||To Whom Do these Questions and Answers Apply?
- These questions and answers apply only to
recipients of Federal financial assistance from the Federal Highway Administration (FHWA),
Federal Transit Administration (FTA), and Federal Aviation Administration (FAA) located in
the states comprising the 9th Federal Judicial Circuit. These states are California,
Oregon, Washington, Alaska, Arizona, Idaho, Montana, Nevada, and Hawaii.
- These questions and answers do not apply to
recipients in other states.
- These questions and answers apply only to
the disadvantaged business enterprise programs (DBE) of recipients of Federal financial
assistance governed by 49 CFR Part 26.
||What did the Court say in Western States?
- Like other Federal courts that have reviewed
the Department of Transportations DBE program, the 9th Circuit panel held that 49
CFR Part 26 and the authorizing statute for the DBE program in TEA-21 were constitutional.
The court affirmed that Congress had determined that there was a compelling need for the
DBE program and the Part 26 was narrowly tailored.
- The court agreed that Washington State did
not need to establish a compelling need for its DBE program, independent of the
determinations that Congress made on a national basis.
- However, the court said that race conscious
elements of a national program, to be narrowly tailored as applied, must be limited to
those parts of the country where its race-based measures are demonstrably needed.
- Whether race-based measures are needed
depends on the presence or absence of discrimination or its effects in a states
transportation contracting industry.
- In addition, even when discrimination is
present in a state, a program is narrowly tailored only if its application is limited to
those specific groups that have actually suffered discrimination or its effects.
- The court concluded that Washington State
DOTs DBE program was not narrowly tailored because the evidence of discrimination
supporting its application was inadequate. The court mentioned several ways in which the
states evidence was insufficient:
Washington State DOT had not conducted
statistical studies to establish the existence of discrimination in the highway
contracting industry that were completed or valid.
Washington State DOTs calculation of
the capacity of DBEs to do work was flawed because it failed to take into account the
effects of past race-conscious programs on current DBE participation
The disparity between DBE participation on
contracts with and without affirmative action components did not provide any evidence of
A small disparity between the proportion of
DBE firms in the state and the percentage of funds awarded to DBEs in race-neutral
contracts (2.7% in the case of Washington State DOT) was entitled to little weight as
evidence of discrimination, because it did not account for other factors that may affect
the relative capacity of DBEs to undertake contracting work.
This small statistical disparity is not
enough, standing alone, to demonstrate the existence of discrimination. To demonstrate
discrimination, a larger disparity would be needed.
Washington State DOT did not present any
anecdotal evidence of discrimination.
The affidavits required by 49 CFR 26.67(a),
in which DBEs certify that they are socially and economically disadvantaged, are not
evidence of the presence of discrimination.
- Consequently, the court found that the
Washington State DOT DBE program was unconstitutional as applied.
- The court cited the 8th Circuits
decision in Sherbrooke Turf v. Minnesota Department of Transportation. In that case, the
court said, Minnesota and Nebraska had hired outside consulting firms to conduct
statistical analyses of the availability and capacity of DBEs in their local markets,
which the 8th Circuit had relied on in holding that the two states DBE programs were
constitutional as applied.
||What action should recipients take with respect to submitting their
overall goals for FY 2006?
- Recipients should examine the evidence they
have on hand of discrimination and its effects. Does this evidence appear to address
successfully the problems the 9th Circuits decision articulated concerning the
Washington State DOT DBE program?
- If the recipient currently has sufficient
evidence of discrimination or its effects, the recipient should go ahead and submit race-
and gender-conscious goals where appropriate, as provided in Part 26. (This submission
would include the normal race conscious/race-neutral split in overall goals.)
- If the evidence of discrimination and its
effects pertains to some, but not all, of the groups that Part 26 presumes to be socially
and economically disadvantaged, then these race- and gender-conscious goals should apply
only to the group or groups for which the evidence is adequate.
- If necessary, the Department may entertain
program waivers of Part 26s prohibition of group-specific goals in this situation.
- If the recipient does not currently have
sufficient evidence of discrimination or its effects, then the recipient would submit an
all-race neutral overall goal for FY 2006. The recipients submission would include a
statement concerning the absence of adequate evidence of discrimination and its effects.
- A race-neutral submission of this kind
should include a description of plans to conduct a study or other appropriate
evidence-gathering process to determine the existence of discrimination or its effects in
the recipients market. An action plan describing the study and time lines for its
completion should also be included.
- The Departments operating
administrations are willing, in response to recipients requests, to extend the time
for submitting FY2006 goals for a time sufficient to allow recipients to evaluate the
adequacy of their current evidence of discrimination or its effects.
- Operating administrations will review
recipients annual goal submissions to determine whether recipients have provided
evidence of discrimination or its effects.
||Should recipients who will be submitting all race-neutral overall goals
for FY 2006 because they do not have sufficient evidence of discrimination or its effects
make any changes to contracts issued during FY 2005 or earlier?
- No. Even where FY 2005 contracts used
race-conscious contract goals, we do not believe it is appropriate to attempt to revise or
reform those contracts.
||If recipients will be operating an all-race neutral DBE program in FY 2006
or subsequent years, what should such a program include?
- With few exceptions, generally there is no
difference in how the DBE program regulations apply to a race- and gender-neutral program
(hereafter race-neutral) as compared to a race- and gender-conscious program (hereafter
- In a wholly race- neutral program (e.g., the
annual overall DBE goal has been approved with no portion of it projected to be attained
by using race- and gender-conscious means) the recipient does not set contract goals on
any of its US DOT-assisted contracts for which DBE subcontracting possibilities exist.
Recipients having an all race-neutral program are not required to establish contract goals
to meet any portion of their overall goal.
- Recipients should take affirmative steps to
use as many of the race-neutral means of achieving DBE participation identified at 49 CFR
26.51(b) as possible to meet the overall goal and to demonstrate that you are
administering your program in good faith. The Department expects that recipients using all
race-neutral programs will use methods such as unbundling of contracts, technical
assistance, capital and bonding assistance, business development programs, etc., rather
than waiting passively for DBEs to participate.
- The good faith efforts requirements in 49
CFR 26.53 that apply when DBE contract goals are set have no required application to
recipients implementing a race-neutral program. However, recipients must continue to
collect the data required to be reported in the Uniform Report of DBE Awards or
Commitments and Payments Form (see §26.11) and to monitor compliance with the
commercially useful function requirements.
- The prompt payment and retainage
requirements of 49 CFR 26.29 are race-neutral mechanisms designed to benefit all
subcontractors, DBEs and non-DBEs alike. Recipients using all race-neutral programs must
continue to implement them.
- The requirement that DBEs must perform a
commercially useful function to receive credit toward the overall goal applies to race
neutral programs just as it does to programs that use race-conscious means to meet program
- It is helpful for recipients to maintain an
effective monitoring and enforcement program to track DBE participation obtained through
race neutral means that the recipient claims credit (see 49 CFR 26.37 (b)).
||What must recipients do that have already submitted their FY 2006 goals to
modal administrations for approval?
the appropriate modal administration determines that the FY 2006 DBE goal submission does
not contain the kind of information or documentation suggested by this guidance that would
comport with the law established by the Ninth Circuit Court of Appeals, the recipient will
be directed to revise and resubmit its DBE goal submission consistent with this guidance.
||Will the process used by the modal administrations to review and approve
goal submissions made by recipients in the Ninth Circuit change?
- For FHWA recipients in the 9th Circuit, FY
2006 DBE goal submissions will require concurrence by the FHWA Office of Civil Rights and
the Office of Chief Counsel in Washington, D.C. before approval by the appropriate FHWA
- FTAs process will remain the same.
- For FAA recipients in the 9th Circuit, FY
2006 DBE goal submission with a race-conscious component will require concurrence by the
FAA Headquarters Office of Civil Rights and a legal sufficiency review by the Office of
Chief Counsel in Washington, D.C. before being approved by the appropriate FAA Regional
Office of Civil Rights and Office of Chief Counsel. Those with an all race-neutral overall
goal will be approved by the Regional Office of Civil Rights.
||If a recipient lacks sufficient evidence of discrimination or its effects,
what should it do to remedy the lack of information?
- A recipient in this situation should
immediately begin to conduct a rigorous and valid study to determine whether there is
evidence of discrimination or its effects.
- The Department expects recipients who submit
an all-race neutral goal for FY 2006 because they lack sufficient evidence of
discrimination to ensure that this evidence-gathering effort is completed expeditiously.
- Studies to determine the presence of
discrimination or its effects are often referred to as disparity or
availability studies, though there can also be rigorous and scientifically
valid studies which may have different names. Whatever label is applied to a study,
however, the key point is that it be designed to determine, in a fair and valid way,
whether evidence of the kind the 9th Circuit decision determined was essential to a DBE
program including race-conscious elements exists.
||What should recipients studies include?
on the 9th Circuit decision, recipients should consider the following points as they
design their studies:
- The study should ascertain the evidence for
discrimination and its effects separately for each of the groups presumed by Part 26 to be
- The study should include an assessment of
any anecdotal and complaint evidence of discrimination.
- Recipients may consider the kinds of
evidence that are used in Step 2 of the Part 26 goal-setting process, such as
evidence of barriers in obtaining bonding and financing, disparities in business formation
- With respect to statistical evidence, the
study should rigorously determine the effects of factors other than discrimination that
may account for statistical disparities between DBE availability and participation. This
is likely to require a multivariate/regression analysis.
- The study should quantify the magnitude of
any differences between DBE availability and participation, or DBE participation in
race-neutral and race-conscious contracts. Recipients should exercise caution in drawing
conclusions about the presence of discrimination and its effects based on small
- In calculating availability of DBEs, the
study should not rely on numbers that may have been inflated by race-conscious programs
that may not have been narrowly tailored.
- Recipients should consider, as they plan
their studies, evidence-gathering efforts that Federal courts have approved in the past.
These include the studies by Minnesota and Nebraska cited in Sherbrooke Turf, Inc. v.
Minnesota Department of Transportation, 345 F.3d 964 (8th Cir. 2003), cert. denied 124 S.
Ct. 2158 (2004) and the Illinois evidence cited in Northern Contracting, Inc. v.State of
Illinois, et al. 2005 WL 2230195, N.D.Ill., September 08, 2005 (No. 00 C 4515)
there be statewide or regional studies, as opposed to a separate study for each individual
- If feasible, studies may be undertaken on a
regional or statewide basis to reduce the costs that would be involved if each recipient
conducted its own separate study.
- We would expect that each State DOT would
conduct a statewide study. Such a study should be conducted in cooperation with transit
and airport recipients in the state, so that the study would apply to recipients in all
- Larger transit and/or airport recipients may
want to conduct their own study, since the demographics of large urban areas may differ
from that of the state as a whole.
Federal funds help to defray the costs of recipients studies?
- Yes. FHWA, FTA, and FAA have all stated that
the costs of conducting disparity studies are reimbursable from Federal program funds,
subject to the availability of those funds.
- Recipients should contact their operating
administration for more detailed information.
This page last modified on
January 23, 2006
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