Availability and Disparity Study - Caltrans · CHAPTER 7. Further Exploration ... What has been the agency’s past experience in meeting its ... This Availability and Disparity Study

Availability and Disparity Study

California Department of Transportation

FINAL REPORT AUGUST 31, 2012

Final Report

August 31, 2012

Availability and Disparity Study

Prepared for California Department of Transportation Office of Business & Economic Opportunity 1823 14th Street, MS 79 Sacramento, CA 95811

Prepared by BBC Research & Consulting 1999 Broadway, Suite 2200 Denver, Colorado 802029750 303.321.2547 fax 303.399.0448 www.bbcresearch.com [email protected]

mailto:[email protected]:www.bbcresearch.com

Table of Contents

CHAPTER ES. Executive Summary History of Caltrans Implementation of the Federal DBE Program .........................................ES2 Analyses in the 2012 Disparity Study ...................................................................................... ES3 Overall Annual DBE Goal ......................................................................................................... ES4 Whether or Not the Annual Goal Can be Achieved Through Neutral Means .........................ES6 Disparity Results for Individual DBE Groups.......................................................................... ES10 Measures to Implement the Program................................................................................... ES12 Next Steps.............................................................................................................................. ES15

CHAPTER 1. Introduction A. Background ...........................................................................................................................12 B. Study Scope ...........................................................................................................................14 C. Study Team............................................................................................................................17

CHAPTER 2. Collection and Analysis of Contract Data A. Overview of Caltrans Transportation Contracts....................................................................21 B. Collection and Analysis of Caltrans Contract Data ................................................................22 C. Collection of Information on Utilized Firms ..........................................................................24 D. Types of Work Involved in Caltrans Contracts ......................................................................25 E. Location of Businesses Performing Caltrans Work................................................................26

CHAPTER 3. Marketplace Conditions A. Entry and Advancement........................................................................................................32 B. Business Ownership ..............................................................................................................36 C. Access to Capital....................................................................................................................39 D. Success of Businesses..........................................................................................................318

CHAPTER 4. Availability Analysis A. Purpose of the Availability Analysis ......................................................................................41 B. Definitions of MBE, WBEs, DBEs, Potential DBEs, and Majorityowned Businesses.............42 C. Information Collected about Potentially Available Businesses .............................................45 D. Businesses Included in the Availability Database .................................................................47 E. Calculating MBE/WBE Availability on a ContractbyContract Basis .....................................48 F. Availability Results ...............................................................................................................412 G. Caltrans Base Figure for its Overall DBE Goal ....................................................................413 H. Implications for Any DBE Contract Goals............................................................................414

BBC RESEARCH & CONSULTING FINAL REPORT i

Table of Contents

CHAPTER 5. Utilization Analysis A. Overview of the Utilization Analysis .....................................................................................51 B. Overall MBE/WBE Utilization on Caltrans and Local Assistance Transportation

Contracts ............................................................................................................................53 C. MBE/WBE Utilization on Caltrans and Local Assistance Transportation Contracts

with and without Race and Genderconscious Goals........................................................54 D. Changes in MBE/WBE and DBE Utilization on Caltrans and Local Assistance

Contracts During the Study Period .....................................................................................57

CHAPTER 6. Disparity Analysis A. Overview of Disparity Analysis Methodology .......................................................................61 B. Overall Disparity Analysis Results for Caltrans Transportation Contracts ............................66 C. Disparity Analysis Results for Contracts Included in the RaceConscious Goals

Program and Contracts Not Included in the Goals Program ..............................................68 D. Contracts Awarded During 2007 and 2008 and Contracts Awarded During

2009 and 2010 ..................................................................................................................610 E. Statistical Significance of Disparity Analysis Results............................................................611

CHAPTER 7. Further Exploration of Any Disparities A. Are disparities found in some regions of the state and not in others?.................................71 B. Are there disparities for Caltrans and Local Assistance construction contracts? .................72 C. Are there disparities for Caltrans and Local Assistance construction contracts? .................72 D. Are there disparities for Caltrans and Local Assistance engineeringrelated contracts? .....79 E. Is there any evidence of overconcentration of DBEs in certain types of work? ..............717

CHAPTER 8. Caltrans Overall Annual Aspirational DBE Goal A. Establishing a Base Figure .....................................................................................................81 B. Consideration of a Step2 Adjustment ..................................................................................82

CHAPTER 9. Portion of DBE Goal to be Met through Neutral Means A. Is there evidence of discrimination within the local transportation contracting

marketplace for any racial, ethnic or gender groups? .......................................................93 B. What has been the agencys past experience in meeting its overall DBE goal? ...................93 C. What has DBE participation been when Caltrans has not applied contract goals

(or other raceconscious remedies)?..................................................................................94 D. What is the extent and effectiveness of race and genderneutral measures that

the agency could have in place for the next fiscal year?....................................................95

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Table of Contents

CHAPTER 10. Caltrans Implementation of the Federal DBE Program A. Federal Requirements of Implementing the Federal DBE Program....................................101 B. Monitoring Changes to the Federal DBE Program ............................................................1011 C. Caltrans Statefunded Contracts ......................................................................................1011

Appendices A. Definitions of Terms .......................................................................................................... A1 B. Legal Environment for Caltrans DBE Program................................................................... B1 C. Collection of Availability Information.................................................................................C1 D. General Approach to Utilization Analysis .......................................................................... D1 E. Entry and Advancement in the California Construction and Engineering Industries .........E1 F. Business Ownership in the California Construction and Engineering Industries ...............F1 G. Access to Capital for Business Formation and Success ..................................................... G1 H. Success of Businesses in the California Construction and Engineering Industries ............ H1 I. Description of Data Sources for Marketplace Analyses ......................................................I1 J. Summary of Anecdotal Interviews ..................................................................................... J1 K. Detailed Disparity Results...................................................................................................K1 L. Additional Anecdotal Information...................................................................................... L1

BBC RESEARCH & CONSULTING FINAL REPORT iii

CHAPTER ES. Executive Summary

ThefederalgovernmentrequiresstateandlocalgovernmentstoimplementtheFederalDisadvantagedBusinessEnterprise(DBE)ProgramiftheyreceiveU.S.DepartmentofTransportation(USDOT)fundsfortransportationprojects,includingFederalHighwayAdministration(FHWA)funds.The CaliforniaDepartmentofTransportation(Caltrans)receivesUSDOTfunds throughFHWAandotherUSDOTagenciesandthereforemustimplementtheFederalDBEProgram.CaltransimplementationofthefederallyrequiredDBEProgramisguidedbyregulationsin49CodeofFederalRegulations(CFR)Part26,USDOTguidanceandcourtdecisions.ThisAvailabilityandDisparityStudyisintendedtoassistCaltransinitsimplementationoftheFederalDBEProgrambyexaminingtheavailabilityandutilizationofminorityandwomenownedbusinessenterprises(MBEsandWBEs)inCaliforniastransportationcontractingindustry.The studyexaminedwhethertherearedisparitiesbetweenutilizationofMBE/WBEsandwhatmightbeexpectedbasedontheiravailabilityfortransportationcontracts.UtilizationandavailabilityresultsreportedforMBE/WBEscombine(a)firms certifiedasDBEs,(b)businessespotentiallycertifiedasDBEsand(c)minorityandwomenownedfirmsthathavegraduatedfromtheDBEprogramorareotherwisetoolargetobe certifiedasDBEs.1

CaltransimplementationoftheFederalDBEProgramincludesthefollowing: CaltransmustsetanoverallannualgoalforDBE participationinCaltransFHWAfunded

contractsand examinewhetherornottheoverallDBEgoalcanbeattainedsolelythroughneutralmeasuresorwhetherraceorgenderbasedmeasuresare needed.(Caltransmustprojecttheportiontobe metthroughneutralmeans.)

Ifitchoosestoimplementraceandgenderconsciousmeasures,suchasDBEcontractgoals,Caltransmustdeterminethe shareoftheoverallannual DBEgoalthatwillbemetthroughrace andgenderbasedmeasuresandthespecificrace,ethnicandgendergroupsthatwillbeeligiblefortheseelements.CaltransproposedimplementationoftheFederalDBEProgrammustthenbereviewedandapprovedbyUSDOT.

1Inthisstudy, certifiedDBEsmeansthosefirmscertifiedasdisadvantagedbusiness enterprises pursuanttofederalregulations.

ThetermpotentialDBEs refersto certifiedDBEsplusthoseMBE/WBEsthatappearthattheycouldbeDBEcertifiedbasedonrevenuerequirementsdescribedin49CFRPart26(regardlessof actualcertification).ThestudyteamdidnotcountaspotentialDBEsthosebusinessesthathave beendecertifiedorappearthattheywillsoongraduate fromtheDBEProgram.

MBE/WBEsincludeallminority andwomenownedfirmsregardlessof whethertheyareeligibleto be,oractuallyare, certifiedas DBEs.SomeMBE/WBEs intheCalifornia transportationcontractingindustryexceedthesizestandardsforDBEcertification.

BBC RESEARCH & CONSULTING FINAL REPORT SECTION ES, PAGE 1

In2011,CaltransretainedBBCResearch&Consulting(BBC)toconductadisparitystudythatwould provideinformation tohelpitimplementtheFederal DBEProgramforitsFHWAfundedcontracts.Disparitystudiesexaminetheutilizationandavailabilityofminority andwomenownedbusinessenterprises(MBEsandWBEs)inan agencyscontractingtodeterminewhethertherearedisparitiesbetweenactualutilizationandwhatmightbeexpectedfromtheavailabilityofMBEs,WBEsandotherfirmsforagencywork.Disparitystudiesalsoexaminequantitativeandqualitativeinformationrelatedtolocalmarketplaceconditions.ThisExecutiveSummaryreviews: ThehistoryofCaltransimplementationoftheFederalDBEProgram; Analysesprovidedinthe2012DisparityStudy; AnanalysisassistingCaltransregardinganoverallannualDBEgoalforCaltransFHWA

fundedcontracts; Informationconcerningwhetherornottheannualgoalcanbeachievedthroughneutral

means; DisparityresultsforindividualDBE groups; Measurestoimplementtheprogram;and Nextsteps.

History of Caltrans Implementation of the Federal DBE Program

CaltranshasbeenimplementingvariationsoftheFederalDBEProgramandtheregulationsthatprecededitsincethe1980s.2AfterenactmentoftheTransportationEquityActforthe21st Century(TEA21)in1998,theU.S.DepartmentofTransportationestablishedanewFederalDBEProgramtobeimplementedbystateandlocalagenciesreceivingUSDOTfunds.Western States Paving decision in 2005.Apublicagencyimplementing raceconsciousmeasuresissubjecttothestrictscrutinyanalysisasappliedbythecourts.In2005,theNinthCircuitCourtofAppealsinWestern States Paving v. Washington State DOTheldthattheFederalDBEProgramenactedbyCongresswasfaciallyconstitutional,butruledthatWashingtonStateDOTsimplementationoftheProgramwasunconstitutional.Thecourtheldthatinordertosatisfyrequirementsofstrictscrutiny,apublicentityimplementingraceconsciousmeasuresmusthaveevidenceofdiscriminationinitstransportationcontractingindustry.InresponsetotheWestern States Pavingdecision,stateandlocalagenciesaffectedbythedecision,includingCaltrans,discontinueduseofraceandgenderconsciouselementsoftheFederalDBEProgram.TheUSDOTrecommendedthatagenciesimplementingtheFederalDBEProgramshouldconsiderconductingdisparitystudies.

2Caltransonceimplementeda race andgenderconsciousprogramforcertainstatefundedcontracts.Proposition209,passedbyCaliforniavotersin1996,precludestheStatefromimplementingraceandgenderconsciousprogramsrelatedto nonfederallyfundedcontracts.


2007 Disparity Study.CaltransretainedBBCtoconductitsfirstdisparitystudy,which BBCcompletedin2007.Atthetimeofthe2007DisparityStudy,CaltranswasimplementingtheFederalDBEProgramonasolelyraceandgenderneutralbasis. 2009 Implementation of race and genderconscious contract goals.InApril2009,CaltransresumedsettingraceandgenderconsciousgoalsoncertainFHWAfundedcontracts.3 FirmscertifiedasDBEsthatwereownedbywomen,AfricanAmericans,AsianPacificAmericansorNativeAmericanswereeligibletomeetcontractgoals.DBEsownedbySubcontinentAsianAmericanmenandHispanicAmericanmencouldparticipateinotherpartsoftheprogrambutwerenoteligibletomeetraceandgenderconsciouscontractgoals.Caltransimplementationoftheprogramwasbasedinpartoninformationinthe 2007DisparityStudy.Legal challenge and 2011 court review of Caltrans implementation of the Federal DBE Program.AfterCaltransmadethesechangestoitsimplementationoftheFederalDBEProgram,AssociatedGeneralContractorsofAmerica,SanDiegoChapterchallengedCaltransimplementationoftheFederalDBEPrograminfederaldistrictcourt.TheUnitedStatesDistrictCourtfortheEasternDistrictofCaliforniain AGC, San Diego Chapter, Inc. v. California DOT, et al.heldinApril2011thatCaltransimplementationoftheFederalDBEProgramwasconstitutional.4TheDistrictCourtheldthattheCaltransDBEProgramisbasedonsubstantial statistical andanecdotalevidenceofdiscrimination in theCaliforniacontractingindustry,satisfiedthestrictscrutinystandard,andisclearlyconstitutionalandnarrowlytailoredunderWestern States PavingandtheSupremeCourtcases.5AGCSanDiegoappealedthedecisionanditiscurrentlypendingbeforetheNinthCircuit.

Analyses in the 2012 Disparity Study

Belowisa briefdescriptionoftheanalysesperformedbythestudyteamforthe2012DisparityStudy. BBCexaminedthetransportationcontractingindustryinCaliforniaandrelated contracts

awardedbyCaltransorwithfundsadministeredbyCaltrans.BBCexamineddataformorethan15,000constructionandengineeringrelatedcontractsandsubcontractsfrom2007through2010.BBCcollectedandanalyzedinformationforFHWAandstatefundedcontractsthat Caltransawardedandthatlocal agenciesawardedthroughtheLocalAssistanceProgram.

Toanalyze relativeavailabilityofminorityandwomenownedfirms(MBE/WBEs)forthiswork,morethan15,000Californiabusinessestablishmentsweresuccessfullycontactedbythestudyteam.

3LocalagenciesthatawardedFHWAfundedcontractsthroughtheLocalAssistanceProgramalsoimplementtheFederalDBEProgram,andtheyresumedsetting raceandgenderconsciousgoalsforcontractsawardedinJune2009.4 Associated General Contractors of America, San Diego Chapter, Inc. v. California DOT,U.S.D.C.E.D.Cal.,CivilActionNo. 2:09cv01622,SlipOpinion(E.D.CalApril20,2011)appeal pending,AppealNo.1116228,UnitedStatesCourtofAppealsforthe NinthCircuit. 5 Id.,SlipOpinionTranscriptat4256.


BBCexaminedquantitativeinformationconcerninglocalmarketplaceconditionsusingdatafromfederalagencies,informationcollectedaspartofthe2012availabilityinterviewswithlocalbusinesses,andothersources.

Thestudyalsoincludedqualitativeinformationfrommorethan200individualswhoparticipatedinindepthinterviews,providedoralorwrittentestimonyaspartofpublichearings,orattendedstakeholdermeetingsaspartofthisstudyorotherrecentdisparitystudiesinCalifornia.Theseindividualsincludebusinessownersandmanagers,representativesandtradeassociationsandotherpeopleknowledgeableaboutthetransportationcontractingindustryinCalifornia.Thisinformationwascollectedfromindividualsthroughoutthestate.

Overall Annual DBE Goal

Caltransmustprepareand submitanoverallannualDBEgoalforthenextthreefiscalyears,supportedby informationaboutthestepsusedtodeveloptheoverallgoal.WhendevelopinganoverallannualgoalforDBEparticipationinfederallyfundedcontracts,federalregulationsrequirethatCaltransfirstestablishabasefigureandthenconsiderstep2adjustments.Analysis of MBE/WBE availability.AboutonethirdoffirmsidentifiedasavailableasprimecontractorsandsubcontractorsonCaltransconstructionand engineeringrelatedtransportationcontractswereownedbyminoritiesorwomen, similartotheresultinthe2007 DisparityStudy.Intheavailabilityanalysis, BBCexaminedtype,contractrole,locationand sizeofworkinvolvedineachFHWAfundedprimecontractandsubcontract,anddeterminedtherelativeavailabilityofminority,womenandmajorityownedfirmstoperformthatspecificwork.BBCdollarweightedresultsforeachprimecontractandsubcontracttodetermineoverallavailability.Base figure.EstablishingabasefigureisthefirststepincalculatinganoverallannualgoalforDBEparticipationinCaltransFHWAfundedtransportationcontracts.BBCcalculatedthebasefigureusingthesameavailabilitydatabaseandapproachdescribedabove,focusingonpotentialDBEs(includingcurrentlycertifiedDBEs).BBCsapproachtocalculatingCaltransbasefigureisconsistentwithrelevantcourtdecisions,federalregulationsandUSDOTguidance.BBCsanalysisindicatesthattheavailabilityofpotentialDBEsforCaltransFHWAfundedtransportationcontractsis12.5percent.Caltransmightconsider12.5percentasthebasefigureforitsoverallannualgoalforDBEparticipation.6

6CaltransshouldalsoconsiderwhetherthetypesofFHWAfundedcontractsexaminedinthestudyarerepresentativeofthe typesofFHWAfundedcontracts thattheagencywillawardedfortheperiodcoveredbytheoverallannualDBEgoal.


Marketplace conditions and adjustments to the overall DBE goal.TheFederalDBEProgramrequiresthatagenciesconsiderstep2adjustmentstothe basefigureaspartofdetermininganoverallannualDBEgoal.Caltransisnotrequiredtomakeanystep2adjustmentsaslong asitconsidersappropriatefactorsandexplainsitsdecisioninitsGoalandMethodology document.Factorsthatagenciesshouldassessindeterminingwhethertomakeanystep2adjustmentstoabasefigureinclude: CurrentcapacityofDBEstoperformwork,asmeasuredbythevolumeofworkDBEshave

performedinrecentyears; Informationrelatedtoemployment,selfemployment,education,training,andunions; AnydisparitiesintheabilityofDBEstogetfinancing,bonding,andinsurance;and Otherrelevantdata.7

BBCanalyzedeachoftheabovestep2factorsandwasabletoquantifytheeffectofcertainfactorsonthebasefigure.Approach 1 make a downward adjustment. CaltransmightconsideranoverallannualDBE goalthatisadjustedtoreflectrecentDBEparticipationinFHWAfundedcontracts. CaltransutilizationreportsforFY2007throughFY2011indicatedmedianannualDBE

participationof6.6percentforthoseyears,whichislowerthanthe12.5percentbasefigure.

USDOTguidancesuggeststhatanagency canmakeastep2 adjustmentbyaveragingthebasefigurewithmedian pastDBEparticipation.

Approach 2 make an upward adjustment.ThereareseveralreasonswhyCaltransmightconsiderahigheroverallannualDBEgoalthanthe12.5percentbasefigure: Caltransmightconsideradjustingitsbasefigureupwardtoaccountforbarriersthat

minoritiesandwomenfaceinowning businessesintheCaliforniatransportationcontracting industry.Suchanadjustmentwouldcorrespondtoa determinationofthelevelofDBEparticipationyouwouldexpectabsenttheeffectsofdiscriminationthatCaltransmightmake.8

Anupwardadjustmentisalsosupportedbytheevidenceofbarriersthataffectminorities,women,andMBE/WBEsinobtainingfinancing,bonding,andinsuranceandtoaccountforevidencethat certaingroupsofMBE/WBEsarelesssuccessfulthancomparablemajorityownedbusinesses.Thecumulativeimpactofthesefactorsonthecurrentavailabilityofminorityandwomenownedfirmscannotbequantified,butcouldbeimportantwhenconsideringwhetherornottomakean upwardstep2adjustment.

749CFRSection26.45.849CFRSection26.45(b).


Approach 3 making no step 2 adjustment.CaltransisnotrequiredtomakeanyadjustmentsaslongasitcanexplainwhatfactorsitconsideredandcanexplainitsdecisioninitsGoalandMethodologydocument.

Whether or Not the Annual Goal Can be Achieved Through Neutral Means

TheFederalDBEProgramrequiresCaltranstoassessthepercentageofitsoverallannualDBEgoalthatcanbeachievedthroughneutralmeans,andifnecessary,thepercentagetobeachievedthroughrace andgenderconsciousmeasures.USDOToffersguidanceconcerninghowtransportationagenciesshouldprojecttheportionsoftheiroverallannualDBE goalsthatwillbemetthroughraceandgenderneutralandraceandgenderconsciousmeasures.Thisinformation suggestedexaminingthefourgeneralquestionsbelow:1. Isthereevidenceofdiscriminationwithinthelocaltransportationcontractingmarketplace

foranyracial,ethnic or gendergroups?2. Whathasbeentheagencyspastexperienceinmeeting itsoverallDBEgoal?3. WhathasDBEparticipationbeen whentheagencydidnotuseraceorgenderconscious

measures?4. Whatistheextentandeffectivenessofraceandgenderneutralmeasuresthattheagency

couldhaveinplaceforthenextfiscalyear? 1. Is there evidence of discrimination within the local transportation contracting marketplace for any racial, ethnic or gender groups?AsdiscussedingreaterdetailinChapter3,BBCexaminedconditionsintheCaliforniamarketplace,including: Entryandadvancement; Businessownership; Accesstocapital,bondingandinsurance;and Successofbusinesses. Therewasquantitativeevidenceofdisparitiesforminorityandwomenowned firmsasawhole,andforspecificgroups,concerningtheaboveissues.Qualitativeinformationindicatedsomeevidenceofdiscriminationaffectingthelocalmarketplace,althoughsomeminorityandfemalebusinessownersinterviewedinthisandotherrecentdisparitystudiesdidnot thinktheyhadbeenaffectedbyanyraceorgenderdiscrimination.


2. What has been Caltrans past experience in meeting its overall DBE goal?CaltransreportedcertifiedDBE participationinrecentyearsissummarizedinFigureES1.CaltranshasnotmetitsDBEgoalinrecentyearsbasedonthesereportsconcerningcommitmentsandawards.Figure ES1. Caltrans reported past certified DBE participation on FHWAfunded contracts, fiscal years 20072011

Federal fiscal year DBE attainment Annual DBE goal Difference

2007 6.6 % 10.5 % 3.9 %

2008 4.1 13.5 9.4

2009 3.4 13.5 10.1

2010 7.4 13.5 6.1

2011 7.2 13.5 6.3

Source: Commitments/Awards reported on Caltrans Uniform Reports of DBE Awards/Commitments and Payments.

3. What has DBE participation been when Caltrans has not applied contract goals?BBCanalyzeda broadrangeofinformationtoexaminecertifiedDBEparticipationwhenCaltranshasnotappliedcontractgoals.Caltrans reported DBE participation in years in which no race or genderconscious program applied.CaltransreportedcertifiedDBEparticipationfortwoentirefiscalyearswhenitdidnotapplyraceorgenderconsciousprogramelementsFFY2007andFFY2008andonefiscalyearwhenitimplementedraceandgenderconsciouselementsforaportionoftheyearFFY2009.FigureES1showsarangeofcertifiedDBEparticipationfrom3.4percentto6.6percentforthoseyears.BBC calculation of DBE participation for nongoals contracts for 20072010.BBCcalculated3.9percentutilizationofcertifiedDBEsfrom2007through2010forCaltransandLocalAssistancecontractsforwhichnoraceandgenderconsciousprogramapplied.9

9Asexplainedin Chapter5,thesenongoalscontractsincludedstatefundedcontractsandthoseFHWAfundedcontractsoutsidethetimeperiodwhenCaltransandlocal agenciesappliedraceandgenderconsciousgoals. Goalscontractsarethose FHWAfundedcontractsduringthetimeperiodwhenCaltransandlocalagenciesappliedDBEcontractgoals(CaltransandlocalagenciessetDBEcontractgoalsformanybutnotallgoalsperiodcontracts.)


BBCalsomeasuredcertifiedDBEparticipationforFHWAfundedcontractswhenraceandgenderconsciouscontractgoalsprogramapplied(inpartsof2009andallof2010).AspresentedinFigureES2,certifiedDBEparticipationwiththeraceandgenderconsciousprograminplacewas4.8percentduringthistimeperiod.FigureES2alsoshows thatoverallutilizationofminorityandwomenownedfirmswashigherwhengoalsdidnotapplythanongoalscontracts(13.2%versus11.5%). Figure ES2. MBE/WBE and certified DBE utilization on Caltrans and Local Assistance goals and nongoals transportation contracts, 20072010

Note:

Certified DBE utilization.

Number of contracts/subcontracts analyzed is 4,864 for FHWAfunded contracts in the goals period, 10,582 for statefunded contracts and FHWAfunded contracts in the nongoals period.

See Figures K5 and K8 and in Appendix K for detailed results.

Source:

BBC Research & Consulting from data on Caltrans and local agency contracts.

Results of disparity analyses.TherewasasubstantialdisparitybetweenoverallMBE/WBEutilizationonnongoalscontractsfrom2007through2010andwhatmightbeexpectedfromtheavailabilityanalysis.10

AnalysisofgoalscontractsindicatedsubstantialdisparitiesforMBE/WBEsoverall(seeChapter6fordetailedresults).Participation of potential DBEs in Caltrans contracts.BBCexaminedutilization ofpotentialDBEfirms(firmsthatarecurrentlycertifiedorappeartomeettherevenuerequirementsforDBEcertification)onFHWAfundedcontracts.PotentialDBEsobtained7.9percentofthecontractdollarsawardedonFHWAfundedcontractsthatwereissuedunderCaltransraceneutralimplementationoftheFederalDBEprogram. Caltransmightconsiderthis7.9percentlevelof attainmentasaminimumlevelofitsoverallannualDBEgoalthatcanbereachedthroughneutralmeansifCaltranswerehighlysuccessfulinencouragingfirmstoapplyforDBE certification.

10MBE/WBEsreceived13.2 percent ofCaltranscontractdollarsfornongoalscontracts,substantiallybelowthe17.9 percentthatmightbe expectedbasedon theavailabilityanalysisforthosecontracts.Thedisparityindex,whichdividesutilization byavailabilityandmultipliestheresultsby100,was74.Based oncertaincourtdecisions,anydisparityindexlessthan80 indicatesa substantialdisparity inthisdisparity study.


http:analysis.10

4. What is the extent and effectiveness of race and genderneutral measures that Caltrans could have in place for the next fiscal year?Caltranswillneedtoreviewtheraceandgenderneutralmeasuresthatitandotherorganizationsalreadyhaveinplace,andthoseCaltranshasplannedorcouldbeconsideredforfutureimplementation,whendeterminingtheextenttowhichCaltranscouldmeetitsoverallannualDBE goalthroughtheuseofsuch measures.TheFinalRuleeffectiveFebruary28,2011addedarequirementfortransportationagenciestofostersmallbusinessparticipationintheircontracting.WhenimplementingtheFederalDBEProgram,Caltransmustincludeanelementtostructurecontractingrequirementstofacilitatecompetitionbysmallbusinessconcerns,takingallreasonablestepstoeliminateobstaclestotheirparticipation,includingunnecessaryandunjustifiedbundlingofcontractrequirementsthatmayprecludesmallbusinessparticipationinprocurementsasprimecontractorsorsubcontractors.11

ThedisparitystudyreviewedmanyofCaltranscurrentandplannedmeasuresaswellasthoseforotherorganizationsinCalifornia.TheneutralmeasuresCaltranscurrentlyhasinplaceareextensive,asarethetechnicalassistance,outreachandothertypesofneutralprogramsoperatedbyotherorganizations.Caltransplansoncontinuingtheuseofthosemeasuresinthefutureaswellasimplementingadditionalprograms(seeChapter9ofthereport).Therewerealsoanumberofrecommendationsforexpansionorimprovementstotheseprogramsmadebybusinessownersandmanagerswhoparticipatedinindepthinterviews,stakeholdermeetingsandpublichearingsperformedduringthisstudyandotherrecentdisparitystudies(seeAppendicesJandLfordetailedresults).Summary.ThehighestlevelofcertifiedDBEparticipationidentifiedforCaltranscontractssolelyapplyingraceandgenderneutralmeasureswas6.6percent,thelevelofparticipationCaltransreportedforfederalfiscalyear2007).Including firmsthatappeartobepotentiallyDBEcertified,participationwas7.9percentonnongoalscontracts.EvenifthesefirmshadbeenDBEcertified,CaltranswouldnothavemetitsoverallgoalforDBEparticipation.BBCalsoidentifiedsubstantialdisparitiesintheoverallutilization ofMBE/WBEsinitscontractsfor2007through2010,withorwithoutincludingraceandgenderconsciouscontractgoalsintheprogram.Thereweresubstantialneutralmeasuresinoperationduringthistimeperiod.Caltransshouldreviewthesesummaryresults,aswellasthecompletedisparitystudyreport,whenprojectingwhetherornotitcanachieveitsoverallannualDBEgoalsolelythroughneutralmeans,andifnot,itsprojectionsof theportionitcan meetthroughneutralmeansandtheportiontobemetthroughraceandgenderconsciousmeans.

1149CFR26.39(a).


Disparity Results for Individual DBE Groups

IfCaltransdeterminesthatitneedstocontinuetheuseofraceorgenderconsciousmeasures,thenitshouldalsoevaluatewhichDBE groupsshouldbeconsideredeligibletoparticipateinanygoalsthatmayapplytoFHWAfundedcontracts(orotherUSDOTfundedcontracts).IfCaltransdeterminestoincludespecificDBEgroups(e.g.,groupsclassifiedasunderutilizedDBEs) butnotothergroupsina contractgoalsprogram,itmustsubmita waiverrequesttoFHWA.ResultsofthedisparityanalysesforCaltranscontractsmayberelevanttoCaltransdeterminationofDBEgroupsthatcouldbeeligibleforraceorgenderconsciousmeasures.BBCexaminedwhetherthereweredisparitiesbetweentheutilizationandavailabilityofindividualracial,ethnicandgendergroups,andpresentsresultsinChapters6and7aswellasAppendixKofthereport.Twokeyresultsaresummarizedhere.Caltrans and Local Assistance contracts from 20072010.WhenexaminingallCaltransandLocalAssistancecontractsfrom2007through2010,thereweresubstantialdisparitiesintheutilizationoffirmsownedbythefollowinggroups: AfricanAmericans; AsianPacificAmericans; HispanicAmericans;and NativeAmericans.Utilization ofwhitewomenownedfirmsandSubcontinentAsianAmericanownedfirmswasalsolessthanwhatmightbeexpectedfromtheavailabilityanalysis,butthedisparitiesdidnotreachthelevelofsubstantial.12

Caltrans and Local Assistance contracts from 20092010.Informationgatheredfromthequalitativeresearch(summarizedinChapter3)suggestedthattherecenteconomicdownturnhadasubstantialimpactonthetransportationcontractingindustry,andthatmarketconditionssubstantiallyworsenedbetweenthebeginningofthestudyperiodandtheendof2010.Thequalitativeevidenceindicatedthattheseconditionsmayhavehadanegativeimpactonsmallbusinesses,particularlyminorityandwomenowned firms.Utilizationresultsfor20072008andfor20092010areconsistentwithdeterioratingconditionsforMBE/WBEs.FigureES3comparesMBE/WBEandDBEutilizationonCaltransandlocalagencycontractsawardedinthe20072008periodversusthe20092010period.OverallMBE/WBEutilizationdroppedfrom13.2percentin20072008to11.8percentin20092010.ThisdeteriorationoccurredwhileCaltransandlocalagenciesusedraceandgenderconsciousmeasuresonitsFHWAfundedcontractsafterearlytomid2009(UDBEcontractgoals).AlthoughtheUDBEcontractgoalsappearedtoincreasetheutilizationofcertifiedDBEsduringthe20092010period,overallmarketplaceconditionsresultedinanoveralldecreaseintheutilizationofminorityandwomenownedfirms.

12Disparityindices were93forwhite womenowned firmsand 84forSubcontinentAsianAmericanowned firmsfor allcontractsfrom20072010.


Figure ES3. MBE/WBE and certified DBE share of prime/subcontract dollars for Caltrans and Local Assistance transportation contracts, 20072008 vs. 20092010

Note:

Certified DBE utilization.

Number of contracts/subcontracts analyzed is 7,785 for the 20072008 period, 7,661 for the 20092010 periods.

See Figures K17 and K18 in Appendix K for detailed results.

Source:

BBC Research & Consulting from data on Caltrans and local agency contracts.

Therefore,thestudyteamcompareddisparityresultsforcontractsawardedduring2007and2008withcontractsawardedduring2009and2010,whichareprovidedinFigureES4.ItappearsthatoveralldisparitiesforMBE/WBEsweremoreseverein20092010thaninthefirsthalfofthestudyperiod.TherewerenoMBE/WBEgroupsforwhich utilization matchedavailabilityduring20092010.Disparitiesfor20092010contractsweresubstantialforfirmsownedby: Whitewomen; AfricanAmericans; AsianPacificAmericans; HispanicAmericans; NativeAmericans.ThedisparityforSubcontinentAsianAmericanownedfirmsin20092010wasnotattheleveltobeidentifiedassubstantial.


Figure ES4. Disparity indices on Caltrans and Local Assistance FHWAand statefunded transportation contracts awarded during 20072008 and 20092010 for all MBE/WBEs considered together and separately by group

Note:

See Figures K5 and K8 for corresponding disparity results tables.

Source:

BBC Research & Consulting utilization analysis.

Other information.Informationconcerningthelocalmarketplace,includingresultsbygroup, isalsoexaminedinthisdisparitystudy.Caltransshouldreviewthefull disparitystudyreport,aswellotherinformationitmayhave,indeterminingwhetheritproposestoincludeanyraceorgenderconsciousmeasures,andifso,indeterminingtheracial,ethnicandgendergroupsthatmaybeincluded.

Measures to Implement the Program

Chapter10ofthereportreviewsUSDOT requirementsforimplementationoftheFederalDBEProgramandpointsoutareasforfurtherCaltransimprovements. ThreesuchareasarehighlightedinthisExecutiveSummary.Encouraging firms to become certified as DBEs.ManyfirmsparticipatinginindepthinterviewsorpublichearingscommentedontheDBEcertificationprocess. ItappearsthatmanyfirmsandlocalagenciesareconfusedaboutthemultipleSBE,MBEand

DBEprogramsoperatedbyagenciesinCalifornia. ManyminorityandwomenownedfirmsreportedthattheywerenotDBEcertified

becausetheythoughttheprocesswould bedifficultandthattherewouldbelittlebenefitfromcertification.

AlthoughsomebusinessownersgavefavorablecommentsabouttheCaltrans certificationprocess,anumberoffirmownerswerehighlycriticalaboutthedifficultyandtimerequirementsforcertification.


CaltransmightconsideradditionaleffortstoencourageeligiblefirmstoapplyforDBEcertification.Although CaltransappearstofollowfederalregulationsconcerningDBEcertification,whichrequirescollectionandreviewofconsiderableinformation fromprogramapplicants,itmightresearchotherwaystomakethecertificationprocesseasierforpotentialDBEs. Need for separate accounting for participation of firms potentially certified as DBEs.BasedonguidanceintheFederalDBEProgram,BBCsanalysisofthe overall annual DBEgoalinthisstudyisbasedonDBEsthatarecurrentlycertifiedandthatcouldpotentiallybecertified.OneofthereasonsthatCaltranshasnotmetitsoverallDBEgoalin pastyearsisthatitsmeasurementofDBEparticipationonly includesthosefirmsthatareDBEcertified,inaccordancewithFederalregulations.FirmsperformingCaltransworkthathavenotbeenDBEcertifiedare: CountedinthesettingofanoverallannualDBEgoal;and Notcounted(inaccordancewiththefederalregulations)intheparticipationreportsused

tomeasurewhethertheoverallannualDBEgoalhasbeenattained.BasedoninstructionsfromUSDOTstaffatthe2011NationalCivil RightSymposiumheldatUSDOTofficesinWashington,D.C. onDecember8,2011,agencies such asCaltranscanexplorewhetheronereasontheyhavenotmettheiroverallDBEgoalisbecauseofparticipationoffirmsthatcouldpotentiallybeDBEcertifiedbutarenot.USDOTthen mightexpectanagencytoexploremethodstofurtherencouragepotentialDBEstobecome DBEcertifiedasoneway ofclosingthegapbetweenreportedDBEparticipationanditsoverallannualDBEgoal.ThegapbetweencurrentlycertifiedDBEsandfirmsthatarepotentiallycertifiedasDBEsisdocumentedinthisreport(seeChapter9),asaresomeofthereasonsforthis gapaccording tobusinessownersandmanagersandothersintheindustry(seeAppendicesJandL).CaltransmaywanttoconsiderdevelopingthetoolstocontinuetotrackparticipationoffirmsthatarepotentiallycertifiedasDBEs,asexplainedinChapter10.ItmightalsoexplorehowtoincreasethenumberofminorityandwomenownedfirmsthatapplyforDBEcertification.Exploration of alternative approaches to current DBE contract goals program.Someindividualsparticipatinginindepthinterviews,publichearingsandstakeholdermeetingsconductedinthestudysuggestedthatCaltransexplorenewwaysofimplementingtheFederalDBEProgramthatbetterachievedtheobjectiveoffurtherdevelopingminorityandwomenownedbusinesses.TheyreportedthattheDBEcontractgoalsencourageextensiveeffortsonthepartofprimecontractorstodocumentthattheyhavecontactedDBEsaboutsubcontractingopportunities(thegoodfaitheffortsprocess)butthatthenatureofthebidding processmakesitdifficultto ensuremeaningfulandsubstantialparticipationofDBEsonthosecontracts.Issuesraisedbytheseparticipantsinclude:


ThechallengeofunbundlingsubcontractelementsaheadoftimeintosizessuitableforDBEs,especiallyoncomplexprojectswithtightbiddingschedules;

DifficultyoffittingDBEsintoabidsubmissioninthefinalminutesbeforeabiddeadline,especiallyiftheDBEhasnotbidacompletesubcontractingpackage;

TendencyofprimecontractorstolooktoDBEsonlyforportionsoftheprojectthatareeasilyseparatedinanoverallbid package(e.g.,trucking);

Insufficient responsibilityonfirsttiersubcontractorsonlargeprojectstolookforwaystoincludeDBEsassecondtiersubcontractorsintheir projectcomponents;

Insufficient incentivestodevelopworkopportunitiesonprojectsthatwouldencourageDBEsubcontractorstobecomeprimecontractorsonfutureprojects; and

Inahighly pricecompetitiveenvironment,thechallengeofchoosinganysubcontractorfora portionoftheprojectthatisnotthelowbidwhentheprimecontractorisputtingtogetherthetotalbid.

AnumberofintervieweesindicatedthatDBE contractgoalsproduceanincentiveforprimecontractorstousehighlyautomatedgoodfaitheffortsprocessestocomplywiththeprogramratherthantoseekmeaningfulparticipationofDBEs inaproject.Manyintervieweeswerehighlycriticalofprogramsthatreliedon goodfaitheffortssubmissions. AnumberofparticipantssuggestedapproachestheythoughtweresuperiortothecurrentversionoftheDBEcontractgoals/goodfaitheffortsmeasuresinplaceforFHWAfundedcontracts.Ingeneral,theseideasfocuson: Streamliningprocessesfor primecontractorsubcontractorcommunicationaboutspecific

bidopportunities(buildingonwhatCaltranshasrecentlyimplemented);and ProvidingincentivesforprimecontractorstoincreaseDBEparticipationonFHWAfunded

projectsinwaysthatwouldfurtherdevelopthoseDBEs.CaltransmightfurtherexploretheseandothertypesofopportunitiesforimprovingitscurrentimplementationoftheFederalDBEProgram.Thismayincludereviewinglegalissues,includingstatecontractinglaw andwhetheralternativemeasureswouldmeetUSDOTregulations.CaltransshouldalsoreviewwhatithaslearnedinitsmoreflexibleapplicationoftheDBEProgramtoitsdesignbuildcontracts.Chapter10ofthedisparitystudyreportdiscussestheseconceptsindetail,withsupportinginformationinAppendicesJandL.


Next Steps

ThedisparitystudyreportpresentsanindependentanalysisofinformationrelatedtoCaltransimplementationoftheFederalDBEProgram.Caltransshould reviewreportresultsandotherrelevantinformationwhenmakingdecisionsconcerningitsimplementationoftheFederalDBEProgram.Caltranswillneedtosubmita GoalandMethodologyforathreeyearperiodbeginningFederalFiscalYear2013.Chapter10ofthereportprovidesadditionalinformationconcerningprogramcomponentsforCaltransconsideration.USDOTperiodicallyrevisescomponentsoftheFederalDBEProgramandissuesguidanceconcerningimplementationof theProgram.Inaddition,newcourtdecisionsprovideinsightsastoproperimplementationoftheFederalDBEProgram.Caltransshould closelyfollowsuchdevelopments.Caltransshouldalsoexaminestaffing,trainingandinformationsystemsnecessarytoimproveitsimplementationoftheFederalDBEProgram.


CHAPTER 1. Introduction

TheCaliforniaDepartmentofTransportation(Caltrans)isresponsible formanagingmorethan50,000milesofCalifornia'sfederalandstatehighways.BecauseCaltransreceivesfundsfromtheUnitedStates DepartmentofTransportation(USDOT),itmustimplementtheFederalDisadvantagedBusinessEnterprise(DBE)Program.TheFederalDBEProgramisdesignedtoaddresspotential discriminationagainstDBEsintheawardandadministrationofUSDOTfundedcontracts.1

CaltransretainedBBCResearch&Consulting(BBC)toconductadisparitystudythatwouldprovideinformationtohelpitimplementtheFederalDBEProgram.Adisparitystudyprimarilyexamineswhetherthereareanydisparitiesbetween: Thepercentageofcontractdollars(includingsubcontractdollars)thatanagencyanditssubrecipientsawardedtominorityandwomenownedbusinessenterprises(MBE/WBEs)duringaparticulartimeperiod(i.e.,utilization)2;and

ThepercentageofcontractdollarsthatMBE/WBEsmightbeexpectedtoreceivebasedontheiravailabilitytoperformonspecifictypes,sizesandlocations oftheagencysprimecontractsand subcontracts(i.e.,availability).

Disparitystudiesalsoexamineotherqualitativeandquantitativeinformationrelatedto:localmarketplaceconditionsforDBE/MBE/WBEsandforothersmallbusinesses;contractingpracticesand businessassistance programsthattheagencycurrentlyhasinplace;andpotentialprogrammeasuresforconsiderationaspartoftheagencysimplementationoftheFederalDBEProgram.USDOTrecommendsthatagenciesimplementingtheFederalDBEProgramshouldconsiderconductingdisparityforseveralreasons. Thetypesofresearchthatareconductedaspartofadisparitystudyprovideinformationthatisuseful forsettingoverallannualaspirationalDBEgoalsandforfinetuningimplementationoftheFederalDBEProgram.

Stateandlocal agenciesthathavesuccessfullydefendedtheirimplementationsoftheFederalDBEProgramincourthavetypicallyreliedonthetypesofinformationcollectedaspartofadisparitystudy.

Adisparitystudyoftenprovidesinsights intohowtoimprovecontractopportunitiesforlocalsmallbusinesses.

1BBCconsiderscontractsthatincludeatleast$1ofUSDOTfundingasUSDOTfunded. 2Percentageofdollarshasbeenacceptedincourtsasanappropriatewayofexaminingutilization.

BBC RESEARCH & CONSULTING FINAL REPORT CHAPTER 1, PAGE 1

Anindependent,objectivereviewofMBE/WBEparticipationinanagencyscontractingisvaluable toboth agencyleadershipandtoexternal groupsthatmaybemonitoringtheagencyspractices.

Inthischapter,BBCintroducesCaltransdisparitystudyinthreeparts: A. BackgroundB. Studyscope;andC. BBCstudyteam.

A. Background

AsarecipientofUSDOTfunds,Caltransmustcomply withfederalregulationsandimplement theFederalDBEProgram.Afterenactment oftheTransportationEquityActforthe21stCentury(TEA21)in1998,USDOTestablishedanewFederalDBEProgramforfund recipientstoimplement.3Federalregulationsin49CFRPart26guidehowstateandlocalgovernmentsshouldimplementtheFederalDBEProgram.4Accordingtothoseregulations,agenciesarerequiredtodevelopandsubmitthreeyearoverallaspirationalpercentagegoalsforDBEparticipation,whichmaybemetusingraceandgenderneutralmeansor,ifnecessary,raceandgenderconsciousmeans(oracombinationofbothtypesofmeasures).5

Setting an overall goal for DBE participation. CaltransmustdevelopathreeyearoverallgoalforDBEparticipationinitsUSDOTfundedcontracts.Caltrans overall goalforDBEparticipationisaspirationalitdoesnothavetomeetthegoalandfailuretodosodoesnotautomaticallyleadtoanypenalties.TheFederalDBEProgramdescribesthestepsanagencymustfollowinestablishingitsgoal.To beginthegoalsettingprocess,anagencymustdevelopabasefigurebasedontheavailabilityoffirmsthatareDBEsorcouldbecertifiedasDBEsandonotherinformation.Then,afterconsideringvarious,relatedfactors,theagencycanmakeupward,downward,ornoadjustmentstoitsbasefigureasitdeterminesitsoverallaspirationalDBEgoal(i.e.,considerationofstep2adjustments).Projecting the portion of the overall DBE goal to be met through neutral means.Accordingtoprogramregulations49CFRPart26,anagencymustmeetthemaximumfeasibleportionofitsoverallgoalforDBEparticipationthroughraceandgenderneutralmeans.6 Neutralprogrammeasuresaremeasuresdesignedtoremovepotentialbarriersforallbusinessesattemptingtodoworkwiththeagencyormeasuresdesignedtospecificallyincreasetheparticipationofsmalloremergingbusinessesingeneral(forotherexamplesofraceandgenderneutralprogrammeasures,see49CFRSection26.51(b)). Ifanagencycanmeetitsgoalsolelythroughraceandgenderneutralmeans,itcannotimplementraceorgenderconscious

3 USDOTmostrecentlyrevisedtheFederalDBEPrograminearly2011.

4http://ecfr.gpoaccess.gov/cgi/t/text/textidx?region=DIV1;type=boolean;c=ecfr;cc=ecfr;sid=14e071f96d5d61cb9d2410ed56c59d3d;q1=dbe;rgn1=Section%20Heading;

op2=and;rgn2=Section;op3=and;rgn3=Section;view=text;idno=49;node=49%3A1.0.1.1.20;rgn=div5

5 49CFRSections26.45,26.51.649CFRSection26.51.


http://ecfr.gpoaccess.gov/cgi/t/text/text

measuresaspartofitsprogram(i.e.,measuresspecificallydesignedtoincreasetheparticipationofDBE/WBE/WBEs,such asDBE/MBE/WBEcontractinggoals).Everythreeyears,theFederalDBEProgramrequiresagenciestoprojecttheportionsoftheiroverallDBEgoalsthattheywillmeetthroughneutralmeasuresandtheportionsthattheywillmeetthroughanyraceorgenderconsciousmeasures.USDOThasoutlinedanumberoffactorsforanagency toconsiderwhenmaking suchdeterminations.7

Determining whether all groups will be eligible for race or genderconscious program measures.If anagencydeterminesthatraceorgenderconsciousprogrammeasuresareappropriateforitsimplementationoftheFederalDBEProgram,then,basedonrelevantanalyses,itmustalsodeterminewhichracial/ethnicorgendergroupsareeligibleforthosemeasures.USDOTprovidesawaiverprovisionifanagencydeterminesthatitsimplementationoftheFederalDBEProgramdoesnotneedtoincludecertainracial/ethnicorgendergroupsintheraceorgenderconsciousprogrammeasuresthatitimplements.Forexample,inrecentyearsCaltranssetcontractinggoalsforunderutilizedDBEs(UDBEs),whichdidnotincludeallDBEgroups.CaltranscountstheparticipationofallDBEstowarditsoverallDBEgoal,but onlyUDBEscounttowardmeetingindividualcontractinggoals.CaltransdeterminedwhichDBEgroupswereUDBEsinpartbyexaminingresultsofdisparityanalysesforindividualracial/ethnicandgendergroups.Promoting DBE participation as prime contractors.The FederalDBEProgramcallsforagenciestoremoveanybarrierstoDBEparticipationasprimecontractorsbutdoesnotrequireagenciestoimplementprogramsthatgivepreferencetoDBEprimecontractors.Quotasareprohibited,butunderextremecircumstances,anagencycanrequestUSDOTapproval tousepreferenceprogramsrelatedtoDBEprimecontracting.Smallbusinesspreferenceprograms,includingreservingcontractsonwhichonlysmallbusinessesprimecontractors canbid,areallowable undertheFederalDBEProgram.USDOTrecentlybeganrequiringagenciestoincludesmall businessprogramsaspartoftheirimplementationoftheFederalDBEProgram.Legal challenges. AlthoughagenciesarerequiredtoimplementtheFederalDBEPrograminordertoreceiveUSDOTfunds,differentgroupshavechallengedthoseimplementationsincourt.Inadditionto Caltrans,statetransportationdepartmentsinIllinois,Minnesota,andNebraskahavesuccessfullydefendedtheirimplementationsoftheFederalDBEProgram,ashasalocaltransportationagencyinNewJersey.TheWashingtonStateDepartmentofTransportationwasnotabletosuccessfullydefenditsimplementationoftheFederalDBEProgram.

7Seehttp://www.dotcr.ost.dot.gov/Documents/Dbe/49CFRPART26.doc


http://www.dotcr.ost.dot.gov/Documents/Dbe/49CFRPART26.doc

B. Study Scope

ThedisparitystudyprovidesinformationthatwillhelpCaltranscontinueitsimplementationoftheFederalDBEProgram,including: EstablishingathreeyearoverallaspirationalgoalforDBEparticipationinitsUSDOTfundedcontracts;

PotentiallyprojectingtheportionofitsoverallaspirationalDBEgoaltobemetthroughraceandgenderneutral meansandanyportiontobemetthroughrace orgenderconsciousmeans;

Identifyingspecificracial/ethnicorgendergroupsthatareeligibleforanyraceorgenderconsciousprogrammeasures(ifapplicable);and

ChoosingspecificprogrammeasuresaspartofitsimplementationoftheFederalDBEProgram.

Theinformationwill alsobeuseful toCaltransasitcontinuesto seekfairnessinitscontracting andprocurementprocesses,includingfornonUSDOTfundedcontracts.Racial/ethnic and gender groups examined in the study. ADBEisdefinedin 49CodeofFederalRegulations(CFR) Part26asaforprofitsmallbusinessthatisownedandoperatedbyoneormoreindividualswhoarebothsociallyandeconomicallydisadvantaged.8Thereisalsoanannualgrossreceiptslimit(notmorethan$22,410,000averageoverthreeyearsandlowerlimitsforcertainlinesofbusiness)andapersonalnetworthlimit($1.32millionnotincludingequityinthebusinessandinprimarypersonalresidence)thatbusinessesandbusinessownersmustfall belowtobeabletobecertifiedasaDBE. TheFederalDBEProgramspecifiesthatthefollowingracial/ethnicandgendergroupsarepresumedtobedisadvantaged: BlackAmericans(orAfricanAmericansinthisstudy); HispanicAmericans; NativeAmericans; AsianPacificAmericans; SubcontinentAsianAmericans; Womenofanyraceorethnicity;and AnyadditionalgroupswhosemembersaredesignatedassociallyandeconomicallydisadvantagedbytheSmallBusinessAdministration(SBA).

849CFRSection26.5.


Inaddition,agenciescanconsiderindividualsto besociallyandeconomicallydisadvantagedonacasebycasebasis.9Aslongasthosebusinessesandbusinessownersdonotexceedrevenueandpersonalnetworthlimits,theyareeligibleforDBEcertification. MBE/WBEs, DBEs, and Potential DBEs.BBCincludesMBEsandWBEsregardlessofDBEcertification inutilization,availability,disparity,andmarketplaceanalyses.Asaresult,thoseanalyses pertaintoanypotentialbarriersrelatedspecificallytotherace,ethnicity,orgenderofbusinessowners.10

ThestudyteamusesthetermsMBEsandWBEstorefertobusinessesthatareownedandcontrolledbyminoritiesorwomen(accordingtotherace/ethnicitydefinitionslistedabove),regardlessofwhethertheyarecertifiedormeettherevenueandnetworthrequirementsforDBEcertification.11

ThestudyteamusesthetermDBEtoreferspecificallytobusinessescertifiedassuch,accordingtothedefinitionsin49CFRPart26.

ThestudyteamusesthetermpotentialDBEtorefertoMBE/WBEsthatareDBEcertifiedorappearthattheycouldbeDBEcertifiedbasedontherevenuerequirementsspecifiedaspartoftheFederalDBEProgram,regardlessofactualDBEcertification.

Analyses in the disparity study. ThedisparitystudyfocusesonCaltranstransportationrelatedcontractscontractsthatinvolvedtheplanning,design,construction,maintenance,orrepairoftransportationinfrastructure.ItincludesanalysesofwhetherthereisadisparitybetweentheutilizationandavailabilityofMBE/WBEsonthosecontracts.Inaddition, itincludesanalysesrelatedtolocalmarketplaceconditionsforDBE/MBE/WBEsandforothersmallbusinesses;CaltransthreeyearoverallaspirationalDBEgoal;Caltranscontractingpracticesandbusinessassistanceprograms;andpotentialprogrammeasuresforconsiderationaspartofCaltransimplementationoftheFederalDBEProgram.Data collection and analysis. BBCreliedonmultiple Caltransdatasourcesincludingbothelectronicandhardcopydatafilestocompletetheutilizationandavailabilityanalyses.Inaddition,thestudyteamconductedtelephoneinterviewswiththousandsofbusinessesthroughoutCalifornia.Thescope ofthestudyteamsdatacollectionandanalysisasitpertainstotheutilizationandavailabilityanalysesispresentedinChapter 2.Marketplace conditions. BBCconductedquantitativeanalysesoftherelativesuccessofminoritiesandwomenandMBE/WBEs throughoutCaliforniastransportationcontractingindustry.BBCcomparedbusinessoutcomesforminorities,women,andMBE/WBEstooutcomesforwhitemalesandwhitemaleownedfirms.Inaddition,thestudyteamcollectedqualitativeinformation aboutpotentialbarriersthatsmallbusinessesandMBE/WBEsfaceintheCalifornia

9 WhitemaleownedbusinessescanalsomeetthefederalcertificationrequirementsandbecertifiedasDBEs.

However,relativelyfewDBEsarewhitemaleownedbusinesses.

10Ifthedisparity analysiswere conductedbased onlyoncurrentlycertifiedDBEs,thestudyteamwouldbeunabletodraw

conclusionsaboutthe effectivenessorneedforprogramstoassistMBE/WBEs.

11Forthis study,a WBEisa firmwithatleast51percentownershipandcontrolbynonminoritywomen. Firmsownedand

controlledbyminoritywomenarecountedasminorityownedfirms.


http:certification.11http:owners.10

constructionandengineeringindustriesthroughindepthanecdotalinterviews,focusgroups,andpublichearings.Informationaboutmarketplaceconditions ispresentedinChapter 3 and Appendices E, F, G, H, I and J.

Availability analysis. BBCanalyzedthepercentageofMBE/WBEsthatareready,willing,andabletoperformonCaltranstransportationrelatedconstructionandengineeringcontracts.Thatanalysiswasbasedontelephoneinterviews withthousandsofCaliforniabusinessesthatworkinindustriesrelatedtothetypesoftransportationcontractingdollarsthatCaltransawards.BBCanalyzedavailabilityforspecificMBE/WBEgroups,typesofcontracts,andfederalfiscalyears.ResultsfromtheavailabilityanalysisarepresentedinChapter 4 and Appendix C. Utilization analysis.BBCanalyzedcontractdollarsthatCaltransawardedtoMBE/WBEsontransportationrelatedconstructionandengineeringcontractsthatCaltransawardedbetweenJanuary1,2007andDecember31,2010.Thosedataincludedinformationaboutassociatedsubcontracts. BBCanalyzedcontractsthatwereUSDOTfundedandthosethatweresolelyfundedthroughnonfederalsources.ResultsfromtheutilizationanalysisarepresentedinChapter 5 and Appendix D.Disparity analysis. BBCexaminedwhethertherewereanydisparitiesbetweentheutilizationandavailabilityofMBE/WBEsforconstructionandengineeringcontractsthatCaltransawardedduringthestudyperiod.BBC analyzeddisparitiesforspecificMBE/WBEgroups,typesofcontracts,contractroles,andcontractsizes.ThestudyteamalsoanalyzeddisparitiesforcontractstowhichDBEcontractinggoalsappliedandforcontractstowhichsuchgoalsdid notapply(e.g.,nonfederallyfundedcontracts).Thestudyteamalsoassessedwhetheranyobserveddisparitieswerestatisticallysignificant.ResultsfromthedisparityanalysisarepresentedinChapter 6 and Appendix K.

Explorations of possible causes of any disparities. BBCexaminedpotential causesofanydisparitiesbetweenutilizationandavailabilityofMBE/WBEsforCaltransandLocalAssistancecontractsawardedduringthestudyperiod.Thisincludedanalysisofavailabledataonthebidandproposal processforasampleofcontracts,comparisonofresultsforsubsetsofCaltranscontractsand reviewofanyindicationsofoverconcentration.ThereviewofpotentialexplanationsofanydisparitiesispresentedinChapter 7.Caltrans overall annual aspirational DBE goal. Basedoninformationfromtheavailabilityandotheranalyses,BBCprovidedCaltranswithinformationthatwillhelpwithsettingitsthreeyearoverall annual aspirational goal,includingthebasefigureandconsiderationofanystep2adjustments.InformationaboutCaltrans'overallannualDBEgoalispresentedinChapter 8. Projecting portion of goal to be met through neutral means. BBCreviewedinformationregardingevidenceofdiscrimination in theCaliforniacontractingmarketplace,analyzedCaltransexperiencewithmeetingitsoverallDBEgoalandprovidedinformationaboutCaltranspastperformanceinmeetingitsoverallDBEgoalusingraceandgenderneutralmeasures.InformationrelatedtotheseinvestigationsispresentedinChapter 9.


Caltrans implementation of the Federal DBE program. BBCreviewedCaltranscurrentcontractingpracticesandcurrentFederalDBEProgrammeasures.Fordifferenttypesofprogramelements,BBCpresentsitemsforCaltranstoconsider.ThestudyteamsreviewispresentedinChapter 10.

C. Study Team

TheBBCstudyteamwascomprisedofsixfirmswith decadesofcollectiveexperiencerelatedtoconductingdisparitystudiesinconnectionwiththeFederalDBEProgram.KeypersonnelfromfourfirmsonthestudyteamBBC,KeenIndependentResearch,Holland&KnightandGCAPServiceswerepartoftheBBCledstudyteamthatconductedthe2007Caltransdisparitystudy.BBC Research & Consulting (BBC) prime consultant. BBCisaDenverbasedeconomicandpolicyresearchfirm.BBChadoverallresponsibilityforthe studyandperformedmostoftherequiredquantitativeanalyses.Keen Independent Research (Keen Independent). KeenIndependentisaDenverbasedeconomicandmarketresearchfirmthatspecializesindisparitystudies.KeenIndependentadvisedonthestudyandcoauthoredthefinalreport.Holland & Knight. Holland&Knightisanationallawfirmwithofficesthroughoutthecountry,includinginCalifornia.Holland&Knightconductedthelegalanalysisthatprovidesthebasisforthisstudy.GCAP Services (GCAP). GCAPisaminorityownedresearchfirmwithofficesinCostaMesaandCitrusHeights,California.GCAPhelpedtocompilehardcopycontractdataatCaltransofficesandhelpedtoreviewcurrentcontractingpracticesandbusinessassistanceprograms.Faro Consulting and Solutions (Faro). FaroisadisabledveteranownedprofessionalservicesfirmlocatedinSacramento,California.Faroconductedindepthanecdotalinterviewsaspartofqualitativeanalyses ofmarketplaceconditions.

WSC Consulting (WSC). WSC isadisabledveteranownedprofessionalservicesfirmlocatedinSacramento,California. WSCconductedindepthanecdotalinterviewsaspartofqualitativeanalysesofmarketplaceconditions.


CHAPTER 2. Collection and Analysis of Contract Data

Chapter2providesanoverviewoftheCaltranstransportationcontractsincludedinthestudyanddescribestheprocessthatthestudyteamusedtocollectinformationonprimecontractsandsubcontracts. Chapter2isorganizedintofiveparts:A. Overview ofCaltranstransportationcontracts; B. CollectionandanalysisofCaltranscontractdata; C. CollectionofinformationonvendorsutilizedonCaltranscontracts;D. Typesofworkinvolvedin Caltranscontracts;andE. LocationofbusinessesperformingCaltranswork.AppendixDprovidesadditionaldetailsaboutthemethodsBBCusedtocollectandanalyzethe contractdata.

A. Overview of Caltrans Transportation Contracts

Caltransuses FederalHighwayAdministration(FHWA)fundingandstateresourcestofundhighwayandrelatedconstructionandengineeringprojectsthroughoutCalifornia.Examplesofsuchprojectsincludeconstructingnewhighways,resurfacingroads,andimprovingbridges.Constructioncontractstypicallyinvolveaprimecontractorandseveralsubcontractors.CaltransOfficeEngineer(OE)awardsconstructioncontracts.Forprojectsthatrequireanengineeringordesignphase, Caltranssometimesretainsanengineeringprimeconsultant.Engineeringprimeconsultantsmayretainsubconsultantstoperformspecializedworkondesignprojectssuchassurveyingormapping.CaltransDivisionofProcurementsandContracts(DPAC)awardsengineeringcontracts. CaltransalsoadministerstheLocalAssistanceProgramusingFHWAandstatefunds. Throughthisprogram,CaltransDivisionofLocalAssistanceoverseesfundingtomorethan600cities,counties,andregionalagenciesforthepurposeofimproving theirtransportationinfrastructureandprovidingtransportationservices.Localagenciesthatreceive thefundingareresponsibleforawardingandadministeringtheresultingcontracts.CaltransalsoadministerssomeFHWAandstatefundsthroughotherdivisionsincludingtheDivisionof TransportationPlanning(DTP)andtheDivisionofMassTransportation(DMT).


B. Collection and Analysis of Caltrans Contract Data

Thestudyteamworkedwith CaltransstafftocollectdataonCaltransFHWAandstatefundedtransportationconstructionandengineeringprimecontractsandsubcontracts.Asa partofthiseffort,thestudyteamcollectedinformationona sampleofcontractsadministeredbylocalagenciesasapartofCaltransLocalAssistanceProgram.Study period.BBCexaminedCaltranscontractsawardedbetweenJanuary1,2007andDecember31,2010.BBCdeterminedthetimeperiodforeachcontractbasedonthedateofcontractaward.Data sources.BBCusedseveralinformationsourcestocompileprimecontractandsubcontractinformation,asdescribedindetailinAppendixD. Caltransstaffprovidedthestudyteamwithelectronicrecordsonprimecontractsthat

Caltransawardedduringthestudyperiod. Thestudyteamworkedwith Caltransstafftoreview anumberofpossibledatasourcesfor

constructionsubcontractsandconcludedthattheformCEM1201 SubcontractingRequestwasthemostcomprehensivesourceofinformation.PrimecontractorsarerequiredtosubmitCEM1201toCaltranspriortousingasubcontractor.ThestudyteamworkedwithCaltransdistrictofficestocollectavailablecopiesofformCEM1201.

InformationaboutCaltransengineeringcontractscamefromacombinationof electronicrecordsandhardcopyinvoicesrelatedtoeachcontract.BBCcollectedinformationforbothFHWAandstatefundedcontracts.

ThestudyteamcollecteddataonasampleofcontractsthatwereawardedaspartoftheLocalAssistanceProgramduringthestudyperiod.AppendixDdescribesthesamplemethodologythatthestudyteamused.Afterselectingthesample,thestudyteamconducteda mailsurveyofthelocalagenciesthatawardedtheselectedcontractstocollectinformation ontheprimecontractorsandsubcontractorsthatperformedthework.

ForDMTcontracts,Caltransstaffprovidedaspreadsheetofcontractswithinformationontheprimecontractorsandsubcontractorsthatperformedthework.

ThestudyteamworkedwithDTPstafftocollectavailabledata fromthelargestrecipientsofDTPfunding.AlargeportionofDTPfundingduring thestudyperiodwasusedforoperationsbylocalagenciesandwasnotincludedinthestudy.

CaltransalsoprovidedinformationonwhethereachconstructionandengineeringcontractwasFHWAfunded.1

1Caltransconsidersacontracttobe FHWAfundedifFHWAfunded$1ormoreof the contract.


Total number of Caltrans contracts. Thestudyteamidentifiedmorethan1,900Caltransawardedconstructioncontracts,morethan170Caltransawardedengineeringcontracts,andmorethan1,000LocalAssistanceProgramcontractsadministeredduringthestudyperiod.Thesecontractsaccountedforapproximately$12.5billionof Caltransspending.Mostofthesecontractsweresuitableforinclusioninthestudyteamsanalyses.Contracts included in the study teams analyses.ThestudyteamincludedtransportationconstructionandengineeringcontractsthatCaltransawardedbetweenJanuary1,2007andDecember31,2010initsanalyses.Foreachprimecontractandsubcontract,thestudyteamdeterminedwhethertheutilizedvendorwasaforprofitbusinessandidentifiedtheindustryandsubindustrythatcharacterizedthevendorsprimaryline ofbusiness(e.g.,thesubindustryofWater,sewer,andutilitylines).BBCidentifiedsubindustriesbasedonCaltranscontract dataandthereportedprimarylineofworkofthecontractor.Thestudyteamonlyconsideredthosecontractsonwhichaforprofitbusinessperformedthework.Basedontheabovecriteria,thestudyteamexamined2,940constructionandengineeringcontractsthatCaltransawardedduringthestudyperiod,totaling$11.4billion.Figure21presentsthenumberofcontractsandcontractdollarsthatthestudyteamincludedinitsanalysesbyfundingsource.Approximately75percentofthedollarsonthesecontracts,$8.5billion,wereforcontractsinvolvingFHWAfunds.ThatamountincludescontractsthatwereonlypartiallyfundedthroughFHWAfunds. Thestudyteamcollecteddataon12,506subcontractsassociatedwithCaltranscontractsawardedduringthestudyperiod.Whenconsideringboth primecontractsandsubcontracts, thestudyteamexamined15,446contractelements.Figure 21. Number of Caltrans transportationrelated contracts, 2009June 2011

Source: BBC Research & Consulting from Caltrans contract data.

Caltrans contracts Dollars (millions) Number

Caltrans construction contracts

FHWAfunded 652 $5,966

Statefunded 1301 2,691

Total 1953 $8,657

Caltrans Engineeringrelated contracts

FHWAfunded contracts 137 $244

Statefunded 40 150

Total 177 $394

Local assistance contracts

FHWAfunded contracts 792 $2,333

Statefunded 18 13

Total 810 $2,346

Total contracts

FHWAfunded 1581 $8,543

Statefunded 1359 2,854

Total 2,940 $11,397


Contracts not included in the study teams analyses.Thestudyteamdidnotincludecontractsintheutilizationanalysisthatwereawardedbeforeandafterthestudyperioddatesandcontractswheretheprimaryindustrywasnotdirectlyrelatedtotransportationcontracting(such asfinancial services).Prime contract and subcontract amounts.Foreachconstructionandengineeringcontract,BBCexamineddollarsthattheprimecontractorandanysubcontractorsreceived. Ifacontractdidnotincludeanysubcontracts,thestudyteamattributedtheentireaward

amount(includinganyamendmentsorchangeorders)totheprimecontractor. Ifacontractincludedsubcontracts,thestudyteamcalculatedsubcontractamountsasthe

totalcontractamount(atthetimeof award)committedorbudgetedtoeachsubcontractor.BBCthencalculatedprimecontractoramountasthetotalawardamountlessthesumofdollarscommittedtoallsubcontractors. Whencontractawardinformationwasnotavailable,BBCusedinformationonpaymentstoprimecontractorsandsubcontractors.

C. Collection of Information on Utilized Firms

ThestudyteamcollectedinformationonfirmsutilizedonCaltranscontractsduringthestudyperiodfromavarietyofsources,including: Caltranscontractdata; TheCaliforniaUnifiedCertificationProgram(CUCP); Dun& Bradstreet(D&B)businesslistingsandotherbusinessinformationsources; Telephoneinterviewswithfirmownersandmanagers;and Caltransstaffreview.Thestudyteamcompiledthefollowinginformationabouteach utilizedvendor: Firmlocation; Ownershipstatus(MBE/WBE/DBE); Primarylineofwork; Yearofestablishment;and Firmsize(intermsofnumberofemployeesandrevenue).AppendixDpresentsadditional informationaboutthedata that thestudyteamcollectedonutilizedfirms.


D. Types of Work Involved in Caltrans Contracts

Thestudyteamdeterminedthesubindustries,orworktypes,thatwereinvolvedineachprimecontractandsubcontractbasedonCaltranscontractdata,and,asasupplement,oninformationabouteachutilizedprimecontractorandsubcontractorsprimary lineofbusiness.BBCdevelopedthesubindustriesbasedinpartonD&B8digitclassificationcodes.Figure22presentsthedollarsthatthestudyteamexaminedineachsubindustryaspartofitsanalyses.Figure 22. Dollars of Caltrans prime contracts and subcontracts by subindustry, 2009June 2011

Industry Total (in thousands)

Construction

Highway and street construction

Electrical work

Asphalt and concrete supply

Rebar and reinforcing steel

Fencing, guardrails and signs

Land site prep

Landscape services

Wrecking and demolition

Painting and striping

Water, sewer and utility lines

Excavation and drilling

Trucking

Flagging services

Heavy construction equipment rental

Construction sand and gravel

Other construction

Other construction supplies

Total construction

Engineeringrelated

Engineering

Construction management

Environmental research and consulting

Testing services

Surveying and mapmaking

Archeological expeditions

Landscape architecture

Transportation consulting

Total engineeringrelated

Total

$8,206,625

427,881

420,308

314,417

216,548

153,399

149,238

112,100

105,671

84,126

81,345

41,326

31,474

11,070

5,724

75,293

62,772

$10,499,315

$620,201

163,177

84,712

10,726

5,880

4,919

4,782

3,317

$897,714

$11,397,030

Source: BBC Research & Consulting from Caltrans contract data.


Whentypesofworkaccountedforarelativelysmallportionoftotaldollarsthatthestudyteamexamined,theywerecombined.Forexample,thecontractingdollarsthatCaltransawardedtocontractorstoinstallfences,guardrailsandsignstotaledlessthan1percentofthetotalcontractdollarsthatthestudyteamexaminedinthestudy.Asaresult,BBCcombinedthesetypesofwork.Othertypesofworkthatweresmallordidnotfitintoothercategorieswereincludedinotherconstruction.

E. Location of Businesses Performing Caltrans Work

TheFederalDBEprogramrequiresagenciestoimplementtheDBE programbasedoninformationfromthe relevantgeographicmarketarea theareainwhichthe agencyspendsthesubstantialmajorityofitscontractingdollars.ThestudyteamusedCaltrans contractingdatatohelpdeterminethe relevantgeographicmarketareaforthestudy. Thestudyteamsummedthedollarsgoingtoeach primecontractorandsubcontractorinvolvedinCaltranscontractsduring thestudyperiod.

Foreachprimecontractorandsubcontractor,BBCdeterminedwhetherthecompanyhadabusinessestablishmentinCaliforniabasedonCaltransvendordataandadditionalresearch.

BBCthenaddedthedollarsforfirmswithCaltranslocationsandcomparedthetotalwiththatforcompanieswithnoestablishmentswithinthe state.

Basedonthis analysis,98percentofCaltranstransportationcontractdollarsduringthestudyperiodwenttofirmswithlocationsinCalifornia.ThisinformationindicatedthatCaliforniashouldbeselectedastherelevantgeographicmarketareaforthestudy.BBCsanalyses,including theavailabilityanalysisandquantitativeanalysesofmarketplaceconditions,focusedonCalifornia.


CHAPTER 3. Marketplace Conditions

FederalcourtshavefoundthatCongress spentdecadescompilingevidenceofracediscriminationingovernmenthighwaycontracting,ofbarrierstotheformationofminorityownedconstructionbusinessesandofbarrierstoentry.1CongressfoundthatdiscriminationhasimpededtheformationandexpansionofqualifiedMBE/WBEs. BBCconductedquantitativeandqualitativeanalysesofconditionsintheCaliforniamarketplacetoexaminewhetherbarriersforMBE/WBEsthatCongressfoundon anationallevelalsoappearinCalifornia.BBCanalyzedwhetherbarriersexistintheCaliforniaconstructionandengineeringindustriesforminorities,women,andforMBE/WBEs,andwhethersuchbarriersaffecttheutilizationandavailabilityofMBE/WBEsforCaltranscontracting.BBCexaminedconditionsintheCaliforniamarketplaceinfourprimaryareas: A. Entryandadvancement;B. Businessownership;C. Accesstocapital;andD. Successofbusinesses. AppendicesEthroughIpresentquantitativeinformationconcerningconditionsin theCaliforniamarketplace.AppendixJpresentsqualitativeinformationthatthestudyteamcollectedthrough40indepthpersonalinterviewswithbusinessownersandothersthroughout thestate;fourfocusgroupsthatBBCconductedwith Caltransstakeholders;and12publichearingsthatCaltransconductedthroughoutthestate.AppendixLreviewsqualitativeinformationthatBBCstudyteamscollectedaspartofa2012BurbankGlendalePasadenaAirportAuthoritydraftdisparitystudy,2a2009SanDiegoCountyRegionalAirportAuthoritydisparitystudyanda2010disparitystudyfortheSouthernCaliforniaTransportationConsortium.3AppendixLsummarizesinformationfrominterviewswithmorethan130businessowners,managersandothersknowledgeableabouttheindustry.

1 Sherbrooke Turf, Inc. v. Minnesota DOT,345F.3d,970(8thCir.2003)(citingAdarand Constructors, Inc.,228F.3dat116776);Western States Paving Co. v. Washington State DOT,407F.3d983,992(9thCir.2005).2AtthetimeofthisdisparitystudyforCaltrans,theBurbankGlendalePasadenaAirport Authoritystudy wasintheformofadraftreportthathadbeendistributedforpubliccomment. 3TheConsortiumstudyincluded aconsortiumoffiveSouthernCaliforniatransportation agencies:LosAngelesCountyMetropolitanTransportationAuthority (Metro), the Southern CaliforniaRegionalRailAuthority(Metrolink),theOrangeCountyTransportationAuthority (OCTA),theSanDiegoAssociationofGovernments (SANDAG),andtheSanDiegoMetropolitanTransitSystem(MTS).


A. Entry and Advancement

IndividualsinterviewedaspartofthecurrentCaltransdisparitystudyaswellaspaststudiesinthestateexplainthatthepeoplewho formconstructionandengineeringfirmsworkintheindustrybeforestartingthesebusinesses(see,forexample,discussioninAppendixK).Anybarrierstoentryintotheconstructionandengineeringindustriesmaylowerthenumberofminoritiesandwomenwhostartconstructionandengineeringbusinessesinthestate. AsdiscussedinAppendix E,a numberofstudiesthroughoutthe UnitedStates haveconcludedthatraceandgenderdiscriminationhas affectedtheemploymentandadvancementofcertaingroupsinthe constructionandengineeringindustry.TheBBCstudyteamexaminedtherepresentationofminoritiesandwomen intheCalifornia constructionandengineeringindustries.Fortheconstructionindustry,thestudyteamexaminedtheadvancementofminoritiesandwomenintosupervisoryandmanagerialroles.Quantitative information about entry and advancement in construction.QuantitativeanalysesoftheCaliforniamarketplacebasedprimarilyondata fromthe2000U.S.Censusandthe20072009AmericanCommunitySurvey(ACS)showedthat,ingeneral,certainminoritygroupsandwomenappeartobeunderrepresentedintheCaliforniaconstructionindustrycomparedtoallindustriesconsideredtogether.4Inaddition, minoritiesandwomenappearedtofacebarriersregardingadvancementtosupervisoryormanagerialpositions.Analysesofentryandadvancementinthe CaliforniaconstructionindustryrevealedpatternsthatweresimilartothosefoundfortheUnitedStatesasawhole.Overall representation. AfricanAmericans,AsianPacificAmericans,SubcontinentAsianAmericansandwomenaccountedforasmallerpercentageofworkersintheCaliforniaconstructionindustrythaninallCaliforniaindustriesin20072009. ThreepercentofCalifornia constructionworkerswereAfricanAmericancomparedwith6

percentofworkersinallCaliforniaindustries. AsianPacificAmericans(5%)andSubcontinentAsianAmericans(lessthan1%)werealso

underrepresentedintheconstructionindustryrelativetoallindustries.Nearly onehalfofCaliforniaconstructionworkerswereHispanicAmerican(48%)comparedwith34percentofworkersinallCaliforniaindustries.NinepercentofCaliforniaconstructionworkerswerewomen,approximatelyonefifthoftherepresentationofwomeninallCaliforniaindustries(45%).Manyofthewomenworkingin theconstructionindustryholdjobs outsidetheconstructiontrades.InmostconstructiontradesinCalifornia,womenwerelessthan3percentofworkers.AppendixEdescribestheseresultsinmoredetail.

4Datafromthe2000Censuswere themostcurrentdecennialCensusdataavailableat thetimeofthisstudy.


Advancement.MinorityandwomenworkersintheCaliforniaconstructionindustrywerelesslikelythannonHispanicwhitesandmalestoadvancetotheleveloffirstlinesupervisorbasedondatafor20072009.Inaddition,minoritiesandwomenweregenerallylesslikelythannonHispanicwhitesandmalestoadvancetothelevelofconstructionmanager.AppendixEprovidesdetailedresults.Formaleducationbeyondhighschoolisnotaprerequisiteformostconstructionjobs.Becausetheaverageeducationalattainmentofminoritiesandwomenwas generallyconsistentwitheducationalrequirementsforconstructionjobs,factorsotherthanformaleducationmayexplaintherelativelylowrepresentationofminoritiesandwomenintheCaliforniaconstructionindustryandtherelativelylowrepresentationofminoritiesandwomenworkinginsupervisoryandmanagerialroles(seeAppendixE). Quantitative information about entry into the engineering industry. BBCalsoused2000U.S.Censusdataand20072009ACSdatatoexamineemploymentandadvancementforminoritiesandwomenintheCaliforniaengineeringindustry.Aswithconstruction,ingeneral,minoritiesappeartobeunderrepresentedinthe Californiaengineeringindustry.ThestudyteamobservedsimilarpatternsfortheUnitedStatesasawhole.Overall representation.Ingeneral,minoritiesandwomenaccountedforasmallerpercentageofworkersintheCaliforniaengineeringindustrythaninallCaliforniaindustriesin20072009,evenwhenlimitingtheanalysestoonly thoseindividualswithcollegedegrees. ThreepercentofworkersintheCaliforniaengineeringindustrywereAfricanAmerican

comparedwith6percentofworkerswithcollegedegreesinallCaliforniaindustries. Similartothatresult,14percentofworkersintheCaliforniaengineeringindustrywere

HispanicAmericancomparedwith34percentofworkerswithcollegedegreesinallCaliforniaindustries.

AfricanAmericans,HispanicAmericansandNativeAmericansrepresentedasmallershareofcivilengineersthanofallworkers25andolderwithacollegedegreein20072009.Incontrast,AsianPacificAmericanswere16percentofengineeringworkerswerecomparedwithonly12percentofworkerswithcollegedegreesinallCaliforniaindustries.AsianPacificAmericanswere21percentofcivilengineersinCaliforniain20072009.TwentysevenpercentofworkersintheCaliforniaengineeringindustrywerewomencomparedwith45percentofworkerswithcollegedegreesinallCaliforniaindustries.Only13percentofcivilengineersinCaliforniawerewomenin20072009.AppendixEpresentscomprehensiveinformationconcerningrelatededucationandemploymentintheengineeringindustry.


Qualitative information about entry and advancement. BBCcollectedqualitativeinformationaboutentryandadvancementintheCaliforniaconstructionandengineeringindustriesthroughindepthinterviews,focusgroupsandpublichearings.Severalintervieweesindicateddifficultiesassociatedwithentryandadvancementin theCaliforniaconstructionandengineeringindustriesforminoritiesandwomen.Theyindicatedthatsuchdifficultiesexistinmanyformsincludingunfavorableworkenvironments,stereotypicalattitudes,andoffensivecommentsorbehavior.(Someminorityandfemaleintervieweesindicatedthattheyhadnotexperienceddifficultiesassociatedwithentryandadvancement.)Anumberofintervieweesreportedadiscriminatoryworkenvironmentforminoritiesandwomen: Someintervieweesreportedthattheyweremadetofeelunwelcomeinthelocal

industry.Forexample,oneintervieweerepresentingawhitewomanownedfirmreportedthatshestartedherownconstructionfirmbecausethefirmthatsheworkedforpreviouslymadecleartoheritsstancethatawomanshould[not]beinmanagement.

Otherintervieweesreportedinstancesofracial slurs,sexistcommentsandsexualharassment,racerelatedgraffitionworksites,andotherincidentsaffectingwomenandminorities.Forexample,anintervieweerepresentingawhitemaleownedfirmstatedthathe isawareoframpant,racerelatedgraffitibeingpresentonsome ofhisworksites.Hereferredtotheconstructionindustryasajungleenvironment.AHispanicfemaleconstructionbusinessownersaidthatunfavorableenvironmentsforwomenareahugeprobleminherbusiness.Menmakeoffensivecommentsallthetimewhenthereisawomanonthejob.Sometimestheywonteventalk tomeaboutjobs.Therewerealsoexamplesindicatingthatsomenonminoritiesandmendid notwanttoworkwithminoritiesorwomenorwouldnot respectaminorityor womaninasupervisoryposition.

Somewomenintheengineeringindustrysaidthatsomemenhaveanexpectationthatwomendonotperformcertaintypesofwork.Forexample,the AsianPacificAmericanfemaleownera constructionservicescompanysaidthatsheexperiencedthiswith amale Caltransstaffmemberwhowasskeptical ofherabilitytoperformspecifictypesofwork.Sheattributedthistogenderdiscrimination.

Someintervieweesreportedthattheirraceorgenderhadoncepreventedthemfrombeinga partofindustryrelatedgroupssuchasunionsandtradeassociations.Oneintervieweesaidthat,manyyearsago,tradeunionsinhisregionofCaliforniawereorganizedaroundethnicgroups,andtheresimplywasntaLocalforHispanicAmericansorAfricanAmericans.Thefemaleownerofaconstructionfirm, said,Theresbeendiscriminationintheunions. Someof ourmembersthathavecomeupthroughthe tradeshavethemosthorrendousstoriestotellofthe thingsthattheyhavehadtoputupwith.Andif youll lookattheunionmembershipnow,youllseethatthere areveryfewwomenintherestill.


Itisimportanttonote,however,thatrecentnationalresearchsuggeststhattherelationshipbetweenminoritiesandunionshasbeenchanging.Asaresult,historicalobservationsmaynotbeindicativeofcurrentdynamicsinconstructionunions.

Someminorityandfemaleintervieweesaswellassomewhitemenindicatedthatthereprobablywasdiscriminationbutcouldnotidentifyspecificexamples.Manyinterviewees, includingsomewhitemen,concludedthatconditionsintheindustryweremoredifficultforwomenandminorities.

Somebusinessownersreportedthatdiscrimination wasmorepervasiveinthepast: AnintervieweerepresentingaHispanicAmericanmaleownedfirm saidthatwhen

hisfatherstartedthefirm30yearsagoheexperienceddiscrimination.HewentontosaythattherearesuchalargenumberofHispanicAmericansintheindustrytodaythatdiscriminatingagainstthemwouldbeakintodiscriminatingagainsttheentireindustryitwouldbetooimpractical.

Someintervieweesreportedthatsocietyhasovercomediscriminationbasedonraceandgender,leadingtoincreasedopportunityforMBE/WBEfirms.Forexample,anintervieweerepresentingalocaltradeassociationindicatedthatracismandsexismarenotasproblematicastheywereinthepast.Withregardtoracism,shesaid,Wevecomea longway.Withregardtosexism,shecommented,Twentyyearsagotherewasadifferentpayscale[formenandwomen],butIbelievethosedaysaregone.

Someminorityandfemaleintervieweessaidthattheydidnotthinktheyhadbeenaffectedbyanyraceorgenderdiscrimination.Effects of entry and advancement. ThebarriersthatminoritiesandwomenappeartofaceenteringandadvancingwithintheCaliforniaconstructionandengineeringindustriesmayhavesubstantialeffectsonbusinessoutcomesforMBE/WBEs. Typically,employmentandadvancementarepreconditionstobusinessownershipinthe

constructionandengineeringindustries.BecausecertainminoritygroupsandwomenareunderrepresentedintheCaliforniaconstructionandengineeringindustries,ingeneralandassupervisorsandmanagers,itfollowsthatsuchunderrepresentationmaypreventsomeminoritiesandwomenfromeverstartingbusinesses,reducingoverallMBE/WBEavailabilityin theCaliforniatransportationcontractingindustry.

Underrepresentationofcertainminoritygroupsandwomeninthe Californiaconstructionandengineeringindustries particularlyinsupervisoryandmanagerial rolesmayperpetuatebeliefsandstereotypicalattitudesthatMBE/WBEsmaynotbeasqualifiedasmajorityownedbusinesses.ThosebeliefsmaymakeitmoredifficultforMBE/WBEstowinworkinCalifornia,includingworkwithCaltrans.


B. Business Ownership

Nationalresearchandstudiesinotherstateshavefoundthatrace/ethnicityandgenderalsoaffectopportunitiesforbusinessownership,evenafteraccountingforraceandgenderneutralfactors.Figure31summarizeshowcourtshaveusedinformationfromsuchstudies particularlyfromregressionanalyseswhen consideringthevalidityofimplementationsoftheFederalDBEPrograminother states.BBCusedregressionanalysesandsimilarsourcesofdataasotherstudiestoanalyzebusinessownershipinthe Californiatransportationcontractingindustry.BBCused20072009ACSdatatoexaminewhethertherearedifferencesinbusinessownershipratesbetweenminoritiesandwomenandnonHispanicwhitesandmalesintheCaliforniaconstructionandengineeringindustries.TheregressionmodelsthatthestudyteamdevelopedshowedthatcertainminoritygroupsandwomenarelesslikelytoownbusinessesthannonHispanicwhitesandmales,evenafteraccountingforvariouspersonalcharacteristicsincludingeducation,age,andabilitytospeakEnglish.Forthosegroupsthatweresignificantlylesslikelytoownbusinesses,BBCcomparedtheiractualbusinessownershiprateswithsimulatedratesifthosegroupsownedbusinessesatthesamerateasnonHispanicwhitesornonHispanicwhitemales(inthecaseofnonHispanicwhitewomen)whosharethesamepersonalcharacteristics.AppendixFprovidesdetailsaboutBBCsquantitativeanalysesofbusinessownershiprates.

Figure 31. Use of regression analyses of business ownership in defense of the Federal DBE Program

State and federal courts have considered differences in business ownership rates between minorities and women and nonHispanic whites and males when reviewing implementations of the Federal DBE Program, particularly when considering DBE goals. For example, disparity studies in Minnesota and Illinois used regression analyses to examine the impact of race/ethnicity and gender on business ownership in the construction and engineering industries. Results from those analyses helped determine whether differences in business ownership exist between minorities and women and nonHispanic white males after statistically controlling for race and genderneutral characteristics. Those analyses, which were based on 2000 Census data, were included in materials submitted to the courts in subsequent litigation concerning the implementation of the Federal DBE Program.

Quantitative information about business ownership in construction. RegressionanalysesoftheCaliforniaconstructionindustryrevealedthatcertaingroupsweresignificantlylesslikelythannonHispanicwhitesandmalestoownconstructionbusinesses,evenafteraccountingforvariousraceandgenderneutralpersonalcharacteristicssuchaseducation,age,personalnetworth,andability tospeakEnglish. Thosegroupswere: AfricanAmericans; HispanicAmericans;and Women.


=

Foreachofthosegroups,Figure32presentsactualbusinessownershipratesandsimulatedbusinessownershiprates(i.e.,benchmark)ifthosegroupsownedconstructionbusinessesatthesamerateasnonHispanicswhitesornonHispanicwhitemales(inthecaseofnonHispanicwhitewomen)whosharethesamepersonalcharacteristics.Thestudyteamcalculatedabusinessownershipdisparityindex foreachgroupbydividingtheobservedbusinessownershipratebythebenchmarkbusinessownershiprateandthenmultiplyingtheresult by100.Valueslessthan100indicatethat,inreality,thegroupislesslikelytoownbusinessesthanwhatwouldbeexpectedfornonHispanicwhitesornonHispanic whitemaleswhosharethesamepersonalcharacteristics.Figure 32. Comparison of actual business ownership rates to simulated rates for California construction workers, 20072009

Self employment rate Disparity index

Group Actual Benchmark (100 parity)

African American 19.1% 26.2% 73

Hispanic American 15.3% 21.9% 70

White female 17.2% 32.9% 52

Note: As the benchmark figure can only be estimated for records with an observed (rather than imputed) dependent variable, comparison is made with only this subset of the sample. For this reason, actual selfemployment rates may differ slightly from those in Figure F1.

Source: BBC Research & Consulting from statistical models of 20072009 ACS data. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.

AsshowninFigure32,AfricanAmericansandHispanicAmericansbothownconstructionbusinessesatratesthataresubstantiallylowerthan thoseofnonHispanicwhiteswhosharethesamepersonalcharacteristics.5African Americansownconstructionbusinessesatapproximately73percentoftheratethatwouldbeexpectedfornonHispanicwhiteswhosharethesamepersonalcharacteristics.HispanicAmericansownconstructionbusinessesatapproximately70percentoftheratethatwouldbeexpectedfornonHispanicwhiteswhosharethesamepersonalcharacteristics.ResultsweresimilarfornonHispanicwhitewomen.NonHispanicwhitewomenownconstructionbusinessesatabouthalftherate(disparityindexof52)thatwouldbeexpectedbasedonthesimulatedbusinessownershipratesofnonHispanicwhitemaleswhosharethesamepersonalcharacteristics.

5PersonalcharacteristicsthatBBC wasable toincludeintheregressionanalysis arediscussedinAppendixF.


=

Quantitative information about business ownership in engineering. Aswithconstruction,BBCexamineddifferencesinbusinessownershipratesbetweenminoritiesandwomenandnonHispanicwhitesandmalesintheCalifornia engineeringindustry.Afteraccountingforvariouspersonalcharacteristics,BBCfoundthatseveralgroupsweresignificantlylesslikelytoownengineeringbusinessesthannonHispanicwhites andmales.Thosegroupswere: AsianPacificAmericans; SubcontinentAsianAmericans; HispanicAmericans;and Women.Foreachofthosegroups,Figure33presentsactualbusinessownershipratesandsimulatedbusinessownershipratesifthosegroupsowned