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NATIONAL NCHRP REPORT 644 COOPERATIVE HIGHWAY RESEARCH PROGRAM Guidelines for Conducting a Disparity and Availability Study for the Federal DBE Program
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TRANSPORTATION RESEARCH BOARD 2009 EXECUTIVE COMMITTEE* OFFICERS CHAIR: Adib K. Kanafani, Cahill Professor of Civil Engineering, University of California, Berkeley VICE CHAIR: Michael R. Morris, Director of Transportation, North Central Texas Council of Governments, Arlington EXECUTIVE DIRECTOR: Robert E. Skinner, Jr., Transportation Research Board MEMBERS J. Barry Barker, Executive Director, Transit Authority of River City, Louisville, KY Allen D. Biehler, Secretary, Pennsylvania DOT, Harrisburg Larry L. Brown, Sr., Executive Director, Mississippi DOT, Jackson Deborah H. Butler, Executive Vice President, Planning, and CIO, Norfolk Southern Corporation, Norfolk, VA William A.V. Clark, Professor, Department of Geography, University of California, Los Angeles David S. Ekern, Commissioner, Virginia DOT, Richmond Nicholas J. Garber, Henry L. Kinnier Professor, Department of Civil Engineering, University of Virginia, Charlottesville Jeffrey W. Hamiel, Executive Director, Metropolitan Airports Commission, Minneapolis, MN Edward A. (Ned) Helme, President, Center for Clean Air Policy, Washington, DC Randell H. Iwasaki, Director, California DOT, Sacramento Susan Martinovich, Director, Nevada DOT, Carson City Debra L. Miller, Secretary, Kansas DOT, Topeka Neil J. Pedersen, Administrator, Maryland State Highway Administration, Baltimore Pete K. Rahn, Director, Missouri DOT, Jefferson City Sandra Rosenbloom, Professor of Planning, University of Arizona, Tucson Tracy L. Rosser, Vice President, Regional General Manager, Wal-Mart Stores, Inc., Mandeville, LA Rosa Clausell Rountree, CEOGeneral Manager, Transroute International Canada Services, Inc., Pitt Meadows, BC Steven T. Scalzo, Chief Operating Officer, Marine Resources Group, Seattle, WA Henry G. (Gerry) Schwartz, Jr., Chairman (retired), Jacobs/Sverdrup Civil, Inc., St. Louis, MO C. Michael Walton, Ernest H. Cockrell Centennial Chair in Engineering, University of Texas, Austin Linda S. Watson, CEO, LYNXCentral Florida Regional Transportation Authority, Orlando Steve Williams, Chairman and CEO, Maverick Transportation, Inc., Little Rock, AR EX OFFICIO MEMBERS Thad Allen (Adm., U.S. Coast Guard), Commandant, U.S. Coast Guard, Washington, DC Peter H. Appel, Administrator, Research and Innovative Technology Administration, U.S.DOT J. Randolph Babbitt, Administrator, Federal Aviation Administration, U.S.DOT Rebecca M. Brewster, President and COO, American Transportation Research Institute, Smyrna, GA George Bugliarello, President Emeritus and University Professor, Polytechnic Institute of New York University, Brooklyn; Foreign Secretary, National Academy of Engineering, Washington, DC James E. Caponiti, Acting Deputy Administrator, Maritime Administration, U.S.DOT Cynthia Douglass, Acting Deputy Administrator, Pipeline and Hazardous Materials Safety Administration, U.S.DOT LeRoy Gishi, Chief, Division of Transportation, Bureau of Indian Affairs, U.S. Department of the Interior, Washington, DC Edward R. Hamberger, President and CEO, Association of American Railroads, Washington, DC John C. Horsley, Executive Director, American Association of State Highway and Transportation Officials, Washington, DC Rose A. McMurry, Acting Deputy Administrator, Federal Motor Carrier Safety Administration, U.S.DOT Ronald Medford, Acting Deputy Administrator, National Highway Traffic Safety Administration, U.S.DOT Victor M. Mendez, Administrator, Federal Highway Administration, U.S.DOT William W. Millar, President, American Public Transportation Association, Washington, DC Peter M. Rogoff, Administrator, Federal Transit Administration, U.S.DOT Joseph C. Szabo, Administrator, Federal Railroad Administration, U.S.DOT Polly Trottenberg, Assistant Secretary for Transportation Policy, U.S.DOT Robert L. Van Antwerp (Lt. Gen., U.S. Army), Chief of Engineers and Commanding General, U.S. Army Corps of Engineers, Washington, DC *Membership as of October 2009.
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NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM NCHRP REPORT 644 Guidelines for Conducting a Disparity and Availability Study for the Federal DBE Program Jon Wainwright NERA ECONOMIC CONSULTING Austin, TX Colette Holt COLETTE HOLT & ASSOCIATES Chicago, IL Subject Areas Transportation Law Research sponsored by the American Association of State Highway and Transportation Officials in cooperation with the Federal Highway Administration TRANSPORTATION RESEARCH BOARD WASHINGTON, D.C. 2010 www.TRB.org
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NATIONAL COOPERATIVE HIGHWAY NCHRP REPORT 644 RESEARCH PROGRAM Systematic, well-designed research provides the most effective Project 20-76 approach to the solution of many problems facing highway ISSN 0077-5614 administrators and engineers. Often, highway problems are of local ISBN 978-0-309-11815-6 interest and can best be studied by highway departments individually Library of Congress Control Number 2009942701 or in cooperation with their state universities and others. However, the © 2010 National Academy of Sciences. All rights reserved. accelerating growth of highway transportation develops increasingly complex problems of wide interest to highway authorities. These problems are best studied through a coordinated program of COPYRIGHT INFORMATION cooperative research. Authors herein are responsible for the authenticity of their materials and for obtaining In recognition of these needs, the highway administrators of the written permissions from publishers or persons who own the copyright to any previously American Association of State Highway and Transportation Officials published or copyrighted material used herein. initiated in 1962 an objective national highway research program Cooperative Research Programs (CRP) grants permission to reproduce material in this employing modern scientific techniques. This program is supported on publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, a continuing basis by funds from participating member states of the FMCSA, FTA, or Transit Development Corporation endorsement of a particular product, Association and it receives the full cooperation and support of the method, or practice. It is expected that those reproducing the material in this document for Federal Highway Administration, United States Department of educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission Transportation. from CRP. The Transportation Research Board of the National Academies was requested by the Association to administer the research program because of the Board's recognized objectivity and understanding of NOTICE modern research practices. The Board is uniquely suited for this purpose as it maintains an extensive committee structure from which The project that is the subject of this report was a part of the National Cooperative Highway Research Program conducted by the Transportation Research Board with the approval of authorities on any highway transportation subject may be drawn; it the Governing Board of the National Research Council. Such approval reflects the possesses avenues of communications and cooperation with federal, Governing Board's judgment that the program concerned is of national importance and state and local governmental agencies, universities, and industry; its appropriate with respect to both the purposes and resources of the National Research Council. relationship to the National Research Council is an insurance of The members of the technical committee selected to monitor this project and to review this objectivity; it maintains a full-time research correlation staff of report were chosen for recognized scholarly competence and with due consideration for the specialists in highway transportation matters to bring the findings of balance of disciplines appropriate to the project. The opinions and conclusions expressed research directly to those who are in a position to use them. or implied are those of the research agency that performed the research, and, while they have been accepted as appropriate by the technical committee, they are not necessarily those of The program is developed on the basis of research needs identified the Transportation Research Board, the National Research Council, the American by chief administrators of the highway and transportation departments Association of State Highway and Transportation Officials, or the Federal Highway and by committees of AASHTO. Each year, specific areas of research Administration, U.S. Department of Transportation. needs to be included in the program are proposed to the National Each report is reviewed and accepted for publication by the technical committee according Research Council and the Board by the American Association of State to procedures established and monitored by the Transportation Research Board Executive Committee and the Governing Board of the National Research Council. Highway and Transportation Officials. Research projects to fulfill these needs are defined by the Board, and qualified research agencies are The Transportation Research Board of the National Academies, the National Research Council, the Federal Highway Administration, the American Association of State Highway selected from those that have submitted proposals. Administration and and Transportation Officials, and the individual states participating in the National surveillance of research contracts are the responsibilities of the National Cooperative Highway Research Program do not endorse products or manufacturers. Trade Research Council and the Transportation Research Board. or manufacturers' names appear herein solely because they are considered essential to the object of this report. The needs for highway research are many, and the National Cooperative Highway Research Program can make significant contributions to the solution of highway transportation problems of mutual concern to many responsible groups. The program, however, is intended to complement rather than to substitute for or duplicate other highway research programs. Published reports of the NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at: http://www.national-academies.org/trb/bookstore Printed in the United States of America
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COOPERATIVE RESEARCH PROGRAMS CRP STAFF FOR NCHRP REPORT 644 Christopher W. Jenks, Director, Cooperative Research Programs Crawford F. Jencks, Deputy Director, Cooperative Research Programs Christopher J. Hedges, Senior Program Officer Eileen P. Delaney, Director of Publications Hilary Freer, Senior Editor NCHRP PROJECT 20-76 PANEL Area of Special Projects Sally A. Howard, Office of the Governor - Kansas, Topeka, KS (Chair) Greg Diehl, Colorado DOT, Denver, CO Jeffery W. Brown, Alabama DOT, Montgomery, AL Olivia Fonseca, California DOT, Sacramento, CA Mark G. Kelsey, City of Columbus, Columbus, OH Robert J. Shea, Pennsylvania DOT, Harrisburg, PA Lester Woods, Jr., Missouri DOT, Jefferson City, MO Candace J. Groudine, FHWA Liaison Martine A. Micozzi, TRB Liaison AUTHOR ACKNOWLEDGMENTS The research reported herein was performed under NCHRP Project 20-76. NERA Economic Consult- ing was the contractor and Colette Holt & Associates was the subcontractor. NERA Vice President Dr. Jon Wainwright was project director and co-Principal Investigator. Attorney Colette Holt of Colette Holt & Associates was co-Principal Investigator. The other authors of this report are Kim Stewart, M.S., Research Assistant at NERA, and J. Wesley Stewart, A.A., Research Assistant at NERA. The work was performed under the general supervision of Dr. Wainwright and Attorney Holt.
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FOREWORD By Christopher J. Hedges Staff Officer Transportation Research Board This report presents guidelines for state departments of transportation (DOTs) on how to conduct effective and legally defensible disparity and availability studies to meet the requirements of the Disadvantaged Business Enterprise program for federally funded proj- ects. It includes guidance to assist DOTs in determining when and if a disparity or availabil- ity study is recommended, a model scope of work that can be used in a request for propos- als, and detailed recommendations on how to design and implement disparity and availability studies. The report will serve as an invaluable resource for legal and contracting staff in all state transportation agencies. Since 1987, the U.S. DOT has required that grantees implement a Disadvantaged Busi- ness Enterprise (DBE) program based on regulations found in 49 C.F.R Parts 23 and 26. The most current regulations, contained at 49 C.F.R Part 26, provide the states with an annual DBE goal-setting methodology. State DOTs must set DBE goals based on demonstrable evi- dence of the availability of "ready, willing and able" DBEs. The regulations state that a dis- parity study can be used to demonstrate availability, but does not require its use. A ruling in the Ninth Circuit Court of Appeals, however, has made the use of a valid disparity study a legal requirement to meet the standards in that Circuit. The ruling in the Ninth Circuit as well as those in other Circuits demonstrates a trend toward utilizing a disparity study to jus- tify race-conscious elements of a DOT DBE program in response to constitutional chal- lenges. Thus, state DOTs, especially those in the Ninth Circuit, will be conducting dispar- ity studies at considerable expense. There are no guidelines or standards provided to states by the U.S. DOT on the elements of an effective disparity and availability study. Because each state is unique, a broad, over- arching framework is needed to guide the development and conduct of disparity and avail- ability studies. Under NCHRP Project 20-76, a research team led by NERA Economic Consulting reviewed current DOT goal-setting methods, conducted a thorough review of existing dis- parity and availability studies, and analyzed relevant court decisions. Current studies were compared according to key elements: definition and use of geographic and product mar- kets, development of availability estimates, analysis of contracting disparities, analyses of economy-wide disparities, and collection of anecdotal evidence. A model scope of work was developed that identified major elements to be included and offered tips for a successful process. The report includes appendices on the importance of collecting comprehensive subcontract data, understanding the concept and definition of "capacity," and legal stan- dards for race-conscious government contracting programs.
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CONTENTS 1 Chapter 1 Overview of Legal Standards for Disadvantaged Business Enterprise Programs 1 Strict Scrutiny Standard 2 Intermediate Scrutiny 2 Strict Scrutiny as Applied to the Disadvantaged Business Enterprise Program 7 Implications and Effects of Western States 8 TRB Model Disparity Study Project 9 Chapter 2 Designing Defensible DBE Programs 9 Introduction 12 Guidelines for Conducting Disparity and Availability Studies 16 Review of Existing Studies 25 Current State DOT Goal-Setting Methods 29 Chapter 3 Model Disparity Study 29 Determination of Relevant Geographic Market Area 29 Determination of Relevant Product Market 30 Estimation of DBE Availability 48 State DOT Utilization Analyses 48 State DOT Disparity Analyses 51 Economy-Wide Disparity Analyses for the Relevant Markets 51 Anecdotal Analyses 54 Chapter 4 Study Resource Issues 54 Sources of Funds 54 Management of the Study Process 55 In-House Studies versus Outside Consultants 55 Availability Studies versus Disparity Studies 55 Collection of Subcontracting Data 56 Subrecipient Data 56 Examples of Costs for Other Analytical Elements 56 Multi-Jurisdiction Studies 57 Multi-Agency State Studies 57 Model Study Scope of Work 58 Tips for a Successful DBE Disparity or Availability Study RFP Process 60 Appendix A Importance of Comprehensive Subcontract Data Collection 60 Introduction 60 Non-DBE Subcontract Data Is Just as Important as DBE Subcontract Data 62 Subcontract Data Allow Detailed Industry Statistics 62 Methods for Collecting Subcontract Data in Anticipation of Future Studies 63 Methods for Addressing Missing Subcontract Data for Current Studies
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65 Appendix B Understanding "Capacity" 68 Appendix C Legal Standards for Race-Conscious Government Contracting Programs 68 Strict Scrutiny Standard 79 Strict Scrutiny as Applied to the Disadvantaged Business Enterprise Program 82 State DOTs' Implementation of Part 26 Must be Narrowly Tailored 84 Judicial Review of DBE Goal Setting Under Part 26 88 Additional Evidence of Discrimination 92 Additional Elements of Narrowly Tailored DBE Goal Setting 94 Implications of Western States 96 Appendix D Glossary 99 References 99 Cases (Alphabetical) 100 Cases (By Circuit) 101 Statutes 101 Regulations 101 General References 102 Disparity and Availability Studies