbeawelcomefromtheCityofVirginiaBeach.”SheindicatedthataworkforcedevelopmentprogramintheCityofVirginiaBeachmaybehelpful.[#34]

Two interviewees had specific comments about participation goals. Examplesofthesecommentsincludethefollowing:

TheBlackAmericanmaleownerofanMBE‐certifiedrealestatedevelopmentfirmnoted,“ThoughtheVirginiaBeachCityCounciladoptedaresolutionin2008settinga10percentgoalforminorityparticipationinCitycontractswithinoneyearoftheresolution’sadoption,theCityhasyettoreachthismeagermark10yearslater.WhereasthelocaleconomyinVirginiaBeachisheavilydependentupontourismandrestartproperty,theCityhasneversetastatisticalstandardtomeasureminorityparticipationinrealestatedevelopment.”[WT#2]

TheownerofaVBE‐andSDVO‐certifiedcompanyexpressed,“ThestateofVirginiahaslessthanonepercentofgivingworktoveteransontheircontracts.Nooneismeasuringthesetgoals.Theyhavetomeasure;theyhavetobeheldaccountable,andtheyhavetohelpcreatesmalljobsorsmallbusinessjobs.Thatwillhelpchangetheeconomyaroundhere.”[KHS#1]


A few business owners recommended that the City let companies know more about the notification or bid process. Forexample:

WhenaskedifhehadanyrecommendationsfortheCitytoimproveitsnotificationorbidprocess,theBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysaid,“TheCityshouldsendoutRFPstothesubcontractorlist.VirginiaBeachshouldhaveasubcontractorlisttoworkfrom.”[#23]

Whenaskedifhehasanypersonalexperienceswithapotentialbarrier,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanyexpressed,"Yes,havingtomeetwiththeadministratorsversusthedecisionmakersisawaytogivetheminoritybusinesstherun‐aroundversusgettingtothedecision‐makerfordetailsofworkandcontractbids.”[#30]

WhenaskedwhatrecommendationshehadfortheCityorotherpublicagenciesintheVirginiaBeacharea,theBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,“Makingus[minorities]awareofwhatisgoingon.They[theCity]needtobeawareofwhotheminoritiesarethatactuallybid.”[#38]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofacarpetcompanystated,“[In]thebidprocess[it]istoughtogetaholdoftherightperson.TheCityshouldpostmorejobopportunitiesonasiteandmakeiteasilyavailable.”[AS#35]

Theownerofapharmacyclinicexpressed,“MyexperiencewiththeCityhasbeenwhenyougointothecontractthepeoplethatawardedyouhadgoodintentions,butwhenyoustartdealingwithpeoplethatyouareactuallyprovidingtheservicesfor,thatiswhenyoustartgettingthepushbackonthethingsthatareinplace.Somepeoplemightthinkyoujustgotthejobbasedonwhoyouare.Theyaregoingtodoeverythingintheirpowertomakesurethatyoufailatyourjob.Thentheycomebackandsay,‘Well,youweregiventhejobopportunity,youjustcouldn’tcometoform.’”[MOC#3]

F. Allegations of Unfair Treatment

Intervieweesdiscussedpotentialareasofunfairtreatment,including:

Bidshopping;

Bidmanipulation;

Treatmentbyprimecontractorsandcustomersduringperformanceofthework;

Unfavorableworkenvironmentforminoritiesorwomen;and

Approvalofworkbyprimecontractorsandcustomers.

Bid shopping. Afewbusinessownersreportedexperiencingbidshopping.Otherintervieweeshadnotexperiencedbidshoppingorwerenotawareofit.[Forexample,#1,#4,#22,#24,#32]

A few interviewees reported that they had experiences with bid shopping.Examplesofsuchcommentsincludethefollowing:


Whenaskedifbidshoppingwasconsideredabarrier,thenon‐HispanicwhitefemaleownerofanAsianAmericanWBE‐andSWaM‐certifiedengineeringandtestingfirmexpressed,“That’sabarrierforeverybody.”[#5]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofalandscapingcompanynoted,“Idon’tworkwiththeCitybecausethey’realwayslookingforthelowestbidder.”[AS#33]

Bid manipulation. Someintervieweesdiscussedissuesandconcernswithbidmanipulation,aboveandbeyondbidshopping.

TheBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicatedhesometimeswondersifbidsarewrittenwithaqualifyingfirminmind.[#4]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofamanagementconsultingfirmstated,“IlookedintobiddingonacontractfortheVirginiaBeachPublicLibraryandtherecreationcenter.However,thebidwasclearlyforbiggercompanieswithinsurancerequirementsandeverything.Iftheyhadunbundledit,thatwouldhaveallowedforsmallercompaniestocompete.Thecontractsareawardedforsuchalongperiodoftime;iftheymadeitforashorteramountitwouldgetmorepeopletobidonit.Whenthebidscomeup,theysometimessetamandatoryconferenceintwodays.Ithinktheyshouldallowmoretime,unlessitwasanemergency.Smallercompaniesneedmoretimeformandatoryconferences.”[AS#26]

ThemaleownerofanSBE‐certifiedhospitalitycompanynoted,“Recentattentiontolackofminorityinclusioninmajorprojects…Inmyopinion,raceisnottheissue:itisclearlycronyism.Thedealsareandhavebeenworkedoutbehindcloseddoorsbeforeotherscanhaveafairshot.Thishasbeendocumentedandisafact.Developersthataretoldtheywillgetmoreafterthebidprocessandcanaffordtobidmore,thereforewinningthebids.Thesolutionistohaveanopenandfairprocesswithequalopportunitytobidonthemajorprojects.Everyoneplaysbythesamerules.”[WT#3]

Treatment by prime contractors and customers during performance of the work. Mostbusinessownersandmanagersreportedthattheyhadnotseenorexperiencedunfairtreatmentduringworkorcontract/projectperformance.

A few business owners reported that they have seen or experienced unfair treatment during the work or contract/project performance. Forexample:

Whenaskedifhehadexperiencedstereotypicalattitudesonthepartofcustomersandbuyers,theBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicatedhehasbeenatCitypre‐bidconferenceswherehereceivedthefeelingitwouldn’tgowell.Overtime,thosefeelingsfadedandheisbetterknownfortheworkhedoes.[#4]


TheAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmhadabadexperiencewithaprivateprimewhousedherasascapegoat.[#20]

Whenaskediftreatmentbyaprimeorcustomerduringperformanceofworkwasapotentialbarrier,thenon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaid,“Yes,therewasoneprimethatwasdishonestinhistaskorders.”[#22]

Unfavorable work environment for minorities or women. Thestudyteamaskedbusinessownersiftherewasanunfavorableworkenvironmentforminoritiesorwomen,suchasanyharassmentonjobsites.Oneintervieweesaidthattherewas.Forexample,whenaskedifhehadexperiencedunfavorableworkenvironmentsforminoritiesandwomen,theBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmstated,“Yes.”[#8]

Other interviewees commented about government resistance to using MBEs and WBEs. Forexample:

Whenaskedaboutpotentialbarriers,theBlackAmericanmaleownerofaminority‐ownedcommercialrealestatedevelopmentfirmstated,“TheCityhascronyismandimplicitbiasthatholdminoritiesandwomenback.”[#2]

WhenaskedifhehadexperiencedgovernmentresistancefortheuseofMBE/WBE/DBE/SBEfirms,theBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedfirmexpressed,“Yes,IhaveexperiencedresistancebygovernmentofficialsoutoffearthatIcan’tperformwell.”[#8]

Approval of work by prime contractors and customers. Intervieweesdiscussedwhetherapprovalofworkbyprimecontractorsorcustomerspresentedabarrierforbusinesses.TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,“Peopletreatmeprettygood.Idon’tstepontoes,justdothework.”Hedoesnotgofurtherwithanyworkuntiltheworkisapproved,especiallywhenhedoesworkfortheVirginiaBeachCityPublicSchools.[#38]

Some business owners reported that they have seen double standards in the performance of

work. Forexample:

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanydoesworkfortheDepartmentofParks&Recreation.Hebelievesthattheinspectorshavedoublestandardsforthecontractors.Heexpressed,"WehavealsoworkedforPublicUtilities,buttheydonothavethesameinspectordoublestandardissuesaswiththeParks&RecreationDepartment.PublicUtilitiesinspectorsarereallygoodandunbiased."[#23]

WhenaskedifthecompanyhadexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofanenvironmentalconsultingagencystated,“Doublestandardswiththeirinspectionstaff.Cityemployeesareviolatingthecodeofethics.”[AS#27]


TheownerofanMBE‐certifiedconcretecontractingcompanynoted,“Wehavenoticedthatcertaincityinspectorsseemtobealittlehardertoworkwiththanothers.Onewasevenreprimandedfordoingsomuch.Overall,theexperiencehasbeenagoodone,butyoucandefinitelyfeeltheracialtensionfromcertainindividuals.TheCityhascomealongway,butdefinitelystillhasawaytogo!”[WT#4]

G. Additional Information Regarding any Race‐ or Gender‐based Discrimination

Intervieweesdiscussedadditionalpotentialareasofanyracial/ethnicorgender‐baseddiscrimination,including:

Stereotypicalattitudesrelatedtorace,ethnicity,orgender;and

“Goodol’boy”networkorotherclosednetworks.

Stereotypical attitudes related to race, ethnicity of gender. Severalintervieweesindicatedthattheyhadeitherexperiencedorwereawareofstereotypicalattitudesonthepartofcustomersandbuyersbasedonrace,ethnicity,orgender.Forexample:

TheHispanicfemaleeditorandpublisherofanewspapernotedthatsometimesshefeelssheandherhusbandmaybetreatedunfairlybecauseoftheiraccents.[#18]

TheAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmstatedshehasexperiencedbarriersbecauseofhergenderandrace.Shebelievesitwasverydifficultyearsagointhelocalmarket.Shewastheonlywomaninateamofmen.ShewasinvolvedintheconstructionbusinessinNewYork.Shestated,“InNewYork,itwastoughbeingaSouthernwoman.Whattheuniondoesn’twanttoseeisaSouthern,minoritywomantellingthemwhattodo.”Shemainlysawgenderdiscriminationwhensheworkedforalargecorporationasanemployee.[#20]

Whenaskedifhehasexperiencedstereotypicalattitudesfromcustomersorbuyers,theBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysays,“Yes,allthetime.Wearestereotypedthatblackfirmscannotdotheworkoraren’tcapable.”[#23]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Yes,therecanbeskepticismastowhethertheminorityfirmscandothework.”[#30]

Whenaskedofanypersonalexperienceswithpotentialbarriers,theBlackAmericanmaleownerofaplumbingcompanynoted,"Yes,sometimesthey[customers]willquestionmyabilitytodotheworkbecauseofmyrace."[#31]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatshehasheardofstereotypicalattitudesonthepartofcustomersandbuyers.Shestated,“IthinkyouhearofitmoreinVirginiaBeachthanyoudoinNorfolk.”[#34]

WhenaskedifthecompanyhadexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofanengineeringservicescompanystated,“I


don’tthinkthattheCityhasshownthatitisextremelyinterestedindoingbusinesswithminorities.”[AS#17]

WhenaskedifthecompanyhasexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofadesignservicesagencyexpressed,“Discrimination,I’dsaythatbecauseI’mupinagewheremostpeopleareretired.SometimeswhatIdoorwhoIamarenotvalued.WhatIdoisnotmainstream,andalotofpeopledon’tgetit.”[AS#23]

TheBlackAmericanmaleownerofanMBE‐certifiedrealestatedevelopmentfirmexpressed,“Myexpertiseandfinancialwherewithalenabledmetoproposeworld‐classprojectsthatwouldundoubtedlyhavegeneratedthousandsofjobsandsubstantialrevenuefortheCityofVirginiaBeach.Despitetheinherentmeritsoftheprojectsproposed,theyweresummarilyrejectedwithoutthebenefitofreasonableexplanationorproofofinfeasibility.Infact,inquiriesastowhytheselucrativeprojectsweredeclinedelicitedevasive,offhandresponsessuchas,‘Wedon’twantacookiecutterprojectorachainrestaurant,’or‘Someoneelsehadabetterproject,’or‘We’renotreadytodevelopthatsite.’Afterthecitycontinuedtofailinitscivicobligationtoprovidecogentprofessionalreasonstosupporttherejectionoftheprofitablerealestatedevelopmentdealsthatmycompanyproffered,Ibegantoconcludethatracialdiscriminationandsystemicbiasmayhavebeenthedeterminingfactorsinrenderingmyproposalsdeadonarrival.”[WT#2]

Oneintervieweeindicatedshehasnotexperiencedstereotypicalattitudesrelatedtoraceorgender.Forexample,thenon‐Hispanicwhitefemaleownerofacomputersupportfirmindicatedthatbeingawomanisaneasierpathwaytogetintoaschool,soshedidnotexperiencebarriersbecauseofgender.[#14]

“Good ol’ boy” network or other closed business networks. Manyintervieweeshadeitherexperiencedorwereawareoftheexistenceofa“goodol’boy”networkorotherclosedbusinessnetworks.

Those who reported the existence of a closed or “good ol’ boy” network included minority,

female, and white male interviewees.Examplesofsuchcommentsincluded:

Whenaskedaboutwhatchangesinthemarketplaceconditionsthefirmhasseen,theBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmstated,“HamptonRoadsisoffthebeatenpath.Thisisamilitarymecca.Idon’tbelongtothegoodoldboys;they’relikevacuumcleaners,andthey’lltakeitall.”[#8]

TheHispanicAmericanfemalerepresentativeofanewspapercompanynotedtherearebarrierswhenshegoestoaskforadsfromtraditionalbusinesseslikebanks.“Theyarestilla‘goodol’boy’network.Idon’tthinktheyvalueitasmuch.Theydon’trecognizethattheworldisreallychanging.Theydon’trecognizethatthefaceoftheUnitedStatesischanging.Somebusinesses,I’mverysurprised,buttheydon’t.”[#18]

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysays,“Theprivatesectorhasthe‘goodol’boy’syndromewhichkeepsjobsfromminorities.Otherwisetherearenohardcorebarriersotherthanthat.Thegovernment


sectorhassomanynewregulationsthatyoucannotkeepupwith,toocomplicatedandtimeconsuming.”[#23]

Whenaskedifclosednetworksarebarriers,anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstated,“Idon’tknowifwe’veeverexperiencedabarrierduetothat.Wemayhaveexperiencedbenefitsfromit.Idon’tknowofanyoneexperiencingabarriertoit.IguessIknowingeneralthatthatstuffhappens.”[#25]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystatedthat,“Yes,a‘goodol’boy’networkisstillaround!"[#30]

TheBlackAmericanmaleownerofaplumbingcompanystated,“Yes,absolutely,a‘goodol’boy’networkcausedmetogointobusinessformyself,becauseIcouldnotgetadvancementswhereIwasworkingandIwastheonlyblackguyemployedthere.”[#31]

TheBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanyexpressed,“Ofcourse!Weknowthe‘goodol’boy’networkisoutthere.Thesamepeoplegetthesamejobs.Thisiswhathurtsmybusinessgrowth.”[#32]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatshehasexperiencedthe‘goodol’boy’network.Shesaid,“I’vebeentoldthatifyou’renotpartofthatgroupthatyourchanceofgettinganyworkisslimtonone.”[#34]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompany,whenaskedaboutthe‘goodol’boy’network,commented,“WhenIwasfirstcomingupinthistrade,IwasusedastheminoritycompanyinthistradeintheVirginiaBeacharea.Onlythreepaintingcontractorswereherewhogotallofthebusiness.The‘goodol’boy’networkdefinitelyexists.”[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanystated,“Yes,absolutelya‘goodol’boy’networkstronglyexists!Youseeitnowinpoliticsandineverythingnow.”[#39]

WhenaskedifthecompanyhadexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,thepresidentofamanagementconsultingfirmstated,“Ithinkthatalotoftimesit’s[theCityofVirginiaBeach],the‘goodol’boy’network.”[AS#22]

WhenaskedifthecompanyhadexperiencedbarriersordifficultiesinVirginiaBeachassociatedwithobtainingwork,theownerofageneralcontractingagencyexpressed,“Forthelast20years,gettingworkhasbeenhard.The‘goodol’boy’systemisaliveandwell.”[AS#37]

TheownerofaSWaM‐certifiedarchitecturefirmnoted,“Firstandforemost,afirmcannotgainmunicipalityexperienceiftheyarenevergivenachancetoperform.Secondlyevenifthemicro,SWaM,orminorityfirmhassomeexperiencethatcouldmirrortheexperiencewanted,thiscriterionissoheavilyweightedthatamicro,SWaMorminorityfirmstillcouldnotamassenoughpointstogetshortlisted.Subsequently,the‘goodol’boy’firmwinsagain.”[WT#1]


TheownerofanMBE‐certifiedconcretecontractingcompanyexpressed,“Gettinginwiththecitywasveryhardinthebeginning.Theydefinitelyworkoffofthe‘goodol’boys’club.”[WT#4]

TheBlackAmericanownerofanarchitecturalcompanystated,“VirginiaBeachiscontrolledbywhatIcallthe‘goodol’boys’.Theyrunanddealwiththings.IamimpressedthattheCitycouncilofVirginiaBeachevencameupwiththeideatodoa10percentset‐aside.Theyjustcouldn’tfollowthrough;thereasonisCitycouncilreallycan’tcontrolyougettingwork.Theymakethelaw,thentheypassittothedepartmentchairsanddirectors.Thosearethepeople[who]controlwhogetsthemoney.It’snotCitycouncil.”[KHS#2]

H. Insights Regarding Neutral Measures

Thestudyteamaskedbusinessownersandmanagersabouttheirviewsofpotentialrace‐andgender‐neutralmeasuresthatmighthelpsmallbusinesses,orallbusinesses,obtainworkintheCityofVirginiaBeach.Intervieweesdiscussedvarioustypesofpotentialmeasuresand,inmanycases,maderecommendationsforspecificprogramsandprogramtopics.ThefollowingpagesofthisAppendixreviewcommentspertainingto:

Technicalassistanceandsupportservices;

On‐the‐jobtrainingprogram;

Mentor‐protégérelationships;

Jointventurerelationships;

Financingassistance;

Bondingassistance;

Assistanceinobtainingbusinessinsurance;

Assistanceinusingemergingtechnology;

Informationonpublicagencycontractingproceduresandbiddingopportunities;

Pre‐bidconferenceswheresubcontractorscanmeetprimecontractors;

Otheragencyoutreachsuchasvendorfairsandevents;

Streamliningorsimplificationofbiddingprocedures;

Breakinguplargecontractsintosmallerpieces;

Smallbusinessset‐asides;

Mandatorysubcontractingminimums;and

Othermeasures.

Technical assistance and support services. Thestudyteamdiscussedtechnicalassistanceandotherbusinesssupportprogramswithinterviewees.Somewereawareoftechnicalassistanceandsupportservicesthatmightbenefitsmallbusinesses,includingMBEsandWBEs.Otherswerenot.Forexample:


Most interviewees indicated that they were not aware of and had not experienced any

technical assistance and support services but thought such services would be very helpful for

small businesses. Examplesofcommentsincludethefollowing:

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysaid,“Yes,thereneedstobebetterdetailsandmorehelpwithrequiredpaperworkload.”[#23]

Whenaskedabouttechnicalassistanceandsupportservicesthatmightbenefitallsmallbusinesses,includingMBE/WBE/SWaM/DBE/SBEs,anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatshehasnothadanyexperiencewithprogramslikethat.Shefurtherexplainedthatifprogramslikethatexistitcouldbenefitsmallbusinesses.Sheindicatedthatfindingqualityaccountingandbookkeepingservicescouldbedifficultbecausetypicallysmallbusinessescan’taffordtopaythesalarynecessary.[#25]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthattechnicalassistanceandsupportservices(e.g.,bookkeeping,estimating,andbidding)wouldbehelpfulforsmallbusinesses.[#28]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Yes,supportserviceswouldbehelpful.Ineedbetterdetailsandmorehelpwithrequiredpaperworkload.”[#30]

Whenaskediftechnicalassistanceandsupportserviceswouldbehelpfulforsmallbusinesses,theBlackAmericanmaleownerofaplumbingcompanystated,“Yes,iftheCityhasthem.”[#31]

TheBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanystated,“ItwouldbegreatbutIdonotknowofany.”[#32]

TheBlackAmericanmaleownerofanHVACcompanystated,“Yes,technicalassistanceandsupportserviceswouldbehelpful.”[#33]

Whenaskediftechnicalassistanceandsupportservicesbeingofferedintheareawouldbehelpful,theAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmstatedthatitwouldbe.Shefurtherindicatedthatbiddingisabigissueanditneedstobeaddressed.[#34]

Whenaskediftechnicalassistanceandsupportserviceswouldbehelpfulforsmallbusinesses,theBlackAmericanmaleownerofaflooringcompanysaid,“Yes,Ineedtechnicalassistanceandsupportservices.”[#37]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanystated,"Yes,technicalassistanceandsupportserviceswouldbehelpful."[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanystated,“Yes,technicalassistanceandsupportserviceswouldbegood.”[#39]

Many interviewees indicated that they were not aware of or had not had any experience with

technical assistance and support services.[Forexample,#1,#4,#6,#10,#22,#24,#35,#36]


On‐the‐job training programs. Somebusinessownersinterviewedwereawareof,andsupportiveof,on‐the‐jobtrainingprograms.Someintervieweesdescribedtrainingprogramsthatmightbebeneficialtosmallbusinesses.Forexample:

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysaid,“Yes,moreon‐the‐job‐trainingwillhelpnewbusinessesandretainlaborersthatareskilled.”[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthateventhoughshehasnopersonalexperiencewiththisprogramshebelievesthaton‐the‐jobtrainingisbeneficialinallareas.[#25]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthaton‐the‐jobtrainingprogramswouldbehelpfulforsmallbusinesses.[#28]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanysaid,“Yes,moreon‐the‐job‐trainingwillhelpnewbusinessesandretainlaborersthatareskilled.”[#30]

Whenaskedabouton‐the‐jobtraining,theBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanyexpressed,“Itwouldbeawesometohave.”[#32]

TheBlackAmericanmaleownerofanHVACcompanysaid,“Yes,moreon‐the‐job‐trainingwillhelp.”[#33]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthaton‐the‐jobtrainingwasuseful.[#34]

Whenaskedifon‐the‐jobtrainingprogramswouldbehelpfulforsmallbusinesses,theBlackAmericanmaleownerofaflooringcompanysaid,“No,thatwouldcostmore,andmoneywouldhavetocomefromsomewhere,creatingmorestrainonmybusiness.”[#37]

Whenaskedifon‐the‐jobtrainingprogramswouldbehelpfulforsmallbusinesses,theBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,“Yes,becauseIhirefromtheprobationsystemtohelpinmateswhohaveservedtheirtimeandaretryingtoreestablishthemselvesbackintonormallife.”[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanysaid,“Yes,moreon‐the‐job‐trainingwillhelpnewbusinesses.”[#39]

Mentor‐protégé relationships. Somebusinessownershadfavorablecommentsaboutmentor‐protégéprogramsandbelievedtheyarehelpful.Forexample:

Whenaskedifmentor‐protégérelationshipswouldbehelpfulforsmallbusinesses,theBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicatedheparticipatedwiththeSCOREprograminVirginiaBeach,andtheyhelpedhimfindoutwhatresourceswereavailable,likewritingabusinessplanorfinancing.[#4]

TheAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmstated,“Iwouldlovetogetinamentor‐protégéprogram.Ihavenotdonethatyet.”[#20]


Whenaskedifamentor‐protégérelationshipwouldbehelpfultosmallbusinesses,thenon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaid,“I’veheardofthese,butdon’tknowaboutthem.”[#22]

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysaid,“Yes,dependsonthementorschosenandhoweffectivetheycanbeforthementee.”[#23]

TheminorityfemaleownerofanMBE‐,WBE‐,SBE‐,andSWaM‐certifiedconstructionstaffingcompanyexpressed,“Iwouldliketohaveamentor‐protégérelationshipwitharoofingcompanytosubmitforSDOVbusiness.”[#24]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthat,eventhoughshehasnopersonalexperiencewiththistypeofprogram,shebelievesthatmentor‐protégérelationshipsarebeneficialtosmallbusinesses,especiallynewstartups.Shesaid,“Sometimesyoudon’tknowwhatyoudon’tknow,andhavingsomeonetoguideyouthroughthatcouldbeveryhelpful.”[#25]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatmentor‐protégérelationshipswouldbehelpfulforsmallbusinesses.[#28]

Whenaskedifamentor‐protégérelationshipwouldbehelpful,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanysaid,“Yes,alotofsmallminority‐ownedbusinessesneedtobeshowntheropes.”[#30]

TheBlackAmericanmaleownerofaplumbingcompanysaid,"Yesmentor‐protégérelationshipswouldbebeneficialinordertoseeanotherpointofview."[#31]

Whenaskedaboutmentor‐protégérelationships,theBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanynotedthatmentor‐protégérelationshipswouldbegreatifbiggercompanieswouldmentor,becausehisbusinessmighthavesucceededintheprivatesector.[#32]

TheBlackAmericanmaleownerofanHVACcompanysaid,“YesbecauseIhavenobusinessbackgroundsoguidanceinweakareaswouldbebeneficial.”[#33]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatmentor‐protégérelationshipsarehelpful.[#34]

Whenaskedifmentor‐protégérelationshipswouldbehelpfulforsmallbusinesses,theBlackAmericanmaleownerofaflooringcompanysaid,“Yes,becausethey[mentors]arealreadyinthefieldtohelpmelearn.”[#37]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanysaid,“Yes,mentor‐protégérelationshipswouldbegood.”[#39]

Joint venture relationships. Intervieweesalsodiscussedjointventurerelationships.

Some of the business owners interviewed had favorable comments about joint venture

programs.Forexample:


TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysaid,“Yes,youshouldhavejointventurerelationshipsformajorprojectswithapayguarantee.”Hefindsittobegoodbecausethatwaybothbusinessesareprimecontractorsloggingperformanceasprimes.[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatshehasnopersonalexperience,butgiventhepropercircumstances,itcouldbebeneficialtostartups.[#25]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatjointventurerelationshipswouldbehelpfulforsmallbusinesses.[#28]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanysaid,“Yes,jointventurerelationshipsshouldexistformorework.”[#30]

Whenaskedaboutjointventurerelationships,theBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanynotedthathisbusinessmighthavesucceededifhehadbeenabletoformajointventurewithabiggercompany.[#32]

TheBlackAmericanmaleownerofanHVACcompanysaid,“Yes,ajointventurerelationshipbringsmorerevenues.”[#33]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatjointventurerelationshipsarehelpful.[#34]

Whenaskedifjointventurerelationshipswouldbehelpfulforsmallbusinesses,theBlackAmericanmaleownerofaflooringcompanysaid,“Yes,becauseIwouldbeabletogetthroughatleastoneprojectwiththejointventure.”[#37]

Whenaskedifjointventurerelationshipswouldbehelpfulforsmallbusinesses,theBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,“Yes,itcouldleadtosomethinggood.”[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanysaid,“Yes,thereshouldbejointventurerelationships.”[#39]

Financing assistance. Businessownershaddifferingviewsabouthowfinancingprogramshelpsmallbusinesses.Examplesofsuchcommentsinclude:

Most business owners indicated that financing assistance would be helpful to small businesses. Forexample:

TheBlackAmericanmaleownerofalandscapingandlawnmaintenancecompanysaid,“Yes,financingassistancewouldhelpalotwithperformancebonds.YouonlybuyperformancebondswhentheCityagreesthatthefirmisgoingtodothework.Itisbetternottohavethosehighexpensesuntilnecessary.”[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatwithherpreviousemployershehadsomeexperiencewithinventoryfinancingprograms.Shefurtherexplainedthatshefoundthattheseprogramsareverybeneficialinthattheyallowthebusinesstostockwhattheyneedtosell.


Shesaid,“Havinginventoryonhandsometimeswillmakethedifferencebetweenasaleandanon‐sale.”[#25]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatfinancingassistancewouldbehelpfulforsmallbusinesses.[#28]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanysaid,“Yes,financingassistancewouldbehelpfulifandwhenneeded.”[#30]

TheBlackAmericanmaleownerofanHVACcompanysaid,“Yes,financingassistancewouldbehelpful.”[#33]

AnAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatfinancingassistancewouldbehelpful.[#34]

WhenaskediffinancingassistancewouldbehelpfulforsmallbusinessestheBlackAmericanmaleownerofaflooringcompanysaid,“Yes,financingassistancewouldbehelpful,financinghasbeenabarrierIamalwaysdeniedornotabletofindfinancingopportunities.”[#37]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanynotedthatfinancingassistancewouldbehelpfulifneeded.[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanysaid,“Yes,itwouldhelptohavefinancingassistance.”[#39]

Bonding assistance. Thestudyteamdiscussedexperienceswithbondingassistanceprogramswithintervieweesduringin‐depthinterviews.Somebusinessownerswereeitherawareoforhadparticipatedinbondingassistanceprograms.Manyotherswerenot.Examplesoftheircommentsinclude:

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysaid,“Yes,bondingassistanceisneeded.[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatshebelievesbondingassistancewouldbehugelybeneficialtosmallbusinesses.Shefurtherexplainedthatherfirmhashadsomedifficultyobtainingbondssimplybecauseoffinancialreasons.Shesaid,“Ifyoudon’thave$3milliondollarsinthebank,theydon’twanttobondyoufor$3milliondollars.Ifyouhad$3milliondollarsinthebankyoumightnotnecessarilyneedthatbond.”[#25]

AHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatbondingassistancewouldbehelpfulforsmallbusinesses.[#28]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanysaid,“Yes,bondingassistancewouldbehelpful,whilewemightnotneeditnowbutprobablywillinthefuture.”[#30]


WhenaskedaboutbondingassistancetheBlackAmericanmaleownerofanSDVO‐andSWaM‐certifiedjanitorialcompanysaid,“Itdefinitelymustbesomekindofwaytogetaroundit[bonding].”[#32]

AnAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatbondingassistancewouldbehelpful.[#34]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanysaid,“Yes,bondingassistancewouldhelp.”[#39]

Assistance in obtaining business insurance. Experienceswithbusinessinsuranceassistanceprogramswerealsodiscussedwithintervieweesduringin‐depthinterviews.

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatassistanceinobtainingbusinessinsurancewouldbebeneficial.Sheexplainedthatbusinessinsuranceisabsolutelycrucialbecauseyoudon’tknowwhatcanhappenonajobsite.Shefurtherexplainedthatnothavingpropersufficientcoveragecouldcloseyourdoors.[#25]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatassistanceinobtainingbusinessinsurancewouldbehelpfulforsmallbusinesses.[#28]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Yes,assistanceinobtainingbusinessinsurancewouldbehelpful.”[#30]

Whenaskedifassistanceinobtainingbusinessinsurancewouldbehelpful,theAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatitwouldbe.Shefurtherexplainedthatitwouldbehelpfulforothercompanieslikeherfirmtohaveanexcellentinsurancecompanythattheycurrentlyworkwith.[#34]

Whenaskedifassistanceinobtainingbusinessinsurancewouldbehelpful,theBlackAmericanmaleownerofaflooringcompanysaid,“Yes,itwouldhelpmakeiteasiertogetjobs.”[#37]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanystated,“Yes,assistanceinobtainingbusinessinsurancecanhelp.”[#39]

Assistance in using emerging technology. Intervieweesalsodiscussedprogramsthatassistintheuseofemergingtechnology(e.g.,electronicbidding)duringin‐depthinterviews.

Some business owners said that they believe emerging technology programs assist or benefit

small businesses.Forexample:

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysays,“Yes,assistanceinusingemergingtechnologywouldbeveryhelpful.”[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatsheloveselectronicbiddingandconsidersitabenefit.[#25]


TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatassistanceinusingemergingtechnology(e.g.,electronicbidding)wouldbehelpfulforsmallbusinesses.[#28]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Yes,assistanceinusingemergingtechnologywouldbehelpful.”[#30]

TheBlackAmericanmaleownerofanHVACcompanysaid,“Yes,assistanceinusingemergingtechnologywouldbeveryhelpful.”[#33]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatassistanceinusingemergingtechnologyisuseful.[#34]

TheBlackAmericanmaleownerofaflooringcompanysaid,"Yes,assistanceinusingemergingtechnologyisgoodandwouldbehelpfulforsmallbusinesses."[#37]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanystated,“Yes,assistanceinusingemergingtechnologywouldbeveryhelpful.”[#39]

Most interviewees indicated that they were not aware of and had not had experience in using

emerging technology assistance programs.[Forexample,#1,#2,#3,#4,#5,#6,#7,#8,#9,#10,#11,#12,#13,#14,#15,#16,#17,#18,#19,#24,#26,#27,#29,#31,#32,#35,#36,#38]

Information on public agency contracting procedures and bidding opportunities. Mostintervieweesindicatedthatmoreinformationonpublicagencycontractingproceduresandbiddingopportunitieswouldbehelpful.

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysayseVAislimited.“Thereneedstobeeasy‐to‐findandincorporateintoafirm’sarsenaloninformationonpublicagencycontractingproceduresandbiddingopportunities.[#23]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Yes,theredefinitelyneedstobeinformationonpublicagencycontractingproceduresandbiddingopportunities.”[#30]

TheBlackAmericanmaleownerofaplumbingcompanystated,“Yes,informationonpublicagencycontractingproceduresandbiddingopportunitieswouldbehelpfulforsmallbusinesses.”[#31]

TheBlackAmericanmaleownerofanHVACcompanysaid,“Informationonpublicagencycontractingproceduresandbiddingopportunitywouldhelp.”[#33]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatinformationonpublicagencycontractingproceduresandbiddingopportunitieswouldbehelpful.[#34]

TheBlackAmericanmaleownerofaflooringcompanysaid,"Yes,informationonpublicagencycontractingproceduresandbiddingopportunitiesisneeded."[#37]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanynoted,“Yes,thereshouldbecontractingproceduresandbiddingopportunitiesmadepublic.”[#39]


Pre‐bid conferences where subcontractors can meet primes. Somebusinessownersthoughtthatpre‐bidconferenceswereuseful,whileothersdidnot.Forexample:

Whenaskedifpre‐bidconferenceswheresubcontractorsandprimesmeetwouldbehelpfulforsmallbusinesses,theBlackAmericanmaleownerofanSBA‐andSWaM‐certifiedmechanicalcontractingfirmindicatedhehasattendedtheseandtheyarehelpful.[#4]

Whenaskedifpre‐bidconferenceswheresubcontractorsmeetprimeswouldbehelpfulforsmallbusinesses,thenon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaidhehasattendedoneheldbyaveterans’organizationandfoundittobeveryhelpful.[#22]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatpre‐bidconferenceswheresubcontractorsmeetprimeswouldbeveryhelpful.Shefurtherexplainedthatitwouldbebeneficialtoboththesubcontractorandtheprime.[#25]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatpre‐bidconferenceswheresubcontractorsmeetprimeswouldbehelpfulforsmallbusinesses.[#28]

Anon‐Hispanicwhitemalerepresentativeofapublicly‐heldmanufacturingequipmentfirmindicatedthathisfirmattendspre‐bidconferenceswheresubcontractorsmeetprimesasasuppliertoseeiftheprimeorsubcontractorneedstheirservices.Hestated,“Itishelpfulforus.”[#29]

TheBlackAmericanmaleownerofaplumbingcompanystated,"Yes,thereshouldbepre‐bidconferenceswheresubsandprimescanmeet."[#31]

TheBlackAmericanmaleownerofanHVACcompanyexpressed,“Pre‐bidconferenceswheresubsandprimesmeetwouldhelpinexposureformorejobs.”[#33]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatpre‐bidconferenceswheresubcontractorsmeetprimeswouldbehelpful.[#34]

Anon‐Hispanicwhitemalerepresentativeofanelectricaldistributioncompanyindicatedthatpre‐bidconferenceswheresubcontractorsmeetprimeswouldbehelpful.[#35]

TheBlackAmericanmaleownerofaflooringcompanysaid,"Pre‐bidconferenceswheresubsandprimescanmeetwouldbeveryhelpfulforsmallbusinesses."[#37]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,"Yes,havingpre‐bidconferenceswheresubsandprimescanmeetwouldbehelpfulforsmallbusinesses."[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanynoted,“Pre‐bidconferenceswheresubsandprimesmeetaregood.”[#39]

Other agency outreach, such as vendor fairs and events. Somebusinessownersandmanagersreportedthatoutreachefforts,likevendorfairsandnetworkingevents,wereuseful.Othersnolongerregularlyattendthoseevents.


Examples of positive comments about agency outreach include the following:

Whenaskedifshehadanyfinalcommentsorrecommendationsforthecity,afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmmentioned,“TheCitycoulddoanoutreachprogram.Haveeachdirectorofthedepartmentsandhaveanoutreachprogramwheretheyintroducethemselves.Itwouldbesimilartowhatgeneralcontractorsdotoreachoutandtalktobusinesses.TheCitydoesn’treachout.Theypost,theypublicize,andtheyarenotinteracting.Haveanevent.Theyarenotwelcoming.”[#9]

Whenaskedifhehadanyfinalcommentsorrecommendationsforthecity,themalerepresentativeofanon‐Hispanicwhite‐ownedenvironmentalremediationfirmmentionedhavingindustrydaysandseminars(basedontheCity’sprojectedopportunities)tocultivaterelationships,promotehigh‐techindustry,pushknowledgetocommunitygroups,workwithorganizationsliketheNationalContractingManagementAssociationandprofessionalassociations,andsendemailblastsaboutcontractopportunitiesandnetworkingevents.[Itshouldbe]ajointeffortbetweentheCityandorganizationstoconnectwithminorityandsmallbusinesses.[#10]

Whenaskedforadditionalcommentsaboutanyothercurrentorpotentialrace/ethnicity/gender‐basedprograms,thenon‐HispanicwhitefemaleownerofapublicrelationsandmarketingfirmnotedtheCityhasn’treachedouttothemandaskedwhattheCitycandoforthemasasmallbusiness.“TheCityknowsus.”ShesuggestedthattheCityshouldcelebratethosebusinesseswhohavebeenaroundalongtimetoshowappreciation.SheaddedthatsuchacknowledgementscouldgoalongwaywithretentionofthoseVirginiaBeach‐basedsmallbusinesses.ShealsosuggestedthattheCityoreconomicdevelopersshouldinvitesmallbusinessestoaneventtomakethemawareofopportunities.Thereneedstobemorerecognition.[#15]

Thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmmentioned,“Idon’tknowhowtheyreachout.Ihaven’thadaconversationwithanybodyintheCity’sSWaMprogramorDisadvantagedBusinessProgram.IknowitispartofthissubmittalthatI’llmaketoday.WehavetosubmitaplantoshowthesubconsultantsthatI’lluseandtheircertificationstatusesandI’llshowabouthowmuchrevenuewethinktheymightgetfromourcontractoveragivenyear.Ihaven’tspokenwithanybodyinthatdepartment.Theyhaven’treachedouttomeandIhaven’treachedouttothem.Iknowit’satwo‐waystreet,butIdon’tknowwhattheycandoforme.Ishouldask.”[#16]

Whenaskedifshehadanycommentsorrecommendationsaboutanyothercurrentorpotentialrace/ethnicity/gender‐basedprograms,theAsianPacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmstated,“IftheCityisnotgoingtoparticipateinSWaMthentheyneedtohostdiversityconferencesthemselvestoeducatecontractorsabouthowtodobusinesswiththeCity.Theyneedtodotheconferencesacoupletimesayear.TheyneedtoputsomerealteethintogettingsmallbusinessesworkintheCityofVirginiaBeachandnotgoingtotheirfavorites.Makingtheirfavoritesfollowtheirplan.”ShenotedtheCityhasfavoritedevelopersandcontractors,butthattheCityneedstomakethemtracktheirspendwithdiversecontractors.[#20]


TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanynoted,“Agencyoutreachisnottooeffective.Thereisnoreturnoninvestmentsuchastime,handoutmaterials,etc.giventobuyerswhentheyprobablyjusttrashthemgoingthroughthemotions.”[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatotheragencyoutreach(e.g.,vendorfairsandevents,opportunitiestomeetbuyers)wouldbebeneficial.Shesaid,“Typicallywhenyouhearaboutsomethinglikethatit’sinLasVegasorsomehotspot.”Shefurtherindicatedthatusuallythereisnothinggoingonlocally.[#25]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatotheragencyoutreachwouldbehelpfulforsmallbusinesses.[#28]

Whenaskedifotheragencyoutreachwouldbehelpful,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Yes,butunlessthereisarelationshipbuilt,thereneedstobeamorepersonalinvolvement.Relationshipscounttogettingcurrentandfuturebusinessfromagenciesorprivatesectorcustomers.”[#30]

TheBlackAmericanmaleownerofaplumbingcompanynoted,"Agencyoutreachisneededandcanhelp."[#31]

TheBlackAmericanmaleownerofanHVACcompanynoted,“Yes,agencyoutreachishelpful.”[#33]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatotheragencyoutreachwouldbehelpful.[#34]

Anon‐Hispanicwhitemalerepresentativeofanelectricaldistributioncompanyindicatedthatotheragencyoutreachwouldbehelpful.[#35]

TheBlackAmericanmaleownerofaflooringcompanynotedthatagencyoutreachforvendors—likefairs,events,andopportunitiestomeetbuyers—wouldbeveryhelpful.[#37]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanynotedthatagencyoutreachwouldbegood.[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanynotedthatotheragencyoutreachwouldbehelpful.[#39]

Streamlining or simplification of bidding procedures. Severalbusinessownerssaidthatstreamliningorsimplifyingbiddingprocedureswouldbehelpful.Forexample:

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysaid,“Yestostreamliningandsimplificationofbiddingprocedure!Paperworkisakilleroftime,pricemargins,andreality.”[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatstreamliningbiddingprocedureswouldbefantastic.


Shefurtherexplainedthatsometimeagoshestartedtheprocessofstreamliningthemoststringentrequirementssothatthefirmwouldreducere‐biddingorbidrejections.[#25]

TheHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatstreamliningorsimplificationofbiddingprocedureswouldbehelpfulforsmallbusinesses.[#28]

Whenaskedifstreamliningorsimplificationofbiddingproceduresishelpful,anon‐Hispanicwhitemalerepresentativeofapublicly‐heldmanufacturingequipmentfirmstated,“It’sprettysimple.It’snotdifficult.”[#29]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Yes,streamliningofthebiddingprocedureswouldbehelpful.Thereisaneedforassistanceincompletingwhatagenciesareaskingforincompletingcontractbidpaperwork.”[#30]

Whenaskedifstreamliningofthebiddingprocedureswouldbehelpful,theBlackAmericanmaleownerofanHVACcompanystated,“Yes,togettothemeatofthematter!”[#33]

TheAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatstreamliningorsimplificationofbiddingprocedureswouldbehelpful.[#34]

Anon‐Hispanicwhitemalerepresentativeofanelectricaldistributioncompanyindicatedthatstreamliningofbiddingprocedureswouldbehelpful.[#35]

TheBlackAmericanmaleownerofaflooringcompanystated,“Yes,streamliningofthebiddingprocedurewouldbehelpful.”[#37]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,“Yes,simplificationofthebiddingprocedurewouldbehelpful!”[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanystated,“Yesstreamliningandsimplificationofbiddingprocedurewouldbeveryhelpful!”[#39]

Breaking up large contracts into smaller pieces. Thesizeofcontractsandunbundlingofcontractsweretopicsofinteresttomanyinterviewees.

Business owners indicated that breaking up large contracts into smaller components would be

helpful. Examplesofthosecommentsincludethefollowing:

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanysaysyestobreakinguplargecontractsintosmallerpiecesitgivesmoreopportunitiestogetawards.[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatbreakinguplargecontractsintosmallerpiecescouldbebeneficialforsubcontractors.Shefurtherexplainedthatitcouldalsobebeneficialtoprimesinthatanewgeneralcontractingconstructioncompanywhodoesnothavethefinancialbackingtosupportanentire$2millioncontractcouldhandleasmallerportion,e.g.$500thousand.[#25]


AHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthatbreakinguplargecontractsintosmallerpieceswouldbehelpfulforsmallbusinesses.[#28]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Yes,breakinguplargecontractsintosmallerpieceswouldbehelpfulforsmallbusinesses.”[#30]

TheBlackAmericanmaleownerofaplumbingcompanyexpressed,“Yes,breakinguplargecontractsintosmallerpiecescangetsmallerbusinessespiecesofthework.”[#31]

TheBlackAmericanmaleownerofaServiceDisabledVeteran‐OwnedandSWaM‐certifiedjanitorialcompanywhenaskedaboutbreakinguplargecontractsintosmallerpiecessaidyes.However,heneededinterpretersandwriterswhoknewhowtobeeffectiveinbidwriting.Hebelievesitwouldbeawesometodothis.[#32]

TheBlackAmericanmaleownerofanHVACcompanysaid,“Yes,breakinguplargecontractsintosmallerpieceswouldbehelpfultobusinesseslikemyselfbecauseIcanonlydoacertainamountofwork[onthecontracts].”[#33]

AnAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatbreakinguplargecontractsintosmallerpieceswouldbehelpful.[#34]

Anon‐Hispanicwhitemalerepresentativeofanelectricaldistributioncompanyindicatedthatbreakinguplargecontractsintosmallerpieceswouldbehelpful.[#35]

TheBlackAmericanmaleownerofaflooringcompanysaid,“Yes,breakinguplargecontractsintosmallerpieceswouldbehelpful.”[#37]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanystatedyestobreakinguplargecontractsintosmallerpieces,“Iwouldlovetoseethathappen!”[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanysaid,“Yes,breakinguplargecontractsintosmallerpieceswouldbehelpful.”[#39]

Small business set‐asides. Thestudyteamdiscussedtheconceptofsmallbusinessset‐asideswithbusinessownersandmanagers.Thattypeofprogramwouldlimitbiddingforcertaincontractstofirmsqualifyingassmallbusinesses.Mostintervieweesthoughtsmallbusinessset‐asideswouldbebeneficialforsmallbusinesses.[Forexample,#11,#28,#34,#35,#37,#38,#39]

Whenaskedifsmallbusinessset‐asideswouldbehelpfulforsmallbusinessesanon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaidhehasheardthattheydothoseandthinkstheywouldbehelpful.[#22]

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanystated,“Yes,smallbusinessset‐asideslimitingcontractbidstocertifiedsmallbusinesswouldbehelpfultoleveltheplayingfield.”[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatsheseessmallbusinessset‐asides(biddinglimitedto


certifiedsmallbusinesses)ashelpfulaslongastheydon’tgooverboardwheretheybegintoset‐asidehugeproportionsofcontractsforsmallbusinessesandleaveoutthepool.Shesaid,“Ifeelstronglythateverybodydeservesanopportunityandthosewhoaregiventheopportunityshouldworkhardtoachievethat.”[#25]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Yes,smallbusinessset‐asideslimitingcontractbidstocertifiedminoritybusinesswouldgivemoreopportunities.”[#30]

Whenaskedifsmallbusinessset‐asideswouldbehelpfulforsmallbusinesses,theBlackAmericanmaleownerofaplumbingcompanystated,“Yes,smallbusinessset‐asideswouldbeahugehelp.”[#31]

TheBlackAmericanmaleownerofaServiceDisabledVeteran‐OwnedandSWaM‐certifiedjanitorialcompanygetsonprojectsbydoor‐to‐doorsolicitation,reachingouttoprimecontractorstogetsomeofthework.Hestated,“Yes,smallbusinessset‐asideswouldhelpwithlimitingcontractbidstocertifiedsmallbusiness,therearenominoritysetasidesinthisbusiness.”[#32]

TheBlackAmericanmaleownerofanHVACcompanywhenaskedifsmallbusinessset‐asidesaregood,henoted,“Itwouldmakesuresmallbusinessescanstayinbusiness.”[#33]

Mandatory subcontracting minimums. Somebusinessownersandmanagerssupportedrequiringaminimumlevelofsubcontractingonprojects.

Comments in support of mandatory subcontracting minimums include the following:

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanystated,“Yes,mandatorysubcontractingminimumslike15‐20percentofthecontractshouldbearequirementtobesubcontractedout.”[#23]

Anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatmandatorysubcontractingminimums(requiringthataminimumpercentageofacontractbesubcontractedout)couldbehelpfulforsmallsubcontractorsaslongasitdidn’tgetoutofhandtoexcludeothers.Shesaid,“Everyonedeservesanopportunity.”[#25]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Yes,mandatorysubcontractingminimumsshouldexist.”[#30]

TheBlackAmericanmaleownerofaplumbingcompanystated,"Yes,mandatorysubcontractingminimumsshouldberequired."[#31]

TheBlackAmericanmaleownerofaServiceDisabledVeteran‐OwnedandSWaM‐certifiedjanitorialcompanystated,“Yes,mandatorysubcontractingminimumslike51percentveterancontrolforsubcontractorswouldbehelpfulforsmallbusinesses.”[#32]

Whenaskedaboutmandatorysubcontractingminimumsbeinghelpfulforsmallbusinesses,theBlackAmericanmaleownerofanHVACcompany,said,“Yes.”[#33]

AnAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatmandatorysubcontractingminimumswouldbehelpful.[#34]


TheBlackAmericanmaleownerofaflooringcompanysaid,"Yesmandatorysubcontractingminimumswouldbeveryhelpfulforsmallbusinesses."[#37]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,"Yes,mandatorysubcontractingminimumsshoulddependonthesizeofthecontract,andwouldbehelpfulforsmallbusinesses."[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanyexpressedthatamandatorysubcontractingminimumwouldbegood.[#39]

Other measures. Somebusinessownersidentifiedotherneutralmeasuresforconsideration.Forexample:

TheAsian‐PacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmstated,“Yes,it’simportanttohaveadebriefwhetheryouwinorlosebecauseyouwanttoknowwhatyouwanttocontinuetodoandyouwanttoknowwhatyoudon’twanttodoagain.That’sextremelyimportant.Alotapeopledon’tdothatbutthat’sveryimportant.”[#20]

Arepresentativeofanarchitectureandengineeringfirmstated,“WehavebeentryingtogetthedefinitionofasmallbusinesschangedinthecommonwealthofVirginia.ThecurrentdefinitionforasmallbusinessinVirginiais250peopleregardlessofyourannualrevenue.So,youcouldhaveatrilliondollarsinrevenue,aslongasyouarelessthan250peopleyouareasmallbusiness.EverytimeItalktothecityaboutrefiningthedefinitiontomakeitreallyarepresentativeofsmallbusinesses,theyresistedtodothatbecausetheylumpsmallwomenandminoritybusinessestogetherinonebigpileintermsofhowmuchtheyreportgoestothatdisadvantagedgroup.Oncewerefinethedefinitionforasmallbusinesstheyaresayingthattheywon’tbeabletomeettheirgoals.Ithinkitisproblematicthatyoudon’treallyhaveatruedefinitionforwhatasmallbusinessis,thenyouaremisreportingthenumberofcontractsthatdogotowomenandminorities.”[MOC#2]

I. Insights Regarding Race‐ or Gender‐based Measures

Interviewees,participantsinpublichearings,andotherindividualsmadeanumberofcommentsaboutrace‐andgender‐basedmeasuresthatpublicagenciesuse,includingMBEcontractgoals.Commentsregarded:

Supportforrace‐/ethnicity‐orgender‐basedmeasures;

TheCity’sSWaMProgram;

MBE/WBEfrontsorfraud;and

Disadvantagesoftheprogram.

Support for race‐/ethnicity‐ or gender‐based measures. Therewereafewcommentsinfavoroftherace/ethnicity/gender‐basedprograms,includingMBEcontractgoals.

WhenaskedabouthisknowledgeandexperiencewithspecificareasofprogramsorinitiativesthatmightbenefitallsmallbusinessesincludingMBE/WBE/SWaM/DBE/SBEstheBlackAmericanmaleownerofanMBE‐,VBE‐,andSWaM‐certifiedmedicalservices


firmnotedthatODUhadaprogramthatusedtobecalledPTAC.Trainingmeetingsledbyformerbusinessowners.NorfolkandVa.Beachusedtohavejointmeetings.Theyweremoredesignedforstart‐upsthanforamorematurebusiness.[#1]

Whenaskedwhatprogramshavebeenhelpfultohissmallbusiness,aBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmmentionedSBA,BOWDCenter/VDOT,PTACandChesapeakeEconomicDevelopment.“Theyhavebeendiligentincommunication,relevantcontentandrelevantassistance.”[#7]

Whenaskedwhatprogramshavebeenhelpfultohissmallbusiness,aBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmnoted,“Thestateagencywashelpfulwithadministrativesupport.”[#8]

Whenaskedwhatprogramshavebeenhelpfultothebusiness,thenon‐HispanicwhitefemalerepresentativeofanMBE‐,DBE‐,SBE‐,andSWaM‐certifiedNativeAmerican‐ownedenvironmentalengineeringfirmnoted,“Theseprogramsthataimtoassistsmallbusinesshavebeenhelpfulnetworkingevents,beingabletoexposeourservicestoprocurementofficersthatmightnotbeaware.DepartmentofEnergyhassummits.LabsintheDepartofEnergyarerunbyprimes,becauseeverysingleoneineachstateisranbydifferentfolks,it’sveryhardtogetwork.”[#11]

Whenaskedwhatprogramshavebeenhelpfultosmallbusinesses,thenon‐Hispanicwhitefemaleownerofastaffingagencynoted,“SBAloanandChesapeakeEconomicDevelopmentAlliancehavebeenagoodsoundingboard.Theyhavebeengoodifweneededinformationoncertainthingsinthearea.They’vebeenaresource.”[#12]

Whenaskedwhatprogramshavebeenhelpfultothebusiness,theHispanicAmericanfemaleownerofatranslationagencynotedshewasawareoftheWomen’sBusinessCenteratOldDominionUniversityandOpportunity,Inc.inNorfolkforworkforcecenterandtheworkforcecenteronthePeninsula.ShealsomentionedtheonlineSBAresources.ShealsomentionedtheChambers,specificallytheHispanicChamber.[#13]

Whenaskedwhatprogramshavebeenhelpfultothebusiness,theBlackAmericanmaleownerofabusinessmanagementconsultingfirmmentionedtheSBA;Chamber’sSCOREandsomebankinginstitutionsarestartingtobealittlebitmoreamenabletohelpingminority‐ownedbusinesswiththeirfinancingandwiththeircapitalstructures.They’vehiredpeoplewhoarelookingintothosemarkets,whichissmart.Theyarerecognizingthattheycan’tignorethatmarketforever.Therealissuethatwe’renotaddressingisthiswholeissueofdowemakesurethatwe’relevelingtheplayingfield.Attheendoftheday,evenifyouhavethecapital,evenifyou’reabletodothejob,ifyou’renotcompetingonalevelplayingfieldwitheverybodyelse,noneofitmatters.”[#17]

Whenaskedwhatprogramsthathavebeenhelpfultothebusiness,theHispanicfemaleeditorandpublisherofanewspapermentionedawarenessofSWaM,SBAloansandSCORE.[#18]

Whenaskedwhatprogramshavebeenhelpfultothebusiness,thenon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmmentionedprogramsviahighereducationinstitutionsthatconducttrainingforSBEfirms.HespecificallymentionedGeorgeMasonUniversityforDepartmentofEnergyprojects.He


advisedthatmanyoftheprogramsaretailoredmoreforstart‐upsandthattheyneedprogramsformorematurebusinessesseekingprocurementopportunities.“Networkingforpartnershipsbetweenandagenciesandsmallbusinessesandalsotobeatechnicalresourcetosmallbusinessesthataretryingtofigureouthowtomanagetheprocurementprocess.”[#19]

Whenaskedarethereprogramsthatyoufindhelpfultosmallbusinessesincludingminorityandwomen‐ownedfirmsanon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaid,“TheCommonwealthofVirginiasendsemailsformonthlymeetings,andVirginiaBeachholdsmeetingsatthelibrary.Theyhelpbutforastart‐uptheyareoverwhelming.”[#22]

Whenaskedaboutpotentialmeasuresorprogramsthatyouareawareofthatseemparticularlyhelpfultosmallbusinessesincludingminority‐andwomen‐ownedfirms,anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthattherearefinancialprogramsthatarehelpful.SheindicatedthatAmericanExpressofferssmallbusinessfinancingandworkingcapitalforsmallbusinesses.Shefurtherexplainedthatshedoesn’tknowofanythatarenothelpful.Shestatedthatshedoesseethecertificationsashelpfulastheyallowthebusinessestogainaccesstopublicsectorjobs.[#25]

Whenaskedaboutpotentialmeasuresorprogramsthatheisawareofthatseemparticularlyhelpfultosmallbusinessesincludingminority‐andwoman‐ownedfirms.Anon‐HispanicwhitemalerepresentativeofaWBE‐certifiedtruckingcompanystated,“Ithinkbeingregisteredasawoman‐ownedbusinesshelpsusout.Especiallywithourgovernmentsideofthefreight.Theylookfortheminority‐ownedbusinessesandsupportthemverywell.Ithinkit’sbeenapositiveforus.”[#27]

Whenaskedaboutpotentialmeasuresorprogramsthatheisawareofthatseemparticularlyhelpfultosmallbusinessesincludingminority‐andwomen‐ownedfirms,aHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthathewasnotawareofanyprograms.Hesaid,“Otherthanthecertifications,youdon’tgetalotofhelp.”[#28]

Whenaskedwhatelseifanythingshouldbedonetoenhancetheavailabilityandparticipationofsmallbusinesses,includingMBE/WBE/SWaM/DBE/SBEs,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Supplyanddemanddriveavailabilityandparticipation.So,thereshouldbemoredemandcreatedasthereisalreadyasupplyofminoritybusinesseswhowanttoreceiveawardsandcontracts.”[#30]

Whenaskedifthereareprogramsthatareparticularlyhelpfulorunhelpful,theBlackAmericanmaleownerofanHVACcompanystated,“SWaM,MicroBusiness,TidewaterBuilders’Associationhasfreeclassesforstart‐uporjobplacement.”[#33]

AnAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmstatedthatsheisawareofsomeprogramsaimedtohelpsmallbusinessesthatarehelpful.Shesaid,“We’relookingtopartnerwithWOTC,theworkreleaseprogramforpeoplethathavebeenincarcerated.”Sheexplainedthatherfirmwillhelptotraintheseindividuals,givethemjobs,andhelpthemtobecomeproductivecitizens.ShealsostatedthatODU’s


Women’sBusinessCenterishelpful.Shesaid,“Alotoftimessmallbusinessesdon’tknowwheretogotogetthisinformation.”SheexplainedthattheWomen’sBusinessCenterisagreatresourceforsmallbusinesses.[#34]

Anon‐Hispanicwhitemalerepresentativeofanelectricaldistributioncompanystated,“TheyareverygoodaboutgettingpricingfromSWaMdistributorsthatareavailable.”[#35]

Whenaskedifthereareprogramsthatareparticularlyhelpfulorunhelpful,theBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanynotedthatSWaMishelpful.[#38]

The City’s Small, Women‐owned, and Minority‐owned Business (SWaM) Program. TherewereseveralpositiveandcriticalcommentsabouttheSWaMprogram.

A few interviewees recommended that improvements be made in the implementation of the City’s SWaM Program. Forexample:

WhenaskedwhatisyourexperiencewiththeCity’sSWaMprogram,oranyprogramsandwhatcommentsorrecommendationsdoyouhave,anon‐HispanicwhitefemalerepresentativeofanMBE‐certifiedHispanicAmerican‐ownedgeneralcontractingfirmstatedthatherpreviousemployerwasawoman‐ownedsmallbusiness.Shefurtherexplainedthatshedidexperiencesomebenefitsinthatthefirmreceivedfirstconsiderationforsales.Shesaid,“Iwouldsuggestthattheapplicationprocessbestreamlined.Thereasonthatthecertificationexpiredforthiscompanywasthedifficultylevelintheapplicationprocessanditjustbecamenotworthit.”[#25]

AHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmindicatedthathisexperiencewiththeCity’sSWaMprogram,oranyotherprogramshavebeenchallenging.Hestated,“Itsbidworld,theyreallydon’tcareaboutanythingelseotherthanlowestprice.Everybodyfightsforthebottom.Unlessyouwanttodosomethingforfreeorclosetoit,it’sarealchallenge.TheCityshouldmovefromlowestpricetobestquality.”[#28]

One interviewee reported a positive experience with the City’s SWaM Program. Whenaskedwhathisfirm’sexperiencewiththeCity’sSWaMprogramoranyprogramsare,anon‐Hispanicwhitemalerepresentativeofanelectricaldistributioncompanyindicatedthatitisfineasis.Hesaid,“TheyincludeSWaMvendorsalongwithus.Iftheyaremorecompetitive,theygetthebusiness.Wedon’treallyhavealotofstrongminoritydistributorslocally.”[#35]

One business owner expressed his opinion about the lack of opportunity with the SWaM

program.WhenaskedwhathisexperiencewiththeCity’sSWaMprogram,oranyprograms,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Thereisnotrueshotathavingtheopportunitytogetthebid.”[#30]

MBE/WBE/SBE fronts or fraud. SomeintervieweescommentedontheirexperienceswithoropinionsregardingpotentialMBE/WBE/SBEfrontsorfraud.


A few interviewees reported knowledge of fronts or fraud. Someintervieweesgavefirst‐personaccountsofinstancesthattheypersonallywitnessed,whereasothersspokeofless‐specificinstancesorsecond‐handaccounts.Forexample:

Anon‐HispanicwhitemaleownerofanSDVO‐andSWaM‐certifiedgeneralcontractingfirmsaidhehasonlyseenfraudwithSDVOcertifications.[#22]

AnAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatshehasheardofMBE/WBE/SWaM/DBE/SBEsfrontsorfrauds.[#34]

ABlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,“Yes,therearefrontsbutIhavenotexperiencedfraud.”[#38]

Disadvantages of the program. AfewbusinessownerscommentedondisadvantagesoftheMBE,WBE,andSWaMprogram.

TheBlackAmericanmaleownerofaServiceDisabledVeteran‐OwnedandSWaM‐certifiedjanitorialcompanynoted,“Certificationsaremeanttobegoodbutusedinthewrongway.Theintentisgoodbutthegovernmentneedstogobacktotheoriginalintent.”[#32]

Whenaskedifthereweredisadvantagestotheprogram,theBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,“Yes,thereisgovernmentalresistancetousingminority‐certifiedcompanies.”[#38]

J. MBE/WBE/SWaM Certification

BusinessownersandmanagersdiscussedtheprocessforMBEcertification,WBEcertification,SWaMcertificationandothercertifications,includingcommentsrelatedto:

Difficultyofbecomingcertified;

Advantagesanddisadvantagesofcertification;and

Recommendationsaboutimprovingthecertificationprocess.

Difficulty of becoming certified. Manyintervieweescommentedonhowdifficultitwastobecomecertified.Othersindicatedlackofawarenessofthecertificationprocessandthelargeamountsofpaperworkinvolved.

Some interviewees reported difficulties with or lack of awareness of the certification process

and the large amounts of paperwork involved.Examplesofsuchcommentsincludedthefollowing:

Whenaskedifthecertificationprocesswaseasyordifficult,anon‐HispanicwhitefemaleownerofanAsianAmericanWBE‐andSWaM‐certifiedengineeringandtestingfirmnoted,“ForVirginia,it’sdifficultfortheDBEandrenewaloftheSWaMcertification.They’rejustnotveryknowledgeableororganized.Theyhaveimplementedsomenewchangessoeverything’sautomatednow.So,Ithinkthat’sastepintherightdirection,I’llgivethemthatcredit.ForMaryland,submittedit.Icantrackitonline.Theyweremissingacoupleofthings.Theycommunicatedwithme.IcouldseewhereIwasthewholetimeintheprocess,andwegotourletter.ForDelaware,evensmoother,it’snotthosefolksweren’tpaying


attentionbecausetheyaskedformorestuffthatwasmissing,it’sjustthattheycommunicated.”[#5]

Whenaskedifthecertificationprocesswaseasyordifficult,afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmreportedtherewereseveralissueswhentheypursuedtheirmicrobusinesscertificationwiththestate.“Wehadtostartoverafewtimeswhenpaperworkwasmissing.Wehadtojumpthroughseveralhoops.”[#9]

Whenaskedifcertificationprocesswaseasyordifficult,thenon‐HispanicwhitefemalerepresentativeofanMBE‐,DBE‐,SBE‐,andSWaM‐certifiedNativeAmerican‐ownedenvironmentalengineeringfirmnotedthattherewasalotofpaperworkfortheNativeAmericancertification.Initiallytheywerewoman‐owned(thewife)thentheyswitchedtoNativeAmericanandSDVO(thehusband).[#11]

TheAsian‐PacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmnotedthecertificationprocessisnoteasy.WithherWOSBandWBENCcertificationprocesses,shebelievessheshouldalreadybecertifiedasan8afirm.Shenotedthatyouhavetodojustasmuch,ifnotmore,togetthoseassomeofthefederalcertifications.[#20]

TheBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanybelievesthatthecertificationprocessesisreasonablydifficult,definitelynoteasy.Hedoesn’tlikethepaperworkinvolvedwithgettingcertified.[#23]

Whenaskedifthecertificationprocessiseasyordifficult,aHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmsaid,“It’saroyalpain.Theinitialcertificationprocessisverychallengingwhenyouhavemultiplepartners.Therecertificationisverychallengingaswellbecauseit’ssopaperworkheavyanddriven.It’severyyearandyou’realwayshavingtosendthesamepaperworkeverytime.”Hefurtherindicatedthatthesystemisnotuserfriendlyaseachcertificationrequiresdifferentpaperwork.Hesaid,“Itcanbeburdensome.”[#28]

TheBlackAmericanmaleownerofaServiceDisabledVeteran‐OwnedandSWaM‐certifiedjanitorialcompanystated,"Thecertificationprocessisdifficultthereisalotofpaperwork,alotofquestions,makingithardtogetSDVOSBcertificationwithouttheexperienceofothercertifications."[#32]

Whenaskedifthecertificationprocessiseasyordifficult,anAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmstated,“Theamountofpaperworkassociatedwiththecertificationprocessmakesitdifficult.”[#34]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanybelievesthatthecertificationprocessesisdifficultandveryexpensive.[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanybelievesthatthecertificationprocessesaredifficult.Allofthepaperwork[time]andmoneyyouhavetoputoutforsmallbusinessisaproblem.Usually,thereisnoreturnontheinvestment(ROI).[#39]


A few interviewees reported that the lack of availability of the certification employees was a problem. Forexample:

Thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmnoteditiseasytogetcertifiedbuthardertogetrecertified.Heexplainedthattheyrequestedlotsofdocumentsbutthere’snowaytouploadthemornocleardirectionastohowtosubmitdocuments.“It’shardtogetrecertifiedthroughtheVirginiaSWaMDepartmentwhenyoucan’tevengetsomebodyonthephone.It’sanautomatedansweringmachine.Ihaven’tfoundanycombinationofkeysthatgetsmetoalivepersonyet.”[#16]

TheminorityfemaleownerofanMBE‐,WBE‐,SBE‐,andSWaM‐certifiedconstructionstaffingcompanybelievesthatthecertificationprocessesarereasonablydifficult,definitelynoteasy.Shedoesnotlikethepaperworkinvolvedwithgettingcertified.Sheexpressed,“DBEisthehardestduetotheproblemwithreachingthecontractperson.”[#24]

Other interviewees reported that that the certification process was not difficult.[Forexample,#3,#7,#8,#25,#27]

Thenon‐Hispanicwhitemalerepresentativeofaconsultingengineeringfirmnoted,“Onceyougetontheothersideofit[certification],itwasn’tthatbad.Therearesomethatareonerous,butthat’sfine.Everyownergotaprocess.Theyhavepeoplethatthey’reaccountabletoregardingthequalityoftheirprocess.”[#19]

WhenaskedisthecertificationprocesseasyordifficulttheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanystated,“Thecertificationprocessiseasy,Ijustgoonlineandfillouttherequiredpaperwork.Thepaperworkhastobecorrectortherewillbeproblems.”[#30]

Advantages and disadvantages of MBE/WBE/SWaM certification. InterviewsandpublichearingsincludedbroaddiscussionoftheadvantagesanddisadvantagesofMBE/WBE/SWaMcertification.

Some owners of MBE‐, WBE‐, and SWaM‐certified firms indicated that certification had helped

their businesses gain opportunities to work with the City or a prime contractor.Forexample:

WhenaskedaboutherexperiencewithherDBEcertificationanditsbenefits,anon‐HispanicwhitefemaleownerofaSWaM‐certifiedwoman‐ownedcivilengineeringfirmstated,“Absolutelycertificationhasbeenabenefit.TheDBEcertification,asIlooktomyfuturemarket,initiallyIwashopefulIwouldhavemuchmorefootinginthefederalmarketbutIthinkmybiggestgrowthopportunityisinthestateandmunicipalmarket,justbecauseoftheDBE.Iwouldbehard‐pressedatthestateleveltoworkotherthanbeingaDBE.Atthemunicipallevel,probably50‐50,dependsonwhatprojectitis.”[#3]

WhenaskedabouttheexperiencewithSWaMcertificationanditsbenefits,afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmnoted,“Itwillhelpusifwewanttoteamwithalargefirm,iftheydon’thavestructuralengineeringin‐house.Thenwecanassistorhelpsincetheyhavetomeetthosegoals.”[#9]


WhenaskedabouttheexperiencewithSWaMcertificationexperienceanditsbenefits,thenon‐HispanicwhitefemalerepresentativeofanMBE‐,DBE‐,SBE‐,andSWaM‐certifiedNativeAmerican‐ownedenvironmentalengineeringfirmnotedthatitallowsthemtogetinthedoorandgetmorepointsinthepointsystem.[#11]

Thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmnotedthattheonlybenefitofhiscertificationiswhenhe’steamingwithprimeswhohavearequirementtohavecertifiedfirmsontheirteam.[#16]

Whenaskedwhatthebenefitsofthecertificationsare,thenon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmnoted,“Itgivesusanopportunitytodoworkwithownersandclientswhohavegoalsthattheyneedtomeet.Itisnotwhatdriveswhatwedo.Thatisnotfundamentaltoourapproachofhowwedoaproject,buttherearecertainlyclientswhohavegoalstomeetandthisissomethingthatweareabletoprovidetothem.Thoughourpartoftheprojectisnormallyjusttenthsofapercent,verylittleoverallvaluedependingontheservicesthatarepackagedatthemostmaybeapercentandahalf.”[#19]

Whenaskedwhattheadvantageordisadvantagesofcertification,theBlackAmericanmaleownerofaSWaM‐certifiedlandscapingandlawnmaintenancecompanybelievesthathegetscallsforcertainjobsthatmightnototherwisecometohim.Therecanbequickresponsesforsolesourceworkthoughtheyarenotmajorjobsbutcangetcalledalot.[#23]

TheminorityfemaleownerofanMBE‐,WBE‐,SBE‐,andSWaM‐certifiedconstructionstaffingcompanybelievesthatonceshegetswithothercompaniesthesecertificationswillbeverylucrativetohercompany.[#24]

Whenaskedaretheredisadvantagesofcertification,anon‐HispanicwhitemalerepresentativeofaWBE‐andSWaM‐certifiedmechanicalcontractingfirmsaid,“No,Ican’tsayitis.Thereareabunchofphoniesouttherethat’sallIknow.Thereareabunchofcrybabiesusingveteransanddisabledpeopletogetacontract.Eitheryoucandoitoryoucan’tdoit,you’dratherstigmatizeyourselfthantotakeajob.It’seitheryouknowthebusinessoryoudon’tknowthebusiness.Idon’tseewheredisabledhasanymoreknowledgethanthepersonthat’snotdisabled,it’sallascam.”[#26]

Whenaskedwhatthebenefitsofcertificationare,anon‐HispanicwhitemalerepresentativeofaWBE‐certifiedtruckingcompanystatedthatgovernmentagenciesseekoutthosetypesofbusinesseswhetherwoman‐ownedorveteran‐owned.Hesaid,“BeforeIworkedhereIworkedforagovernmentcontractingcompanythatwasalsoawoman‐ownedbusiness.Theyreceivedalotofpositivepoints.”Heindicatedthatitwasdefinitelyapositive.[#27]

Whenaskedwhatdoyouseeasbenefitsofcertification,aHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmstated,“Itisanopportunitytoopenadoorthatisotherwiseclosedandtheremaybesomesetasideopportunities.Asayoungcompanyit’saplacetostart,afoundationifanything.Companiesshouldnotleadwithcertifications,itshouldbelastwhentalkingabouttheirfirms’qualifications.”[#28]


Whenaskedwhatthebenefitsofcertificationare,theBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanyexpressed,“Ourcertificationgetsusmilitarycontractsthatmayhavenotcometouswithoutit.”[#30]

TheBlackAmericanmaleownerofaServiceDisabledVeteran‐OwnedandSWaM‐certifiedjanitorialcompanybelievesthattherecanbebenefitingettingcontractsfromtheStateandFederalifyoucanwinthem.[#32]

TheBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanystated,"IonlyneedonemorecertificationwhichistheRIPcertification.Itistheregistrationtogoonthemilitarybases.IhavetobecarefulwhoItalktowantingmoneytobecertifiedbecausetheychargealotofmoneytogetthecertificationdone.ItisdifficultandexpensivetogettheRIPcertification.Ifyouarenotcarefulyouwillbetakenadvantageof."[#38]

Some interviews indicated that there are limited advantages, or even disadvantages, to being

certified.Forexample:

Whenaskedtodescribethefirmsexperiencewith[MBE/WBE/DBE/SBE]certification,aBlackAmericanmaleownerofanMBE‐,VBE‐,andSWaM‐certifiedmedicalservicesfirmreported,“ThereisnobenefitfrombeingVeteran‐ownedsofar,thereshouldn’tbeadifferentiationbetweenservice‐disabledandveteran‐owned,itshouldbemorebalanced.8agivesustheopportunitytobidwithfirmsofsimilarsize.Itteachesyouhowtocompeteinthemarketplace,givesyouexperienceinhowtoprovideyourservices.The8aprogramisn’tlongenough,bythetimeyoulearnthesystem,it’salmosttimetograduatefromtheprogramwithanother4or5years,youcouldreallyapplyyourknowledge.Theycouldhaveabettersuccessratewithalongertimeperiodintheprogram.[Wehavenot]experiencedanybenefitsofSWaMyet,wejustbecamecertifiedin2017.[#1]

WhenaskediftherearedisadvantagesofcertificationaBlackAmericanmaleownerofanSBAandSWaM‐certifiedmechanicalcontractingfirmindicated,“Itdoesn’treallyhelpmecompetebecauseIstillhavetobeabletodotheworkwithquality.”[#4]

WhenaskedaboutherexperiencewiththeirDBEcertificationanditsbenefits,anon‐HispanicwhitefemaleownerofanAsianAmericanWBE‐andSWaM‐certifiedengineeringandtestingfirmstated,“It’sabenefitonlargeVDOTprojectsbecausetheyturntousthenrealizewe’rethemostreliableaswellasthemostknowledgeableforthearea.Sometimesitdoesn’thelpuswhatsoever.”AnAsianAmericanmaleownerofaWBE‐andSWaM‐certifiedengineeringandtestingfirmadded,“It’sproject‐specific.Sometimeswhenyoumentionyou’reDBEtosomeone,theimpressionthatyougetisthatyou’renotqualified.Thereasonwhywe’reDBEistogetworknotthequalityofthework.”[#5]

Whenaskedaboutthefirmsexperienceandiftherearedisadvantageswiththecertification,aBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmexpressed,“ItconnectsmetolargerfirmswhowanttouseDBEfirms.TheDBElabelimpliessmallsizeandcapacitytodothework.TheProgramdoesn’tseemtohelpsmallbusinessestobecomecompetitiveorindependent.”[#7]


Whenaskediftherearedisadvantagesofcertification,aBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmstated,“I’mnotoneofthe‘Goodol’boys’.Theindustryisveryprejudiced,socertificationcansometimeslimityourwork.”[#8]

Whenaskedwhatthebenefitsofcertificationsare,theAsian‐PacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmnotedherWOSBandWBENCcertificationshavegottenherintothecorporateworldalot.Shehasn’tgottenanycontractswithherSWaMcertificationatthestateorlocallevels.SheisworkingonamajordealnowwithherSWaMbutnothingdefiniteyet.[#20]

TheBlackAmericanmaleownerofanHVACcompanydoesnotbelievethathecangetjobsfromcertification.HewasSWaMwhenhewasalocksmithbutdidnotgetanythingfromit.Hedoesnotknowifheatingandairconditioningwillbenefitfromcertifications.[#33]

Whenaskedwhatthebenefitsofcertificationare,anAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmindicatedthatasofnowshedoesnotseeabenefittotheMBEandWBEcertifications.Shestated,“Whenyou’regoingaftergovernmentcontractsthey’renotsomuchlookingatthemastheyarelookingatSWaMandDBE.They’reminorincomparisontoSWaMandDBE.Theonedisadvantageisallofthepaperworkinvolved.”[#34]

TheownerofanMBE‐,DBE‐,andSWaM‐certifiedprofessionalservicesfirmstated,“IntermsofcertificationIhaveeverylastoneofthemMBE,DBE‐,andSWaMconsultantsMicro.Ihavedoneitallandstillsometimesitseemsdifficulttogetinthedoorandhavingafaircompetitionaswellasonewhichasmallbusinesscansurviveparticularlyinthecompetitionprocess.”[MOC#3]

Recommendations about improving the certification process.Whenaskediftheyhadanyrecommendationsaboutimprovingthecertificationprocess,manyintervieweesdid.Forexample:

Whenaskeddoyouhaveanycommentsorrecommendationsaboutanyothercurrentorpotentialrace/ethnicity/gender‐basedprograms,aBlackAmericanmaleownerofanMBE‐,VBE‐,andSWaM‐certifiedmedicalservicesfirm,henotedthereneedstobepolicychangediscussions.[#1]

Whenaskeddoyouhaveanycommentsorrecommendationsaboutanyothercurrentorpotentialrace/ethnicity/gender‐basedprograms,aBlackAmericanmaleowneroftheminority‐ownedcommercialrealestatedevelopmentfirmnoted,“Ifthecityisseriousabouthavingamoreinclusiveprogram,theymustbemoretransparent,notsayonethinganddoanotherandit’saboutopportunitiesnotset‐asides.[#2]

Whenaskedifshehadanyrecommendationsaboutimprovingthecertificationprocess,anon‐HispanicwhitefemaleownerofaSWaM‐certifiedwoman‐ownedcivilengineeringfirmnoted,“Theinitialapplicationcouldbeasis.Itwouldbeniceiftherewasamaintaineddatabasesothatyougoforyourrenewalsonanannualbasisthatyou’donlyhavetoupdatethosethingsthathavechangedinsteadofgoingthroughthewholethingagain.”[#3]

Whenaskedifshehadanyrecommendationsaboutimprovingthecertificationprocess,anon‐HispanicwhitefemaleownerofanAsianAmericanWBE‐andSWaM‐certified


engineeringandtestingfirmnoted,“Thecommunication,Ibelievethattheinterfacethattheyhavenowislittlebitbetter.WhenIwentinforourSWaMrecertification,therewerecertainthingstheyneeded,notevenforrecertification,thiswastheyearlysubmittal.So,we’realsoconsideredamicrobusiness.Sointhatsubmittal,itsaidyouhavetogiveusthese3thingsbuttherewasnoplacetouploadthem.So,Ihadtouploadthemelsewhereandwhatdoyouknowtheycamebacktwomonthslaterandsaidyou’remissingthis,youdidn’tuploadit.Theydidn’tgolookforit.So,Ihadtogobackanduploaditagain.Asasmallbusiness,youwanttobeabletodoitinonecompleteswoop.Communicationiskey.”[#5]

Whenaskedifhehadanyrecommendationsaboutimprovingthecertificationprocess,aBlackAmericanmaleownerofaSWaM‐certifiedgeotechnicalengineeringfirmrecommendedthatsmallercompaniesshouldreceivemorehands‐onassistanceandhelpwithfinancialdocuments(taxdocuments,businessplan,administrativesupport).[#7]

Whenaskedifhehadanyrecommendationsaboutimprovingthecertificationprocess,aBlackAmericanmaleownerofaDBE‐andSWaM‐certifiedarchitecturalfirmreported,“Whenit’stimetorecertify,theyshouldgiveyouatleasta6‐monthnoticebecauseofallthepaperwork.Youreallyareoverwhelmedandyoucouldeasilyforget.”[#8]

Whenaskedifshehadanyrecommendationsaboutimprovingthecertificationprocess,afemalerepresentativeofanon‐Hispanicwhite‐ownedSWaM‐certifiedstructuralengineeringfirmnoted,“Theircustomerserviceattitudewasn’tthere.”[#9]

TheHispanicAmericanfemaleownerofatranslationagencydidn’thaveanyrecommendationsfortheCity.ShedidobservethattheCityshoulddomoretoconnectwithcertifiedfirmsandeducatethemaboutwhatthatcertificationmeansforthemandminoritybusinesscounseling.Shestated,“Onceyou’recertified,nowwhat?Thewholeprocessisalittleintimidating.Ithinkweneedtogetthewordoutmoretopeople.Wegottofindmoreincentivesforpeopletowanttobeapartofthis.Givenewerbusinessesmoredirectionandguidanceaboutnextstepsaftertheygettheirbusinesslicense.Havethemcompleteasurveytogivethecitysomeideaofhowtofollowupwiththem.Thecityshouldshowinterestintheirbusinessinsteadofjustregisteringandtakingtheirmoney.Whenyoureachouttopeople,youawakenthatcuriosity.”[#13]

Thenon‐HispanicwhitemaleownerofanSBE‐andSWaM‐certifiedengineeringfirmofferedrecommendationsaboutimprovingthecertificationprocessbyhavingsomeoneavailabletoanswerquestions.Heexpressed,“They’veaskedmeforsomeadditionalinformationontheirwebsite.Icanseeit,buttheydon’tgiveyouavehicletouploadtherequesteddocuments.”[#16]

Whenaskedifhehadanyrecommendationstoimprovethecertificationprocess,thenon‐HispanicwhitemalerepresentativeofanSBE‐andSWaM‐certifiedconsultingengineeringfirmreplied,“Hireus.”Henotedthatthey’vedoneplentyofworkintheareabutnotwiththeCityofVirginiaBeachforatleastthepasttenyears.Hementionedthathisfirmsbidonjobsbutthecitykeepshiringthesamefirmeverytime.Henotedthatiftheyarebeingaskedtoputintheefforttogetcertifiedthenthecityshouldoffercontractsfromtimetotime.“Spreadtheworkaround.Itshouldbeaboutmorethanjusthavingastableofpeoplethatsaylookatallthepeoplewegotcertified,butwe’reonlygoingtogiveoneofthemwork.That’snotfair.”[#19]


Whenaskedifshehadanyrecommendationstoimprovethecertificationprocess,theAsian‐PacificAmericanfemaleownerofanMBE‐,WBE‐,andSWaM‐certifiedprojectmanagementfirmexpressedthecityshouldcontinueconductinginterviewsandsitevisitsaspartofthecertificationprocess.Althoughusingtheinternetisfaster,shebelievestheystillshouldseethepersonwhoissupposedtobemanagingthebusinessreallyknowswhattheyaredoingandthatthefirmisnotafront.[#20]

TheminorityfemaleownerofanMBE‐,WBE‐,SBE‐,andSWaM‐certifiedconstructionstaffingcompanystated,“TheDBEprocessshouldhaveonepersonwhoonlyhasthetasktoanswerquestionstoquickentheprocess.IttookmeoneandhalfyearstogetmyDBEbecausetherewasnooneIcouldaskquestionsatanygiventimewhenIneededanswers.”[#24]

Whenaskedifhehadanyrecommendationsaboutimprovingthecertificationprocess,anon‐HispanicwhitemalerepresentativeofaWBE‐andSWaM‐certifiedmechanicalcontractingfirmstated,“Justmakeitneutraldon’tmakeselectionsonthebasisofaperson’smentalordisabledqualifications.”[#26]

Whenaskedifhehasanyrecommendationsaboutimprovingthecertificationprocess,aHispanicAmericanmaleownerofanMBE‐andSWaM‐certifiedsecurityintegrationandgeneralcontractingfirmstatedthatthereshouldbeaholisticsystemforallcertifications.Heexplainedthatstandardizationwouldbehelpfulanditwouldreducecostandsavemoney.Hesaid,“Standardizationisthekeytoeverything.”[#28]

TheBlackAmericanmaleownerofanMBE‐andSWaM‐certifiedgaragedoorcompanyexpressed,“Therecouldbemoreassistance,morereachouttohelp,andbettercustomerserviceinhelpingtounderstandwhatisneededwiththepaperwork.”[#30]

Whenaskedifthereareanyrecommendationsforimprovingthecertificationprocess,theBlackAmericanmaleownerofaServiceDisabledVeteran‐OwnedandSWaM‐certifiedjanitorialcompanysaid,"Thereshouldbemorehelporhelponlinewhensmallminoritybusinessesaretryingtodothepaperworkbythemselves."[#32]

TheBlackAmericanmaleownerofanHVACcompanysaid,“Iwouldhavetodocertificationmyselfandassistanceorsometypeofhelpwouldbegood.”[#33]

Whenaskedifshehasanyrecommendationsaboutimprovingthecertificationprocess,anAsianAmericanfemaleownerofanMBE‐andWBE‐certifiedgeneralcontractingfirmreportedthatone‐on‐oneassistancewithbusinessownerstocompletethepaperworkwouldbehelpfulasitcanbeanoverwhelmingprocess.[#34]

Whenaskedifhehadanyrecommendationsabouttheimprovingthecertificationprocess,theBlackAmericanmaleownerofaDBE‐,MBE‐,andSWaM‐certifiedpaintingcompanysaid,“Yes,makesureyouknowwhoshouldbedoinggovernmentcontacts.Youneedtoinvestigatefraudbybadcompanies.”[#38]

TheBlackAmericanfemaleownerofanSBE‐certifiedconcretecompanysaid,“Yes,Ihaverecommendations.Theremustbeafairchanceofgettinginandnothavingstipulationsinthebidstokeepyou[minorities]out.Stopmanipulatingthebids.Ifeellikewearegettingkick‐backs,sonotafairgame.Ibelievethatlawsandrulesshouldbechangedstartingwiththelocal[municipalities].”[#39]

APPENDIX E.

Availability Analysis Approach

BBC RESEARCH & CONSULTING—FINAL REPORT APPENDIX E, PAGE 1

APPENDIX E. Availability Analysis Approach

BBCResearch&Consulting(BBC)usedacustomcensusapproachtoanalyzetheavailabilityofminority‐ownedbusinesses;woman‐ownedbusinesses;andveteran‐ownedbusinessesforconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicesprimecontractsandsubcontractsthattheCityofVirginiaBeach(theCity)awards.AppendixEexpandsontheinformationpresentedinChapter5todescribe:

A. Availabilitydata;

B. Representativebusinesses;

C. Availabilitysurveyinstrument;

D. Surveyexecution;and

E. Additionalconsiderations.

A. Availability data

BBCcontractedwithCustomerResearchInternational(CRI)toconducttelephonesurveyswiththousandsofbusinessestablishmentsthroughouttherelevantgeographicmarketareaforCitycontracting,whichBBCidentifiedasChesapeakeCity,NorfolkCity,PortsmouthCity,andVirginiaBeachCityinVirginia.BusinessestablishmentsthatCRIsurveyedwerebusinesseswithlocationsintherelevantgeographicmarketareathatthestudyteamidentifiedasdoingworkinfieldscloselyrelatedtothetypesofcontractsandprocurementsthattheCityawardedbetweenJuly1,2012andJune30,2017(i.e.,thestudyperiod).Thestudyteambeganthesurveyprocessbydeterminingtheworkspecializations,orsubindustries,foreachrelevantCityprimecontractandsubcontractandidentifying8‐digitDun&Bradstreet(D&B)workspecializationcodesthatbestcorrespondedtothosesubindustries.ThestudyteamthencollectedinformationaboutlocalbusinessestablishmentsthatD&Blistedashavingtheirprimarylinesofbusinesswithinthoseworkspecializations.

Aspartofthetelephonesurveyeffort,thestudyteamattemptedtocontact7,013localbusinessestablishmentsthatperformworkthatisrelevanttoCitycontracting.Thattotalincluded2,602constructionestablishments;103architectureandengineeringestablishments;2,637otherprofessionalservicesestablishments;and1,646goodsandservicesestablishments;and25establishmentswithaprimarylineofworkthatturnedouttobeoutsideofthecontractingareasrelevanttothedisparitystudy.(Those25businessestablishmentswerenotconsideredfurtheraspartoftheavailabilityanalysis.)Thestudyteamwasabletosuccessfullycontact3,238ofthosebusinessestablishments(1,145businessestablishmentsdidnothavevalidphonelistings).Ofbusinessestablishmentsthatthestudyteamcontactedsuccessfully,1,045establishmentscompletedavailabilitysurveys.


B. Representative Businesses

TheobjectiveofBBC’savailabilityapproachwasnottocollectinformationabouteachandeverybusinessthatisoperatingintherelevantgeographicmarketarea.Instead,itwastocollectinformationfromalarge,unbiasedsubsetoflocalbusinessesthatappropriatelyrepresentstheentirerelevantbusinesspopulation.ThatapproachallowedBBCtoestimatetheavailabilityofsmalldisadvantagedbusinessesinanaccurate,statistically‐validmanner.Inaddition,BBCdidnotdesigntheresearcheffortsothatthestudyteamwouldcontacteverylocalbusinesspossiblyperformingconstruction;architectureandengineering;otherprofessionalservices;orgoodsandserviceswork.Instead,BBCdeterminedthetypesofworkthatweremostrelevanttoCitycontractingbyreviewingprimecontractandsubcontractdollarsthatwenttodifferenttypesofbusinessesduringthestudyperiod.

FigureE‐1liststhe8‐digitworkspecializationcodeswithinconstruction;architectureandengineering;otherprofessionalservices;andgoodsandservicesthatweremostrelatedtothecontractandprocurementdollarsthattheCityawardedduringthestudyperiod,andthatBBCincludedaspartoftheavailabilityanalysis.Thestudyteamgroupedthosespecializationsintodistinctsubindustries,whicharepresentedasheadingsinFigureE‐1.

C. Availability Survey Instrument

BBCcreatedanavailabilitysurveyinstrumenttocollectinformationfromrelevantbusinessestablishmentslocatedintherelevantgeographicmarketarea.Asanexample,thesurveyinstrumentthatthestudyteamusedwithconstructionestablishmentsispresentedattheendofAppendixE.Thestudyteammodifiedtheconstructionsurveyinstrumentslightlyforusewithestablishmentsworkinginotherindustriesinordertoreflecttermsmorecommonlyusedinthoseindustries(e.g.,thestudyteamsubstitutedthewords“primecontractor”and“subcontractor”with“primeconsultant”and“subconsultant”whensurveyingprofessionalservicesestablishments).1

Survey structure.Theavailabilitysurveyincluded14sections,andCRIattemptedtocoverallsectionswitheachbusinessestablishmentthatthestudyteamsuccessfullycontactedandthatwaswillingtocompleteasurvey.

1. Identification of purpose.ThesurveysbeganbyidentifyingtheCityasthesurveysponsoranddescribingthepurposeofthestudy.(e.g.,“TheCityisconductingasurveytodevelopalistofcompaniesinterestedinprovidingconstruction‐relatedservicestotheCityofVirginiaBeach.”)

2. Verification of correct business name.Thesurveyorverifiedthatheorshehadreachedthecorrectbusiness.Ifthebusinessnamewasnotcorrect,surveyorsaskediftherespondentknewhowtocontactthecorrectbusiness.CRIthenfollowedupwiththecorrectbusinessbasedonthenewcontactinformation(seeareas“X”and“Y”oftheavailabilitysurveyinstrument).

1BBCalsodevelopedafaxande‐mailversionofthesurveyinstrumentforbusinessestablishmentsthatpreferredtocompletethesurveyinthoseformats.


Figure E‐1. Subindustries included in the availability analysis

Industry Code Industry Description Industry Code Industry Description

Architecture and Engineering

Architectural and design services Engineering (Continued)07810000 Landscape counseling and planning 87119909 Professional engineer07810201 Landscape architects 87120101 Architectural engineering

07810202 Landscape counseling services 87480400 Systems analysis and engineering consulting services07810203 Landscape planning services73890600 Interior design services Environmental and planning services73890602 Interior designer 17990801 Asbestos removal and encapsulation73891800 Design services 49590302 Environmental cleanup services73891801 Design, commercial and industrial 87110101 Pollution control engineering87120000 Architectural services 87119906 Energy conservation engineering

87449904 Environmental remediation

Construction management 87480200 Urban planning and consulting services87419902 Construction management 87480201 City planning87420402 Construction project management consultant 87480204 Traffic consultant

87489904 Energy conservation consultant

Engineering 87489905 Environmental consultant87110000 Engineering services 89990703 Natural resource preservation service87110202 Mechanical engineering87110400 Construction and civil engineering Surveying and mapmaking87110401 Building construction consultant 73890802 Photogrammatic mapping87110402 Civil engineering 87130000 Surveying services87110404 Structural engineering 87139901 Photogrammetric engineering87119903 Consulting engineer 87139902 Ariel digital imaging

ConstructionBuilding construction Building construction (Continued)15210104 Repairing fire damage, single‐family houses 15420103 Commercial and office buildings, renovation and repair15220104 Dormitory construction15410000 Industrial buildings and warehouses Concrete work15419903 Food products manufacturing or packing plant construction 17710000 Concrete work15419905 Industrial buildings, new construction15419909 Renovation, remodeling and repairs: industrial buidings Concrete, asphalt, and related products15419912 Warehouse construction 14230000 Crushed and broken granite15420000 Nonresidential construction 14420000 Construction sand and gravel15420100 Commercial and office building contractors 29510000 Asphalt paving mixtures and blocks15420101 Commercial and office building, new construction 32730000 Ready‐mixed concrete15420102 Commercial and office buildings, prefabricated erection 50320503 Concrete building products


Figure E‐1. Subindustries included in the availability analysis (Continued)


Construction (Continued)

Concrete, asphalt, and related products Heavy construction (Continued)

50329901 Aggregate 16119901 General contractor, highway and street construction

16119902 Highway and street maintenanceDam and marine construction 16220000 Bridge, tunnel, and elevated highway construction16290100 Dams, waterways, docks, and other marine construction 16229901 Bridge construction

16290110 Marine construction 16229902 Highway construction, elevated

16290113 Waterway construction 16239905 Pumping station construction16290000 Heavy construction

Electrical work 17710301 Blacktop (asphalt) work07820208 Electrical work 17990302 Service station equipment installation, maint., an

07829903 Telephone and telephone equipment installation 17999935 Petroleum storage tank installation, underground07829902 Fire detection and burglar alarm systems specialization07820206 General electrical contractor Masonry, drywall and stonework

17410000 Masonry and other stonework

Elevators, conveyors, and moving walkways35350000 Conveyors and conveying equipment Mechanical contracting services

17110000 Plumbing, heating, air‐conditioningExcavation 17110200 Plumbing contractors07839902 Removal services, bush and tree 17110301 Fire sprinkler system installation16110203 Grading 17110302 Irrigation sprinkler system installation16290105 Drainage system construction 17110400 Heating and air conditioning contractors16290106 Dredging contractor 17110401 Mechanical contractor16290108 Irrigation system construction 17110405 Warm air heating and air conditioning contractor16290400 Land preparation construction 76239902 Refrigeration repair service16290403 Rock removal16299903 Land clearing contractor Other construction services17940000 Excavation work 17810000 Water well drilling17949901 Excavation and grading, building construction 17990000 Special trade contractors

17950000 Wrecking and demolition work 17990103 Playground construction and equipment installation17959902 Demolition, buildings and other structures 17990105 Swimming pool construction17990900 Building site preparation 17990501 Cleaning building exteriors

49710000 Irrigation systems 49590102 Sweeping service: road, airport, parking lot, etc.

Heavy construction Painting and weatherproofing16110000 Highway and street construction 17210000 Painting and paper hanging16110200 Surfacing and paving 17210200 Commercial painting16110204 Highway and street paving contractor 17210303 Pavement marking contractor




Construction (Continued)Painting and weatherproofing (Continued) Trucking, hauling and storage

17990200 Coating, caulking, and weather, water, and fireproofing 42120000 Local trucking, without storage17990201 Caulking (construction) 42120401 Furniture moving, local: without storage17990209 Waterproofing 42129905 Dump truck haulage

42130000 Trucking, except localRoofing, siding, and flooring contractors 42139903 Contract haulers17520000 Floor laying and floor work 42149901 Furniture moving and storage, local

17610000 Roofing, siding, and sheetmetal work 42259903 Warehousing, self storage17610103 Roofing contractor17619903 Sheet metal work Water, sewer, and utility lines

17719903 Flooring contractor 16230000 Water, sewer, and utility lines16230200 Communication line and transmission tower construction

Structural metals 16230203 Telephone and communication line construction50510200 Iron and steel (ferrous) products 16230300 Water and sewer line construction

50510216 Steel 16230302 Sewer line construction16230303 Water main construction

Structural steel construction 16239906 Underground utilities contractor15419910 Steel building construction 76990403 Sewer cleaning and rodding17999932 Welding on site

76920000 Welding repair

Goods and Services

Automobiles Automobiles (Continued)37110000 Motor vehicles and car bodies 55719906 Motorcycles

37130102 Truck bodies (motor vehicles) 75140000 Passenger car rental50120000 Automobiles and other motor vehicles 75149902 Rent‐a‐car service50120100 Automotive brokers 75150000 Passenger car leasing

50120101 Automobile auction50120102 Automobiles Cleaning and janitorial services

50120403 Motorcycles 72119901 Laundry collecting and distributing outlet55110000 New and used car dealers 72170000 Carpet and upholstery cleaning

55119901 Automobiles, new and used 72190000 Laundry and garment services55119903 Trucks, tractors, and trailers: new and used 73420200 Pest control services

55210000 Used car dealers 73420202 Exterminating and fumigating55219902 Automobiles, used cars only 73420203 Pest control in structures55710000 Motorcycle dealers 73420204 Termite control




Goods and Services (Continued)

Cleaning and janitorial services (Continued) Electrical equipment and supplies (Continued)

73490104 Janitorial service, contract basis 50630000 Electrical apparatus and equipment

73499902 Cleaning service, industrial or commercial 50630206 Electrical supplies

28420000 Polishes and sanitation goods 50630600 Batteries

50870300 Cleaning and maintenance equipment and supplies 50650000 Electronic parts and equipment

50870304 Janitors' supplies 50650300 Electronic parts

59999910 Electronic parts and equipment

Communications equipment

36610102 Communication headgear, telephone Engineering equipment and precision instruments

50650200 Communication equipment 38290000 Measuring and controlling devices

59990601 Audio‐visual equipment and supplies

Equipment maintenance and repair

Computer systems and services 76992206 Hydraulic equipment repair

73780000 Computer maintenance and repair 76992501 Elevators: inspection, service, and repair

73789902 Computer peripheral equipment repair and maintenanceEvent coordination and promotion

Computers and peripherals 72990502 Party planning service50450000 Computers, peripherals, and software 73890300 Advertising, promotional, and trade show services

50459903 Computer software 73890301 Convention and show services50459905 Computers 73890308 Promoters of shows and exhibitions57340000 Computer and software stores 79220105 Entertainment promotion

79991007 Festival operation

Dining and recreational services58129903 Caterers Fencing, guardrails and signs58129906 Contract food services 17999912 Fence construction59419905 Playground equipment73890305 Exhibit construction by industrial contractors Food products, wholesale and retail82999914 Self‐defense and athletic instruction 51469902 Fish, fresh

Doors, windows, and glasswork Furniture17510201 Garage door, installation or erection 25310000 Public building and related furniture17510202 Window and door (prefabricated) installation 50210000 Furniture17930000 Glass and glazing work 50210100 Office and public building furniture52110203 Garage doors, sale and installation 50210106 Office furniture

57129904 Office furniture

Electrical equipment and supplies 57129905 Outdoor and garden furniture36990000 Electrical equipment and supplies





Heavy construction equipment Lawn and garden supplies

35310000 Construction machinery 01810105 Plants, potted: growing of

35310604 Cranes 51930202 Nursery stock

50820000 Construction and mining machinery 52610000 Retail nurseries and garden stores

50820300 General construction machinery and equipment

50820303 Cranes, construction Office equipment and supplies

50820304 Excavating machinery and equipment 50440000 Office equipment

50840400 Petroleum industry machinery 51110000 Printing and writing paper

73530000 Heavy construction equipment rental 51119902 Printing paper

73539901 Cranes and aerial lift equipment, rental or leasing 51120000 Stationery and office supplies

73590000 Equipment rental and leasing 51129902 Business forms

59991402 Photocopy machines

Industrial chemicals51910102 Fertilizer and fertilizer materials Other construction materials

32819901 Granite, cut and shaped

Industrial equipment and machinery 34440000 Sheet metalwork35610000 Pumps and pumping equipment 50230401 Carpets35630000 Air and gas compressors 50310000 Lumber, plywood, and millwork35630102 Vacuum pumps, except laboratory 50310100 Building materials, exterior50840000 Industrial machinery and equipment 50319904 Lumber: rough, dressed, and finished

50840800 Materials handling machinery 50320000 Brick, stone, and related material50850000 Industrial supplies 50329902 Brick, except refractory50850300 Valves, pistons, and fittings 50510107 Wire50870000 Service establishment equipment 50859916 Welding supplies76990500 Industrial equipment services 51980100 Paints

52110000 Lumber and other building materials

Landscape services 52110200 Door and window products07810200 Landscape services 52310200 Paint and painting supplies07820000 Lawn and garden services 52510000 Hardware stores07820203 Lawn care services 57130000 Floor covering stores07829903 Landscape contractors 57139901 Carpets52610100 Lawn and garden equipment

Other goodsLawn and garden equipment 36690100 Emergency alarms52610100 Lawn and garden equipment 39930000 Signs and advertising specialties





Other goods (Continued) Parking services

50460306 Restaurant equipment and supplies 72991105 Valet parking

50479901 Industrial safety devices: first aid kits and masks 75210000 Automobile parking

50499903 Law enforcement equipment and supplies 75210101 Parking lots

50519903 Foundry products

50640203 Radios Petroleum and petroleum products

50659903 Security control equipment and systems 59830000 Fuel oil dealers

50780200 Refrigerated beverage dispensers

50849905 Hydraulic systems equipment and supplies Plumbing and HVAC supplies50849912 Safety equipment 35850300 Heating equipment, complete50870500 Firefighting equipment 50740000 Plumbing and hydronic heating supplies50879913 Vending machines and supplies 50740300 Plumbing fittings and supplies50990300 Safety equipment and supplies 50740304 Plumbing and heating valves51720200 Engine fuels and oils 50750000 Warm air heating and air conditioning51720203 Gasoline 50750100 Air conditioning and ventilation equipment and supplies51990102 Art goods 50750102 Air filters55510400 Marine supplies and equipment 50780000 Refrigeration equipment and supplies57220000 Household appliance stores57310000 Radio, television, and electronic stores Printing, copying, and mailing59410501 Skin diving, scuba equipment and supplies 27520000 Commercial printing, lithographic59990101 Alarm signal systems 27520101 Offset printing59990200 Art and architectural supplies 27590000 Commercial printing73590600 Party supplies rental services 73310000 Direct mail advertising services73599904 Portable toilet rental 73319903 Mailing list compilers73599910 Tent and tarpaulin rental 73319904 Mailing service73829903 Protective devices, security 73319906 Mailing list brokers73891503 Sign painting and lettering shop 73891600 Mailing and messenger services76991103 Locksmith shop 73891603 Mailbox rental and related service

73899958 Subscription fulfillment services: magazine, newspaper, etc.

Other services37320000 Boatbuilding and repairing Security guard services47259903 Tours, conducted 73810100 Guard services48130201 Internet connectivity services 73810105 Security guard service56990402 Custom tailor87340000 Testing laboratories Security services89990000 Services 73820000 Security systems services





Traffic signals and street lighting Vehicle parts and supplies (Continued)

36480000 Lighting equipment 37140000 Motor vehicle parts and accessories

50130100 Automotive supplies and parts

Transit services 50150100 Automotive parts and supplies, used

41199902 Ambulance service 50840602 Engines and parts, diesel

41420000 Bus charter service, except local 50850501 Bearings

55310000 Auto and home supply stores

Uniforms, apparels, and linen 55310102 Automotive accessories

56510000 Family clothing stores 55310107 Truck equipment and parts

56610000 Shoe stores 55999905 Utility trailers

56990100 Uniforms and work clothing

56990102 Uniforms Vehicle repair

56990103 Work clothing 75389902 General truck repair

72130000 Linen supply 75490300 Towing services

72130204 Uniform supply

Waste and recycling servicesVehicle parts and supplies 49530200 Refuse collection and disposal services37130100 Truck bodies and parts

Other Professional Services

Advertising, marketing and public relations Business and market research services (Continued)73110000 Advertising agencies 87320107 Opinion research73119901 Advertising consultant 87320109 Survey service: marketing, location, etc.73190100 Transit advertising services 87410000 Management services73360000 Commercial art and graphic design 87410100 Business management87420300 Marketing consulting services 87420000 Management consulting services87430000 Public relations services 87420103 Industrial hygiene consultant87439902 Promotion service 87420104 Maintenance management consultant87439903 Public relations and publicity 87420500 Business planning and organizing services87439904 Sales promotion 87429902 Business management consultant

87429904 General management consultant

Business and market research services 87480302 Telecommunications consultant42269902 Document and office records storage73229902 Collection agency, except real estate Educational services73890000 Business services 82439903 Software training, computer73899953 Translation services 89990600 Lecturing services87320105 Market analysis or research



Source: BBC Research & Consulting.


Other Professional Services (Continued)

Finance and accounting Human resources and job training services (Continued)

87210200 Accounting services, except auditing 87480100 Testing services

87219901 Billing and bookkeeping service

IT and data services

Health and medical services 73710000 Custom computer programming services

80110400 Psychiatrists and psychoanalysts 73710101 Computer software systems analysis and design, custom

80110402 Psychiatrist 73710301 Computer software development

80490400 Psychologist, psychotherapist and hypnotist 73730000 Computer integrated systems design

80710000 Medical laboratories 73730200 Systems integration services

80829902 Visiting nurse service 73730201 Local area network (LAN) systems integrator

73740104 Service bureau, computer

Health and medical services (Continued) 73790200 Computer related consulting services83610100 Residential care for children 73790201 Computer hardware requirements analysis83610400 Geriatric residential care 73790202 Data processing consultant87420404 Hospital and health services consultant 73790203 Online services technology consultants89991003 Psychological consultant

Real estate managementHuman resources and job training services 65120100 Commercial and industrial building operation73610000 Employment agencies73610100 Placement agencies Scientific and medical research73610101 Executive placement 87319902 Medical research, commercial73610102 Labor contractors (employment agency)73630000 Help supply services Testing services73630103 Temporary help service 73890200 Inspection and testing services87420206 Training and development consultant


3. Verification of for‐profit business status.Thesurveyoraskedwhethertheorganizationwasafor‐profitbusinessasopposedtoagovernmentornonprofitorganization(QuestionA2).Surveyorscontinuedthesurveywithbusinessesthatresponded“yes”tothatquestion.

4. Confirmation of main lines of business.BusinessesconfirmedtheirmainlinesofbusinessaccordingtoD&B(QuestionA3a).IfD&B’sworkspecializationcodeswereincorrect,businessesdescribedtheirmainlinesofbusiness(QuestionsA3b).Businesseswerealsoaskedtoidentifytheothertypesofworkthattheyperformbeyondtheirmainlinesofbusiness(QuestionA3c).BBCcodedinformationonmainlinesofbusinessandadditionaltypesofworkintoappropriate8‐digitD&Bworkspecializationcodes.

5. Locations and affiliations.Thesurveyoraskedbusinessownersormanagersiftheirbusinesseshadotherlocations(QuestionA4).Thestudyteamalsoaskedbusinessownersormanagerswheretheirbusinesseswereheadquartered(QuestionA5andA6)andiftheirbusinessesweresubsidiariesoraffiliatesofotherbusinesses(QuestionsA7andA8).

6. Past bids or work with government agencies and private sector organizations.Thesurveyoraskedaboutbidsandworkonpastgovernmentandprivatesectorcontracts.CRIaskedthosequestionsinconnectionwithprimecontractsandsubcontracts(QuestionsB1andB2).2

7. Interest in future work.Thesurveyoraskedaboutbusinesses’interestinfutureworkwiththeCity.CRIaskedthosequestionsinconnectionwithbothprimecontractsandsubcontracts(QuestionsB3andB4).3

8. Geographic area.ThesurveyoraskedwhetherbusinessesperformworkorservecustomersinVirginiaBeach(QuestionC1).

9. Year established.Thesurveyoraskedbusinessestoidentifytheapproximateyearinwhichtheywereestablished(QuestionD1).

10. Largest contracts.Thestudyteamaskedbusinessesaboutthevalueofthelargestcontractsonwhichtheyhadbidorhadbeenawardedduringthepastfiveyears.(QuestionsD2andD3).

11. Ownership.Thesurveyoraskedwhetherbusinesseswereatleast51percentownedandcontrolledbyminorities,women,veterans,orindividualswithdisabilities(QuestionsE1throughE5).Ifbusinessesindicatedthattheywereminority‐owned,theywerealsoaskedabouttherace/ethnicityofthebusiness’sownership(QuestionE3).Thestudyteamconfirmedthatinformationthroughseveralotherdatasources,including:

TheCity’sdirectoryofSmall,Woman,andMinority‐owned(SWaM)businesses;

Cityvendordata;

Cityreview;and

InformationfromD&Bandothersources.

2Neithergoodssuppliersnorservicesproviderswereaskedquestionsaboutsubcontractwork.

3Neithergoodssuppliersnorservicesproviderswereaskedquestionsaboutsubcontractwork.


12. Business revenue.Thesurveyoraskedseveralquestionsaboutbusinesses’sizeintermsoftheirrevenues.Forbusinesseswithmultiplelocations,thebusinessrevenuesectionofthesurveyalsoaskedabouttheirrevenuesandnumberofemployeesacrossalllocations(QuestionsF1throughF3).

13. Potential barriers in the marketplace.Thesurveyoraskedanopen‐endedquestionconcerninggeneralinsightsaboutconditionsinthelocalmarketplace(QuestionG1).Inaddition,thesurveyincludedaquestionaskingwhetherrespondentswouldbewillingtoparticipateinafollow‐upinterviewaboutconditionsinthelocalmarketplace(QuestionG2).

14. Contact information.Thesurveyconcludedwithquestionsabouttheparticipant’snameandpositionwiththeorganization(QuestionsH1andH2).

D. Survey Execution

CRIconductedallsurveysin2018.CRImadeuptoeightattemptsduringdifferenttimesofthedayandondifferentdaysoftheweektosuccessfullyreacheachbusinessestablishment.CRIattemptedtosurveyacompanyrepresentativesuchastheowner,manager,orotherofficerwhocouldprovideaccurateanddetailedresponsestosurveyquestions.

Establishments that the study team successfully contacted.FigureE‐2presentsthedispositionofthe7,013businessestablishmentsthatthestudyteamattemptedtocontactforavailabilitysurveysandhowthatnumberresultedinthe5,868establishmentsthatthestudyteamwasabletosuccessfullycontact.

Non‐working or wrong phone numbers.SomeofthebusinesslistingsthatthestudyteampurchasedfromD&BandthatCRIattemptedtocontactwere:

Duplicatephonenumbers(77listings);

Non‐workingphonenumbers(880listings);or

Wrongnumbersforthedesiredbusinesses(188listings).

Somenon‐workingphonenumbersandwrongnumbersresultedfrombusinessesgoingoutofbusinessorchangingtheirnamesandphonenumbersbetweenthetimethatD&Blistedthemandthetimethatthestudyteamattemptedtocontactthem.

Working phone numbers.AsshowninFigureE‐2,therewere5,868businessestablishmentswithworkingphonenumbersthatCRIattemptedtocontact.CRIwasunsuccessfulincontactingmanyofthosebusinessesforvariousreasons:

CRIcouldnotreachanyoneaftereightattemptsatdifferenttimesofthedayandondifferentdaysoftheweekfor2,280establishments.

CRIcouldnotreacharesponsiblestaffmemberafterfiveattemptsatdifferenttimesofthedayondifferentdaysoftheweekfor345establishments.

CRIcouldnotconducttheavailabilitysurveyduetolanguagebarriersforfiveestablishments.


Figure E‐2. Disposition of attempts to survey business establishments

Note:

Availability analysis results are based on a representative, unbiased, and statistically‐valid subset of the relevant business population.

Source:

2017‐18 availability surveys.

Thus,CRIwasabletosuccessfullycontact3,238businessestablishments.

Establishments included in the availability database. FigureE‐3presentsthedispositionofthe3,238businessestablishmentsthatCRIsuccessfullycontactedandhowthatnumberresultedinthe659businessesthatthestudyteamincludedintheavailabilitydatabaseandthatthestudyteamconsideredpotentiallyavailableforCitywork.

Figure E‐3. Disposition of successfully contacted business establishments

Note:

Availability analysis results are based on a representative, unbiased, and statistically‐valid subset of the relevant business population.

Source:

2017‐18 availability surveys.

Establishments not interested in discussing availability for City work.Ofthe3,238businessestablishmentsthatthestudyteamsuccessfullycontacted,1,986establishmentswerenotinterestedindiscussingtheiravailabilityforCitywork.Inaddition,BBCsenthardcopyfaxore‐mailavailabilitysurveysuponrequestbutdidnotreceivecompletedsurveysfrom207establishments.Intotal,1,045successfully‐contactedbusinessestablishmentscompletedavailabilitysurveys.

Establishments available for City work.ThestudyteamdeemedonlyaportionofthebusinessestablishmentsthatcompletedavailabilitysurveysasavailablefortheprimecontractsandsubcontractsthattheCityawardedduringthestudyperiod.Thestudyteamexcludedmanyofthebusinessestablishmentsthatcompletedsurveysfromtheavailabilitydatabaseforvariousreasons:

Beginning list 7,013

Less duplicate phone numbers 77

Less non‐working phone numbers 880

Less wrong number/business 188

Unique business listings with working phone numbers 5,868

Less no answer 2,280

Less could not reach responsible staff member 345

Less language barrier 5

Establishments successfully contacted 3,238

Number of

Establishments

Establishments successfully contacted 3,238

Less establishments not interested in discussing availability for VB work 1,986

Less unreturned fax/email surveys 207

Establishments that completed surveys 1,045

Less not a for‐profit business 39

Less line of work outside of study scope 128

Less no interest in future work 159

Less established after study period 25

Less multiple establishments 35

Establishments potentially available for entity work 659

Number of

Establishments


BBCexcluded39establishmentsthatindicatedthattheirorganizationswerenotfor‐profitbusinesses.

BBCexcluded128establishmentsthatindicatedthattheirmainlinesofbusinesswereoutsideofthestudyscope.

BBCexcluded159establishmentsthatreportednotbeinginterestedineitherprimecontractingorsubcontractingopportunitieswiththeCity.

BBCexcluded25establishmentsthatreportedthattheirbusinesseswereestablishedafterthestudyperiod.

Thirty‐fiveestablishmentsrepresenteddifferentlocationsofthesamebusinesses.Priortoanalyzingresults,BBCcombinedresponsesfrommultiplelocationsofthesamebusinessintoasingledatarecord.

Afterthoseexclusions,BBCcompiledadatabaseof659businessesthatwereconsideredpotentiallyavailableforCitywork.

Coding responses from multi‐location businesses.Responsesfromdifferentlocationsofthesamebusinesswerecombinedintoasinglesummarydatarecordaccordingtoseveralrules:

Ifanyoftheestablishmentsreportedbiddingorworkingonacontractwithinaparticularsubindustry,thestudyteamconsideredthebusinesstohavebidorworkedonacontractinthatsubindustry.

Thestudyteamcombinedthedifferentrolesofwork(i.e.,primecontractororsubcontractor)thatestablishmentsofthesamebusinessreportedintoasingleresponsecorrespondingtotheappropriatesubindustry.Forexample,ifoneestablishmentreportedthatitworksasaprimecontractorandanotherestablishmentreportedthatitworksasasubcontractor,thenthestudyteamconsideredthebusinessasavailableforbothprimecontractsandsubcontractswithintherelevantsubindustry.4

BBCconsideredthelargestcontractthatanyestablishmentsofthesamebusinessreportedhavingbidorworkedonasthebusiness’relativecapacity(i.e.,thelargestcontractforwhichthebusinesscouldbeconsideredavailable).

BBCdeterminedthenumberofemployeesforbusinessesbycalculatingthemodeorthemeanofresponsesfromitsestablishments.

BBCcodedbusinessesasminority‐owned,woman‐owned,veteran‐owned,orservice‐disabledveteran‐ownedifthemajorityofitsestablishmentsreportedsuchstatus.

E. Additional Considerations

BBCmadeseveraladditionalconsiderationsrelatedtoitsapproachtomeasuringavailabilitytoensurethatestimatesoftheavailabilityofbusinessesforCityworkwereaccurateandappropriate.

4Neithergoodsandcommoditiessuppliersnorotherservicesproviderswereaskedquestionsaboutsubcontractwork.


Not providing a count of all businesses available for City work.ThepurposeoftheavailabilityanalysiswastoprovidepreciseandrepresentativeestimatesofthepercentageofCitycontractingdollarsforwhichsmalldisadvantagedbusinessesareready,willing,andabletoperform.TheavailabilityanalysisdidnotprovideacomprehensivelistingofeverybusinessthatcouldbeavailableforCityworkandshouldnotbeusedinthatway.FederalcourtshaveapprovedBBC’sapproachtomeasuringavailability.Inaddition,federalregulationsaroundminority‐andwoman‐ownedbusinessprogramsrecommendsimilarapproachestomeasuringavailabilityfororganizationsimplementingbusinessassistanceprograms.

Not basing the availability analysis on certification directories, prequalification lists, or bidders lists. Federalguidancearoundmeasuringtheavailabilityofminority‐andwoman‐ownedbusinessesrecommendsdividingthenumberofminority‐andwoman‐ownedbusinessesinanorganization’scertificationdirectorybythetotalnumberofbusinessesinthemarketplace(forexample,asreportedinUnitedStatesCensusdata).Asanotheroption,organizationscouldusealistofprequalifiedbusinessesorabidderslisttoestimatetheavailabilityofminority‐andwoman‐ownedbusinessesforitsprimecontractsandsubcontracts.TheprimaryreasonwhyBBCrejectedsuchapproacheswhenmeasuringtheavailabilityofbusinessesforCityworkisthatdividingasimpleheadcountofcertifiedbusinessesbythetotalnumberofbusinessesdoesnotaccountforbusinesscharacteristicsthatarecrucialtoestimatingavailabilityaccurately.ThemethodologythatBBCusedinthisstudytakesacustomcensusapproachtomeasuringavailabilityandaddsseverallayersofrefinementtoasimpleheadcountapproach.Forexample,theavailabilitysurveysthatthestudyteamconductedprovideddataonqualifications,relativecapacity,andinterestinCityworkforeachbusiness,whichallowedBBCtotakeamoredetailedapproachtomeasuringavailability.Courtcasesinvolvingimplementationsofminority‐andwoman‐ownedbusinessprogramshaveapprovedtheuseofsuchapproachestomeasuringavailability.

Selection of specific subindustries.Definingsubindustriesbasedonspecificworkspecializationcodes(e.g.,D&Bindustrycodes)isastandardstepinanalyzingbusinessesinaneconomicsector.Governmentandprivatesectoreconomicdataaretypicallyorganizedaccordingtosuchcodes.Aswithanysuchresearch,therearelimitationswhenchoosingspecificD&Bworkspecializationcodestodefinesetsofestablishmentstobesurveyed.Forexample,itwasnotpossibleforBBCtoincludeallbusinessespossiblydoingworkinrelevantindustrieswithoutconductingsurveyswithnearlyeverybusinesslocatedintherelevantgeographicmarketarea.Inaddition,someindustrycodesareimpreciseandoverlapwithotherbusinessspecialties.Somebusinessesspanseveraltypesofwork,evenataverydetailedlevelofspecificity.Thatoverlapcanmakeclassifyingbusinessesintosinglemainlinesofbusinessdifficultandimprecise.Whenthestudyteamaskedbusinessownersandmanagerstoidentifytheirmainlinesofbusiness,theyoftengavebroadanswers.Forthoseandotherreasons,BBCcollapsedworkspecializationcodesintobroadersubindustriestomoreaccuratelyclassifybusinessesintheavailabilitydatabase.

Non‐response. Ananalysisofnon‐responseconsiderswhetherbusinessesthatwerenotsuccessfullysurveyedaresystematicallydifferentfromthosethatweresuccessfullysurveyedandincludedinthefinaldataset.Thereareopportunitiesfornon‐responsebiasinanysurveyeffort.Thestudyteamconsideredthepotentialfornon‐responsedueto:


Researchsponsorship;

Workspecializations;and

Languagebarriers.

Research sponsorship.SurveyorsintroducedthemselvesbyidentifyingtheCityasthesurveysponsor,becausebusinessesmaybelesslikelytoanswersomewhatsensitivebusinessquestionsifthesurveyorwasunabletoidentifythesponsor.Inpastsurveyefforts—particularlythoserelatedtoavailabilityanalyses—BBChasfoundthatidentifyingthesponsorsubstantiallyincreasesresponserates.

Work specializations.Businessesinhighlymobilefields,suchastrucking,maybemoredifficulttoreachforavailabilitysurveysthanbusinessesmorelikelytoworkoutoffixedoffices(e.g.,engineeringbusinesses).Thatassertionsuggeststhatresponseratesmaydifferbyworkspecialization.Simplycountingallsurveyedbusinessesacrossworkspecializationstoestimatetheavailabilityofsmalldisadvantagedbusinesseswouldleadtoestimatesthatwerebiasedinfavorofbusinessesthatcouldbeeasilycontactedbytelephone.However,workspecializationasapotentialsourceofnon‐responsebiasintheBBCavailabilityanalysisisminimized,becausetheavailabilityanalysisexaminesbusinesseswithinparticularworkfieldsbeforecalculatingoverallavailabilityestimates.Thus,thepotentialforbusinessesinhighlymobilefieldstobelesslikelytocompleteasurveyislessimportant,becausethestudyteamcalculatedavailabilityestimateswithinthosefieldsbeforecombiningtheminadollar‐weightedfashionwithavailabilityestimatesfromotherfields.Workspecializationwouldbeagreatersourceofnon‐responsebiasifparticularsubsetsofbusinesseswithinaparticularfieldwerelesslikelythanothersubsetstobeeasilycontactedbytelephone.

Response reliability.Businessownersandmanagerswereaskedquestionsthatmaybedifficulttoanswerincludingquestionsabouttheirrevenues.Forthatreason,thestudyteamcollectedcorrespondingD&Binformationfortheirestablishmentsandaskedrespondentstoconfirmthatinformationorprovidemoreaccurateestimates.Further,respondentswerenottypicallyaskedtogiveabsolutefiguresfordifficultquestionssuchasrevenueandcapacity.Rather,theyweregivenrangesofdollarfigures.BBCexploredthereliabilityofsurveyresponsesinanumberofways.

Certification lists.BBCrevieweddatafromtheavailabilitysurveysinlightofinformationfromothersourcessuchasvendorinformationthatthestudyteamcollectedfromtheCity.Forexample,certificationdatabasesincludedataontherace/ethnicityandgenderoftheownersofcertifiedbusinesses.Thestudyteamcomparedsurveyresponsesconcerningbusinessownershipwithsuchinformation.

Contract data.BBCexaminedCitycontractdatatofurtherexplorethelargestcontractsandsubcontractsawardedtobusinessesthatparticipatedintheavailabilitysurveysforthepurposesofassessingcapacity.BBCcomparedsurveyresponsesaboutthelargestcontractsthatbusinesseswonduringthepastfiveyearswithactualCitycontractdata.

City review.TheCityreviewedcontractandvendordatathatthestudyteamcollectedandcompiledaspartoftheavailabilityanalysisandprovidedfeedbackregardingitsaccuracy.


Availability Survey Instrument [Construction]

Hello. My name is [interviewer name] from Customer Research International. We are calling on behalf of the City of Virginia Beach. This is not a sales call. The City is conducting a survey to develop a list of companies interested in providing construction‐related services to the City of Virginia Beach. The survey should take between 10 and 15 minutes to complete. Who can I speak with to get the information that we need from your firm?

[AFTERREACHINGANAPPROPRIATELYSENIORSTAFFMEMBER,THEINTERVIEWERSHOULDREINTRODUCETHEPURPOSEOFTHESURVEYANDBEGINWITHQUESTIONS.]

[IFASKED,THEINFORMATIONDEVELOPEDINTHESEINTERVIEWSWILLADDTOEXISTINGDATAONCOMPANIESINTERESTEDINWORKINGWITHTHECITY]

X1. I have a few basic questions about your company and the type of work you do. Can you

confirm that this is [firm name]?

1=RIGHT COMPANY – SKIP TO A1

2=NOT RIGHT COMPANY

99=REFUSE TO GIVE INFORMATION – TERMINATE

Y1. What is the name of this firm?

1=VERBATIM

Y2. Can you give me any information about [new firm name]?

1=Yes, same owner doing business under a different name – SKIP TO Y4

2=Yes, can give information about named company

3=Company bought/sold/changed ownership – SKIP TO Y4

98=No, does not have information – TERMINATE

99=Refused to give information – TERMINATE

Y3. Can you give me the complete address or city for [new firm name]?

[NOTE TO INTERVIEWER ‐ RECORD IN THE FOLLOWING FORMAT]:

. STREET ADDRESS

. CITY

. STATE

. ZIP

1=VERBATIM


Y4. Can you give me the name of the owner or manager of [new firm name]?

[ENTER UPDATED NAME]

1=VERBATIM

Y5. Can I have a telephone number for him/her?

[ENTER UPDATED PHONE]

1=VERBATIM

Y6. Do you work for this new company?

1=YES

2=NO – TERMINATE

A2. Let me confirm that [firm name/new firm name] is a for‐profit business, as opposed to a non‐profit organization, a foundation, or a government office. Is that correct?

1=Yes, a business

2=No, other – TERMINATE

A3a. Let me also confirm what kind of business this is. The information we have from Dun &

Bradstreet indicates that your main line of business is [SIC Code description]. Is that correct?

[NOTE TO INTERVIEWER – IF ASKED, DUN & BRADSTREET OR D&B, IS A COMPANY THAT COMPILES

INFORMATION ON BUSINESSES THROUGHOUT THE COUNTRY]

1=Yes – SKIP TO A3c

2=No

98=(DON'T KNOW)

99=(REFUSED)

A3b. What would you say is the main line of business at [firm name/new firm name]?

[NOTE TO INTERVIEWER – IF RESPONDENT INDICATES THAT FIRM’S MAIN LINE OF BUSINESS IS

“GENERAL CONSTRUCTION” OR GENERAL CONTRACTOR,” PROBE TO FIND OUT IF MAIN LINE OF

BUSINESS IS CLOSER TO BUILDING CONSTRUCTION OR HIGHWAY AND ROAD CONSTRUCTION.]

1=VERBATIM

A3c. What other types of work, if any, does your business perform?

[ENTER VERBATIM RESPONSE]

1=VERBATIM


A4. Is this the sole location for your business, or do you have offices in other locations?

1=Sole location – SKIP TO A7

2=Have other locations

98=(DON'T KNOW)

99=(REFUSED)

A5. Is this location the headquarters for your business, or is your business headquartered at

another location?

[CONFIRM LOCATION FOR ALL PARTICIPANTS]

1=Headquartered here – SKIP TO A7

2=Headquartered at another location

98=(DON'T KNOW)

99=(REFUSED)

A6. What is the city and state of your business’ headquarters?

(ENTER VERBATIM CITY, ST)

1=VERBATIM

A7. Is your company a subsidiary or affiliate of another firm?

1=Independent – SKIP TO B1

2=Subsidiary or affiliate of another firm

98=(DON'T KNOW) – SKIP TO B1

99=(REFUSED) – SKIP TO B1

A8. What is the name of your parent company?

1=VERBATIM

98=(DON'T KNOW)

99=(REFUSED)


B1. Next, I have a few questions about your company’s role in doing work or providing

materials related to construction, maintenance, or design. During the past five years, has your

company submitted a bid or received an award for any part of a contract as either a prime

contractor or subcontractor?

[NOTE TO INTERVIEWER: THIS INCLUDES PUBLIC OR PRIVATE SECTOR WORK OR BIDS]

1=Yes

2=No – SKIP TO B3

98=(DON'T KNOW) – SKIP TO B3

99=(REFUSED) – SKIP TO B3

B2. Were those bids or awards to work as a prime contractor, a subcontractor, a

trucker/hauler, a supplier, or any other roles?

[MULTIPUNCH]

1=Prime contractor

2=Subcontractor

3=Trucker/hauler

4=Supplier (or manufacturer)

5= Other ‐ SPECIFY ___________________

98=(DON'T KNOW)

99=(REFUSED)

B3. Please think about future construction, maintenance, or design‐related work as you

answer the following few questions. Is your company interested in working with the City of

Virginia Beach as a prime contractor?

1=Yes

2=No

98=(DON'T KNOW)

99=(REFUSED)

B4. Is your company interested in working with the City of Virginia Beach as a subcontractor,

trucker/hauler, or supplier?

1=Yes

2=No

98=(DON'T KNOW)

99=(REFUSED)


C1. Now I’m interested in the geographic area in which your company serves customers. Is

your company able to do work or serve customers in Virginia Beach?

1=Yes

2=No

98=(DON'T KNOW)

99=(REFUSED)

D1. About what year was your firm established?

1=NUMERIC (1600‐2018)

9998 = (DON'T KNOW)

9999 = (REFUSED)

D2. What was the largest prime contract that your company bid on or was awarded during the

past five years in either the public sector or private sector? This includes contracts not yet

complete.

[NOTE TO INTERVIEWER ‐ READ CATEGORIES IF NECESSARY]

1=$100,000 or less

2=More than $100,000 to $250,000

3=More than $250,000 to $500,000

4=More than $500,000 to $1 million

5=More than $1 million to $2 million






11= More than $100 million to $200 million

12=$200 million or greater

97=(NONE)

98=(DON'T KNOW)

99=(REFUSED)/(NO PRIME BIDS)


D3. What was the largest subcontract or supply contract that your company bid on or was

awarded during the past five years in either the public sector or private sector? This includes

contracts not yet complete.

[NOTE TO INTERVIEWER ‐ READ CATEGORIES IF NECESSARY]

1=$100,000 or less

2=More than $100,000 to $250,000

3=More than $250,000 to $500,000

4=More than $500,000 to $1 million







11= More than $100 million to $200 million

12=$200 million or greater

97=(NONE)

98=(DON'T KNOW)

99=(REFUSED)/(NO SUB BIDS)

E1. My next questions are about the ownership of the business. A business is defined as

woman‐owned if more than half—that is, 51 percent or more—of the ownership and control

is by women. By this definition, is [firm name / new firm name] a woman‐owned business?

1=Yes

2=No

98=(DON'T KNOW)

99=(REFUSED)

E2. A business is defined as minority‐owned if more than half—that is, 51 percent or more—of

the ownership and control is by Black American, Asian American, Hispanic American, or Native

American. By this definition, is [firm name || new firm name] a minority‐owned business?

1=Yes

2=No – SKIP TO E4

98=(DON'T KNOW) – SKIP TO E4

99=(REFUSED) – SKIP TO E4


E3. Would you say that the minority group ownership of your company is mostly Black

American, Asian‐Pacific American, Subcontinent Asian American, Hispanic American, or Native

American?

1=Black American

2=Asian Pacific American (persons whose origins are from Japan, China, Taiwan, Korea, Burma (Myanmar), Vietnam, Laos, Cambodia(Kampuchea),Thailand, Malaysia, Indonesia, the Philippines, Brunei, Samoa, Guam, the U.S. Trust Territories of the Pacific Islands (Republic of Palau), the Common‐wealth of the Northern Marianas Islands, Macao, Fiji, Tonga, Kirbati, Juvalu, Nauru, Federated States of Micronesia, or Hong Kong)

3=Hispanic American (persons of Mexican, Puerto Rican, Cuban, Dominican, Central or South American, or other Spanish or Portuguese culture or origin, regardless of race)

4=Native American (American Indians, Eskimos, Aleuts, or Native Hawaiians)

5=Subcontinent Asian American (persons whose Origins are from India, Pakistan, Bangladesh, Bhutan, the Maldives Islands, Nepal or Sri Lanka)

6=(OTHER ‐ SPECIFY) ___________________

98=(DON'T KNOW)

99=(REFUSED)

E4. A business is defined as veteran‐owned if more than half—that is, 51 percent or more—of

the ownership and control is by a veteran of the U.S. military. By this definition, is [firm name

|| new firm name] a veteran‐owned business?

[NOTE TO INTERVIEWER – U.S. MILITARY SERVICES INCLUDE THE U.S. ARMY, AIR FORCE, NAVY,

MARINES, OR COAST GUARD.]

1=Yes

2=No – SKIP TO F1

98=(DON'T KNOW) – SKIP TO F1

99=(REFUSED) – SKIP TO F1

E5. Does that veteran owner have a physical or mental disability that resulted directly from

their service in the U.S. military?

1=Yes

2=No

98=(DON'T KNOW)

99=(REFUSED)


F1. Just considering your location, Dun & Bradstreet lists the average annual gross revenue of

your company to be [dollar amount]. Is that an accurate estimate for your company’s average

annual gross revenue over the last three years?

1=Yes – SKIP TO F3

2=No

98=(DON'T KNOW) – SKIP TO F3

99=(REFUSED) – SKIP TO F3

F2. What was the average annual gross revenue of your company over the last three years,

just considering your location? Would you say . . .

[READ LIST]

1=Less than $750,000

2=$750,000 ‐ $5.5 Million

3=$5.6 Million ‐ $7.4 Million

4=$7.5 Million ‐ $11 Million





9=$24.1 Million or more

98= (DON'T KNOW)

99= (REFUSED)

F3. [ONLY IF A4 = 2] Roughly, what was the average annual gross revenue of your company,

for all of your locations over the last three years? Would you say . . .

[READ LIST]

1=Less than $750,000

2=$750,000 ‐ $5.5 Million







9=$24.1 Million or more

98= (DON'T KNOW)

G1. We're interested in whether your company has experienced barriers or difficulties in

Virginia Beach associated with starting or expanding a business in your industry or with

obtaining work. Do you have any thoughts to share on these topics?

1=VERBATIM [PROBE FOR COMPLETE THOUGHTS]

97=(NOTHING/NONE/NO COMMENTS)

98=(DON'T KNOW)

99=(REFUSED)


G2. Would you be willing to participate in a follow‐up interview about any of those issues?

1=Yes

2=No

98=(DON'T KNOW)

99=(REFUSED)

H1. Just a few last questions. What is your name?

1=VERBATIM

H2. What is your position at [firm name / new firm name]?

1=Receptionist

2=Owner

3=Manager

4=CFO

5=CEO

6=Assistant to Owner/CEO

7=Sales manager

8=Office manager

9=President

9=(OTHER ‐ SPECIFY) _______________

99=(REFUSED)

Thank you very much for your participation. If you have any questions or concerns, please contact Lavera Tolentino, Minority Business Coordinator at the City of Virginia Beach at telephone 757‐385‐4246.

APPENDIX F.

Disparity Tables

Figure F-1.

Table Time period Contract area Contract role Goals

F-2 07/01/12 - 06/30/17 All industries Prime contracts and subcontracts N/A Goals and no goalsF-3 07/01/12 - 06/30/15 All industries Prime contracts and subcontracts N/A Goals and no goalsF-4 07/01/15 - 06/30/17 All industries Prime contracts and subcontracts N/A Goals and no goalsF-5 07/01/12 - 06/30/17 Construction Prime contracts and subcontracts N/A Goals and no goalsF-6 07/01/12 - 06/30/17 Architecture and engineering Prime contracts and subcontracts N/A Goals and no goalsF-7 07/01/12 - 06/30/17 Other professional services Prime contracts and subcontracts N/A Goals and no goalsF-8 07/01/12 - 06/30/17 Goods and services Prime contracts and subcontracts N/A Goals and no goalsF-9 07/01/12 - 06/30/17 All industries Prime contracts N/A Goals and no goalsF-10 07/01/12 - 06/30/17 All industries Subcontracts N/A Goals and no goalsF-11 07/01/12 - 06/30/17 All industries Prime contracts and subcontracts N/A SWaM GoalsF-12 07/01/12 - 06/30/17 All industries Prime contracts and subcontracts N/A No goalsF-13 07/01/12 - 06/30/17 All industries Prime contracts Large Goals and no goalsF-14 07/01/12 - 06/30/17 All industries Prime contracts Small Goals and no goals

CharacteristicsContract Size

Figure F-2.Time period: 07/01/2012 - 06/30/2017Contract area: All industriesContract role: Prime contracts and subcontractsContract size: N/AGoals: Goals and no goals

(1) All businesses 26,322 $1,176,459 $1,176,459

(2) Minority and woman-owned businesses 7,429 $221,800 $221,800 18.9 25.2 -6.4 74.7

(3) Non-Hispanic white woman-owned 3,838 $95,902 $95,902 8.2 13.3 -5.1 61.5

(4) Minority-owned 3,591 $125,898 $125,898 10.7 12.0 -1.3 89.4

(5) Asian American-owned 339 $65,543 $66,330 5.6 0.8 4.9 200+

(6) Black American-owned 3,033 $52,414 $53,043 4.5 8.1 -3.6 55.9

(7) Hispanic American-owned 105 $6,219 $6,293 0.5 2.7 -2.2 19.5

(8) Native American-owned 42 $229 $231 0.0 0.4 -0.4 5.1

(9) Unknown minority-owned 72 $1,495

(10) SWAM-certified 3,061 $101,744 $101,744 8.6

(11) Non-Hispanic white woman-owned SWaM 2,181 $73,118 $73,589 6.3

(12) Minority-owned SWAM 858 $27,974 $28,155 2.4

(13) Asian American-owned SWAM 222 $2,246 $2,301 0.2

(14) Black American-owned SWAM 514 $21,706 $22,240 1.9

(15) Hispanic American-owned SWAM 78 $3,432 $3,516 0.3

(16) Native American-owned SWAM 17 $95 $98 0.0

(17) Unknown minority-owned SWAM 27 $496

Note: Numbers are rounded to the nearest thousand dollars or tenth of one percent. “Woman-owned” refers to non-Hispanic white woman-owned businesses.

Unknown minority-owned businesses and unknown MWBEs were allocated to minority and MWBE subgroups proportional to the known total dollars of those groups. For example, if total dollars of Black American-owned businesses (column b, row 5) accounted for 25 percent of total minority-owned business dollars (column b, row 4), then 25 percent of column b, row 10 would be added to column b, row 5 and the sum would be shown in column c, row 5.

Source: BBC Research & Consulting Disparity Analysis.

Numbers are rounded to the nearest thousand dollars or tenth of 1 percent. “Woman-owned” refers to non-Hispanic white woman-owned businesses.*Unknown minority-owned businesses and unknown minority-owned MWBEs were allocated to minority and MWBE subgroups proportional to the known total dollars of those groups. For example, if totaldollars of Black American-owned businesses (column b, row 6) accounted for 25 percent of total minority-owned business dollars (column b, row 4), then 25 percent of column b, row 10 would be added tocolumn b, row 6 and the sum would be shown in column c, row 6. In addition, column c was adjusted for the sampling weights for the contract elements that local agencies awarded.

(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group

Number ofcontractelements

dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)

Utilization -Availability


Utilization


(1) All businesses 16,584 $746,121 $746,121



(4) Minority-owned 2,175 $74,108 $74,108 9.9 10.4 -0.5 95.1






(10) SWAM-certified 1,819 $64,875 $64,875 8.7












(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization


(1) All businesses 9,738 $430,338 $430,338



(4) Minority-owned 1,416 $51,791 $51,791 12.0 14.6 -2.6 82.3





(9) Unknown minority-owned 16 $250

(10) SWAM-certified 1,242 $36,869 $36,869 8.6

(11) Non-Hispanic white woman-owned SWaM 852 $24,813 $24,910 5.8


(13) Asian American-owned SWAM 87 $739 $748 0.2









(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

Figure F-5.Time period: 07/01/2012 - 06/30/2017Contract area: ConstructionContract role: Prime contracts and subcontractsContract size: N/AGoals: Goals and no goals

(1) All businesses 3,445 $525,979 $525,979

(2) Minority and woman-owned businesses 886 $61,948 $61,948 11.8 19.8 -8.0 59.5

(3) Non-Hispanic white woman-owned 485 $48,793 $48,793 9.3 9.6 -0.3 96.4

(4) Minority-owned 401 $13,155 $13,155 2.5 10.2 -7.7 24.6

(5) Asian American-owned 59 $1,061 $1,074 0.2 1.6 -1.4 12.8

(6) Black American-owned 257 $6,676 $6,755 1.3 5.7 -4.4 22.5


(8) Native American-owned 37 $207 $209 0.0 0.0 0.0 117.0


(10) SWAM-certified 703 $54,671 $54,671 10.4












(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

Figure F-6.Time period: 07/01/2012 - 06/30/2017Contract area: Architecture and engineeringContract role: Prime contracts and subcontractsContract size: N/AGoals: Goals and no goals

(1) All businesses 1,377 $153,581 $153,581



(4) Minority-owned 38 $2,112 $2,112 1.4 14.0 -12.7 9.8

(5) Asian American-owned 6 $529 $568 0.4 0.0 0.3 200+


(7) Hispanic American-owned 1 $151 $162 0.1 3.1 -3.0 3.4



(10) SWAM-certified 431 $14,436 $14,436 9.4




(14) Black American-owned SWAM 19 $819 $920 0.6

(15) Hispanic American-owned SWAM 1 $151 $170 0.1







(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

Figure F-7.Time period: 07/01/2012 - 06/30/2017Contract area: Other professional servicesContract role: Prime contracts and subcontractsContract size: N/AGoals: Goals and no goals

(1) All businesses 5,725 $196,174 $196,174

(2) Minority and woman-owned businesses 2,785 $99,362 $99,362 50.6 26.3 24.4 192.6


(4) Minority-owned 2,531 $93,611 $93,611 47.7 16.0 31.7 200+


(6) Black American-owned 2,441 $29,937 $29,937 15.3 10.4 4.9 146.6




(10) SWAM-certified 146 $3,904 $3,904 2.0












(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

Figure F-8.Time period: 07/01/2012 - 06/30/2017Contract area: Goods and servicesContract role: Prime contracts and subcontractsContract size: N/AGoals: Goals and no goals

(1) All businesses 15,775 $300,725 $300,725



(4) Minority-owned 621 $17,020 $17,020 5.7 11.4 -5.8 49.5






(10) SWAM-certified 1,781 $28,732 $28,732 9.6












(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

Figure F-9.Time period: 07/01/2012 - 06/30/2017Contract area: All industriesContract role: Prime contractsContract size: N/AGoals: Goals and no goals

(1) All businesses 24,701 $1,048,903 $1,048,903



(4) Minority-owned 3,494 $121,103 $121,103 11.5 11.9 -0.4 96.8






(10) SWAM-certified 2,732 $77,448 $77,448 7.4












(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

Figure F-10.Time period: 07/01/2012 - 06/30/2017Contract area: All industriesContract role: SubcontractsContract size: N/AGoals: Goals and no goals

(1) All businesses 1,621 $127,556 $127,556



(4) Minority-owned 97 $4,795 $4,795 3.8 12.4 -8.6 30.4

(5) Asian American-owned 16 $486 $522 0.4 1.0 -0.6 41.9





(10) SWAM-certified 329 $24,296 $24,296 19.0




(14) Black American-owned SWAM 39 $830 $1,031 0.8








(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

Figure F-11.Time period: 07/01/2012 - 06/30/2017Contract area: All industriesContract role: Prime contracts and subcontractsContract size: N/AGoals: SWaM Goals

(1) All businesses 1,429 $468,254 $468,254



(4) Minority-owned 79 $9,768 $9,768 2.1 10.4 -8.3 20.1

(5) Asian American-owned 13 $445 $453 0.1 1.1 -1.1 8.4





(10) SWAM-certified 289 $48,019 $48,019 10.3












(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

Figure F-12.Time period: 07/01/2012 - 06/30/2017Contract area: All industriesContract role: Prime contracts and subcontractsContract size: N/AGoals: No goals

(1) All businesses 24,893 $708,205 $708,205



(4) Minority-owned 3,512 $116,130 $116,130 16.4 13.0 3.4 125.7






(10) SWAM-certified 2,772 $53,725 $53,725 7.6












(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

Figure F-13.Time period: 07/01/2012 - 06/30/2017Contract area: All industriesContract role: Prime contractsContract size: LargeGoals: Goals and no goals

(1) All businesses 1,121 $828,846 $828,846



(4) Minority-owned 85 $101,752 $101,752 12.3 10.6 1.7 115.7






(10) SWAM-certified 66 $45,193 $45,193 5.5












(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

Figure F-14.Time period: 07/01/2012 - 06/30/2017Contract area: All industriesContract role: Prime contractsContract size: SmallGoals: Goals and no goals

(1) All businesses 23,580 $220,057 $220,057



(4) Minority-owned 3,409 $19,351 $19,351 8.8 16.9 -8.1 52.1

(5) Asian American-owned 309 $2,523 $2,618 1.2 1.4 -0.2 85.5





(10) SWAM-certified 2,666 $32,255 $32,255 14.7












(c)

total dollars

(a) (b)

(thousands)*

Estimated

Business Group


dollarsTotal

(thousands)

(e)(d) (g)

Disparityindex

(f)



Utilization

2018 disparity study - virginia beach, virginia...final report january 2019 2018 city of virginia...

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