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51 Economy-Wide Disparity Analyses minority male business owners. These have been imple- for the Relevant Markets mented using data from the Survey of Small Business Finances produced by the Federal Research Board and the Small Busi- Recommended Approach. Statistical analyses that assess ness Administration. how minorities and women fare in several key aspects of busi- · Disparity ratios comparing market share of revenues to ness enterprise activity should be conducted to determine market share of business population between minority, whether a state DOT is passively participating in an industry female, and nonminority businesses using data from the sector tainted by discrimination. Census Bureau's SBO. In Concrete Works III, the court discussed the importance of · Disparity ratios comparing minority and female utilization evidence of economy-wide (or "marketplace") discrimination: to availability using data on private sector construction In Adarand VII, we specifically concluded that evidence of mar- projects from Reed Construction Data and/or F. W. Dodge ketplace discrimination can be used to support a compelling and/or building permit databases. interest in remedying past or present discrimination through the use of affirmative action legislation. . . . We clearly stated that evi- Regression analyses of business formation rates have also dence explaining "the Denver government's role in contributing been used to quantify Step 2 adjustments, which must be con- to the underutilization of MBEs and WBEs in the private construc- tion market in the Denver MSA" was relevant to Denver's burden sidered under 49 C.F.R. § 26.45(d). This is accomplished by of producing strong evidence. . . . first estimating a business formation regression model for non- The City can demonstrate that it is a "passive participant in a minority males and then applying that model to the minority system of racial exclusion practiced by elements of the local con- and female observations to estimate the business formation struction industry" by compiling evidence of marketplace dis- rate that would be expected if minorities and women faced the crimination and then linking its spending practices to the private discrimination. Therefore, evidence of marketplace discrimina- same market structure as nonminority males. tion is not only relevant but, in this case, it is essential to the City's claim that it is an indirect participant in private discrimination. Consequently, we again reject [plaintiff's] argument and con- Anecdotal Analyses clude that the district court's determination that the marketplace data was irrelevant was a legal error that significantly affected the Recommended Approach. Anecdotal evidence has been court's analysis of Denver's evidence.175 collected in a variety of formats including mail surveys, indi- vidual interviews, group interviews or focus groups, and pub- A disparity studies should not ignore such evidence.176 lic hearings. All of these approaches can and have produced Evidence of economy-wide discrimination in disparity qualitative evidence of barriers to full and fair participation by and availability studies has taken several forms, including the DBEs in the public contracting and subcontracting process. following: High-quality studies often employ multiple approaches to gathering this type of evidence, e.g., mail surveys and focus · Regression analyses comparing business formation rates groups or personal interviews. between minorities, women, and similarly situated non- Mail surveys are particularly important to establish a broad minority males in the relevant markets. These have been base of coverage that is capable of being quantified. Several implemented using the Census Bureau's 5% Public Use studies used mail or telephone surveys, but most failed to test Microdata Samples (PUMS) from the decennial census for nonresponse bias. Since response rates on voluntary sur- and/or the Current Population Surveys (CPS), produced veys tend to be low (typically 5%115%), it is important to test jointly by the Census Bureau and the Bureau of Labor whether nonrespondents differ from respondents in ways that Statistics. would alter the conclusions drawn from the survey. Failure to · Regression analyses comparing the earnings of minority test for nonresponse bias may likewise undermine the persua- and female business owners to those of similarly situated siveness of the results. nonminority male business owners in the relevant markets. Studies should gather evidence from non-DBEs as well as These have also been implemented using the PUMS and/or DBEs. It is critical to explore the extent to which barriers the CPS. reported by anecdotal sources are the result of discrimination · Regression analyses comparing denial rates on commercial rather than the usual challenges facing all businesses related to loans between minority, female, and similarly situated non- developing markets, finding suppliers, managing cash flow, etc. This is also the state DOT's opportunity to explore the operations of the DBE Program. This should include ques- 175 Id. at 976. tions regarding the use of race-conscious goals from the 176 See Adarand VII, 228 F.3d at 116768. point of view of both the DBEs and non-DBEs. These include
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52 Table 15. Types of anecdotal evidence collected in state DOT disparity and availability studies. Indi- Public Tele- Nonre- Study vidual Focus Mail Study Hear- phone sponse Type Inter- Groups Surveys ings Surveys Testing views IDOT (2004) A Mn/DOT (2005) A MoDOT (2004) A NDOR (2000) A WSDOT (2006) A x CDOT (ongoing) D x x x x HDOT (ongoing) D x x MDT (ongoing) D x x x NCDOT (ongoing) D n/a n/a n/a n/a n/a n/a NY (ongoing) D x x ADOT (2009) D x x x Alaska DOT&PF (2008) D x x x Caltrans (2007) D x x ITD (2007) D x NDOT (2007) D x ODOT (2007) D x x TDOT (2007) D n/a n/a n/a n/a n/a n/a MD (2006) D x x GDOT (2005) D x x x NJ (2005) D x NCDOT (2004) D x x x VDOT (2004) D CDOT (2001) D OH (2001) D x FDOT (1999) D n/a n/a n/a n/a n/a n/a NMDOT (1995) D x SCDOT (1995) D x x x LA (1991) D x Note: (1) x indicates this type of anecdotal evidence was collected as part of the study; n/a indicates that we do not know whether this type of anecdotal evidence was collected as part of the study or not, because the study was unavailable to us; a blank indicates that this type of anecdotal evidence was not collected as part of the study; (2) anecdotal evidence is sometimes collected directly by the state DOT rather than the consultant and presented in its annual DBE goals submissions to the FHWA.
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53 how goals are set; evaluating bidders' DBE submissions; and dence through interviews with business owners.177 The evi- monitoring compliance with DBE contractual commitments. dence collected ranged from individual interviews, to group Evidence gathering should also include the effectiveness of interviews, to public hearings, to large scale quantitative sur- race-neutral measures such as unbundling contracts and veys. As Table 15 shows, the most commonly used technique setting aside contracts for bidding by small firms; bonding and was individual interviews. financing support programs; certification outreach; and other While the interviews generally elicited useful information, supportive services. Special emphasis should be placed on the some studies interviewed only DBEs, or only a very small num- experiences of DBEs that desire to obtain prime contracts as a ber of non-DBEs. This is a serious deficiency, as it is important measure of continuing barriers to full participation in the to tease out the effects of discrimination from the general bar- marketplace. Careful consideration of race-neutral measures riers faced by all small and new firms. This lack of balance may is necessary to provide support for the state DOT's projection undermine the results, since the race-conscious elements must of the amount of the DBE goal it can meet solely through race- be narrowly tailored to only the categories of identified victims neutral measures. of discrimination and the impact of race-conscious programs Studies should also have a wide enough variety of intervie- on third-parties such as non-DBE subcontractors must be wees, survey participants, etc., to ensure representation of all considered. racial and ethnic minorities, white women and white men, and all major procurement categories. All disparity studies provided some anecdotal evidence; 177 This anecdotal evidence was gathered after the completion of the study in light one availability study was supplemented with anecdotal evi- of Western States.