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82 Finally, a plaintiff cannot use a challenge to a state's imple- rates in your program without reference to the relative mentation of the federal DBE Program under narrow tailoring availability of DBEs in your market. as a collateral attack on the regulation's compelling interest. "[A]ppellants cannot protest the federal program by claiming Step 1 Analysis: Estimation of DBE Availability the state's implementation of it is unconstitutional."349 The process to set the overall annual DBE goal is divided into two steps: State DOTs' Implementation of Part 26 Must be Narrowly Tailored (c) Step 1. You must begin your goal-setting process by deter- Part 26 requires that state DOTs narrowly tailor their DBE mining a base figure for the relative availability of DBEs. efforts to the evidence of discrimination in their marketplace. The following are examples of approaches that you may Especially in the context of considering options to respond to take toward determining a base figure. These examples are the demands of narrow tailoring, it is important to focus provided as a starting point for your goal setting process. upon the overall objective of the DBE program "to achieve a Any percentage figure derived from one of these examples `level playing field' for DBEs seeking to participate in federal- should be considered a basis from which you begin when aid transportation contracting. To reach a level playing field, examining all evidence available in your jurisdiction. These recipients need to examine their programs and their markets examples are not intended as an exhaustive list. Other and determine the amount of participation they would expect methods or combinations of methods to determine a base DBEs to achieve in the absence of discrimination and the figure may be used, subject to approval by the concerned effects of past discrimination."350 operating administration. Among the objectives of the regulations is "help to remove (1) Use DBE Directories and Census Bureau Data. Deter- barriers to the participation of DBEs in DOT-assisted contracts" mine the number of ready, willing, and able DBEs in and to "assist the development of firms that can compete suc- your market from your DBE directory. Using the Cen- cessfully in the marketplace outside the DBE program."351 A sus Bureau's County Business Pattern (CBP) database, goal-setting methodology that takes into account these objec- determine the number of all ready, willing, and able tives meets not only the letter of the regulations but also the businesses available in your market that perform work remedial objectives and spirit of the statute. It is not enough to in the same SIC codes.353 Divide the number of DBEs merely replicate the outcomes of the discriminatory market- by the number of all businesses to derive a base figure place Congress seeks to eliminate. for the relative availability of DBEs in your market. The 1999 revisions to the DBE Program prescribe narrowly (2) Use a bidders list. Determine the number of DBEs that tailored methods for setting annual DBE goals to achieve a have bid or quoted on your DOT-assisted prime con- level playing field for DBEs.352 49 C.F.R. § 26.45 provides: tracts or subcontracts in the previous year. Determine the number of all businesses that have bid or quoted on (a) You must set an overall goal for DBE participation in prime or subcontracts in the same time period. Divide your DOT-assisted contracts. the number of DBE bidders and quoters by the num- (b) Your overall goal must be based on demonstrable evi- ber for all businesses to derive a base figure for the rel- dence of the availability of ready, willing and able DBEs ative availability of DBEs in your market. relative to all businesses ready, willing and able to partic- (3) Use data from a disparity study. Use a percentage fig- ipate on your DOT-assisted contracts (hereafter, the ure derived from data in a valid, applicable disparity "relative availability of DBEs"). The goal must reflect study. your determination of the level of DBE participation you (4) Use the goal of another DOT recipient. If another DOT would expect absent the effects of discrimination. You recipient in the same, or substantially similar, market cannot simply rely on either the 10 percent national goal, has set an overall goal in compliance with this rule, you your previous overall goal or past DBE participation may use that goal as a base figure for your goal. (5) Alternative methods. Subject to the approval of the DOT operating administration, you may use other methods to determine a base figure for your overall 349Harrison & Burrowes, 981 F.2d at 57, relying on Milwaukee County Pavers Ass'n goal. Any methodology you choose must be based on v. Fiedler, 922 F.2d 419, 424 (7th Cir. 1991), cert. denied, 500 U.S. 954 (1991). 35064 Fed. Reg. 5108. demonstrable evidence of local market conditions 35149 C.F.R. §26.1. 352Adarand VII, 228 F.3d at 1182 ("The process by which recipients of federal transportation funding set aspirational goals is now much more rigorous [than 353See www.census.gov/epcd/cbp/view/cbpview.html for information about the the prior Part 23]."). CBP database.
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83 and be designed to ultimately attain a goal that is Step 2. Once you have calculated a base figure, you must rationally related to the relative availability of DBEs examine all of the evidence available in your jurisdiction in your market. to determine what adjustment, if any, is needed to the base figure in order to arrive at your overall goal. The commentary stresses the examples provided embody (1) There are many types of evidence that must be con- principles rather than rules "recipients are free to adopt in sidered when adjusting the base figure. These include: their entirety or to use as guidelines for how to devise their (i) The current capacity of DBEs to perform work in own measurement."354 This flexible approach allows each your DOT-assisted contracting program, as meas- recipient to use "the best data available."355 As noted in the ured by the volume of work DBEs have performed discussion about using example 1--dividing the DBE direc- in recent years; tory over County Business Patterns data--"[a]ny recipient (ii) Evidence from disparity studies conducted any- that believes it has available to it better sources of local data where within your jurisdiction, to the extent it is from which to make a similar calculation for its base figure is not already accounted for in your base figure; and encouraged to use them."356 (iii) If your base figure is the goal of another recipient, As discussed in Chapter 2, the bidders list approach has you must adjust it for differences in your local been commonly used by state DOTs to estimate the Step 1 base market and your contracting program. figure. However, those courts that have addressed this approach (2) You may also consider available evidence from related directly have pointed out that lists can be either under-inclusive fields that affect the opportunities for DBEs to form, or over-inclusive. Bidders lists may be under-inclusive because grow, and compete. These include, but are not lim- they do not cast a broad net in the geographic market of the ited to: agency,357 and are possibly tainted by the effects of discrimina- (i) Statistical disparities in the ability of DBEs to get tion.358 To the extent that minority- and women-owned firms the financing, bonding and insurance required have been encouraged to apply for the lists, such firms may be to participate in your program; overrepresented and thus the lists are over-inclusive.359 Further, (ii) Data on employment, self-employment, educa- bidders lists rarely capture full data on subcontractors, who bid tion, training, and union apprenticeship pro- to the prime contractor not the agency. As noted in the com- grams, to the extent you can relate it to the oppor- mentary to Part 26, "[w]e realize that identifying subcontrac- tunities for DBEs to perform in your program. tors, particularly non-DBEs and all subcontractors that were (3) If you attempt to make an adjustment to your base unsuccessful in their attempts to obtain contracts, may well be figure to account for the continuing effects of past a difficult task for many recipients."360 discrimination (often called the "but for" factor) or the effects of an ongoing DBE Program, the adjust- ment must be based on demonstrable evidence that is Step 2 Analysis: Examining Evidence of Disparities logically and directly related to the effect for which in DBE Opportunities the adjustment is sought.361 After the state DOT has estimated its Step 1 base figure of DBE availability, it must estimate the level of DBE availabil- The case law is very sparse regarding the elements of the ity in a discrimination free market, that is, DBE availability "but for" determination. The Western States opinion does not "but for" discrimination. address it, and IDOT determined not to make a Step 2 adjust- ment since the Step 1 base figure was the "plausible lower bound estimate" of DBE availability. The Eight Circuit in 354 64 Fed. Reg. 5109. Sherbrooke noted without further comment that "[b]ased 355 Id. upon [the Availability Study's] analysis of business formation 356Id. at 5110. 357Associated General Contractors of America v. City of Columbus, 936 F. Supp. statistics, NERA next estimated that the number of participat- 1363, 1389 (S.D. Oh. 1996) ("This [list] is only a small fraction of the total num- ing minority owned businesses would be 34 percent higher in ber of construction firms in the Columbus MSA, as shown by U.S. Census a race-neutral market. Therefore, NERA adjusted its DBE Bureau data."). availability figure from 11.4 to 11.6 percent."362 In considering 358Philadelphia III, 91 F.3d at 604 ("if there has been discrimination in City con- tracting, it is to be expected that black firms may be discouraged from applying, whether Part 26 has a strong basis in evidence, the Tenth Cir- and the low numbers may tend to corroborate the existence of discrimination cuit commented that while data showing that discriminatory rather than belie it."). 359AGC v. Columbus, 936 F.Supp. at 1389 (City actively recruited MBEs but not majority-owned firms to register and the set aside program provided an incen- tive for them to do so). 361 49 C.F.R. § 26.45(d). 360 362 64 Fed. Reg. 510405. 345 F.3d at 973.