Q&A- Western States Paving Company Case

The US DOT provides specific guidance regarding the Western States Paving Company case and its impact on federally-funded contracting  in the 9th Circuit. Below is an abbreviated summary of the questions and answers provided by the US DOT.

Q. What did the court say in Western States?

The 9th Circuit panel held that 49 CFR Part 26 was constitutional. The court affirmed that Congress had determined that there was a compelling need for the DBE program and 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 state’s 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 DOT’s DBE program was not narrowly tailored because the evidence of discrimination supporting its application was inadequate. The court mentioned several ways in which the state’s 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 DOT’s 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.
  • Washington State DOT did not present any anecdotal evidence of discrimination.

Consequently, the court found that the Washington State DOT DBE program was unconstitutional as applied.

Q. What action should recipients take with respect to submitting their triennial goals?

  • 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.
  • 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 the recipient does not currently have sufficient evidence of discrimination or its effects, then the recipient would submit a race neutral triennial goal. The recipient’s 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 recipient’s market. An action plan describing the study and time lines for its completion should also be included.

Q. If recipients will be operating an all-race neutral DBE program, 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 as compared to a race- and gender-conscious program.
  • In a wholly race- neutral program (e.g., the triennial 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 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 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.

Q. 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 triennial goal  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.

Q. What should recipients’ studies include?

Based on the 9 th 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 disadvantaged. 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 and earnings.
  • 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 differences.

Q. Can there be statewide or regional studies, as opposed to a separate study for each individual recipient?

  • 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 three modes.
  • 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.

Q. Will 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.