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OCR for page 92
92 Barriers to competition by existing DBEs have included the Additional Elements of Narrowly following: Tailored DBE Goal Setting Definition of State DOT's Marketplace Nonsolicitation of DBEs in the absence of DBE goals; Bid shopping of DBE quotes to non-DBEs; Part 26 directs grantees to set goals based on the "relative Industry domination by "informal, racially exclusionary availability of DBEs in your market."435 State DOTs must business networks"; therefore apply economic principles to empirically establish Discrimination by surety bonding companies; and the geographic and industry dimensions of their contracting Price and delivery discrimination by suppliers.428 marketplace in order to ensure that the evidence is narrowly tailored. The studies relied upon by IDOT and Mn/DOT defined the geographic and industry markets as the location Anecdotal Evidence and industries that comprised over 80% of the contract dol- Anecdotal evidence of experiences with discrimination lars awarded. in contracting opportunities, including testimony from other governments' studies and programs, is relevant since it goes Race- and Gender-Neutral Remedies to the question of whether observed statistical disparities are due to discrimination and not to some other nondis- Race- and gender-neutral approaches are a necessary com- criminatory cause or causes.429 Testimony about discrimina- ponent of a defensible and effective DBE Program.436 They tion by prime contractors, unions, bonding companies, sup- must be used to the maximum feasible extent and applied in pliers and lenders has been found relevant regarding barriers good faith.437 Such measures include unbundling of contracts both to minority subcontractors' business formation and into smaller units, providing technical support, and address- to their success on governmental projects.430 While anec- ing issues of financing, bonding, and insurance important to dotal evidence is insufficient standing alone, "[p]ersonal all small and emerging businesses.438 Difficulty in accessing accounts of actual discrimination or the effects of dis- procurement opportunities, restrictive bid specifications, criminatory practices may, however, vividly complement excessive experience requirements, and overly burdensome empirical evidence. Moreover, anecdotal evidence of a insurance and/or bonding requirements, for example, might [government's] institutional practices that exacerbate dis- be addressed by recipients without resort to using race or gen- criminatory market conditions are [sic] often particularly der in their decision making. Further, governments have a probative."431 Anecdotal proof "may bring cold numbers duty to ferret out and punish discrimination against minori- convincingly to life."432 "[W]e do not set out a categorical ties and women by their contractors, staff, lenders, bonding rule that every case must rise or fall entirely on the suffi- companies, or others.439 Enforcement of anti-discrimination ciency of the numbers. To the contrary, anecdotal evidence legislation is another race-neutral approach that has been might make the pivotal difference in some cases; indeed, in implemented.440 Collecting data is another necessary race-neutral meas- an exceptional case, we do not rule out the possibility that ure. Agencies should track the utilization of M/W/DBEs as evidence not reinforced by statistical evidence, as such, will a measure of their success in the bidding process, including be enough."433 as subcontractors.441 Part 26 goes further in mandating the There is no requirement that anecdotal testimony be veri- creation and maintenance of a "bidder's list, consisting of fied. "Denver was not required to present corroborating evi- all firms bidding on prime contracts and bidding or quoting dence and [plaintiff] was free to present its own witnesses to either refute the incidents described by Denver's witnesses or to relate their own perceptions on discrimination in the Den- 435 49 CFR 26.45(b). ver construction industry."434 436 Croson, 488 U.S. at 507 (Richmond considered no alternatives to race-based quota); Drabik, 214 F.3d at 738; Philadelphia III, 91 F.3d at 609 (city's failure to consider race-neutral alternatives was particularly telling); Webster, 51 F. Supp.2d at 1380 (for over 20 years county never seriously considered race- 428 Id. at 117072. neutral remedies). 429 Webster, 51 F.Supp.2d at 1363, 1379. 437See 49 C.F.R. 26.51(a). 430Adarand VII, 228 F.3d at 11681172; see also AGC v. Coalition for Economic 43849 C.F.R. 26.51(b). Equity, 950 F.2d at 1415. 439Croson, 488 U.S. at 503 n.3; Webster, 51 F.Supp.2d at 1380. 431Concrete Works II, 36 F.3d at 1520. 440Associated General Contractors of California, Inc. v. Coalition for Economic 432Id. at 1521. Equity, 950 F.2d 1401, 1417 (9th Cir. 1991) (San Francisco "continues to make 433Engineering Contractors II, 122 F.3d at 926. efforts to enforce the anti-discrimination ordinance"). 434 441 Concrete Works IV, 321 F.3d at 989. See, e.g., Virdi, 2005 U.S. App. LEXIS 11203 at n.8 (11th Cir. June 13, 2005).

OCR for page 92
93 on subcontracts . . . [including] (1) Firm name; (2) Firm contracts to enterprises owned by non-minority males, is in and address; (3) Firm's status as a DBE or non-DBE; (4) The age of itself a form of passive participation in discrimination that Congress is entitled to seek to avoid. See Croson, 488 U.S. at 492 of the firm; and (5) The annual gross receipts of the firm."442 (Op. of O'Connor, J.).447 However, strict scrutiny does not require that every race- neutral approach must be implemented and then proven At least one court has recognized that goal setting is not an ineffective before race-conscious remedies may be utilized.443 absolute science. In holding the DBE regulations to be nar- While an entity must give good faith consideration to race- rowly tailored, the Eighth Circuit noted that "[t]hough the neutral alternatives, "strict scrutiny does not require exhaus- underlying estimates may be inexact, the exercise requires the tion of every possible such alternative . . . however irrational, States to focus on establishing realistic goals for DBE partici- costly, unreasonable, and unlikely to succeed such alternative pation in the relevant contracting markets. This stands in might be. . . . [s]ome degree of practicality is subsumed in the stark contrast to the program struck down in Croson."448 On exhaustion requirement."444 the other hand, "sheer speculation" cannot form the basis for an enforceable measure.449 Annual and Contract Goal Setting A related issue is whether goals can be set to reflect the expected availability "but for" the continued effects of dis- Numerical goals or benchmarks for M/W/DBE participa- crimination. The DBE regulations direct recipients to con- tion must be substantially related to the availability of such sider making this adjustment to the baseline "headcount" of firms in the relevant market.445 One unanswered question is whether goals or benchmarks DBEs, to reflect the results of a level playing field for DBEs. for overall agency contracting may be set higher than estimates This embodies the fundamental remedial purpose of the pro- of actual current availability. To freeze the goals at current head gram: "[u]ntil that future day when national aspiration and counts would set the results of discrimination--depressed national reality converge, the [Supreme] Court has made clear M/W/DBE availability--as the marker of the elimination of that under certain circumstances the federal government may discrimination. It therefore should be reasonable for the gov- use race-conscious means to remedy the effects of historical ernment to seek to attempt to level the racial playing field by and present-day racial discrimination."450 setting targets somewhat higher than current headcount. For In addition to the overall aspirational goals for their annual example, 49 C.F.R. Part 26 requires grant recipients to deter- aggregate spending, state DOTs must set subcontracting goals mine the availability of DBEs in their marketplaces absent the for specific projects based upon the availability of DBEs to presence of discrimination.446 In upholding the DBE regula- perform the anticipated scopes of subcontracting.451 As pro- tions, the Tenth Circuit stated that: vided in Part 26, goals should reflect the particulars of the con- tract, not reiterate annual aggregate targets.452 For example, because Congress has evidence that the effects of past discrimi- in considering a challenge to the City of Baltimore's M/WBE nation have excluded minorities from the construction industry Program, the court noted that the new ordinance, in con- and that the number of available minority subcontractors reflects trast to an earlier program struck down as unconstitutional, that discrimination, the existing percentage of minority-owned businesses is not necessarily an absolute cap on the percentage specifically required that goals be set on a contract-by-contract that a remedial program might legitimately seek to achieve. and craft-by-craft basis.453 Not only is contract-specific goal Absolute proportionality to overall demographics is an unrea- setting probably necessary to ensure flexibility,454 but also set- sonable goal. However, Croson does not prohibit setting an aspi- ting goals that reflect the reality of the scopes of work of the rational goal above the current percentage of minority-owned job instead of overall agency spending targets reduces the need businesses that is substantially below the percentage of minority to conduct good faith efforts reviews because the goal will persons in the population as a whole. This aspirational goal is reasonably construed as narrowly tailored to remedy past dis- reflect the realities of actual subcontractable scopes of work as crimination that has resulted in homogenous ownership within well as the temptation to create "front" companies and sham the industry. It is reasonable to conclude that allocating more participation. than 95% of all federal contracts to enterprises owned by non- minority persons, or more than 90% of federal transportation 447Adarand VII, 228 F.3d at 1181 (emphasis in the original). 448Sherbrooke, 345 F.3d. at 972. 442 49 C.F.R. 26.11(c). 449Adarand VII, 228 F.3d at 1174; See Croson, 488 U.S. at 499. 443 Grutter, 529 U.S. at 339. 450Adarand VII, 228 F.3d at 1155. 444Coral Construction, 941 F.2d at 923. 45149 C.F.R. 26.51(d). 445Webster, 51 F.Supp.2d at 1379, 1381 (statistically insignificant disparities are 45249 C.F.R. 26.51(e). insufficient to support an unexplained goal of 35% M/WBE participation in 453Baltimore II, 218 F.Supp.2d at 75152. county contracts); see also Baltimore I, 83 F.Supp.2d at 621. 454See Western States, 407 F.3d at 990, 994; Sherbrooke, 345 F.3d at 972; Coral 446 49 C.F.R. 26.45. Construction, 941 F.2d at 924.