Court Upholds Race and Gender-Conscious Goals in Federal Contracting

Aug 29, 2011
ACLU of Northern California

Page Media

ACLU of Northern CA

Civil Rights Groups Win Major Victory

While studying for a doctorate, San Francisco-based engineer Satinder P. Singh chose to specialize in the retrofitting of bridges. He joined a team charged with evaluating the structural soundness of the Bay Area's bridges following the Loma Prieta earthquake. Soon thereafter, Singh was hired as a Caltrans engineer. And in 1999, he founded his own structural engineering firm.

"At the time, I did not believe that there was discrimination in the engineering sector," recalled Singh.

Singh's firm, SPS Engineering, sought certification from Caltrans as a Disadvantaged Business Enterprise (DBE) in hopes that the agency's DBE program, created to encourage large, well established firms to contract with smaller minority and women-owned firms, might open new doors. His experiences with the program surprised him.

To score points for partnering with a DBE, one prime contractor listed Singh's firm as a subcontractor during the bidding process, but never contacted Singh after winning the contract. And Singh discovered that primes would often wait to put a call out for bid solicitations until a day or two before bids were due, rather than allowing the several weeks or even months that are generally needed to assemble a thorough and competitive bid. These were token gestures to substantiate that they have made a "good faith effort" to team up with DBEs, as Caltrans requires them to do.

Singh's experience is familiar to thousands of women – and minority-business owners who would like to get in the game when it comes to the more than $3 billion in federal dollars received by Caltrans each year. Anecdotal testimony of Singh's experiences fill more than 150 pages of a disparity study commissioned by Caltrans to help explain the gap between the numbers of minority and women-owned DBEs available to work and the numbers that are actually employed to do so.

Among the most common obstacles cited in the disparity study are difficulties in securing credit lines, loans, bonding and insurance. Many minority and female subcontractors also mentioned their lack of connections to important decision-makers in both public and private sectors, which leaves them out of the loop when it comes to hearing about bidding opportunities and sealing the deal.

Others shared examples of hostility from male primes who don't think that women should have a role in the construction industry – and say so.

But while the study was completed in 2007 and the findings were clear and significant, Caltrans officials refused to utilize the data to bolster Caltrans' DBE program. Instead, Caltrans did nothing, a decision that came at great cost to women and minority business owners, and that may have resulted from pressure from the Associated General Contractors of America (AGC) of California and the association's San Diego affiliate, part of the largest national trade organization representing commercial contractors.

This is the story of the battle over the fate of Caltrans's DBE program, one that, despite a significant recent court victory by civil rights advocates, remains far from settled.

Caltrans's Civil Rights Responsibilities and Western States Paving

A core question is this: What is the role of a public agency like Caltrans in opening up opportunities for minority and women-owned businesses? If one were to sum up 30 years of case law in this arena it would go something like this: The U.S. Supreme Court and the Ninth Circuit Court of Appeals have recognized that discrimination can distort access to opportunities, systematically preventing minority – and women-owned businesses from competing on equal footing. The government and its agencies have a compelling interest in taking affirmative steps to do better, and ensuring that tax dollars are not used to perpetuate patterns of discrimination. Any remedy must be narrowly tailored so that it addresses discrimination that is substantiated by concrete anecdotal and statistical evidence.

In a 2005 decision in the case Western States Paving Co. v. Washington State Department of Transportation, the Ninth Circuit provided criteria to define "narrowly tailored": DBE contracting goals set by the state must be limited to minority groups that evidence shows have actually suffered discrimination, and that evidence must be state-specific.

At the time of the Western States Paving decision, Caltrans had a DBE participation goal of 13.5 percent, to be achieved through a combination of race-neutral and race and genderconscious measures. (The goal was not – and has never been – mandatory. No agency or contractor can be punished for failing to meet it. The goal is more aspirational in nature.)

In 2004-2005, with the 13.5 percent goal in place, DBEs received 10.5 percent of Caltrans's contracting dollars.

Caltrans Pulls Back

But in 2006, Caltrans officials decided to remove the race – and gender – conscious component of the goal, ignoring pleas from seasoned civil rights lawyers like Oren Sellstrom of the Lawyers Committee on Civil Rights (LCCR), who warned that the results would be disastrous for DBEs. This decision was made relying on guidelines issued by the federal Department of Transportation (DOT), whose attorneys wanted to ensure that states covered by the Western States Paving decision did not violate the ruling.

Caltrans employed a firm called BBC to undertake the new disparity study. Specific evidence of discrimination, if found, would then be used to re-implement its DBE program with a narrowly tailored goal.

The BBC study was completed in June of 2007 and found statistically significant disparities for African American, Asian American, Native American and women-owned firms. But rather than putting the new evidence to work for DBEs,

Caltrans began dragging its feet.

In August of 2007, using the data in the study, Caltrans proposed to the federal DOT that it resume its prior goal of 13.5 percent. In the months that followed, DOT questioned why the agency did not specify a higher goal, based on the number of DBEs found to be available for work in California. A year later,

Caltrans was still delaying the re-implementation of any goal, and the DOT was still asking questions. Finally, in December 2008, with no goal in place, the DOT threatened sanctions against Caltrans, warning that the agency "appears not in good faith" and implying that its federal funding may be at risk.

But by that time, the result of Caltrans' inaction was already severe. DBE participation in contracting dropped to 4.6 percent by 2008, and eventually fell below 3 percent by 2009.. Minority and women business owners were effectively shut out of millions of dollars in contracts that would likely have been awarded them if Caltrans had reinstituted its program in 2007. And the door began to close as the Great Recession took hold.

The Lawsuit

Finally in 2009, Caltrans re-implemented its old goal. Almost immediately, the Pacific Legal Foundation (PLF) filed suit against Caltrans in U.S. District Court on behalf of the Associated General Contractors of America, San Diego Chapter (SDGCA), calling the disparity study "stale," "useless and irrelevant." The plaintiffs discounted the disparity study entirely, claiming that Caltrans' program was based on "some nebulous claim of unidentified discrimination" that does not meet the narrowly tailored standard.

Of particular intellectual interest is the fact that the briefs filed by PLF reflect a wholly unique interpretation of the case law. A number of pages are devoted to the argument that discrimination does not exist unless one contractor is found to be guilty of an overt, intentional act of discrimination against another, as evidenced by a specific incident tied to a specific contract. PLF argues that because Caltrans has failed to identify any discrimination that fits this criteria, its DBE program is "unconstitutional as a matter of law."

Three advocacy organizations, the LCCR, the Equal Justice Society and the ACLU of Northern California joined forces with the firm Bingham McCutchen to defend the Caltrans DBE program on behalf of a network of minority and women business owners called the Coalition for Economic Equity, and the San Diego Chapter of the National Association for the Advancement of Colored People. The civil rights groups have never been satisfied with Caltrans' DBE program – the organizations believe its goals should be higher and that they should be met. But defending the program's existence is paramount if minority and women-owned DBEs are to have a meaningful opportunity to compete and grow in California's transportation industry.

The civil rights team drew on key arguments from a wealth of precedent. The Ninth Circuit, in Western States Paving, held that state governments have a compelling interest in remedying discrimination, as Caltrans' DBE program seeks to do. Not only was the methodology of the disparity study sound, but researchers found exactly the type of evidence that courts have required: statistical evidence of disparity from which discrimination can be inferred combined with anecdotal evidence supporting the statistical analysis. And by applying race-conscious goals only to the groups that the BBC study found to be significantly under-utilized, Caltrans created a program narrowly tailored in precisely the way the Court specified in Western States Paving.

In the process of acquiring documents from the parties in the case, the civil rights lawyers learned that during the years when Caltrans was dragging its feet on reinstituting its goals, the former director of the agency, Will Kempton, was holding meetings with the Associated General Contractors of California and their San Diego affiliate (AGCSD), apparently to assuage their concerns about the DBE program.

The ACLU and partners also learned that the AGC California has been a consistent funder of the Pacific Legal Foundation for more than 20 years.

The Ruling

In March of this year, the civil rights team moved for summary judgment, asking the judge to uphold Caltrans DBE program. The U.S. District Court granted the motion, permitting the race – and gender-conscious component of the DBE program to remain in place.

The ruling marks a major victory for equality of opportunity. "The Court has signaled that race – and gender – conscious goals are an invaluable and effective tool to combat discrimination in federal contracting, whether it be direct and explicit or subtle and pervasive," explained ACLU of Northern California attorney Jory Steele.

PLF has appealed, and the next hearings will take place in 2012. The civil rights team will be ready. If the arguments in favor of the race and gender conscious approach prevail, the people who are building and maintaining California's transportation infrastructure will look more and more like the people of California. And Mr. Singh, and thousands of other minority and women business owners, will know that when it comes to contracting opportunities, one important door will remain open.