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1 CHAPTER 1 Overview of Legal Standards for Disadvantaged Business Enterprise Programs The project to develop the National Model Disparity Study the focus on evidentiary issues. A more detailed discussion, and Request for Proposals for state departments of transporta- with case and other citations, is provided in Appendix C to tion (state DOTs) seeks to address the evidentiary tests created the report. by the federal courts that govern the Disadvantaged Business Enterprise (DBE) Program for federally assisted transporta- tion contracts.1 In general, race- and gender-based govern- Strict Scrutiny Standard ment actions are subject to high levels of scrutiny: a program In City of Richmond v. J. A. Croson Co.,3 the United States must be based on strong evidence and designed to be narrow Supreme Court established the constitutional contours of per- in its remedies. missible race-based public contracting programs. Strict scrutiny It is in response to these strictures that disparity studies of requires that a government entity prove both its "compelling discrimination in the market for public contracts were first interest" in remedying identified race discrimination based conducted. It is therefore crucial to canvass the state of the upon a "strong basis in evidence," and that the measures law to develop national guidelines for the examination of ev- adopted to remedy that discrimination are "narrowly tailored" idence of discrimination in the market for federally assisted to that evidence. transportation contracts. In Croson, the Court struck down Richmond's Minority This Model Study Project is designed to assist state DOTs Business Enterprise Plan that required prime contractors in meeting the regulatory goal-setting requirements in con- awarded city construction contracts to subcontract at least 30% formance with strict constitutional scrutiny. Where state of the project to minority-owned business enterprises (MBEs). DOT DBE programs have been challenged, a disparity or In affirming the court of appeals' determination that the plan availability study has survived judicial review. It should pro- was unconstitutional, the Court held: vide evidence relevant to the two steps in annual overall goal setting--estimating the base figure of DBE availability and [A] state or local subdivision . . . has the authority to eradicate the expected DBE utilization "but for" the effects of the DBE the effects of private discrimination within its own legislative ju- program and discrimination--as well as data relevant to risdiction. . . . [Richmond] can use its spending powers to rem- contract-level goal setting.2 Specifically, we were directed to edy private discrimination, if it identifies that discrimination "prepare an analysis of the federal DBE goal-setting regula- with the particularity required by the Fourteenth Amend- tions and case law in all federal circuits considering challenges ment. . . . [I]f the City could show that it had essentially become a "passive participant" in a system of racial exclusion . . . [it] to the constitutionality of the U.S. Disadvantaged Business could take affirmative steps to dismantle such a system. Program. Identify common themes and key distinguishing factors in state DOT DBE programs that influenced the court Having found that Richmond had not presented evidence to ruling on constitutionality." support its compelling interest in remedying discrimination-- What follows is a summary of the case law and regulations the first prong of strict scrutiny--the Court went on to make relevant to the development of a disparity study model, with two observations about the narrowness of the remedy--the 1 49 C.F.R. Part 26. 2 3 See infra at pp. 3839. 488 U.S. 469 (1989).