The Legal Landscape of the DBE Program: What DBEs Need to Know Now by Colette Holt

Colette HoltIn recent months, there has been much talk across the nation about affirmative action, especially in view of the Supreme Court’s decisions in the challenge to the University of Texas’ admissions policy, and by extension, the gutting of the 1965 Voting Rights Act. These developments may have caused some to question whether contracting programs designed to create equal opportunities for minority and women-owned firms are likewise in danger of being thrown out by the courts. Here’s what DBEs need to know now.

The USDOT DBE Program is Constitutional

The good news is that the Disadvantaged Business Enterprise (DBE) program for U.S. Department of Transportation contracts is on solid legal ground. While DBEs must be vigilant in protecting their interests, there has emerged a judicial consensus that the program developed by USDOT meets constitutional tests. Every court has held that the DBE program regulations at 49 C.F.R. Part 26 are constitutional. The regulations were revised in 1999 to meet the test of strict judicial scrutiny applied by the courts to race-based government decision-making – the highest level of legal review. Ever since, the courts have found that Congress amassed extensive evidence that race remains a significant barrier to the participation by minority firms in federally-assisted transportation contracts, and that the DBE program is narrowly tailored to address that evidence.

The programs for the Minnesota and the Illinois Departments of Transportation have been upheld, and most recently, the challenge to the California Department of Transportation’s implementation of the DBE regulations was unsuccessful. There are new cases pending against the Minnesota and Illinois DOTs, but they are in the early stages and the outcomes are unlikely to be different from that of the earlier decisions.

Interestingly, there have been no challenges to the Airport Concessions DBE program under 49 C.F.R. Part 23. The major concessionaires have been very supportive of the program and of ACDBEs.

State and Local Programs Have Mixed Judicial Records

The legal track record of the DBE program is in contrast to the fate of many state and local Minority and Women Business Enterprise (M/WBE) programs. In the wake of the Supreme Court’s 1989 decision in City of Richmond v. J.A. Croson Co., dozens of local programs were found not to meet the parameters of strict scrutiny. Examples of these ordinances include Atlanta, Philadelphia and Columbus.

Governments that then modeled their evidence on the DBE program’s approach have fared much better. Denver and Chicago both were held to have sufficient evidence to continue to use M/WBE goals to level the playing field for their contracting opportunities.

Disparity Study Methodology Matters

The courts have required state and local governments to conduct “disparity studies” to support the use of race- and gender-conscious approaches to level the contracting playing field. Disparity studies are designed to answer the questions whether the agency has a “strong basis in evidence” that race and/or gender discrimination remain significant barriers to equal contracting opportunities, and if so, what available measures are narrowly tailored to remedy that discrimination.

Since Croson, it has become clear that the failure to conduct good studies is likely to be fatal if the program is challenged. On the other hand, good studies that apply broad remedial principles have led to strong programs that get results.

The courts have accepted various approaches to conducting disparity studies. Methodologies vary from the very conservative to those fully in line with affirmative action’s remedial objectives. DBEs need to educate themselves on the different ways to determine DBE availability, collect prime and subcontract data, analyze disparities, evaluate economy-wide evidence of barriers, develop anecdotal evidence and craft recommendations.

The results of the different methodologies can be stark. Study recommendations range from programs that are fully inclusive of all racial and ethnic groups and women, and that set significant DBE or M/WBE goals (Illinois DOT, State of Maryland, City of Houston); to programs that exclude certain racial or ethnic groups or white females and set low goals (California DOT, Oregon DOT, State of North Carolina) – or apply the program only to small contracts (New York City) or recommend no race- and gender-conscious measures at all (Cities of Boston and Birmingham).

DBEs need to understand these differences and get involved well before the agency issues its request for study proposals. Organize to insist on being part of the initial development of the RFP and having a seat at the table during the study process. Waiting until the consultant provides the report is too late.

Data Collection and Program Monitoring are Often the Weakest Links

There are excellent, reasonably priced electronic, web-based data collection and program monitoring systems available. The failure to collect accurate, complete and timely data not only greatly increases the costs and time to conduct a disparity study, but also means that the agency doesn’t know whether its contractors are in compliance and whether its goals are being met. Data are critical to evaluating a program’s success and ensuring the DBEs have equal opportunities, as well as a solid legal defense.

by Colette Holt, Esq., Colette Holt & Associates

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