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94 Third, program remedies should be limited to those firms U.S.DOT Guidance for Ninth Circuit Recipients that have some nexus to the harms sought to be ameliorated. In response to Western States, the General Counsel of Some courts have held that state and local programs must the U.S.DOT in 2005 provided guidance to Ninth Circuit provide proof that the individual owner of a firm seeking to grantees on how to meet the new test imposed by the opin- benefit from the program has suffered discrimination.455 ion. After summarizing the opinion, the guidance describes In considering the eligibility of individual firms to participate the actions recipients should take regarding their next DBE in the remedial benefits of the DBE Program, the rebuttable goal submissions. presumptions of social and economic disadvantage have been central to the courts' holdings that Part 26 is narrowly tai- "Recipients should examine the evidence they have on hand lored. "While TEA-21 creates a rebuttable presumption that of discrimination and its effects. Does this evidence appear members of certain racial minorities fall within that class, to address successfully the problems the 9th Circuit's deci- the presumption is rebuttable, wealthy minority owners and sion articulated concerning the Washington State DOT DBE wealthy minority-owned firms are excluded, and certification Program? is available to persons who are not presumptively disadvan- If the recipient currently has sufficient evidence of discrim- taged but can demonstrate actual social and economic dis- ination or its effects, the recipient should go ahead and sub- advantage. Thus, race is made relevant in the program, but it is mit race- and gender-conscious goals where appropriate, as not a determinative factor."456 Moreover, anyone can challenge provided in Part 26. (This submission would include the the disadvantage of any firm.457 Finally, each firm's owner is reg- normal race-conscious/race-neutral `split' in overall goals.) ularly reviewed to ensure that his or her economic disadvantage If the evidence of discrimination and its effects pertains to has not exceeded the personal net worth limit.458 some, but not all, of the groups that Part 26 presumes to be socially and economically disadvantaged, then these race- Flexibility of Contract Goals and gender-conscious goals should apply only to the group or groups for which the evidence is adequate. It is imperative that remedies not operate as fixed quotas. If necessary, the Department may entertain program The ability of a prime contractor that has made good faith waivers of Part 26's prohibition of group-specific goals in efforts to meet a contract goal to receive a waiver has been this situation. central to the holding that the DBE Program meets the nar- If the recipient does not currently have sufficient evidence row tailoring requirement. State DOTs should collect data on of discrimination or its effects, then the recipient would the frequency and circumstances of waivers to ensure that its submit an all race-neutral overall goal for FY 2006. The implementation of Part 26 is flexible. recipient's submission would include a statement concern- ing the absence of adequate evidence of discrimination and Implications of Western States its effects. A race-neutral submission of this kind should include a The implications of Western States have been profound. description of plans to conduct a study or other appropri- All grantees in the Ninth Circuit have been directed to ate evidence-gathering process to determine the existence comply by suspending the use of subcontracting goals until of discrimination or its effects in the recipient's market. An the evidentiary standards are satisfied. How to meet those action plan describing the study and time lines for its com- standards led in large part to TRB's commissioning of this pletion should also be included." Report. If a recipient lacks sufficient evidence of discrimination or its effects, it "should immediately begin to conduct a rigorous and 455See, e.g., Drabik II, 50 F.Supp.2d at 766 (no "consideration given to whether valid study to determine whether there is evidence of discrimi- the particular MBE seeking a racial preference has suffered from the effects of nation or its effects. . . . this evidence-gathering effort [should past discrimination by the state or prime contractors."); Main Line Paving, 725 F.Supp. at 1362 ("program contains no provisions to identify those who were be] completed expeditiously. . . . [A study should] be designed victims of past discrimination and to limit the program's benefits to them"). to determine, in a fair and valid way, whether evidence of the 456Sherbrooke, 345 F.3d at 973; see also Grutter, 539 U.S. at 341; Adarand VII, 228 kind the 9th Circuit decision determined was essential to a DBE F.3d at 11831184 (personal net worth limit is element of narrow tailoring); cf. Associated General Contractors v. City of New Haven, 791 F.Supp. 941, 948 program including race-conscious elements exists." (D. Conn. 1992), vacated on other grounds, 41 F.3d 62 (2nd Cir. 1992) (defini- In particular: tion of "disadvantage" was vague and unrelated to goal). 45749 C.F.R. 26.87. 458Adarand VII, 228 F.3d at 118687 ("The current regulations more precisely "The study should ascertain the evidence for discrimination identify the proper minority recipients of DBE certification by periodically re- and its effects separately for each of the groups presumed by screening for economic disadvantage all candidates for such certification."). Part 26 to be disadvantaged.

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95 The study should include an assessment of any anecdotal because while the Western States court suggests disparity evi- and complaint evidence of discrimination. dence is required, it also relied upon Sherbrooke where such Recipients may consider the kinds of evidence that are used evidence was not presented. The Seventh Circuit explained the in "Step 2" of the Part 26 goal-setting process, such as evi- Ninth Circuit's misreading of a previous Seventh Circuit case, dence of barriers in obtaining bonding and financing, and but the IDOT trial presented evidence of the type referred to by disparities in business formation and earnings. the Ninth Circuit, so it again is impossible to know the out- With respect to statistical evidence, the study should rigor- come had Illinois relied solely upon its Availability Study. ously determine the effects of factors other than discrimi- What is certain is that at a minimum, Ninth Circuit state nation that may account for statistical disparities between DOTs, and perhaps all recipients, must significantly customize DBE availability and participation. This is likely to require their goals to withstand strict scrutiny. It is not enough to plug a multivariate/regression analysis. the Step 1 availability estimate into a formula without consid- The study should quantify the magnitude of any differ- ering the effects of discrimination. Western States also casts ences between DBE availability and participation, or DBE doubt on the value of using the state DOT's past levels of DBE participation in race-neutral and race-conscious contracts. utilization as a measure of the availability of DBEs "but for" Recipients should exercise caution in drawing conclusions discrimination because of the interposition of the DBE Pro- about the presence of discrimination and its effects based gram. While the opinion affirms that the Step 2 adjustment is on small differences. the appropriate point at which to undertake this inquiry, a con- In calculating availability of DBEs, the study should not rely ceptually rigorous model must be applied. Any adjustment on numbers that may have been inflated by race-conscious must be a quantifiable representation of the qualitative judg- programs or that may not have been narrowly tailored. ment that the ongoing effects of past or current discrimination Recipients should consider, as they plan their studies, either do or do not continue to impede DBEs' full and fair evidence-gathering efforts that Federal courts have approved access to the recipient's market. in the past. These include the studies by Minnesota and Western States further implies, and the U.S.DOT Guidance Nebraska cited in Sherbrooke Turf . . . [and] the Illinois evi- provides, that when a recipient determines that not all the enu- dence cited in Northern Contracting." merated groups have suffered discrimination in its market it must petition U.S.DOT for a waiver of the prohibition against separate goals for racial and ethnic minorities and white DBE Goal Setting women. If a group is not found to suffer discrimination in the While the Guidance provided the contours of the types of state DOT's marketplace, certified DBEs owned by such evidence to be analyzed, precisely what evidence a defensi- persons cannot be counted by a prime contractor toward ble study should analyze in the Ninth Circuit is not clear. If meeting a DBE contract goal. DBE directories must be revised WSDOT had presented a Sherbrooke/IDOT-type availability to provide race and gender information and clearly spell out study and proffered expert testimony in support of its analysis, which firms are eligible for goal credit. Waivers to remove the court may have approved the program. Whether additional some racial or ethnic groups or white women from credit evidence of discrimination of the type presented at the North- toward meeting DBE contract goals have been filed by at ern Contracting trial should also be included is uncertain least two state DOTs.