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16 ommended method for measuring DBE availability. Finally, 2008)--as well as Georgia DOT (GDOT, 2005), IDOT (2004), we incorporate these elements into a Model Scope of Work to the State of Maryland (MD, 2006), Mn/DOT (2005), Mis- be used in future RFPs, along with other advice for improving souri DOT (MoDOT, 2004), the State of New Jersey (NJ, the disparity/availability study RFP process. Appendix A, as 2005), NCDOT (2004), Tennessee DOT (TDOT, 2007), and well as other subsections in the report, provides detailed infor- Virginia DOT (VDOT, 2004). mation on the type and quality of data necessary to support a Seven states currently have studies that are more than 5 years high-quality disparity or availability study. Appendix D pro- old: CDOT (2001), Florida DOT (FDOT, 1999), the State of vides a glossary of abbreviations and technical terms such as Louisiana (LA, 1990; LA, 1991);60 NDOR (2000); New Mexico "endogenous," and "multivariate regression," and their mean- DOT (NMDOT, 1995); the State of Ohio (OH, 2001a; OH, ing in disparity and availability studies. Appendix C is a full dis- 2001b);61 and South Carolina DOT (SCDOT, 1995). cussion of the legal issues and judicial decisions. Of the 14 state DOTs with current studies,62 only 863 used them, in whole or in part, as the basis for DBE goals for FFYs 2006, 2007, and/or 2008.64 CDOT used its previous study to Review of Existing Studies set goals for FFY 2006 and used the City of Denver's local State DOTs That Have Performed Disparity study to set goals for FFYs 2007 and 2008,65 and it is currently or Availability Studies conducting a new study (CDOT, ongoing). GDOT made explicit use of its disparity study in recommending DBE goals For this report, we contacted each state DOT and the Dis- for FFYs 2006, 2007, and 2008 to the State Transportation trict of Columbia and requested its annual DBE goal submis- Board. However, the board adopted lower goals, without sions for FFYs 2006, 2007, and 2008.58 We also asked whether explanation or modification of the evidentiary basis, in lieu each was currently performing, had recently performed, or of the recommended ones in all three years. ADOT's study had ever performed a disparity or availability study. If an (ADOT, 2009) is being used as the basis for its FFY 2009 DBE agency had recently performed or was currently performing a goals. The remaining five DOTs66 used one of the other meth- study, we also asked for a copy of the RFP for the study. ods from 26.45(c) to set annual goals. Of the 51 state DOTs we contacted, 26 have performed or are currently performing, a disparity or availability study. These 26 states account for 28 studies altogether since two Common Elements in State DOT Disparity states--Colorado (CDOT, ongoing) and North Carolina and Availability Studies (NCDOT, ongoing)--are currently conducting studies to As a prelude to developing the model recommendations, replace earlier ones. Of those 28 studies, 22 were commis- we reviewed 25 of the 28 studies identified above.67 Nineteen sioned directly by the state DOT while the remaining 6 were disparity studies; the remaining five were availability included the DOT as part of a multi-agency statewide study.59 studies. Table 2 lists the 29 studies, the study type (disparity Five state DOTs have studies in progress, as of this writing-- or availability), and the year they were completed. Table 3 Hawaii (HDOT, ongoing) and Montana (MDT, ongoing), shows which studies included which elements. both in the Ninth Circuit; as well as Colorado (CDOT, ongo- ing), New York State (NY, ongoing), and North Carolina (NCDOT, ongoing). 60 Volume 1 of the 1990 State of Louisiana Study was performed by two local uni- Sixteen states have completed studies within the last six years versity professors and completed in 1990. The state subsequently determined additional analysis was needed and commissioned another consultant, D.J. This includes the other seven Ninth Circuit state DOTs-- Miller & Associates, to perform Volume II, which was completed in 1991. Arizona DOT (ADOT, 2009), Caltrans (2007), Idaho Trans- 61Ohio's study was conducted by two consultants. D. J. Miller & Associates con- portation Department (ITD, 2007), Nevada DOT (NDOT, ducted the statistical portion and Mason Tillman Associates, Ltd. conducted the 2007), ODOT (2007), WSDOT (2006), and Alaska Department historical and anecdotal portion. 62 California, Georgia, Idaho, Illinois, Maryland, Minnesota, Missouri, Nevada, of Transportation and Public Facilities (Alaska DOT&PF, New Jersey, North Carolina, Oregon, Tennessee, Virginia, and Washington. 63 California, Illinois, Maryland, Minnesota, Missouri, Nevada, North Carolina, and Washington. 58Few DOTs post their annual DBE goals and supporting goal-setting methods 64 Alaska's study was not completed in time to be used for FFY 2008. 65 on their departmental Web sites. Of those that did, most posted only the latest Colorado DOT used CDOT (2001) to help set goals for FFY 2006. For FFY 2007 submission. In a few cases, despite providing a letter of introduction from TRB, and 2008, it used CCD (2006). 66 we had to file open records/freedom of information requests to obtain the goal- New Jersey, Virginia, Tennessee, Oregon, and Idaho. 67 setting information. In contrast, a handful of state DOTs had a great deal of infor- We were unable to review the remaining three studies. For one that was ongo- mation posted on their Web sites. North Dakota DOT's [NDDOT] Web site, in ing, we were unable to obtain a copy of the winning proposal (NCDOT). Another particular, was excellent. See http://www.dot.nd.gov/divisions/civilrights/dbe study was never publicly released (TDOT), and a copy of one study could not be program.htm. located (FDOT). For the other four ongoing studies (CDOT, Hawaii DOT 59Multi-agency statewide studies in this category not only had to include the state [HDOT], Montana DOT [MDT], and New York State), we obtained copies of the DOT but also had to include federally assisted state DOT contracts. winning proposals and based our review on the contents of those proposals.

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17 Table 2. State DOT disparity and availability studies reviewed. Type of Year State Consultant Study Completed AK D. Wilson Consulting Group, LLC Disparity 2008 AZ MGT of America, Inc. Disparity 2009 CA BBC Research & Consulting Disparity 2007 CO MGT of America, Inc. Disparity 2001 CO D. Wilson Consulting Group, LLC Disparity ongoing FL MGT of America, Inc. Disparity 1999 GA Boston Research Group Disparity 2005 HI NERA Economic Consulting Disparity ongoing ID BBC Research & Consulting Disparity 2007 IL NERA Economic Consulting Availability 2004 LA D.J. Miller & Associates & Lunn/Perry Disparity 1991 MD NERA Economic Consulting Disparity 2006 MN NERA Economic Consulting Availability 2005 MO NERA Economic Consulting Availability 2004 MT D. Wilson Consulting Group, LLC Disparity ongoing NC EuQuant68 Disparity ongoing NC MGT of America, Inc. Disparity 2004 NE MGT of America, Inc. Availability 2000 NJ Mason Tillman Associates, Ltd. Disparity 2005 NM BBC Research & Consulting Disparity 1995 NV BBC Research & Consulting Disparity 2007 NY NERA Economic Consulting Disparity ongoing D.J. Miller & Associates & Mason Tillman OH Disparity 2001 Associates, Ltd. OR MGT of America, Inc. Disparity 2007 SC MGT of America, Inc. Disparity 1995 TN Mason Tillman Associates, Ltd. Disparity 2007 VA MGT of America, Inc. Disparity 2004 WA NERA Economic Consulting Availability 2006 68 EuQuant was formerly Boston Research Group.

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18 The remainder of this section discusses important study isfactory, and guides the court about the legal principles as elements and whether these were included in the studies we applied by the consultant. examined. For ease of reference, Table 3 is presented in three parts, 3a, 3b, and 3c: study elements (a) through (d) are ref- Historical Review. None of the five availability studies erenced in Table 3a, study elements (e) through (i) are refer- (0%) included any review of the history of the impact of dis- enced in Table 3b, and study elements (j) through (m) are crimination on business enterprise. Only two of 20 disparity referenced in Table 3c. studies (10%) included such an historical review, and they The next section introduces our proposed Model Dispar- were also among the oldest studies we examined (LA, 1991; ity Study by examining differences in how certain elements SCDOT, 1995).70 were implemented in these 25 studies and making recom- Many disparity studies in the immediate post-Croson era mendations as to the most constitutionally sound approach included historical reviews, including of the civil rights move- to each study element. ment, and the emergence of black-owned businesses. This approach soon fell out of favor. Nothing in Croson, however, Executive Summary and Introduction. None of the five indicates that specific historical evidence of discrimination availability studies (0%) included an executive summary. All does not have a place as part of a larger mosaic of quantita- (100%) included an introduction. Seventeen of 18 disparity tive and qualitative evidence produced in a disparity study, studies (94%) included an executive summary. Seventeen of only that such studies cannot rest on such evidence in isola- 18 disparity studies (94%) included an introduction.69 Every tion. On the contrary, high-quality historical analyses can study, though, included at least one or the other. provide important context, for both policy makers and jurists, An introductory chapter describing, at a minimum, the for understanding how current disparities arose and the link- objectives of the study and the structure of the study report ori- ages between different types of past discrimination and the ents the reader to the material to follow and is a useful contri- current disadvantaged status of many minority- and women- bution to any study. An executive summary that briefly owned business enterprises. Such information may be solicited describes the data, methods, key findings, and conclusions also as part of the anecdotal interviews with local business own- provides a handy digest of what is typically a lengthy and fairly ers, however, rather than as a stand alone section in a study. complex collection of quantitative and qualitative analyses. The For example, in finding that the City of Chicago had a strong longer the study, the more important an executive summary. basis in evidence to continue its M/WBE program for con- Although an executive summary provides a handy digest, struction contracts, the court reviewed the history of the it is only that--a digest. Should a DBE Program that is sup- "long, slow, painful and continuing process" of eradicating ported by a disparity or availability study ever be challenged, the continuing effects of slavery and discrimination.71 it will be helpful to be able to establish that key decision mak- ers in the organization read and carefully considered the Review of Contracting Policies and Procedures. None entire study--not just the executive summary. of the five availability studies (0%) included a review of con- tracting policies and procedures. Fourteen of 20 disparity Legal Review. Four of the five availability studies (80%) studies (70%) included such a review. included a legal review. Fifteen of 20 disparity studies (75%) A race- and gender-based contracting program must be included a legal review. "narrowly tailored" to any evidence of discrimination in the Since the case law in the field of race-conscious contracting agency's markets. For state DOTs, this is the crucial task for is constantly evolving, it is helpful to include a section in goal setting under Part 26:72 recipients must utilize race- the study that reviews and evaluates relevant case law and neutral means to the maximum feasible extent to meet the shows how the study methods comport with the consultant's overall goal73 and project the portion of the goal that it expects understanding of the law. This section of the study also pro- to meet through race-neutral measures and race-conscious vides helpful information for state DOT attorneys if a pro- subcontracting goals.74 The requirement that recipients utilize gram is challenged. This section allows the state DOT's attor- neys to determine whether the consultant's grasp of strict 70The State of Ohio study (OH, 2001b) also included an historical section. How- scrutiny and the relationship of its methods to the law is sat- ever, it was only two pages in length and did not qualify to be counted in this cat- egory. 71Builders Association of Greater Chicago v. City of Chicago, 298 F. Supp.2d 725, 727 (N.D. Ill. 2003). 69For CDOT (ongoing) and MDT (ongoing), only the proposals were available, 7264 Fed. Reg. 5109 (Feb. 2, 1999) (section 26.45 "is critical to meeting our con- and these did not specify whether introductory chapters or executive summaries stitutional obligation to ensure that the program is narrowly tailored to remedy would be provided. For FDOT (1999), neither the study nor a copy of the pro- the effects of discrimination."). posal could be located. For NCDOT (ongoing), the proposal was not available, 7349 C.F.R. 26.51(a). and for TDOT (2007) the study was never released. 74 49 C.F.R. 26.51(c).

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19 Table 3a. Elements included in state DOT disparity and availability studies. Review Legal of Con- Execu- Histor- Review tracting Intro- tive ical Study Type and Policies duction Sum- Analy- Anal- and mary sis ysis Proce- dures WSDOT (2006) A x x Mn/DOT (2005) A x x MoDOT (2004) A x x IDOT (2004) A x x NDOR (2000) A x HDOT (ongoing) D x x x x NY (ongoing) D x x x x MD (2006) D x x x x ADOT (2009) D x x x x ODOT (2007) D x x x x NCDOT (2004) D x x x VDOT (2004) D x x x x CDOT (2001) D x x FDOT (1999) D n/a n/a n/a n/a n/a SCDOT (1995) D x x x x x Caltrans (2007) D x x ITD (2007) D x x NDOT (2007) D x x x NMDOT (1995) D x x x x OH (2001) D x x LA (1991) D x x x x NJ (2005) D x x x TDOT (2007) D n/a n/a n/a n/a n/a Alaska DOT&PF (2008) D x x x x CDOT (ongoing) D n/a n/a x x MDT (ongoing) D n/a n/a x x GDOT (2005) D x x x NCDOT (ongoing) D n/a n/a n/a n/a n/a Notes: (1) x indicates the relevant study element was present, an empty cell indicates that the element was not present; (2) in the type column, A indicates an availability study, D indicates a disparity study; (3) n/a means the necessary information to make a determination was not available, usually because the study was ongoing and the study proposal was not available or did not address a particular element, or because the study was never released or could not be located.

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20 Table 3b. Elements included in state DOT disparity and availability studies. Geo- Product Avail- Public Public graphic Market ability Sector Sector Study Type Market Defi- Anal- Utiliza- Dispar- Defi- nition ysis tion ity nition WSDOT (2006) A x x x Mn/DOT (2005) A x x x MoDOT (2004) A x x x IDOT (2004) A x x x NDOR (2000) A x x x x HDOT (ongoing) D x x x x x NY (ongoing) D x x x x x MD (2006) D x x x x x ADOT (2009) D x x x x ODOT (2007) D x x x x NCDOT (2004) D x x x x VDOT (2004) D x x x x CDOT (2001) D x x x x x FDOT (1999) D n/a n/a n/a n/a n/a SCDOT (1995) D x x x x Caltrans (2007) D x x x x x ITD (2007) D x x x x x NDOT (2007) D x x x x x NMDOT (1995) D x x x x OH (2001) D x x x x LA (1991) D x x x NJ (2005) D x x x x TDOT (2007) D n/a n/a n/a n/a n/a Alaska DOT&PF (2008) D x x x x CDOT (ongoing) D x n/a x x x MDT (ongoing) D x n/a x x x GDOT (2005) D x x x x x NCDOT (ongoing) D n/a n/a n/a n/a n/a Notes: (1) x indicates the relevant study element was present, an empty cell indicates that the element was not present; (2) in the type column, A indicates an availability study, D indicates a disparity study; (3) n/a means the necessary information to make a determination was not available, usually because the study was ongoing and the study proposal was not available or did not address a particular element, or because the study was never released or could not be located.

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21 Table 3c. Elements included in state DOT disparity and availability studies. Private Anec- Recom- Sector Credit Study Type dotal Evi- menda- Dispar- Access dence tions ities WSDOT (2006) A x x x Mn/DOT (2005) A x x MoDOT (2004) A x x IDOT (2004) A x x NDOR (2000) A x HDOT (ongoing) D x x x x NY (ongoing) D x x x x MD (2006) D x x x x ADOT (2009) D x x x x ODOT (2007) D x x x x NCDOT (2004) D x x x VDOT (2004) D x x CDOT (2001) D x FDOT (1999) D n/a n/a n/a n/a SCDOT (1995) D x x x Caltrans (2007) D x x x x ITD (2007) D x x x x NDOT (2007) D x x x x NMDOT (1995) D x x x OH (2001) D x x x LA (1991) D x x x NJ (2005) D x x TDOT (2007) D n/a n/a n/a n/a Alaska DOT&PF (2008) D x x CDOT (ongoing) D x x x MDT (ongoing) D x x x GDOT (2005) D x x NCDOT (ongoing) D n/a n/a n/a n/a Notes: (1) x indicates the relevant study element was present, an empty cell indicates that the element was not present; (2) in the type column, A indicates an availability study, D indicates a disparity study; (3) n/a means the necessary information to make a determination was not available, usually because the study was ongoing and the study proposal was not available or did not address a particular element, or because the study was never released or could not be located.

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22 race-neutral measures to the maximum feasible extent has mined based on contract and subcontract expenditure data.78 been critical to the unanimous judicial conclusion that the Only eight of 18 disparity studies (44%) included a product regulations are facially narrowly tailored.75 It was also useful market analysis.79 in defending IDOT's DBE Program, where expert testimony Narrow tailoring also applies to product markets. The was admitted to establish that the DBE Program complied extent of discrimination may differ from industry to industry with Part 26 and best practices, as well as the process for just as among geographic locations.80 Documenting the spe- adopting the annual goal. A review of current contracting cific industries that comprise a state DOT's contracting activ- policies and procedures should therefore document whether, ities and the relative importance of each to contract and and to what extent, the state DOT's implementation of the subcontract spending is an important study element. A care- regulations meets the constitutional objective. ful product market definition allows for (1) implementation Conducting this type of review also familiarizes the con- of more narrowly tailored availability estimation methods, sultant with the agency's policies and procedures, which (2) contract-level goal setting, and (3) overall DBE availabil- allows a more effective collection and analysis of anecdotal ity estimates and annual goals that are a weighted average of and other qualitative information regarding the interaction underlying industry-level availability estimates, rather than a of both DBEs and non-DBE with the agency's policies and simple average. The weights used are the proportion of dol- procedures. It further permits recommendations for program lars spent with each industry and allow the overall availabil- improvements that support the success of the state DOT's ity measure to be influenced more heavily by availability in program in leveling its playing field. those industries where more contracting dollars are spent, and less heavily by availability in those industries where rela- Determination of Relevant Geographic Market Area. All tively few contracting dollars are spent. five availability studies (100%) included a section describing how geographic markets were empirically determined based Estimation of DBE Availability. Estimating DBE avail- on contract and subcontract expenditure data. Nineteen of 20 ability is at the core of any disparity or availability study. Mea- disparity studies (95%) included a geographic market analysis. sures of DBE availability are needed in order to set narrowly The importance of establishing the geographic market area tailored goals and to make comparisons to utilization in order stems from Croson: to gauge disparities. All five availability studies (100%) and all 20 disparity studies (100%) included a section describing Finally, the city and the District Court relied on Congress' find- how availability was estimated. ing in connection with the set-aside approved in Fullilove76 that there had been nationwide discrimination in the construction State DOT DBE Utilization. Only one of the five avail- industry. The probative value of these findings for demonstrat- ing the existence of discrimination in Richmond is extremely ability studies (20%) included a section on DBE utilization by limited. By its inclusion of a waiver procedure in the national the state DOT itself. However, all 20 disparity studies (100%) program addressed in Fullilove, Congress explicitly recognized included a utilization section. that the scope of the problem would vary from market area to Like availability, measuring the utilization of DBEs as market area.77 prime contractors and subcontractors on state DOT con- tracts is a key part of any disparity study. It is not as often seen While the DBE Program was established by Congress and as a stand-alone section in availability studies since the focus based on findings of nationwide discrimination in the con- is on assisting state DOTs with narrowly tailored goal setting struction industry, establishing the state DOT's geographic rather than making compelling interest determinations of market area is nevertheless an important component of nar- disparities (derived in part by comparing DBE utilization to rowly tailoring its DBE Program. The DBE annual goal DBE availability). should reflect DBE availability within the specific geographic market from which that state DOT draws the vast bulk (75% or more) of its contractors and subcontractors. 78The NDOR (2000) study included some statistical analysis of how the depart- Determination of Relevant Product Market Area. Four ment's contract dollars were distributed according to internal work codes (grad- of the five availability studies (80%) included a section ing, concrete pavement, landscaping, bridges, etc.); however, this information was not used to weight the overall DBE availability figure according to the dif- describing how product markets were empirically deter- ferent levels of spending within each work code. 79CDOT (ongoing) and MDT (ongoing) were excluded from this figure since we could not determine from the proposals whether a product market analysis 75See, e.g., Sherbrooke Turf, Inc. v. Minnesota Department of Transportation, 345 would be included in the study. F.3d. 964, 973 (8th Cir. 2003), cert. denied, 541 U.S. 1041 (2004). 80See, however, Wainwright (2000), documenting that, in general, the similari- 76Fullilove v. Klutznick, 448 US 448 (1980). ties in the amount of discrimination present in different industries and geo- 77 Croson, at 504 (citations omitted, emphasis added). graphic locations significantly outweighs the differences.

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23 State DOT Disparity Analysis. Only one of the five rier, and econometric studies of minority and female business availability studies (20%) included a section on disparities in owner earnings address the second type of barrier. These the state DOT's own utilization. However, all 20 disparity analyses focus on the private sector as opposed to the public studies (100%) included such a section. sector because race-conscious contracting in the private sec- Assessing disparities between DBE participation on DOT tor is far less common and there are a significant number of contracts and DBE availability in the DOT's relevant markets construction firms that work in both sectors. is a central element of any disparity study. To determine The business formation disparity analysis can also be impor- whether DBEs have or have not been used by the state DOT tant for assessing "Step 2" adjustments under 26.45(d)(3), as in proportion to their availability in the marketplace, the con- a way to quantify how much higher "Step 1" DBE availability sultant should ideally examine contracting expenditures that would be "but-for" the "present effects of past discrimination." were not subject to race-conscious goals. However, since a This type of disparity analysis can additionally be con- state DOT's federally assisted contracting expenditures are ducted by comparing DBE participation on public sector subject to the DBE Program, its data may not show evidence contracts with goals to participation on contracts without of a lack of participation even if it exists in the private sector goals. There are several possible sources of data on contracts of the state's relevant market area. Instead, the state DOT's without goals. Within the public sector, they can come from own data are typically most useful for examining the effec- non-federally assisted state DOT contracts without M/WBE tiveness of its DBE policies during the study period. On the requirements (such as, for example, in California or Wash- other hand, of course, if actual participation in state DOT ington State);82 representative state DOT "control" or "zero contracts still turns out to be significantly less than availabil- goals" contracts, such as IDOT presented at the Northern ity in any industry or procurement category, then the state Contracting trial;83 and from comparing different time peri- DOT's data will still provide evidence of adverse impact. ods within the same geographic and product markets when goals were and were not in force. Moreover, comparisons can Economy-Wide Disparity Analyses. Four of the five also be made between the state DOT and other public agen- availability studies (80%) included a section on economy-wide cies in the relevant market without race-conscious pro- disparity analyses. Fifteen of 20 disparity studies (75%) grams.84 In the private sector, F.W. Dodge Reports or Reed included such a section. Construction Data can be used, in some circumstances,85 to Assessing the presence or absence of disparities in contract- compare M/WBE participation on private contracts in a ing and other business activities that are not already subject to given geographic market to M/WBE participation on public race-conscious goals is at the core of the compelling interest contracts. Some studies also used building permit data for inquiry. As the Tenth Circuit noted in Adarand VII: this purpose. This type of economy-wide evidence is relevant not only [T]he evidence presented by the government in the present case demonstrates the existence of two kinds of discriminatory barri- to the presence or absence of discrimination in the market- ers to minority . . . enterprises, both of which show a strong link place but also to whether any discrimination would be suf- between racial disparities in the federal government's disburse- ficiently ameliorated through solely race-neutral methods. ments of public funds for construction contracts and the chan- Surprisingly, some disparity studies omit these critical neling of those funds due to private discrimination. The first dis- economy-wide analyses, making it impossible to determine criminatory barriers are to the formation of qualified minority . . . whether an agency is a passive participant in a discrimina- enterprises due to private discrimination, precluding from the out- set competition for public construction contracts by minority enter- tory marketplace. prises. The second discriminatory barriers are to fair competition between minority and non-minority . . . enterprises, again due to private discrimination, precluding existing minority firms from 82Both states have passed citizen-initiated propositions banning the use of race- effectively competing for public construction contracts. The govern- conscious affirmative action in public contracting. Cal. Const. art. 1, sec. 31(a); ment also presents further evidence in the form of . . . studies of RCW 49.60.400. local subcontracting markets after the removal of affirmative 83See fn. 136 and the accompanying discussion. action programs.81 84Comparisons between DBE participation at IDOT and the Illinois State Toll Highway Authority were mentioned previously. In a recent study performed for the Commonwealth of Massachusetts, similar comparisons were made between In disparity studies, econometric studies of minority and two agencies operating race-conscious programs, the Massachusetts Housing female business formation rates address the first type of bar- Finance Agency and the Division of Capital Asset Management, and two agen- cies whose programs had been either legally enjoined (Massachusetts Bay Trans- portation Authority) or voluntarily suspended pursuant to a disparity study (City of Boston) (MA, 2006; MA, 2008). 81 Adarand Constructors, Inc. v. Slater (Adarand VII), 228 F.3d 1147, 116768 85The completeness of these data sources varies significantly by region. Some (10th Cir. 2000), cert. granted, 532 U.S. 941, then dismissed as improvidently parts of the country have very complete data (e.g., NCDOT, 2004, Ch. 7), others granted, 534 U.S. 103 (2001) (emphasis added). much less so (e.g., ODOT, 2007, Ch. 7).

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24 Credit Market Access. None of the five availability stud- constant.89 Denver also introduced the Colorado Center for ies (0%) included a section on lending discrimination. Nine Community Development (CCD, 1996) study, as well as tes- of 20 disparity studies (45%) included this section. timony from the former top state banking official in Col- Discrimination in access to capital is one of the most com- orado who examined the financial records of several DBEs mon and long-standing problems voiced by minority and who had been recently denied credit and concluded that the women entrepreneurs. As long ago as 1944, Gunnar Myrdal's denials could not be justified by their finances. Additionally, seminal study of race in America found: there was testimony from MBEs and WBEs concerning their difficulties in obtaining capital for their businesses and require- The Negro businessman . . . encounters greater difficulties than ments that were placed on them by lenders that were not whites in securing credit. This is partly due to the marginal posi- placed on majority firms. tion of Negro business. It is also partly due to prejudicial opinions Upon review, the Tenth Circuit noted: among whites concerning business ability and personal reliability of Negroes. In either case a vicious circle is in operation keeping The City presented evidence of lending discrimination to sup- Negro business down.86 port its position that M/WBEs in the Denver MSA90 construc- tion industry face discriminatory barriers to business forma- Evidence of this type of discrimination has proven repeat- tion. . . . [Plaintiffs] did not present any evidence that undermines the reliability of the lending discrimination evi- edly persuasive to courts in upholding race-conscious con- dence but simply repeats the argument, foreclosed by circuit tracting programs. In determining that the DBE Program met precedent, that it is irrelevant. . . . [However,] in Adarand VII strict scrutiny, the Tenth Circuit wrote: we took "judicial notice of the obvious causal connection between access to capital and ability to implement public works The government's evidence is particularly striking in the area of construction projects." the race-based denial of access to capital, without which the for- mation of minority subcontracting enterprises is stymied. . . . Outside of litigation, analysis of lending discrimination [One study,87 for example] . . . surveyed 407 business owners in problems has been relatively rare in disparity studies. Statis- the Denver area. It found that African Americans were 3 times tical tabulations comparing M/WBE and non-M/WBE more likely to be rejected for business loans than whites. The denial rate for Hispanic owners was 1.5 times as high as white answers to a number of survey questions relating to credit owners. Disparities in the denial rate remained significant even and bonding were included in Louisiana (LA, 1991). Formal after controlling for other factors that may affect the lending rate, econometric analysis of race and gender differences in lend- such as the size and net worth of the business. The study con- ing discrimination did not appear, however, until Maryland cluded that "despite the fact that loan applicants of three differ- (MD, 2001). Recently, Caltrans (2007), ITD (2007), NDOT ent racial/ethnic backgrounds in this sample (Black, Hispanic and (2007), ODOT (2007), and ADOT (2009) have included sim- Anglo) were not appreciably different as businesspeople, they ilar analyses.91 were ultimately treated differently by the lenders on the crucial issue of loan approval or denial." Lending discrimination alone of course does not justify Anecdotal Analyses. One of the five availability studies action in the construction market. . . . However, the persis- (20%) included anecdotal and/or other types of qualitative tence of such discrimination, which is already unlawful under evidence. Nineteen of 20 disparity studies (95%) included federal law, supports the assertion that the formation, as well anecdotal evidence. as utilization, of minority-owned construction enterprises has Qualitative or anecdotal evidence of the direct experiences been impeded.88 of minority and female business owners with discrimination is a crucial complement to the statistical evidence in any dis- The first formal econometric analysis of credit market dis- crimination was introduced during the Concrete Works v. Denver trial. Using data compiled by the Federal Reserve 89In the interest of full disclosure, Denver's trial experts were NERA economists Board and the U.S. Small Business Administration, Denver's and Colette Holt served as outside counsel. 90"Metropolitan Statistical Area." See also Appendix D--Glossary. expert economists demonstrated that large and statistically 91The two proposals from D. Wilson Consulting, LLC (CDOT, ongoing; MDT, significant differences in commercial loan denial rates ongoing) mention the main data set that has been used to produce econometric between minority and nonminority firms were evident even studies of lending discrimination (the Survey of Small Business Finances) but give no indication how it will be used: "The Wilson Group will use data from the when balance sheet and creditworthiness measures were held National Survey of Small Business Finances (NSSBF) conducted by the Federal Reserve Board and the U.S. Small Business Administration, the Current Popu- lation Survey (CPS) and the Five Percent Public Use Microdata Samples (PUMS) 86 Myrdal (1944, 308). from the 2000 decennial census. These data are used to examine the incidence of 87 Colorado Center for Community Development (1996). See also, U.S. Depart- minority and female business ownership and [their] earnings. . . ." However, the ment of Justice (1996, at 2605758). NSSBF cannot be used for analyses of M/WBE ownership or earnings and the 88 Adarand VII at 116970, fn 13, citations omitted. CPS and PUMS cannot be used to analyze disparities in credit access.