U.S. Department
of Justice
Motion for Summary Judgment - United States v. Adarand Constructors, Inc.
Civil Action No: 97-K-1351
ADARAND CONSTRUCTORS, INC.,
Plaintiff,
v.
BILL OWENS, et al.,
Defendants.
FEDERAL DEFENDANTS' BRIEF IN SUPPORT OF THEIR
MOTION FOR SUMMARY JUDGMENT AND IN OPPOSITION
TO PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
ROSALIND A. KNAPP BILL LANN LEE
Acting General Counsel Assistant Attorney General Civil Rights Division
PAUL M. GEIER MARYBETH MARTIN
Asst. General Counsel CHARLES E. LEGGOTT Employment Litigation Section
EDWARD V.A. KUSSY Civil Rights Division, Rm. 4028
Acting Chief Counsel U.S.Department of Justice
Federal Highway Adm. P.O. Box 65968
Washington, D.C. 20035-5968
U.S. Dept. of Transportation (202) 514-0548
400 Seventh Street, S.W. (202) 514-1005 (facsimile)
Washington, D.C. 20590
(202) 366-4731
Dated: October 14, 2000
TABLE OF CONTENTS
Table of Contents
I. INTRODUCTION
II. DESCRIPTION OF FEDERAL AND STATE PROGRAMS
1. Consideration of race-neutral measures.
3. Availability of waiver mechanisms.
4. Rules for determining eligibility as a DBE. 8
III. ARGUMENT
A. THE TENTH CIRCUIT COURT OF APPEALS HAS HELD THAT THE FEDERAL PROGRAM IS CONSTITUTIONAL.
2. There Exists Ample Evidence of Discrimination to Support the Presumption
3. Congress has a Compelling Interest in Enacting TEA-21's DBE Program
4. The Federal DBE Program is Narrowly Tailored.
a. Consideration of Race-Neutral Alternative Remedies.
c. The Flexibility of Relief Including Waiver Provisions.
d. Relationship of Numerical Goals and the Relevant Labor Market.
e. The Impact of Relief on Third Parties
f. Alleged "Over-and Under-Inclusiveness."
B. CDOT'S DBE PROGRAM COMPORTS WITH
FEDERAL STANDARDS AND IS CONSTITUTIONAL.
IV. CONCLUSION
CASES:
Adarand v. Peña , 16 F.3d 1537 (10th Cir. 1994) 1
Adarand v. Peña("Adarand III"), 515 U.S. 200 (1995).........................................................passim
Adarand v. Peña ("Adarand IV"), 965 F.Supp. 1556 (D.Colo. 1997).........................1, 2, 3, 21,25
Adarand v. Skinner ("Adarand I"), 790 F.Supp. 240 (D.Colo. 1992) 1
Adarand v. Slater ("Adarand VI), 120 S. Ct. 722 (2000) 2, 19, 41
Adarand v. Slater ("Adarand V"), 169 F.3d 1292 (10th Cir. 1999) 1
Adarand v. Slater, 2000 WL 1375571 (10th Cir., Sept. 25, 2000) ("Adarand VII").............passim
Branson School Dist. v. Romer, 161 F.2d. 619 (10th Cir. 1998) 16
Cache Valley Elec. Co. v. Utah Dept. of Transp., 149 F.3d 1119 (10th Cir. 1998) 16, 19
City of Richmond v. Croson , 488 U.S. at 507 14, 20, 23, 32
Ensley Branch NAACP v. Siebels, 31 F.3d 1548 (11th Cir. 1994) 31
Fullilove v. Klutznick, 448 U.S. 448 (1980) 13, 33
Interstate Traffic Control v. Beverage, 101 F.Supp. 2d 445 (D. W.Va. 2000) 34
City Council of Los Angeles v. Taxpayers for Vincent, 466 U.S.789 (1984) ............................ 15
Peightal v. Metropolitan Dade County, 26 F.3d 1545 (11th Cir. 1994) 31
Romer v. Evans, 517 U.S. 620 (1996) 16
Rothe v. U.S. Dept. of Defense, 49 F.Supp. 2d 937 (W.D. Tex. 1999) 33, 36
Shuford v. Alabama St. Bd. of Educ., 897 F.Supp. 1535 (M.D. Ala 1995) 14
United States v. Paradise, 480 U.S. 149 (1987).....................................................13, 15, 20, 21, 41
United States v. Salerno, 481 U.S. 739 (1987) 16
Villanueve v. Carere, 85 F.3d 481 (10th Cir. 1996) 16
Wygant v. Jackson, 476 U.S. 267 (1986) 13, 19
-ii-
STATUTES :
Section 1003(b) of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA),
Pub. L. No. 102-240, 105 Stat. 1914 .............................................................................................3
Section 106(c) of the Surface Transportation and Uniform Relocation Assistance Act of
1987 (STURAA), Pub. L. No. 100-17, 101 Stat. 132 3
Transportation Equity Act for the 21st Century (TEA-21), Pub. L. No. 105-178, 112
Stat. 107 1, 3, 13, 14, 22, 40
112 Stat. 114 24
Section 8(d) of the Small Business Act (15 U.S.C. 637(d)) 1, 13, 14,
22, 40
Housing and Urban Development Act, 15 U.S.C. ｧ 694a 22
REGULATIONS:
49 C.F.R. ｧ 26.15.................................................................................................................7, 11, 26
49 C.F.R. ｧ 26.41(c).............................................................................................................5, 25, 30
49 C.F.R. ｧ 26.43.......................................................................................................................8, 30
49 C.F.R. ｧ 26.45.......................................................................5, 6, 9, 10, 25, 28,29, 30, 31,32, 36
49 C.F.R. ｧ 26.47............................................................................................................7, 25, 26,31
49 C.F.R. ｧ 26.51(a)......................................................................................................5, 6, 7,22, 24
49 C.F.R. ｧ 26.51(c) 6
49 C.F.R. ｧ 26.53 7, 8, 31
49 C.F.R. ｧ26.65 24, 27
49 C.F.R. ｧ 26.67(a).............................................................................................8, 9, 24, 26, 34, 35
49 C.F.R. ｧ 26.67(b) 8, 27
49 C.F.R. ｧ 26.87.......................................................................................................................9, 27
-iii-
Rodney E. Slater, Kenneth R. Wykle, the United States Department of Transportation, Federal Highway Administration (FHWA) and the United States (collectively Federal Defendants), through their undersigned attorneys, respectfully move pursuant to Rule 56 of the Federal Rules for Civil Procedure for entry of summary judgment. As such, Federal Defendants contend that Plaintiff's motion for partial summary must be denied. This brief is submitted in support of Federal Defendants' motion and in opposition to Plaintiff's motion.
Plaintiff's amended complaint challenges the constitutionality of the U.S. Department of Transportation's (DOT) disadvantaged business enterprise (DBE) program facially and as adopted by the Colorado Department of Transportation (CDOT). Plaintiff's motion for partial summary judgment seeks to isolate the race- and gender-conscious presumptions found in section 1101(b) of the Transportation Equity Act for the Twenty First Century (TEA-21) and section 8(d) of the Small Business Act (15 U.S.C. 637(d)) and have them declared unconstitutional on their face. Plaintiff's Brief at 1. Contrary to Plaintiff's arguments, the DBE provisions of TEA-21, section 8(d) of the Small Business Act and DOT's DBE regulation, 49 C.F.R. Part 26, are lawful and constitutional, as the Court of Appeals for the Tenth Circuit recently held. Adarand v. Slater, 2000 WL 1375571 (10th Cir., Sept. 25, 2000) (Adarand VII). (1) In so deciding, the Tenth Circuit found the statutory presumption challenged by Plaintiff to be constitutional.
The Colorado Department of Transportation's (CDOT) DBE program, which was adopted pursuant to the federal regulations, was not before the Adarand VII Court. However, as shown in this brief, that program is consistent with the federal program, and also is lawful and constitutional.
This Court has not had an opportunity previously to review the DOT DBE program established by TEA-21 and DOT's revised regulation, 49 C.F.R. Part 26, and reviewed by the Tenth Circuit in Adarand VII. This Court's earlier decision in the companion case of Adarand v. Peña, 965 F.Supp. 1556 (D. Colo. 1997) (Adarand IV), considered the now superseded DOT DBE program that implemented section 1003(b) of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) (and earlier similar statutes) and 49 C.F.R. Part 23. In part in response to that decision involving ISTEA and its implementing regulations, the DOT undertook a comprehensive evaluation of the DBE program and made substantial changes to ensure that the program was narrowly tailored to address the discrimination that Congress had found in enacting section 1101(b) of TEA-21. Those changes, as the Court of Appeals held, respond to the concerns raised by this Court in Adarand IV.
In Adarand VII, the Tenth Circuit considered the constitutionality of the new DOT DBE program and found it meets the strict scrutiny test adopted in Adarand III. Thus, any doubt that the program passes muster under the most strict level of constitutional review has been put to rest. For this reason, this Court must deny Plaintiff's motion and grant Federal Defendants' motion for summary judgment.
II. DESCRIPTION OF FEDERAL AND STATE PROGRAMS
On June 9, 1998, the President signed into law the current DOT authorization Act for federal highway and transit programs, the Transportation Equity Act for the 21st Century (TEA-21), Pub. L. No. 105-178, 112 Stat. 107. Section 1101(b) of TEA-21 (2) reauthorized the DBE program that existed in earlier DOT statutory provisions (see e,g, section 1003(b) of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), Pub. L. No. 102-240, 105 Stat. 1914; section 106(c) of the Surface Transportation and Uniform Relocation Assistance Act of 1987 (STURAA), Pub. L. No. 100-17, 101 Stat. 132) .
Prior to passing TEA-21, Congress extensively debated whether to renew the DBE program. During those debates, Congress heard and soundly rejected by bipartisan vote two bills that would have eliminated the DBE program. Congress also debated at length the DBE program as it existed under the earlier DOT authorization acts, and debated several criticisms about the earlier programs, some of which were raised by this Court in Adarand IV. During those debates, Congress understood that DOT would revise its regulatory program to address outstanding judicial, legislative, and practical concerns and to more narrowly focus the program's application to small firms owned by individuals who are truly socially and economically disadvantaged.
The 1998 debates over the DBE legislation were the most comprehensive debates in which Congress has engaged since the beginning of the DBE program. A more detailed discussion of those debates is referenced throughout this brief.
Congress was aware during its extensive debates that DOT was developing regulations to more narrowly tailor the DBE program. (3) The new regulatory program was published at 64 Fed. Reg. 5096 et seq. (February 2, 1999) and is codified at 49 C.F.R. Part 26. These new regulations, which implement the DBE program, include waiver provisions that specifically address narrow tailoring. See Fed. Reg. at 5102-03. Hence, the new regulations require DOT fund recipients like CDOT to give priority and make concerted efforts to rely on race-neutral measures in setting and meeting an annual aspirational goal; provide new mechanisms for recipients to tie annual goals to local conditions; and require recipients to place greater emphasis on contractors' good faith efforts in achieving individual contract goals. The new DBE program also provides greater flexibility for recipients and contractors, authorizes the creation of mechanisms to address any DBE overconcentration, sets net worth restrictions for DBEs, and makes improvements to the system to permit challenges to the presumptions of social and economic disadvantage for specific individuals. While we believe that the Tenth Circuit decision resolves any question about the constitutionality of the new DBE rule, we nevertheless highlight several important features of the new regulatory program that respond to this Court's earlier criticisms about the former ISTEA DBE program:
1. Consideration of Race-Neutral Measures.
Under the new DOT regulations, recipients of federal highway funds, such as CDOT, are required to conduct detailed analyses to determine the level of DBE participation that would be expected absent discrimination. 49 C.F.R. ｧ 26.45(b). After the recipient establishes an overall annual goal that reflects its unique market conditions, it then must meet the maximum feasible portion of its overall goal by using race-neutral means of facilitating DBE participation. 49 C.F.R. ｧ 26.51(a).
Recommended race-neutral means include arranging solicitations in ways that facilitate participation by all small businesses, including DBEs; providing assistance in overcoming limitations such as the inability to obtain bonding or financing; providing technical assistance and services to small businesses; providing technical assistance; and engaging in outreach efforts. 49 C.F.R ｧ 26.51(b). Recipients are instructed to use contract goals only if they cannot meet their overall goals through race-neutral measures. 49 C.F.R. ｧ 26.51(d).
Under 49 C.F.R. ｧ 26.45, recipients are now required to set their own overall annual goals based on local market conditions; the particular overall goal that each recipient selects is not imposed by the federal government, nor should the recipient tie the goal to any uniform national percentage. Annual goals are set based solely on local market conditions, and each recipient must choose its own method for goal setting and can choose to base the goal on the evidence that it believes best reflects its market conditions using a two-step process. 49 C.F.R. ｧ 26.45. (4)
The first step of the current goal selection process requires creating a baseline figure for the relative availability of ready, willing and able DBEs in each recipient's market. 49 C.F.R. ｧ 26.45(c). The second step of the process requires adjusting the base figure, if possible, to ensure that the annual overall goal truly and accurately reflects the DBE participation that the recipient would expect absent the effects of discrimination. 49 C.F.R. ｧ 26.45(d). For this second step, each recipient may rely on its own knowledge of its unique contracting markets and the extent of local discrimination. Then, after an overall goal is established, the recipient must project the portion of the goal that it expects to meet through race-neutral means. 49 C.F.R. ｧ 26.51(c). If the recipient projects that it can meet its overall goal for a given year entirely through race-neutral means, it must implement its program without setting contract goals during that year. Id.
If a recipient determines that contract goals are necessary to meet a portion of its annual overall goal, it has substantial discretion in deciding how and when to use contract goals. Under 49 C.F.R. ｧ 26.51, recipients are not required to set a goal for each contract. Contract goals are to be used only to meet the portion of the overall goal that the recipient projects it will be unable to meet using race-neutral means, such as outreach and technical assistance, or projected success by DBEs in open competition. Id. If a recipient elects to use a contract goal, it is free to set the goal at any level it believes is appropriate for the type and location of the specific work involved. 49 C.F.R. ｧ 26.51(e).
3. Availability of Waiver Mechanisms.
Under the new DBE regulations, recipients are permitted to react to unique local circumstances and to apply to the DOT for waivers releasing them from almost any of the specific requirements of the regulations if they believe that they can achieve equal opportunity for DBEs through other approaches. 49 C.F.R. ｧ 26.15. For example, waiver requests could pertain to subjects including, but not limited to, the use of a race-conscious measure other than a contract goal, different ways of counting DBE participation in certain industries, use of separate overall or contract goals to address demonstrated discrimination against specific categories of socially and economically disadvantaged individuals. 64 Fed. Reg. at 5115. Also, recipients can receive exemptions from any provision of the regulations if there exist circumstances that permit achievement of the objectives of the DBE program by means that may differ from the specific requirements of the program. 49 C.F.R. ｧ 26.15. In these circumstances, no penalty will be imposed upon recipients for failing to meet their overall goal. 49 C.F.R. ｧ 26.47.
The DBE regulations also provide, at 49 C.F.R. ｧ 26.53, that even when a contract goal is established, it may be waived entirely for a prime contractor that demonstrates that it has made good faith efforts to achieve the goal but was still unable to meet it. Recipients are required to give serious consideration to bidders' documentation of their good faith efforts and are strictly prohibited from interpreting the goals as quotas. Id., 49 C.F.R. ｧ 26.43. Indeed, the new regulations require recipients to offer administrative reconsideration to bidders whose good faith efforts showings are initially rejected. 49 C.F.R. ｧ 26.53(d).
4. Rules for Determining Eligibility as a DBE.
After this Court's decision in Adarand IV, DOT developed enhanced safeguards to ensure that only firms owned and controlled by individuals who are in fact socially and economically disadvantaged can participate in the DBE program. For the first time, the program contains economic eligibility limitations. Recipients must now require that each owner of a firm applying to participate as a DBE submit a signed, notarized statement of personal net worth, with appropriate supporting documentation. 49 C.F.R. ｧ 26.67(a). If the individual's personal net worth exceeds $750,000, the presumption of economic disadvantage is conclusively rebutted and the individual is no longer eligible to participate in the DBE program. ｧ 49 C.F.R. ｧ 26.67(b).
Although recipients of DOT highway funds must still rebuttably presume that members of the enumerated groups and women are socially disadvantaged, each individual applicant for DBE certification must submit a signed, notarized certification that each presumptively disadvantaged owner is, in fact, socially disadvantaged. 49 C.F.R. ｧ 26.67(a). If a recipient has a reasonable basis to believe that an individual owner who is a member of one of the designated groups is not, in fact, socially and/or economically disadvantaged, it may at any time start a proceeding to determine whether the presumption should be regarded as rebutted with respect to that individual. 49 C.F.R. ｧ 26.67(b)(2). In fact, any person, including the DOT, may challenge whether a DBE is entitled to the presumption of social and economic disadvantage. 49 C.F.R. ｧ 26.87. The regulations also have provisions that permit any business owner, including a white male, to demonstrate social and economic disadvantage on an individual basis and thereby become a DBE. 49 C.F.R.. ｧ 26.67(d). The criteria for making determinations of social disadvantage are set forth in Appendix E to Part 26.
CDOT submitted its DBE Program Plan to DOT in September 1999, and it was approved on April 27, 2000. It retained an overall goal of 10% participation of all DBEs but stated its intent to meet over 80% of that goal, or 8.27%, by race-and gender-neutral methods.
The review of CDOT's Program Plan, as was the practice in the review of other Federal Highway Administration (FHWA) grant recipient DBE programs, consisted of an initial review by the FHWA Colorado Division Office; a more formal review by a DOT team tasked to review state DBE programs; and a Departmental legal review. Throughout the review process, the FHWA provided comments to CDOT on its Program Plan. In response to these comments, CDOT would either provide clarification or revise the applicable provisions of its Program Plan. DOT's comments to CDOT generally focused on discrete issues on which further response or clarification was required.
DOT reviewed CDOT's plan in its entirety for its compliance and consistency with the new DBE regulations. As explained earlier, 49 C.F.R. ｧ 26.45 requires recipients such as CDOT to set overall annual goals for DBE participation in federally-funded highway contracting based on local market conditions. The first step of the goal selection process requires creating a baseline figure for the relative availability of ready, willing and able DBEs in each recipient's market. 49 C.F.R. ｧ 26.45(c). The second step of the process permits adjusting the base figure to ensure that the annual overall goal truly and accurately reflects the DBE participation that the recipient would expect absent the effects of discrimination. 49 C.F.R. ｧ 26.45(d).
In accordance with 49 C.F.R. ｧ 26.45, CDOT relied on a disparity study as the basis for determining whether local conditions warranted race-conscious goals. CDOT did not automatically establish a 10% annual overall goal based on its 10% DBE goal from previous years. Rather, it went through a lengthy process of analyzing statistical reports of past years' DBE participation, assessing the availability of ready, willing, and able DBEs that would compete for contracts and subcontracts, reviewing budget data, seeking and considering extensive public input, and projecting the amount of race-and gender-neutral DBE participation that CDOT anticipated in the upcoming year. After all the data had been considered, it was determined that a 10% annual goal was appropriate.
CDOT undertook a similarly detailed analysis to determine what extent, if any, race- and gender-conscious means were needed to attain its annual goal. It relied on a statewide disparity report, completed in April 1998, that found that, within highway subcontracting in the most recent years reported, both African American and Asian/Native American owned firms received little to none of the CDOT highway contract monies and therefore were underutilized based upon their availability. African American and Asian/Native-American owned firms represented 0.67% and 1.06% of the available subcontractor firms in Colorado, respectively.
DOT's regulations state that contract goals may not be subdivided into group-specific goals; however, the regulations permit recipients such as CDOT to request a waiver of overall goals and contract goals if it can be demonstrated that the recipient can achieve the objectives of the program by means that differ from that stated in the regulations. 49 C.F.R. ｧｧ 26.15(b); 49 C.F.R. 26.51(e)(4). Based on the findings contained in the disparity study, CDOT requested a waiver from DOT to be permitted to use group-specific contract goals. Since the disparity study showed that only firms owned by African Americans and Asian/Native Americans were underutilized, CDOT indicated that it would use group-specific contract goals at a rate of 0.67% for African American owned firms and at 1.06% for Asian/Native Americans owned firms. Thus, contract goals under the CDOT program plan are not established for Hispanic American and white women-owned DBEs.
A. THE TENTH CIRCUIT COURT OF APPEALS HAS HELD THAT THE NEW FEDERAL DBE PROGRAM IS CONSTITUTIONAL
In Adarand VII, the Tenth Circuit determined that since the time this Court rendered its decision in Adarand IV in 1997, Congress had conducted lengthy hearings in response to the Supreme Court's decision in Adarand III, after which the federal government "significantly changed the way in which it implements the challenged race-conscious programs in highway construction contracting." Adarand VII, 2000 WL 1375571 *1. After reviewing all of the changes to the relevant statutes and regulations, the Court of Appeals concluded that the statutory and regulatory program now before this Court, including the DBE certification process as currently structured, satisfies a strict scrutiny analysis and is constitutional. Adarand VII at 1375571 *31. Unlike the Court of Appeals in Adarand VII, this Court is not presented with the need to consider intervening changes in the law. Plaintiff's Amended Complaint, which controls the issues in this case, was filed on December 20, 1999, well after TEA-21 and the new DOT regulations at 49 C.F.R. Part 26 went into effect, and Plaintiff expressly challenges only the current DBE program.
The Tenth Circuit's recent decision controls this case. There, the Court of Appeals considered both the statutory and regulatory framework that existed in 1992 when this Court decidedAdarand I, as well as "intervening changes in the law." 2000 WL 1375571 *2-3. In this regard, the Court stated, "[t]o ignore intervening changes in the statutory and regulatory framework underlying this litigation would be to shirk our responsibility to strictly scrutinize the real world legal regime against which Adarand seeks prospective relief." Id. at 1375571 *4. The Court of Appeals applied a strict scrutiny analysis to the applicable statutes and regulations, and recognized that the Supreme Court in Adarand III cautioned that it should not be applied in such a manner that would be be "fatal in fact." Id. at 1375571 *3.
In examining the first prong of strict scrutiny -- whether the government had a compelling interest in enacting race-conscious legislation to "remedy the effects of racial discrimination and open up federal contracting opportunities to members of previously excluded minority groups" -- the Tenth Circuit reviewed the evidence that has been presented to Congress since the early 1970s. Id. at 1375571*10-19. This evidence, produced through congressional investigations and hearings, and provided in outside statistical and anecdotal sources, including voluminous evidence contained in "The Compelling Interest," 61 Fed.Reg. 26050-63 (1996), as well as local disparity studies and the results of eliminating affirmative action programs by various states and localities, led the Tenth Circuit to conclude that the government had "more than satisfie[d]" its burden of production "regarding the compelling interest for a race conscious remedy." Id. at 1375571*21.
With respect to the "narrow tailoring" prong of strict scrutiny, the Tenth Circuit agreed with this Court that the DBE certification process presumed that members of certain minority groups and women were economically disadvantaged without inquiring into the actual economic disadvantage of an applicant on an individual basis. The Court concluded that the new DOT regulations cured that deficiency. Id.
The Court of Appeals also addressed whether the government must inquire into discrimination against each particular minority racial or ethnic in the Colorado construction industry, holding that such an inquiry would be "at odds with our holdings regarding compelling interest and Congress' power to enact nationwide legislation." Adarand VII, 2000 WL 1375571*30. The Court of Appeals stated that, "[requiring that degree of a precise fit would again render strict scrutiny 'fatal in fact.'" Id., citing Fullilove v. Klutznick, 448 U.S. 448, 507 (1980) (Powell J., concurring). The Court of Appeals held that, "such fatality is inconsistent withAdarand III, which reaffirmed Paradise, in its declaration that strict scrutiny was not fatal in fact." Id., citing 515 U.S. at 237. The Court of Appeals further determined that there is a middle ground between the need to make individualized inquiries such as in a Title VII lawsuit, and "an unconstitutionally sweeping, race-based generalization." In this regard the Court noted that, "[i]ndeed the police officers receiving the benefit of the promotion policy in Paradise were not required to prove that they themselves individually were victims of past discrimination." Adarand VII, 2000 WL 1375571 *30, citing U.S. v. Paradise. 480 U.S. 149 (1987).
Plaintiff squarely bears the ultimate burden of proof here. "The ultimate burden [of proof] remains with [the challenging party] to demonstrate the unconstitutionality of an affirmative action program." Id. at 1375571 *30, quoting Concrete Works v. City and County of Denver, 36 F.3d 1513, 1522 (10th Cir. 1994) (quoting Wygant v. Jackson, 476 U.S. 267, 277-78 (1986). "[T]he non-minority [challengers] ... continue to bear the ultimate burden of persuading the Court that [the government's] evidence did not support an inference of prior discrimination and thus a remedial purpose." Id., quoting Wygant, 476 U.S. at 293.
The majority opinion in Adarand III states that "[w]hen race-based action is necessary to further a compelling interest, such action is within constitutional constraints if it satisfies the 'narrow tailoring' test this Court has set out in previous cases." 515 U.S. at 237. The majority opinion in Adarand III cited Paradise as a case in which the Supreme Court determined that a racial classification satisfied strict scrutiny. Id. In Paradise, the Court considered the following factors in determining whether race-conscious remedies are appropriate: (a) the necessity for relief and efficacy of alternative remedies, (b) the flexibility of the relief, including the availability of waiver provisions, (c) the duration of the planned relief, (d) the relationship of numerical goals to the relevant labor market, and (e) the impact of the relief on third parties. 480 U.S. at 171. Justice O'Connor's opinion in Adarand III mentions two additional questions that were to be considered on remand: whether there was any consideration of the use of race neutral means to increase minority business participation in government contracting, 515 U.S. at 237-38,citing City of Richmond v. Croson, 488 U.S. 469 507 (1989), and whether the program was appropriately limited such that it will not last longer than the discriminatory effects it is designed to eliminate, 515 U.S. at 237-38, citing Fullilove, 448 U.S. at 496. (5) These are the narrow tailoring factors applied by the Tenth Circuit in concluding that the DBE program is constitutional. 2000 WL 1375571 * 21-22.
"Narrowly tailored" does not mean tailored to absolute perfection. Rather, "[n]arrow tailoring ... is a range of what is acceptable, not one perfect plan." See Shuford v. Alabama St. Bd. of Educ., 897 F.Supp. 1535, 1569 (M.D. Ala. 1995) (a post-Adarand case applying strict scrutiny to race-conscious relief in a consent decree). Moreover, as the Tenth Circuit concluded in Adarand VII, the position expressed by Plaintiff in Adarand IV that a racial classification, to be narrowly tailored, "must not only include minority individuals who themselves have suffered discrimination, but must also automatically include all non-minority individuals who have suffered disadvantage as well," requires a degree of fit so precise that it would render strict scrutiny "fatal in fact." Adarand VII, at 1375571*30.
1. The Race- and Gender-Conscious Presumptions
Must be Evaluated in Conjunction with the New Regulations.
Plaintiff challenges in its motion for partial summary judgment only the so-called "race and gender based presumptions" of ｧ 8(d) as incorporated in ｧ 1101(b) of TEA-21. It argues that the presumptions, standing alone, are facially unconstitutional because they are "over- and under-inclusive." See Plaintiff's Memorandum at 11-17. The Tenth Circuit's decision dictates that this argument must be rejected. Plaintiff cannot challenge the presumptions in isolation. As the courts in Adarand III, Adarand IV and Adarand VII all have concluded, the DBE program is a complex, integrated statutory and regulatory scheme. When Plaintiff competes for a contract in Colorado, it is affected by the challenged statutes in the context of the federal regulatory program. See, Members of the City Council of the City of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789, 797-98 (1984) (even in cases involving solely a facial challenge, constitutional adjudication requires a review of the application of a statute to the conduct of the party before the court).
Facial challenges of the type sought here by Plaintiff are rarely successful. To demonstrate that a legislative Act is facially unconstitutional, Plaintiff must establish that "no set of circumstances exist under which the Act would be valid." United States v. Salerno, 481 U.S. 739, 745 (1987); Romer v. Evans, 517 U.S. 620, 643 (1996) (Scalia, J., dissenting). In Branson School Dist. v. Romer, 161 F.2d. 619, 636 (10th Cir. 1998), the Tenth Circuit stated, "we must start with the venerable rule of statutory construction that the statute is presumed to be constitutional unless shown otherwise," and cited Villanueve v. Carere, 85 F.3d 481, 487 (10th Cir. 1996) as a case applying the "presumption of constitutionality to a state statue in the face of an equal protection challenge."
2. There Exists Ample Evidence of Discrimination to Support the Presumption.
Even if the presumptions alone could be viewed separate from the federal DBE regulatory program and CDOT's implementation of the federal regulatory program, the presumptions would survive a facial challenge. As the Tenth Circuit pointed out in Cache Valley Elec. Co. v. Utah Dept. of Transp., 149 F.3d 1119, 1124 (10th Cir. 1998), the racial presumption "serves only as a recognition that 'in many ... cases status as a minority can be directly and unequivocally correlated with social disadvantagement and this condition exists regardless of the individual, personal qualities of the minority person.'" 149 F.3d at 1124, citing H.R. Conf. Rep. No. 95-1714 at 21 (1978). It is wholly appropriate for Congress to fashion a remedy that recognizes the obvious connection between a person's race or gender and that person's relative disadvantage based on a history of racial or sexual discrimination when attempting to compete for work in the highway construction industry.
In fact, Congress repeatedly discussed the connection between race or gender and disadvantage in highway contracting during its debates whether to include the DBE program in TEA-21. For example, in early 1998, Senator Mitch McConnell offered Amendment No. 1708 to the new proposed transportation bill. His amendment proposed to eliminate the racial- and gender-based presumptions, eliminate the entire DBE program and adopt a race-neutral small business program. (S1395). (6) After an extensive debate, the Senate defeated the McConnell amendment by a non-partisan vote of 58-37. (S1496). A similar amendment was proposed in the House of Representatives by Congresswoman Marge Roukema. (H 2000). Her amendment proposed to eliminate the presumption of social and economic disadvantage for certain minority groups. After debate, the House of Representatives defeated the Roukema amendment by a non-partisan vote of 225 to 194. (H2011). Congress ultimately retained the DBE provision in ｧ 1101(b) of the TEA-21.
In both the House and Senate, many members argued and presented evidence that minorities and women continue to be victims of persistent and severe discrimination and its effects, specifically in the area of construction contracting. Members of the House of Representatives who testified about the continuing nature of the problem included Rep. Norton (H2003); Rep. Poshard (H2003); Rep. Menendez (H2004); Rep. Davis (H2005); Rep. Boswell (H2005); Rep. Lampson (H2006); Rep. Kennedy (H2006); Rep. Jackson-Lee (H2006), Rep. Edwards (H2007); Rep. Andrews (H2007); Rep. Rodriguez (H2008), Rep. Towns (H2010), Rep. Dixon (2010) and Rep. Millender-McDonald (H2011). Likewise, numerous Senators also recognized that such discrimination still persists, including Sen. Baucus (S1403, S1413, S1496); Sen. Warner (S1403); Sen. Kerry (S1408), Sen. Wellstone (S1410); Sen. Moseley-Braun (S1419-20); Sen. Robb (S1422); Sen. Brownback (S1423-24); Sen. Domenici (S1425-26); Sen. Kennedy (S1429-30, S1482); Sen. Specter (S1485); Sen. McCain (S1489); Sen. Lautenberg (S1490); Sen. Durbin (S1491); Sen. Daschle (S1492); Sen. Lieberman (S1493); Sen. Bingaman (S1494); Sen. Murray (S1495); and Sen. Dorgan (S1495).
Throughout the debates, members of Congress relied on various data to support their conclusions that discrimination and its injurious effects continue to exist and provide a compelling justification for inclusion of the presumptions in the reauthorized DBE program. For example, in comments in the conference report on the passage of the TEA-21, Senator Chafee cited a newly published CDOT disparity study that found a significant disparity existed between what minority contractors actually received and in all likelihood would have received in a competitive arena free of discrimination. (S5413).
Senator Baucus cited other data indicating that minorities nationally own 9 percent of construction businesses, but receive only 4 percent of construction receipts, and that women own about one-third of all small businesses but receive only 3 percent of Federal procurement dollars. (S1403). He also cited earlier congressional findings concerning the effects of discrimination in the construction industry and in DOT-assisted programs. (S1413). In addition, Congresswoman Norton testified about the extensive record of hearings, reports, testimony, and statistics reviewed by this Court in the remand of the Adarand case (H3957-58) and the evidence contained in the Department of Justice publication in the Federal Register, including the 29 congressional hearings between 1980 and 1995 on the subject of racial discrimination (H3958). She also testified about discrimination in the attempts of minority businesses to secure capital, discrimination in private and public contracting, and further evidence available to Congress informally from hearing the concerns of constituents and reading numerous studies and reports (H3958-60).
In Adarand VII, the Tenth Circuit held that Congress correctly relied on these presumptions in TEA-21 as the starting point for determining whether individuals are socially and economically disadvantaged:
While the concept of classifying human beings by race is distasteful, the fact remains that discrimination occurs based on such classifications, and engaging the classifications in order to eradicate such discrimination is a necessary evil which constitutes a compelling government interest.
Adarand VII, 2000 WL 1375571 *30.
3. Congress Has a Compelling Interest in Enacting TEA-21's DBE Program. (7)
The legislative history of TEA-21 confirms that Congress has a compelling interest in remedying the effects of discrimination in highway construction contracting. Indeed, the Tenth Circuit explicitly found Congress had a "strong basis in evidence" for concluding that action was necessary to remedy the effects of racial discrimination. Adarand VII, 1375571 *19, citingCroson, 488 U.S. at 500 (quoting Wygant v. Jackson Bd. of Educ., 476 U.S. 267, 277 (1986). The evidence in support of this conclusion is both persuasive and overwhelming.
Moreover, this Court has already found that Congress had a compelling interest in enacting the statutes at issue in Adarand IV ( 965 F.Supp at 1577). The extensive debates in both the U.S. Senate and U.S. House of Representatives that preceded the passage of the DBE program in TEA-21, along with the information referred to in the form of committee reports, testimony, reports, and statistics, only bolster this Court's earlier finding. Thus, this Court must conclude that Congress continues to have a compelling interest in using race-conscious measure to remedy the effects of identified discrimination in the highway construction industry.
4. The Federal DBE Program is Narrowly Tailored.
As noted above, the Supreme Court in Paradise, 480 U.S. at 171, and in Adarand IIIsuggested several factors adopted by the Tenth Circuit in Adarand III in determining whether federal race-conscious programs are narrowly tailored. Adarand VII establishes that the DOT DBE program comports with each of these factors and is narrowly tailored.
a. Consideration of Race-Neutral Alternative Remedies.
The legislative history of TEA-21 demonstrates that Congress actively considered imposing an entirely race-neutral program on the proposed highway legislation in lieu of the DBE provisions that ultimately were adopted. Some of the most pertinent evidence that race-neutral programs are not effective to combat discrimination in the construction industry nationwide included the dramatic drop-off in DBE participation in jurisdictions where state goal-oriented (race-conscious) programs were eliminated or curtailed (e.g., the rate fell to zero in Michigan), compared to participation rates in the federal DBE program where race-conscious measures were still in use. See, e.g. Sen. Baucus (S1404), Sen. Kerry (S1409-10), Sen. Moseley-Braun (S1420-21), and Sen. Kennedy (S1429-30, S1482).
In considering TEA-21, Congress was very much aware that the new DBE regulations give priority to race-neutral means to achieve the DBE program's objectives. See supra at n.3. Under the regulations, recipients must obtain maximum feasible DBE participation through race-neutral means. 49 C.F.R. ｧ 26.51. If a recipient expects to be able to meet its entire overall goal through race-neutral means, it can implement its program without any use of contract goals. 49 C.F.R. ｧ 26.51(f)(1).
The congressional debates on TEA-21 must be considered along with the historical knowledge that Congress had available to it when it considered other race-neutral approaches to similar programs. For example, history demonstrates that Congress considered and utilized race-neutral measures for at least twenty-five years prior to enacting the 1978 amendments to the Small Business Act, including the portions of Section 8(d), 15 U.S.C. 637(d), that were incorporated in ISTEA (and its predecessors) and now TEA-21. In 1970, to help small businesses obtain surety bonds, the Small Business Administration was authorized by the Housing and Urban Development Act, 15 U.S.C. ｧ 694a and b, to establish the Surety Bond Guarantee Program. By 1975, however, the General Accounting Office reported that the "SBA's success in helping disadvantaged firms to become self-sufficient and competitive has been minimal." Library of Congress, Congressional Research Service, Minority Enterprise and Public Policy 53 (1977). The reform of the Small Business Act in 1978 was based on the ineffectiveness of race-neutral measures in helping minority-owned firms overcome the discriminatory barriers in federal procurement. Thus, Congress established Sections 8(a) and 8(d) of the Small Business Act, 15 U.S.C. ｧ 637(a) and (d), and ｧ 644(g) (establishing procurement contracting goals for, among others, businesses owned and controlled by socially and economically disadvantaged individuals) only after it determined that the race-neutral alternatives had not been successful in opening up opportunities for small disadvantaged businesses. Congress passed TEA-21, with its race-conscious classifications specifically addressing discrimination in the highway construction area, based on its knowledge that race-neutral efforts to remedy discrimination in the construction industry had been ineffective.
These race-neutral provisions contained in the new DOT regulations were explicitly relied upon by the Tenth Circuit, which concluded that the regulations "emphasize the need for race-conscious remedies, even as the need for race-conscious remedies is recognized." Adarand VII, 2000 WL 1375571 * 23. Plaintiff does not challenge the conclusion that Congress over a period of decades attempted to correct by race-neutral means the problem of too few minority contractors for government construction contracts, and only after it continued to observe discriminatory effects did it first implement a race-conscious remedy. See also Adarand VII, 2000 WL at 1375571 *22, citing, 965 F.Supp. 1582-83, and Croson, 488 U.S. at 507 (noting the finding in Fullilove that "Congress ... carefully examined and rejected race-neutral alternatives before enacting the [minority business program at issue])."
In Adarand III, one of the issues Justice O'Connor identified for the lower courts to consider on remand was whether the challenged racial classification is appropriately limited such that it "will not last longer than the discriminatory effects it is designed to eliminate." 515 U.S. at 238,citing Fullilove, 448 U.S. at 513. In debates over TEA-21, Congress thoroughly reviewed the DOT DBE program before deciding to reauthorize it for six additional years. (8) In each prior reauthorization bill for the surface transportation program, Congress examined the current state of transportation contracting and determined that the current DBE program was still necessary to remedy the continuing effects of discrimination. Congress will have the same opportunity prior to 2004 when the current DBE program will expire unless it is reauthorized by Congress.
In addition to Congress' periodic review of the entire DBE program, there are limits within the DBE program itself imposed upon individuals and firms participating in the DBE program. The new program imposes a personal net worth cap of $750,000 and maintains an overall business size cap. When an individual's personal wealth grows beyond the $750,000 limit, he or she will no longer be eligible to participate in the DBE program. 49 C.F.R. ｧ 26.67. Similarly, when a firm's receipts grow beyond the small business size standards, it can no longer participate in the program. 49 C.F.R. ｧ 26.65. Also, to ensure that race-conscious remedies are not used any longer than absolutely necessary, 49 C.F.R. ｧ 26.51 requires recipients to reduce or eliminate the use of contract goals and rely on race-neutral measures to the extent that they are effective,e.g. when a DBE goal can be entirely achieved through race- or gender-neutral means, reliance on race or gender will be eliminated.
The Tenth Circuit commented favorably on the extensive 1998 congressional debates over TEA-21, and the limited duration of the legislation and its predecessor statutes, leading it to conclude the "race conscious programs at issue are 'appropriately limited' to last no longer that 'the discriminatory effects [they are] designed to eliminate.'" See 2000 WL 1375571 at *24;quoting Adarand III, 515 U.S. at 237. This Court must reach that same conclusion.
c. The Flexibility of Relief Including Waiver Provisions.
Section 1101(b)(1) of TEA-21 provides as follows:
"Except to the extent the Secretary determines otherwise, not less than 10 percent of the amounts authorized to be appropriated under [the Act] shall be expended with small business concerns owned and controlled by socially and economically disadvantaged individuals (emphasis added).
49 C.F.R. ｧ 26.41 makes clear that the 10 percent statutory goal contained in the TEA-21 is an aspirational goal at the national level and does not set any funds aside for any person or group. It does not require any recipient or contractor to have 10 percent (or any other percentage level) DBE goals or participation. Each recipient is required under 49 C.F.R. ｧ 26.45 to set an annual overall goal consistent with its local circumstances, and there is no direct link between the national 10 percent aspirational goal and the way a recipient operates its program. Moreover, the new regulations explicitly state that a recipient cannot be penalized or found in non-compliance for failure to meet the annual goal it has established. 49 C.F.R. ｧ 26.47. The regulations also require that in setting its annual overall goals, a recipient should aspire to achieving only the amount of DBE participation that would be obtained in a nondiscriminatory market. 49 C.F.R. ｧ 26.45(b).
The DOT regulations permit a recipient to apply for waivers releasing the recipient from almost any of the specific requirements of the regulations if it believes that equal opportunity for DBEs can be achieved through other approaches. 49 C.F.R. ｧ 26.15. For example, the new regulations permit a recipient to seek waivers if the recipient believes that it can operate its DBE program differently from the way recommended in the regulations. Waiver requests could pertain to such subjects including, but not limited to, the use of a race-conscious measure other than a contract goal, different ways of counting DBE participation in certain industries, use of separate overall or contract goals to address demonstrated discrimination against specific categories of socially and economically disadvantaged individuals. 64 Fed. Reg. 5096 (1999) (9) A recipient can also receive an exemption from any provision if it has unique circumstances that permit achievement of the objectives of the DBE program by means that may differ from the specific requirements of the program. 49 C.F.R. ｧ 26.15. In these circumstances, no penalty will be imposed upon a recipient for failing to meet its annual overall goal. 49 C.F.R. ｧ 26.47.
In addition, the new DBE program addresses concerns directed at the inflexibility of the former DBE program in that it relied on a presumption founded on an immutable condition acquired at birth and that its goals were actually rigid quotas. The new DBE program addresses both concerns. First, the preference granted to DBEs is not based on "immutable conditions acquired at birth" but is based on a more extensive, probing inquiry into the business seeking DBE status. The certification provisions of the new DBE program, and particularly the social and economic disadvantage provisions of 49 C.F.R. ｧ 26.67, ensure that only firms owned and controlled by individuals who are in fact socially and economically disadvantaged can participate in the program. The new regulatory program imposes for the first time an economic standard for the owners of firms seeking DBE status. Under the new program, recipients are required to obtain a signed and notarized statement of personal net worth from all persons who claim to own and control a firm applying for DBE certification and whose ownership and control are relied upon for DBE certification. The personal net worth standard for rebutting the presumption of economic disadvantage has been established at $750,000. 49 C.F.R. ｧｧ 26.65, 26.67(b). Those who exceed this standard are excluded from the program. In addition, the new program reaffirms that any person (as well as the recipient and DOT) may challenge a DBE's entitlement to the presumption of social and economic disadvantage. 49 C.F.R. ｧ 26.87. The new program also reaffirms that people who are not presumed to be socially and economically disadvantaged (e.g., non-minorities) can secure DBE certification. To do so, they must demonstrate to the recipient that they are disadvantaged as individuals. Recipients are required to make case-by-case decisions concerning such applications. The focus of the new program is now better directed to a DBE program that is disadvantage-based, and not one limited only to members of certain designated minority groups.
The new DBE regulations emphasize that the DBE program is not a quota or set-aside program, and is not intended to operate as one. Explicit language appears in the new regulations stating that recipients are prohibited from using quotas on DOT-assisted contracts. 49 C.F.R. ｧ 26.43. Also, 49 C.F.R. ｧ 26.41 makes clear that the 10 percent statutory goal contained in the TEA-21 is an aspirational goal at the national level and does not set any funds aside for any person or group. It does not require any recipient or contractor to have 10 percent (or any other specific percentage) DBE goals or participation. Unlike the former regulations, the new program does not require a recipient to take any special administrative steps if its annual overall goal is less than 10 percent. Recipients are required under 49 C.F.R. ｧ 26.45 to set goals consistent with their own local circumstances. There is no direct link between the national 10 percent aspirational goal and the way a recipient operates its program. Moreover, the new regulations explicitly state that a recipient cannot be penalized or found in non-compliance for failure to meet the annual goal it has established. 49 C.F.R. ｧ 26.47.
The new DBE program also makes it clear that in setting annual overall goals, recipients should aspire to achieving only the amount of DBE participation that would be obtained in a local nondiscriminatory market. See Adarand VII, 2000 WL 1375571*37. The program outlines what bidders must do to be responsive and responsible on DOT-assisted contracts having contract goals. Failure to attain a contract goal after exercising good faith efforts is a legitimate means of contract compliance. 49 C.F.R. ｧ 26.53. Recipients are prohibited from denying a contract to a bidder simply because it did not obtain enough DBE participation to meet the goal. Recipients are required to seriously consider bidders' documentation of good faith efforts and cannot ignore a contractor's legitimate interest in striving for low price and high quality bids. To ensure that a contractor's documentation of its good faith efforts is taken seriously, the regulation requires recipients to offer administrative reconsideration to bidders whose good faith efforts are initially rejected for failure to meet a DBE goal. Id.
d. Relationship of Numerical Goals and the Relevant Labor Market.
An analysis of over or under-inclusiveness generally focuses on "the relationship of the numerical goals to the relevant labor market." See Peightal v. Metropolitan Dade County, 26 F.3d 1545, 1558 (11th Cir. 1994); Ensley Branch NAACP v. Siebels, 31 F.3d 1548, 1576 (11th Cir. 1994)(court asked whether goals were "reasonably related to the pool of qualified minorities").
The DOT DBE regulations require each recipient to set annual overall aspirational goals that reflect market conditions that might exist had discrimination not impaired the contracting opportunities of minorities and women. 49 C.F.R. ｧ 26.45. The direct effect of this goal-setting process narrows the focus of the program to DBEs that actually are ready, willing, and able to compete in that recipient's market, and not to members of classes of individuals outside that market. The Tenth Circuit found that the process by which recipients set aspirational goals is "rigorous," and concluded that the DBE regulations pertaining to the setting of goals avoids the danger of arbitrariness identified in Croson, 488 U.S. at 507. 2000 WL at *26.
e. The Impact of Relief on Third Parties.
The current DOT DBE program is designed to impact only minimally the legitimate interests of third parties (e.g., non-DBE prime contractors and non-DBE subcontractors) because the new program is aimed at replicating a market in which there are no effects of discrimination. In addition, the design of the overall goal provisions ensures that the use of race-conscious remedies that have the potential to affect the interests of third parties is limited to the extent necessary to counter the effects of discrimination. A reduction in the use of race-conscious remedies obviously lessens the potential impact on non-DBEs. Each recipient sets and attains goals based on demonstrable evidence of the relative availability of ready, willing and able DBEs in the areas from which it obtains contractors, but only to the extent that the program is needed to counter the effects of discrimination in the recipient's market. 49 C.F.R. ｧ 26.45. Therefore, goals will not bestow any undue benefits on DBEs, but rather place them on a level playing field with non-DBE firms.
While Plaintiff alleges that it cannot compete on an equal footing with DBE-certified firms due to the race and gender of its owner, it has prospered, with its revenues and earnings having increased each year since 1996, (10) and Plaintiff has not pointed to a single contract it has lost due to race or gender-based preferences under the new federal DBE program. Plaintiff's "burden" caused by the new DBE program, if any, is minimal, and well within the range needed to find the DBE program narrowly tailored. See Fullilove, 448 U.S. at 484 ("When effectuating a limited and properly tailored remedy to cure the effects of prior discrimination ... a 'sharing of the burden' by innocent parties is not impermissible."); See also Rothe Development Corp. v.U.S. Dept. of Defense, 49 F.Supp. 2d 937, 951 (W.D. Tex. 1999) ("[Plaintiff] has not provided evidence showing that, in this case, the number of contracts awarded with or without the preference exceeded any constitutional limit that might be placed on Congress."). Indeed, the Rothe court concluded that if it were to accept the position that "the mere loss of a contract constitutes a violation of the Equal Protection Clause - no race based remedial program would survive strict scrutiny ... such a result would contravene the clear language of [Adarand III]." 49 F.Supp.2d at 953.
In Colorado, the overwhelming majority of federally-assisted contracts - in excess of 98% - will be let without race- or gender-conscious goals. The Tenth Circuit did not have the benefit of reviewing CDOT's annual or contract goals but nevertheless came to the following conclusion:
While at the margin, some DBEs may be hired under the program in lieu of non-DBEs, the possibility that innocent parties will share the burden of a remedial program is itself insufficient to warrant the conclusion that the program is not narrowly tailored.
Adarand VII, 2000 WL 1375571*27.
The current DOT DBE program only minimally impacts the legitimate interests of Plaintiff and other third parties because the new program is aimed at replicating a market in which there are no effects of discrimination. Moreover, as is the situation here, any injury sustained by Plaintiff, if it were to sustain any injury at all, is minimal.
f. Alleged "Over-and Under-Inclusiveness."
The current DOT regulations clearly reflect that no preference is granted to a DBE based on solely on race. See Adarand VII, 2000 WL 1375571*31 ("[The new DBE] regulations illustrate how more careful tailoring now in place avoids some of the problems identified by the district court ... .") The certification provisions of the new DBE program, and particularly the social and economic disadvantage provisions of 49 C.F.R. ｧ 26.67, ensure that only firms owned and controlled by individuals who are in fact socially and economically disadvantaged can participate in the program. Under 49 C.F.R. ｧ 26.67(a), applicants for DBE status who are rebuttably presumed to be socially and economically disadvantaged due to their membership in one of the enumerated groups must nevertheless submit a signed, notarized certification that each presumptively disadvantaged owner is, in fact, socially and economically disadvantaged. Plaintiff acknowledges that "what is being certified to is under oath and subject to perjury and punishment therefore under both federal and Colorado law. Plt's Amended Complaint ｶ 44. (11)
Recipients are also required to obtain a signed and notarized statement of personal net worth from all persons who claim to own and control a firm applying for DBE certification and whose ownership and control are relied upon for DBE certification. 49 C.F.R. ｧ 26.67(a)(2(i). The personal net worth standard for rebutting the presumption of economic disadvantage has been established at $750,000. Those who exceed this standard are excluded from the program. 49 C.F.R. ｧ 26.67(b). The regulations permit any business owner, including a white male, to demonstrate social and economic disadvantage on an individual basis. 49 C.F.R. ｧ 26.67(d).
For these reasons, it must be concluded that the DBE program has effective safeguards to insure that only firms owned by persons who are socially and economically disadvantaged may be certified as DBEs. The changes from the previous regulations led the Tenth Circuit to conclude that the new regulations more precisely identify persons entitled to DBE certification. One way, among others, of accomplishing this precision is by periodically re-screening for economic disadvantage all candidates for certification. 2000 WL 1375571 *31.
Plaintiff acknowledges that if the "gender and race-based presumption" in ｧ 8(d) were eliminated, an entirely race-neutral program would result. As Plaintiff states (Plt's Brief at 20):
Without this gender- and race-based presumption, the DBE program would simply be a gender- and race-neutral program designed to assist disadvantaged individuals, regarding which, women, African, Hispanic, Asian, and Native Americans would enjoy no special advantage.
A gender and race-neutral program, however, would completely thwart the determination of Congress that members of certain racial and ethnic groups and women need assistance to overcome a history of discrimination in highway construction contracting. The recent congressional debates over TEA-21 show conclusively that Congress considered evidence showing that race-neutral programs have not been effective in overcoming the discriminatory barriers to women and minorities seeking to compete in the highway construction industry. As Justice O'Connor stated in Adarand III, "racial discrimination is an unfortunate reality and Congress is not disqualified from acting in response to it." 515 U.S. at 237. It is contradictory for Plaintiff to expect Congress, after having found a close, causal link between membership in certain groups and disadvantage in highway contracting, to then design a remedy that fails to take into account the very factors underlying their disadvantage: race and gender. Such a remedy would not be "narrowly tailored" to remedy the problem Congress has identified. (12)
B. CDOT'S DBE PROGRAM COMPORTS WITH FEDERAL STANDARDS AND IS CONSTITUTIONAL.
Plaintiff has not alleged in its Amended Complaint, and there is no factual basis upon which to conclude, that CDOT has implemented its DBE program inconsistently with the federal program. Indeed, Colorado's program is consistent with the federal DBE program. As indicated above, CDOT submitted its Disadvantaged Business Program Plan to DOT in September 1999. After careful analysis, CDOT adopted an annual goal of 10% participation of all DBEs and stated its intent to meet over 80% of that goal (8.27%) by race-and gender-neutral methods.
DOT conducted an extensive review of CDOT's Program Plan for its compliance and consistency with DOT's DBE regulations and approved the program on April 27, 2000. CDOT relied on a statewide disparity report that found that, within highway subcontracting in the most recent years reported, both African American and Asian/Native American firms received little to none of the CDOT highway contract monies and therefore were underutilized based upon their availability. Since the disparity study showed that only firms owned by African Americans (0.67%) and Asian/Native Americans (1.06%) were underutilized, CDOT adopted goals only for those groups.
Virtually all of the decisions about how to narrowly tailor a recipient's DBE program are dictated by the federal DBE program. Indeed, CDOT could not have adopted its program plan without DOT approval, and DOT gave its approval after thorough review. Since the CDOT program plan is authorized by and consistent with the overall scheme and purpose of TEA-21 and 49 C.F.R. Part 26, both of which the Tenth Circuit found to be constitutional, the CDOT program likewise passes constitutional muster.
The Tenth Circuit Court of Appeals recently held that Congress' enactment of the TEA-21 provides a strong basis to support a finding that a compelling need exists for the DOT DBE program and that race-neutral efforts were found to be insufficient to remedy the problem of barriers to the full participation in contracting by firms owned by minorities and women. In addition, it held that the DBE regulations recently promulgated by the DOT address concerns raised by this Court by changing the program to more narrowly tailor it to meet judicial and congressional concerns. These changes in the program compel the conclusion that the new DBE program is constitutional. Likewise, the CDOT program plan is constitutional. Accordingly, the Federal Defendants request that this Court grant its motion for summary judgment and deny Plaintiff's motion for partial summary judgment.
Respectfully submitted,
ROSALIND A. KNAPP BILL LANN LEE
Acting General Counsel Assistant Attorney General
Civil Rights Division
U.S. Department of Justice
PAUL M. GEIER ___________________________
Asst. General Counsel for Litigation MARYBETH MARTIN
PETER S. SMITH CHARLES E. LEGGOTT
Trial Attorney U.S. Department of Justice
EDWARD V.A. KUSSY Civil Rights Division
Acting Chief Counsel Employment Litigation Section
Federal Highway Adm. P.O. Box 65968
Washington, D.C. 20035-5968
(202) 514-0548
(202) 514-1005 (facsimile)
U.S. Dept. of Transportation
400 Seventh Street, S.W.
Washington, DC 20590
(202) 366-4731
Attorneys for Federal Defendants
CERTIFICATE OF SERVICE
I certify that on this the 14th day of October, 2000, a true and correct copy of the above and foregoing Federal Defendants' Motion for Summary Judgment and Memorandum in Support of their Motion for Summary Judgment and in Opposition to Plaintiff's Motion for Partial Summary Judgment was served upon Plaintiff and the State Defendants by sending a copy of it by Federal Express to :
James Scott Detamore, Esq.
707 Seventeenth Street, Suite 3030
Denver, Colorado 80202-3408
Harry Morrow, Esq.
Office of the Attorney General
1525 Sherman Street, 5th Floor
Denver, Colorado 80203
________________________
Charles E. Leggott
1. Litigation related to this case, including reported decisions in this case, will be referred to as follows: Adarand v. Skinner, 790 F.Supp. 240 (D.Colo. 1992) (Adarand I); Adarand v. Peña, 16 F.3d 1537 (10th Cir. 1994) (Adarand II); Adarand v. Peña, 515 U.S. 200 (1995) (Adarand III); Adarand v. Peña, 965 F.Supp. 1556 (D.Colo. 1997) (Adarand IV); Adarand v. Slater, 169 F.3d 1292 (10th Cir. 1999); (Adarand V); Adarand v. Slater, 120 S. Ct. 722 (2000) (Adarand VI) ; andAdarand v. Slater, 2000 WL 1375571 (10th Cir., Sept. 25, 2000) (Adarand VII).
2. ｧ 1101(b)(1) of TEA-21 provides, in part, as follows:
Except to the extent the Secretary determines otherwise, not less than 10 percent of the amounts authorized to be appropriated under [the Act] shall be expended with small business concerns owned and controlled by socially and economically disadvantaged individuals.
3. See e.g. Report of the Committee on Transportation and Infrastructure, Report 105-467, Part 1, March 25, 1998, page 174 ("the Committee understands that the Department of Transportation is reviewing the DBE program in light of recent court rulings and has proposed new regulations to ensure the program withstands constitutional muster;" id. at pp. 504-05 ("In addition, DOT has initiated rulemaking to address concerns raised by the [Adarand IV] Court. DOT's rulemaking is designed to ensure that the DBE program remains narrowly tailored by fine tuning the annual goal setting process, expanding local flexibility, and emphasizing race neutral measures and good faith effort waivers of contract goals"); Conference Report for H.R. 2400, Transportation Equity Act for the 21st Century. Report 105-550, May 22, 1998, p. 409 ("The Department of Transportation is reviewing the DBE program in light of recent court rulings and has proposed new regulations to ensure that the program withstands constitutional muster.").
4. Under 49 C.F.R. ｧ 26.41(c), recipients are assured that the 10 percent statutory DBE subcontracting goal in TEA-21 is only a national aspirational goal and does not require them to set overall annual or contract goals at the 10 percent level, or take any special administrative steps if their goals are above or below 10 percent. See 64 Fed. Reg. at 5107.
5. While the new DOT DBE program fulfills each of the narrow tailoring factors set forth in Paradiseand Adarand III, it is not clear that narrow tailoring requires that each factor must be satisfied in order to pass constitutional muster.
6. Congressional debates on the amendments to eliminate the DBE program from the highway bill are contained in the Congressional Record for March 5 and 6, 1998, for the Senate debate; April 1, 1998, for the House debate; and May 22, 1998, for the debate on the conference report in both chambers. References to the Senate debate are shown as "S(page number of statement)" and to the House debate as "H(page number of statement)."
7. Plaintiff does not allege that the government lacks a compelling interest in using race-conscious measures to remedy the effects of discrimination in the highway construction industry; rather, Plaintiff challenges only that the DBE program does not meet the narrow tailoring prong of strict scrutiny (Amended Complaint ｶ 86). The above discussion on compelling interest addresses the first Paradisefactor: "the necessity for relief [and the efficacy of alternative remedies]." 480 U.S. at 171.
8. TEA-21 provides for an interim review of the impact of the DBE program. Section 1101(b)(6) provides that within three years of the statute's enactment, "the Comptroller General of the United States shall conduct a review of, and publish and report to Congress findings and conclusions on, the impact throughout the United States of administering the" DBE provisions. 112 Stat. 114.
9. The availability of waivers to accommodate local conditions is illustrated by Colorado's establishment of contract goals only for African, Asian and Native-American owned firms. Plaintiff has not contended that it competes with any such firms for contracts in Colorado.
10. This statement is based on financial data provided by Plaintiff in response to Federal Defendants' interrogatories. The parties have entered into a protective order, under which Federal Defendants agreed not to disclose Plaintiff's proprietary financial data.
11. The court in Interstate Traffic Control v. Beverage, 101 F.Supp. 2d 445, 453 (D. W.Va. 2000), commented favorably on the new DBE certification process, stating that under the new regulations, "the presumptive truth of disadvantage is then confirmed by dual certifications as to disadvantage and personal net worth." The court observed that the only apparent way a Plaintiff could be injured by the rebuttable presumption would be "if there was fraud in the program." The court reasoned that any applicant for certification as a DBE who was not truly disadvantaged would have to fraudulently certify to his or her disadvantage. The court held that the plaintiff in Interstate had not alleged fraud in the program, and had failed to show how the presumption of itself was causally related to the plaintiff's alleged inability to compete on an equal footing due to an impermissible use of race. Id.
12. See also Rothe Development Corp. v. U.S. Dept. of Defense, 49 F.Supp. 2d 937, 949 (W.D. Tex. 1999) (given the scope of Congress' power to address discrimination on a nationwide basis, "there must be some relationship between the breadth of the problem to be remedied and the breadth of the remedy to be allowed. Strict application of the Croson criteria, without consideration of Congress' role in addressing issues that face the nation as a whole, will almost inevitably result in the invalidation of congressional remedial measures. Such automatic invalidation would render strict scrutiny 'strict in theory; fatal in fact,' a result the Supreme Court has explicitly rejected (citation omitted))."