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9 CHAPTER 2 Designing Defensible DBE Programs Introduction "To help remove barriers to the participation of DBEs in DOT-assisted contracts"; and The federal government apportions tens of billions of dol- "To assist the development of firms that can compete suc- lars each year from the National Highway Trust Fund to the cessfully in the marketplace outside the DBE program."32 fifty states and the District of Columbia to assist and support the construction and maintenance of the nation's highway The DBE Program operates on both the supply-side and the infrastructure.27 In the decade between FFYs28 1998 and 2007, demand-side of the market for highway construction. On the more than $325 billion in federal highway transportation assis- supply-side, the program encourages recipients to undertake tance (in 2007 dollars) was allocated to state DOTs.29 In FFY efforts to increase the number of firms that can be certified to 2007 alone, the amount distributed was almost $32 billion. participate in the program and to enhance the ability of DBEs Table 1 shows the apportionment of federal highway funds to compete effectively in the highway contracting marketplace. among state DOTs in FFY 2007, as well as their 2007 rankings Such "race-neutral" activities include structuring solicitations, and their average rankings from FFYs 1998 through 2007. quantities, specifications, and delivery schedules to facilitate As a condition of receipt of these federal funds, the state increased participation by DBEs; assisting DBEs to overcome DOTs must agree to abide by certain federal rules and regu- barriers related to surety bonding and other types of financing; lations, including those governing the U.S.DOT's DBE Pro- assisting start-up DBE firms to become established; imple- gram.30 The DBE Program, as originally enacted and as menting communications programs regarding contracting revised, was established by Congress in response to wide- procedures and specific contract opportunities; implementing spread evidence of discrimination against businesses owned supportive services programs to develop business manage- by minorities and women in the construction industries, and ment, record keeping, and accounting skills; helping firms in particular the highway construction industries.31 learn to handle increasingly significant projects and a greater The principal objectives of the DBE Program are to: diversity of project types; and assisting firms in the adoption of emerging technologies and use of electronic media.33 Ensure "nondiscrimination in the award and administra- On the demand-side, the DBE Program requires state DOTs tion of DOT-assisted contracts in the Department's high- to encourage prime contractors and consultants to subcon- way, transit, and airport financial assistance programs"; tract to DBEs by placing percentage participation goals on cer- "To create a level playing field on which DBEs can compete tain contracts and requiring prime contractors and consul- fairly for DOT-assisted contracts"; tants to make good-faith efforts to meet those goals, and ensuring distribution of the DBE directory to the widest feasi- ble universe of prime contractors.34 Such demand-side activi- 27 Highway Trust Fund monies are also allocated to American Samoa, Guam, the ties are described in Part 26 as "race-conscious" efforts.35 Northern Mariana Islands, Puerto Rico, and the Virgin Islands. These entities, however, are excluded from the scope of the present report. 28 The federal fiscal year runs from October 1 through September 30. 32 49 C.F.R. 26.1. 29 U.S. Department of Transportation (2008) and U.S. Department of Labor 33 49 C.F.R. 26.51(b). (2008). 34 49 C.F.R. 26.51(d). 30 49 C.F.R. Part 26. 35 Since women-owned firms can also qualify as DBEs, such efforts can also be 31 See, e.g., The Compelling Interest for Affirmative Action in Federal Procurement, "gender-conscious." Following the nomenclature of Part 26, we shall refer to 61 Fed. Reg. 26050 et seq (1996). both types of efforts as "race-conscious."

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10 Table 1. Federal-aid highway apportionments by state, FFYs 19982007. Federal-aid Highway Federal-aid Highway Fund Apportionment Fund Apportionment State Rank Rank (in thousands) (in thousands) FFY 2007 FFY 1998FFY 2007 California $2,960,914 1 $26,397,793 1 Texas $2,624,571 2 $23,067,022 2 New York $1,512,802 4 $14,129,262 3 Florida $1,556,841 3 $14,044,320 4 Pennsylvania $1,508,597 5 $13,666,393 5 Georgia $1,148,445 7 $10,325,502 6 Ohio $1,085,685 6 $10,079,858 7 Illinois $965,678 8 $9,447,852 8 Michigan $971,738 9 $8,996,057 9 North Carolina $890,846 10 $8,150,729 10 New Jersey $831,505 12 $7,554,338 11 Virginia $819,035 11 $7,546,287 12 Indiana $751,898 13 $6,935,524 13 Missouri $739,140 14 $6,759,202 14 Tennessee $696,083 15 $6,444,907 15 Alabama $629,576 16 $5,745,715 16 Wisconsin $614,695 18 $5,658,072 17 Arizona $594,321 17 $5,184,202 18 Massachusetts $552,890 22 $5,140,683 19 Kentucky $539,127 19 $4,990,111 20 Washington $519,858 21 $4,953,246 21 South Carolina $516,771 20 $4,799,501 22 Maryland $502,039 23 $4,638,775 23 Louisiana $489,304 25 $4,526,336 24 Oklahoma $493,726 26 $4,464,640 25 Minnesota $416,012 24 $4,246,007 26 Connecticut $450,100 27 $4,217,953 27 Arkansas $396,891 29 $3,693,491 28 Colorado $391,802 28 $3,628,968 29 Mississippi $371,797 30 $3,511,338 30

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11 Table 1. (Continued). Federal-aid Highway Federal-aid Highway Fund Apportionment Fund Apportionment State Rank Rank (in thousands) (in thousands) FFY 2007 FFY 1998FFY 2007 Oregon $355,299 31 $3,359,554 31 Iowa $334,938 32 $3,296,421 32 Kansas $340,126 34 $3,221,821 33 Alaska $281,428 37 $3,148,654 34 West Virginia $338,224 33 $3,088,318 35 Montana $301,199 35 $2,867,240 36 New Mexico $301,437 36 $2,796,547 37 Nebraska $229,493 39 $2,213,989 38 Utah $225,006 40 $2,169,214 39 Idaho $232,943 38 $2,126,670 40 Nevada $200,879 41 $2,028,138 41 Wyoming $214,290 42 $2,005,894 42 South Dakota $209,154 43 $1,995,007 43 North Dakota $194,716 44 $1,872,619 44 Rhode Island $158,583 45 $1,639,456 45 Maine $139,141 47 $1,440,198 46 New Hampshire $152,770 46 $1,411,474 47 Hawaii $140,971 49 $1,393,796 48 Vermont $133,324 48 $1,294,456 49 Delaware $124,031 51 $1,246,687 50 District of Columbia $125,354 50 $1,142,586 51 Source: U. S. Department of Transportation, Federal Highway Administration (2008). As discussed in Chapter One, and in more detail in Appen- dotal evidence of discrimination against M/WBEs to allow dix C, the U.S. Supreme Court's plurality opinion in City of state or local policy makers to determine whether there was a Richmond v. J. A. Croson Co., requires the highest level of "strong basis in evidence"--the standard of proof imposed by review on the use of race-conscious classifications by public the Supreme Court--to adopt race-conscious remedies. entities, even when such classifications are used as a tool for This project seeks to provide guidance and models to state remedying the effects of past and present discrimination.36 DOTs considering what evidence is necessary to meet their The Court's explanation of the type of evidence that would constitutional obligations and regulatory mandates. The guide- support a race-conscious contracting program gave rise to the lines for disparity and availability studies, presented below, "disparity study." These studies gathered statistical and anec- reflect recent judicial decisions about what is necessary to meet strict constitutional scrutiny and implement best prac- 36488 U.S. 469. See Chapter One for an overview and Appendix C for a detailed tices for DBE Programs, based upon controlling precedents, discussion of the law governing contracting affirmative action. sound science, and practical experience.