Driving Equity: The U.S. Department of Transportation's Disadvantaged Business Enterprise Program, House hearing transcript (September 23, 2020), GovInfo CHRG-116hhrg43413, PDF
Summary
The House Committee on Transportation and Infrastructure met for remote hearing 116–64, “Driving Equity: The U.S. Department of Transportation’s Disadvantaged Business Enterprise Program,” on September 23, 2020; this is the Government Publishing Office PDF. Seven witnesses testified: Evalynn Williams, Geri E. Boyer, Mary T. Lerdahl, Farad Ali, Sandy-Michael E. McDonald, Sandra Norman and Jon Wainwright, Ph.D. Background material in the hearing volume explains that Congress set a national 10 percent participation goal for firms certified as DBEs in surface transportation and airport programs, and that recipients must base their own goals on evidence of ready, willing and able DBEs. Submissions include a letter of October 7, 2020 from the Associated General Contractors of America.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
DRIVING EQUITY: THE U.S. DEPARTMENT OF
TRANSPORTATION’S DISADVANTAGED BUSINESS
ENTERPRISE PROGRAM
(116–64)
REMOTE HEARING
BEFORE THE
COMMITTEE ON
TRANSPORTATION AND
INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
SEPTEMBER 23, 2020
Printed for the use of the
Committee on Transportation and Infrastructure
(
Available online at: https://www.govinfo.gov/committee/house-transportation?path=/
browsecommittee/chamber/house/committee/transportation
U.S. GOVERNMENT PUBLISHING OFFICE
43–413 PDF WASHINGTON : 2021
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
PETER A. DEFAZIO, Oregon, Chair
ELEANOR HOLMES NORTON, SAM GRAVES, Missouri
District of Columbia DON YOUNG, Alaska
EDDIE BERNICE JOHNSON, Texas ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas
RICK LARSEN, Washington BOB GIBBS, Ohio
GRACE F. NAPOLITANO, California DANIEL WEBSTER, Florida
DANIEL LIPINSKI, Illinois THOMAS MASSIE, Kentucky
STEVE COHEN, Tennessee SCOTT PERRY, Pennsylvania
ALBIO SIRES, New Jersey RODNEY DAVIS, Illinois
JOHN GARAMENDI, California ROB WOODALL, Georgia
HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia JOHN KATKO, New York
ANDRÉ CARSON, Indiana BRIAN BABIN, Texas
DINA TITUS, Nevada GARRET GRAVES, Louisiana
SEAN PATRICK MALONEY, New York DAVID ROUZER, North Carolina
JARED HUFFMAN, California MIKE BOST, Illinois
JULIA BROWNLEY, California RANDY K. WEBER, SR., Texas
FREDERICA S. WILSON, Florida DOUG LAMALFA, California
DONALD M. PAYNE, JR., New Jersey BRUCE WESTERMAN, Arkansas
ALAN S. LOWENTHAL, California LLOYD SMUCKER, Pennsylvania
MARK DESAULNIER, California PAUL MITCHELL, Michigan
STACEY E. PLASKETT, Virgin Islands BRIAN J. MAST, Florida
STEPHEN F. LYNCH, Massachusetts MIKE GALLAGHER, Wisconsin
SALUD O. CARBAJAL, California, Vice Chair GARY J. PALMER, Alabama
ANTHONY G. BROWN, Maryland BRIAN K. FITZPATRICK, Pennsylvania
ADRIANO ESPAILLAT, New York JENNIFFER GONZÁLEZ-COLÓN,
TOM MALINOWSKI, New Jersey Puerto Rico
GREG STANTON, Arizona TROY BALDERSON, Ohio
DEBBIE MUCARSEL-POWELL, Florida ROSS SPANO, Florida
LIZZIE FLETCHER, Texas PETE STAUBER, Minnesota
COLIN Z. ALLRED, Texas CAROL D. MILLER, West Virginia
SHARICE DAVIDS, Kansas GREG PENCE, Indiana
ABBY FINKENAUER, Iowa MIKE GARCIA, California
JESÚS G. ‘‘CHUY’’ GARCÍA, Illinois
ANTONIO DELGADO, New York
CHRIS PAPPAS, New Hampshire
ANGIE CRAIG, Minnesota
HARLEY ROUDA, California
CONOR LAMB, Pennsylvania
(ii)
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CONTENTS Page
Summary of Subject Matter .................................................................................... v
STATEMENTS OF MEMBERS OF THE COMMITTEE
Hon. Peter A. DeFazio, a Representative in Congress from the State of Or-
egon, and Chairman, Committee on Transportation and Infrastructure:
Opening statement ........................................................................................... 1
Prepared statement .......................................................................................... 4
Hon. Sam Graves, a Representative in Congress from the State of Missouri,
and Ranking Member, Committee on Transportation and Infrastructure:
Opening statement ........................................................................................... 4
Prepared statement .......................................................................................... 5
Hon. Eleanor Holmes Norton, a Delegate in Congress from the District of
Columbia, and Chairwoman, Subcommittee on Highways and Transit:
Opening statement ........................................................................................... 5
Prepared statement .......................................................................................... 6
Hon. Rodney Davis, a Representative in Congress from the State of Illinois,
and Ranking Member, Subcommittee on Highways and Transit:
Opening statement ........................................................................................... 7
Prepared statement .......................................................................................... 8
Hon. Eddie Bernice Johnson, a Representative in Congress from the State
of Texas, prepared statement .............................................................................. 133
Hon. Rick Larsen, a Representative in Congress from the State of Wash-
ington, and Chairman, Subcommittee on Aviation, prepared statement ........ 133
WITNESSES
Evalynn Williams, President and Chief Executive Officer, Dikita Enterprises,
Inc., on behalf of the Conference of Minority Transportation Officials:
Oral statement .................................................................................................. 10
Prepared statement .......................................................................................... 11
Geri E. Boyer, P.E., President, Kaskaskia Engineering Group, LLC, on behalf
of the American Council of Engineering Companies:
Oral statement .................................................................................................. 14
Prepared statement .......................................................................................... 16
Mary T. Lerdahl, President, Emerald Consulting Services, LLC:
Oral statement .................................................................................................. 22
Prepared statement .......................................................................................... 24
Farad Ali, Chairman, Government Affairs Committee, Airport Minority Advi-
sory Council:
Oral statement .................................................................................................. 27
Prepared statement .......................................................................................... 29
Sandy-Michael E. McDonald, Director, Office of Economic and Small Business
Development, Broward County, Florida:
Oral statement .................................................................................................. 32
Prepared statement .......................................................................................... 33
Sandra D. Norman, Division Administrator, Civil Rights, Virginia Depart-
ment of Transportation:
Oral statement .................................................................................................. 36
Prepared statement .......................................................................................... 37
Jon S. Wainwright, Ph.D., Affiliated Consultant, NERA Economic Consulting:
Oral statement .................................................................................................. 38
Prepared statement .......................................................................................... 40
(iii)
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Page
SUBMISSIONS FOR THE RECORD
Submissions for the Record by Hon. Peter A. DeFazio:
Ten Disparity Studies ...................................................................................... 3
Letter of June 25, 2020, from Geri E. Boyer, P.E., President, Kaskaskia
Engineering Group, LLC .............................................................................. 95
Letter of July 13, 2020, from Lawrence T. Green, President, Divine Ce-
ment, Inc. ....................................................................................................... 134
Letter of July 15, 2020, from Linda Moen, P.E., LEED BD+C, President
and Managing Member, EFK Moen ............................................................ 136
Letter of July 1, 2020, from Carla M. Williams, DBELO, Director of
Community and Business Engagement, Hillsborough Area Regional
Transit Authority, and President, COMTO Central Florida Chapter ...... 137
Letter of September 19, 2020, from Colette Holt, Colette Holt & Associ-
ates ................................................................................................................. 138
Letter of June 16, 2020, from Katherine M. Cloonen, President, JK Steel
Erectors, Inc. ................................................................................................. 142
Letter of June 24, 2020, from Carol L. Kwan, Carol Kwan Consulting
LLC ................................................................................................................ 143
Letter of May 26, 2020, from Sarah Imberman, S. Levy Foods ................... 144
Letter of June 17, 2020, from Constance Macolino, President, Puget
Sound Steel Co., Inc. ..................................................................................... 144
Letter of September 9, 2020, from Robert S. Bright, Founder and Presi-
dent, Talson Solutions, LLC ......................................................................... 145
Letter of September 8, 2020, from Lorenzo Thompson, Principal, Thomp-
son Civil, LLC ............................................................................................... 146
Letter of July 1, 2020, from Katey Doman, President, TyE Bar LLC ......... 147
Statement of Joann Payne, President, Women First National Legislative
Committee ..................................................................................................... 147
Submissions for the Record by Hon. Sam Graves of Missouri:
Statement of the American Road & Transportation Builders Association .. 151
Letter of October 7, 2020, from James V. Christianson, Vice President,
Government Relations, Associated General Contractors of America ........ 155
Statement of the Airport Restaurant and Retail Association, Submitted for
the Record by Hon. Rick Larsen ......................................................................... 159
APPENDIX
Question from Hon. Troy Balderson to Sandy-Michael E. McDonald, Director,
Office of Economic and Small Business Development, Broward County,
Florida ................................................................................................................... 163
Questions from Hon. Peter A. DeFazio to Jon S. Wainwright, Ph.D., Affiliated
Consultant, NERA Economic Consulting ........................................................... 164
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SEPTEMBER 18, 2020
SUMMARY OF SUBJECT MATTER
TO: Members, Committee on Transportation and Infrastructure
FROM: Staff, Committee on Transportation and Infrastructure
SUBJECT: Hearing on ‘‘Driving Equity: The U.S. Department of Transpor-
tation’s Disadvantaged Business Enterprise Program’’
PURPOSE OF HEARING
The Committee on Transportation and Infrastructure will meet on Wednesday,
September 23, 2020, at 10:00 am, in room 2167 Rayburn House Office Building and
remotely via Cisco WebEx, to receive testimony regarding ‘‘Driving Equity: The U.S.
Department of Transportation’s Disadvantaged Business Enterprise Program.’’ The
Committee will hear from representatives of the Virginia Department of Transpor-
tation; Broward County, Florida, Office of Small Business and Economic Develop-
ment; the Airport Minority Advisory Council (AMAC); the Conference of Minority
Transportation Officials (COMTO); Emerald Consulting Services; NERA Economic
Consulting; and the American Council of Engineering Companies (ACEC).
BACKGROUND
The U.S. Department of Transportation’s (DOT) Disadvantaged Business Enter-
prise (DBE) Program was established to remedy discrimination against minority
and women-owned businesses.1 The DBE program seeks to ensure those businesses
are provided equal opportunities to compete for contracts assisted by certain DOT
funds administered by the Federal Highway Administration (FHWA), the Federal
Aviation Administration (FAA), the Federal Transit Administration (FTA), and the
National Highway Traffic Safety Administration (NHTSA).2
First established by Federal regulation in 1980 as a minority and women’s busi-
ness enterprise program, the DBE program was later statutorily authorized for sur-
face transportation programs in 1983 by the Surface Transportation Assistance Act
of 1982 (P.L. 97–424) to aid small businesses owned and controlled by minorities
facing historic and continuing discriminatory barriers to participation in the high-
ways and transit programs.3
DBE programs for women-owned businesses and the FAA’s airport DBE program
were primarily implemented by regulation until Congress passed the Surface Trans-
portation and Uniform Relocation Assistance Act of 1987 (P.L. 100–17) and the Air-
port and Airway Safety and Capacity Expansion Act of 1987 (P.L. 100–223), which
expanded statutory authorization for surface and airport transportation construction
1 DOT Office of Civil Rights. Disadvantaged Business Enterprise (DBE) Program. US Depart-
ment of Transportation. Retrieved September 18, 2020, from https://www.transportation.gov/
civil-rights/disadvantaged-business-enterprise
2 49 CFR 26.3.
3 DOT Office of Civil Rights. Disadvantaged Business Enterprise (DBE) Program.
(v)
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DBE programs to include women-controlled small businesses and codified the air-
port DBE program, respectively. The Airport and Airway Safety and Capacity Ex-
pansion Act also established a separate Airport Concession Disadvantaged Business
Enterprise (ACDBE) Program administered by the FAA for airport concessions and
related contracts.4 Since P.L. 100–223 codified the airport construction DBE pro-
gram and the ACBDE program, these programs do not require statutory reauthor-
ization in the same manner as surface transportation DBE programs.
Though not codified like the airport programs, Congress has regularly reauthor-
ized the DBE program for highways and transit in successive surface transportation
bills, most recently with the enactment of the Fixing America’s Surface Transpor-
tation (FAST) Act (P.L. 114–94). In addition, the U.S. House of Representatives
passed H.R. 2, the Moving Forward Act, which aims to reauthorize the surface DBE
program with some amendments.
Both the surface DBE program and the aviation construction DBE program are
implemented pursuant to regulations established under 49 CFR part 26. The
ACDBE program is implemented pursuant to regulations established under 49 CFR
part 23.
I. WHAT IS A DBE?
For eligibility purposes, a DBE is defined as a small, for-profit business where so-
cially and economically disadvantaged individuals (1) own at least 51 percent of the
economic interests of the entity, and (2) control and manage the business operations
of the firm.5 A firm and its minority and/or women owners seeking certification as
a DBE must meet: (1) an ownership and control test, (2) a personal net worth test,
and (3) a size standard test, requirements for which are described in regulation.6
To be regarded as socially disadvantaged means to face historic and ongoing dis-
crimination, such as racial or ethnic prejudice or cultural bias due to membership
in a particular group.7 Consistent with DOT implementing regulations, minorities
and women are presumed to be socially disadvantaged (although that presumption
is rebuttable).8 Others may qualify as socially disadvantaged on a case-by-case
basis.9
To be regarded as economically disadvantaged, an individual must, among other
things, have a personal net worth that does not exceed $1.32 million, excluding the
equity in the individual’s primary residence and the value of their ownership inter-
est in the firm seeking certification.10
To meet size standards for DBE eligibility and be regarded as a small business
in the surface transportation sector, a business must meet the qualifications of a
small business defined by the Small Business Administration (SBA) in accordance
with the North American Industry Classification System (NAICS) codes relevant to
the business and as defined by the annual gross receipts or employee number caps
outlined for each industry code.11 In addition, the small business must not have av-
erage annual gross receipts over the firm’s previous three fiscal years in excess of
$23.98 million, regardless of the relevant NAICS code qualification.12
Until the FAA Reauthorization Act of 2018 (P.L. 115–254), size standards for DBE
eligibility in the aviation construction sector reflected the same requirements as the
surface DBE program. With that Act, however, Congress removed the separate
$23.98 million gross receipts cap requirement for businesses in the aviation con-
struction sector, tying eligibility requirements directly to the SBA’s definitions of
small businesses.13
In addition, H.R. 2, the Moving Forward Act, proposes to remove the $23.98 mil-
lion gross receipts cap from the surface transportation DBE program as well, so the
SBA would determine business size standards for DBEs. This proposed change
would result in a uniform standard for determining small business size for both the
surface and aviation construction DBE programs, set by the SBA.
To be certified under the FAA’s ACDBE program, a business must meet different
size standards reflective of the diversity of industries present in airport conces-
sions.14
4 Id.
5 49 CFR 26.5.
6 49 CFR 26; 49 CFR 23.
7 13 CFR 124.103.
8 49 CFR 26.67(a) and (b).
9 49 CFR 26.67(d).
10 49 CFR 26.67(a).
11 49 CFR 26.65(a).
12 49 CFR 26.65(b).
13 49 USC §47113(a)(1).
14 49 CFR 23.33.
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II. HOW ARE FIRMS CERTIFIED?
Recipients of DOT financial assistance (such as state departments of transpor-
tation, local governments, transit agencies, and port authorities) are required to es-
tablish a Unified Certification Program (UCP) in their state.15 The purpose of a
UCP is to ensure DBEs and applicants (including airport concessionaires) will have
‘‘one-stop shopping’’ on all certification matters with respect to these recipients. If
a business wants to be certified as a DBE, it must submit an application to the state
UCP for approval.16 Determinations as to whether a firm meets the DBE criteria
are made by the UCP using various means, including on-site visits, personal inter-
views, reviews of licenses, stock ownership, equipment, bonding capacity, work com-
pleted, résumé of principal owners, financial capacity, and type of work preferred.17
Once a DBE is certified through the UCP, that certification must be honored by all
recipients of DOT funds within the state.18
While some state UCPs maintain certification reciprocity agreements with other
state UCPs, each state exercises its own discretion as to whether it will accept cer-
tification from other states.19 DBEs wishing to do business in multiple states must
generally recertify with all applicable UCPs.20
III. HOW DOES THE DBE PROGRAM WORK?
Under the authorizing statues for the various DBE programs, Congress set a na-
tional 10 percent participation goal for firms certified as DBEs in surface transpor-
tation programs, in airport federally assisted contracting (i.e., procurement, con-
struction, or professional services contracts), and in airport concessions.21
DOT regulations require recipients of federal financial assistance that anticipate
awarding prime contracts of more than $250,000 to establish an annual aspirational
DBE participation goal that reflects what DBE participation in federally-assisted
projects would look like in the absence of discrimination.22 Recipients must base
their goals on how to achieve a level playing field in their individual programs, re-
gardless of the 10 percent national goal.23 These goals must be based on demon-
strable evidence of the availability of ready, willing, and able DBEs relative to the
DOT-assisted contracts that will be available that fiscal year (FY).24
The two-step process for goal-setting in accordance with this demonstrable evi-
dence is laid out in 49 CFR 26.45. Demonstrable evidence may come from several
sources, including, but not limited to: census data, established DBE directories, past
bidder lists, determinations by other DOT recipients with substantially similar mar-
ket areas, and statistical DBE availability and disparity studies covering recipients’
market areas.25 The recipient of DOT funds must establish its goal for a three-year
period and submit that goal with the determining methodology to the FAA, FHWA,
or FTA for review and approval.26
It is important to note that a recipient’s goal is aspirational only; quotas and set-
asides are generally not permitted. In addition, DOT does not assess penalties for
not meeting DBE goals as long as good faith efforts are demonstrably made.27 Fur-
thermore, recipients are required to use race-neutral means to meet as much of
their overall goal as possible (in this context, ‘‘race-neutral’’ refers to both race and
gender, i.e., without application of any criteria favoring DBEs over non-DBEs).28 Ex-
amples of ‘‘race-neutral means’’ include: providing assistance to small businesses in
overcoming issues such as the inability to obtain bonding or financing; unbundling
large contracts to make them more accessible to small businesses; informational and
communication programs on contracting procedures and specific contract opportuni-
ties; and other business support services.29
15 49 CFR 26.81.
16 Id.
17 49 CFR 26.83(c).
18 49 CFR 26.81(b).
19 49 CFR 26.81(e) and (f).
20 49 CFR 26.85.
21 See P.L. 114–94 §1101(b)(3) for surface, and 49 USC §47113(b) for aviation.
22 49 CFR 26.21(a)(1) requires all FHWA ‘‘primary recipients’’ of Federal financial assistance
to establish a DBE program, regardless of contract size. Subrecipients are governed by the
prime recipient’s DBE program.
23 49 CFR 26.45(b).
24 49 CFR 26.45.
25 49 CFR 26.45.
26 Id.
27 49 CFR 26.47.
28 See 49 CFR 26.5 and 49 CFR 26.51.
29 49 CFR 26.51(b).
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If a recipient is unable to meet its overall DBE participation goal through race-
neutral means, then a recipient must establish contract goals (which are deemed
race-conscious) for DBE participation.30 This means the recipient has determined
that, without the use of race-conscious measures, a level playing field for DBE busi-
nesses could not be achieved. Contract goals require that prime contractors em-
ployed by DOT recipients make good-faith efforts to award a certain percentage of
their total contract work to certified DBEs in order to meet the race-conscious por-
tion of their overall DBE participation goal.31 There are no Federally-mandated pen-
alties for failing to meet these goals as long as good-faith efforts are made.
Importantly, as discussed further in section VI below, states under the jurisdiction
of the Ninth Circuit Court of Appeals must use evidence from statistical disparity
studies during their goal-setting process before DOT recipients in those states are
allowed to set race-conscious goals for DBE participation.32
V. WHAT MUST RECIPIENTS REPORT TO DOT MODAL ADMINISTRATIONS?
Recipients of DOT funds must maintain accurate records of data related to the
participation of DBEs on projects and report these records regularly to DOT modal
administrations.33 FHWA and FTA recipients must submit a uniform report of DBE
contract awards, commitments, and payments twice per FY, and FAA recipients
must submit such a report once per FY.34
These uniform reports break down awards, commitments, and payments of federal
financial assistance in terms of, among other things: (1) number of contracts award-
ed to DBEs as a percentage of total contracts, (2) dollar amount of contracts award-
ed to DBEs as a percentage of total contract dollars, (3) a breakdown of number of
contracts awarded to DBEs disaggregated by race, gender, or other applicable cat-
egories, and (4) a breakdown of contract dollar amounts awarded to DBEs
disaggregated by race, gender, or other applicable categories.35
VI. HOW HAS THE DBE PROGRAM BEEN REVIEWED BY THE COURTS?
Numerous court cases dealing with the DOT’s DBE program or questions of race
or gender-based discrimination have affected the implementation of the program
over time. Some have involved the program directly and others indirectly. Below is
a brief overview of a few of the most relevant cases.
a. City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989)
In 1989, the United States Supreme Court held in City of Richmond v. J.A.
Croson Co. (Croson) that a Richmond, Virginia, set-aside program giving preference
to minority businesses in the awarding of municipal contracts was unconstitutional
on the grounds that the city had failed to adequately demonstrate its compelling in-
terest in establishing such a program on the basis of relevant, measurable evi-
dence.36 With this holding, the Court established an outline of what would con-
stitute a permissible program for race-based awarding of public contracts by requir-
ing that such programs be subject to a ‘‘strict scrutiny’’ standard (the most stringent
standard) of judicial review.37 Under the strict scrutiny standard, a public entity
must prove: (1) that it has a ‘‘compelling interest’’ in remedying discrimination
based on ‘‘a strong basis in evidence,’’ and (2) that the measures employed to rem-
edy such discrimination are ‘‘narrowly tailored’’ to the scope of the evidence pre-
sented.38
b. Adarand v. Pena, 515 U.S. 200 (1995)
In 1995, in Adarand v. Pena (Adarand), a case dealing with DOT funds expended
in the state of Colorado, the United States Supreme Court held that the strict scru-
tiny standard previously applied in Croson applies to the Federal government in the
establishment of race-based programs.39 While the Court did not specifically deter-
mine the constitutionality of DOT’s DBE program in Adarand, the Administration
undertook a review of Federal programs, including the DBE program, that used race
or gender as a basis for decision-making to ensure compliance with the strict scru-
30 49 CFR 26.51(d).
31 49 CFR 26.51(e)(2).
32 Case No. C00–5204 RBL (W.D. Wash. June 23, 2006)
33 49 CFR 26.11.
34 Id.
35 49 CFR 26, Appendix B.
36 488 U.S. 469 (1989).
37 Id.
38 Id.
39 515 U.S. 200 (1995).
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tiny standard.40 In 1998, Congress reauthorized the surface DBE programs with the
Transportation Equity Act for the 21st Century (TEA–21, P.L. 105–178). In 1999,
the DOT finalized new rules for both the surface and aviation DBE programs to en-
sure compliance with Adarand, and new rules for the ACDBE program were issued
in 2005.41 Since the new rules were adopted, courts considering the constitutionality
of the DBE program have consistently upheld the program against facial chal-
lenges.42
c. Western States Paving Co, Inc. v. Washington State Department of Transportation,
Case No. C00–5204 RBL (W.D. Wash. June 23, 2006)
In 2005, the U.S. Court of Appeals for the Ninth Circuit decided in Western States
Paving Co, Inc. v. Washington State Department of Transportation (Western States)
that DOT’s DBE program was facially constitutional, however was unconstitutional
‘‘as applied’’ by Washington State’s DOT (WashDOT), because WashDOT had failed
to meet the strict scrutiny requirement that the program be narrowly tailored.43
The court held WashDOT had not established with sufficient statistical evidence
that it needed race-conscious measures to meet WashDOT’s DBE participation
goals.44 In response to this ruling, the DOT advised all states within the jurisdiction
of the Ninth Circuit Court to implement only race-neutral program goals until sta-
tistical disparity studies could be completed to meet strict scrutiny standards for
race-conscious contracting goals.45
VII. WHAT ARE DISPARITY STUDIES AND HOW DO THEY IDENTIFY DISCRIMINATION IN
MARKETS?
Disparity studies are complex statistical analyses of relevant marketplaces for
Federal contracts. Study methodology can vary, but studies generally aim to present
policymakers with a ‘‘disparity ratio,’’ the relative percentage of Federal contract
dollars awarded to minority groups and women in comparison with the percentage
such groups would be expected to receive in a marketplace where discrimination is
not present.46 Disparity studies conducted for DOT funding recipients may include,
among other factors, analysis such as: (1) an empirical determination of the appro-
priate market area and appropriate product markets relevant to the recipients con-
tracting activity; (2) an estimate of the fraction of DBEs compared with non-DBEs
in the relevant market area and product markets (DBE availability); (3) an estimate
of the percentage of the recipient’s contract dollars earned by DBEs (DBE utiliza-
tion); (4) a statistical comparison of DBE availability and utilization; (5) econometric
analysis of the relative success of DBEs in the recipients public sector market as
well as the corresponding private sector market; and (6) econometric analysis of
DBE access to capital in the relevant marketplace.
As noted, recipients of DOT funds may use, and recipients under the jurisdiction
of the Ninth Circuit Court generally must use pursuant to Western States, statistical
disparity studies to aid in the establishment of goals for DBE participation on Fed-
eral-aid contracts. Since the Croson decision, many public agencies across the coun-
try, including DOT funding recipients, have relied upon disparity studies to estab-
lish accurate, empirically-based goals for minority participation in public contracting
programs, including the DOT’s DBE program.
40 See Affirmative Action Review Report to the President. Retrieved September 18, 2020, from
https://clintonwhitehouse2.archives.gov/WH/EOP/OP/html/aa/aa-index.html
41 See 54 Fed. Reg. 5,096 (February 2, 1999), and 70 Fed. Reg. 14,496 (March 22, 2005)
42 See Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000), cert. granted, 532
U.S. 941, then dismissed as improvidently granted, 534 U.S. 103 (2001) (Adarand VII);
Sherbrooke Turf, Inc. v. Minnesota Department of Transportation, and Gross Seed Co. v. Ne-
braska Department of Roads, 345 F.3d. 964 (8th Cir. 2003), cert. denied, 541 U.S. 1041 (2004);
Western States Paving Co., Inc. v. Washington Department of Transportation, 407 F.3d 983 (9th
Cir. 2005), cert. denied, 546 U.S. 1170 (2006); Northern Contracting, Inc. v. Illinois Department
of Transportation, 473 F.3d 715 (7th Cir. 2007) (Northern Contracting III); Orion Insurance
Group v. Washington OMWBE, U.S. DOT, 2018 WL 6695345 (9th Cir. 2018), cert. denied, June
24, 2019.
43 Case No. C00–5204 RBL (W.D. Wash. June 23, 2006).
44 Id.
45 DOT Office of Civil Rights. Western States Paving Company Case Q&A. US Department of
Transportation. Retrieved September 18, 2020 from https://www.transportation.gov/osdbu/dis-
advantaged-business-enterprise/western-states-paving-company-case-q-and-a
46 National Academies of Sciences, Engineering, and Medicine, Transportation Research
Board, & National Cooperative Highway Research Program. (2010). Guidelines for Conducting
a Disparity and Availability Study for the Federal DBE Program. The National Academies Press.
Retrieved September 18, 2020, from https://www.nap.edu/catalog/14346/guidelines-for-con-
ducting-a-disparity-and-availability-study-for-the-federal-dbe-program
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x
WITNESSES
• Mr. Farad Ali, Airport Minority Advisory Council
• Ms. Geri E. Boyer, P.E., American Council of Engineering Companies
• Ms. Mary Lerdahl, Emerald Consulting Services
• Mr. Sandy-Michael McDonald, Broward County, Florida, Office of Economic and
Small Business Development
• Ms. Sandra Norman, Virginia Department of Transportation
• Mr. Jon Wainwright, Ph.D., NERA Economic Consulting
• Ms. Evalynn Williams, Conference of Minority Transportation Officials
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DRIVING EQUITY: THE U.S. DEPARTMENT OF
TRANSPORTATION’S DISADVANTAGED BUSI-
NESS ENTERPRISE PROGRAM
WEDNESDAY, SEPTEMBER 23, 2020
HOUSE OF REPRESENTATIVES,
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,
WASHINGTON, DC.
The committee met, pursuant to call, at 10:01 a.m., in room 2167
Rayburn House Office Building and via Cisco Webex, Hon. Peter A.
DeFazio (Chairman of the committee) presiding.
Mr. DEFAZIO. The committee will come to order.
I ask unanimous consent that the chair be authorized to declare
recess at any time during today’s hearing.
Without objection, so ordered.
Before proceeding further, I would first like to make a few com-
ments about how we intend to proceed today. We had previously
covered these issues, but I want to briefly remind Members for this
hearing; it has been a while.
Today’s hearing is being held in the committee’s hearing room,
as well as remotely by Cisco Webex. For Members and staff in the
hearing room, I do have an announcement based on guidance from
the Attending Physician, dated June 16, 2020. Members, staff, and
all those physically present are informed that, in accordance with
recent guidance from the Office of the Attending Physician, masks
must be worn at all times during today’s proceeding, except when
a Member is speaking at a microphone.
The chair views this as a safety issue and, therefore, an impor-
tant matter of order and decorum, and will assert his responsibility
to preserve order and decorum with respect to the wearing of
masks. The chair’s authority to enforce the preservation of order
and decorum during committee proceedings derives from the
Speaker’s enforcement authority under clause 2 of rule I. Pursuant
to clause 1 of rule XI, the rules of the House are the rules of its
committees and subcommittees, as far as applicable.
The committee chair has long been responsible for the enforce-
ment of general decorum in their respective committees. The chair
would greatly prefer that all present simply uphold the decorum of
the committee by complying with reasonable safety standards that
are recommended by the Attending Physician and are respectful of
all the occupants in the room. However, failing that, enforcement
would include denial of recognition toward Members who refuse to
uphold standards of decorum.
As this is a hybrid hearing, I also want to remind Members of
key regulations from the House Committee on Rules to ensure the
(1)
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2
hearing goes smoothly. Members must be visible—hello—on screen
for purposes of identification when joining this hearing. Members
must also continue to use the video function software platform,
Cisco Webex, as lame as it is, for the remainder of the time they
are attending this hearing, unless experiencing connectivity issues
or other technical problems.
If a Member is experiencing any connectivity issues or other
technical problems, please inform committee staff as soon as pos-
sible so you can receive assistance. The chat function is available
for Members on the Webex site platform for this purpose. Members
can also call the committee’s main phone line, 202–225–4472, for
technical assistance by phone.
Members may not participate remotely in any other proceeding
that may be occurring simultaneously.
It is the responsibility of each Member seeking recognition to
unmute their microphone prior to speaking. To avoid any inad-
vertent background noise, I request every Member to keep their
microphone muted when not seeking recognition to speak. Should
I hear any inadvertent background noise, I will request the Mem-
ber to please mute their microphone.
Finally, despite this being a hybrid hearing, I want to emphasize
that all the standard rules of decorum apply.
As the chair of today’s hearing, I will make a good faith effort
to provide every Member experiencing connectivity issues an oppor-
tunity to participate fully.
Members will have the standard 5 minutes to ask questions.
To insert a document into the record, please have your staff
email it to the committee’s clerk, Mike Twinchek.
This hearing is also being livestreamed for the public to view.
And I would now recognize myself for my opening statement.
Today’s hearing is focused on the United States Department of
Transportation’s Disadvantaged Business Enterprise program,
DBE program, for short. It is an essential program that seeks to
remedy discrimination and its effects on women- and minority-
owned businesses as they compete for federally assisted transpor-
tation contracts. It seeks to ensure all businesses can compete for
Federal transportation dollars on a level playing field.
I am proud to follow in the footsteps of my friend, the former
chairman of this committee, Jim Oberstar—there is Jim, right
there [indicating portrait]—who was the last chairman to convene
a hearing on this subject, 11 years ago, in 2009.
I am also disturbed that, in the 11 years since that hearing, dis-
crimination has continued to plague women and minorities in this
country in the transportation sector. Discrimination is still terribly
real in America. And if the events of 2020 have not proven that
convincingly enough, I am confident the overwhelming evidence we
have examined for this hearing will at least shut the door on the
question, as it relates to federally assisted transportation projects.
Our committee planned to hold this hearing more than 5 months
ago, but our plans were delayed by the rapid spread of the COVID–
19 pandemic. Sadly, the continuing pandemic only underscores the
need for this hearing and for the DBE program. It is increasingly
clear minority communities and minority-owned businesses have
been disproportionately devastated by the virus.
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3
Almost 2 months ago, during debate before the passage of H.R.
2 on the House floor, I submitted 30 high-quality disparity studies
into the Congressional Record, including many hundreds of pages
of rigorous empirical evidence testifying to the reality of discrimi-
nation and its effects on the transportation sector.
Today I ask unanimous consent to insert into this committee’s
record an additional 10 studies, for a total of 40 studies, only a
sampling of the mountain of evidence this committee has seen over
the years testifying to the reality of discrimination in the transpor-
tation sector.
Without objection, so ordered.
[The information follows:]
f
Ten Disparity Studies, Submitted for the Record by Hon. Peter A. DeFazio
The full text of each report is held on file electronically with the Committee on
Transportation and Infrastructure.
Dallas Fort Worth International Airport Disparity Study 2019, Colette Holt & Asso-
ciates, 2019
Washington State Airports Disparity Study 2019, Conducted for the Washington
State Department of Transportation, Colette Holt & Associates, 2019
City of South Bend Disparity Study 2019, Colette Holt & Associates, 2019
2017 Minnesota Joint Disparity Study, Metropolitan Airports Commission, Draft Re-
port, Keen Independent Research, January 2018
2015 Disadvantaged Business Enterprise Disparity Study, John Wayne Airport,
County of Orange, California, MGT of America, Inc., December 2016
2015 Procurement Disparity Study, City of Portsmouth, Virginia, MGT of America,
Inc., 2015
Tampa International Airport 2015 Disparity Study Update, MGT of America, Inc.,
August 2015
The State of Minority- and Women-Owned Business Enterprise: Evidence from Mem-
phis, Prepared for the Memphis-Shelby County Airport Authority, NERA Economic
Consulting, December 2013
The State of Minority- and Women-Owned Business Enterprise: Evidence from Mis-
sissippi, Prepared for the Jackson Municipal Airport Authority, NERA Economic
Consulting, December 2012
The State of Minority- and Women-Owned Business Enterprise: Evidence from Mis-
souri, Prepared for the Missouri Department of Transportation, NERA Economic
Consulting, August 2012
Mr. DEFAZIO. I repeatedly pointed to these disparity studies to
demonstrate the reality of discrimination and its effects. But it is
equally important to note that our committee has received quali-
tative evidence of discrimination, as well. Letters from DBE-cer-
tified business owners and other stakeholders from across the coun-
try have come to this committee in the last few months, testifying
to the importance of the program and to the reality of discrimina-
tion faced by women and minority business owners. Some of those
business owners and stakeholders are before us, virtually, today to
share their stories, and I thank them for their testimony.
The DBE program has been narrowly constructed to combat the
discrimination laid out in the evidence from across this country. It
is not a perfect program; I am sure we will hear more about that
today. But I believe it is an essential program, if we want to ensure
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4
a level playing field for all American businesses wishing to compete
for Federal transportation dollars.
Once again, I want to thank all the witnesses for taking the time
to be with us today, particularly in this rather awkward virtual for-
mat. This is a profoundly important topic, and I look forward to
hearing your testimony.
[Mr. DeFazio’s prepared statement follows:]
f
Prepared Statement of Hon. Peter A. DeFazio, a Representative in Con-
gress from the State of Oregon, and Chairman, Committee on Transpor-
tation and Infrastructure
Today’s hearing is focused on the U.S. Department of Transportation’s Disadvan-
taged Business Enterprise, or DBE, Program. This essential program seeks to rem-
edy discrimination and its effects on women- and minority-owned businesses as they
compete for Federally-assisted transportation contracts. It seeks to ensure all busi-
nesses can compete for Federal transportation dollars on a level playing field.
I am very proud to follow in the footsteps of my friend, the former Chairman of
this Committee, Jim Oberstar, who was the last Chairman to convene a hearing on
this subject eleven years ago in 2009. But I am also disturbed that in the eleven
years since that hearing discrimination has continued to plague women and minori-
ties in this country and in the transportation sector.
Discrimination is still terribly real in America, and if the events of 2020 have not
proven that convincingly enough, I’m confident the overwhelming evidence we have
examined for this hearing will at least shut the door on the question as it relates
to Federally-assisted transportation contracts.
Our Committee planned to hold this hearing over five months ago, but our plans
were delayed by the rapid spread of the COVID–19 pandemic. Sadly, the continuing
pandemic only underscores the need for this hearing and for the DBE program. It
is increasingly clear minority communities and minority-owned businesses have
been disproportionately devastated by the virus.
Almost two months ago, during debate before the passage of HR 2 on the House
floor, I submitted thirty, high-quality disparity studies into the Congressional
Record including many hundreds of pages of rigorous empirical evidence testifying
to the reality of discrimination and its effects in the transportation sector. Today,
I ask unanimous consent to insert into this Committee’s Record an additional ten
studies, for a total of forty studies—only a sampling of the mountain of evidence
this Committee has seen over the years—testifying to the reality of discrimination
in the transportation sector.
I have repeatedly pointed to these disparity studies to demonstrate the reality of
discrimination and its effects, but it is equally important to note that our Committee
has received qualitative evidence of discrimination as well. Letters from DBE-cer-
tified business owners and other stakeholders from across the country have come
to this committee in the last few months testifying to the importance of the pro-
gram, and to the reality of discrimination faced by women and minority business
owners. Some of those business owners and stakeholders are before us today to
share their stories, and I thank them for being here.
The DBE program has been narrowly constructed to combat the discrimination
laid out in the evidence from across this country. It is not a perfect program, and
I’m sure we will hear more about that today. But I believe it is an essential program
if we want to ensure a level playing field for all American businesses wishing to
compete for Federal transportation dollars.
Once again, I want to thank all the witnesses for taking the time to be with us
today, particularly in this virtual format. This is a profoundly important topic, and
I look forward to hearing your testimony.
Mr. DEFAZIO. With that, I would recognize the ranking member,
Sam Graves, for an opening statement.
Mr. GRAVES OF MISSOURI. Thank you, Chairman DeFazio, and I
want to thank you for calling today’s hearing to review the Depart-
ment of Transportation’s Disadvantaged Business Enterprise, or
DBE, program.
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5
We are all here today to examine the DBE program and deter-
mine what, if anything, can be done to improve the program, mov-
ing forward.
It has been 37 years since Congress first created the DBE pro-
gram, which was intended to help small businesses owned and con-
trolled by those facing discriminatory barriers in the transpor-
tation, construction, and airport concessions industry. Congress has
recognized the success of the DBE program by continuing to keep
it in place, and making adjustments as needed.
I look forward to hearing from today’s witnesses as to the
progress that we have made towards realizing the goals of the DBE
program, and what recommendations they have.
And with that, I yield back.
[Mr. Graves of Missouri’s prepared statement follows:]
f
Prepared Statement of Hon. Sam Graves, a Representative in Congress
from the State of Missouri, and Ranking Member, Committee on Trans-
portation and Infrastructure
We are here today to examine the DBE program and determine what, if anything,
can be done to improve the program going forward.
It has been 37 years since Congress first created the DBE program, which was
intended to help small businesses owned and controlled by those facing discrimina-
tory barriers in the transportation construction and airport concession industries.
Congress has recognized the success of the DBE program by continuing it and
making adjustments as needed.
I look forward to hearing from today’s witnesses as to the progress that we have
made toward realizing the goals of the DBE program, and what recommendations
they have.
Mr. DEFAZIO. I thank the gentleman. I now recognize the chair
of the Subcommittee on Highways and Transit, Congresswoman
Norton, for a statement.
Ms. NORTON. Thank you, Mr. Chairman. I very much appreciate
your holding this important hearing, especially this year.
We are at a pivotal moment in our Nation’s history, we are shin-
ing a long-overdue light on the lived realities of people of color in
this country, despite our pledge of liberty and justice for all. Over
the last few months, the vulnerability of African Americans,
Latinos, Native American, and other Black and Brown people has
been unmistakably demonstrated as we ride wave after wave of cri-
sis, a global pandemic, a tanking economy, and systemic racism re-
peatedly manifesting itself.
The way in which our Nation has failed and marginalized large
populations of our citizens, while unbearable to watch over and
over again, comes as no surprise to those of us who feel the preva-
lence of racism in our experience.
I have spent my entire career—in Congress, and as chair of the
U.S. Equal Opportunity Commission before that—fighting for
equality and seeking to break down barriers so that all citizens
have the same opportunities to participate and thrive in our econ-
omy and our society.
One of the most powerful tools in the field of transportation and
construction to assist people who have been routinely left out is the
Disadvantaged Business Enterprise program. This program, when
properly administered and enforced, ensures that businesses owned
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6
by women and minorities have a fair chance to compete for feder-
ally assisted transportation contracts. The need for this program is
ongoing, and stronger than ever, as income inequality in this coun-
try, with a pandemic helping it to grow, continues.
Today’s panel will provide mountains of statistical evidence that
show discrimination in transportation and construction projects.
Mr. Wainwright’s testimony documents, through rigorous statis-
tical analysis and survey data collected by various agencies, the
continued need for the DBE program. We are also joined today by
individual business owners who have participated in the DBE pro-
gram to provide some context for why these surveys and statistical
studies matter.
But let me point to a 2018 study conducted for the Maryland De-
partment of Transportation, whose geographic market includes
Washington, DC. The study looked at, among other things, whether
prime contractors who work with minority- and women-owned
firms as subcontractors on contracts with DBE-type goals ever so-
licit or hire those same firms to work on contracts without such
goals.
The answers were stark and stunning: 69 percent of African-
American-owned firms responded that they were seldom or never
solicited to work on contracts without goals in place, and 74 per-
cent of African-American-owned firms were seldom or never hired
to work on contracts without goals. For Hispanic Americans, the
results were 47 percent and 52 percent. For Asian Americans, the
results were 56 percent and 61 percent. For Native Americans, the
results were 82 percent and 70 percent. And for nonminority
women, the results were 54 percent and 53 percent. This is just one
regional example, but this pattern repeats itself across the country.
In closing, I remind my colleagues that this hearing presents a
welcome opportunity to elevate the realities of minority- and
women-owned business owners. By holding this hearing today, we
ensure that the DBE program and the business owners it lifts up
will receive thorough consideration by our committee.
We also have the opportunity to learn what policy changes Con-
gress should consider for the continued success of the DBE pro-
gram.
And I look forward to hearing from today’s witnesses, as well as
from my fellow members of this committee.
Thank you very much, Mr. Chairman.
[Ms. Norton’s prepared statement follows:]
f
Prepared Statement of Hon. Eleanor Holmes Norton, a Delegate in Con-
gress from the District of Columbia, and Chairwoman, Subcommittee on
Highways and Transit
Thank you, Mr. Chairman. I cannot overstate the importance of this hearing on
the U.S. Department of Transportation’s Disadvantaged Business Enterprise pro-
gram. I thank Chairman DeFazio, Ranking Member Graves, and all the Members
participating today for your time and attention to this critical topic.
We are at a pivotal moment in our Nation’s history. We are shining a long over-
due light on the lived realities for people of color in this country, despite our pledge
of ‘‘liberty and justice for all’’. Over the last few months, the vulnerability of African
American, Latinx, Native American, and other black and brown people has been un-
mistakably demonstrated as we ride wave after wave of crisis—a global pandemic,
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7
a tanking economy, and systemic racism repeatedly manifesting as physical vio-
lence.
The ways in which our Nation has failed and marginalized large populations of
our citizens—while unbearable to watch over and over again—comes as no surprise
to those of us who can feel the prevalence of racism in our bones. I have spent my
entire career—in Congress, and as Chair of the U.S. Equal Opportunity Commission
before that—fighting for equality and seeking to break down barriers so that truly
all citizens have the same opportunities to participate and thrive in our economy
and our society.
One of the most powerful tools in the field of transportation and construction to
assist people who have routinely been left out or left behind is the U.S. Department
of Transportation’s Disadvantaged Business Enterprise (DBE) Program. This pro-
gram, when properly administered and enforced, ensures that businesses owned by
women and minorities have a fair chance to compete for federally assisted transpor-
tation contracts.
The need for this program is ongoing, and stronger than ever, as income inequal-
ity in this country with the pandemic helping it to grow. Today’s panel will provide
mountains of statistical evidence that shows discrimination on transportation con-
struction projects is, unfortunately, alive and well.
Mr. Wainwright’s testimony documents, through rigorous statistical analysis and
survey data collected by various public agencies, the continued need for the DBE
program.
We are also joined today by individual business owners who have participated in
the DBE program and will share their personal stories of how this program affirma-
tively created opportunities that did not exist in its absence. I would like in par-
ticular to thank Ms. Lerdahl, Ms. Williams, and Ms. Boyer for sharing your experi-
ences with the Committee.
To provide some context for why these surveys and statistical studies matter, let
me point to a 2018 study conducted for the Maryland Department of Transportation,
whose geographic market area includes Washington, D.C. The study looked at,
among other things, whether prime contractors who work with minority- and
women-owned firms as subcontractors on contracts with DBE-type goals ever solicit
or hire those same firms to work on contracts without such goals. The answers were
stark and stunning—69 percent of African American owned firms responded that
they were seldom or never solicited to work on contracts without goals in place, and
74 percent of African American owned firms were seldom or never hired to work
on contracts without goals. For Hispanic Americans the results were 47 percent and
52 percent; for Asian Americans the results were 56 percent and 61 percent; for Na-
tive Americans the results were 82 percent and 70 percent; and for non-minority
women, the results were 54 percent and 53 percent. This is just one regional exam-
ple but this pattern repeats itself across the country.
In closing, I remind my colleagues that this hearing presents a welcome oppor-
tunity to elevate the realities of minority and women-owned business owners. By
holding this hearing today, we ensure that the DBE program and the business own-
ers it lifts up receive thorough consideration by this Committee. We also have the
opportunity to learn what policy changes Congress should consider for the continued
success of the DBE program in the future.
I look forward to hearing from today’s witnesses, as well as my fellow Members,
on the DBE program.
Mr. DEFAZIO. Thank you, Ms. Norton. I now call on the ranking
member of the Subcommittee on Highways and Transit, Mr. Davis.
Mr. DAVIS. Thank you, Chairman DeFazio. I want to thank the
witnesses for participating in this important hearing. I want to
give a special welcome to my friend, Ms. Geri Boyer, who is in
southern Illinois right now.
I understand Congressman Bost is going to be providing us with
your full introduction today, so I won’t steal his thunder, unless he
screws it up.
So I am watching you right now, Mike.
But it is great to see you. I appreciate the work you do for Illi-
nois and across the Midwest.
The Disadvantaged Business Enterprise program, administered
by the Department of Transportation, applies to airport construc-
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8
tion, airport concessions, and surface transportation construction
programs. The program addresses discrimination against minority-
and women-owned businesses, and provides those businesses with-
in the transportation industry an equal opportunity to participate
in billions of dollars of DOT-assisted highway, transit, and airport
contracts each year.
The DBE program has been successful, and this committee has
demonstrated a bipartisan commitment to this program and to pro-
moting full and fair access to transportation contracting opportuni-
ties.
I commend the chairman and the ranking member for holding
this hearing today. This is an important discussion, important to
all of us in the room, and those connecting remotely, and to the Na-
tion, as a whole.
Mr. Chair, I yield back the balance of my time.
[Mr. Davis’ prepared statement follows:]
f
Prepared Statement of Hon. Rodney Davis, a Representative in Congress
from the State of Illinois, and Ranking Member, Subcommittee on High-
ways and Transit
I want to thank the witnesses for participating in this important hearing, and I
want to give a special welcome to Ms. Geri Boyer. It is great to see you and I appre-
ciate the work you do for Illinois and across the Midwest.
The Disadvantaged Business Enterprise program, administered by the Depart-
ment of Transportation, applies to airport construction, airport concessions, and sur-
face transportation construction programs. The program addresses discrimination
against minority and women-owned businesses and provides those businesses within
the transportation industry an equal opportunity to participate in billions of dollars
of DOT-assisted highway, transit, and airport contracts each year.
The DBE program has been successful, and this Committee has demonstrated a
bipartisan commitment to this program and to promoting fair and full access to
transportation contracting opportunities.
I commend you for holding this hearing today. This is an important discussion—
important to all of us in the room and those connecting remotely, and to the Nation
as a whole.
Mr. DEFAZIO. I thank the gentleman.
I would now like to welcome the witnesses on our panel: Ms.
Evalynn Williams, president, Dikita Enterprises, on behalf of the
Conference of Minority Transportation Officials; Ms. Geri Boyer,
president, Kaskaskia Engineering Group, on behalf of the Amer-
ican Council of Engineering Companies; Ms. Mary Lerdahl, owner,
Emerald Consulting Services; Mr. Farad Ali, at-large board direc-
tor, Airport Minority Advisory Council; Mr. Sandy-Michael McDon-
ald, director, Office of Economic and Small Business Development,
Broward County, Florida; and Ms. Sandra Norman, administrator,
civil rights division, Virginia Department of Transportation; and
Mr. Jon Wainwright, Ph.D., affiliated consultant, NERA Economic
Consulting.
Thank you all for participating today. We are looking forward to
your testimony.
Without objection, our witnesses’ full statements will be included
in the record.
Hearing none.
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9
Since your written testimony has been made part of the record,
the committee requests you limit your oral testimony to 5 minutes.
Summarize as best as possible.
Before we hear from our panel of witnesses, I recognize Rep-
resentative Johnson to introduce Ms. Evalynn Williams.
Representative Johnson?
Ms. JOHNSON OF TEXAS. Yes, thank you very much. And I want
to thank all of the witnesses for being present.
I want to say that I am pleased to introduce Ms. Evalynn Wil-
liams, who is a constituent in Dallas, Texas. She has served as the
chief financial officer for Dikita for 26 years, prior to transitioning
to the president and CEO in 2010. Following and guided by her fa-
ther, the company has grown to unprecedented heights. Under her
leadership, the company has continued to thrive in new markets
and obtain large and notable projects. Dikita’s largest client is Dal-
las Area Rapid Transit, where the company has managed transit
and NTD data for the last 28 consecutive years. Recently, Dikita
completed a prime role as a 49-percent JV partner designing and
managing the construction of DART’s last 3 miles of light rail, and
I look forward to her testimony.
And thank you very much for being here.
Mr. DEFAZIO. Thanks, Representative Johnson. I now recognize
Representative Bost to introduce Ms. Geri Boyer, under threat by
Rodney Davis.
Mr. BOST. Thank you, Mr. Chairman. You know, I am happy to
have the opportunity to introduce our constituent, Geri Boyer from
Belleville, Illinois, as a witness for today’s hearing.
Ms. Boyer is a founder, owner, and president of Kaskaskia Engi-
neering Group. Kaskaskia Engineering Group is a civil engineering
and contracting firm that has been recognized on the list of St.
Louis Business Journal’s largest women-owned businesses over the
past decade. Ms. Boyer has also won multiple awards for her lead-
ership. She is an active member of the American Council of Engi-
neering Companies, Associated General Contractors of Illinois, Illi-
nois Association of County Engineers, and the Illinois Association
of Highway Engineers. Ms. Boyer is also an active member within
our community, working with the Belleville CEO Program and is
the civil chairperson for the Belle-Scott Committee of the Greater
Belleville Chamber of Commerce.
I am excited to have her give her testimony on the Department’s
Disadvantaged Business Enterprise program, and look forward to
the insight that she can offer, given her years of success in busi-
ness. She is one of the most qualified witnesses, I believe, that is
on the panel today, and I appreciate her being here, and I appre-
ciate the opportunity to introduce her.
And Rodney, I hope that was good enough for you, because I
think Geri is going to do a great job.
And with that, I yield back.
Mr. DEFAZIO. Rodney stepped out, but I am sure he is in accord-
ance. I think that was very well done. So thank you.
We will now move to witness testimonies.
Ms. Williams, you may proceed. You are recognized for 5 min-
utes.
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TESTIMONY OF EVALYNN WILLIAMS, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, DIKITA ENTERPRISES, INC., ON BE-
HALF OF THE CONFERENCE OF MINORITY TRANSPOR-
TATION OFFICIALS; GERI E. BOYER, P.E., PRESIDENT,
KASKASKIA ENGINEERING GROUP, LLC, ON BEHALF OF THE
AMERICAN COUNCIL OF ENGINEERING COMPANIES; MARY
T. LERDAHL, PRESIDENT, EMERALD CONSULTING SERVICES,
LLC; FARAD ALI, CHAIRMAN, GOVERNMENT AFFAIRS COM-
MITTEE, AIRPORT MINORITY ADVISORY COUNCIL; SANDY-
MICHAEL E. MCDONALD, DIRECTOR, OFFICE OF ECONOMIC
AND SMALL BUSINESS DEVELOPMENT, BROWARD COUNTY,
FLORIDA; SANDRA D. NORMAN, DIVISION ADMINISTRATOR,
CIVIL RIGHTS, VIRGINIA DEPARTMENT OF TRANSPOR-
TATION; AND JON S. WAINWRIGHT, PH.D., AFFILIATED CON-
SULTANT, NERA ECONOMIC CONSULTING
Ms. WILLIAMS. Good morning, and I want to thank you for allow-
ing me the opportunity to testify in support of the DBE program.
My name is Eve Williams, president of Dikita Enterprises, a 40-
year-old African-American engineering firm located in Dallas,
Texas. And today I speak on behalf of COMTO, as well as all the
DBEs across the Nation.
I also sit on the APTA board of directors, where next month I
will become the first African-American female to chair its distin-
guished Business Members Board of Governors.
My company has been a part of the DBE program since its begin-
ning, and is the oldest black engineering firm in north Texas.
Being a female, Black, and a small business in the construction
industry has many challenges. Programs such as the DBE program
provide us a chance to participate in lead roles, which affords us
the opportunity to create majority-minority teams. One success
story I would like to share.
Dikita was a 49-percent partner in a team where we designed
the last 3 miles of the rail system for Dallas Area Rapid Transit.
We saved the agency over $4 million, and began revenue service 2
months ahead of schedule. The icing on the cake is that 60 percent
of the project was designed by DBE firms.
Being called disadvantaged is not a privilege, nor does it sound
like a company’s goal. And quite frankly, it was embarrassing, ex-
plaining that to my 25-year-old millennial. What an engaging con-
versation that followed.
The public sector is where firms like Dikita has its greatest op-
portunity. But please note, if majority companies and public agen-
cies are not incentivized to include firms like mine, they won’t. Let
me give you a case in point.
We were going after a project in a small suburban community
near Dallas. I knew about the proposal because of my strong rela-
tionships in the community. The project was much in our wheel-
house, but since there were parts of the work that others could do
better, we reached out to a nationally known, local firm that we
had worked with in the past. They were not aware of the oppor-
tunity. What happened next was shocking, but not surprising.
In an email thread that was inadvertently sent to me, I read a
discussion that went something like this. Of course, I changed the
names here. So I called John to ask if they’d be interested in
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teaming with us. John informed his boss, Ted. John explained the
services, and thought Dikita and their company could do well, since
we had a relationship.
Ted asked about the minority participation goal. John told him
there was no minority goal. Ted asked John, ‘‘Then why would we
sub to Dikita?’’ John reminded Ted that Dikita was the best at
what they were doing.
Ted told him that, since there was no minority participation goal,
‘‘Dig into the opportunity, and we will just do it ourselves.’’
When John questioned Ted again, Ted told them, ‘‘Hey, we’re big-
ger, just reject the offer.’’
This is when John sent me an email rejecting our offer, and inad-
vertently included the entire thread. The email was so painful and
disappointing.
There are so many sad storybook episodes regarding blatant dis-
criminatory practices, especially against Black firms. In fact, if you
look closer at the minority goals being met today, you more than
likely will find that African Americans who the DBE program was
first written for will have the smallest percentages, while other
groups have benefitted more. Black professional firms are starting
to be an endangered species, like the bald eagle was.
I do want to bring one barrier that you have the power to
change. That is the formula in determining personal net worth. It
took 22 years before an inflationary adjustment was made to the
personal net worth statement in 2011. It is now almost another 10
years and counting. The lack of regular inflationary adjustments
could prematurely remove small businesses from the program.
One idea I have is to exclude retirement savings from the net
worth calculation. Currently, it includes restricted funds such as
401(k), which disincentivizes a business owner to save for retire-
ment. So here I am, respectfully asking for your consideration to
remove retirement savings from the personal net worth calculation.
In conclusion, this program is not a handout. It is a leg up. It
forces big companies and public agencies to play fair. And, quite
frankly, without the DBE program, we would be out of business at
the end date of the last contract in our pipeline. We should be pro-
tected like——
[Microphone unmuted.]
Mr. DEFAZIO. Somebody is transmitting. Just conclude, then, Ms.
Williams. Thank you, sorry about that.
[No response.]
Mr. DEFAZIO. OK?
Ms. WILLIAMS. Yes, thank you.
[Ms. Williams’ prepared statement follows:]
f
Prepared Statement of Evalynn Williams, President and Chief Executive
Officer, Dikita Enterprises, Inc., on behalf of the Conference of Minority
Transportation Officials
My name is Evalynn Williams. I am the President and CEO of Dikita Enterprises,
Inc., a family-owned minority consulting engineering and architectural firm
headquartered in Dallas, Texas. We celebrated our 40th year in business last No-
vember. We provide civil design, program and construction management, and transit
market research as it relates to public transit planning. We have 40–50 people typi-
cally and employ all nationalities of which many are skilled professionals who are
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either woman or are of a minority group. My father, Lucious Williams, founded the
firm in 1979 in Milwaukee Wisconsin and branched to Dallas, where I was attend-
ing college in 1983. I promised him 2 years as his CFO in exchange for paying off
my college loans, which was only $5,000 at the time. That was 36 years ago. We’ve
been partners ever since. Over the years, especially in the 80 and 90’s we have
many times been the first African American firm to be awarded . . . and you can fill
in the blank. Even today, I’m amazed that we continue to be the first African Amer-
ican engineering firm to prime a contract with public entities. Many of the firms
we began with in the early 80s no longer exist for various reasons, but mostly be-
cause of the lack of opportunities and resources. We are the oldest African American
professional engineering firm in North Texas.
We offer our services to mainly the governmental sectors, that are federally, state
or locally funded. Our industries include public transit, highways, aviation, public
educational institutions, including K–12 and higher education, municipalities for
roadway and infrastructure projects. We have worked on multi-billion dollar projects
as well as those under $100,000. We have worked across the nation providing a va-
riety of services, typically transit planning. We are certified in 19 locations across
the nation. Being certified in these many areas allow us to participate with transit
properties and provide transit market research. We typically are precluded from of-
fering engineering services as a DBE in other states because of certain state laws.
Neither my father nor I have a professional engineering license. We excel in man-
agement, marketing and financial expertise.
I have a BBA degree in information systems and an MBA in accounting. I serve
on several civic boards and have won my share of awards. I am currently a member
of COMTO and the American Public Transportation Association (APTA), where, in
October, I will become the first African American female to chair APTA’s distin-
guished Business Members Board of Governors. APTA membership includes at least
90% of all public transit organizations in North America and practically every large
national commercial firm that does business with public transit authorities.
COMTO, which is the Conference of Minority Transportation Officials, is the leading
national advocate for employment diversity, inclusion and contracting opportunities
in the multi-modal, multi-billion-dollar transportation industry. Their mission is to
eliminate barriers to maximum participation for minority individuals, veterans, peo-
ple with disabilities and certified MWDBE businesses.
In 2010, I became President and CEO of Dikita and my father has remained ac-
tive as the Chairman of the Board and Director of Government Affairs. He owns
51% of the firm and I own 47%, while my oldest daughter owns 2%. Being trained
in accounting and finance, running an engineering firm has its challenges in of
itself. Being a female, an African American, and a small business in the construc-
tion industry has had many challenges. There are certain systemic stereotypes that
are associated with all the classes of categories I’ve mentioned, but typically they
all have one thing in common. The idea that women, African Americans, small busi-
nesses, engineering companies ran by non-engineers—produce an inferior work
product. These certainly create barriers for successfully contracting and being rel-
evant in the industry. Of all these labels, I think being African American, however,
presents the biggest challenge when competing for work.
Being a disadvantaged business has certainly helped level the playing field. As
the CEO of a 2nd generation African American engineering and architectural firm,
we would never have sustained had it not been for disparity programs such as the
Federal DBE Program. Competition for prime contracts with the Department of
Transportation, Federal Aviation and Federal Transit is difficult at best, and out
of reach for most minority and women owned businesses (M/WBE).
It is almost impossible for DBE firms to compete with large national and inter-
national firms. They have the capacity and depth within their workforce and can
pull from global office locations. And over the last 15 years, they have gotten even
larger; which makes the reauthorization of the DBE Program is so extremely critical
to firms such as Dikita Enterprises, Inc. It provides us with opportunities to join
a team as a subcontractor, a prime or joint venture partner, which in turn helps
to build financial capacity and workforce resources. It’s because of this program,
Dikita led a joint-venture team with a huge majority firm to design and build the
last 3 miles of rail line for the Dallas Area Rapid Transit system (DART), saving
the agency over $4 million. DART was able to open for revenue service 2 months
ahead of schedule. Sixty-one percent of the team were DBE firms.
The truth is . . . if not for the DBE Program, large corporations would not share
the work and would self-perform 100% of contract-work. Being called ‘‘disadvan-
taged’’ is not a privilege nor does it sound like a goal that a company would strive
to be. The reality is, without the program we would not have a chance at fair com-
petition. Quite frankly, it was embarrassing explaining to my 21-year-old millennial,
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a few years ago, why we were considered a disadvantaged business. I can tell you
that an engaging conversation and history lesson spun from this revelation. Never-
theless, the DBE program is necessary for the continuing survival of firms such as
mine—to feed our families, educate our youth, and build our communities.
I know for a fact that if it wasn’t for the federal and local equity programs, we
would not be able to compete or obtain contracts. That is evident when you look at
private vs. public work. In the public sector, the large firms that are considered
primes, contract with us only to the extent that it will help them win the project.
If the goal is 25%, then they will typically subcontract only that minimum amount,
even though we are a proven entity. Case in point. We were going after a project
in a small suburban community near Dallas. I found out about the request for pro-
posal because I had very strong relationships in that community. Much of the
project was within our wheelhouse and we felt certain we could successfully propose
and win. Since there were parts of the work that others could do better, we reached
out to a nationally known local firm that we had worked with in the past. They
were not aware of the opportunity. What happened later was shocking but not sur-
prising. In an email thread that was inadvertently sent to me, I read a discussion
that went something like this (all names are fictitious and are here to make the
conversation easier to understand):
• John informed his boss Ted that Dikita had inquired about XYZ company pro-
viding service on an upcoming proposal.
• Ted asked about the services to be performed and John explained the services
and thought Dikita and XYZ could do well since they have worked together in
the past.
• Ted asked about the minority participation goal.
• John told him that there was no minority goal.
• Ted asked John why they would sub to Dikita.
• John reminded Ted that Dikita was very good at providing these type of spe-
cialty services
• Ted told John that XYZ was bigger and to dig into the opportunity.
• When John asked about participating with Dikita, Ted told him that since there
was no minority participation, they would just do the project themselves.
• When John questioned Ted again, Ted told him that XYZ was bigger and to re-
ject our offer.
• This is when John sent us an email rejecting our offer and inadvertently in-
cluded the entire thread.
This kind of conversation among large majority firms is not unusual and is a mat-
ter of practice. And often we only suspect or hear about why we were rejected from
a third party. However, this was played out in an email and was so painful and
disappointing.
There are many story-book episodes regarding blatant discriminatory practices
that occur to either keep minority firms small or run them out of business, espe-
cially African American firms. Everyone knows that DBE businesses often live
month to month unless we have been successful in backfilling our pipelines with fu-
ture projects. One of the most disheartening feelings is to know that you are only
as good as the current project. We have had many relationships with larger firms
and have provided excellent service, but it’s never quite the excellent services in
which you are remembered. We are the token DBE checkbox that fulfilled the re-
quirement. This I say because I have witnessed the less than genuine relationships
we have forged. We can perform exceptionally well for many years on a 5-year large
project. However, I notice that when that same large firm is going for the exact
project-type in another state, they will not invite us to the team. When I’ve asked
about being on the team, the reply is the same, ‘‘we needed you in Dallas, we will
‘use’ someone else in Houston’’. When I question why, the answer is always ‘‘because
you are only useful in Dallas and taking you to other cities or states doesn’t help
us to win’’, even if we are the best in providing the services required. It’s political.
Well that mentality keeps firms like mine small and confines us to our own neigh-
borhoods. For us to grow, we need not only to be able to work in other states, but
to work in the private industry. Working for private developers is typically not an
option, hence the need for DBE program for government projects.
I’d like to talk about another challenge I see with the DBE Program. While I ap-
preciate the nature of the DBE program, there seems to be a lack of attention to
some of the challenges we face. Still in existence are discriminatory and other re-
lated barriers that pose significant obstacles for minority and women-owned busi-
nesses competing for federally funded contracts. One such barrier is the lack of reg-
ular inflation-adjustments to the Personal Net Worth requirement for DBE certifi-
cation. Unlike the Business Revenue Cap, (which is reviewed and adjusted periodi-
cally by the Secretary of Transportation) it was 22 years before an inflation-adjust-
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ment was made to the Personal Net Worth, increasing the 1989 cap of $750K to
$1.3M in 2011. It is important to note that much like the economy, the personal
net worth of DBE owners and their companies are fluid. The lack of regular infla-
tion-adjustments stops DBE businesses from growing and could prematurely remove
businesses such as mine from the program. Some folks think that this $1.3M net
worth is vast. If you are a successful business, you must accumulate a net worth
that will allow banks to loan you money in order to continue upward growth and
mobility. But more importantly, you must save money for retirement. While the for-
mula for calculating personal net worth excludes our homestead, it does include
your retirement savings. By including restricted retirement savings into the calcula-
tion, it acts to disincentivize a business owner from saving adequately for retire-
ment. At the end of the day, we all should have a transition plan and be able to
retire comfortably. However, if most of the dollars I save become retirement assets
and those assets count against me in the certification process, then I’m likely not
encouraged to save but to spend. So, I am asking that the program exclude retire-
ment savings from the Personal Net Worth calculation.
In conclusion, the disparity and the inequities of our capitalistic society, coupled
with the injustices from America’s history of discriminatory practices against Afri-
can Americans specifically, are reasons that DBE program must continue to exist
and expand. My dad, my daughters and I depend on the program to stay in busi-
ness. This program is not a handout, it’s a leg up. It forces the big companies to
play fair, and quite frankly, if we graduated from the program (and its sister M/
WBE local programs) or the program is dissolved, we would be out of business at
the expiration date of the last contracts in our pipeline.
Mr. DEFAZIO. OK, thank you for your testimony and your sugges-
tion.
Ms. Boyer, you may proceed.
Ms. BOYER. Chairman DeFazio and Ranking Member Graves,
thank you for the opportunity to testify before the committee today.
It is an honor to represent my firm and my colleagues in the Na-
tion’s engineering industry.
And thank you, Representative Davis and Representative Bost,
for that kind introduction.
As you heard, my name is Geri Boyer. I am president and sole
owner of Kaskaskia Engineering Group, headquartered in Belle-
ville, Illinois. We have DBE certifications in Illinois, Iowa, Indiana,
Kentucky, Missouri, Minnesota, and Wisconsin.
I am testifying today on behalf of the American Council of Engi-
neering Companies, the business association of the Nation’s engi-
neering industry. ACEC represents nearly 5,500 engineering com-
panies, nationwide. Our members include very large firms with
tens of thousands of employees as well as hundreds of small busi-
nesses like mine.
I want to communicate three main points to you today: first of
all, DBE programs are essential for helping businesses like mine
compete for work; second, securing certifications in different States
and different jurisdictions can be burdensome; and three, for pro-
fessional engineering and design-related services, it is important to
balance DBE considerations with qualification-based selection pro-
cedures.
DBE programs have provided me the opportunity to diversify and
grow my company within the engineering and construction indus-
try throughout the Midwest. I still encounter discrimination and
the historic effects of discrimination, and DBE certification gives
me the opportunity to compete for contracts and expand my busi-
ness opportunities.
If we are going to be able to sustain our profession and continue
to support the transportation clients we serve, it is imperative that
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we continue these efforts. Diversification makes our companies and
our industry stronger, and it makes us more appealing to the next
generation of professionals which we desperately need to recruit.
Federal DBE programs are one tool to bring these goals forward.
However, one challenge for DBE firms like mine that work in
multiple jurisdictions is the lack of a unified approach to DBE cer-
tification. The changes made in MAP–21 to implement a uniform
certification application and reporting forms have been helpful. All
the States I mentioned before use the uniform application, but they
require the entire application again at different times of the year.
The application must be current to equipment, purchases, loans,
and anything else a business uses to run their day-to-day oper-
ation. This creates unnecessary work for the DBE firm and the
public agency, who both have limited time and budget pressures.
I submitted for the hearing record a white paper I helped develop
with the ACEC Illinois Business Practices Committee. It goes into
greater detail on certification challenges and potential solutions to
streamline and simplify the process.
Lastly, I want to note the intersection of DBE certification with
Federal and State procurement requirements for contracting for en-
gineering services. Current laws require agencies using Federal
funds to follow QBS, qualification-based selection procedures, for
procuring engineering and design-related services. Under QBS,
agencies select firms based on their experience, expertise, and dem-
onstrated competence. These rules apply to federal-aid highway,
transit, and airport improvement programs through various pieces
of legislation approved by this committee over many years, which
ACEC strongly supported.
Current regulations strike an effective balance between the QBS
framework and DBE program goals. Contracting agencies are re-
quired to give consideration to DBEs, but without set-aside con-
tracts or quotas. State and local agencies set their own DBE pro-
gram participation goals and the method for achieving them, sub-
ject to DOT approval, of course. Agencies may use an evaluation
criterion for DBE participation limited to 10 percent of the overall
qualifications-based selection criteria, or they can establish DBE
participation goals, which can be satisfied through good-faith ef-
forts.
ACEC supports this approach. It helps to achieve DBE program
goals, while still emphasizing qualifications as the preeminent fac-
tor in selecting engineering firms. Increasing the weight of DBE as
a selection criterion, or adding specific set-asides, quotas, or man-
dates will diminish QBS and the successful project delivery that it
promotes.
Thank you again for the opportunity to testify today. I will be
happy to answer any questions later.
[Ms. Boyer’s prepared statement follows:]
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f
Prepared Statement of Geri E. Boyer, P.E., President, Kaskaskia Engineer-
ing Group, LLC, on behalf of the American Council of Engineering Com-
panies
Chairman DeFazio and Ranking Member Graves:
Thank you for the opportunity to testify before the committee today. It’s an honor
to represent my firm and my colleagues in the nation’s engineering industry to you
and the members of the committee.
My name is Geri Boyer. I am the President and sole owner of Kaskaskia Engi-
neering Group, a civil engineering, environmental, and contracting firm
headquartered in Belleville, Illinois.
I am testifying today on behalf of the American Council of Engineering Companies
(ACEC)—the business association of the nation’s engineering industry. ACEC mem-
ber firms drive the design of America’s infrastructure and built environment.
Founded in 1906, ACEC is a national federation of 52 state and regional organiza-
tions representing nearly 5,500 engineering firms and 600,000+ engineers, sur-
veyors, architects, and other specialists nationwide.
FIRM PROFILE
I founded Kaskaskia Engineering Group, LLC (KEG) in 2006 with the mission of
making the world a better place through the practice of engineering. Through part-
nerships with our clients and regulatory agencies, we plan, design, and build
projects that enhance communities, spur economic development, and respect the en-
vironment. From the beginning, we have recruited highly skilled employees from a
variety of public and private sector backgrounds. Armed with good experience, a
great reputation and the Disadvantaged Business Enterprise Program, I have built
an impressive portfolio of federal, state, local, and private project experience. Since
2006, KEG has earned over $100 million in revenue and provides engineering serv-
ices in Illinois, Iowa, Indiana, Kentucky, Michigan, Minnesota, Missouri, North Da-
kota, Ohio, Oklahoma, and Wisconsin.
KEG specializes in transportation engineering, traffic engineering, geotechnical
engineering, structural engineering, environmental science, infrastructure analysis
and planning, water resource management, right-of-way acquisition, and general
highway construction.
DBE CERTIFICATIONS AND DOT EXPERIENCES
KEG is a certified DBE through the Illinois Unified Certification Program, Iowa
Department of Transportation, Indiana Department of Transportation, Kentucky
Transportation Cabinet, Missouri Regional Certification Committee, Minnesota Uni-
fied Certification Program, and Wisconsin Unified Certification Program.
KEG is a certified Women Business Enterprise (WBE) through the Illinois Central
Management Services, Indiana Department of Administration, Minnesota Central
CERT Certification Program, Missouri Office of Equal Opportunity, Metropolitan
Water Reclamation District of Greater Chicago, and the Women Business Enterprise
National Council.
KEG is a certified Small Business Enterprise (SBE) through the Kentucky Trans-
portation Cabinet and Minnesota Central CERT Certification Program.
KEG is a self-certified Women Owned Small Business (WOSB) and Economically
Disadvantaged Women Owned Small Business (EDWOSB) through the Small Busi-
ness Administration.
In an ever changing and volatile business market, corporate growth and stability
rely on diversification strategies, which often include providing services to multiple
federal, state, and local agencies, as well as private corporations across regional, na-
tional, and international markets. Diversification has long been a successful strat-
egy for large businesses, and it is just as important for the survival and develop-
ment of small firms.
Using the opportunities that the DBE program has provided, I have diversified
my company within the engineering and construction industry throughout the Mid-
west. It’s this diversification that has helped me grow and weather economic storms.
But it takes all these certification programs in multiple states in order for me to
have the same opportunities as non-DBE firms.
One challenge for DBE firms like mine that work in multiple jurisdictions is the
lack of a unified approach to DBE certification. The amended 49 CFR Part 26 which
was included in MAP–21 implemented a revised uniform certification application
and reporting forms. However, even though there is a uniform process, there is not
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a uniform certification. All the agencies I mentioned before use the uniform applica-
tion but require the entire application again at different times of the year. The ap-
plication must be current to equipment purchases, loans, and anything else a busi-
ness uses to run their day-to-day operation. This creates unnecessary work for the
DBE firm and the public agency who both have limited time and budget pressures.
And with the rising problem of identity theft, it’s stressful to be sending all your
personal information to multiple agencies in multiple states.
I encourage the committee to consider additional reforms to streamline and sim-
plify the DBE certification process, creating a program that is more efficient and
effective for women and minority firms working for multiple agencies across mul-
tiple states.
QUALIFICATIONS-BASED SELECTION
It’s important to note the intersection of DBE program goals with federal and
state procurement requirements for the contracting of engineering and design-re-
lated services. Current laws require agencies using federal funds to follow Brooks
Act qualifications-based selection (QBS) procedures for procuring engineering and
design services. These rules apply to federal-aid highway, transit, and airport im-
provement programs through various pieces of legislation approved by this com-
mittee dating back to 1987. ACEC applauds this committee’s consistent and historic
leadership in protecting and expanding QBS requirements on federal infrastructure
programs. Most states have a ‘‘Mini Brooks Act’’ that apply the same selection pro-
cedures to state programs.
Under QBS, agencies select firms based on their experience, expertise, and dem-
onstrated competence for the types of professional services required. They first
evaluate and rank submitting firms’ statements of qualifications, performance data,
and information regarding the proposed project or services. The contracting agency
then selects and ranks firms based on those qualifications in accordance with the
established/advertised criteria for the project and negotiates with the most highly
qualified firm to arrive at a fair and reasonable price for the solicited services.
QBS is the gold standard for procurement of professional engineering and design
services. It helps small and DBE firms compete for work by providing us a forum
to demonstrate the advantages we often have, including niche market expertise,
ability to be nimble to meet deadlines, local knowledge, and involvement of senior
level management. Quantitative studies have shown that QBS lowers total project
costs and results in more satisfactory outcomes for owners.
Current Federal Highway Administration (FHWA) regulations strike an effective
balance between the QBS procurement framework and DBE program goals. Con-
tracting agencies are required to give consideration to DBE consultants in the pro-
curement of engineering and design related services contracts using federal-aid
funds, but without set-aside contracts or quotas for DBE participation. State and
local agencies set their own DBE program participation goals, as well as the method
for achieving them, subject to FHWA approval. To the extent practical, a contracting
agency must achieve DBE program participation goals through race and gender-neu-
tral measures. DBE participation on all contracts funded with federal funds, wheth-
er for professional or construction services, may be counted toward overall DBE pro-
gram participation goals.
FHWA regulations provide that when overall DBE program participation goals
cannot be met through race-neutral measures, additional DBE participation on engi-
neering and design-related services contracts may be achieved through either (1) the
use of an evaluation criterion for DBE participation in the qualifications-based se-
lection of firms, or (2) establishment of a contract DBE participation goal. Prime
contractors can satisfy these measures through good-faith efforts to engage DBE
participation.
In its policy guidance, FHWA states that in order to ‘‘harmonize’’ QBS rules and
DBE program implementation, a contracting agency may establish the use/participa-
tion of certified and qualified DBE firms as an evaluation criterion of no more than
ten (10) percent of the total evaluation criteria in assessing the qualifications of
firms/teams to perform the solicited services.
ACEC supports this current approach. It helps to achieve DBE program goals
while still respecting the importance of emphasizing qualifications as the pre-
eminent factor in selecting engineering firms. Increasing the weight of DBE as a
selection criterion or adding specific set-asides, quotas, or mandates will diminish
QBS and the successful project delivery that it promotes.
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ACEC DIVERSITY AND INCLUSION INITIATIVES
Lastly, I want to draw the committee’s attention to the new Strategic Plan that
ACEC approved in October 2019. Embodying inclusion and diversity is one of the
five pillars of the new plan. Our express goal is that the Council is recognized as
a welcoming organization where all members are included, involved and can achieve
their full potential. The objectives include improving the diversity of ACEC leader-
ship, enhancing the diversity of our membership, and increasing engagement of di-
verse individuals from member firms.
If we’re going to be able to sustain our profession and continue to support the
transportation clients we serve, it’s imperative that we deliver on these goals. Diver-
sity makes our companies and our industry stronger, and it makes us more appeal-
ing to the next generation of professionals who we need to recruit. Federal DBE pro-
grams, as explored by this hearing today, are one tool to help firms like mine bring
those goals forward.
I want to close by inserting here the statement that the Council made earlier this
year, which encapsulates how I personally feel and what I strongly support about
the engineering industry.
‘‘ACEC is committed to an inclusive and diverse engineering industry.
The engineering profession has always been grounded in integrity, fair-
ness, and service to community. Engineers build communities. We create
space and by extension, we create social experience. We support equality
and respect for all humankind. We believe in providing equitable opportuni-
ties within our profession to support untapped potential both within our
workforce and within the communities we serve. And we have the power
to foster progress by breaking down the physical barriers that can inhibit
economic and social equity.
Those are the principles that have guided our community through this
difficult time. Through ACEC we will embrace inclusion and diversity and
continue to focus our members on ways to lift people up to become their
best selves and to make our companies models of the values we embrace.’’
Thank you again for the opportunity to testify.
ATTACHMENT
NATIONAL UNIFIED DBE CERTIFICATION PROGRAM
A WHITE PAPER BY ACEC ILLINOIS
BUSINESS PRACTICES—DBE/WBE/MBE COMMITTEE
Authored by: Geri E. Boyer, P.E., Kaskaskia Engineering Group, LLC
June 2016
Last update: 6/25/2020
INTRODUCTION
In an ever changing and volatile business market, corporate growth and stability
rely on diversification strategies, which often include providing services to multiple
federal, state, and local agencies, as well as private corporations across regional, na-
tional, and international markets. Diversification has long been a successful strat-
egy for large businesses, but it is just as important for the survival and development
of small firms.
Firms owned by women and minority group members that want to employ diver-
sification strategies are encumbered by the current DBE Certification process. Pub-
lic agencies and small business owners have limited time and continued budget
pressures. Time and budget constraints have significantly affected DBE certification
in Illinois and its surrounding states. This white paper discusses how a national
unified program could strengthen, streamline, and simplify the DBE certification
program, creating a program that is more efficient and effective for women and mi-
nority firms working for multiple agencies across multiple states.
BACKGROUND
History of DBE Program
A policy of helping small businesses owned and controlled by socially and eco-
nomically disadvantaged individuals, including minorities and women, participating
in contracting opportunities created by Department of Transportation (DOT) finan-
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cial assistance programs, has been in effect for more than 20 years. The Depart-
ment, through its Operating Administrations, distributes billions of dollars annually
to help finance thousands of projects across the country. Approximately 85 percent
of the assistance dollars is for construction. The major portion of construction funds
are allocated to state highway and transportation agencies for highway construction.
The balance is provided to local public transit and airport authorities for mass tran-
sit and airport facilities.
In 1983, Congress enacted the first Disadvantaged Business Enterprise (DBE)
statutory provision, which applied primarily to small minority-owned firms. This
provision required the Department to ensure that at least 10% of the funds author-
ized for the highway and transit Federal financial assistance programs be expended
with DBE’s. In 1987, Congress re-authorized and amended the statutory DBE pro-
gram to, among other changes, add women to the groups presumed to be disadvan-
taged. Since 1987, the DOT has established a single DBE goal, encompassing both
firms owned by women and minority group members.
Primarily three major DOT Operating Administrations (OA’s) are involved in the
DBE program. They are the Federal Highway Administration, the Federal Aviation
Administration, and the Federal Transit Administration. The DOT DBE program is
carried out by state and local transportation agencies under the rules and guidelines
in the Code of Federal Regulations (Title 49, Part 26). The FAA also maintains a
separate DBE program for concessions in airports (Title 49, Part 23).
Title 49, Part 26 of the Code of Federal Regulation (49 CRF part 26) required all
agencies in each state receiving DOT funds to participate in a state Unified Certifi-
cation Program (UCP). Within three years of March 4, 1999, recipients of DOT fund-
ing had to sign an agreement establishing the UCP for that state and submit the
agreement to the Secretary for approval. The agreement provided for the establish-
ment of a UCP, which met all the requirements. The agreement had to specify that
the UCP would follow all certification procedures and standards; that the UCP
would cooperate fully with oversight, review, and monitoring activities of DOT and
its operating administrations; and that the UCP would implement DOT directives
and guidance concerning certification matters. The agreement also committed recipi-
ents to ensuring that the UCP has sufficient resources and expertise to carry out
the requirements.
DBE Unified Certification Program (UCP)
The purpose of the UCP is to provide ‘‘one-stop shopping’’ to applicants for certifi-
cation. The program was designed so that if a firm was certified using a UCP agen-
cy in a state, they would only have to apply to one federally-funded agency within
that state to work with all UCP member agencies. In Illinois, the UCP is made up
of five US DOT-funded agencies, the Illinois Department of Transportation (IDOT),
City of Chicago, Chicago Transit Authority (CTA), Metra, and Pace. The Regional
Transportation Authority (RTA) is also part of the IL UCP, but is a non-certifying
agency. Other states have very similar programs made up of all agencies that re-
ceive federal funds.
Non-DOT-funded Certifying Agencies
Within every state, there are also non-DOT-funded agencies. Some will accept the
DOT’s state implemented DBE Certification Program, and some have their own cer-
tification process. Several non-DOT-funded agencies have chosen to certify women
business enterprises (WBE), minority business enterprises (MBE), and Business En-
terprise owned by People with Disabilities (BEPD). In Illinois, the non-DOT-funded
certifying agencies are Central Management Services (CMS), City of Chicago, and
Cook County.
Interstate Certification Rule
While the DBE program was always a national program, state specific adminis-
trative requirements tended to impair a DBE firm’s ability to fully compete for busi-
ness opportunities in other states. In response to longstanding concerns from the
DBE community, the USDOT issued a proposed rule aimed at breaking down these
barriers. On January 1, 2012, the interstate certification provision (49 CRF 26.85)
went into effect. Its intent was to clear up administrative obstacles to certification
that were undermining important program objectives. The rule furthered the fol-
lowing fundamental objectives of the DBE program.
(1) Facilitated the ability of DBE firms to compete for DOT-assisted contracting.
(2) Reduced administrative burdens and costs on small businesses that sought to
pursue contracting opportunities in other states.
(3) Fostered greater consistency and uniformity in the application of certification
requirements, while maintaining program integrity.
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The ultimate purpose of the interstate certification rule was to facilitate certifi-
cation of currently certified firms in other jurisdictions. Interstate certification was
not meant to be an automatic reciprocity in the sense that each state must honor
the other states’ certification decisions without review. Rather, the rule created a
rebuttable presumption, such that a firm certified in its home state is eligible to be
certified in other states to which it applies.
The Department once again amended 49 CFR Part 26, which went into effect on
November 3, 2014. The final rule improved DBE program implementation in the fol-
lowing three major areas.
(1) Revised the uniform certification application and reporting forms and created
a uniform personal net worth form for use by applicant owners, which collect
the data required by the Department’s Surface Transportation Reauthoriza-
tion, Moving Ahead for Progress in the 21st Century Act (MAP–21).
(2) The rule strengthened the certification-related program provisions, which in-
cludes adding a new section authorizing summary suspensions under specified
circumstances.
(3) The rule modified several other program provisions concerning such subjects
as overall goal setting, good faith efforts, transit vehicle manufacturers, and
counting for trucking companies.
PROBLEMS
Over the last several years, the DOT has made a concerted effort to improve the
DBE program. Many hurdles have already been overcome, but there are still prob-
lems to be solved to make this program even more useful to small businesses owned
and controlled by socially and economically disadvantaged individuals. Problems
that are burdensome and limit the success of a DBE company are 1) Confusion be-
tween DBE Certification and Prequalification, 2) Duplication of Applications for
DBE Certification, and 3) Slow Responsiveness of Reviewing Agencies.
The following are a few examples to support the need for additional changes to
the DBE program.
1) Confusion between DBE Certification and Prequalification
The Bureau of Small Business Enterprises administers IDOT’s DBE program.
IDOT, like all other state DOT’s, is tasked with the certification of DBE firms and
the prequalification of firms wanting to bid on contracts and/or offer their services
to the department. DBE certification and DOT prequalification are performed by
two different units within IDOT. While there is some overlap in the certification and
prequalification processes for DBE firms, the certification process is generally con-
cerned with establishing if a business qualifies as ‘‘disadvantaged,’’ and the
prequalification process confirms if an applicant has resources and experience to
self-perform each specific service. If you are a DBE engineering/architectural con-
sultant, you are certified as a DBE through the Bureau of Small Business Enter-
prises and prequalified through the Bureau of Design and Environment. The Bu-
reau of Design and Environment prequalifies firms in multiple categories of service.
If you are a DBE contractor, you are certified as a DBE through the Bureau of
Small Business Enterprises and prequalified through the Bureau of Construction.
The prequalification process of a contractor is governed by Title 44 Illinois Adminis-
trative Code Section 650. The prequalification process does not apply to subcontrac-
tors. However, DBE subcontractors are required to be certified through the Bureau
of Small Business Enterprises but only need to be registered through the Bureau
of Construction to perform work for IDOT.
Currently, the Bureau of Small Business Enterprises utilizes the uniform certifi-
cation application and forms required in the final rule. These forms require the ap-
plicant to fill out a listing of NAICS codes for which they are able to self-perform.
The NAICS codes are used on the UCP online directory and generally correlate with
the prequalification categories. However, the Bureau of Small Business Enterprises
has taken on the responsibility of prequalifying subcontractors through the certifi-
cation process. Instead of verifying NAICS codes, they are verifying the resources
and experience of a DBE subcontractor to complete an IDOT specific contract pay
item. They are also certifying DBE subcontractors/contractors in work classifications
that are not in alignment with the Bureau of Construction. These additional re-
quirements are limiting the expansion of DBE subcontractors/contractors.
2) Duplication of Applications for DBE Certification
The Illinois Department of Central Management Services (CMS) Business Enter-
prise Program (BEP) is now certifying businesses owned by women, minorities, and
persons with disabilities. They claim that with their certification a company will
have the opportunity to participate in the State’s 20% minority, female, and persons
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with disabilities goal. Also, a company would be listed in their BEP directory that
is used by state agencies, universities, and other large firms when they are looking
for businesses owned by females, minorities, and persons with disabilities. This pro-
gram’s eligibility is available to companies whose gross annual sales are less than
$75 million, which far exceeds the limit of $23.98 million in gross annual receipts
required by the new federal form and exceeds the Small Business Administration
size standard for all transportation-related industries.
CMS states that if a firm is currently certified with the City of Chicago, Cook
County, Chicago Transit Authority, METRA, PACE, IDOT, Women Business Devel-
opment Council, or Chicago Minority Business Development Council, you can com-
plete the Recognition Certification Application to qualify for the ‘‘limited’’ Business
Enterprise Certification. CMS also offers the BEP Full Certification Application,
which effectively requires the same information as the UCP, but with different
forms. Both of these application processes certify businesses as MBE, FBE, Female
and Minority Business Enterprise (FMB), and/or Persons with Disability Business
Enterprise (PBE). Although a firm may choose to be certified by CMS using the rec-
ognition certification, this certification is not considered a valid certification by
agencies in other states.
For example, the Indiana Department of Administration only recognizes CMS as
the official M/WBE certifying agency for the State of Illinois. As part of their appli-
cation, the Illinois firm must provide a copy of the Illinois certification conducted
by CMS. If the firm was initially awarded certification by IDOT and the firm used
the CMS Recognition Certification, the firm cannot apply for M/WBE certification
with the State of Indiana through the Indiana Department of Administration. Also,
the Indiana Minority & Women’s Business Enterprise Division does not accept on-
site reports from the City of Chicago, PACE, Metra, the Chicago Transit Authority,
or the Chicago Minority Business Development Council, making the ability for an
Illinois DBE firm to work in Indiana as an M/WBE firm very difficult.
The City of Chicago is a member of the IL UCP, which certifies DBE firms.
The City also has the following certifications:
• MBE
• WBE
• Business Enterprise owned by People with Disabilities (BEPD)
• Airport Concession Disadvantaged Business Enterprise (ACDBE)
The MBE/WBE/BEPD certification is needed to work on city-funded contracts and
the DBE/ACDBE certification is needed to work on state and federally funded con-
tracts. If a woman-owned DBE firm that is already certified through the IL UCP
and CMS wants to work on a city-funded project, the firm must also apply to the
City of Chicago’s WBE program.
3) Slow Responsiveness of Reviewing Agencies
The goal of the DBE program is to give individuals who own disadvantaged busi-
nesses the opportunity to grow their business. DBE firms are taking advantage of
the goals of the DBE program and looking for opportunities to expand their busi-
nesses outside of their home-based state. A single firm could apply to as many as
50 DBE offices, which places additional burden on certifying offices. Additionally,
as state DOTs replace and/or reduce staff the burden increases.
State personnel are struggling to review the applications for home-based firms in
a timely manner. Adding a maximum 60 day determination period for non-home-
based firms set forth in 49 CRF 26.85 is creating an impossible situation for review-
ing agencies. There have been cases in which it has taken over a year to issue a
DBE certification.
SOLUTION
A proposed solution is to create a National Unified DBE Certification Program
(National UCP) to serve as a ‘‘one-stop shopping’’ to applicants for certification. Any
state agency using the unified certification application could be a coordinating mem-
ber of the National UCP, and its certification would be recognized as a National
UCP. Under a National UCP, the firm applies one time for certification as DBE
with their participating cognizant agency or a national organization. If approved,
that certification would be honored by all recipients of federally funded and non-fed-
erally funded projects in all states. The National UCP would only certify firms using
the unified certification application. Prequalification, determination if an applicant
has the requisite resources and experience to complete the service/category as re-
quired, would remain with the contracting agency.
The certification and record would be held by a national agency/organization, such
as the Small Business Administration (SBA). The SBA already have systems in
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place to review a standard application, evaluate its compliance with federal regula-
tions, and certify its credibility. It currently is certifying Women Owned Small Busi-
ness (WOSB), 8(A), and HUBZone. It has the capacity for the upload of documents
necessary for annual renewal (Affidavit of Continued DBE Certification). This proc-
ess would significantly reduce the time and effort necessary to become licensed in
multiple states.
B2GNow, a cloud-based software system for real-time collection, tracking and
analysis of compliance data, currently maintains compliance of DBE firms with fed-
eral, state, and local diversity programs. It is a tool that could serve as a DBE cer-
tification record holder for federal and state agencies to utilize.
Certifying agencies that do not use unified certification application or do not
choose to be a coordinating member of the National UCP could continue to certify
DBE. If a firm does not intend to work with multiple agencies in multiple states,
it might not be advantageous to certify with a national organization. A certified firm
that had been certified by a non-coordinating local certifying agency could still apply
to have their record held by the national organization.
Although this White Paper is focused on DBE firms certified to do engineering
and contracting, any type of DBE business could benefit from a National UCP.
SOURCES
‘‘Disadvantaged Business Enterprise (DBE) Program.’’ United States Department of
Transportation, n.d. Web. 08 March 2015.
‘‘Final Rule Changes Effective as of November 3, 2014.’’ United States Department
of Transportation—Departmental Office of Civil Rights, n.d. Web. 8 March 2015.
Indiana Department of Administration Division of Supplier Diversity, Application
for Certification, n.d. Web. 1 March, 2015
‘‘Small Business Size Standards’’ US Small Business Administration, n.d. Web. 1
March, 2015
Mr. DEFAZIO. Thank you, Ms. Boyer.
Ms. Lerdahl, you may proceed.
Ms. LERDAHL. Good morning, Chairman DeFazio and committee
members. My name is Mary Lerdahl, currently the owner of Emer-
ald Consulting Services in the Seattle area.
Prior to starting my firm to help DBEs navigate the challenges
of the construction industry, I was an electrical contractor for 22
years. I started my firm, DBE Electric, in 2009 during the Great
Recession, after losing my share of another company as the result
of a marital dissolution. The firm DBE Electric performed 122
projects valued at over $80 million over the course of 9 years, until
I was forced out of business as a result of WSDOT, Washington
State Department of Transportation’s, waiver to exclude White
women from the DBE program.
The waiver was approved by U.S. DOT in 2016 after, in my opin-
ion, a faulty disparity study that included projected revenue from
the two largest mega-projects in Washington State history.
From the time the waiver was enacted in June 2017 to mid-2018,
my firm’s revenues went from $9 million a year to zero. Without
the designation of a DBE, I couldn’t win a single project, even with
my successful track record. I was the only female contractor in the
State that performed complex, heavy highway electrical projects,
traffic signals, illumination, intelligent transportation, and tolling
systems.
By September of 2017, a new disparity study showed that White
women were not over-represented, and WSDOT asked U.S. DOT to
rescind the waiver on September 11, 2017.
I personally made two trips to Washington, DC, to meet with
U.S. DOT, the Federal Highway Admnistration, and Terence Cole-
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man of the Department of Assistant General Counsel, all to no
avail. When U.S. DOT finally denied WSDOT’s request to rescind
the waiver on December 13, 2019, it was far too late to save my
business and the businesses of other White women in our State.
Because of the DBE program, I participated in building the SR
520 floating bridge, the longest floating bridge in the world, with
Kiewit. The contract was a design-build project, and my contract
value was $14 million. It was a great example of how a small DBE
firm like mine could work together with a large prime contractor
to grow, learn, and build a project that all contractors could be
proud of.
At the same time as I was building the bridge project, I was also
working on the SR 99 Bored Tunnel project, valued at $1.6 billion,
with Seattle Tunnel Partners, the joint venture with Dragados and
Tutor-Perini. I have experienced many incidents, overt and subtle,
of discrimination in many years, but this one was the worst. Short-
ly after winning the tunnel project, Tutor-Perini purchased Fisk
Electric, a large firm out of Houston.
At an initial DBE outreach meeting, a Fisk representative bla-
tantly stated that they were only interested in receiving labor-only
bids from DBE firms, thus exposing the DBE firms to more risk
and less profit from the less risky material purchases portion of the
work. A local subcontractor, JH Kelley, was brought in to sub out
to the two electrical firms owned by the joint venture—Fisk being
owned by Tutor-Perini, and SICE, being owned by Dragados in
Spain—to minimize the appearance of self-dealing.
While my firm ultimately performed $977,246 of work on the
project, public records show that SICE performed $34,315,556, and
Fisk performed $106,057,656. STP solicited bids from DBE firms
like mine in order to show good faith efforts, only to self-perform
much of the work.
I experienced sexual advances while on the project site, while su-
pervising my crews.
Getting paid was slow and difficult, and begging was necessary,
as they always had some excuse. They needed two signers, who
were rarely both there, for example.
Finally, while my firm was working on a change order to convert
temporary generator power to permanent power feeding refrig-
erated shipping containers, I experienced discrimination at the
hands of Mike Kerschner, a project manager for Tutor-Perini. He
was pressuring me to proceed with ordering expensive Siemens
electrical gear, but my change order hadn’t yet been signed for that
work, and STP owed me over $80,000. It was very past due.
I put in a call to the local electrical union for an electrician to
do the power cutover, but the union wouldn’t fill my call for labor.
I met with Mike Kerschner face to face to discuss the ongoing fail-
ure of the union to respond to my call. And after looking me up
and down in a sexually suggestive manner, he informed me that
if I didn’t have labor on the job the next day, he would take over
my work.
The next day my crews were shut out of the job, and my equip-
ment was taken over. I also received a letter from the union that
day, pulling manpower from all of my jobs, including the bridge
project. Fortunately, Kiewit intervened, and didn’t allow that to
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happen, so my company lived to see another day. I later learned
that Fisk took over my work, and that Tutor-Perini had colluded
with the union to make this happen.
My firm finally got paid the $80,000 owed by STP, only because
of a Federal Highway Administration investigation into WSDOT’s
mishandling of the DBE program and the project.
Tutor-Perini has been found guilty of DBE fraud on several occa-
sions across the country, and has paid millions of dollars in fines.
In my opinion, the only reason Tutor-Perini hasn’t been disbarred
from Federal contracting is because of the powerful connection be-
tween this company and a certain U.S. Senator.
In closing, the DBE program is essential to allow small firms
owned by women and minorities to compete for a few pennies of
the highway dollar. However, it must be administered with strict
compliance, starting with the Federal Highway Administration’s
enforcement of CFR part 26.
State and local programs’ field compliance need to start from the
bottom up, listening to the DBE firms and the field inspectors from
each agency, instead of from the top down, so the issues can be re-
solved as soon as possible to avoid business failure due to non-
payment and discrimination during disputes.
Waivers should never again destroy a DBE firm, separating the
DBE communities.
Unfortunately, due to human nature, discrimination will prob-
ably always be with us. But this program is effective, and the com-
mittee has an opportunity to strengthen it and make it more ac-
countable and transparent to participating firms and taxpayers.
Thank you for the opportunity to share my story, and I would be
happy to share any other information you would like. Thank you.
[Ms. Lerdahl’s prepared statement follows:]
f
Prepared Statement of Mary T. Lerdahl, President, Emerald Consulting
Services, LLC
Good morning Chairman DeFazio and members of the Committee:
My name is Mary Lerdahl and I formerly owned an electrical contracting firm in
the Seattle area named DBE Electric. I started the firm in November 2009 during
the ‘‘Great Recession’’ after losing my share of a similar firm as a result of a marital
dissolution. Altogether I had been an electrical contractor since 1996, for a total of
22 years before I was driven out of business as a result of WSDOT’s (Washington
State Department of Transportation) decision to waive white women out of the fed-
eral DBE program. My company focused exclusively on highway electrical projects;
traffic signal systems, illumination, Intelligent Transportation Systems. From 2009
to 2018 (the year the company closed) my firm successfully completed 122 projects
valued at nearly $80 million. My firm never failed to complete a project on time and
finished all contracted projects with the exception of two, which were the result of
blatant discrimination, which I will explain later in greater detail. The typical size
of projects performed were $500,000–$2,000,000.
The highlight of my career was building the SR 520 Floating Bridge project, a de-
sign build project with Kiewit, the longest floating bridge in the world. The overall
project was about five years long; about 2 years in design and 3 years in actual con-
struction. The initial contract was $8.9 million with the final contract value being
$14 million. This project had an 8% mandatory DBE goal, which is why my firm
had a ‘‘place at the table’’, along with my company’s proven track record of projects
with Kiewit and other firms. I learned so much from that project, both technically
as well as what it was like to ‘‘work with the big boys’’. As doors opened to me be-
cause of my certification as a DBE firm, I could see a bright future ahead for my
company after the successful completion of the project.
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Kiewit treated me fairly and with respect and was a good example of how a mega
firm and a small, DBE firm could work together to build a great project that all
parties could be proud of.
At the same time I was working on the design portion of the bridge project, I was
working on the SR 99 Bored Tunnel project with Seattle Tunnel Partners, (STP) a
joint venture between Tutor-Perini and Dragados.
The project had a value of $1.6 Billion and a 8% DBE Condition of Award goal.
Initially my firm worked as a second tier subcontractor to one of the larger local
general contractors, and then directly for STP. The contrast between Kiewit and
STP couldn’t be more stark. My firm faced discrimination in many ways throughout
my 2 year experience on the tunnel project, finally culminating in a meeting re-
quired by WSDOT as a result of the Conciliatory Change Order required by FHWA
after an investigation by FHWA showed widespread discrimination by STP against
DBE firms. Some of the specific instances of discrimination that I personally suf-
fered and my firm experienced are as follows:
1. Initial DBE ‘‘outreach’’ meetings in which Fisk Electric, a large electrical con-
tracting firm purchased by Tutor-Perini shortly after winning the project, stat-
ed outright that they were only interested in ‘‘labor only’’ bids from DBE firms,
thereby denying DBE firms the opportunity for profit on the less risky material
purchases portion of the project.
2. Sexual advances made directly to me by STP supervisors while I was in the
field supervising operations.
3. Slow payment processing and a feeling of ‘‘begging’’ to get paid during the di-
rect visits to STP’s offices because of intentionally slow payment processing; for
example, two check signers who were hard to track down, no option for ACH
payments, delayed processing of change orders while being demanded to per-
form work by STP supervisors prior to the change orders being executed.
4. Invitations to bid electrical systems inside the tunnel that were virtually iden-
tical to the work I was performing on the bridge project just to provide ‘‘good
faith efforts’’ and allow SICE, an electrical firm owned by Dragados, to self-
perform the work. My firm wasted countless hours bidding this design-build
work when STP knew all along that they would never use my firm to build
the work.
5. The final incident occurred when my firm was working to convert electrical
power from temporary diesel generators to provide power to the refrigerated
containers being unloaded at the Seattle waterfront to permanent power. Since
my crews primarily worked on signal systems, I put in a call to the local IBEW
(electrical workers) union for a call for a journey level electrician with experi-
ence with such work; the union failed to fill my call for labor and after a week
without getting my call for labor filled I had a meeting with the project super-
intendent, Mike Kerschner to discuss the situation. At this time there was a
pending change order for $200,000 with specialized Siemens equipment that I
wasn’t going to order the equipment until the change order was approved.
Mike Kerschner had been pressuring me to order it anyway without a change
order but I refused. When I met with him regarding the power conversion issue
due to the union’s continued failure to supply the requested labor, he was
openly hostile to me while at the same time giving me unwanted top to bottom
looks that were sexual in nature. He informed me that if I didn’t get the need-
ed labor that he would take over my work. The next day I received a letter
from the IBEW stating that they were pulling all manpower off ALL of my jobs
because I had failed to make a trust payment, which was only two weeks late
due to STP’s failure to pay my company. The union was colluding with STP
and Fisk Electric to drive my firm off the tunnel job, and there were other
large electrical contractors who were hoping to take over my SR 520 Floating
Bridge Project. Fortunately Kiewit didn’t allow that to happen, so the outright
destruction of my business didn’t happen at that time. In retrospect I realize
that my firm was a threat to the assertion that DBE firms didn’t have the
technical expertise to perform on such a large, technically challenging projects
because I was doing just that across the water. By the time I was locked out
of the job STP owed my firm over $80,000 and I am certain that the only rea-
son I eventually got paid was because of the focus of FHWA’s investigation into
STP and WSDOT’s administering of the DBE program. Public records show
that SICE, Inc. did $34,315.556.53 on the project and Fisk Electric did
$106,057,656.02, while my firm, DBE Electric did $977,246.59. Both SICE and
Fisk were hired by a local company, JH Kelley, in order to minimize the ap-
pearance of the self-dealing by STP’s ownership of Fisk and SICE. It is widely
known that Tutor-Perini has been found guilty of DBE fraud in other areas of
the country and has paid millions of dollars in fines; our state simply wasn’t
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prepared to handle the assortment of dirty tricks that Tutor-Perini pulled in
order to line their own pockets while appearing to be employing ‘‘good faith ef-
forts’’ among the DBE firms who were hoping for a piece of the pie.
While the SR 99 Bored Tunnel was one of the worst examples of discrimination
I experienced, it certainly wasn’t the only one. I could spend hours citing examples,
but since my time for testimony before the committee is limited, I will share just
one more in detail. My firm was working on a city project that had federal funds
administered through WSDOT Local Programs. The contract value was approxi-
mately $1.2 million. The general contractor was falling behind the critical path
schedule as originally submitted and approved by the city, and changed the sched-
ule to place the blame for the delays on my firm. When I challenged the project
manager and eventually the company president regarding the disputed schedule
and delays, they didn’t want to meet with me, only with my male project super-
intendent. The dispute few uglier by the day, and resulted in the general contractor
failing to pay my firm nearly $300,000 at one point. The general contractor sought
to have my contract terminated, and WSDOT became involved in their request in
accordance with CFR Part 26 rules. In the interim, the general contractor contacted
my main pole supplier and threatened not to pay for the $500,000 pole order if they
placed it with my firm. Due to the on-going hostilities WSDOT allowed the contract
to be terminated, but only for convenience, not for cause. I then brought suit again
the contractor and eventually was awarded the $300,000 owed and attorney’s fees
after 3 years of legal battles. I know that the only reason this situation wasn’t able
to be resolved without litigation was because I am female and stood up for my com-
pany. I had done business with this company before when I was in business with
my ex-husband, and when issues came up as they do in construction, they were able
to be resolved, ‘‘man to man’’. Not so when I was the principal. The general con-
tractor even stated in front of WSDOT attorney’s during meetings to resolve the
issues that ‘‘the only reason he hired me was because he had to make the goal’’.
I’d also like to mention that this man himself was a minority and had been in the
DBE program before graduating from the program. He was openly hostile to women
in the construction industry, unless they worked in the office, not in the field and
certainly not being an owner herself.
There are many other instances of outright and subtle discrimination that I could
cite, but unfortunately the worst was when the agency that was supposed to help
firms like mine actually caused the destruction of my business by enacting the waiv-
er to exclude white women from the federal DBE program in Washington State.
When the waiver was enacted in June 2017 after being approved by Secretary Foxx
on December 16, 2016, my firm was doing approximately $8,000,000 in revenue.
After June 2017 when my firm was no longer considered eligible for ‘‘Condition of
Award’’ projects with DBE goals, I did not win one single bid, including several that
I knew I was the low bidder for. This is when the full knowledge of the level of
discrimination in the highway construction industry really sunk in. I had fought
battle after battle for years, but surely I thought that my company’s proven track
record of successful projects would see me through this unfortunate and unfair pe-
riod, but I was dead wrong. I did everything I could to get work, begging contractors
to use me on their projects. I had been the only female electrical contractor doing
major highway electrical projects, and now the ‘‘good ole boys’’ were making up for
lost time getting on projects that I formerly might have won. When WSDOT ex-
cluded my firm from participation, those project dollars didn’t go to another DBE
firm; they went to larger firms in our region doing $50–600 million in annual reve-
nues! In the space of 18 awful months, my company died a death of a thousand cuts
as I watched my firm die, month after month. I had to lay off my daughter, whom
I had hoped to pass the company on to, along with other family members and em-
ployees. Word spread at the IBEW union that my company was going to go under,
so getting quality labor dispatches to finish my jobs was extremely difficult. I could
have easily filed for bankruptcy but I wanted to finish my projects and cause as
least amount of collateral damage as possible for my employees, general contractors
with which I had project backlog with, and the public agencies who were counting
on the projects to be finished. By the fall of 2018 it was finished and there was noth-
ing left to show for my years of hard work except exposure to creditors due to the
personal guarantees typically required by DBE firms due to credit discrimination.
During the period of the demise of my business I made two trips to Washington DC
to meet with FHWA and USDOT to plead for WSDOT’s request to rescind the waiv-
er dated September 13, 2017. I met with Terence Coleman of the Department of As-
sistant General Counsel to share how this delay in responding affirmatively to
WSDOT’s request to rescind the waiver was causing my business failure, along with
many other women in the region, all to no avail.
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Finally on December 13, 2019 USDOT denied WSDOT’s request to rescind the
waiver; while the reasons cited speak for themselves, there is no mention whatso-
ever of the skewing of the 2009–2011 data included in the flawed study, which in-
cluded both the DBE awarded dollars of the two largest projects in Washington
state history (SR 99 Bored Tunnel and SR 520 Floating Bridge) as well as docu-
mented DBE fraud purported by a white woman trucking firm that was eventually
decertified as a DBE firm by WSDOT.
In summary, while I am a positive person, I am also a realist. I had hoped to
see discrimination end during my lifetime, unfortunately it seems to be getting
worse in our society. While one can only change oneself to be a fair and just person,
we can’t change human nature. This committee through the federal DBE program
has an opportunity to make a big difference in small DBE firms. I don’t think it’s
realistic to expect to ‘‘level the playing field’’, but it is realistic to make a significant
impact and hold to account the large general contractors who complain about the
DBE contracting community getting a few pennies of the federal contracting dollar.
While it is too late for my firm to benefit from the return of white women as Condi-
tion of Award as of October 1, 2020, I am determined to do all that I can to coach
and mentor DBE firms as they navigate the difficult construction industry and
avoid being used and abused by some of the unethical prime contractors who seek
to abuse ‘‘good faith efforts’’ for their own gain.
I had hoped to participate in building the Interstate Bridge Replacement program,
replacing the aging bridge connecting Washington and Oregon after my successful
completion of the SR 520 Floating Bridge. When I left Oregon as a young girl in
1968 to move to Washington with my mother and younger siblings she related that
I said ‘‘Seattle is my town’’ when I saw the Space Needle. Now instead of helping
to build a physical bridge, I hope that I can use my experience to build a bridge
between DBE firms and the good general contractors like Kiewit that do believe in
this program to help empower DBE firms to grow in the way that the DBE program
was intended for.
Thank you for your time.
Mr. DEFAZIO. Thank you, Ms. Lerdahl.
Mr. Ali, you may proceed for 5 minutes.
[Pause.]
Mr. DEFAZIO. You have to unmute.
Mr. ALI. Oh, sorry. Oh, am I unmuted?
Mr. DEFAZIO. You are unmuted now.
Mr. ALI. I apologize for that, Chairman. I have my own feelings
about Cisco.
Chairman DeFazio, thank you, and members of the committee.
My name is Farad Ali, chairman of the advisory Government Af-
fairs Committee for the Airport Minority Advisory Council. I am
also the immediate past chairman of the Raleigh Durham Inter-
national Airport Authority. Thank you for providing AMAC the op-
portunity to participate in the committee’s hearing today.
AMAC was founded 36 years ago to combat discrimination in the
airport industry. Since its founding, AMAC has been in the fore-
front of every national policy discussion concerning this ubiquitous
nature of discrimination in the transportation industry, and in par-
ticular, concerning airport contracting opportunities for small and
disadvantaged business enterprises.
AMAC’s members include DBEs and airport concessionaire
DBEs, non-DBEs, airports, and airport officials, and all others who
are committed to promoting diversity and inclusion in the airport
industry.
The DBE authorization by Congress is vitally needed to combat
conscious and unconscious bias and institutional discrimination
that, regrettably, minority and women entrepreneurs too often face.
To be sure, steady progress has been made. However, our DBEs
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and ACDBE members regularly attest that, without the DBE pro-
gram, they would be locked out of contracting opportunities.
Having served in many capacities with AMAC, as board chair,
and committee chair, and as an airport commissioner, I too have
had my own direct observation about the additional work to be
done.
In addition, anecdotal accounts, like academic papers and data
from recent disparity studies, further document the continuing
challenge of racial and/or gender bias barriers to full participation.
They also point to the ongoing need for a DOT DBE program.
AMAC works consistently with Congress, the U.S. DOT, Federal
Aviation Administration, aviation trade organizations, and others,
as a resource to provide education and guidance concerning these
public policies and best practices to redress discrimination and fur-
ther diversity and inclusion issues.
Often we are unwilling to, really, have candid conversations and
discussion about discrimination. But its ongoing present-day mani-
festations are real.
With regard to the Government’s interest in battling discrimina-
tion, equality is a core value of our Constitution, and fairness also
yields great societal benefits.
Although there has been growth in a number of minority- and
women-owned firms in the United States, they continue to experi-
ence both direct and indirect discrimination. Examples of this is
clear when you look at prime contractors and suppliers, unequal
access to capital, bias in bonding decisions, how contracts are struc-
tured, and RFP experience requirements. The Government has a
powerful fundamental interest in addressing these forms of dis-
crimination.
The DBE program allows minority- and women-owned firms to
participate in federally assisted contracts worth millions of dollars
and, as you have heard earlier, these businesses are only receiving
pennies. But we really do appreciate all the work that has been
going on so far, and I would like to make a few comments on the
disparity studies that have been presented for a fact of evidence.
While it was clear progress has been made, and many policy bat-
tles have been won, it is also clear there is a continuing and com-
pelling need for the DBE program. There are far too many in-
stances when women and minorities are denied equal access to op-
portunities in the transportation space. As noted, we continue to
see extreme, compelling statistical evidence of discrimination, and
its effect in disparity studies are really clear, and we will present
other ideas.
For a number of years, this committee has worked in a bipar-
tisan manner to shore up this program by monitoring current dis-
crimination and present-day effects on the past discriminations, as
well as legislation modifications for the current program. These ef-
forts have been really important, and I want to let Members know
that these policy gains have been great.
But the COVID–19 epidemic has really created even more prob-
lems for our diverse businesses. Although in response to the pan-
demic Congress has provided a lot of assistance to small business,
they are hindered by these discrimination policies. As I said ear-
lier, these businesses have unique challenges that can’t be solved
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by short-term programs like the Paycheck Protection Program, and
other funding decisions.
ACDBEs will find themselves ill-equipped to participate in pro-
grams like the Main Street Lending Program, and the airport con-
cessionaires, unlike passenger air carriers, air cargo carriers, and
associated contractors, received no explicit assistance in phase 3 of
the CARES Act. So I would like to ask you to look at issues sur-
rounding the DBE program, that you look at what could be done
in the short term to protect and sustain these businesses that are
under this current economic crisis.
I thank you for the opportunity to testify before the House Com-
mittee on Transportation and Infrastructure, and on behalf of our
group and the thousands of airport concessionaires, I would like to
say thank you. And if there are any other questions, I will be
happy to answer those at the appropriate time.
[Mr. Ali’s prepared statement follows:]
f
Prepared Statement of Farad Ali, Chairman, Government Affairs
Committee, Airport Minority Advisory Council
Chairman DeFazio, Ranking Member Graves, and members of the Committee, my
name is Farad Ali, and I am the Chairman of the Government Affairs Committee
for the Airport Minority Advisory Council (AMAC). I am also the immediate past
Chairman of the Raleigh Durham International Airport Authority. Thank you for
providing AMAC with the opportunity to participate in the Committee’s hearing
today.
AMAC was founded thirty-six (36) years ago to combat discrimination in the air-
port industry. Since its founding AMAC has been at the forefront of nearly every
national policy discussion concerning the ubiquitous nature of discrimination in the
transportation industry and, in particular, concerning airport contracting opportuni-
ties for small and disadvantaged businesses enterprises (DBEs). AMAC’s members
include DBEs—and airport concessions DBEs (ACDBEs), non-DBEs, airports and
airport officials and others who are committed to promoting diversity and inclusion
in the airport industry. As a result, AMAC occupies a unique vantage point con-
cerning the purpose of this hearing.
The DBE program authorized by Congress is vitally needed to combat conscious
and unconscious bias and institutional discrimination that regrettably minority and
woman entrepreneurs too often experience. Too be sure, steady progress has been
made; however, our DBE and ACDBE members regularly attest that without the
DBE program they would be locked out of contracting opportunities. Having served
in many capacities with AMAC (as a board chair and committee chair) and as an
airport commissioner I too have my own direct observations about the additional
work to be done. In addition, anecdotal accounts, academic papers, and data from
recent disparity studies—many of them undertaken by AMAC members who are
consultants and researchers—further document the continuing challenge of racial
and/or gender based barriers to full participation. They also point to the ongoing
need for the DOT DBE program.
AMAC works consistently with Congress, the US Department of Transportation,
the Federal Aviation Administration, aviation trade associations, and others as a re-
source for information, education and guidance concerning public policies and best
practices to redress discrimination and further diversity and inclusion. On a bi-par-
tisan basis this Committee and the Congress has shown great leadership in affirm-
ing the government’s continuing interest in remedying discrimination and its effects.
As we are aware, Congressional efforts to monitor ongoing evidence of discrimina-
tion undergird the statutory and regulatory framework of the DBE program—and
give airports a targeted, narrowly tailored, evidence based ‘‘tool’’ to promote equity,
fairness, participation. Again, Mr. Chairman, AMAC thanks you and the Committee
for your ongoing leadership and collaborative approach with industry stakeholders.
Often we are unwilling to have candid discussions about discrimination and its
ongoing present day manifestations. With regard to the government’s interest in
combatting discrimination, equity is a core value of our Constitution and fairness
also yields other important societal benefits. Although there has been growth in the
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number of minority businesses in the United States, they continue to experience
both direct and indirect discrimination. Examples of indirect discrimination include:
direct discrimination by prime contractors or suppliers, unequal access to capital,
bias in bonding decisions, how contracts are structured, RFP experience require-
ments in RFPs, and the like. The government has a powerful and fundamental in-
terest in addressing these forms of discrimination and the DBE program is part of
that effort.
Minority-owned businesses remain underrepresented as a share of the total U.S.
business ownership. Moreover, these businesses when compared to their non-minor-
ity counterparts typically have fewer employees and lower revenues. This underrep-
resentation in large measure has its basis in racial discrimination and addressing
it is a critical reason why Congress must continue to support initiatives like the
DBE program.
The program allows women and minority-owned companies to participate in feder-
ally-assisted transportation contracts worth billions of dollars a year. The program
is an essential entry point for many DBE firms into the transportation space and
there is a large and growing body of evidence that shows that the DBE program
enables women and minority owned firms the opportunity to play in a space that
would otherwise be off limits to them. Simply put, this program works and as noted
previously, it is narrowly tailored to meet the constitutional standard set out by the
U.S. Supreme Court. A fact that has been affirmed by many federal District and
Courts of Appeal.
I’d like to offer a few more comments on disparity studies and other fact based
evidence that discrimination continues to a problem in the transportation sector.
While it’s clear that progress has been made and many policy battles have been
won, it is also clear that there is still a continuing and compelling need for the DBE
program. In far too many instances women and minorities are being denied equal
access to opportunities in the transportation space. As noted previously, we continue
to see extremely compelling statistical evidence of discrimination and its effects
from a variety of disparity studies that are produced by state and local govern-
ments. These studies are backed up by countless accounts from women and minority
owned firms that show that they continue to operate on an uneven playing field.
AMAC continuously works with its members to monitor ongoing discrimination, and
we will submit some examples to the Committee. AMAC believes that these ac-
counts show that this problem is not specific to any one county, state, or group.
Rather, it exists throughout the country and effects countless individual businesses.
In the aggregate, these studies show us that women and minority owned firms
continue to face discrimination and that without initiatives like the DBE program,
these firms would receive far fewer opportunities to successfully compete for con-
tracts in the transportation sector. AMAC commends the work that the Committee
has done in this area and I would personally like to thank all of the Committee
Members and their staff for working to ensure that the DBE program continues to
create a fairer marketplace in which women and minority owned businesses are able
to find opportunities in transportation sector. For a number of years, this Com-
mittee has worked in a bipartisan manner to shore up and maintain this program
by:
• Monitoring Current Discrimination and the Present Day Effects of Past Dis-
crimination: Holding hearings like this one permit the Committee to hear di-
rectly from DBEs and ACDBEs and their representatives about the discrimina-
tion they experience as they attempt to establish and grow their businesses. It
is critically important that Congress and the public have a full understanding
of the types of discrimination that persist across the nation so that they can
support and improve the programs intended to address such discrimination.. We
are grateful to this Committee for the work it has done in this area.
• Legislative Modifications to the Current Program that Foster a Fairer Market-
place: Similarly, this Committee has also worked to incorporate needed statu-
tory modifications into legislation that has moved through this committee.
Again, for example, in the 2018 FAA Reauthorization, the Committee addressed
a long-standing discriminatory small business ‘‘size standard’’ barrier to DBEs
involved in FAA-assisted contracting. The legislation rectified this matter by
conforming the DBE size standard for programs authorized by the FAA bill to
those set by the U.S. Small Business Administration. The prior definition had
not used size tests that are generally applicable under the Small Business Act,
but instead imposed an arbitrary rule that reduced the size standard for DBEs
by approximately 30% as compared to the size standard set in the Small Busi-
ness Act. We note as well that H.R. 2, which recently passed the House of Rep-
resentatives, would eliminate the discriminatory small business standard with
respect to all DOT modes—highways, transit, and rail.
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These efforts have been substantive and helpful in ensuring that the DBE pro-
gram continues to be a success. However, while I and AMAC applaud the Com-
mittee for its efforts in assisting women and minority owned businesses, I want to
take some time to let Members know that many of these policy gains (particularly
in airport concessions space) will likely be lost as a result of the COVID–19 Pan-
demic—if Congress does not provide direct and immediate assistance to conces-
sionaires.
The COVID crisis has absolutely decimated women and minority owned airport
businesses. From the vantage point of the airport sector, I can say that this crisis
and the resulting economic downturn has been absolutely devastating. Airport con-
cessionaires including Disadvantaged Business Enterprises (ACDBEs) are the third
major partner in an ecosystem that serves air travelers. Concessionaires take empty
airport terminals and turn them into vibrant shopping and dining destinations that
generate important revenues for themselves and fees that are paid to airports.
These concessionaires are major sources of employment and taxes for surrounding
communities and they help to grow the airports in which they are located by pro-
viding (in aggregate and pre-COVID times) approximately $2.5 billion in non-aero-
nautical revenue to airports. This revenue fuels new airport growth by underpinning
airport bond financing, development, and growth.
However, as airport concessionaires, these businesses are uniquely dependent on
the flow of passengers in and around airports. Our revenues rise and fall based on
Airline passenger traffic. If there is no traffic, we cannot survive. With COVID–19,
we have seen this traffic fall sharply in some cases up to 95% of pre-pandemic to-
tals. This dramatic fall in potential customer traffic has already caused many
ACDBEs to close their doors permanently. Those that are still open are barely sur-
viving and have seen their revenues drop by 95 percent or more. Unlike the rest
of the economy, industry experts don’t expect this industry to bounce back quickly.
Instead these experts expect passenger traffic (and subsequently business sales) to
remain depressed for at least 18–36 months. Prior to this pandemic, ACDBE pro-
gram had created several success stories of businesses that not only scaled within
their home airport but were able to open new operations in airports across the coun-
try. This program saw businesses that had begun to setup joint ventures with larger
businesses to grow their operations, and had also seen older ACDBEs act as men-
tors to other businesses that had just entered this space. COVID–19 could undo all
of this progress. I don’t want to sound alarmist, but the industry and ACDBEs in
particular are at a crossroads.
Although in response to the pandemic Congress has enacted programs intended
to assist small businesses, they are not well suited to the airport environment. As
a result, concessionaires continue to struggle to secure adequate resources to survive
the COVID crisis. ACDBEs, which are already hindered by discrimination in many
aspects of their work, are even more vulnerable to the pandemic. As I said earlier,
these businesses have unique challenges that can’t be solved by short term pro-
grams like the Paycheck Protection Act and often need more funding than what is
currently available under the Economic Injury Disaster Loan. ACDBEs also find
themselves ill-equipped to participate in programs like the Main Street Lending
Program and airport concessionaires unlike the passenger air carriers, air cargo car-
riers, or associated contractors received no explicit assistance in Phase III of the
CARES Act.
Although DBEs and ACDBEs, in particular, are severely impacted by the pan-
demic, this economic devastation is not limited to the aviation sector. Minority busi-
nesses in general have been decimated by the pandemic. All across the country, mi-
nority businesses are shutting down permanently. Lacking pre-existing relation-
ships with banks, many of these businesses were unable to access loans from the
first round of the PPP. Many of these companies simply folded, taking jobs and po-
tential revenues with them. This country can’t afford to lose a generation of minor-
ity entrepreneurs. These businesses are sources of income, skills training, and devel-
opment for many minority communities. I ask that as you look into the issues sur-
rounding the DBE program that you also look at what can be done in the short-
term to protect and sustain businesses under the current economic climate. This
Committee and the DBE program has done an amazing job of helping to build a
transportation marketplace that is more equitable and fairer than it would have
been without your efforts. To protect and maintain these efforts, I ask that Members
continue to not only support the DBE program, but to also work to support the
ACDBEs and DBEs as they seek to get back on their feet.
Thank you for this opportunity to testify before the House Committee on Trans-
portation and Infrastructure on behalf of AMAC. Our group and the thousands of
Airport Concessionaires that we represent look forward to working with the Com-
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mittee to advance policies that will continue to protect and enhance the DBE pro-
gram.
Mr. DEFAZIO. Thank you for your testimony.
Ms. Norman, you may proceed.
Oh, wait, I am sorry, I skipped someone.
Mr. McDonald, you may proceed.
Mr. MCDONALD. Thank you, Chairman DeFazio, and good morn-
ing, committee members. My name is Sandy McDonald, and I am
the director of the Office of Economic and Small Business Develop-
ment in Broward County. I am also here on behalf of COMTO, the
Conference of Minority Transportation Officials, this morning. And
my office is also a member of the Airport Minority Advisory Coun-
cil.
It was an excellent start in 1983, when the provision was made
to authorize highway and Federal assistance programs to allocate
at least 10 percent of the funds to be spent with DBEs. In 1987
the program progressed, and included women during the reauthor-
ization.
The DBE program, as we know it today, is one of the most sig-
nificant tools for guaranteeing the participation of minority-owned
and women-owned businesses in the Federal procurement of goods
and services in the arenas of highway, aviation, and transit. But
we also know we can do more.
In Broward County alone, the DBE program accounts for 408
businesses, of which 210 are women-owned. Throughout the State
of Florida, there are over 4,000 certified DBEs documented. The
significance of the number of DBEs in my county and State is only
one important factor to consider. Equally as important are the
number of jobs these DBEs provide and account for throughout the
State and the country. But yet we know we can do more.
Broward County believes the success of our DBEs comes from the
additional assistance we are willing to offer in our program. All
DBE program administrators are required to meet eight objectives
of the DBE program under part 26. However, the following specific
objective, ‘‘to assist the development of firms that can compete suc-
cessfully in the marketplace outside the DBE program,’’ is one we
put extra emphasis on and apply to grow our minority and women
participation and, yes, grow our overall economy.
The DBE program in Broward County develops and directly af-
fords our minority- and women-owned businesses the chance to
perfect their craft, realize their growth, build capacity, and nurture
relationships that can carry them far beyond a single contract.
Going through the process for a DBE is invaluable. Whether they
win or lose a specific bid, it allows them to create relationships that
lead to partnerships that have the potential to result in future con-
tracting opportunities. And it is that potential with our firms we
want to build on even more.
Providing this opportunity through Department of Transpor-
tation contracting for minority- and women-owned businesses goes
far beyond the one single contract. It is imperative that a DBE pro-
gram achieves the outlined objectives. It is these objectives that
provide opportunities for DBEs, and are the standard that
DBELOs—Disadvantaged Business Enterprise Liaison Officers—
such as myself, govern our programs by. We recognize that there
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is always room for improvement. We accept the challenges that
arise as opportunities to expand on the original intent, and to con-
tinue the purpose of the program.
I have seen the professional growth of DBEs over time. I have
witnessed the evolution of business owners with an idea who start-
ed operations in small residential markets, and then expanded to
commercial markets, and prepared themselves for Government pro-
curement. I have certified businesses who met all the eligibility cri-
teria for DBE participation, but were not familiar with Government
bidding or establishing professional relationships. I have worked
with established DBE businesses who have used their talents and
experiences to grow their business beyond my county, and beyond
my State, and to provide their service in multiple States.
I have also, unfortunately, seen those businesses who were not
given the opportunity this program should allow. We can actually
do more.
The DBE program affords minority- and women-owned busi-
nesses the chance to start, develop, and master their abilities, and
grow beyond their initial footprint and the program. For this rea-
son and many more, the DBE program needs to continue for an ad-
ditional 37 years and beyond.
While my office in Broward County continues to find more ways
to increase our DBE participation while focusing on successful con-
tracting awards to DBEs, we also pay attention to the areas where
there are opportunities to grow, and embrace the challenges that
could make this program even better. The success of our program
and the impact it has on the local and State economy is an ideal
example of the importance of the DBE program to drive equality
in the field of transportation.
And yes, I will say without question, COVID has impacted our
community in the worst way, and we believe the DBE program will
be one of those starts that helps us to bring our community back
and support the minority- and women-owned businesses.
Thank you for this opportunity.
[Mr. McDonald’s prepared statement follows:]
f
Prepared Statement of Sandy-Michael E. McDonald, Director, Office of
Economic and Small Business Development, Broward County, Florida
Greetings Chairman DeFazio and Committee Members:
My name is Sandy-Michael E. McDonald and I am the Director of the Office of
Economic and Small Business Development for Broward County, Florida. I also
serve as the Disadvantaged Business Enterprise Liaison Officer (DBELO) and Air-
port Concession Disadvantaged Business Enterprise Liaison Officer (ACDBELO) for
the administering of the DBE and ACDBE programs under 49 CFR Parts 26 & 23.
As the DBELO/ACDBELO, it is my responsibility, and that of my office, to ensure
that the objectives of the Disadvantaged Business Enterprise (DBE) and the Airport
Concessions Disadvantaged Business Enterprise (ACDBE) programs are adhered to.
This includes certifying eligible applicants and confirming that program activities
and projects are monitored and reported accurately. As this Committee on Transpor-
tation and Infrastructure convenes to hear testimony on the topic of ‘‘Driving Equal-
ity: The U.S. Department of Transportation’s Disadvantaged Business Enterprise
Program’’, I would like to share some of my thoughts, professional experiences, and
observations of my daily role in driving equality and using the DBE program to do
so.
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OPENING STATEMENT
It was an excellent start in 1983 when the provision was made to authorize high-
way and federal financial assistance programs to allocate at least 10% of the funds
to be spent with DBEs to ensure that minorities would have an opportunity to par-
ticipate and compete. In 1987, as the program progressed, it included women during
the reauthorization. The DBE program as we know it today, is one of the most sig-
nificant tools for guaranteeing the participation of minority-owned and women-
owned businesses in the federal procurement of goods and services in the arenas
of Highway, Transit and Aviation. However, it also serves as a foundation for other
federal procurement programs and contracting opportunities.
In Broward County alone, the DBE program accounts for 408 businesses; of which
210 are women-owned. Throughout the State of Florida there are over 4,043 cer-
tified DBEs documented. The significance of the number of DBEs in my county and
state is only one important factor to consider. Equally as important, are the number
of jobs these DBEs provide and account for throughout the state and country. The
implications and impact on labor and economics of these combined factors are not
singular, but exponential. As an office, we are excited about growing the number
of DBEs in the county, and throughout the state. We are even more excited about
developing DBEs to participate successfully in the process, and then, preparing
them to win contracts. That is the true value of the program.
Broward County believes the success of our DBEs comes from the additional as-
sistance we are willing to offer in our program. All DBE program administrators
are required to meet the eight objectives of the DBE Program under 49 CFR Part
26.1. However, the following specific objective: ‘‘To assist the development of firms
that can compete successfully in the marketplace outside the DBE program’’, is the
one we apply to grow our minority and women participation, and to grow our overall
economy. We support this by preparing minority and women owned businesses to
contract and provide services in all areas of government, private industry, national
and international markets, as well as to produce more entrepreneurs and startup
businesses.
NEED OF THE PROGRAM—THEN AND NOW
Broward County clearly understands the importance and the need for the DBE
program since its inception to the present. Through the projects and procurement
of our Aviation and Transit Departments, our DBEs are given the opportunity to
not only participate as a subcontractor, but to also serve as Prime Contractors
(Primes). Due to our unbundling and small business development, our DBEs can
serve as Primes on contracts and offer additional opportunities to other DBEs as
subcontractors. The DBE program in Broward County develops and directly affords
our minority and women owned businesses the chance to perfect their craft, realize
their growth, build capacity, and nurture relationships that carry them far beyond
a single contract. Going through the process for our DBEs is invaluable. Whether
they win or lose a specific bid, it still allows them to create relationships that lead
to partnerships that have the potential to result in future contracting opportunities
outside of the government. Providing this opportunity through DOT contracting for
minority and women owned businesses goes far beyond the contract.
It is imperative that a DBE program achieves the following objectives:
a) To ensure nondiscrimination in the award and administration of DOT-assisted
contracts in the Department’s highway, transit, and airport financial assist-
ance programs;
b) To create a level playing field on which DBEs can compete fairly for DOT-as-
sisted contracts;
c) To ensure that the Department’s DBE program is narrowly tailored in accord-
ance with applicable law;
d) To ensure that only firms that fully meet this part’s eligibility standards are
permitted to participate as DBEs;
e) To help remove barriers to the participation of DBEs in DOT-assisted con-
tracts;
f) To promote the use of DBEs in all types of Federally assisted contracts and
procurement activities conducted by recipients.
g) To assist the development of firms that can compete successfully in the mar-
ketplace outside the DBE program; and
h) To provide appropriate flexibility to recipients of Federal financial assistance
in establishing and providing opportunities for DBEs.
It is these objectives that provide opportunities for DBEs, and are the standard
that DBELOs, such as myself, govern ourselves and the program. These along with
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the principles of professionalism and personal compassion, commitment, interest in
growing and sustaining minority and women owned businesses, and striving for a
greater economy, is why my office and Broward County supports and takes seriously
our role and responsibility.
We recognize that there is always room for improvement. We accept the chal-
lenges that arise as opportunities to expand on the original intent, and to continue
the purpose of the program. Broward County uses the DBE program and county
contracting funded by DOT to stabilize and grow our economy and workforce. Now,
more than ever, due to the COVID–19 public health crisis, industries such as avia-
tion and transit have been adversely impacted, and to a degree, completely shut
down in some locations for 5 months or more. Broward is identifying opportunities
through Master Plans and through previously dedicated funding sources, to continue
projects that will put some of our DBEs back to work and assist in the rejuvenation
of our economy. We also realize that for the DBEs we have certified over the years,
a significant part of developing them is also making sure they have the necessary
access to capital. DBEs must be able to not only win a contract, but also to execute
the contract over time. They must be able to meet all their financial obligations as
they await payment. Clearly, this is a priority for all small businesses, especially
minority and women owned businesses. Broward County is committed to leveraging
resources to assist our businesses in being prepared financially. Another key ele-
ment of developing our DBEs is making sure they have examples of best practices
and access to information sharing. We continue to grow in that area; this includes
building Mentor-Protégé relationships, as well as business development workshops
on topics and areas of need and demand.
CLOSING REMARKS
I have seen the professional growth of DBEs over time. I have witnessed the evo-
lution of business owners with an idea who started operations in small residential
markets and then expanded to commercial markets and prepared themselves for
government procurement. I have certified businesses who met all the eligibility cri-
teria for DBE participation but were not familiar with government bidding or estab-
lishing professional relationships. I have worked with established DBE businesses
who have used their talents and experiences to grow their business beyond my coun-
ty and beyond my state to provide their services in multiple states.
The DBE program affords minority and women owned businesses the chance to
start, develop, master their abilities, and grow beyond their initial footprint and the
program. For these reasons, and many more, the DBE program needs to continue
for an additional 37 years and beyond. While my office and Broward County con-
tinues to find more ways to increase our DBE participation numbers, while focusing
on the successful contracting awards to DBEs, we will also pay attention to the
areas where there are opportunities to grow and embrace the challenges that could
make this great program even better. We will continue to work to make sure that
more than our county office and staff are aware of the success of the DBE program
and its participants. The participants themselves and their businesses are the best
way to tell the story, and to have a voice for recruitment of new DBEs. Existing
DBEs are the best trainers to share what the best business practices are. Existing
DBEs are the demonstrators of how to contribute to the economic vitality, success,
and a growing economy. Broward County will continue to do its part to meet and
exceed all the objectives of the 49 CFR to maintain a successful DBE program. The
success of our program and the impact it has on the local and state economy is an
ideal example of the importance of the DBE program to drive equality in the field
of transportation. Broward County exemplifies what DBEs, in partnership with gov-
ernment, working within a federal program that is committed to utilizing a target
group, can produce.
Thank you for this opportunity to share my knowledge and experience with the
DBE program. The impact the program has historically had on the economy, and
the effect it continues to have should not be minimized. I am in full support of the
continuation of the program in the interest of driving equality.
Mr. DEFAZIO. Thank you, Mr. McDonald. While you are testi-
fying, if you wonder why I am looking over there, somehow some
people show up on that screen, and some people only show up over
there. So I don’t know—I would hope, if our tech person is listen-
ing, when someone is speaking, if we could pop them up on the
main screen, so we can just look forward.
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With that, Ms. Norman, you may proceed.
Ms. NORMAN. Thank you very much, Mr. Chairman and mem-
bers of the Transportation and Infrastructure Committee. Thank
you all so much for allowing me to be a part of this process, and
I am very honored and pleased to appear before you today. My
name is Sandra D. Norman. I am division administrator for civil
rights with the Virginia Department of Transportation.
As director, I know firsthand of the DBE program’s importance
that is within your jurisdiction. I am very supportive of the DBE
program that assists minority- and women-owned businesses who
are ready, willing, and able to compete and perform contract work
as either a prime contractor or subcontractor. I believe it is the
right thing to do. It continues to drive equality and inclusiveness.
The DBE program for the United States meets constitutional
tests. Every court has held that the DBE program regulations and
49 CFR 26 are constitutional.
Why is the DBE program important? Here are some of my
thoughts for you to consider.
The DBE program has its roots in the Civil Rights Act of 1964.
It has been regulated through a series of reauthorization legislative
initiatives. The DBE program applies to airport and surface trans-
portation, highway, transit, and aviation. The DBE program has
been enacted by Congress to address historical discrimination
against minority-owned firms in the transportation industry, and
to ensure that minority- and women-owned businesses have a fair
chance to participate in contracting opportunities made possible by
Federal financial assistance.
The DBE program, with its rigid certification requirements, pre-
sents an excellent opportunity for a win-win for all parties.
It is a success for VDOT, and a success for the community. We
want the residents of those communities to benefit from the public
investment in that community. The majority of employment growth
in the United States comes from small businesses. When small
businesses are allowed to do contract work, it is an opportunity for
people who might have been excluded from the relevant workforce
to showcase their talents and skills, get training, and work within
the transportation industry to have more employment opportuni-
ties in the future.
Advancing diversity and making money are not conflicting goals.
It is good for business and good for society.
DOT’s DBE program is as relevant today as ever to level the
playing field in transportation for individuals, businesses, and com-
munities of race, color, and gender. Our country suffers when tal-
ented people who have new ideas and who want to work hard are
denied the opportunity to compete because of their ethnic back-
ground, race, or gender. And that is why there is a continuing need
for the Disadvantaged Business Program, a need to ensure that
small businesses can compete fairly for Federal-funded, transpor-
tation-related projects.
The DBE program, independent of the inherent challenges and
the nature that comes with those challenges, has provided opportu-
nities for minorities and women-owned small businesses and other
contractors to participate in an arena that has historically not seen
such participation. It has allowed people to create jobs, and give
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37
their employees a quality of life which they would not have been
able to do before the DBE program.
So, independent of all the challenges, the right part of the pro-
gram is access, access to many construction projects that use gov-
ernmental money that will have a requirement with a designated
percentage of the total contract values awarded, making sure they
are awarded to the DBEs. This allows access to DBE businesses
that may not have been able to compete on price with larger oper-
ations to win contracts on projects.
In addition to the financial benefit, contacts are made with re-
spective industries that may lead to additional work. It is about
people.
It is about jobs. And too often we forget that our industry’s gold-
en nuggets are the people who participate in the DBE program, our
small businesses and the thousands upon thousands of people they
employ.
Oftentimes we forget that the faces behind the businesses also
want to leave a legacy for their children, grandchildren, and for
generations yet unborn.
In closing, the success of DOT’s DBE program depends on the
rich diversity, skills, and talents of our DBEs. VDOT, as an agency,
will continue to serve as a model DBE program to ensure that
minority- and women-owned businesses have a fair opportunity to
participate in contracting opportunities at VDOT. Therefore, we are
committed to championing and strengthening our DBE program.
It is the real-life stories of discrimination for minority and
women business owners that are vital to assisting courts, policy-
makers such as yourselves, and the public to understand the need
to preserve and improve the Government DBE program that helps
to drive equality and inclusiveness within the U.S. DOT DBE pro-
gram.
Again, I am honored, and thank you so much for your time and
consideration.
[Ms. Norman’s prepared statement follows:]
f
Prepared Statement of Sandra D. Norman, Division Administrator, Civil
Rights, Virginia Department of Transportation
Thank you very much, Mr. Chairman, and members of the Transportation and In-
frastructure Committee. Thank you all so much for allowing me to be a part of this
process and I am very honored and pleased to appear before you today.
My name is Sandra D. Norman, Division Administrator for Civil Rights for the
Virginia Department of Transportation (VDOT). As Director, I know firsthand of the
DBE Program’s meaning that is within your jurisdiction. I am very supportive of
the DBE program that assists minority and women-owned businesses who are
ready, willing, and able to compete and conduct contract work as either a Prime
Contractor or Subcontractor. I believe it is the right thing to do.
The Disadvantaged Business Enterprise (DBE) program for the U.S. meets con-
stitutional tests. Every court has held that the DBE program regulations at 49 CFR
Part 26 are constitutional.
Why is the DBE Program Important, great question Mr. Chairman? Here are my
thoughts for Transportation and Infrastructure (T&I):
The Disadvantaged Business Enterprise Program (DBE) has its roots in the Civil
Rights Act of 1964. It has been regulated through a series of reauthorization legisla-
tive initiatives. The DBE program applies to airports and surface transportation
(Highway and Transit). The DBE Program has been enacted by Congress to address
historical discrimination against minority-owned firms in the transportation indus-
try and to ensure that minority and women-owned businesses have a fair oppor-
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tunity to participate in contracting opportunities made possible by Federal financial
assistance
The DBE program, with its rigid certification requirements, presents an excellent
opportunity for a win-win for all parties. It is a success for VDOT and a success
for the community. We want the residents of those communities to benefit from the
public investment in that community. The majority of employment growth in the
United States comes from small businesses. When small businesses are allowed to
do contract work, it is also an opportunity for people who might have been excluded
from the relevant workforce to showcase their talents and skills, get trained and
work within the transportation industry to have more employment opportunities in
the future. Advancing diversity and making money are not conflicting goals; it is
good for business and good for society.
Our DBE Program is as relevant today as ever: to level the playing field in trans-
portation for individuals, businesses, and communities of race, color, and gender.
Our Country suffers when talented people, who have new ideas, and who want to
work hard, are denied the opportunity to compete because of their ethnic back-
ground, race, or gender. And that is why there is a continued need for the Disadvan-
taged Business Program, a need to ensure that small disadvantaged business enter-
prises can compete fairly for federal funded transportation related projects.
The DBE program, independent of the inherent challenges and the nature that
comes with those challenges, has provided opportunities for minorities and women-
owned small businesses and other contractors to participate in an arena that had
historically not seen such participation. It has allowed people to create jobs and give
their employees a quality of life, which they would not have been able to do before
the DBE program. So independent of all the challenges we have, the right part of
the program is ACCESS. Access to many construction projects that use govern-
mental money that will have a requirement with a designated percentage of the
total contract values awarded are awarded to DBEs. This allows access to DBE busi-
nesses that may not be able to compete on price with larger operations to win con-
tracts on projects that such businesses may not traditionally be able to win on price
alone. In addition to the financial benefit, contacts are made with respective indus-
tries that may lead to additional work. It is about people, it is about jobs, and too
often, we forget that our industry’s golden nuggets are the people who participate
in the DBE program and the thousands upon thousands of people they employ. Of-
tentimes we forget that the faces behind the businesses also want to leave a legacy
for their children, grandchildren, and for generations yet unborn.
The success of VDOT’s DBE Program depends on the rich diversity, skills and tal-
ents of our DBEs. VDOT will continue to serve as a model DBE Program to ensure
that minority and women-owned businesses have a fair opportunity to participate
in contracting opportunities at VDOT. Therefore, we are committed to championing
and strengthening our DBE Program. It is the real life stories of discrimination
from minority and women business owners that are vital to assisting courts, policy-
makers such as yourselves, and the public to understand the need to preserve and
improve the government disadvantaged business programs that help to DRIVE
EQUALITY.
Again, I am honored, and thank you very much for your time and consideration.
Mr. DEFAZIO. Thank you, Ms. Norman.
Dr. Wainwright, you may proceed for 5 minutes.
Mr. WAINWRIGHT. Thank you, Chairman DeFazio, Ranking Mem-
ber Graves, members of the committee. Good morning. I appreciate
the invitation to appear here today. My name is Jon Wainwright.
I hold a Ph.D. in economics from the University of Texas at Austin.
Until my recent retirement after 24 years, I served as a managing
director at NERA Economic Consulting. My primary career focus
has been analyzing the effects of discrimination on minorities and
women.
My written testimony contains 90 pages of analysis conducted
and compiled for this hearing. I will attempt to summarize. I have
performed extensive original research using 95 existing disparity
studies, as well as data covering millions of firms from the Census
Bureau Survey of Business Owners, the Annual Business Survey,
and the American Community Survey. My testimony is a continu-
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ation of similar research I have performed over the course of my
career as an economist.
I conclude that there is strong evidence, both past and present,
of large, adverse, and statistically significant disparities facing mi-
nority-owned and women-owned business enterprises in the United
States. Moreover, these disparities cannot be explained solely or
even primarily by differences in factors that are untainted by dis-
crimination. In other words, these disparities are primarily due to
discrimination and its destructive effects.
I reached this conclusion from three main sources of empirical
evidence.
First, disparity studies overwhelmingly demonstrate adverse
findings for minority- and women-owned businesses. The vast ma-
jority of the 95 disparity studies I reviewed in my testimony identi-
fied large, adverse disparities affecting minority- and women-
owned businesses in both construction and professional services
like architecture and engineering. In construction, 72 percent of
disparities were adverse, and 81 percent of those were large and
adverse. In construction-related professional services, 77 percent
were adverse and 97 percent of those were large and adverse. I am
confident that, if a similar analysis were conducted with additional
studies such as the 40 that have been introduced into the record
here today, it would reveal similar results.
Second, census data shows large, adverse, and statistically sig-
nificant disparities. The most recent complete census showed that,
for every dollar of sales and receipts earned by nonminority male-
owned firms, African Americans earned just $.34, Hispanics just
$.47, and Asians just $.47. American Indian and Alaska Native-
owned firms earned just $.43. Native Hawaiian and other Pacific
Islander owned firms earned just $.49, and women earned just
$.41.
Third, statistical regression analysis shows that historical and
current disparities are largely due to discrimination. The most re-
cent American Community Survey shows that the rate of business
formation for African Americans would be 120 percent higher in
the absence of discrimination. For Hispanics, the figure is 41 per-
cent; for Asians, 30 percent higher; for American Indians and Alas-
ka Natives, 43 percent higher; for Native Hawaiians and other Pa-
cific Islanders, 58 percent higher; for women, 44 percent higher, in
the absence of discrimination.
In closing, there is still some good news. As my testimony shows,
and as you have heard today from the other witnesses, although se-
vere disparities persist, we are making progress, thanks primarily
to public efforts like the DBE and ACDBE programs. Still, now is
not the time to reduce our efforts to eliminate business discrimina-
tion and its effects. Indeed, the evidence is overwhelming that, if
we eliminate or reduce these programs, much greater disparities
will very quickly occur.
The best metaphor I can offer is to consider someone like myself,
who takes blood pressure medication: if you take my blood pressure
while I am on my meds, it will read close to normal. Obviously,
that does not mean that any responsible doctor will say it is time
to stop taking my medicine. This is precisely why I and other re-
searchers in this area try to examine both public-sector contracting
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markets, where affirmative measures like the DBE program are
found, as well as private-sector contracting markets, where such
programs are rare and, consequently, discrimination remains al-
most totally undermediated.
The bottom line is this: despite admirable progress, discrimina-
tion and its destructive effects are deeply rooted in the American
economy. Such discrimination makes it immeasurably harder for
women and minorities to form and grow their own firms. This re-
ality has innumerable harmful consequences for our economy and
for our Nation. For all these reasons, I strongly urge you to reau-
thorize the DBE program. Thank you very much.
[Mr. Wainwright’s 55-page prepared statement follows. The tran-
script resumes on page 95.]
f
Prepared Statement of Jon S. Wainwright, Ph.D., Affiliated Consultant,
NERA Economic Consulting
Chairman DeFazio, Ranking Member Graves, and Members of the Committee:
Thank you for the invitation to appear here today. My name is Jon Wainwright.
I hold a Ph.D. in economics from the University of Texas at Austin. Until my recent
retirement after 24 years, I served as a Managing Director at NERA Economic Con-
sulting in Austin, Texas and Chicago, Illinois. NERA is a national and international
economic consulting firm dedicated to applying economic, finance, and quantitative
principles to complex business and legal challenges. One of my primary areas of in-
terest as a professional economist has been documenting and analyzing the effects
of discrimination on minorities, women, and other disadvantaged groups.
I would like to ask the Committee’s permission to include my entire testimony in
the record as if read in full and to supplement my testimony with additional mate-
rial if needed.
A. INTRODUCTION
I have been asked to provide a statistical overview of the historical and current
state of Minority-Owned and Women-Owned Business Enterprise (M/WBE) in the
United States, for the economy as a whole and particularly in those industry sectors
relevant to Federal surface and aviation transportation funding.
My findings are drawn from evidence in numerous studies of M/WBE participa-
tion in public sector contracting activity that have been performed in the wake of
the U.S. Supreme Court’s ruling in City of Richmond v. J. A. Croson Company,1
many of which I conducted myself. These disparity studies examine statistical evi-
dence of M/WBE participation in public sector and private sector business activity
compared to M/WBE representation in the relevant business populations, and offer
explanations for the disparities observed between these factors. They also include
qualitative, or anecdotal, accounts from both M/WBEs and non-M/WBEs regarding
these disparities.
Additionally, I have drawn findings from the few primary sources of statistical
evidence that exist regarding M/WBEs, namely the Census Bureau’s historical Sur-
vey of Business Owners, its new Annual Business Survey, and its ongoing American
Community Survey. The Survey of Business Owners and its recent successor, the An-
nual Business Survey, provide information regarding the total number of M/WBEs
in the country, their gross sales and receipts, and their employment and payroll,
both in absolute terms as well as relative to their nonminority, male-owned counter-
parts. The American Community Survey is an annual version to the old decennial
census long form and provides evidence regarding patterns of business formation by
minority and female entrepreneurs and associated business earnings relative to
their nonminority, male-owned counterparts.
In preparing this testimony, I conducted extensive original research using all of
the above-mentioned sources of evidence. This research is a continuation of similar
research I have performed over the course of my career as an economist. Based on
the findings presented below, I conclude that there is strong evidence, both past and
present, of large, adverse, and statistically significant disparities facing minority-
1 488 U.S. 469 (1989).
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owned and women-owned business enterprises in the United States. Moreover, these
disparities cannot be explained solely, or even primarily, by differences between the
relevant populations in factors untainted by the effects of discrimination. These dis-
parities are primarily due to discrimination and its effects, in the economy as a
whole, as well as in the markets such as construction, architecture, and engineering
that most relevant to Federal surface and aviation transportation funding.
1. Qualifications
I hold a Ph.D. in economics from the University of Texas at Austin. My graduate
curriculum included advanced courses in statistics, econometrics and labor econom-
ics, among others. Prior to joining NERA in 1995, I served as a Research Associate
Professor at the Lyndon B. Johnson School of Public Affairs at the University of
Texas at Austin and also headed my own economic consulting firm. While at NERA,
I conducted economic and statistical studies of discrimination for attorneys, corpora-
tions, governments and non-profit organizations. I also conducted research and ad-
vised clients on adverse impact and economic damage issues arising from con-
tracting activities, hiring, termination, performance assessment, compensation, and
promotion. I have extensive experience producing, processing, and analyzing large
and complex statistical data bases, including public sector contracting and pur-
chasing data, as well as with myriad socioeconomic and demographic datasets pro-
duced by the Census Bureau and other official statistical agencies.
Over the course of my career, I have conducted economic and statistical research
and assisted in litigation concerning the minority and female participation in public
contracting activities. From 2004 through 2018, I directed NERA’s national discrimi-
nation consulting practice. In that capacity, I served as the project director and
principal investigator for more than 40 studies of business discrimination, and prior
to that time as principal or co-principal investigator on approximately a dozen addi-
tional business discrimination studies. I have authored two peer-reviewed mono-
graphs and several articles and white papers on this and related subjects, including
Guidelines for Conducting a Disparity and Availability Study for the Federal DBE
Program, published in 2010 by the Transportation Research Board of the National
Academy of Sciences.
Between 2010 and 2013 I served as the principal economic and statistical expert
on behalf of the U.S. Department of Justice, testifying in four cases challenging Fed-
eral policies to promote participation by minority-owned and/or women-owned busi-
nesses in Federal contracting activities. These were:
• Kevcon, Inc. v. The United States (United States Court of Federal Claims), con-
cerning the Small Business Administration’s 8(a) minority business set-aside
program.2
• Geyer Signal, Inc. and Kevin Kissell v. Minnesota Department of Transportation,
et al. (United States District Court for the District of Minnesota), concerning
the USDOT Disadvantaged Business Enterprise Program.3
• Midwest Fence Corporation v. United States Department of Transportation, et al.
(United States District Court for the Northern District of Illinois, Eastern Divi-
sion), concerning the USDOT Disadvantaged Business Enterprise Program.4
• Rothe Development, Inc. v. Department of Defense and Small Business Adminis-
tration (United States District Court for the District of Columbia), concerning
the Small Business Administration 8(a) minority business set-aside program.5
I have been repeatedly qualified as an expert economic and statistical witness in
both Federal and state courts and have testified in these and related matters on
20 occasions. I have also testified before the U.S. Congress on these matters on five
previous occasions.
My current curriculum vitae is attached to this testimony. The source material
relied on in reaching my findings and conclusions are noted below in the body of
my testimony.
2. Discrimination and its Effects, Historically and Currently, Consistently Disadvan-
tages Minority- and Women-Owned Business Enterprises
As other researchers have noted, and as demonstrated in many of the studies, re-
ports, and other testimony submitted to Congress, minorities and women have been
historically and consistently disadvantaged by the effects of discrimination in busi-
2 Wainwright, Jon S. (2010).
3 Wainwright, Jon S. (2012).
4 Wainwright, Jon S. (2013b), (2013c).
5 Wainwright, Jon S. (2013a).
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ness enterprise.6 Despite progress in some areas, these disadvantages are still
present in business markets.7 As my testimony demonstrates, although severe dis-
parities persist between non-minority male owned firms and minority- and women-
owned firms, we are making progress thanks to programs like the Disadvantaged
Business Enterprise Program. Still, now is no time to reduce our efforts to eliminate
business discrimination and its effects. Indeed, much of the progress that has been
achieved is due to the effect that programs like the DBE program have had. The
evidence is overwhelming that, were we to eliminate or reduce these programs,
much greater disparities would very quickly occur. The best metaphor I can think
of is the person who takes blood pressure medicine. If we take that person’s blood
pressure while they are taking their medicine, their blood pressure will appear nor-
mal but that does not mean that any responsible doctor would argue that the person
should stop taking their blood pressure medicine. This is precisely why I and other
researchers in this area try to examine both the public sector contracting markets
where affirmative measures like the DBE program are found as well as the private
sector contracting markets where such programs are much more rare. This is also
why, although my testimony includes voluminous data from public sector sources
like disparity studies, I also include a great deal of information from Census sources
which examine markets that are largely unremediated by programs like the DBE
program.
African Americans are 13.3 percent of the general population, 12.6 percent of the
civilian labor force, and 12.2 percent of total employment. However, at last count,
African Americans owned only 9.5 percent of the nation’s businesses, and earned a
mere 1.26 percent of all business sales and receipts.8
Hispanics are 18.2 percent of the general population, 17.1 percent of the civilian
labor force, and 17.0 percent of total employment. However, at last count Hispanics
owned only 12.2 percent of the nation’s businesses, earned less than 4.0 percent of
all business sales and receipts.
American Indians and Alaska Natives are 1.3 percent of the general population,
but they are only 1.0 percent of the business population and earned just 0.32 per-
cent of business sales and receipts.
Asians and Pacific Islanders represent 6.1 percent of the general population, 6.2
percent of the civilian labor force, and 6.2 percent of total employment. While
Asians own 7.1 percent of the nation’s businesses, they earned only 5.9 percent of
business sales and receipts.
Women represent 50.9 percent of the general population, 46.9 percent of the civil-
ian labor force, and 46.9 percent of total employment. However, they are only 36.4
percent of the business population and earn only 11.9 percent of business sales and
receipts.
Even those minorities and women who manage against the odds to start their own
businesses must compete in a business enterprise system that has long been domi-
nated by non-minority male-owned firms.9 The advantages enjoyed by non-minority
males in this context are borne out in the statistics. In a groundbreaking pair of
studies of employer business closure rates, Professor Ying Lowrey documented that
existing African American-owned, Hispanic-owned, Asian and Pacific Islander-
owned, and women-owned businesses across a wide variety of industry groups suf-
fered substantially higher closure rates during the 2002–2006 period than did their
nonminority male counterparts.10 More recently, Professor Rob Fairlie has shown
that African American, Hispanic Asian, American Indian and Alaska Native, and
female small businesses closed at higher rates than their non-minority male coun-
terparts during the first month of widespread COVID–19 induced shelter-in-place
restrictions in April of this year.11
Even among larger firms, such as those with one or more paid employees, the dis-
parities between minorities and women, on the one hand, and non-minority males,
on the other, are stark. In 2017, for every dollar in sales and receipts earned by
6 See, e.g., U.S. Department of Commerce (2015); Lowrey (2010a); Lowrey (2010b); Marshall
(2002); Wainwright (2000).
7 See, generally, U.S. Small Business Administration (2010).
8 General population statistics are from the U.S. Census Bureau (2017a); civilian labor force
and total employment figures are from the Bureau of Labor Statistics (2018a, 2018b, 2018c);
business enterprise statistics are from the 2012 Survey of Business Owners, U.S. Census Bureau
(2018b). Note: Publicly owned companies have been excluded from all calculations in this report
that use Survey of Business Owners or Annual Business Survey statistics.
9 See, e.g., Wainwright (2000), pp. 17–22, and the studies cited therein.
10 Lowrey, Ying (2010a), pp. 20–21; Lowrey, Ying (2010b), p. 16. The comparison was between
non-publicly held establishments that were in business in 2002 but had closed by 2006 versus
all non-publicly held establishments in business in 2002.
11 Fairlie, Robert (2020). p. 16.
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non-minority male-owned employers, African American-owned employers earned 45
cents, Hispanic-owned employers earned 57 cents, Asian and Pacific Islander-owned
employers earned 63 cents, American Indians and Alaska Native-owned employers
earned 67 cents, and women-owned employers earned 61 cents.12
The overwhelming majority of businesses have less than 10 employees, and only
a small fraction have more than 500 employees. Minority- and women-owned firms
are over-represented in the former category and under-represented in the latter. For
the smallest firms in 2017 (the most recent data available), 78 percent of non-minor-
ity male-owned firms had less than 10 employees, compared to 82.1 percent of Afri-
can American-owned firms, 82.3 percent of Hispanic-owned firms, 81.2 percent of
Asian and Pacific Islander-owned firms, 82.2 percent of American Indian and Alaska
Native-owned firms, and 82.2 percent of women-owned firms.13 For the largest firms
in 2017, 0.21 percent of nonminority-owned male firms had 500 or more employees,
compared to 0.12 percent of African Americans, 0.1 percent of Hispanics, 0.07 per-
cent of Asians and Pacific Islanders, 0.11 percent of Native Americans, and 0.1 per-
cent of women.14
B. STUDIES CONDUCTED SINCE 2000 PROVIDE STRONG EVIDENCE OF DISPARITIES
AGAINST MINORITY- AND WOMEN-OWNED BUSINESSES
As mentioned above, between 2010 and 2013 I served as an expert witness on be-
half of the U.S. Department of Justice in its defense of two challenges to the SBA
8(a) Program and two challenges to the USDOT DBE Program. As part of this work,
I collected and reviewed every known study of M/WBE disparities published since
2000.
1. Data and Methods
Table 1 identifies 95 studies of minority and female business enterprise completed
between 2000 and 2012. These studies examined M/WBE participation in public con-
tracting and procurement for 127 different public entities and/or funding sources.
The studies span 32 different states that collectively account for over 80 percent of
the general population of the United States.15 Of the 95 studies, 21 were conducted
under my direction. Over the course of these studies, I personally examined and
analyzed tens of billions of dollars worth of public sector spending across tens of
thousands of contracts and subcontracts. The remaining 74 studies covered an even
larger number of public contracts and public dollars.
All of the disparity studies in Table 1 examined minority-owned business enter-
prises as well as non-minority women-owned business enterprises. Typically, M/
WBEs include businesses owned by African Americans, Hispanics, Asians and Pa-
cific Islanders, American Indians and Alaska Natives, and non-minority women.
A wide variety of government types are represented as well in these disparity
studies. Some studies encompassed the entire state (i.e., Indiana, Maryland, Min-
nesota, New York, Texas, and Virginia), others were performed for single state
agencies (i.e., Department of Transportation studies in Alaska, Arizona, California,
Colorado, Georgia, Hawaii, Idaho, Illinois, Kansas, Maryland, Minnesota, Missouri,
Montana, Nevada, North Carolina, Oklahoma, Oregon, Virginia, and Washington
and the Division of Capital Asset Management and the Housing Finance Agency in
Massachusetts), others were done for cities (i.e., Atlanta, Augusta, Austin, Balti-
more, Boston, Charlotte, Cincinnati, Columbia, Dayton, Denver, Durham, Fort
Worth, Houston, Kansas City, Memphis, Milwaukee, Minneapolis, Nashville, Phila-
delphia, Phoenix, Portland, San Antonio, St. Louis, St. Paul, Tallahassee, Tucson,
and Tulsa), others covered counties (i.e., Pima, AZ; Broward, FL; Leon, FL; Rich-
mond, GA; Wyandotte, KS; Durham, NC; Davidson, TN), and still more were for a
variety of special districts including schools, public utilities, housing authorities, air-
ports, and transit agencies.
All 95 studies identified included contracts and procurements for public works in
construction, and a large majority also included contracts in the construction-related
professional services (‘‘CRS’’) sector, which includes architecture, engineering, and
related services. Construction and CRS activities include the public works per-
12 U.S. Census Bureau (2020a). For employer firms, the most recent data are from the 2017
Annual Business Survey, released in May 2020.
13 U.S. Census Bureau (2018b, 2018c 2018d).
14 Ibid.
15 U.S. Census Bureau (2011e).
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formed by highway departments, transit agencies, and airports under USDOT juris-
diction.16
Many of the disparity studies in Table 1 encompass public contracting and pur-
chasing activities in other industry sectors as well. This reflects the fact that state
and local governments, and their prime contractors and vendors, purchase goods
and services from practically every major industry. In addition to construction and
CRS, these include agriculture, mining, utilities, transportation, wholesale trade, re-
tail trade, finance and insurance, real estate, professional and technical services, ad-
ministrative and support services, waste management services, educational services,
health care and social assistance services, food services, and others. NERA’s most
recent study for the State of Maryland, for example, encompassed 695 distinct in-
dustries.17
In addition to covering construction, CRS, and other industries, the 95 studies in
Table 1 span the country geographically, representing all four Census Regions and
all nine Census Divisions. In all, 32 states plus the District of Columbia are rep-
resented here, as well as 53 of this Committee’s 67 members.
As part of my work on behalf of USDOJ, I reviewed all of 95 studies identified
in Table 1. Typically, these studies include an Executive Summary, a review of case
law pertaining to M/WBEs, a review of the government’s purchasing and contracting
policies as they pertain to M/WBEs, a chapter estimating the availability of M/
WBEs, a chapter estimating the utilization of M/WBEs, a chapter comparing avail-
ability and utilization to assess disparities, and a chapter examining anecdotal evi-
dence of discrimination. Often, these disparity studies also included one or more
chapters examining evidence of disparities and discrimination in the wider market
area, surrounding a particular government’s jurisdiction. These are referred to as
‘‘private sector’’ or ‘‘economy-wide’’ analyses.
2. Findings
Each study is different. They were prepared by different consultants, for different
governments, in different parts of the country, with differing levels of resources.
They examined different periods of time and used a variety of methods for assessing
utilization, availability, and disparity, and for gathering anecdotal information.18
Nevertheless, the striking similarities among these studies strongly outweigh the
differences. Foremost among these is an almost universal finding that historical and
contemporary discrimination adversely impacts all different types of M/WBEs
throughout the United States, in the construction sector, the CRS sector, and in
other industry segments as well.
To begin to see this, Table 2 presents specific statistical findings from the studies
listed in Table 1. One primary function of a disparity study is to gather information
on a government entity’s prime contracting and subcontracting activity during the
time period being studied. Since the Federal DBE Program applies to both prime
contracting and subcontracting, I focused my review on the combined utilization of
M/WBEs as both prime contractors and subcontractors.19
I reviewed each study’s findings concerning:
• The percentage utilization of M/WBEs in construction spending,
• The percentage availability of M/WBEs for construction spending,
• The percentage utilization of M/WBEs in CRS spending, and
• The percentage availability of M/BEs for CRS spending.
Several appear more than once in Table 2 since they provided statistical evidence
in more than one relevant category. Columns (1) and (2) in Table 2 identify the state
and political subdivision for which each disparity study was performed. Columns (3)
and (6) present the utilization statistics for construction and CRS, respectively. Col-
16 Construction prime contractors and subcontractors also purchase a variety of supplies and
materials (e.g., steel, concrete, asphalt), as well as trucking services.
17 NERA Economic Consulting (2017), p. 45. However, public sector spending is not typically
distributed evenly among industries. In the State of Maryland’s case, 261 industries (38 percent)
accounted for 99 percent of all spending over the study period.
18 A detailed discussion of the differences in methods employed by different consultants is pro-
vided in Wainwright and Holt (2010), pp. 29–53.
19 Depending on how any given study’s statistics were presented, I had to carry out certain
additional calculations in order to present the information in Table 2 in a consistent manner.
For example, a study might show the total number of prime contract construction dollars accru-
ing to M/WBEs in one table, the total number of subcontract construction dollars accruing to
M/WBEs in another table, and the total number of construction dollars overall in yet another
table. Calculating overall M/WBE prime contract and subcontract utilization thereby required
adding the figure in the first table to the figure in the second table and dividing the sum by
the figure in the third table. These figures, in turn, might then be combined with availability
statistics from one or more tables in the study in question to form the relevant disparity index.
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umns (4) and (7) present the availability statistics for construction and CRS, respec-
tively. Columns (5) and (8) present the disparity indexes for construction and CRS,
respectively. Column (9) indicates the years covered by each study. Column (10) pro-
vides the page citations for the statistical data presented.
The disparity indexes presented in column (5) for construction and column (8) for
CRS are formed by dividing the M/WBE utilization percentage by the M/WBE avail-
ability percentage, and multiplying the result by 100. A disparity index of 100 or
more indicates that M/WBEs are being utilized at or above their market availability
level. A disparity index of less than 100 indicates that M/WBEs are being utilized
at or below their market availability level. A disparity index of 80 or lower is com-
monly taken as an indicator that discrimination is adversely affecting M/WBEs.20
The substantial majority of the disparity studies reviewed and presented in Table
2 identified large adverse disparities affecting M/WBEs in both construction and
CRS.21 There are 206 disparity indexes altogether—127 for the construction sector
and 79 for the CRS sector.
• In construction, 74 of 127 disparity indexes, or 58 percent, fall at or below 80;
and 91 of 127, or 72 percent, are less than 100.
• In CRS, 59 of 79 disparity indexes, or 75 percent, fall at or below 80; and 61
of 79, or 77 percent, are less than 100.
• Combining the results from both industry sectors, 133 of 206 disparity indexes,
or 65 percent, fall at or below 80; and 152 of 206, or 74 percent, are less than
100.
Notably, the general consistency of these results occurs despite these studies hav-
ing been undertaken by different consultants, using differing methods, at different
points in time, with different budgets, and for a wide variety of state and local gov-
ernment agencies in a wide variety of geographic locations. Perhaps most notably,
these disparities exist despite the fact that, in the overwhelming majority of studies
there was a strong, mature MBE or DBE program in place aimed at eliminating dis-
parities. In other words, these disparities are so powerful and so severe that even
strong efforts to level the playing field are simply not enough to eradicate them.
Eleven different consultants produced the studies in Table 2. However, just four
firms produced 75 percent of these studies: MGT of America, NERA Economic Con-
sulting, BBC Research & Consulting, and Mason Tillman Associates.
• Of the 34 construction disparity indexes from MGT of America, 20 (59 percent)
are less than or equal to 80 and 26 (76 percent) are less than or equal to 100.
Of the 15 CRS disparity indexes from MGT, 12 (80 percent) are less than or
equal to 80 and 12 (80 percent) are less than or equal to 100.
• Of the 24 construction disparity indexes from NERA Economic Consulting, 16
(67 percent) are less than or equal to 80 and 17 (71 percent) are less than or
equal to 100. Of the 20 CRS disparity indexes from NERA, 10 (50 percent) are
less than or equal to 80 and 11 (55 percent) are less than or equal to 100.
• Of the 23 construction disparity indexes from BBC Research & Consulting, 13
(57 percent) are less than or equal to 80 and 17 (74 percent) are less than or
equal to 100. Of the 20 CRS disparity indexes from BBC, 17 (85 percent) are
less than or equal to 80 and 17 (85 percent) are less than or equal to 100.
• Of the 17 construction disparity indexes from Mason Tillman Associates, 13 (76
percent) are less than or equal to 80 and 16 (94 percent) are less than or equal
to 100. Of the 12 CRS disparity indexes from Mason Tillman, 10 (83 percent)
are less than or equal to 80 and 10 (83 percent) are less than or equal to 100.
• Of the 29 construction disparity indexes from the balance of consulting firms
in Table 2, 12 (41 percent) are less than or equal to 80 and 15 (52 percent) are
less than or equal to 100. Of the 12 CRS disparity indexes from the balance
of consulting firms, 10 (83 percent) are less than or equal to 80 and 11 (92 per-
cent) are less than or equal to 100.
Some specific results in Table 2 are highlighted below:
• Of the 33 state DOT construction disparity indexes, 26 (79 percent) are less
than or equal to 80 and 29 (88 percent) are less than or equal to 100. These
include Alaska, Arizona, California, Colorado, Georgia, Hawaii, Idaho, Illinois,
Kansas, Minnesota, Missouri, Nevada, North Carolina, Oregon, Texas, Virginia,
and Washington.
20 Although not the same as statistical significance, the ‘‘four-fifths rule’’ says that a disparity
index of less than or equal to 80 (on a scale of zero to 100, zero being perfect disparity and
100 being perfect parity), because it is large, or ‘‘substantively’’ significant, indicates the pres-
ence of discrimination. See 29 C.F.R. § 1607.4(d).
21 In Table 2, disparity indexes of 80 or lower are highlighted in boldface type. Disparity in-
dexes above 80 but still less than 100 (which would indicate parity with non-M/WBEs) are high-
lighted in boldface italicized type.
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• Of the 24 state DOT CRS disparity indexes, 23 (96 percent) are less than or
equal to 80 and 23 (96 percent) are less than or equal to 100. These include
Arizona, California, Colorado, Georgia, Idaho, Illinois, Missouri, Montana, Ne-
vada, North Carolina, Oklahoma, Oregon, Virginia, and Washington. Only Ha-
waii was found to have consistently utilized M/WBEs at or above their esti-
mated availability in CRS.
• Of the 11 statewide (excluding DOTs) construction disparity indexes, 7 (64 per-
cent) are less than or equal to 80 and 10 (91 percent) are less than or equal
to 100. Of the 4 statewide (excluding DOTs) CRS disparity indexes, 3 (75 per-
cent) are less than or equal to 80 and 4 (100 percent) are less than or equal
to 100.
• Of the 41 city or county construction disparity indexes, 19 (46 percent) are less
than or equal to 80 and 25 (61 percent) are less than or equal to 100. Of the
22 city or county CRS disparity indexes, 13 (59 percent) are less than or equal
to 80 and 13 (59 percent) are less than or equal to 100.
• Of the 39 special district (e.g., transit agencies, airports, housing authorities,
school districts) construction disparity indexes, 23 (59 percent) are less than or
equal to 80 and 27 (69 percent) are less than or equal to 100. Of the 28 special
district CRS disparity indexes, 20 (71 percent) are less than or equal to 80 and
21 (75 percent) are less than or equal to 100.
Finally, in almost all of the studies presented, the statistical findings are accom-
panied by anecdotal evidence of discrimination against M/WBEs.22 Many of these
studies also include statistical evidence of disparities in the surrounding private sec-
tor—in minority and female business formation rates, business owner earnings, and
access to commercial loans and capital. This type of statistical evidence is especially
important since it helps explain why the large and adverse disparities observed for
M/WBEs can be attributed to discrimination rather than to other, non-discrimina-
tory factors.
3. Conclusions from the Disparity Study Data
According to my records, there are at least another 150 disparity studies that
have been completed since I finished my work for USDOJ in 2013. There is no doubt
in my mind that were I to conduct a comparable analysis on these latest studies,
I would find similar results—large and adverse disparities that continue to face M/
WBEs throughout the country. In the next two sections of my testimony, I examine
the most recent Census Bureau data with respect to M/WBEs.
Table 1. Selected Disparity and Availability Studies Performed in the United States Between
2000–2012
Type of Year
State Subdivision Author Study Completed
AK .... Department of Transportation and Public Facilities D. Wilson Consulting Group, LLC Disparity ..... 2007
AZ .... Arizona Department of Transportation ..................... MGT of America, Inc. .................... Disparity ..... 2009
AZ .... City of Phoenix ......................................................... MGT of America, Inc. .................... Disparity ..... 2005
AZ .... City of Tucson .......................................................... D. Wilson Consulting Group, LLC Disparity ..... 2008
AZ .... Pima County ............................................................. D. Wilson Consulting Group, LLC Disparity ..... 2008
CA ... Bay Area Rapid Transit (BART) ................................ Mason Tillman Associates, Ltd. ... Disparity ..... 2009
CA ... California Department of Transportation ................. BBC Research & Consulting ........ Disparity ..... 2007
CA ... Los Angeles County Metropolitan Transportation BBC Research & Consulting ........ Disparity ..... 2010
Authority.
CA ... Metrolink—Southern California Regional Rail Au- BBC Research & Consulting ........ Disparity ..... 2009
thority.
CA ... Orange County Transportation Authority .................. BBC Research & Consulting ........ Disparity ..... 2010
CA ... San Diego Association of Governments ................... BBC Research & Consulting ........ Disparity ..... 2010
CA ... San Diego Metropolitan Transit System ................... BBC Research & Consulting ........ Disparity ..... 2010
CA ... San Mateo County Transit District ........................... CRA International ......................... Disparity ..... 2008
CA ... Santa Clara Valley Transportation Authority ........... CRA International ......................... Disparity ..... 2007
CO ... City and County of Denver, Denver International NERA ............................................. Disparity ..... 2006
Airport.
CO ... Colorado Department of Transportation ................... MGT of America, Inc. .................... Disparity ..... 2001
CO ... Colorado Department of Transportation ................... D. Wilson Consulting Group, LLC Disparity ..... 2009
CT .... Metropolitan District Commission ............................ M3C ............................................... Disparity ..... 2009
22 See also, e.g., U.S. Small Business Administration (2010), Aparicio (2009), Asian American
Justice Center (2008), Lau (2009), Quon (2008), U.S. Congress (2007), (2008), (2009a), (2009b),
and (2009c).
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Table 1. Selected Disparity and Availability Studies Performed in the United States Between
2000–2012—Continued
Type of Year
State Subdivision Author Study Completed
DC ... Washington Suburban Sanitary Commission ........... Mason Tillman Associates, Ltd. ... Disparity ..... 2011
FL .... Broward County ........................................................ MGT of America, Inc. .................... Disparity ..... 2001
FL .... Broward County ........................................................ NERA ............................................. Disparity ..... 2010
FL .... City of Tallahassee ................................................... MGT of America, Inc. .................... Disparity ..... 2004
FL .... Leon County .............................................................. MGT of America, Inc. .................... Disparity ..... 2009
FL .... School District of Hillsborough County .................... Mason Tillman Associates, Ltd. ... Disparity ..... 2007
GA ... City of Atlanta .......................................................... Griffin & Strong ............................ Disparity ..... 2006
GA ... Consolidated Government of Augusta-Richmond NERA ............................................. Disparity ..... 2009
County.
GA ... Georgia Department of Transportation .................... Boston Research Group, Inc. ........ Disparity ..... 2005
GA ... Georgia Department of Transportation .................... BBC Research & Consulting ........ Disparity ..... 2012
HI .... Hawai’i Department of Transportation ..................... NERA ............................................. Disparity ..... 2010
ID .... Idaho Transportation Department ............................ BBC Research & Consulting ........ Disparity ..... 2007
IL ..... Illinois Department of Transportation ...................... Mason Tillman Associates, Ltd. ... Disparity ..... 2011
IL ..... Illinois State Toll Highway Authority ........................ Mason Tillman Associates, Ltd. ... Disparity ..... 2011
IL ..... Illinois State Toll Highway Authority ........................ NERA ............................................. Disparity ..... 2006
IN .... Indiana Department of Administration, Indiana BBC Research & Consulting ........ Disparity ..... 2010
DOT, Ball State Univ., Indiana State Univ., Indiana
Univ., Ivy Tech Comm. College, Purdue Univ., Univ.
of Southern Indiana, Vincennes Univ..
KS .... Kansas Department of Transportation ..................... MGT of America, Inc. .................... Availability 2003
KS; ... City of Kansas City; Wyandotte County, KS; Kansas Mason Tillman Associates, Ltd. ... Disparity ..... 2006
MO City Area Transit Authority; Kansas City School
District, MO.
MD ... City of Baltimore ...................................................... MGT of America, Inc. .................... Disparity ..... 2000
MD ... City of Baltimore ...................................................... NERA ............................................. Disparity ..... 2007
MD ... State of Maryland ..................................................... NERA ............................................. Disparity ..... 2006
MD ... State of Maryland ..................................................... NERA ............................................. Disparity ..... 2011
MA ... City of Boston ........................................................... Mason Tillman Associates, Ltd. ... Disparity ..... 2003
MA ... Division of Capital Asset Management ................... NERA ............................................. Disparity ..... 2006
MA ... Massachusetts Housing Finance Agency ................. NERA ............................................. Disparity ..... 2006
MN ... City of Minneapolis .................................................. NERA ............................................. Disparity ..... 2010
MN ... City of St. Paul and the St. Paul Housing Authority MGT of America, Inc. .................... Disparity ..... 2008
MN ... Metropolitan Airports Commission ........................... MGT of America, Inc. .................... Disparity ..... 2009
MN ... Metropolitan Council ................................................ MGT of America, Inc. .................... Disparity ..... 2009
MN ... Minnesota Department of Administration ................ MGT of America, Inc. .................... Disparity ..... 2009
MN ... Minnesota Department of Transportation ................ NERA ............................................. Availability 2005
MN ... Minnesota Department of Transportation ................ MGT of America, Inc. .................... Disparity ..... 2009
MO ... Bi-State Development Agency (St. Louis Metro) ...... NERA ............................................. Disparity ..... 2005
MO ... City of St. Louis, The St. Louis Housing Authority, MGT of America, Inc. .................... Disparity ..... 2001
The Metropolitan St. Louis Sewer District.
MO ... Missouri Department of Transportation ................... NERA ............................................. Disparity ..... 2012
MT ... Montana Department of Transportation ................... D. Wilson Consulting Group, LLC Disparity ..... 2009
NV ... Nevada Department of Transportation ..................... BBC Research & Consulting ........ Disparity ..... 2007
NY ... State of New York .................................................... NERA ............................................. Disparity ..... 2010
NC ... City of Charlotte ....................................................... MGT of America, Inc. .................... Disparity ..... 2011
NC ... City of Durham and Durham County ....................... Mason Tillman Associates, Ltd. ... Disparity ..... 2000
NC ... Durham County ......................................................... Griffin & Strong ............................ Disparity ..... 2007
NC ... North Carolina Department of Transportation ......... MGT of America, Inc. .................... Disparity ..... 2004
NC ... North Carolina Department of Transportation ......... Euquant ........................................ Disparity ..... 2009
OH ... City of Cincinnati ..................................................... Griffin & Strong ............................ Disparity ..... 2002
OH ... City of Dayton ........................................................... MGT of America, Inc. .................... Disparity ..... 2008
OH ... Northeast Ohio Regional Sewer District ................... NERA ............................................. Disparity ..... 2010
OK ... City of Tulsa ............................................................. MGT of America, Inc. .................... Disparity ..... 2010
OK ... Oklahoma Department of Transportation ................. BBC Research & Consulting ........ Disparity ..... 2010
OR ... City of Portland ........................................................ BBC Research & Consulting ........ Disparity ..... 2011
OR ... Oregon Department of Transportation ..................... MGT of America, Inc. .................... Disparity ..... 2007
OR ... Port of Portland ........................................................ MGT of America, Inc. .................... Disparity ..... 2009
OR ... Portland Development Commission .......................... BBC Research & Consulting ........ Disparity ..... 2011
PA .... City of Philadelphia .................................................. Econsult Corporation .................... Disparity ..... 2007
PA .... City of Philadelphia .................................................. Econsult Corporation .................... Disparity ..... 2008
PA .... City of Philadelphia .................................................. Econsult Corporation .................... Disparity ..... 2009
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Table 1. Selected Disparity and Availability Studies Performed in the United States Between
2000–2012—Continued
Type of Year
State Subdivision Author Study Completed
PA .... City of Philadelphia .................................................. Econsult Corporation .................... Disparity ..... 2010
PA .... City of Philadelphia .................................................. Econsult Corporation .................... Disparity ..... 2011
PA .... City of Philadelphia .................................................. Econsult Corporation .................... Disparity ..... 2012
SC ... City of Columbia ...................................................... MGT of America, Inc. .................... Disparity ..... 2006
TN .... City of Memphis ....................................................... Griffin & Strong ............................ Disparity ..... 2010
TN .... Consolidated Government of Nashville and David- Griffin & Strong ............................ Disparity ..... 2004
son County.
TN .... Memphis International Airport ................................. NERA ............................................. Disparity ..... 2008
TN .... Nashville International Airport ................................. Griffin & Strong ............................ Disparity ..... 2007
TX .... City of Austin ........................................................... NERA ............................................. Disparity ..... 2008
TX .... City of Fort Worth; City of Arlington; DFW Airport; Mason Tillman Associates, Ltd. ... Disparity ..... 2010
Fort Worth Independent School District; Fort Worth
Transportation Authority; North Texas Tollway Au-
thority [North Central Texas Council of Govern-
ments].
TX .... City of Houston ......................................................... NERA ............................................. Disparity ..... 2012
TX .... City of San Antonio, Alamo Regional Mobility Au- MGT of America, Inc. .................... Disparity ..... 2009
thority, Brooks Development Authority, CPS Energy,
Edwards Aquifer Authority, Port Authority of San
Antonio, San Antonio Housing Authority, San Anto-
nio Water System, University Health System.
TX .... Dallas Area Rapid Transit Authority (DART) ............ Mason Tillman Associates, Ltd. ... Disparity ..... 2003
TX .... State of Texas .......................................................... Mason Tillman Associates, Ltd. ... Disparity ..... 2007
TX .... State of Texas .......................................................... MGT of America, Inc. .................... Disparity ..... 2010
UT .... Salt Lake City International Airport ......................... NERA ............................................. Disparity ..... 2009
VA .... Commonwealth of Virginia ....................................... MGT of America, Inc. .................... Disparity ..... 2004
VA .... Commonwealth of Virginia ....................................... MGT of America, Inc. .................... Disparity ..... 2010
VA .... Virginia DOT ............................................................. MGT of America, Inc. .................... Disparity ..... 2004
WA ... Washington Department of Transportation .............. NERA ............................................. Availability 2005
WI .... City of Milwaukee ..................................................... Mason Tillman Associates, Ltd. ... Disparity ..... 2007
WI .... City of Milwaukee ..................................................... D. Wilson Consulting Group, LLC Disparity ..... 2010
Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
AK ... Department of Transportation 10.52 14.26 73.73 2002- 4-9,
and Public Facilities. 2006 4-11,
5-10,
5-13
AZ ... Arizona Department of Transpor- 7.03 15.61 45.03 5.39 27.07 19.90 2002- 4-47
tation. 2007
AZ ... City of Phoenix ............................ 11.37 21.48 52.94 2000- 4-29,
2004 4-33
AZ ... City of Tucson ............................. 24.55 5.76 426.21 2002- 4-9,
2006 4-10,
5-10,
5-19
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Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012—Continued
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
AZ ... Pima County ................................ 19.51 9.43 206.83 19.25 25.10 76.71 2002- 4-9,
2006 4-10,
5-13,
5-16,
5-28,
5-32
CA ... Bay Area Rapid Transit (BART) .. 19.34 34.42 56.20 2002- 4-8,
2007 5-5,
7-20
CA ... California Department of Trans- 14.34 17.00 84.36 18.90 25.50 74.11 2002- Figs.
portation (federal funds). 2006 E-26, 29
CA ... California Department of Trans- 11.41 18.70 61.00 12.04 28.20 42.68 2002- Figs.
portation (state funds). 2006 E-69, 70
CA ... Los Angeles County Metropolitan 15.01 13.70 109.54 14.44 29.65 48.69 2003- E-42,
Transportation Authority (federal 2007 E-20,
funds). E-21
CA ... Los Angeles County Metropolitan 12.20 20.80 58.65 17.81 28.80 61.84 2003- E-13,
Transportation Authority (local 2007 E-22
funds).
CA ... Metrolink—Southern California 10.71 16.00 66.97 62.54 24.58 254.40 2003- E-42,
Regional Rail Authority (federal 2007 E-20,
funds). E-21
CA ... Metrolink—Southern California 8.60 30.00 28.65 24.73 40.40 61.22 2003- E-13,
Regional Rail Authority (local 2007 E-22
funds).
CA ... Orange County Transportation 36.77 26.70 137.70 13.42 23.77 56.47 2003- E-42,
Authority (federal funds). 2007 E-20,
E-21
CA ... Orange County Transportation 52.24 30.00 174.13 24.97 31.90 78.27 2003- E-13,
Authority (local funds). 2007 E-22
CA ... San Diego Association of Govern- 8.49 23.60 35.97 27.59 23.54 117.22 2003- E-42,
ments (federal funds). 2007 E-20,
E-21
CA ... San Diego Association of Govern- 0.45 22.50 1.99 18.20 27.70 65.69 2003- E-13,
ments (local funds). 2007 E-22
CA ... San Diego Metropolitan Transit 27.66 33.20 83.30 19.75 26.56 74.37 2003- E-42,
System (federal funds). 2007 E-20,
E-21
CA ... San Diego Metropolitan Transit 26.75 36.90 72.49 0.00 32.90 0.00 2003- E-13,
System (local funds). 2007 E-22
CA ... San Mateo County Transit Dis- 5.56 21.40 26.00 2002 26, 104
trict.
CA ... Santa Clara Valley Transpor- 17.10 21.40 79.88 2001- 28, 104,
tation Authority. 2006 112
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Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012—Continued
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
CO .. City and County of Denver, Den- 12.86 21.92 58.67 25.41 14.97 169.74 2000- 190
ver International Airport. 2005
CO .. Colorado Department of Trans- 10.56 20.21 52.25 4.69 24.07 19.48 1996- 3-20
portation. 2000
CO .. Colorado Department of Trans- 16.58 23.17 71.58 21.21 41.37 51.28 2002- 4-5,
portation. 2007 4-6,
4-7,
5-8,
5-10,
6-6,
6-7
CT ... Metropolitan District Commission 30.68 19.66 156.07 8.35 18.70 44.64 2005- V-112,
2008 V-114,
V-116,
V-117,
V-119,
V-121,
V-123,
V-125
DC .. Washington Suburban Sanitary 29.57 68.38 43.24 31.49 61.12 51.52 2003- 1-15,
Commission. 2009 1-17,
2-5,
2-7,
4-21,
4-23,
4-36,
4-38
FL ... Broward County ........................... 35.70 40.57 87.99 16.04 44.95 35.68 1991- 4-18,
1999 4-21,
4-28,
4-31,
4-33,
4-37
FL ... Broward County ........................... 28.62 24.10 118.76 26.86 25.87 103.83 2005- 284
2009
FL ... City of Tallahassee ..................... 28.50 34.03 83.74 1996- 4-13,
2000 4-17,
4-19
FL ... Leon County ................................. 19.56 11.92 164.04 2004- 4-10,
2008 4-12,
4-13
FL ... School District of Hillsborough 30.49 37.58 81.12 24.69 42.99 57.45 2001- 2-5,
County. 2004 2-7,
3-4,
3-6,
5-21,
5-23,
5-32,
5-34
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Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012—Continued
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
GA ... City of Atlanta ............................. 34.02 57.63 59.04 35.03 56.30 62.21 2001- Vol. I,
2005 19, 21,
22, 30,
46, 59,
62
GA ... City of Atlanta (Airport, local 59.17 57.63 102.66 2001- Vol. I,
dollars). 2005 19, 70,
73, 80
GA ... City of Atlanta (Airport, federal 26.30 57.63 45.63 2001- Vol. I,
dollars). 2005 19, 83,
86
GA ... City of Atlanta (Watershed Man- 23.72 57.63 41.16 2001- Vol. I,
agement). 2005 19, 21,
22, 88,
91, 95
GA ... Consolidated Government of Au- 5.91 32.37 18.26 28.65 44.93 63.77 2003- 225
gusta-Richmond County. 2007
GA ... Georgia Department of Transpor- 8.46 11.03 76.67 1999- 111,
tation. 2004 119,
123,
130
GA ... Georgia Department of Transpor- 13.23 21.50 61.52 9.31 24.40 38.17 2009- K-6,
tation (federal dollars). 2011 K-9
GA ... Georgia Department of Transpor- 4.81 25.50 18.87 12.26 26.50 46.27 2009- K-7,
tation (state dollars). 2011 K-10
HI .... Hawai’i Department of Transpor- 32.17 54.78 58.70 62.01 51.79 119.73 2003- 331
tation. 2008
ID .... Idaho Transportation Department 14.36 16.90 84.95 6.79 12.90 52.63 2002- Figs.
2006 E-11, 20
IL .... Illinois Department of Transpor- 11.00 27.33 40.25 21.22 29.82 71.18 2006- 4-10,
tation. 2008 4-11,
5-3,
5-4,
7-18,
7-19,
7-21,
7-22
IL .... Illinois State Toll Highway Au- 11.43 19.56 58.44 23.58 19.03 123.91 2000- 49, 50,
thority. 2005 61, 63
IL .... Illinois State Toll Highway Au- 11.38 39.39 28.89 16.42 41.02 40.04 2006- 4-8,
thority. 2009 4-10,
5-4,
5-6,
7-15,
7-17,
7-20,
7-22
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Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012—Continued
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
IN .... State of Indiana (INDOT and 10.03 10.90 92.03 2006- O-2
INDOA). 2009
IN .... State of Indiana (Higher Educ.) 10.69 15.10 70.79 2006- M-2
2009
KS; .. City of Kansas City, KS ............... 18.34 25.31 72.44 15.34 36.21 42.37 2002- 3-5,
MO 2004 3-7,
4-4,
4-6,
6-21,
6-23,
6-30,
6-32
KS; .. Kansas City School District, MO 34.20 25.60 133.58 2002- 3-5,
MO 2004 4-4,
6-21,
6-28
KS ... Kansas Department of Transpor- 10.31 13.75 75.01 2000- 2-10,
tation. 2001 2-12,
3-2,
3-3
MD .. City of Baltimore ......................... 23.02 36.63 62.84 30.14 21.60 139.51 1990- 4-20,
1998 4-26,
4-29,
4-31,
4-33,
4-34
MD .. City of Baltimore ......................... 25.85 22.88 112.98 31.88 27.32 116.69 2000- 217
2005
MD .. State of Maryland ....................... 15.81 24.00 65.88 24.52 28.46 86.16 2000- 206
2004
MD .. State of Maryland ....................... 23.45 30.26 77.51 22.31 41.34 53.97 2005- 328
2009
MA .. City of Boston ............................. 23.76 24.23 98.08 10.26 47.02 21.83 1999- 1-5,
2001 1-7,
2-4,
2-6,
4-22,
4-24,
4-29,
4-31
MA .. Division of Capital Asset Man- 19.44 10.39 187.10 33.79 17.86 189.19 1999- 199
agement. 2004
MA .. Massachusetts Housing Finance 25.80 10.86 237.57 2000- 203
Agency. 2004
MN .. City of Minneapolis ..................... 7.57 19.54 38.73 13.65 19.08 71.51 2003- 234
2007
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Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012—Continued
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
MN .. City of St. Paul ........................... 15.23 15.05 101.17 2002- 4-21,
2006 4-22,
4-28,
4-29
MN .. St. Paul Housing Authority .......... 6.33 10.43 60.67 2002- 6-6,
2006 6-12,
6-18
MN .. Metropolitan Airports Commis- 2.05 11.28 18.21 2004- 3-8,
sion. 2007 3-10,
3-12,
3-13
MN .. Metropolitan Council ................... 0.16 3.63 4.41 2003- 3-8,
2007 3-10,
3-13
MN .. Minnesota Department of Admin- 3.42 2.74 124.97 2002- 3-8,
istration. 2007 3-10,
3-14
MN .. Minnesota Department of Trans- 5.55 15.18 36.56 2000- 69,
portation (federal funds). 2004 72
MN .. Minnesota Department of Trans- 2.92 15.18 19.24 2000- 69,
portation (state funds). 2004 75
MN .. Minnesota Department of Trans- 2.40 3.52 68.06 2002- 3-7,
portation. 2007 3-9,
3-12
MO .. Bi-State Development Agency (St. 21.16 20.14 105.06 18.98 15.29 124.13 1997- 167
Louis Metro). 2003
MO .. City of St. Louis .......................... 19.06 15.89 119.97 17.44 27.46 63.52 1995- Ex. pp.
1999 2, 4, 7,
9, 11,
12
MO .. The Metropolitan St. Louis Sewer 13.91 15.89 87.54 15.42 27.46 56.16 1995- Ex. pp.
District. 1999 84, 86,
89, 91,
93, 94
MO .. Missouri Department of Trans- 13.35 20.37 65.56 13.05 21.52 60.66 2005- 220
portation (federal funds). 2009
MO .. Missouri Department of Trans- 6.49 20.19 32.16 12.28 21.48 57.16 2005- 224
portation (state funds). 2009
MT .. Montana Department of Trans- 11.32 2.01 563.36 11.68 16.09 72.58 2000- 4-6,
portation. 2006 4-8,
5-18,
5-29,
5-53,
5-64
NV ... Nevada Department of Transpor- 8.70 15.60 55.79 3.03 7.80 38.89 2000- Figs.
tation (federal funds). 2006 E-11, 20
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Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012—Continued
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
NV ... Nevada Department of Transpor- 8.34 12.90 64.65 3.05 10.80 28.26 2000- Figs.
tation (state funds). 2006 E-38, 47
NY ... State of New York ....................... 12.39 22.74 54.48 19.43 24.53 79.21 2004- 292
2008
NC .. City of Charlotte .......................... 19.28 35.74 53.95 13.66 18.55 73.66 2005- 3-11,
2010 3-13,
3-15,
3-16,
3-19,
3-20,
3-23
NC .. City of Durham and Durham 12.79 27.38 46.72 1996- 3-4,
County. 1999 3-6,
5-9,
5-11
NC .. Durham County ........................... 6.24 72.85 8.57 20.23 27.30 74.13 2001- 76, 78,
2005 82, 85,
94, 118
NC .. North Carolina Department of 13.41 12.70 105.59 1999- 4-16,
Transportation (divisionally-let). 2003 4-26,
4-49,
4-72,
4-90
NC .. North Carolina Department of 9.83 29.92 32.87 14.41 20.00 72.06 1999- 4-52,
Transportation (centrally-let, 2003 4-56,
state funds). 4-70,
4-76,
4-80,
4-90
NC .. North Carolina Department of 11.43 29.92 38.22 4.86 20.00 24.30 1999- 4-62,
Transportation (centrally-let, fed- 2003 4-66,
eral funds). 4-70,
4-84,
4-88,
4-90
NC .. North Carolina Department of 8.65 24.98 34.62 2004- 89, 90,
Transportation. 2008 138
OH .. City of Cincinnati ........................ 16.41 18.33 89.51 12.20 22.48 54.28 1995- 44, 45,
2001 49, 50
OH .. City of Dayton ............................. 4.73 23.91 19.80 2001- 4-11,
2006 4-17,
4-19,
4-20,
4-24
OH .. Northeast Ohio Regional Sewer 24.44 22.31 109.55 23.78 22.03 107.94 2004- 263
District. 2008
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Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012—Continued
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
OK ... City of Tulsa ................................ 4.72 20.77 22.73 24.70 22.51 109.71 2002- 4-8,
2008 4-13,
4-14,
4-15,
4-20,
4-22,
4-23
OK ... Oklahoma Department of Trans- 19.47 12.40 156.99 3.96 19.10 20.73 2004- K-6,
portation (federal funds). 2009 K-9
OK ... Oklahoma Department of Trans- 19.82 15.40 128.70 5.00 19.90 25.13 2004- K-7,
portation (state funds). 2009 K-10
OR .. City of Portland ........................... 7.49 5.10 146.85 34.98 14.60 239.62 2004- L-5,
2009 M-2
OR .. Oregon Department of Transpor- 19.07 27.55 69.20 3.84 46.31 8.30 2000- 4-12,
tation. 2007 4-21,
4-25,
4-111,
4-120,
4-123,
4-124
OR .. Port of Portland ........................... 18.59 15.16 122.66 9.94 27.97 35.53 2002- 4-11,
2007 4-13,
4-15,
4-19
OR .. Portland Development Commis- 9.29 12.37 75.06 2004- L-2,
sion. 2009 L-5
PA ... City of Philadelphia .................... 12.90 10.80 119.44 2006 17, 21
PA ... City of Philadelphia .................... 13.80 10.80 127.78 2007 36, 51
PA ... City of Philadelphia .................... 12.70 10.80 117.59 2008 vi, 45
PA ... City of Philadelphia .................... 9.30 10.80 86.11 2009 viii, 41
PA ... City of Philadelphia .................... 17.40 14.90 116.78 2010 vi, vii
PA ... City of Philadelphia .................... 13.30 11.40 116.67 2011 v, vii
SC ... City of Columbia ......................... 3.42 19.03 17.96 18.15 17.14 105.90 2002- 4-10,
2005 4-15,
4-16,
4-17,
4-24,
4-26
TN ... City of Memphis .......................... 18.77 18.84 99.62 2002- 112,
2007 116,
129
TN ... Consolidated Government of 0.37 6.25 5.90 0.04 2.39 1.63 1999- 57, 65,
Nashville and Davidson County 2003 66, 68,
(Metro Purchasing). 69
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Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012—Continued
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
TN ... Consolidated Government of 0.02 4.27 0.40 3.30 7.24 45.58 1999- 58, 98,
Nashville and Davidson County 2003 99, 100,
(Nashville Public Schools). 102
TN ... Consolidated Government of 12.70 12.70 100.00 0.20 7.97 2.50 1999- 60, 76,
Nashville and Davidson County 2003 77, 79
(Metro Nashville Airport).
TN ... Consolidated Government of 20.70 16.56 125.03 29.33 10.41 281.71 1999- 61, 85,
Nashville and Davidson County 2003 86, 88,
(Metro Development and Housing 89
Authority).
TN ... Memphis International Airport .... 18.69 27.99 66.77 13.88 34.32 40.44 1999- 229
2005
TN ... Nashville International Airport .... 9.81 9.68 101.37 7.53 8.87 84.84 2003- 36, 38,
2006 39, 40,
47, 49
TX ... City of Austin .............................. 29.83 27.54 108.32 39.39 31.79 123.91 2002- 206
2006
TX ... City of Arlington .......................... 10.94 66.58 16.43 13.11 54.03 24.27 2002- 2-9,
2007 2-11,
3-5,
3-7,
3-9,
5-24,
5-26,
5-33,
5-35,
5-37
TX ... City of Fort Worth ........................ 38.41 60.28 63.72 60.81 54.05 112.51 2002- 2-9,
2007 2-11,
3-5,
3-7,
5-26,
5-28,
5-37,
5-39
TX ... DFW Airport ................................. 50.72 62.82 80.74 57.53 53.80 106.93 2002- 2-9,
2007 2-11,
3-5,
3-7,
5-26,
5-28,
5-37,
5-39
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Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012—Continued
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
TX ... Fort Worth Independent School 27.75 66.06 42.01 28.91 53.89 53.64 2002- 2-9,
District. 2007 2-11,
3-4,
3-6,
5-26,
5-28,
5-37,
5-39
TX ... North Texas Tollway Authority ..... 18.60 58.34 31.88 14.75 53.56 27.54 2003- 2-9,
2007 2-11,
3-4,
3-6,
5-26,
5-28,
5-37,
5-39
TX ... City of Houston ........................... 29.87 34.74 85.97 2005- 191
2010
TX ... City of San Antonio ..................... 35.19 28.14 125.09 2004- 3-9,
2007 3-15,
3-16,
3-17
TX ... Dallas Area Rapid Transit Au- 31.44 68.38 45.98 1996- 3-5,
thority (DART). 2001 4-5,
4-7,
6-22,
6-29,
6-31
TX ... State of Texas ............................. 13.71 51.57 26.58 18.27 55.74 32.79 2002- 3-8,
2005 3-10,
4-6,
4-12,
6-21,
6-23,
6-37,
6-39
TX ... State of Texas (TxDOT) ................ 7.07 10.14 69.67 2006- 4-10,
2008 4-19,
5-11
TX ... State of Texas (State Agencies) 24.04 22.10 108.78 2006- 4-10,
2008 4-20,
4-21,
5-11
TX ... State of Texas (Universities) ....... 21.66 22.10 98.01 2006- 4-10,
2008 4-20,
4-21,
5-11
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Table 2. M/WBE Utilization, Availability, and Disparity: Selected Studies Performed in the U.S.
Between 2000–2012—Continued
Page
State Subdivision U-CON A-CON D-CON U-CRS A-CRS D-CRS Years Spec.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (11)
TX ... State of Texas (Medical Institu- 21.95 22.10 99.29 2006- 4-10,
tions). 2008 4-20,
4-21,
5-11
UT ... Salt Lake City International Air- 5.32 17.03 31.24 0.79 18.25 4.33 2001- 258
port. 2006
VA ... Commonwealth of Virginia .......... 3.39 15.55 21.78 2006- 4-10,
2009 4-12,
4-20,
4-26
VA ... Commonwealth of Virginia .......... 1.35 14.66 9.19 1998- 4-16,
2002 4-23,
4-27,
4-32
VA ... Virginia DOT (federal funds) ....... 6.59 10.26 64.21 9.53 15.89 59.99 1998- 11, 15,
2002 18, 22,
26, 29
VA ... Virginia DOT (state funds) .......... 8.52 10.26 82.99 5.41 15.89 34.08 1998- 34, 38,
2002 41, 45,
49, 52
WA .. Washington Department of 14.32 19.59 73.10 10.44 14.88 70.16 1999- 63, 66,
Transportation (federal funds). 2003 72
WA .. Washington Department of 2.97 19.59 15.16 10.66 14.88 71.64 1999- 63, 69,
Transportation (state funds). 2003 75
WI ... City of Milwaukee ........................ 18.94 40.91 46.29 2005 5-11,
6-5,
6-26
WI ... City of Milwaukee ........................ 31.21 13.77 226.74 2005- 4-7,
2008 4-9,
5-2,
5-7
Note: Disparity indexes of 80 or lower are highlighted in boldface type. Disparity indexes above 80 but lower than 100 are highlighted in
boldface italic type.
C. THERE IS STRONG EVIDENCE OF DISPARITIES BETWEEN UTILIZATION AND
AVAILABILITY IN AGGREGATE U.S. BUSINESS ENTERPRISE ACTIVITY
A key rationale for the advent of public sector policies such as the USDOT DBE
Program was the Federal Government’s desire to prevent its own passive participa-
tion in private sector discrimination in business enterprise activity.23 Therefore, it
is important to examine the best available evidence regarding how minorities and
women fare in the economy as a whole with respect to business enterprise activity.
In order to do this, I present evidence from the U.S. Census Bureau’s past and
present data collection efforts dedicated to M/WBEs.
The Survey of Business Owners and Self-Employed Persons (SBO) collected data
on the number, sales, employment, and payrolls of businesses owned by minorities,
women, and non-minority males. This survey was conducted every 5 years from
23 City of Richmond v. J. A. Croson Company, 488 U.S. 469, at 492 (‘‘Thus, if the city could
show that it had essentially become a ’passive participant’ in a system of racial exclusion prac-
ticed by elements of the local construction industry, we think it clear that the city could take
affirmative steps to dismantle such a system.’’).
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1972 to 2012 as part of the Economic Census program. Data from the 2012 SBO,
the most recent available, were released in December 2015. In mid-2018, the Census
Bureau announced that the SBO would be discontinued and only partially replaced
with a new survey called the Annual Business Survey (ABS).24 Unfortunately, the
ABS is restricted to firms with paid employees only, as opposed to the SBO that
also included nonemployer firms.25 Data from the 2017 ABS, the most recent avail-
able, were released in May 2020.26 The SBO and ABS cover women and five groups
of minorities: (1) African Americans, (2) Hispanics, (3) Asians, (4) Native Hawaiians
and Other Pacific Islanders, and (5) American Indians and Alaskan Natives. Com-
parative information for non-minority male-owned firms is also included.27
The SBO and ABS contain a wealth of information on the character of minority
and female business enterprise in the U.S. as a whole as well as in individual states
and sub-state divisions.28 In the remainder of this section, I present national evi-
dence from the 2012 SBO and the 2017 ABS for the economy as whole, as well as
for the construction and architecture/engineering industries that are the main bene-
ficiaries of Federal surface and aviation transportation funding.
1. Results from the 2012 Survey of Business Owners
a. Economy-Wide Results
I begin with the 2012 SBO—the most recent and last data from this important
survey. Table 3 contains data for the U.S. as a whole and the economy-wide (i.e.
all industries combined). Panel A in this table summarizes the SBO results for each
race and/or sex grouping. For example, Panel A shows a total of 27.18 million firms
in the U.S. in 2012 (column 1) with overall sales and receipts of $11.964 trillion (col-
umn 2). Of these 27.18 million firms, 5.14 million had one or more employees (col-
umn 3) and these 5.14 million firms had overall sales and receipts of $10.965 trillion
(column 4). Column (5) shows a total of 56.059 million employees on the payroll of
these 5.14 million firms and a total annual payroll expense of $2.096 trillion (col-
umn 6).
The remaining rows in Panel A provide comparable statistics for nonminority
male-owned, women-owned, and minority-owned firms. For example, Table 3 shows
that there were 2.6 million African American-owned firms counted in the SBO, and
that these 2.6 million firms registered $150.2 billion in sales and receipts. It also
shows that 109,137 of these African American-owned firms had one or more employ-
ees, and that they employed a total of 975,052 workers with an annual payroll total
of $27.69 billion.
Panel B in Table 3 converts the figures in Panel A to percentage distributions
within each column. For example, Column (1) in Panel B of Table 3 shows that Afri-
can American-owned firms were 9.51 percent of all firms in the U.S. and women-
owned firms were 36.35 percent. Additionally, 12.16 percent of firms were Hispanic-
owned, 7.06 percent were Asian-owned, 1.0 percent were American Indian- and
Alaska Native-owned, and 0.20 percent were Native Hawaiian- and Other Pacific Is-
lander-owned.
Column (2) in Panel B provides the same percentage distribution for overall sales
and receipts. Table 3, for example, shows that nonminority males owned 45.18 per-
cent of all firms and earned 73.45 percent of all sales and receipts. In contrast:
• Although African Americans owned 9.51 percent of all firms in the U.S. in 2012,
they earned only 1.26 percent of all sales and receipts.
• Although Hispanics owned 12.16 percent of all firms, they earned only 3.96 per-
cent, of all sales and receipts.
• Although Asians owned 7.06 percent of all firms, they earned only 5.85 percent,
of all sales and receipts.
• Although American Indians and Alaska Natives owned 1.0 percent of all firms,
they earned only 0.32 percent of all sales and receipts.
• Although Native Hawaiians and Other Pacific Islanders owned 0.20 percent of
all firms, they earned only 0.07 percent of all sales and receipts.
24 U.S. Census Bureau (2018e).
25 U.S. Census Bureau (2018f). In 2012, according to the SBO, there were about 5.1 million
firms with paid employees and more than 22 million nonemployer firms.
26 U.S. Census Bureau (2020c).
27 In the American Community Survey Public Use Microdata Samples (ACS PUMS), discussed
below, the unit of analysis is the business owner, or self-employed person. In the SBO and ABS
data, the unit of analysis is the business itself rather than the business owner. Furthermore,
unlike most other business statistics, including the other components of the Economic Census,
the unit of analysis in the SBO and ABS is the firm, rather than the establishment.
28 Appendix A, below, provides state-level data from the 2017 ABS. Appendices B, C and D,
below, provide state-level data from the 2012, 2007 and 2002 SBO.
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• Although women owned firms 36.35 percent of all firms, they earned only 11.87
percent of all sales and receipts.
These disparities between the availability and utilization of minority- and women-
owned firms can be viewed directly from the disparity indexes in Panel C of Table
3. For example, Panel C shows that African American-owned firms in 2012 received
just 13.2 percent of what would be expected based on their availability in the mar-
ket. Panel C shows as well that women-owned firms received just 32.65 percent of
what would be expected based on their availability in the market. For Hispanics,
the figure was 32.55 percent. For Asians, the figure was 82.85 percent. For Amer-
ican Indians and Alaska Natives, the figure was 32.33 percent, and for Native Ha-
waiians and Other Pacific Islanders, the figure was 33.76 percent. These disparities
are all adverse, and statistically significant. The disparities are all large as well,
with the exception of Asian-owned firms.
We can also compare sales and receipts per firm among all firms in 2012. In Table
3, for example, average per firm sales and receipts for non-minority male-owned
firms was $715.6 thousand. In contrast:
• For African American-owned employer firms, average per firm sales and re-
ceipts was $58.1 thousand. In other words, for every dollar of sales and receipts
earned by non-minority male-owned firms, African American-owned firms re-
ceived just 8 cents.
• For Hispanic-owned firms, average per firm sales and receipts was $143.3 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, Hispanic-owned firms received just 20 cents.
• For Asian-owned firms, average per firm sales and receipts was $364.7 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, Asian-owned firms received just 51 cents.
• For American Indian- and Alaska Native-owned firms, average per firm sales
and receipts was $142.3 thousand. In other words, for every dollar of sales and
receipts earned by non-minority male-owned firms, American Indian- and Alas-
ka Native-owned firms received just 20 cents.
• For Native Hawaiian- and Other Pacific Islander-owned firms, average per firm
sales and receipts was $148.6 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Native Hawaiian- and
Other Pacific Islander-owned firms received just 21 cents.
• For women-owned firms, average per firm sales and receipts was $143.7 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, women-owned firms received just 20 cents.
Turning to employer firms, we see from column (3) in Table 3, that although non-
minority male-owned firms were 57.11 percent of all employer firms, they accounted
for 74.98 percent of all employer firm sales and receipts. In contrast:
• Although African Americans owned 2.12 percent of all employer firms in the
U.S. in 2012, they earned only 0.94 percent of all sales and receipts.
• Although Hispanics firms 5.6 percent of all employer firms, they earned only
3.47 percent of all sales and receipts.
• Although Asians owned 9.37 percent of all employer firms, they earned only
5.72 percent of all sales and receipts.
• Although American Indians and Alaska Natives owned 0.51 percent of all em-
ployer firms, they earned only 0.29 percent of all sales and receipts.
• Although Native Hawaiians and Other Pacific Islanders owned 0.09 percent of
all employer firms, they earned only 0.06 percent of all sales and receipts.
• Although women owned 20.16 percent of all employer firms, they earned only
10.86 percent of all sales and receipts.
The economy-wide employer firm disparity indexes for 2012 appear in Panel C of
Table 3. Panel C shows that African American-owned firms in 2012 received just
44.4 percent of what would be expected based on their availability in the market.
Women-owned firms received just 53.85 percent of what would be expected based
on their availability in the market. For Hispanics, the figure was 61.91 percent. For
Asians, the figure was 61.11 percent. For American Indians and Alaska Natives, the
figure was 56.64 percent, and for Native Hawaiians and Other Pacific Islanders, the
figure was 64.40 percent. These disparities are all large, adverse, and statistically
significant.
Considering sales and receipts among employer firms in 2012. Table 3 shows a
figure of $2.8 million for non-minority male-owned employer firms. In contrast:
• For African American-owned employer firms, average per firm sales and re-
ceipts was $947.9 thousand. In other words, for every dollar of sales and re-
ceipts earned by non-minority male-owned firms, African American-owned firms
received just 34 cents.
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• For Hispanic-owned firms, average per firm sales and receipts was $1.32 mil-
lion. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, Hispanic-owned firms received just 47 cents.
• For Asian-owned firms, average per firm sales and receipts was $1.3 million.
In other words, for every dollar of sales and receipts earned by non-minority
male-owned firms, Asian-owned firms received just 47 cents.
• For American Indian- and Alaska Native-owned firms, average per firm sales
and receipts was $1.21 million. In other words, for every dollar of sales and re-
ceipts earned by non-minority male-owned firms, American Indian- and Alaska
Native-owned firms received just 43 cents.
• For Native Hawaiian- and Other Pacific Islander-owned firms, average per firm
sales and receipts was $1.37 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Native Hawaiian- and
Other Pacific Islander-owned firms received just 49 cents.
• For women-owned firms, average per firm sales and receipts was $1.15 million.
In other words, for every dollar of sales and receipts earned by non-minority
male-owned firms, women-owned firms received just 41 cents.
The problem of minority- and women-owned firms earning less has important con-
sequences that ripple throughout the economy. Because these firms make less, they
have to pay their employees less. This obviously compounds race and gender dispari-
ties to the extent that minority- and women-owned firms hire proportionately more
minority and female employees. In addition, it reduces the wealth accruing to mi-
norities and women and thus hinders any would-be minority and women entre-
preneurs in their efforts to create and grow their own firms thus reinforcing the
negative consequences of social and economic disadvantage. Table 3 shows that av-
erage payroll per employee at non-minority male-owned employer firms in 2012 was
$40,573. In contrast:
• For African American-owned employers, average payroll per employee was just
$28,398. In other words, for every $1 in wages earned by employees at non-mi-
nority male-owned firms, employees at African American-owned firms earned
only 70 cents.
• For Hispanic-owned employers average payroll per employee was just $30,416.
In other words, for every $1 in wages earned by employees at non-minority
male-owned firms, employees at Hispanic-owned firms earned only 75 cents.
• For Asian-owned employers average payroll per employee was just $30,942. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at Asian-owned firms earned only 76 cents.
• For American Indian- and Alaska Native-owned employers average payroll per
employee was just $33,599. In other words, for every $1 in wages earned by em-
ployees at non-minority male-owned firms, employees at American Indian- and
Alaska Native-owned firms earned just 83 cents.
• For Native Hawaiian- and Other Pacific Islander-owned employers, average
payroll per employee was just $36,681. In other words, for every $1 in wages
earned by employees at non-minority male-owned firms, employees at Native
Hawaiian- and Other Pacific Islander-owned firms earned just 90 cents.
• For women-owned employers average payroll per employee was just $31,278. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at women-owned firms earned only 77 cents.
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Table 3. Disparity Ratios from the 2012 Survey of Business Owners, United States,
All Industries
Sales and Sales and
Number of Receipts Employer Receipts Payroll
Firms ($000s) Firms ($000s) Employees ($000s)
(1) (2) (3) (4) (5) (6)
Panel A. Levels
All Firms ....................... 27,179,380 11,964,077,871 5,136,203 10,964,584,749 56,058,563 2,096,442,212
Non-minority male ........ 12,280,591 8,787,915,377 2,933,198 8,221,010,815 37,750,711 1,531,662,394
African American .......... 2,584,403 150,203,163 109,137 103,451,510 975,052 27,689,957
Hispanic ........................ 3,305,873 473,635,944 287,501 379,994,999 2,329,553 70,855,704
Asian ............................. 1,917,902 699,492,422 481,026 627,532,399 3,572,577 110,543,615
Native Hawaiian/Pac.
Islander ......................... 54,749 8,136,445 4,706 6,469,957 39,001 1,430,591
Am. Indian & Alaska
Native ........................... 272,919 38,838,125 26,179 31,654,165 208,178 6,994,509
Female .......................... 9,878,397 1,419,834,295 1,035,655 1,190,586,438 8,431,614 263,720,252
Panel B. Column Percentages
All Firms ....................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Non-minority male ........ 45.18% 73.45% 57.11% 74.98% 67.34% 73.06%
African American .......... 9.51% 1.26% 2.12% 0.94% 1.74% 1.32%
Hispanic ........................ 12.16% 3.96% 5.60% 3.47% 4.16% 3.38%
Asian ............................. 7.06% 5.85% 9.37% 5.72% 6.37% 5.27%
Native Hawaiian/Pac.
Islander ......................... 0.20% 0.07% 0.09% 0.06% 0.07% 0.07%
Am. Indian & Alaska
Native ........................... 1.00% 0.32% 0.51% 0.29% 0.37% 0.33%
Female .......................... 36.35% 11.87% 20.16% 10.86% 15.04% 12.58%
Panel C. Disparity Ratios (2) vs. (1) (4) vs. (3) (5) vs. (3) (6) vs. (3)
Non-minority male ................................. 162.56 131.29 117.92 127.93
African American ................................... 13.20 44.40 81.86 62.16
Hispanic ................................................. 32.55 61.91 74.24 60.38
Asian ..................................................... 82.85 61.11 68.05 56.30
Native Hawaiian/Pac. Islander .............. 33.76 64.40 75.93 74.48
Am. Indian & Alaska Native ................. 32.33 56.64 72.86 65.46
Female ................................................... 32.65 53.85 74.59 62.39
Source: Author’s calculations using 2012 SBO. Notes: (1) Figures are rounded. Rounding was performed subsequent to any mathematical
calculations; (2) Excludes publicly owned, foreign-owned, and not-for-profit firms; (3) Totals for ‘‘All Firms’’ includes firms that were equally
nonminority-minority owned; (4) Statistically significant disparity indexes are italicized; (5) ‘‘n/a’’ indicates that data were not disclosed due
to confidentiality or other publication restrictions.
b. Results for the Construction Sector
Table 4 shows comparable 2012 SBO data for the construction sector in the U.S.
as a whole.
Column (2) in Panel B of Table 4 shows that nonminority males owned 62.85 per-
cent of all firms and earned 78.02 percent of all sales and receipts. In contrast:
• Although African Americans owned 4.67 percent of all firms in the U.S. in 2012,
they earned only 0.93 percent of all sales and receipts.
• Although Hispanics owned 16.24 percent of all firms, they earned only 4.65 per-
cent, of all sales and receipts.
• Although Asians owned 2.63 percent of all firms, they earned only 1.28 percent,
of all sales and receipts.
• Although American Indians and Alaska Natives owned 1.23 percent of all firms,
they earned only 0.62 percent of all sales and receipts.
• Although Native Hawaiians and Other Pacific Islanders owned 0.19 percent of
all firms, they earned only 0.13 percent of all sales and receipts.
• Although women owned firms 9.08 percent of all firms, they earned only 7.75
percent of all sales and receipts.
The associated 2012 disparity indexes for firms in the construction sector can be
viewed directly in Panel C of Table 4. Panel C shows that African American-owned
firms in 2012 received just 19.88 percent of what would be expected based on their
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availability in the market. Panel C shows as well that women-owned firms received
85.37 percent of what would be expected based on their availability in the market.
For Hispanics, the figure was 28.64 percent. For Asians, the figure was 48.74 per-
cent. For American Indians and Alaska Natives, the figure was 50.19 percent, and
for Native Hawaiians and Other Pacific Islanders, the figure was 66.26 percent.
These disparities are all adverse, and statistically significant. The disparities are all
large as well, with the exception of women-owned firms.
We can also compare sales and receipts per firm among all firms in construction
in 2012. In Table 4 average per firm sales and receipts for non-minority male-owned
firms was $508.9 thousand. In contrast:
• For African American-owned employer firms, average per firm sales and re-
ceipts was $81.5 thousand. In other words, for every dollar of sales and receipts
earned by non-minority male-owned firms, African American-owned firms re-
ceived just 16 cents.
• For Hispanic-owned firms, average per firm sales and receipts was $117.4 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, Hispanic-owned firms received just 23 cents.
• For Asian-owned firms, average per firm sales and receipts was $199.8 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, Asian-owned firms received just 39 cents.
• For American Indian- and Alaska Native-owned firms, average per firm sales
and receipts was $205.8 thousand. In other words, for every dollar of sales and
receipts earned by non-minority male-owned firms, American Indian- and Alas-
ka Native-owned firms received just 40 cents.
• For Native Hawaiian- and Other Pacific Islander-owned firms, average per firm
sales and receipts was $271.7 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Native Hawaiian- and
Other Pacific Islander-owned firms received just 53 cents.
• For women-owned firms, average per firm sales and receipts was $350 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, women-owned firms received just 69 cents.
Turning to employer firms, we see from column (3) in Table 4, that although non-
minority male-owned firms were 69.87 percent of all employer firms, they accounted
for 79.09 percent of all employer firm sales and receipts. In contrast:
• Although African Americans owned 1.19 percent of all employer firms in the
U.S. in 2017, they earned only 0.77 percent of all sales and receipts.
• Although Hispanics firms 6.07 percent of all employer firms, they earned only
3.59 percent of all sales and receipts.
• Although Asians owned 1.66 percent of all employer firms, they earned only
1.19 percent of all sales and receipts.
• Although American Indians and Alaska Natives owned 0.76 percent of all em-
ployer firms, they earned only 0.57 percent of all sales and receipts.
• Native Hawaiians and Other Pacific Islanders owned 0.11 percent of all em-
ployer firms, and they earned 0.12 percent of all sales and receipts, essentially
at parity.
• Although women owned 8.55 percent of all employer firms, they earned only
7.86 percent of all sales and receipts.
The employer firm disparity indexes for construction in 42012 appear in Panel C
of Table 4. Panel C shows that African American-owned firms in 2012 received just
64.51 percent of what would be expected based on their availability in the market.
Women-owned firms received just 91.88 percent of what would be expected based
on their availability in the market. For Hispanics, the figure was 59.14 percent. For
Asians, the figure was 71.94 percent. For American Indians and Alaska Natives, the
figure was 74.52 percent, and for Native Hawaiians and Other Pacific Islanders, the
figure was 101.89 percent. The disparities for African Americans, Hispanics, Asians
and American Indians and Alaska Natives are all large, adverse, and statistically
significant. The disparity for women is adverse, and statistically significant. The dis-
parity for Native Hawaiians and Other Pacific Islanders is not statistically signifi-
cant.
Considering sales and receipts among employer firms in 2012, Table 4 shows a
figure of $1.92 million for non-minority male-owned employer firms. In contrast:
• For African American-owned employer firms, average per firm sales and re-
ceipts was $1.1 million. In other words, for every dollar of sales and receipts
earned by non-minority male-owned firms, African American-owned firms re-
ceived just 57 cents.
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• For Hispanic-owned firms, average per firm sales and receipts was $1.01 mil-
lion. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, Hispanic-owned firms received just 52 cents.
• For Asian-owned firms, average per firm sales and receipts was $1.22 million.
In other words, for every dollar of sales and receipts earned by non-minority
male-owned firms, Asian-owned firms received just 64 cents.
• For American Indian- and Alaska Native-owned firms, average per firm sales
and receipts was $1.27 million. In other words, for every dollar of sales and re-
ceipts earned by non-minority male-owned firms, American Indian- and Alaska
Native-owned firms received just 66 cents.
• For Native Hawaiian- and Other Pacific Islander-owned firms, average per firm
sales and receipts was $1.73 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Native Hawaiian- and
Other Pacific Islander-owned firms received just 90 cents.
• For women-owned firms, average per firm sales and receipts was $1.56 million.
In other words, for every dollar of sales and receipts earned by non-minority
male-owned firms, women-owned firms received just 81 cents.
As discussed above, these disparities extend to the employees of minority- and
women-owned firms as well and thus cause a ripple effect that further damages
women and minorities. Table 4 shows that average payroll per employee at non-mi-
nority male-owned employer firms in 2012 was $48,736. In contrast:
• For African American-owned employers, average payroll per employee was just
$42,824. In other words, for every $1 in wages earned by employees at non-mi-
nority male-owned firms, employees at African American-owned firms earned
only 88 cents.
• For Hispanic-owned employers average payroll per employee was just $37,977.
In other words, for every $1 in wages earned by employees at non-minority
male-owned firms, employees at Hispanic-owned firms earned only 78 cents.
• For Asian-owned employers average payroll per employee was just $45,450. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at Asian-owned firms earned only 93 cents.
• For American Indian- and Alaska Native-owned employers average payroll per
employee was just $44,763. In other words, for every $1 in wages earned by em-
ployees at non-minority male-owned firms, employees at American Indian- and
Alaska Native-owned firms earned just 92 cents.
• For Native Hawaiian- and Other Pacific Islander-owned firms, on the other
hand, was $49,870. In other words, for every $1 in wages earned by employees
at non-minority male-owned firms, employees at Native Hawaiian- and Other
Pacific Islander-owned firms earned $1.02—essentially at par with non-minority
male-owned firms.
• For women-owned employers average payroll per employee was just $46,509. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at women-owned firms earned only 95 cents.
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Table 4. Disparity Ratios from the 2012 Survey of Business Owners, United States,
Construction
Sales and Sales and
Number of Receipts Employer Receipts Payroll
Firms ($000s) Firms ($000s) Employees ($000s)
(1) (2) (3) (4) (5) (6)
Panel A. Levels
All Firms ....................... 2,928,015 1,200,413,658 637,296 1,083,093,941 4,764,280 225,039,336
Non-minority male ........ 1,840,218 936,510,929 445,288 856,603,507 3,581,982 174,571,576
African American .......... 136,729 11,141,919 7,594 8,325,857 39,883 1,707,968
Hispanic ........................ 475,472 55,830,007 38,704 38,900,840 222,161 8,437,113
Asian ............................. 76,883 15,362,433 10,567 12,919,296 54,404 2,472,635
Native Hawaiian/Pac.
Islander ......................... 5,551 1,507,949 724 1,253,656 4,803 239,527
Am. Indian & Alaska
Native ........................... 35,969 7,401,462 4,836 6,124,399 29,700 1,329,464
Female .......................... 265,733 93,002,152 54,511 85,116,364 435,718 20,264,904
Panel B. Column Percentages
All Firms ....................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Non-minority male ........ 62.85% 78.02% 69.87% 79.09% 75.18% 77.57%
African American .......... 4.67% 0.93% 1.19% 0.77% 0.84% 0.76%
Hispanic ........................ 16.24% 4.65% 6.07% 3.59% 4.66% 3.75%
Asian ............................. 2.63% 1.28% 1.66% 1.19% 1.14% 1.10%
Native Hawaiian/Pac.
Islander ......................... 0.19% 0.13% 0.11% 0.12% 0.10% 0.11%
Am. Indian & Alaska
Native ........................... 1.23% 0.62% 0.76% 0.57% 0.62% 0.59%
Female .......................... 9.08% 7.75% 8.55% 7.86% 9.15% 9.01%
Panel C. Disparity Ratios
Non-minority male ................................. 124.13 113.19 107.60 111.02
African American ................................... 19.88 64.51 70.25 63.69
Hispanic ................................................. 28.64 59.14 76.78 61.73
Asian ..................................................... 48.74 71.94 68.87 66.27
Native Hawaiian/Pac. Islander .............. 66.26 101.89 88.74 93.69
Am. Indian & Alaska Native ................. 50.19 74.52 82.15 77.85
Female ................................................... 85.37 91.88 106.92 105.28
Source and Notes: See Table 6.
c. Results for the Professional, Scientific, and Technical Services Sector
Table 8 shows comparable 2012 SBO data for the professional, scientific, and tech-
nical services sector in the U.S. as a whole.
Column (2) in Panel B of Table 8 shows that nonminority males owned 47.45 per-
cent of all firms and earned 66.95 percent of all sales and receipts. In contrast:
• Although African Americans owned 5.35 percent of all firms in the U.S. in 2012,
they earned only 1.79 percent of all sales and receipts.
• Although Hispanics owned 7.19 percent of all firms, they earned only 3.82 per-
cent of all sales and receipts.
• Although Asians owned 7.16 percent of all firms, they earned 7.72 percent of
all sales and receipts.
• Although American Indians and Alaska Natives owned 0.8 percent of all firms,
they earned only 0.36 percent of all sales and receipts.
• Although Native Hawaiians and Other Pacific Islanders owned 0.16 percent of
all firms, they earned only 0.11 percent of all sales and receipts.
• Although women-owned firms were 34.5 percent of all firms, they earned only
15.81 percent of all sales and receipts.
The associated 2012 disparity indexes for firms in the construction sector can be
viewed directly in Panel C of Table 8. Panel C shows that African American-owned
firms in 2012 received just 33.42 percent of what would be expected based on their
availability in the market. Panel C shows as well that women-owned firms received
45.82 percent of what would be expected based on their availability in the market.
For Hispanics, the figure was 53.17 percent. For Asians, the figure was 107.9 per-
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cent. For American Indians and Alaska Natives, the figure was 45.12 percent, and
for Native Hawaiians and Other Pacific Islanders, the figure was 65.32 percent.
With the exception of Asians, these disparities are all large, adverse, and statis-
tically significant.
We can also compare sales and receipts per firm among all firms in professional
services in 2012. In Table 8, average per firm sales and receipts for non-minority
male-owned firms was $319.9 thousand. In contrast:
• For African American-owned employer firms, average per firm sales and re-
ceipts was $75.8 thousand. In other words, for every dollar of sales and receipts
earned by non-minority male-owned firms, African American-owned firms re-
ceived just 24 cents.
• For Hispanic-owned firms, average per firm sales and receipts was $120.6 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, Hispanic-owned firms received just 38 cents.
• For Asian-owned firms, average per firm sales and receipts was $244.78 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, Asian-owned firms received just 76 cents.
• For American Indian- and Alaska Native-owned firms, average per firm sales
and receipts was $102.3 thousand. In other words, for every dollar of sales and
receipts earned by non-minority male-owned firms, American Indian- and Alas-
ka Native-owned firms received just 32 cents.
• For Native Hawaiian- and Other Pacific Islander-owned firms, average per firm
sales and receipts was $148.1 thousand. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Native Hawaiian- and
Other Pacific Islander-owned firms received just 46 cents.
• For women-owned firms, average per firm sales and receipts was $103.9 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, women-owned firms received just 32 cents.
Turning to employer firms, we see from column (3) in Table 8, that although non-
minority male-owned firms were 59 percent of all employer firms, they accounted
for 69.13 percent of all employer firm sales and receipts. In contrast:
• Although African Americans owned 1.85 percent of all employer firms in the
U.S. in 2012, they earned only 1.52 percent of all sales and receipts.
• Although Hispanics firms 3.95 percent of all employer firms, they earned only
3.45 percent of all sales and receipts.
• Asians owned 6.79 percent of all employer firms, and they earned 7.9 percent
of all sales and receipts.
• Although American Indians and Alaska Natives owned 0.48 percent of all em-
ployer firms, they earned only 0.3 percent of all sales and receipts.
• Native Hawaiians and Other Pacific Islanders owned 0.08 percent of all em-
ployer firms, and they earned 0.1 percent of all sales and receipts.
• Although women owned 22.1 percent of all employer firms, they earned only
13.81 percent of all sales and receipts.
The employer firm disparity indexes for construction in 42012 appear in Panel C
of Table 8. Panel C shows that African American-owned firms in 2012 received just
82.26 percent of what would be expected based on their availability in the market.
Women-owned firms received just 62.47 percent of what would be expected based
on their availability in the market. For Hispanics, the figure was 87.16 percent. For
Asians, the figure was 116.31 percent. For American Indians and Alaska Natives,
the figure was 60.94 percent, and for Native Hawaiians and Other Pacific Islanders,
the figure was 116.31 percent. The disparities for women and American Indians and
Alaska Natives are large, adverse, and statistically significant. The disparities for
African Americans and Hispanics are adverse and statistically significant. The dis-
parities for Asians is not adverse and is statistically significant. The disparity for
Native Hawaiians and Other Pacific Islanders is not statistically significant.
Considering sales and receipts among employer firms in 2012, Table 8 shows a
figure of $1.16 million for non-minority male-owned employer firms. In contrast:
• For African American-owned employer firms, average per firm sales and re-
ceipts was $816.2 thousand. In other words, for every dollar of sales and re-
ceipts earned by non-minority male-owned firms, African American-owned firms
received just 70 cents.
• For Hispanic-owned firms, average per firm sales and receipts was $864.9 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, Hispanic-owned firms received just 74 cents.
• For Asian-owned firms, average per firm sales and receipts was $1.15 million.
In other words, for every dollar of sales and receipts earned by non-minority
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male-owned firms, Asian-owned firms received just 99 cents, just slightly below
parity.
• For American Indian- and Alaska Native-owned firms, average per firm sales
and receipts was $604.7 thousand. In other words, for every dollar of sales and
receipts earned by non-minority male-owned firms, American Indian- and Alas-
ka Native-owned firms received just 52 cents.
• For Native Hawaiian- and Other Pacific Islander-owned firms, average per firm
sales and receipts was $1.27 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned firms, Native Hawaiian- and
Other Pacific Islander-owned firms received just $1.10, slightly above parity.
• For women-owned firms, average per firm sales and receipts was $619.9 thou-
sand. In other words, for every dollar of sales and receipts earned by non-minor-
ity male-owned firms, women-owned firms received just 53 cents.
Considering the employees of minority- and women-owned employer firms in the
professional services sector, Table 8 shows that average payroll per employee at
non-minority male-owned employer firms in 2012 was $63,240. In contrast:
• For African American-owned employers, average payroll per employee was just
$54,911. In other words, for every $1 in wages earned by employees at non-mi-
nority male-owned firms, employees at African American-owned firms earned
only 88 cents.
• For Hispanic-owned employers average payroll per employee was just $51,813.
In other words, for every $1 in wages earned by employees at non-minority
male-owned firms, employees at Hispanic-owned firms earned only 78 cents.
• For Asian-owned employers average payroll per employee was just $66,788. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at Asian-owned firms earned only 93 cents.
• For American Indian- and Alaska Native-owned employers average payroll per
employee was just $44,013. In other words, for every $1 in wages earned by em-
ployees at non-minority male-owned firms, employees at American Indian- and
Alaska Native-owned firms earned just 92 cents.
• For women-owned employers average payroll per employee was just $49,128. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at women-owned firms earned only 95 cents.
Payroll per employee for Native Hawaiian- and Other Pacific Islander-owned
firms, on the other hand, was $69,386. In other words, for every $1 in wages earned
by employees at non-minority male-owned firms, employees at Native Hawaiian-
and Other Pacific Islander-owned firms earned $1.10—slightly above par with non-
minority male-owned firms.
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Table 5. Disparity Ratios from the 2012 Survey of Business Owners, United States,
Professional Services
Sales and Sales and
Number of Receipts Employer Receipts Payroll
Firms ($000s) Firms ($000s) Employees ($000s)
(1) (2) (3) (4) (5) (6)
Panel A. Levels
All Firms ....................... 3,868,657 877,237,881 748,444 742,626,210 4,652,991 277,172,802
Non-minority male ........ 1,835,748 587,306,112 441,573 513,381,557 3,050,082 192,887,690
African American .......... 206,942 15,682,967 13,822 11,281,769 81,170 4,457,109
Hispanic ........................ 278,066 33,525,181 29,582 25,584,292 170,953 8,857,606
Asian ............................. 276,960 67,766,453 50,834 58,666,210 345,376 23,067,037
Native Hawaiian/Pac.
Islander ......................... 6,292 931,973 600 764,525 3,680 255,342
Am. Indian & Alaska
Native ........................... 30,966 3,168,244 3,627 2,193,127 17,882 787,037
Female .......................... 1,334,561 138,669,937 165,437 102,552,393 774,717 38,060,358
Panel B. Column Percentages
All Firms ....................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Non-minority male ........ 47.45% 66.95% 59.00% 69.13% 65.55% 69.59%
African American .......... 5.35% 1.79% 1.85% 1.52% 1.74% 1.61%
Hispanic ........................ 7.19% 3.82% 3.95% 3.45% 3.67% 3.20%
Asian ............................. 7.16% 7.72% 6.79% 7.90% 7.42% 8.32%
Native Hawaiian/Pac.
Islander ......................... 0.16% 0.11% 0.08% 0.10% 0.08% 0.09%
Am. Indian & Alaska
Native ........................... 0.80% 0.36% 0.48% 0.30% 0.38% 0.28%
Female .......................... 34.50% 15.81% 22.10% 13.81% 16.65% 13.73%
Panel C. Disparity Ratios
Non-minority male ................................. 141.09 117.17 111.11 117.95
African American ................................... 33.42 82.26 94.46 87.07
Hispanic ................................................. 53.17 87.16 92.96 80.85
Asian ..................................................... 107.90 116.31 109.29 122.53
Native Hawaiian/Pac. Islander .............. 65.32 128.42 98.66 114.92
Am. Indian & Alaska Native ................. 45.12 60.94 79.30 58.59
Female ................................................... 45.82 62.47 75.32 62.12
Source and Notes: See Table 6.
2. Results from the 2017 Annual Survey of Businesses
a. Economy-Wide Results
Turning now to the 2017 ABS, Table 6, below, presents results for all industries
combined (i.e. economy-wide) and for the United States as a whole. Panel A summa-
rizes the ABS results for each race and/or sex group. For example, Panel A shows
a total of 5.47 million employer firms in the U.S. in 2017 (column 1) with overall
sales and receipts of $12.689 trillion (column 2). These 5.47 million firms had a total
of 62.99 million employees (column 3) and a total annual payroll expense of $2.618
trillion (column 4).
The remaining rows in Panel A provide comparable statistics for non-minority
male-owned, women-owned, and minority-owned firms. For example, Table 6 shows
that there were 124,004 African American-owned employer firms counted in 2017,
and that these 124,004 firms registered $127.851 billion in sales and receipts. It also
shows that these African American-owned firms employed a total of 1.21 million
workers with an annual payroll total of $36.105 billion.
Panel B in Table 6 converts the figures in Panel A to percentage distributions
within each column. For example, Column (1) in Panel B of Table 6 shows that Afri-
can Americans owned just 2.27 percent of all employer firms in the U.S. and women
owned just 15.62 percent. Additionally, 5.88 percent of employer firms were His-
panic-owned, 10.15 percent were Asian-owned, 0.45 percent were American Indian-
and Alaska Native-owned, and 0.13 percent were Native Hawaiian- and Other Pa-
cific Islander-owned.
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Column (2) in Panel B provides the same percentage distribution for overall sales
and receipts for employer firms. Table 6, for example, shows that non-minority
males owned 52.08 percent of all employer firms and earned 70.71 percent of all
sales and receipts. In contrast:
• Although African Americans owned 2.27 percent of all employer firms in the
U.S. in 2017, they earned only 1.01 percent of all sales and receipts.
• Although Hispanics firms 5.88 percent of all employer firms, they earned only
3.33 percent of all sales and receipts.
• Although Asians owned 10.15 percent of all employer firms, they earned only
6.42 percent of all sales and receipts.
• Although American Indians and Alaska Natives owned 0.45 percent of all em-
ployer firms, they earned only 0.3 percent of all sales and receipts.
• Although Native Hawaiians and Other Pacific Islanders owned 0.13 percent of
all employer firms, they earned only 0.07 percent of all sales and receipts.
• Although women owned 15.62 percent of all employer firms, they earned only
9.6 percent of all sales and receipts.
These disparities between the availability and utilization of minority- and women-
owned firms can be viewed directly from the disparity indexes in Panel C of Table
6. For example, Panel C shows that African American-owned employer firms in 2017
received just 44.48 percent of what would be expected based on their availability
in the market.29 Panel C shows as well that women-owned firms received just 61.44
percent of what would be expected based on their availability in the market. For
Hispanics, the figure was 56.6 percent. For Asians, the figure was 63.27 percent.
For American Indians and Alaska Natives, the figure was 66.89 percent, and for Na-
tive Hawaiians and Other Pacific Islanders, the figure was 53.09 percent. These dis-
parities are all large, adverse, and statistically significant.
Another way to look at these disparities is by comparing sales and receipts per
firm. In Table 6, for example, average per firm sales and receipts for non-minority
male-owned employer firms was $3.15 million.30 In contrast:
• For African American-owned employer firms, average per firm sales and re-
ceipts was $1.03 million. In other words, for every dollar of sales and receipts
earned by non-minority male-owned employer firms, African American-owned
employer firms received just 33 cents.
• For Hispanic-owned employer firms, average per firm sales and receipts was
$1.31 million. In other words, for every dollar of sales and receipts earned by
non-minority male-owned employer firms, Hispanic-owned employer firms re-
ceived just 42 cents.
• For Asian-owned employer firms, average per firm sales and receipts was $1.47
million. In other words, for every dollar of sales and receipts earned by non-
minority male-owned employer firms, Asian-owned employer firms received just
47 cents.
• For American Indian- and Alaska Native-owned employer firms, average per
firm sales and receipts was $1.55 million. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms, Amer-
ican Indian- and Alaska Native-owned employer firms received just 49 cents.
• For Native Hawaiian- and Other Pacific Islander-owned employer firms, aver-
age per firm sales and receipts was $1.23 million. In other words, for every dol-
lar of sales and receipts earned by non-minority male-owned employer firms,
Native Hawaiian- and Other Pacific Islander-owned employer firms received
just 39 cents.
• For women-owned employer firms, average per firm sales and receipts was
$1.42 million. In other words, for every dollar of sales and receipts earned by
non-minority male-owned employer firms, women-owned employer firms re-
ceived just 45 cents.
As discussed above, these severe disparities in firm earnings have a direct nega-
tive and compounding effect on the employees of minority- and women-owned firms.
Table 6, for example, shows that average payroll per employee at non-minority
male-owned employer firms in 2017 was $45,555.31 In contrast:
• For African American-owned employers, average payroll per employee was just
$29,882. In other words, for every $1 in wages earned by employees at non-mi-
29 The disparity index is derived by dividing the share of sales and receipts from Panel B col-
umn (2) by the share of firms in Panel B column (1) and multiplying the result by 100.
30 Per firm sales and receipts is derived by dividing the sales and receipts amount in Panel
A column (2) by the number of employer firms in Panel A column (1).
31 Average payroll per employee is derived by dividing total payroll in Panel A column (4) by
total number of employees in Panel A column (3).
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nority male-owned firms, employees at African American-owned firms earned
just 66 cents.
• For Hispanic-owned employers average payroll per employee was just $31,674.
In other words, for every $1 in wages earned by employees at non-minority
male-owned firms, employees at Hispanic-owned firms earned just 70 cents.
• For Asian-owned employers average payroll per employee was just $34,137. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at Asian-owned firms earned just 75 cents.
• For American Indian- and Alaska Native-owned employers average payroll per
employee was just $39,756. In other words, for every $1 in wages earned by em-
ployees at non-minority male-owned firms, employees at American Indian- and
Alaska Native-owned firms earned just 87 cents.
• For Native Hawaiian- and Other Pacific Islander-owned employers it was just
$35,386. In other words, for every $1 in wages earned by employees at non-mi-
nority male-owned firms, employees at Native Hawaiian- and Other Pacific Is-
lander-owned firms earned just 78 cents.
• For women-owned employers average payroll per employee was just $36,926. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at women-owned firms earned just 81 cents.
Table 6. Disparity Ratios from the 2017 Annual Business Survey, United States, All Industries
Sales and
Employer Receipts Payroll
Firms ($000s) Employees ($000s)
(1) (2) (3) (4)
Panel A. Levels
All Firms ............................................................................... 5,474,721 12,689,937,307 62,990,475 2,618,191,164
Non-minority male ................................................................ 2,851,098 8,972,454,223 38,973,541 1,775,434,267
African American .................................................................. 124,004 127,850,815 1,208,270 36,105,467
Hispanic ............................................................................... 322,076 422,573,589 2,872,550 90,985,526
Asian .................................................................................... 555,638 814,806,324 4,649,688 158,725,110
Native Hawaiian/Pac. Islander ............................................. 6,847 8,426,209 55,413 1,960,819
Am. Indian & Alaska Native ................................................ 24,503 37,992,217 221,193 8,793,842
Female .................................................................................. 855,136 1,217,743,211 7,863,653 290,375,358
Panel B. Column Percentages
All Firms ............................................................................... 100.00% 100.00% 100.00% 100.00%
Non-minority male ................................................................ 52.08% 70.71% 61.87% 67.81%
African American .................................................................. 2.27% 1.01% 1.92% 1.38%
Hispanic ............................................................................... 5.88% 3.33% 4.56% 3.48%
Asian .................................................................................... 10.15% 6.42% 7.38% 6.06%
Native Hawaiian/Pac. Islander ............................................. 0.13% 0.07% 0.09% 0.07%
Am. Indian & Alaska Native ................................................ 0.45% 0.30% 0.35% 0.34%
Female .................................................................................. 15.62% 9.60% 12.48% 11.09%
Panel C. Disparity Ratios (2) vs. (1) (3) vs. (1) (4) vs. (1)
Non-minority male ........................................................................................ 135.77 118.81 130.21
African American .......................................................................................... 44.48 84.69 60.88
Hispanic ........................................................................................................ 56.60 77.52 59.07
Asian ............................................................................................................. 63.27 72.73 59.73
Native Hawaiian/Pac. Islander ..................................................................... 53.09 70.34 59.88
Am. Indian & Alaska Native ......................................................................... 66.89 78.46 75.04
Female ........................................................................................................... 61.44 79.92 71.00
Source: Authors calculations from the 2017 ABS. Notes: (1) Figures are rounded. Rounding was performed subsequent to any mathematical
calculations; (2) Excludes publicly owned, foreign-owned, and not-for-profit firms; (3) Totals for ‘‘All Firms’’ includes firms that were equally
nonminority-minority owned; (4) Statistically significant; disparity indexes are italicized; (5) ‘‘n/a’’ indicates that data were not disclosed due
to confidentiality or other publication restrictions.
b. Results for the Construction Sector
Table 7 provides comparable 2017 information for the construction sector, which,
along with architecture, engineering, and related professional services, is a major
recipient of Federal surface and aviation transportation funding.
Although non-minority males owned 68.52 percent of all employer firms in the
construction sector, they earned 77.92 percent of all sales and receipts. In contrast:
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• Although African Americans owned 1.17 percent of all employer firms in the
U.S. in 2017, they earned only 0.72 percent of all sales and receipts. This yields
a disparity index of 61.05.
• Although Hispanics owned 7.16 percent of all employer firms in the U.S. in
2017, they earned only 4.1 percent of all sales and receipts. This yields a dis-
parity index of 57.26.
• Although Asians owned 2.02 percent of all employer firms in the U.S. in 2017,
they earned only 1.37 percent of all sales and receipts. This yields a disparity
index of 67.73.
• Although Native Hawaiians and Other Pacific Islanders owned 0.16 percent of
all employer firms in the U.S. in 2017, they earned only 0.1 percent of all sales
and receipts. This yields a disparity index of 62.97.
• Although American Indians and Alaska Natives owned 0.69 percent of all em-
ployer firms in the U.S. in 2017, they earned only 0.52 percent of all sales and
receipts. This yields a disparity index of 76.15.
As a group, women fared much better in construction in 2017 compared to other
disadvantaged groups. Women owned 7.15 percent of all employer firms in the U.S.
in 2017, and they earned an equivalent share of sales and receipts—7.26 percent,
yielding no adverse disparity index. But remember, this new ABS data does not in-
clude emerging firms that have yet grown sufficiently large to hire employees.
When we consider per firm sales and receipts for employer firms in 2017, we see
that non-minority male-owned firms averaged $2.51 million. In contrast:
• For African American-owned employer firms, average per firm sales and re-
ceipts was 1.35 million. In other words, for every dollar of sales and receipts
earned by non-minority male-owned employer firms, African American-owned
employer firms received just 54 cents.
• For Hispanic-owned employer firms, average per firm sales and receipts was
1.26 million. In other words, for every dollar of sales and receipts earned by
non-minority male-owned employer firms, Hispanic-owned employer firms re-
ceived just 50 cents.
• For Asian-owned employer firms, average per firm sales and receipts was 1.49
million. In other words, for every dollar of sales and receipts earned by non-
minority male-owned employer firms, Asian-owned employer firms received just
60 cents.
• For American Indian- and Alaska Native-owned employer firms, average per
firm sales and receipts was 1.68 million. In other words, for every dollar of sales
and receipts earned by non-minority male-owned employer firms, American
Indian- and Alaska Native-owned employer firms received just 67 cents.
• For Native Hawaiian- and Other Pacific Islander-owned employer firms, aver-
age per firm sales and receipts was 1.39 million. In other words, for every dollar
of sales and receipts earned by non-minority male-owned employer firms, Na-
tive Hawaiian- and Other Pacific Islander-owned employer firms received just
55 cents.
• For women-owned employer firms, average per firm sales and receipts was 2.24
million. In other words, for every dollar of sales and receipts earned by non-
minority male-owned employer firms, women-owned employer firms received
just 89 cents.
Considering the employees of these minority- and women-owned firms, Table 7
shows that average payroll per employee at non-minority male-owned employer
firms the construction sector in 2017 was $54,984. In contrast:
• For African American-owned employers, average payroll per employee was just
$45,869. In other words, for every $1 in wages earned by employees at non-mi-
nority male-owned firms, employees at African American-owned firms earned
just 83 cents.
• For Hispanic-owned employers average payroll per employee was just $41,881.
In other words, for every $1 in wages earned by employees at non-minority
male-owned firms, employees at Hispanic-owned firms earned just 76 cents.
• For Asian-owned employers average payroll per employee was just $50,307. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at Asian-owned firms earned 91 cents.
• For American Indian- and Alaska Native-owned employers average payroll per
employee was just $51,723. In other words, for every $1 in wages earned by em-
ployees at non-minority male-owned firms, employees at American Indian- and
Alaska Native-owned firms earned 94 cents.
• For Native Hawaiian- and Other Pacific Islander-owned employers it was just
$46,120 male-owned firms, employees at Native Hawaiian- and Other Pacific Is-
lander-owned firms earned just 84 cents.
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• For women-owned employers average payroll per employee was just $53,318. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at women-owned firms earned 97 cents.
Table 7. Disparity Ratios from the 2017 Annual Business Survey, United States, Construction
Sales and
Employer Receipts Payroll
Firms ($000s) Employees ($000s)
(3) (4) (5) (6)
Panel A. Levels
All Firms ............................................................................... 700,453 1,544,490,456 6,120,046 324,999,296
Non-minority male ................................................................ 479,971 1,203,446,334 4,504,618 247,682,903
African American .................................................................. 8,218 11,062,034 54,093 2,481,191
Hispanic ............................................................................... 50,187 63,362,420 327,799 13,728,565
Asian .................................................................................... 14,169 21,160,223 82,746 4,162,689
Native Hawaiian/Pac. Islander ............................................. 1,093 1,517,730 7,795 359,508
Am. Indian & Alaska Native ................................................ 4,821 8,095,145 35,355 1,828,684
Female .................................................................................. 50,075 112,156,157 508,141 27,092,808
Panel B. Column Percentages
All Firms ............................................................................... 100.00% 100.00% 100.00% 100.00%
Non-minority male ................................................................ 68.52% 77.92% 73.60% 76.21%
African American .................................................................. 1.17% 0.72% 0.88% 0.76%
Hispanic ............................................................................... 7.16% 4.10% 5.36% 4.22%
Asian .................................................................................... 2.02% 1.37% 1.35% 1.28%
Native Hawaiian/Pac. Islander ............................................. 0.16% 0.10% 0.13% 0.11%
Am. Indian & Alaska Native ................................................ 0.69% 0.52% 0.58% 0.56%
Female .................................................................................. 7.15% 7.26% 8.30% 8.34%
Panel C. Disparity Ratios (2) vs. (1) (3) vs. (1) (4) vs. (1)
Non-minority male ........................................................................................ 113.71 107.42 111.22
African American .......................................................................................... 61.05 75.34 65.07
Hispanic ........................................................................................................ 57.26 74.76 58.96
Asian ............................................................................................................. 67.73 66.84 63.32
Native Hawaiian/Pac. Islander ..................................................................... 62.97 81.62 70.89
Am. Indian & Alaska Native ......................................................................... 76.15 83.93 81.75
Female ........................................................................................................... 101.58 116.14 116.61
Source and Notes: See Table 6.
c. Results for the Professional, Scientific, and Technical Sector
Table 8 provides comparable 2017 information for the professional, scientific, and
technical sector (which includes architecture, engineering, and related professional
services). This sector, along with construction, is a major recipient of Federal sur-
face and aviation transportation funding.
Although non-minority males owned 56.31 percent of all employer firms in the
construction sector, they earned 66.39 percent of all sales and receipts. In contrast:
• Although African Americans owned 2.06 percent of all employer firms in the
U.S. in 2017, they earned only 1.6 percent of all sales and receipts. This yields
a disparity index of 77.65.
• Although Hispanics owned 4.32 percent of all employer firms in the U.S. in
2017, they earned only 3.2 percent of all sales and receipts. This yields a dis-
parity index of 74.09.
• Although Asians owned 7.67 percent of all employer firms in the U.S. in 2017,
they earned only 8.84 percent of all sales and receipts. This yields a disparity
index of 115.31.
• Although Native Hawaiians and Other Pacific Islanders owned 0.12 percent of
all employer firms in the U.S. in 2017, they earned only 0.1 percent of all sales
and receipts. This yields a disparity index of 84.87.
• Although American Indians and Alaska Natives owned 0.52 percent of all em-
ployer firms in the U.S. in 2017, they earned only 0.52 percent of all sales and
receipts. This yields a disparity index of 99.76.
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• Although women owned 19.1 percent of all employer firms in the U.S. in 2017,
they earned only 12.4 percent of all sales and receipts. This yields a disparity
index of 64.91.
When we consider per firm sales and receipts for employer firms, we see that non-
minority male-owned firms averaged $1.37 million in 2017. In contrast:
• For African American-owned employer firms, average per firm sales and re-
ceipts was $902 thousand. In other words, for every dollar of sales and receipts
earned by non-minority male-owned employer firms, African American-owned
employer firms received just 66 cents.
• For Hispanic-owned employer firms, average per firm sales and receipts was
$861 thousand. In other words, for every dollar of sales and receipts earned by
non-minority male-owned employer firms, Hispanic-owned employer firms re-
ceived just 63 cents.
• For Asian-owned employer firms, average per firm sales and receipts was $1.34
million. In other words, for every dollar of sales and receipts earned by non-
minority male-owned employer firms, Asian-owned employer firms received just
98 cents.
• For Native Hawaiian- and Other Pacific Islander-owned employer firms, aver-
age per firm sales and receipts was $986 thousand. In other words, for every
dollar of sales and receipts earned by non-minority male-owned employer firms,
Native Hawaiian- and Other Pacific Islander-owned employer firms received
just 72 cents.
• For American Indian- and Alaska Native-owned employer firms, average per
firm sales and receipts was $1.16 million. In other words, for every dollar of
sales and receipts earned by non-minority male-owned employer firms, Amer-
ican Indian- and Alaska Native-owned employer firms received just 85 cents.
• For women-owned employer firms, average per firm sales and receipts was $754
thousand. In other words, for every dollar of sales and receipts earned by non-
minority male-owned employer firms, women-owned employer firms received
just 55 cents.
Considering the employees of these minority- and women-owned firms, Table 8
shows that average payroll per employee at non-minority male-owned employer
firms the professional services sector in 2017 was $70,546. In contrast:
• For African American-owned employers, average payroll per employee was just
$59,033. In other words, for every $1 in wages earned by employees at non-mi-
nority male-owned firms, employees at African American-owned firms earned
just 84 cents.
• For Hispanic-owned employers average payroll per employee was just $56,567.
In other words, for every $1 in wages earned by employees at non-minority
male-owned firms, employees at Hispanic-owned firms earned just 80 cents.
• For Asian-owned employers average payroll per employee was $75,179—some-
what higher than non-minority male-owned employers. Thus, for every $1 in
wages earned by employees at non-minority male-owned firms, employees at
Asian-owned firms earned $1.07 cents, slightly better than parity.
• For American Indian- and Alaska Native-owned employers average payroll per
employee was just $60,884. In other words, for every $1 in wages earned by em-
ployees at non-minority male-owned firms, employees at American Indian- and
Alaska Native-owned firms earned 86 cents.
• For Native Hawaiian- and Other Pacific Islander-owned employers it was just
$63,009 male-owned firms, employees at Native Hawaiian- and Other Pacific Is-
lander-owned firms earned just 89 cents.
• For women-owned employers average payroll per employee was just $55,606. In
other words, for every $1 in wages earned by employees at non-minority male-
owned firms, employees at women-owned firms earned 79 cents.
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Table 8. Disparity Ratios from the 2017 Annual Business Survey, United States,
Professional, Scientific, and Technical Services
Sales and
Employer Receipts Payroll
Firms ($000s) Employees ($000s)
(3) (4) (5) (6)
Panel A. Levels
All Firms ............................................................................... 794,235 922,698,077 5,339,009 362,594,623
Non-minority male ................................................................ 447,254 612,610,502 3,281,827 231,520,629
African American .................................................................. 16,392 14,787,229 96,267 5,682,935
Hispanic ............................................................................... 34,292 29,514,634 185,395 10,487,211
Asian .................................................................................... 60,907 81,592,941 432,567 32,520,040
Native Hawaiian/Pac. Islander ............................................. 971 957,403 6,118 385,489
Am. Indian & Alaska Native ................................................ 4,142 4,800,227 29,953 1,823,661
Female .................................................................................. 151,694 114,396,323 751,207 41,771,294
Panel B. Column Percentages
All Firms ............................................................................... 100.00% 100.00% 100.00% 100.00%
Non-minority male ................................................................ 56.31% 66.39% 61.47% 63.85%
African American .................................................................. 2.06% 1.60% 1.80% 1.57%
Hispanic ............................................................................... 4.32% 3.20% 3.47% 2.89%
Asian .................................................................................... 7.67% 8.84% 8.10% 8.97%
Native Hawaiian/Pac. Islander ............................................. 0.12% 0.10% 0.11% 0.11%
Am. Indian & Alaska Native ................................................ 0.52% 0.52% 0.56% 0.50%
Female .................................................................................. 19.10% 12.40% 14.07% 11.52%
Panel C. Disparity Ratios (2) vs. (1) (3) vs. (1) (4) vs. (1)
Non-minority male ........................................................................................ 117.90 109.16 113.39
African American .......................................................................................... 77.65 87.36 75.94
Hispanic ........................................................................................................ 74.09 80.43 66.99
Asian ............................................................................................................. 115.31 105.65 116.95
Native Hawaiian/Pac. Islander ..................................................................... 84.87 93.73 86.96
Am. Indian & Alaska Native ......................................................................... 99.76 107.58 96.44
Female ........................................................................................................... 64.91 73.67 60.32
Source and Notes: See Table 6.
3. State-Level Results from 2002–2017
The state-level disparities observed in the 2017 ABS are documented below in Ap-
pendix A, Tables A.1 through A.18. Data from the 2012 SBO is presented in Appen-
dix B, Tables B.1 through B.18. Data from the 2007 SBO is presented in Appendix
C, Tables C.1 through C.18. Data from the 2002 SBO is presented in Appendix D,
Tables D.1 through D.18.
The most noticeable aspect of the statistics presented in Tables A.1 through D.18
below is how many of the disparity indexes are large, adverse, and statistically sig-
nificant.32 This is true for African Americans, Hispanics, Asians and Pacific Island-
ers, American Indians and Alaska Natives, and non-minority women. It is true in
the construction sector, it is true in the professional services sector, and it is true
when considering all industries combined. It is true in all 50 states and the District
of Columbia. While there is certainly variation by race, sex, industry, geography,
and time, the similarities vastly outweigh the differences. Table 9 provides a high-
level summary of the findings of disparity from the 2007 SBO in Tables A.1 through
A.18.
32 I have measured statistical significance here using the ‘‘two standard deviation’’ or ‘‘5%’’
level of significance typically used in disparate impact litigation in employment and related
areas.
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Table 9. Prevalence of Disparities in the 2017 Annual Business Survey and the 2012, 2007 &
2002 Survey of Business Owners
Fraction of
Fraction of Fraction of Disparity
Number of Disparity Disparity Indexes that
Disparity Indexes Less Indexes Less are
Indexes in than or Equal than or Equal Statistically
Year Industry Table Race/Sex Group to 80 to 100 Significant
2017 .... All Industries .......................... 48 AfrAmer .................. 98% 100% 88%
2012 .... All Industries .......................... 96 AfrAmer .................. 97% 98% 92%
2007 .... All Industries .......................... 96 AfrAmer .................. 93% 97% 90%
2002 .... All Industries .......................... 100 AfrAmer .................. 98% 100% 98%
2017 .... Construction ........................... 39 AfrAmer .................. 77% 82% 46%
2012 .... Construction ........................... 84 AfrAmer .................. 88% 93% 80%
2007 .... Construction ........................... 84 AfrAmer .................. 85% 90% 82%
2002 .... Construction ........................... 69 AfrAmer .................. 86% 88% 72%
2017 .... Professional Services .............. 41 AfrAmer .................. 73% 80% 49%
2012 .... Professional Services .............. 92 AfrAmer .................. 78% 90% 70%
2007 .... Professional Services .............. 92 AfrAmer .................. 76% 88% 73%
2002 .... Professional Services .............. 86 AfrAmer .................. 94% 98% 80%
2017 .... All Industries .......................... 52 Hispanic ................. 87% 94% 79%
2012 .... All Industries .......................... 101 Hispanic ................. 87% 94% 84%
2007 .... All Industries .......................... 101 Hispanic ................. 82% 90% 86%
2002 .... All Industries .......................... 102 Hispanic ................. 100% 100% 100%
2017 .... Construction ........................... 49 Hispanic ................. 86% 92% 61%
2012 .... Construction ........................... 95 Hispanic ................. 89% 96% 79%
2007 .... Construction ........................... 95 Hispanic ................. 87% 93% 78%
2002 .... Construction ........................... 85 Hispanic ................. 88% 91% 81%
2017 .... Professional Services .............. 48 Hispanic ................. 42% 65% 29%
2012 .... Professional Services .............. 97 Hispanic ................. 63% 79% 54%
2007 .... Professional Services .............. 97 Hispanic ................. 65% 75% 57%
2002 .... Professional Services .............. 84 Hispanic ................. 93% 94% 74%
2017 .... All Industries .......................... 52 Asian ...................... 98% 98% 96%
2012 .... All Industries .......................... 104 Asian ...................... 68% 89% 73%
2007 .... All Industries .......................... 104 Asian ...................... 75% 96% 80%
2002 .... All Industries .......................... 102 Asian ...................... 100% 100% 100%
2017 .... Construction ........................... 40 Asian ...................... 72% 75% 38%
2012 .... Construction ........................... 84 Asian ...................... 70% 75% 57%
2007 .... Construction ........................... 84 Asian ...................... 71% 77% 54%
2002 .... Construction ........................... 58 Asian ...................... 74% 90% 53%
2017 .... Professional Services .............. 49 Asian ...................... 14% 29% 16%
2012 .... Professional Services .............. 100 Asian ...................... 21% 33% 34%
2007 .... Professional Services .............. 100 Asian ...................... 15% 28% 32%
2002 .... Professional Services .............. 88 Asian ...................... 64% 77% 51%
2017 .... All Industries .......................... 36 NHPI ....................... 81% 86% 58%
2012 .... All Industries .......................... 71 NHPI ....................... 86% 86% 70%
2007 .... All Industries .......................... 71 NHPI ....................... 86% 93% 72%
2002 .... All Industries .......................... 48 NHPI ....................... 100% 100% 96%
2017 .... Construction ........................... 11 NHPI ....................... 73% 73% 45%
2012 .... Construction ........................... 33 NHPI ....................... 76% 79% 74%
2007 .... Construction ........................... 33 NHPI ....................... 73% 79% 58%
2002 .... Construction ........................... 10 NHPI ....................... 70% 80% 50%
2017 .... Professional Services .............. 13 NHPI ....................... 69% 77% 46%
2012 .... Professional Services .............. 31 NHPI ....................... 68% 75% 73%
2007 .... Professional Services .............. 31 NHPI ....................... 52% 58% 39%
2002 .... Professional Services .............. 13 NHPI ....................... 92% 92% 85%
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Table 9. Prevalence of Disparities in the 2017 Annual Business Survey and the 2012, 2007 &
2002 Survey of Business Owners—Continued
Fraction of
Fraction of Fraction of Disparity
Number of Disparity Disparity Indexes that
Disparity Indexes Less Indexes Less are
Indexes in than or Equal than or Equal Statistically
Year Industry Table Race/Sex Group to 80 to 100 Significant
2017 .... All Industries .......................... 49 AIAN ....................... 76% 88% 55%
2012 .... All Industries .......................... 94 AIAN ....................... 89% 97% 82%
2007 .... All Industries .......................... 94 AIAN ....................... 91% 98% 82%
2002 .... All Industries .......................... 96 AIAN ....................... 99% 99% 98%
2017 .... Construction ........................... 39 AIAN ....................... 59% 72% 23%
2012 .... Construction ........................... 74 AIAN ....................... 72% 81% 53%
2007 .... Construction ........................... 74 AIAN ....................... 73% 85% 54%
2002 .... Construction ........................... 74 AIAN ....................... 81% 91% 64%
2017 .... Professional Services .............. 33 AIAN ....................... 52% 67% 27%
2012 .... Professional Services .............. 79 AIAN ....................... 79% 92% 51%
2007 .... Professional Services .............. 79 AIAN ....................... 68% 80% 43%
2002 .... Professional Services .............. 71 AIAN ....................... 90% 92% 76%
2017 .... All Industries .......................... 52 NMF ........................ 100% 100% 98%
2012 .... All Industries .......................... 104 NMF ........................ 98% 99% 98%
2007 .... All Industries .......................... 104 NMF ........................ 98% 100% 100%
2002 .... All Industries .......................... 104 NMF ........................ 100% 100% 100%
2017 .... Construction ........................... 52 NMF ........................ 21% 54% 2%
2012 .... Construction ........................... 103 NMF ........................ 30% 56% 16%
2007 .... Construction ........................... 103 NMF ........................ 36% 67% 23%
2002 .... Construction ........................... 42 NMF ........................ 71% 86% 50%
2017 .... Professional Services .............. 52 NMF ........................ 92% 100% 83%
2012 .... Professional Services .............. 103 NMF ........................ 97% 100% 94%
2007 .... Professional Services .............. 103 NMF ........................ 99% 99% 94%
2002 .... Professional Services .............. 54 NMF ........................ 100% 100% 98%
Source: Author’s calculations from the 2017 ABS, and the 2012, 2007 and 2002 SBO. Note: ‘‘NHPI’’ stands for Native Hawaiians and Other
Pacific Islanders, ‘‘AIAN’’ stands for American Indians and Alaska Natives, and ‘‘NMF’’ stands for non-minority female.
a. Conclusions from the Survey of Business Owners/Annual Business Survey
Data
While the exact proportions vary, large and statistically significant disparities are
observed in the U.S. as a whole, in all 50 states and the District of Columbia, for
all minority groups—African Americans, Hispanics, Asians and Pacific Islanders,
and American Indians and Alaska Natives—as well as for non-minority women.
These disparities are found in the Construction sector, the Professional, Scientific
and Technical Services Sector (which includes Architecture, Engineering and related
industries), and in the economy as a whole.
D. THERE IS STRONG EVIDENCE OF DISPARITIES AND DISCRIMINATION IN MINORITY
AND FEMALE BUSINESS FORMATION RATES AND EARNINGS
It is fair to ask whether the disparities documented in most disparity studies and
in the SBO and ABS data result primarily from discrimination, or whether they re-
sult from other, potentially non-discriminatory, factors.
This question can be tested directly using the American Community Survey 5-year
Public Use Microdata Sample (ACS PUMS), which allows us to examine business
outcomes for different race, ethnic, and gender groups in great detail while holding
constant a wide variety of other demographic and economic variables.
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1. Discrimination Impacting Business Formation
a. Methods
To assess the extent of discrimination in business formation, I developed three dif-
ferent statistical regression models.33 In ‘‘Model A’’, the only independent variables
included in the analysis are indicators for race and sex and survey year. This model
identifies the raw differences in business formation rates between minorities,
women, and non-minority males, holding only time constant.
Next, ‘‘Model B’’ adds to the regression equation several independent variables
that are indicators of qualifications and capacity, including schooling, state of resi-
dence, and age.34 This allows us to compare individuals that are similarly situated
in terms of their educational attainment, their geographic location, and their labor
market experience.
Finally, ‘‘Model C’’ adds to the regression equation a large number of independent
variables that have been shown to be related to the propensity to become a business
owner. These include proxies for individual financial assets (interest and dividend
income, home ownership status, and home property value), family structure (spouse
present in the household, number of children in the household), mobility (lived in
the same house last year), immigration status (foreign born, years in the U.S.,
English proficiency), military status (veteran), and local macroeconomic conditions
by state (general population level, unemployment rate, number of full-time govern-
ment employees, per capita personal income).35
Taken together, these three models allow us to test whether discrimination is the
primary explanation for observed business disparities for minorities and women. If
disparity indexes remain adverse, large, and statistically significant throughout
Models A, B and C, then the answer is ‘‘Yes.’’
b. Data
The data used for the analyses in this section are the most recent 2014–2018
American Community Survey 5-year Public Use Microdata Sample (ACS), which al-
lows us to examine business outcomes for different race, ethnic, and gender groups
in great detail while holding constant a wide variety of other demographic and eco-
nomic variables.36
The analyses undertaken in this section require individual-level data (i.e.,
‘‘microdata’’) with relevant information on business ownership status and other key
socioeconomic characteristics. The American Community Survey is an ongoing an-
nual survey covering the same type of information that was formerly collected in
the decennial census ‘‘long form.’’ The ACS is sent to approximately 3.5 million ad-
dresses annually, including housing units in all counties in the 50 states and the
District of Columbia.37 The PUMS file from the ACS contains records for a sub-
sample of the full ACS. The data used here are the multi-year estimates combining
the 2014 through 2018 ACS PUMS records. The combined file contains over six mil-
lion person-level records. The 2014–2018 ACS PUMS provides the full range of pop-
ulation and housing information collected in the annual ACS and in the decennial
census. Business ownership status is identified in the ACS PUMS through the ‘‘class
of worker’’ variable, which distinguishes the unincorporated and incorporated self-
employed from others in the labor force. The presence of the class of worker variable
allows us to construct a detailed cross-sectional sample of individual business own-
ers and their associated earnings. The ACS PUMS universe for all of the analyses
presented below includes all prime age (16–64) private sector labor force partici-
pants.
c. Economy-Wide Findings
I estimated Models A, B and C across four different industry groupings in the
U.S.: (1) the entire economy, (2) the construction sector, and (3) the Architecture/
Engineering sector. These results are reported below in Tables 10–12.
33 Regression analysis is a type of statistical analysis that examines the correlation between
two variables (‘‘regression’’) or three or more variables (‘‘multiple regression’’ or ‘‘multivariate
regression’’) in a mathematical model by determining the line of best fit through a series of data
points. In simpler terms, regression analysis is a statistical technique allowing the comparison
between certain business outcomes, such as business formation, business earnings, or loan deni-
als, and minority or female status, while holding other, potentially non-discriminatory factors,
such as geographic location, industry affiliation, education, age, or balance sheets, constant.
34 A person’s age is a widely used proxy for their labor market experience and enters the re-
gression equation quadratically.
35 Interest and dividend income and per capita personal income are included in the model in
their logarithmic forms.
36 These ACS data were released in January 2020. See U.S. Census Bureau (2020d).
37 U.S. Census Bureau (2013).
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For the economy as a whole, the results are presented in Table 10. Model A iden-
tifies large, adverse, and statistically significant disparities in business formation
rates in 2014–2018 for all minority groups and for women. The results for Model
A show:
• For African Americans, the observed self-employment rate is 5.7 percent and
the model predicts that it would be 6.7 percentage points higher—12.5 per-
cent—if African Americans faced the same market outcomes as non-minority
males. This yields a disparity index of 46.
• For Hispanics, the observed self-employment rate is 9.2 percent and the model
predicts that it would be 3.8 percentage points higher—13 percent—if Hispanics
faced the same market outcomes as non-minority males. This yields a disparity
index of 70.9.
• For Asian and Pacific Islanders, the observed self-employment rate is 10 per-
cent and the model predicts that it would be 3 percentage points higher—13
percent—if Asian and Pacific Islanders faced the same market outcomes as non-
minority males. This yields a disparity index of 76.8.
• For American Indians and Alaska Natives, the observed self-employment rate
is 8.7 percent and the model predicts that it would be 3.7 percentage points
higher—12.4 percent—if American Indians and Alaska Natives faced the same
market outcomes as non-minority males. This yields a disparity index of 70.3.
• For minorities as a group, the observed self-employment rate is 8.3 percent and
the model predicts that it would be 4.8 percentage points higher—13.1 per-
cent—if minorities as a group faced the same market outcomes as non-minority
males. This yields a disparity index of 63.2.
• For non-minority females, the observed self-employment rate is 9 percent and
the model predicts that it would be 4 percentage points higher—13 percent—
if non-minority females faced the same market outcomes as non-minority males.
This yields a disparity index of 69.1.
For minorities and women as a group, the observed self-employment rate is 8.6
percent and the model predicts that it would be 4.9 percentage points higher—13.4
percent—if minorities and women as a group faced the same market outcomes as
non-minority males. This yields a disparity index of 63.7.Despite the addition of im-
portant qualifications and capacity variables, the results for Model B show that, for
the economy as a whole, disparities in business formation rates remain large, ad-
verse, and statistically significant even when we compare individuals that are simi-
larly situated in terms of their educational attainment, their geographic location,
and their labor market experience. Specifically, the results for Model B show:
• For African Americans, the observed self-employment rate is 5.7 percent and
the model predicts that it would be 5.9 percentage points higher—11.6 per-
cent—if African Americans faced the same market outcomes as non-minority
males. This yields a disparity index of 49.5.
• For Hispanics, the observed self-employment rate is 9.2 percent and the model
predicts that it would be 3.3 percentage points higher—12.5 percent—if His-
panics faced the same market outcomes as non-minority males. This yields a
disparity index of 73.9.
• For Asian and Pacific Islanders, the observed self-employment rate is 10 per-
cent and the model predicts that it would be 3.2 percentage points higher—13.1
percent—if Asian and Pacific Islanders faced the same market outcomes as non-
minority males. This yields a disparity index of 75.9.
• For American Indians and Alaska Natives, the observed self-employment rate
is 8.7 percent and the model predicts that it would be 3.5 percentage points
higher—12.2 percent—if American Indians and Alaska Natives faced the same
market outcomes as non-minority males. This yields a disparity index of 71.4.
• For minorities as a group, the observed self-employment rate is 9 percent and
the model predicts that it would be 3.6 percentage points higher—12.5 per-
cent—if minorities as a group faced the same market outcomes as non-minority
males. This yields a disparity index of 71.6.
• For non-minority females, the observed self-employment rate is 8.3 percent and
the model predicts that it would be 4.3 percentage points higher—12.6 per-
cent—if non-minority females faced the same market outcomes as non-minority
males. This yields a disparity index of 65.7.
• For minorities and women as a group, the observed self-employment rate is 8.6
percent and the model predicts that it would be 4.3 percentage points higher—
12.9 percent—if minorities and women as a group faced the same market out-
comes as non-minority males. This yields a disparity index of 66.5.
In Model C, numerous additional variables are included that measure individual
financial assets, family structure, mobility, immigration status, military status, and
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local macroeconomic conditions. Despite the inclusion of all these additional explan-
atory variables, the results still show that disparities in business formation rates
remain large, adverse, and statistically significant when we compare individuals
who are also similarly situated in terms of these additional measures. The specific
results for Model C show:
• For African Americans, the observed self-employment rate is 5.7 percent and
the model predicts that it would be 5.4 percentage points higher—11.2 per-
cent—if African Americans faced the same market outcomes as non-minority
males. This yields a disparity index of 51.5.
• For Hispanics, the observed self-employment rate is 9.2 percent and the model
predicts that it would be 4.3 percentage points higher—13.5 percent—if His-
panics faced the same market outcomes as non-minority males. This yields a
disparity index of 68.4.
• For Asian and Pacific Islanders, the observed self-employment rate is 10 per-
cent and the model predicts that it would be 5 percentage points higher—14.9
percent—if Asian and Pacific Islanders faced the same market outcomes as non-
minority males. This yields a disparity index of 66.7.
• For American Indians and Alaska Natives, the observed self-employment rate
is 8.7 percent and the model predicts that it would be 3.2 percentage points
higher—11.9 percent—if American Indians and Alaska Natives faced the same
market outcomes as non-minority males. This yields a disparity index of 73.3.
• For minorities as a group, the observed self-employment rate is 9 percent and
the model predicts that it would be 3.5 percentage points higher—12.4 per-
cent—if minorities as a group faced the same market outcomes as non-minority
males. This yields a disparity index of 72.1.
• For non-minority females, the observed self-employment rate is 8.3 percent and
the model predicts that it would be 5.1 percentage points higher—13.4 per-
cent—if non-minority females faced the same market outcomes as non-minority
males. This yields a disparity index of 61.9.
• For minorities and women as a group, the observed self-employment rate is 8.6
percent and the model predicts that it would be 4.5 percentage points higher—
13.1 percent—if minorities and women as a group faced the same market out-
comes as non-minority males. This yields a disparity index of 65.6.
Table 10. Actual and Potential Minority and Female Business Formation Rates, 2014–2018,
All Industries
Current Expected
Business Business
Formation Formation
Rate Rate Disparity
(%) (%) Index
Race, Location (1) (2) (3)
Regression Model A
African American .......................................................................................................... 5.74 12.48 45.99
Hispanic ........................................................................................................................ 9.21 12.99 70.90
Asian and Pacific Islander ........................................................................................... 9.96 12.97 76.79
American Indian and Alaska Native ............................................................................. 8.70 12.38 70.27
Two or More Races ....................................................................................................... 8.87 12.66 70.06
Minority ......................................................................................................................... 8.27 13.08 63.23
Non-minority female ..................................................................................................... 8.95 12.96 69.06
DBE ............................................................................................................................... 8.56 13.44 63.69
Non-minority male ........................................................................................................ 13.09
Regression Model B
African American .......................................................................................................... 5.74 11.60 49.48
Hispanic ........................................................................................................................ 9.21 12.46 73.92
Asian and Pacific Islander ........................................................................................... 9.96 13.12 75.91
American Indian and Alaska Native ............................................................................. 8.70 12.18 71.43
Two or More Races ....................................................................................................... 8.87 11.06 80.20
Minority ......................................................................................................................... 8.27 12.58 65.74
Non-minority female ..................................................................................................... 8.95 12.50 71.60
DBE ............................................................................................................................... 8.56 12.87 66.51
Non-minority male ........................................................................................................ 13.09
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Table 10. Actual and Potential Minority and Female Business Formation Rates, 2014–2018,
All Industries—Continued
Current Expected
Business Business
Formation Formation
Rate Rate Disparity
(%) (%) Index
Race, Location (1) (2) (3)
Regression Model C
African American .......................................................................................................... 5.74 11.15 51.48
Hispanic ........................................................................................................................ 9.21 13.46 68.42
Asian and Pacific Islander ........................................................................................... 9.96 14.93 66.71
American Indian and Alaska Native ............................................................................. 8.70 11.87 73.29
Two or More Races ....................................................................................................... 8.87 11.06 80.20
Minority ......................................................................................................................... 8.27 13.35 61.95
Non-minority female ..................................................................................................... 8.95 12.41 72.12
DBE ............................................................................................................................... 8.56 13.05 65.59
Non-minority male ........................................................................................................ 13.09
Source and Notes: Calculations by the author from the 2014–2018 ACS PUMS. Disparity Indexes in italics are statistically significant at a
95 percent probability level or better.
d. Findings for Construction
When the scope of the inquiry is limited to just the construction industries, the
results appear in Table 11. When we examine just the construction industry, Model
A identifies large, adverse, and statistically significant disparities in business for-
mation rates in 2014–2018 for all minority groups and for women. The results for
Model A show:
• For African Americans, the observed self-employment rate is 17.8 percent and
the model predicts that it would be 8.9 percentage points higher—26.6 per-
cent—if African Americans faced the same market outcomes as non-minority
males. This yields a disparity index of 66.7.
• For Hispanics, the observed self-employment rate is 17.9 percent and the model
predicts that it would be 8.7 percentage points higher—26.6 percent—if His-
panics faced the same market outcomes as non-minority males. This yields a
disparity index of 67.3.
• For Asian and Pacific Islanders, the observed self-employment rate is 23.6 per-
cent and the model predicts that it would be 3.9 percentage points higher—27.5
percent—if Asian and Pacific Islanders faced the same market outcomes as non-
minority males. This yields a disparity index of 85.9.
• For American Indians and Alaska Natives, the observed self-employment rate
is 19.1 percent and the model predicts that it would be 9.1 percentage points
higher—28.2 percent—if American Indians and Alaska Natives faced the same
market outcomes as non-minority males. This yields a disparity index of 67.9.
• For minorities as a group, the observed self-employment rate is 18.3 percent
and the model predicts that it would be 8.5 percentage points higher—26.8 per-
cent—if minorities as a group faced the same market outcomes as non-minority
males. This yields a disparity index of 68.2.
• For non-minority females, the observed self-employment rate is 17.9 percent
and the model predicts that it would be 9 percentage points higher—26.9 per-
cent—if non-minority females faced the same market outcomes as non-minority
males. This yields a disparity index of 66.5.
• For minorities and women as a group, the observed self-employment rate is 18.2
percent and the model predicts that it would be 8.9 percentage points higher—
27.1 percent—if minorities and women as a group faced the same market out-
comes as non-minority males. This yields a disparity index of 67.3.
Despite the addition of important qualifications and capacity variables, the results
for Model B show that, for the economy as a whole, disparities in business formation
rates remain large, adverse, and statistically significant even when we compare in-
dividuals that are similarly situated in terms of their educational attainment, their
geographic location, and their labor market experience. Specifically, the results for
Model B show:
• For African Americans, the observed self-employment rate is 17.8 percent and
the model predicts that it would be 8.7 percentage points higher—26.5 per-
cent—if African Americans faced the same market outcomes as non-minority
males. This yields a disparity index of 67.2.
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• For Hispanics, the observed self-employment rate is 17.9 percent and the model
predicts that it would be 5.6 percentage points higher—23.5 percent—if His-
panics faced the same market outcomes as non-minority males. This yields a
disparity index of 76.1.
• For Asian and Pacific Islanders, the observed self-employment rate is 23.6 per-
cent and the model predicts that it would be 2.9 percentage points higher—26.5
percent—if Asian and Pacific Islanders faced the same market outcomes as non-
minority males. This yields a disparity index of 89.1.
• For American Indians and Alaska Natives, the observed self-employment rate
is 19.1 percent and the model predicts that it would be 7.9 percentage points
higher—27 percent—if American Indians and Alaska Natives faced the same
market outcomes as non-minority males. This yields a disparity index of 70.9.
• For minorities as a group, the observed self-employment rate is 17.9 percent
and the model predicts that it would be 10 percentage points higher—27.9 per-
cent—if minorities as a group faced the same market outcomes as non-minority
males. This yields a disparity index of 64.1.
• For non-minority females, the observed self-employment rate is 18.3 percent
and the model predicts that it would be 6.1 percentage points higher—24.3 per-
cent—if non-minority females faced the same market outcomes as non-minority
males. This yields a disparity index of 75.
• For minorities and women as a group, the observed self-employment rate is 18.2
percent and the model predicts that it would be 7.5 percentage points higher—
25.7 percent—if minorities and women as a group faced the same market out-
comes as non-minority males. This yields a disparity index of 71.
In Model C, numerous additional variables are included that measure individual
financial assets, family structure, mobility, immigration status, military status, and
local macroeconomic conditions. Despite the inclusion of all these additional explan-
atory variables, the results still show that disparities in business formation rates
remain large, adverse, and statistically significant when we compare individuals
who are also similarly situated in terms of these additional measures. The specific
results for Model C show:
• For African Americans, the observed self-employment rate is 17.8 percent and
the model predicts that it would be 7.5 percentage points higher—25.3 per-
cent—if African Americans faced the same market outcomes as non-minority
males. This yields a disparity index of 70.4.
• For Hispanics, the observed self-employment rate is 17.9 percent and the model
predicts that it would be 9 percentage points higher—26.9 percent—if Hispanics
faced the same market outcomes as non-minority males. This yields a disparity
index of 66.5.
• For Asian and Pacific Islanders, the observed self-employment rate is 23.6 per-
cent and the model predicts that it would be 6.8 percentage points higher—30.5
percent—if Asian and Pacific Islanders faced the same market outcomes as non-
minority males. This yields a disparity index of 77.6.
• For American Indians and Alaska Natives, the observed self-employment rate
is 19.1 percent and the model predicts that it would be 7.9 percentage points
higher—27.1 percent—if American Indians and Alaska Natives faced the same
market outcomes as non-minority males. This yields a disparity index of 70.7.
• For minorities as a group, the observed self-employment rate is 17.9 percent
and the model predicts that it would be 10.3 percentage points higher—28.2
percent—if minorities as a group faced the same market outcomes as non-mi-
nority males. This yields a disparity index of 63.4.
• For non-minority females, the observed self-employment rate is 18.3 percent
and the model predicts that it would be 8.1 percentage points higher—26.4 per-
cent—if non-minority females faced the same market outcomes as non-minority
males. This yields a disparity index of 69.2.
• For minorities and women as a group, the observed self-employment rate is 18.2
percent and the model predicts that it would be 9.5 percentage points higher—
27.7 percent—if minorities and women as a group faced the same market out-
comes as non-minority males. This yields a disparity index of 65.8.
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Table 11. Actual and Potential Minority Business and Female Formation Rates, 2014–2018,
Construction
Current Expected
Business Business
Formation Formation
Rate Rate Disparity
(%) (%) Index
Race, Location (1) (2) (3)
Regression Model A
African American .......................................................................................................... 17.78 26.64 66.74
Hispanic ........................................................................................................................ 17.90 26.58 67.34
Asian and Pacific Islander ........................................................................................... 23.64 27.52 85.90
American Indian and Alaska Native ............................................................................. 19.13 28.19 67.86
Two or More Races ....................................................................................................... 20.10 25.79 77.94
Minority ......................................................................................................................... 18.25 26.77 68.17
Non-minority female ..................................................................................................... 17.91 26.92 66.53
DBE ............................................................................................................................... 18.20 27.06 67.26
Non-minority male ........................................................................................................ 26.84
Regression Model B
African American .......................................................................................................... 17.78 26.47 67.17
Hispanic ........................................................................................................................ 17.90 23.52 76.11
Asian and Pacific Islander ........................................................................................... 23.64 26.53 89.11
American Indian and Alaska Native ............................................................................. 19.13 27.00 70.85
Two or More Races ....................................................................................................... 20.10 22.43 89.61
Minority ......................................................................................................................... 18.25 24.33 75.01
Non-minority female ..................................................................................................... 17.91 27.92 64.15
DBE ............................................................................................................................... 18.20 25.65 70.96
Non-minority male ........................................................................................................ 26.84
Regression Model C
African American .......................................................................................................... 17.78 25.27 70.36
Hispanic ........................................................................................................................ 17.90 26.90 66.54
Asian and Pacific Islander ........................................................................................... 23.64 30.45 77.64
American Indian and Alaska Native ............................................................................. 19.13 27.06 70.69
Two or More Races ....................................................................................................... 20.10 22.62 88.86
Minority ......................................................................................................................... 18.25 28.24 63.42
Non-minority female ..................................................................................................... 17.91 26.38 69.18
DBE ............................................................................................................................... 18.20 27.65 65.82
Non-minority male ........................................................................................................ 26.84
Source and Notes: See Table 10.
e. Findings for Architecture/Engineering
When the scope of the inquiry is limited to just the Architecture/Engineering in-
dustries, the results appear in Table 12. When we examine just the Architecture/
Engineering industries, Model A identifies large, adverse, and statistically signifi-
cant disparities in business formation rates in 2014–2018 for all minority groups
and for women. The results for Model A show:
• For African Americans, the observed self-employment rate is 6.5 percent and
the model predicts that it would be 5.2 percentage points higher—11.8 per-
cent—if African Americans faced the same market outcomes as non-minority
males. This yields a disparity index of 55.6.
• For Hispanics, the observed self-employment rate is 8.4 percent and the model
predicts that it would be 3.4 percentage points higher—11.8 percent—if His-
panics faced the same market outcomes as non-minority males. This yields a
disparity index of 71.1.
• For Asian and Pacific Islanders, the observed self-employment rate is 6.5 per-
cent and the model predicts that it would be 5.1 percentage points higher—11.5
percent—if Asian and Pacific Islanders faced the same market outcomes as non-
minority males. This yields a disparity index of 55.9.
• For American Indians and Alaska Natives, the observed self-employment rate
is 6.2 percent and the model predicts that it would be 5.3 percentage points
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higher—11.5 percent—if American Indians and Alaska Natives faced the same
market outcomes as non-minority males. This yields a disparity index of 53.7.
• For minorities as a group, the observed self-employment rate is 7.4 percent and
the model predicts that it would be 4.5 percentage points higher—11.9 per-
cent—if minorities as a group faced the same market outcomes as non-minority
males. This yields a disparity index of 62.
• For non-minority females, the observed self-employment rate is 7.8 percent and
the model predicts that it would be 4.2 percentage points higher—12 percent—
if non-minority females faced the same market outcomes as non-minority males.
This yields a disparity index of 65.4.
• For minorities and women as a group, the observed self-employment rate is 7.6
percent and the model predicts that it would be 4.7 percentage points higher—
12.3 percent—if minorities and women as a group faced the same market out-
comes as non-minority males. This yields a disparity index of 62.
Despite the addition of important qualifications and capacity variables, the results
for Model B show that, for the economy as a whole, disparities in business formation
rates remain large, adverse, and statistically significant even when we compare in-
dividuals that are similarly situated in terms of their educational attainment, their
geographic location, and their labor market experience. Specifically, the results for
Model B show:
• For African Americans, the observed self-employment rate is 6.5 percent and
the model predicts that it would be 3.6 percentage points higher—10.1 per-
cent—if African Americans faced the same market outcomes as non-minority
males. This yields a disparity index of 64.6.
• For Hispanics, the observed self-employment rate is 8.4 percent and the model
predicts that it would be 1.6 percentage points higher—9.9 percent—if His-
panics faced the same market outcomes as non-minority males. This yields a
disparity index of 84.4.
• For Asian and Pacific Islanders, the observed self-employment rate is 6.5 per-
cent and the model predicts that it would be 4.4 percentage points higher—10.9
percent—if Asian and Pacific Islanders faced the same market outcomes as non-
minority males. This yields a disparity index of 59.2.
• For American Indians and Alaska Natives, the observed self-employment rate
is 6.2 percent and the model predicts that it would be 4.4 percentage points
higher—10.5 percent—if American Indians and Alaska Natives faced the same
market outcomes as non-minority males. This yields a disparity index of 58.6.
• For minorities as a group, the observed self-employment rate is 7.8 percent and
the model predicts that it would be 3.1 percentage points higher—11 percent—
if minorities as a group faced the same market outcomes as non-minority males.
This yields a disparity index of 71.4.
• For non-minority females, the observed self-employment rate is 7.4 percent and
the model predicts that it would be 3.1 percentage points higher—10.5 per-
cent—if non-minority females faced the same market outcomes as non-minority
males. This yields a disparity index of 70.5.
• For minorities and women as a group, the observed self-employment rate is 7.6
percent and the model predicts that it would be 3.3 percentage points higher—
10.9 percent—if minorities and women as a group faced the same market out-
comes as non-minority males. This yields a disparity index of 69.6.
In Model C, numerous additional variables are included that measure individual
financial assets, family structure, mobility, immigration status, military status, and
local macroeconomic conditions. Despite the inclusion of all these additional explan-
atory variables, the results still show that disparities in business formation rates
remain large, adverse, and statistically significant when we compare individuals
who are also similarly situated in terms of these additional measures. The specific
results for Model C show:
• For African Americans, the observed self-employment rate is 6.5 percent and
the model predicts that it would be 3 percentage points higher—9.6 percent—
if African Americans faced the same market outcomes as non-minority males.
This yields a disparity index of 68.3.
• For Hispanics, the observed self-employment rate is 8.4 percent and the model
predicts that it would be 1.8 percentage points higher—10.2 percent—if His-
panics faced the same market outcomes as non-minority males. This yields a
disparity index of 82.3.
• For Asian and Pacific Islanders, the observed self-employment rate is 6.5 per-
cent and the model predicts that it would be 4.9 percentage points higher—11.4
percent—if Asian and Pacific Islanders faced the same market outcomes as non-
minority males. This yields a disparity index of 56.7.
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• For American Indians and Alaska Natives, the observed self-employment rate
is 6.2 percent and the model predicts that it would be 4.1 percentage points
higher—10.3 percent—if American Indians and Alaska Natives faced the same
market outcomes as non-minority males. This yields a disparity index of 60.3.
• For minorities as a group, the observed self-employment rate is 7.8 percent and
the model predicts that it would be 3.4 percentage points higher—11.2 per-
cent—if minorities as a group faced the same market outcomes as non-minority
males. This yields a disparity index of 69.9.
• For non-minority females, the observed self-employment rate is 7.4 percent and
the model predicts that it would be 3.1 percentage points higher—10.5 per-
cent—if non-minority females faced the same market outcomes as non-minority
males. This yields a disparity index of 70.5.
• For minorities and women as a group, the observed self-employment rate is 7.6
percent and the model predicts that it would be 3.5 percentage points higher—
11.1 percent—if minorities and women as a group faced the same market out-
comes as non-minority males. This yields a disparity index of 68.5.
Table 12. Actual and Potential Minority and Female Business Formation Rates, 2014–2018,
Architecture/Engineering
Current Expected
Business Business
Formation Formation
Rate Rate Disparity
(%) (%) Index
Race, Location (1) (2) (3)
Regression Model A
African American .......................................................................................................... 6.54 11.77 55.56
Hispanic ........................................................................................................................ 8.37 11.78 71.05
Asian and Pacific Islander ........................................................................................... 6.45 11.54 55.89
American Indian and Alaska Native ............................................................................. 6.18 11.50 53.74
Two or More Races ....................................................................................................... 8.68 11.92 72.82
Minority ......................................................................................................................... 7.40 11.94 61.98
Non-minority female ..................................................................................................... 7.84 11.99 65.39
DBE ............................................................................................................................... 7.60 12.25 62.04
Non-minority male ........................................................................................................ 12.15
Regression Model B
African American .......................................................................................................... 6.54 10.13 64.56
Hispanic ........................................................................................................................ 8.37 9.92 84.38
Asian and Pacific Islander ........................................................................................... 6.45 10.89 59.23
American Indian and Alaska Native ............................................................................. 6.18 10.54 58.63
Two or More Races ....................................................................................................... 8.68 9.83 88.30
Minority ......................................................................................................................... 7.40 10.50 70.48
Non-minority female ..................................................................................................... 7.84 10.98 71.40
DBE ............................................................................................................................... 7.60 10.92 69.60
Non-minority male ........................................................................................................ 12.15
Regression Model C
African American .......................................................................................................... 6.54 9.58 68.27
Hispanic ........................................................................................................................ 8.37 10.17 82.30
Asian and Pacific Islander ........................................................................................... 6.45 11.37 56.73
American Indian and Alaska Native ............................................................................. 6.18 10.25 60.29
Two or More Races ....................................................................................................... 8.68 9.85 88.12
Minority ......................................................................................................................... 7.40 10.49 70.54
Non-minority female ..................................................................................................... 7.84 11.22 69.88
DBE ............................................................................................................................... 7.60 11.09 68.53
Non-minority male ........................................................................................................ 12.15
Source and Notes: See Table 10.
2. Discrimination Impacting Business Earnings
Even for those disproportionately few minority and female entrepreneurs who
manage against the odds—as we have just seen from the results in Tables 10–12—
to form their own businesses, their earnings from those businesses tend to lag far
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behind their non-minority male counterparts. These disparities, just as those ob-
served with respect to business formation, tend to remain large, adverse, and statis-
tically significant—even when other important non-discriminatory attributes are
held constant.
a. Methods and Data
I examined deficits in business owner earnings between minorities, women, and
their non-minority male counterparts using the same framework as above. Model A
included only the race, sex, and time indicators, thus showing the raw disparities
in earnings between the groups. Model B consisted of our set of qualifications and
capacity controls, which include educational attainment, geographic location, and
labor market experience. Finally, Model C included all the controls from Models A
and B plus those for individual financial assets, family structure, mobility, immigra-
tion status, military status, and local macroeconomic conditions.
b. Economy-Wide Findings
As shown in Table 13, the baseline regression equation (Model A) includes only
indicators for race, sex and time. This is the raw difference in earnings between mi-
nority and women business owners, one the one hand, and non-minority male busi-
ness owners, on the other. The results for Model A show:
• African American business owners earned 46.2 percent less than non-minority
male business owners from 2014–2018. In other words, for each dollar of busi-
ness earnings accruing to non-minority males, African American business own-
ers made just 54 cents.
• Hispanic business owners earned 26.9 percent less than non-minority male
business owners from 2014–2018. For each dollar of business earnings accruing
to non-minority males, Hispanic business owners made just 73 cents.
• Asian and Pacific business owners earned 8.9 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, Asian and Pacific business owners made just 91
cents.
• Native business owners earned 44 percent less than non-minority male business
owners from 2014–2018. For each dollar of business earnings accruing to non-
minority males, Native business owners made just 56 cents.
• Minority business owners earned 29.9 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, minority business owners made just 70 cents.
• Non-minority female business owners earned 46.3 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, non-minority female business owners made just
54 cents.
• Minority and Female business owners earned 39.2 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, minority and female business owners made just
61 cents.
In Model B, which accounts for some common qualifications and capacity controls,
we observe small changes in both directions for all the groups except Asian and Pa-
cific Islanders, for whom the business earnings gap increases significantly compared
to Model A. Specifically, the results for Model B show:
• African American business owners earned 44.8 percent less than non-minority
male business owners from 2014–2018. In other words, for each dollar of busi-
ness earnings accruing to non-minority males, African American business own-
ers made just 55 cents.
• Hispanic business owners earned 26.1 percent less than non-minority male
business owners from 2014–2018. For each dollar of business earnings accruing
to non-minority males, Hispanic business owners made just 74 cents.
• Asian and Pacific business owners earned 18.2 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, Asian and Pacific business owners made just 82
cents.
• Native business owners earned 40.6 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, Native business owners made just 59 cents.
• Minority business owners earned 30.9 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, minority business owners made just 69 cents.
• Non-minority female business owners earned 45 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
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cruing to non-minority males, non-minority female business owners made just
55 cents.
• Minority and Female business owners earned 39.6 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, minority and female business owners made just
60 cents.
In Model C, which accounts for a large set of additional explanatory variables re-
lated to business owner earnings, we again observe small changes in both directions
for all the groups except Asian and Pacific Islanders, for whom the business earn-
ings gap increases significantly compared to Model B. Specifically, the results for
Model C show:
• African American business owners earned 38.2 percent less than non-minority
male business owners from 2014–2018. In other words, for each dollar of busi-
ness earnings accruing to non-minority males, African American business own-
ers made just 62 cents.
• Hispanic business owners earned 29.4 percent less than non-minority male
business owners from 2014–2018. For each dollar of business earnings accruing
to non-minority males, Hispanic business owners made just 71 cents.
• Asian and Pacific business owners earned 28.9 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, Asian and Pacific business owners made just 71
cents.
• Native business owners earned 36.9 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, Native business owners made just 63 cents.
• Minority business owners earned 44.4 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, minority business owners made just 56 cents.
• Non-minority female business owners earned 33.3 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, non-minority female business owners made just
67 cents.
• Minority and Female business owners earned 41.1 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, minority and female business owners made just
59 cents.
All of these economy-wide findings are statistically significant at a 95 percent
probability level or better.
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Table 13. Minority and Female Business Owner Earnings Disparities, All Industries
Cents
Earned Per
Business Dollar of
Earnings Non-Minority
Deficit Male
(%) Earnings
Race, Location (1) (2)
Regression Model A
African American ................................................................................................................................. –46.2 54¢
Hispanic ............................................................................................................................................... –26.9 73¢
Asian and Pacific Islander .................................................................................................................. –8.9 91¢
American Indian and Alaska Native ................................................................................................... –44.0 56¢
Two or More Races .............................................................................................................................. –45.3 55¢
Minority ................................................................................................................................................ –29.9 70¢
Non-minority female ............................................................................................................................ –46.3 54¢
DBE ...................................................................................................................................................... –39.2 61¢
Regression Model B
African American ................................................................................................................................. –44.8 55¢
Hispanic ............................................................................................................................................... –26.1 74¢
Asian and Pacific Islander .................................................................................................................. –18.2 82¢
American Indian and Alaska Native ................................................................................................... –40.6 59¢
Two or More Races .............................................................................................................................. –40.1 60¢
Minority ................................................................................................................................................ –30.9 69¢
Non-minority female ............................................................................................................................ –45.0 55¢
DBE ...................................................................................................................................................... –39.6 60¢
Regression Model C
African American ................................................................................................................................. –38.2 62¢
Hispanic ............................................................................................................................................... –29.4 71¢
Asian and Pacific Islander .................................................................................................................. –28.9 71¢
American Indian and Alaska Native ................................................................................................... –36.9 63¢
Two or More Races .............................................................................................................................. –37.9 62¢
Minority ................................................................................................................................................ –33.3 67¢
Non-minority female ............................................................................................................................ –44.4 56¢
DBE ...................................................................................................................................................... –41.1 59¢
Source and Notes: Calculations by the author from the 2014–2018 ACS PUMS. Figures in italics are statistically significant at a 95 percent
probability level or better.
c. Findings for Construction
As shown in Table 14, the baseline regression equation (Model A) includes only
indicators for race, sex and time. This is the raw difference in earnings between mi-
nority and women business owners, one the one hand, and non-minority male busi-
ness owners, on the other. The results for Model A show:
• African American business owners earned 40.4 percent less than non-minority
male business owners from 2014–2018. In other words, for each dollar of busi-
ness earnings accruing to non-minority males, African American business own-
ers made just 60 cents.
• Hispanic business owners earned 12.4 percent less than non-minority male
business owners from 2014–2018. For each dollar of business earnings accruing
to non-minority males, Hispanic business owners made just 88 cents.
• Asian and Pacific business owners earned 1.1 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, Asian and Pacific business owners made just 99
cents.
• Native business owners earned 30.4 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, Native business owners made just 70 cents.
• Minority business owners earned 17.3 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, minority business owners made just 83 cents.
• Non-minority female business owners earned 45.6 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
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accruing to non-minority males, non-minority female business owners made just
54 cents.
• Minority and Female business owners earned 22.3 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, minority and female business owners made just
78 cents.
In Model B, which accounts for some common qualifications and capacity controls,
we observe small changes in both directions for all the groups except Asian and Pa-
cific Islanders, for whom the business earnings gap increases significantly compared
to Model A. Specifically, the results for Model B show:
• African American business owners earned 39.9 percent less than non-minority
male business owners from 2014–2018. In other words, for each dollar of busi-
ness earnings accruing to non-minority males, African American business own-
ers made just 60 cents.
• Hispanic business owners earned 11 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, Hispanic business owners made just 89 cents.
• Asian and Pacific business owners earned 10.7 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, Asian and Pacific business owners made just 89
cents.
• Native business owners earned 26.9 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, Native business owners made just 73 cents.
• Minority business owners earned 18.5 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, minority business owners made just 82 cents.
• Non-minority female business owners earned 46.4 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, non-minority female business owners made just
54 cents.
• Minority and Female business owners earned 25.1 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, minority and female business owners made just
75 cents.
In Model C, which accounts for a large set of additional explanatory variables re-
lated to business owner earnings, we again observe small changes in both directions
for all the groups except Asian and Pacific Islanders, for whom the business earn-
ings gap increases significantly compared to Model B. Specifically, the results for
Model C show:
• African American business owners earned 32.8 percent less than non-minority
male business owners from 2014–2018. In other words, for each dollar of busi-
ness earnings accruing to non-minority males, African American business own-
ers made just 67 cents.
• Hispanic business owners earned 16.7 percent less than non-minority male
business owners from 2014–2018. For each dollar of business earnings accruing
to non-minority males, Hispanic business owners made just 83 cents.
• Asian and Pacific business owners earned 21.6 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, Asian and Pacific business owners made just 78
cents.
• Native business owners earned 22.2 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, Native business owners made just 78 cents.
• Minority business owners earned 47.5 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, minority business owners made just 52 cents.
• Non-minority female business owners earned 22.5 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, non-minority female business owners made just
78 cents.
• Minority and Female business owners earned 30.7 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, minority and female business owners made just
69 cents.
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With only one exception, once again, all of these findings for the construction re-
gressions are statistically significant at a 95 percent probability level or better.38
Table 14. Minority and Female Business Owner Earnings Disparities, Construction
Cents
Earned Per
Business Dollar of
Earnings Non-Minority
Deficit Male
(%) Earnings
Race, Location (1) (2)
Regression Model A
African American ................................................................................................................................. –40.4 60¢
Hispanic ............................................................................................................................................... –12.4 88¢
Asian and Pacific Islander .................................................................................................................. –1.1 99¢
American Indian and Alaska Native ................................................................................................... –30.4 70¢
Two or More Races .............................................................................................................................. –29.0 71¢
Minority ................................................................................................................................................ –17.3 83¢
Non-minority female ............................................................................................................................ –45.6 54¢
DBE ...................................................................................................................................................... –22.3 78¢
Regression Model B
African American ................................................................................................................................. –39.9 60¢
Hispanic ............................................................................................................................................... –11.0 89¢
Asian and Pacific Islander .................................................................................................................. –10.7 89¢
American Indian and Alaska Native ................................................................................................... –26.9 73¢
Two or More Races .............................................................................................................................. –28.3 72¢
Minority ................................................................................................................................................ –18.5 82¢
Non-minority female ............................................................................................................................ –46.4 54¢
DBE ...................................................................................................................................................... –25.1 75¢
Regression Model C
African American ................................................................................................................................. –32.8 67¢
Hispanic ............................................................................................................................................... –16.7 83¢
Asian and Pacific Islander .................................................................................................................. –21.6 78¢
American Indian and Alaska Native ................................................................................................... –22.2 78¢
Two or More Races .............................................................................................................................. –25.8 74¢
Minority ................................................................................................................................................ –22.5 78¢
Non-minority female ............................................................................................................................ –47.5 52¢
DBE ...................................................................................................................................................... –30.7 69¢
Source and Notes: See Table 13.
d. Findings for Architecture/Engineering
As shown in Table 15, the baseline regression equation (Model A) includes only
indicators for race, sex and time. This is the raw difference in earnings between mi-
nority and women business owners, one the one hand, and non-minority male busi-
ness owners, on the other. The results for Model A show:
• African American business owners earned 59.2 percent less than non-minority
male business owners from 2014–2018. In other words, for each dollar of busi-
ness earnings accruing to non-minority males, African American business own-
ers made just 41 cents.
• Hispanic business owners earned 16.3 percent less than non-minority male
business owners from 2014–2018. For each dollar of business earnings accruing
to non-minority males, Hispanic business owners made just 84 cents.
• Asian and Pacific business owners earned 23.4 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, Asian and Pacific business owners made just 77
cents.
• Native business owners earned 60.8 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, Native business owners made just 39 cents.
38 The sole exception is again the result in Model A for Asian and Pacific Islanders. However
this result was not statistically significant.
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• Minority business owners earned 30 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, minority business owners made just 70 cents.
• Non-minority female business owners earned 46 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, non-minority female business owners made just
54 cents.
• Minority and Female business owners earned 39 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, minority and female business owners made just
61 cents.
In Model B, which accounts for some common qualifications and capacity controls,
we observe once again just small changes in both directions for all the groups except
Asian and Pacific Islanders, for whom the business earnings gap increases signifi-
cantly compared to Model A. Specifically, the results for Model B show:
• African American business owners earned 55 percent less than non-minority
male business owners from 2014–2018. In other words, for each dollar of busi-
ness earnings accruing to non-minority males, African American business own-
ers made just 45 cents.
• Hispanic business owners earned 6.9 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, Hispanic business owners made just 93 cents.
• Asian and Pacific business owners earned 28.1 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, Asian and Pacific business owners made just 72
cents.
• Native business owners earned 70.5 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, Native business owners made just 30 cents.
• Minority business owners earned 27.2 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, minority business owners made just 73 cents.
• Non-minority female business owners earned 43.4 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, non-minority female business owners made just
57 cents.
• Minority and Female business owners earned 36.7 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, minority and female business owners made just
63 cents.
In Model C, which accounts for a large set of additional explanatory variables re-
lated to business owner earnings, we again observe just small changes in both direc-
tions for all groups. Specifically, the results for Model C show:
• African American business owners earned 50.6 percent less than non-minority
male business owners from 2014–2018. In other words, for each dollar of busi-
ness earnings accruing to non-minority males, African American business own-
ers made just 49 cents.
• Hispanic business owners earned 9.1 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, Hispanic business owners made just 91 cents.
• Asian and Pacific business owners earned 30.7 percent less than non-minority
male business owners from 2014–2018. For each dollar of business earnings ac-
cruing to non-minority males, Asian and Pacific business owners made just 69
cents.
• Native business owners earned 71 percent less than non-minority male business
owners from 2014–2018. For each dollar of business earnings accruing to non-
minority males, Native business owners made just 29 cents.
• Minority business owners earned 45.1 percent less than non-minority male busi-
ness owners from 2014–2018. For each dollar of business earnings accruing to
non-minority males, minority business owners made just 55 cents.
• Non-minority female business owners earned 28.9 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
accruing to non-minority males, non-minority female business owners made just
71 cents.
• Minority and Female business owners earned 39.5 percent less than non-minor-
ity male business owners from 2014–2018. For each dollar of business earnings
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91
accruing to non-minority males, minority and female business owners made just
60 cents.
With only two exceptions, all of these findings for the Architecture/Engineering
regressions are statistically significant at a 95 percent probability level or better.39
Table 15. Minority and Female Business Owner Earnings Disparities, Architecture/Engineering
Cents
Earned Per
Business Dollar of
Earnings Non-Minority
Deficit Male
(%) Earnings
Race, Location (1) (2)
Regression Model A
African American ................................................................................................................................. –59.2 41¢
Hispanic ............................................................................................................................................... –16.3 84¢
Asian and Pacific Islander .................................................................................................................. –23.4 77¢
American Indian and Alaska Native ................................................................................................... –60.8 39¢
Two or More Races .............................................................................................................................. –39.0 61¢
Minority ................................................................................................................................................ –30.0 70¢
Non-minority female ............................................................................................................................ –46.0 54¢
DBE ...................................................................................................................................................... –39.0 61¢
Regression Model B
African American ................................................................................................................................. –55.0 45¢
Hispanic ............................................................................................................................................... –6.9 93¢
Asian and Pacific Islander .................................................................................................................. –28.1 72¢
American Indian and Alaska Native ................................................................................................... –70.5 30¢
Two or More Races .............................................................................................................................. –32.3 68¢
Minority ................................................................................................................................................ –27.2 73¢
Non-minority female ............................................................................................................................ –43.4 57¢
DBE ...................................................................................................................................................... –36.7 63¢
Regression Model C
African American ................................................................................................................................. –50.6 49¢
Hispanic ............................................................................................................................................... –9.1 91¢
Asian and Pacific Islander .................................................................................................................. –30.7 69¢
American Indian and Alaska Native ................................................................................................... –71.0 29¢
Two or More Races .............................................................................................................................. –27.9 72¢
Minority ................................................................................................................................................ –28.9 71¢
Non-minority female ............................................................................................................................ –45.1 55¢
DBE ...................................................................................................................................................... –39.5 60¢
Source and Notes: See Table 13.
e. Conclusions from American Community Survey Data
This section has documented that when we examine the status of minorities and
women compared to non-minority males in the industry segments relevant to Fed-
eral surface and aviation transportation funding, the results look very similar to
what we observe elsewhere in the economy.
That is, even when other non-discriminatory factors are held constant using the
statistical technique of regression analysis, the disparities in business formation
rates between African Americans, Hispanics, Asians and Pacific Islanders, American
Indians and Alaska Natives, and women, on the one hand, and their non-minority
male counterparts, on the other, remain large, adverse, and statistically significant.
I have documented such disparities in this testimony for the Nation as a whole and
throughout the states, and in the economy as a whole as well as in Construction
and Architecture/Engineering, which are key industries with respect to Federal sur-
face and aviation transportation funding.
Furthermore, I have documented that even for those minority and female entre-
preneurs who manage against the odds to form their own businesses, their earnings
39 The exceptions are the results in Models B and C for Hispanics.
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from those businesses lag far behind their non-minority male counterparts.40 These
disparities as well remain large, adverse, and statistically significant even when
other non-discriminatory attributes are held constant.
These results are fully consistent with the conclusion that discrimination con-
tinues to adversely affect minorities and women operating in United States business
markets, and in particular those markets that are relevant to Federal surface and
aviation transportation funding.
E. OVERALL CONCLUSIONS
In preparing this testimony, I conducted extensive original research using almost
100 previously produced disparity studies, and current and past data from the Sur-
vey of Business Owners, the Annual Business Survey, and the American Community
Survey. This research is a continuation of similar research I have performed over
the course of my career as an economist. Based on the findings presented above,
I conclude that there is strong evidence, both past and present, of large, adverse,
and statistically significant disparities facing minority-owned and women-owned
business enterprises in the United States. Moreover, these disparities cannot be ex-
plained solely, or even primarily, by differences between the relevant populations
in factors untainted by the effects of discrimination. These disparities are primarily
due to discrimination, in the economy as a whole, as well as in the markets such
as construction, architecture, and engineering that most relevant to Federal surface
and aviation transportation funding.
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Lau, Yvonne M. 2009. Profiles on Asian Americans in Construction—A Study for
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40 In addition to the analyses of business owner earnings, I also ran comparable analyses on
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Mr. DEFAZIO. Thank you, Dr. Wainwright, a good summary of 90
pages of comprehensive research. So thanks very much. Your full
research will be entered into the record.
So now we will proceed to questions. Each Member will have 5
minutes to question the witnesses. I will first begin by recognizing
myself.
Ms. Boyer, in addition to your testimony today, you sent a com-
pelling letter to the committee, when the committee reauthorized
the DBE program in H.R. 2 earlier this year. I ask unanimous con-
sent to put this letter in the record.
Without objection.
[The information follows:]
f
Letter of June 25, 2020, from Geri E. Boyer, P.E., President, Kaskaskia En-
gineering Group, LLC, Submitted for the Record by Hon. Peter A. DeFa-
zio
JUNE 25, 2020.
Congressman PETER DEFAZIO,
Chairman,
House Committee on Transportation and Infrastructure, United States House of Rep-
resentatives, Washington, DC.
RE: Response to the request from the Committee on Transportation and Infrastruc-
ture for a letter or statement on the Disadvantaged Business Enterprise Pro-
gram.
DEAR CONGRESSMAN DEFAZIO:
I am a licensed professional engineer and sole owner of Kaskaskia Engineering
Group, a civil engineering design firm. My firm has had the opportunity to work
on public infrastructure projects across the Midwest, and approximately 82% of the
$10,000,000 of work done every year can be attributed to the Disadvantaged Busi-
ness Enterprise Program (DBE). It is because of the DBE Program that my firm
is in existence and continues to grow.
For the first twenty five years of my civil engineering career, I experienced dis-
crimination on many levels including advancement and salary. I was told over and
over by supervisors at a state agency that although I was an overachiever and did
excellent work it would not be reflected in my yearly raise because I was not ‘‘the
breadwinner’’ of my family. When I left that agency, the lowest paid managers were
all women. In those years, I was also told that I needed to make a choice between
being an engineer and being a mother. My inspiration for started my own firm was
to take care of myself, to have the flexibility to work while being a mother, and to
afford those same opportunities to other women and men.
The only reason I was able to start my own business was the DBE program. I
worked with DBE firms while employed by a large ‘‘white-male led’’ company, and
realized that with the help of the program, I could be a business owner. I survived
the first year while working through the certification processed on small city
projects I got because of my reputation. Those projects were small and it was only
enough fee to keep a few people busy. Once I was BDE certified, many consulting
firms used my firm to satisfy their DBE requirement. My firm grew fast once I had
the certification.
Even though I have been in business for 14 years and won several statewide
awards for my engineering, I still cannot compete with established engineering
firms owned/managed by white-males. I have participated in many equity surveys
and discussions, and the question always comes up about the need for this program
to continue. I can testify that without this program, the work I get on federal and
state infrastructure projects would cease. The only reason other firms team with me
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is because I am a certified DBE firm first and then because I do excellent work.
I am not their buddy. I do not look like them. Large firms do and will continue to
keep all the work for themselves unless they are mandated to give a percentage
away. Small firms do not have the capacity to propose on large projects by them-
selves, so without the DBE program, small firms would never have a chance to work
on a portion of these large projects.
Instead of discussing if the program is needed, the discussion should center
around expanding the program by increasing the limits and making the program
more accessible. A policy of helping small businesses owned and controlled by so-
cially and economically disadvantaged individuals, including minorities and women,
participating in contracting opportunities created by Department of Transportation
(DOT) financial assistance programs, has been in effect for more than 20 years. It
has had several revisions which has made the program function more efficiently for
business such as the Unified Certification Program (UCP) and the interstate certifi-
cation provision. But there is still more that needs to be done to help this program
be more successful.
In an ever changing and volatile business market, corporate growth and stability
rely on diversification strategies, which often include providing services to multiple
federal, state, and local agencies, as well as private corporations across regional, na-
tional, and international markets. Diversification has long been a successful strat-
egy for large businesses, but it is just as important for the survival and development
of small firms.
Firms owned by women and minority groups that want to employ diversification
strategies are encumbered by the individual state agencies that do not want to ac-
cept the DBE’s certification from their cognizant certifying agency. The amended 49
CFR Part 26, which went into effect on November 3, 2014, implemented a revised
uniform certification application and reporting forms and created a uniform personal
net worth form for use by applicant owners, which collects the data required by the
Department’s Surface Transportation Reauthorization, Moving Ahead for Progress
in the 21st Century Act (MAP–21). Even though there is a uniform process, states
do not trust the certification process of neighboring states and require the entire ap-
plication again. This creates unnecessary work for the DBE firm and the public
agency who both have limited time and budget pressures. And with the rising prob-
lem of identity theft, it’s stressful to be sending all your personal information to
multiple agencies in multiple states.
A national unified program could strengthen, streamline, and simplify the DBE
certification program, creating a program that is more efficient and effective for
women and minority firms working for multiple agencies across multiple states. A
National UCP to serve as a ‘‘one-stop shopping’’ to applicants for certification is
needed. Any state agency using the unified certification application could be a co-
ordinating member of the National UCP, and its certification would be recognized
as a National UCP. Under a National UCP, the firm applies one time for certifi-
cation as DBE with their participating cognizant agency or a national organization.
If approved, that certification would be honored by all recipients of federally funded
and non-federally funded projects in all states. The National UCP would only certify
firms using the unified certification application. Prequalification, determination if
an applicant has the requisite resources and experience to complete the service/cat-
egory as required, would remain with the contracting agency.
The certification and record would be held by a national agency/organization, such
as the Federal Highway Administration (FHWA), National Council of Examiners for
Engineering and Surveying (NCEES) or Women’s Business Enterprise National
Council (WBENC). The FHWA has offices in every state and would be locally avail-
able to firms that have questions or need to meet in person. NCEES and WBENC
already have systems in place to review a standard application, evaluate its compli-
ance with federal regulations, and certify its credibility. They both allow for the
upload of documents necessary for annual renewal (Affidavit of Continued DBE Cer-
tification). WBENC’s regional offices also have the capacity to conduct site visits for
compliance with the 49 CFR Part 26. Members of the NCEES system can easily re-
quest their record be sent to other states for licensure. A similar system could be
employed by NCEES for a National UCP. A national unified program could
strengthen, streamline, and simplify the DBE certification program, creating a pro-
gram that is more efficient and effective for women and minority firms working for
multiple agencies across multiple states.
If you have any questions or need any additional information, please contact me.
Respectfully,
GERI E. BOYER, P.E.,
President, Kaskaskia Engineering Group, LLC.
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Mr. DEFAZIO. You know, you detailed experiences there with dis-
crimination throughout your career. And you said it was only be-
cause of the DBE program you were able to start your business,
grow your business in the face of that discrimination. And one
quote was, ‘‘Even though I have been in business for 14 years and
won several statewide awards for my engineering, I still cannot
compete with established engineering firms owned and managed by
White males. I have participated in many equity surveys and dis-
cussions, and the question always comes up about the need for this
program to continue. I can testify that without this program, the
work I get on Federal and State infrastructure projects would
cease. The only reason other firms team with me is because I am
a certified DBE firm first and then because I do excellent work. I
am not their buddy. I do not look like them.’’
That is pretty compelling, Ms. Boyer. You stand by that quote?
Ms. BOYER. Absolutely.
Mr. DEFAZIO. Yes, OK. That is pretty sad.
Ms. Williams, would you agree with Ms. Boyer’s assessments in
these matters?
Ms. WILLIAMS. Absolutely.
Mr. DEFAZIO. OK. Well, that really underlines why we are here
today, why we are reauthorizing the program, and also looking at
ways to make the program work better.
Dr. Wainwright, at the end of your testimony you mentioned the
private-sector study versus the public sector with the DBE pro-
gram. Can you give us a rough, quantified comparison in any way,
in brief?
I know that you go into it in more depth in your study, but—Dr.
Wainwright, are you still there?
[Pause.]
Mr. DEFAZIO. Yes, I see you over there. You need to unmute.
Mr. WAINWRIGHT. Yes, I am not sure I fully understand the ques-
tion. Can you——
Mr. DEFAZIO. Well, you concluded, the private sector versus pub-
lic sector, and you are doing these comparative studies. In aggre-
gate, is there any way—can we say—it is a small percentage of the
work, overall, in the public programs? What percent is it where the
public programs with DBE aren’t—how much smaller is that?
Mr. WAINWRIGHT. Oh, sure. I think I understand now, sorry.
Mr. DEFAZIO. Yes.
Mr. WAINWRIGHT. The public sector, as a share of the overall
economy, is maybe 20 percent. The DBE program and programs
like it throughout the country are, you know, to some degree, a fin-
ger in the dike. You don’t see these programs very much at all in
the private sector. So you have got the DBE program and programs
like it, trying on their own, largely, to remedy discrimination and
remediate discrimination, with only 20 percent of the economic ac-
tivity to work with. The other 80 percent remains practically un-
touched.
Mr. DEFAZIO. Great. That is what I was looking for. I didn’t
know what the comparison was. So 20/80, and then we get a frac-
tion of the 20. So——
Mr. WAINWRIGHT. That is correct.
Mr. DEFAZIO. Thanks.
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To anybody else, I have got about 1 minute left. Anybody else
want to expand on their remarks for about 1 minute?
[No response.]
Mr. DEFAZIO. OK, I am not hearing anybody.
Oh, go ahead.
Ms. LERDAHL. I would just like—this is Mary Lerdahl again—I
would just like to reiterate the importance of waivers, and the ef-
fect that they have on hurting DBE firms that, while they may
have enjoyed some success within the DBE group, they are still far
from being ready to be kicked out or graduated from the program.
I think also that in Washington, the waiver that was enacted to
exclude White women actually really separated the DBE commu-
nity, and actually pit one group against the other, which, of course,
you know, it is the last thing that we need. We want to bring DBE
communities together. And they are—you know, just by the num-
bers of statistics, there will always be one group that is going to
do better in any particular data segment than another. But overall,
the DBE community still is just getting pennies of the Federal
highway dollar.
So I would like to submit that the committee consider that waiv-
ers should never be enacted against one group or another. They are
very destructive, and they are not necessary. In our State of Wash-
ington, because we were covered by the Ninth Circuit District for
court decisions, I realize that the State of Washington had the op-
portunity to ask for a waiver, but it was not required that they
seek a waiver. And that is an important distinction that I hope
that the committee would perhaps consider writing into the reen-
actment, that never again that waivers would waiver out one group
in the DBE community against the other. Thank you.
Mr. DEFAZIO. OK, thanks for that observation. Now I would turn
to Ranking Member Graves for his questions.
Oh, no. He’s not there. It would be Representative Weber who
will ask.
Mr. WEBER. Thank you, Mr. Chairman. I have questions for
Farad Ali, and I am not sure how we get him up on the screen.
I guess we look to whoever the speaking part is.
Mr. Ali, does the DBE program assist minorities in attaining fi-
nancing?
Mr. ALI. Thank you for your question. I have been also the execu-
tive director of the Small Business Transportation Resource Cen-
ters that is through your NCDOT funding. In that program, part
of the milestones are to provide technical assistance and access to
capital, or resources for them to get that access to capital. But the
program doesn’t actually provide the financing. You have to go out
and find sources.
I will tell you in my work I have seen that we have had to go
out and find specialized—or people of color or women to support
this group, to help them, to show a duty of care, to make sure they
can get the financing and the bonding necessary to participate on
roadside projects, as well as the ACDBEs. So you also do see some
institutional discrimination in that work, from allowing people to
show duty of care and helping others.
Mr. WEBER. Are you able—when that happens, do you have a
matrix? Are you able to track how—from each project or each com-
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pany, how good it went, what the pitfalls were, and how to improve
upon that?
Mr. ALI. Yes, thank you. Great question again, Congressman. In
our program, what we would do is look at some of the ways that
we—weaknesses in the DBEs, or that we may see that are impor-
tant. We find ways to strengthen it, if it is on asset base, or if it
is credit, or whatever it may be, to help them to get the financing.
Again, the financial system has not always treated ACDBEs or
even DBEs fairly.
And it is hard to speak to this, because I know in the banking
system or the financial system, there are rules of the way people
operate. But it is also the ways that people have culture in allow-
ing people to feel like they can have opportunity.
So we do measure, when people actually look for financing oppor-
tunities, figure out ways to help them to overcome any obstacles,
and then success in getting them financing or bonding needed to
meet the requirements of the project.
The answer is yes.
Mr. WEBER. OK, that is good to know. And then I am going to
jump over to Ms. Sandra Norman, if I may.
Ms. Norman, what would you say, in your experience, is the big-
gest obstacle to increasing minority participation in transportation-
related projects in your State?
Ms. NORMAN. I would say, as you just talked about, access to
capital. The other part, too, is the—how we procure projects, mak-
ing sure that our DBEs have the opportunity on the design side of
the house, as well as the construction side of the house, so making
sure that we do set aside some smaller bundle of projects so that
the small business DBEs will have the opportunity to compete and
win contracts. We just don’t want them to compete for it, we want
them to be awarded the contract, and be successful in carrying it
out from beginning to end, making that project a win-win for both
the DBE and for the DOT.
Mr. WEBER. So, as kind of a follow up, I guess, with my question
with Mr. Ali, do you have a process, Ms. Norman, with the way you
are doing it?
I mean, is there a hotline for help set up? Do you encourage par-
ticipation? Do you reach out and get feedback from them, I guess?
Ms. NORMAN. Just like Mr. Ali, we do have what we call the
BOWD Center, the Business Opportunity Workforce Development
Center. It is through a supportive services program. We do provide
technical assistance. And one of the things that I do, I do a lot of
outreach, a lot of networking through different entities, through
different partnerships with State, local programs, so that our DBEs
will have that opportunity.
But sometimes the requirements for our DBEs are stricter and
harder for them to have that level playing field with regards to ac-
cess to capital.
But to your point, yes, we do provide technical support and as-
sistance, make sure that we do have partnership opportunities for
our DBEs.
Mr. WEBER. Well, thank you for that.
I have been kind of setting the stage for you, Ms. Lerdahl. You
are the last one up. I am quickly getting close to my time, and I
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appreciate the chairman’s indulgence. Since you have run a com-
pany, Ms. Lerdahl—you have heard the panelists, especially the
last two that I have had questions for—from your business experi-
ence, would you be able to give them suggestions—maybe you want
to hire on as a consultant, I don’t know, but would you be able to
give them suggestions on how to better help these companies suc-
cessfully compete on these jobs?
Ms. LERDAHL. Yes, thank you. Well, I do think they touched on
the importance of access to capital. I will state that, in the 9 years
I was in business, I was never able to obtain a line of credit, except
for the one project that was provided through the Small Business
Transportation Center. I was able to get a $250,000 line of credit
to do one particular project. So that really did help. But the rest
of my work, $80 million worth of work, was done without a line of
credit. So I became a really good bill collector; otherwise, I couldn’t
pay.
I do think, too, there is definitely, not only in the banking seg-
ment, discrimination against small business, and particularly
women- and minority-owned businesses, but also with creditors. I
was not able to get the pricing on big loads of material—$500,000
pull orders, for example—that my larger contracting competitors
could.
So—and there was a few times I tried to pursue collusion within
the supplier network, and that was a very difficult thing to prove,
because, of course, if they are not going to bid to you, how can you
prove that they are stacking the deck against you?
I do think that there is also evidence of supplier fraud, where
even, unfortunately, DBE firms that are a supplier up the pricing
of a package of materials on bid day to a non-DBE electrical firm
or other firm in order to win the bid, because they can count 60
percent of that billable material. So that, again, stacks against
DBEs. It is almost the DBE supplier working against the DBE con-
tractor.
And so there is a lot of games that get played in the supplier
DBE industry, unfortunately, as well as access to credit in both the
suppliers and the banking forums.
Mr. WEBER. Well, thank you for that. It sounds like you would
be a good resource for the other folks on the panel on working on
some of the pitfalls that a lot of these business owners see.
So I appreciate your indulgence, Madam Chairwoman. I yield
back.
Ms. NORTON [presiding]. I thank my good friend, and I recognize
myself for the next series of questions.
I think I want to start with Ms. Williams and Ms. Boyer, because
I am interested in why this discrimination continues to occur.
Now, you would have the same ability, even more experience, if
the DBE program went away. So I would like you to elaborate on
why you think opportunities for small businesses like yours would
dry up—you all seem to have testified to that effect—without the
DBE program. I am trying to find whether there is a real remedy
here that is lasting.
For example, do you think that these contracts are based on per-
sonal relationships that these companies have? Is it based on the
size they prefer, larger companies? Is it based on the nature of the
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competition? Indeed, are they competed? I am trying to get at the
cause of what you have—virtually, all of you have—elaborated as
continuing discrimination, notwithstanding the DBE program.
So I will start with Ms. Williams.
Ms. WILLIAMS. Thank you so much. I think that one of the unin-
tentional consequences of the DBE program is that the program is
set up to invite and encourage the checkbox. In other words, you
have to check the box [inaudible] so in large majority firms, and
the goal is 25 percent, I am looking for a DBE, and I check the box.
If I am a large, majority firm, I am trying to get 40—50 to 60 per-
cent of the project. And so, I have got to give out 25. I mean it is
all in the numbers.
And so I think if you graduated or you weren’t a DBE, they
would not pick you as just a good engineering company. [Inaudi-
ble.] So it is an unintentional consequence that the DBE program
has developed. But it is what it is.
Ms. NORTON. Ms. Boyer, do you have any views on this?
Ms. BOYER. Yes, of course. So thank you for the question.
Excluding the city that I live in and I am headquartered in,
Belleville, Illinois, they give us work because we are right here in
their community, serving their needs, going the extra mile all the
time. And we do excellent work. And it doesn’t matter if I am a
DBE here, because this is where I work, and they know me. So I
think a lot of it has to do with relationships, although it is also
about the culture of our Nation.
And so, even though I work with large engineering firms, and we
give work back and forth all the time, I think for us in Illinois it
has more to do with—the Illinois Department of Transportation
really emphasizes that they want DBEs to succeed, and they want
prime firms to be giving DBEs chances to lead. And they know the
only way that they are going to win the work is to work with
DBEs, because that is what the State wants.
So it is all about winning. It is all about getting a leg up. And
if a firm thinks that they are going to have a better chance to win
with a DBE, then we are great. Even if we do fantastic work, they
won’t use us if they don’t have to, because it is all about winning
the most. It is all about this individual culture that we have in the
U.S., that the more for me, the better. And the only way people are
going to share is if they are made to share. I hate to say it.
Ms. NORTON. Interesting to note, and it says a lot about the im-
portance of continuing this program, because you would think,
automatically, these firms, women- and minority-owned firms,
would work their way into the industry.
Ms. Lerdahl, I must say, your story was particularly chilling to
me, about the problems of women business owners. And I am try-
ing to find out the difference between waivers and graduation from
the program. I am confused on that. What is your response for
those who believe that the program should exclude automatically
certain groups, once they have attained what is known as parity
in the market?
Ms. LERDAHL. Well, thank you for that question. It is a great
one.
First, a big difference between graduating and the waiver. The
waiver sought to exclude White women as a result of a disparity
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study. It, again, had some unusual data in it, with these two big
mega-projects, where billions of dollars of contracts with multiple
years of work were counted in that 2009 to 2011 study data period.
Other firms—ironically, the two biggest firms in our State—one
is Valley Electric, one is Elcon Electric—both used to be DBE
firms, but they were allowed the time and the length of the runway
to grow, and to graduate from the program. Elcon is owned by an
African-American gentleman, and Valley Electric was a women-
owned majority business. But they had——
Ms. NORTON. They are not in the program any longer, those two
firms?
Ms. LERDAHL. Yes, they graduated from the program.
Ms. NORTON. Yes, OK.
Ms. LERDAHL. But in the case of a waiver, we were essentially
kicked out by our own agency because of the disparity study data
that indicated that White women were getting more than our share
of the DBE dollar, which is absolutely not true. So my company
barely got [inaudible] and started to do great projects, like the 520
bridge, and then I was completely cut off at the knees.
And I would also share what the other ladies talked about, not
getting work without there being a condition of award. I bid—from
the time the waiver was enacted in June of 2017, I bid hundreds
of projects. I pulled out every networking—I begged, I pleaded. I
mean, I had never not finished a job on time or ahead of schedule.
I had done multiple millions of dollars’ worth of work, never with
a problem. And I could not get a single job. But that is because dis-
crimination is even more real than I thought.
Now, I have been in business for 22 years. I had a great reputa-
tion in the community, and not only as a DBE firm, but as an elec-
trical contractor. I had been in business for 10 years prior to start-
ing my own firm, in a non-DBE firm. I knew everybody. Everybody
knew me. But I couldn’t get one job to save my company, and that
is why my company died a death of 1,000 cuts over 18 months, $9
million a year to [inaudible].
Ms. NORTON. Thank you. My time has expired. I do note that you
cited two firms that had graduated from the program. I would hope
that, if we have this hearing again, we will invite at least one firm
that has graduated from the program, so that we can learn about
what the program does for people to put them on their own. I think
that would have added a great deal to this hearing.
I am pleased now to recognize Representative Davis.
Mr. DAVIS. Thank you, Madam Chair, and thanks again to all
the witnesses.
Ms. Boyer, I heard that Mr. Bost did a fine job with your intro-
duction while I was absent.
Ms. BOYER. Yes.
Mr. DAVIS. I do want to start my question with you. Based on
your experience, do you believe that a mentorship program between
prime contractors and your company, like your company,
Kaskaskia Engineering Group, would have been helpful to you
when you first became a business owner?
Ms. BOYER. Obviously, the mentor programs are so beneficial in
getting started, and even just getting into different forms of work.
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So I have actually participated with mentor programs in both engi-
neering and on the contracting side.
The problem with mentor programs is it takes a lot of adminis-
tration, both by the companies and by the agency. So often the fol-
lowup and making sure that it is really happening falls through
the cracks, because people are short-staffed and they are just too
busy. But mentorships do work when there is enough staff to make
it work.
Mr. DAVIS. Great. Great to hear that. Another question for you.
Has either the DBE program’s personal net worth or the gross
receipts limitation factored into your decisionmaking when consid-
ering new business opportunities?
Ms. BOYER. Absolutely. It is a strategy. I know right now that
I could not survive if I graduated out of the DBE program right
now. My foundation is not deep enough. And so, yes, it has every-
thing to do with the decisions that I make. I need to stay in the
program right now, because I have 45 mouths to feed here.
Mr. DAVIS. Would you be more interested in getting off, making
more dollars available, if there was a better off-ramp to move to-
ward self-sufficiency?
Ms. BOYER. Absolutely. I mean, one of the things that I actually
looked at with a firm in Minnesota as they were graduating out of
the program is to form a joint venture with them, a joint venture
company, in a sense, that would go after Federal work there, and
share the work, me being a DBE, but giving them, like, 40 percent
of it to kind of pad them as they graduated out of the program, and
built and sustained themselves.
In the end, we couldn’t come up with an agreement. And I think
that there are a lot of problems right now with staffing engineers.
There is a huge shortage. And I think the close relationship scared
them, that their people might like our firm better, and have some
people move over. So they decided not to do it with us.
But I think that just the exercise of looking at how can you sta-
bilize a firm as they jump out of the program, and teaming with
another DBE to share work back and forth could lift both firms. So
I think there are a lot of opportunities there.
Mr. DAVIS. You know, it is great to hear, and that the program
has been so successful for companies like yours. But I think some
of the things you just mentioned, Ms. Boyer, could make the pro-
gram better. And we look forward to working with you on those
issues.
I know that this program has meant a lot for you and your com-
pany. We heard about that in your opening statement. And I just
wanted to give you another chance. Is there anything that you
haven’t yet said about this having an impact on you and your life
that you would like to mention to us in the committee?
Ms. BOYER. Well, you certainly would never see a mother-daugh-
ter engineering firm. And this program has made that available.
Mr. DAVIS. Well, that is wonderful.
Ms. BOYER. I also do want to say that this idea of a unified cer-
tification is so important. And, you know, we have a lot of stuff
going on in the United States right now. We have the DBE pro-
gram, but we also have a lot of people trying things. Our utility
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companies are trying to come up with their own DBE programs,
and they have separated out women and minorities.
And so, you know, when I would work in 7 States, I have to get
17 different certifications. And it just seems that we are far enough
along in our electronic world that we could have one place, one re-
pository, and that we could certify DBEs in categories of women or
minorities, so that everybody doesn’t have to do the same thing
over and over and over. It takes one full staff member of mine to
just keep up with this.
So I think it can be simplified, but it takes our agencies to trust
each other. And the Small Business Administration does a great
job. They are the perfect candidate for something like that.
Mr. DAVIS. That is another great idea. Look, we know—and we
see the emotion that you have shown us—how much of an impact
this has had in your life. Thank you for being here. I look forward
to seeing you in person again soon.
And I yield back the balance of my time.
Ms. NORTON. The gentleman has yielded. I must say I was very
touched to hear the testimony about a mother-daughter engineer-
ing firm. I mean, typically, we see businesses like this passed on
to sons. The notion that you had that effect within your family is
telling about the importance of this program. I appreciated that,
hearing that, very much.
We will next hear from Representative Larsen.
You are recognized for 5 minutes.
Mr. LARSEN. Thank you. I have a question for Mr. Ali.
It is clear the pandemic continues to have a significant impact
on the U.S. aviation industry, particularly on airport conces-
sionaires. Even more concerning is the fact that minority-owned
small businesses are disproportionately impacted by the effects of
the pandemic. Could you cover for us how the pandemic has af-
fected AMAC members and airports, concessions, disadvantaged
business enterprises?
Mr. ALI. Yes, thank you, Congressman. It is really important to
understand the process of how these work. You look at an airport—
I look at it, really, as a hotel—and big concessionaires, which are
mainly foreign-owned, secure pieces of the airport to be able to pro-
vide services for their passengers.
And as you have heard earlier, a lot of the DBEs, the status of
DBE allows for them to partner with other minority- and women-
owned firms. And many of these concessionaires, these large con-
cessionaires, look for women- and minority-owned firms to partici-
pate, and that is how they get a pathway into being conces-
sionaires, either from streetside to airports, or even beginning new
businesses.
A lot of the investment, the investment for these airports to, as
you could see, the—improvements inside of the airport are shared
cost by DBEs. So they are making investment in public assets
based on a contract for 5, 7, or 10 years, and they have to pay
those loans back, typically, to their master concessionaire.
So when you have the COVID crisis, which took down 90 percent
of the travel, a lot of these ACDBEs are now having to still make
payments which are not being received. And because they made
them in public assets, they can’t get traditional funding, which is
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really hard, because then, if you can’t get traditional funding from
a bank, there is no way you could refinance or restructure your
loan. And as a result, you find yourself in a cataclysm of debt, of
not only business debt from the pandemic, but business debt from
being able to pay back your loan.
So not being able to get access to the PPP, it didn’t help these
businesses, ACDBEs. And some of them weren’t able to get the
EIDL loan, because the EIDL loan, which was once at $2 million,
went down to $150,000. But a lot of these businesses needed the
EIDL loan so that they could continue to cooperate and manage in-
side of these airports.
So you find a lot of the concessionaires are in default, which
means they are in a position where they could be eliminated from
these contracts that they needed, and whatever assets they had
tied up would be lost.
Mr. LARSEN. Yes. And what effect would large-scale closures of
the concessionaires have on airport operations?
Mr. ALI. It would do a whole lot of things for airport operations,
thanks for the question.
If you look at these ACDBEs or these DBEs that would be elimi-
nated from contracts, they will lose these opportunities. You will
have societal impacts to them where these communities that look
to these DBEs for support or hiring, so they would lose all of these
employees. These employees would lose houses.
I mean, the trickle-down effect of ACDBEs going out of business
or DBEs going out of business, please note if you look at some of
the statistical analysis, most DBEs hire people of color or women
than any other constituency groups. So when they go out of busi-
ness, it has a real trickle-down effect into either of the communities
and the airport community.
Mr. LARSEN. Yes, thank you.
A question for Mr. McDonald. So, Mr. McDonald, I am the chair
of the Aviation Subcommittee and certainly acutely aware of the
lack of diversity in U.S. aviation and the need to attract new talent
to ensure this industry remains competitive.
In the time I have remaining, which is about 1 minute, I think,
can you discuss some of the successful initiatives that you have im-
plemented within the DBE program that have attracted more par-
ticipation from women- and minority-owned firms, particularly re-
lated to aviation?
Mr. MCDONALD. Yes, I would say that through our community
partners—again, I am with the Office of Economic and Small Busi-
ness Development, and because of that we have community part-
ners. We have a group called the Greater Fort Lauderdale Alliance
that works with the attraction and the retaining of businesses in
our county.
And through that group, we also have a cohort of aviation type
businesses, but from education and training and apprenticeship, we
have been able to create a collaboration where we attract not only
those businesses, but we engage those business opportunities, and
we align that with our DBE program.
So our upside is by being an economic development office, also
operating the Small Business Program, also by administering the
Federal program, we leverage our resources and our partnerships.
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And, again, that is one of our saving graces. The idea that we
also have an aviation director who is supportive of the program.
We have education and institutional organizations that are willing
to commit their resources, and this becomes, as you can imagine,
attractive to the business community who recognizes your growth
and your opportunity.
Because, as you know, businesses always speak to do I have ac-
cess to that employee, to that individual who has the skill set as
well as the interest?
So it is through our collaboration and our partnerships that we
have been able to have some success in growing the businesses,
which also introduced opportunities for our DBEs to participate.
Mr. LARSEN. That is great. That is really helpful. I appreciate
that.
And according to my personal timer, I am out of time, and I will
yield back.
Thank you, Mr. McDonald.
Ms. NORTON. I note this term ‘‘trickle-down effect.’’ It seems to
me that is very important to hear. We are talking about engineer-
ing, where minorities and women have not participated in nearly
the numbers they do in other professions.
So the notion that this encourages minorities and women to even
enter the profession, it seems to me, should be encouraging to this
committee.
I am pleased to recognize Representative Woodall at this time.
Mr. WOODALL. Thank you very much, Madam Chair.
I wanted to start with Dr. Wainwright. I appreciated his likening
our challenges to blood pressure medication, and we certainly do
not want to end the blood pressure medication.
I wanted to find out, Dr. Wainwright, if you saw anything in
your research that helped us on the pathway to a cure. I have
heard lots of concerns about graduating from the program. I have
heard lots of concerns about the impact of categorical exclusions.
At the end of the day, the DBE program was intended to be a
step towards a cure. Do you see anything that could help us alter
the program in ways that alleviate some of the fears of graduation
and bring us closer to that societal cure?
Mr. WAINWRIGHT. Thank you, Representative.
A couple of things. One is I am not a policy guy as much as a
statistical guy. So I am not sure I can speak about what detailed
improvements in the DBE program might get to the cure, as you
are mentioning.
But as Chairman DeFazio mentioned at the beginning, one of the
touchstones for me would be to see greater spillover of efforts like
the DBE program, like the State and local MWBE programs, into
the private sector, which, as I mentioned, is about 80 percent of the
economic activity.
So the DBE program at its best is affecting a fraction of 20 per-
cent that the public sector controls and, you know, still more, we
are talking today just about the transportation sector.
In the 37 years that the program has been in effect, we are start-
ing to see some of that, but it is still a long, long way off. When
I started working on this in 1989, you never heard of the term
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‘‘supplier diversity officer’’ at a public agency, let alone a private
agency.
So there is a demonstration effect, I think, to see and then to
witness the positive effects that this program has on many of the
witnesses you have here today, business owners.
Hopefully, that has a demonstration effect into the private sector
and will encourage more private companies to diversify their sup-
ply chains and their contracting and procurement chains.
And when that day comes, I may be getting off my blood pres-
sure medicine at some point down the road from that. So that is
a great question. Thank you.
Mr. WOODALL. I thank you for that, Dr. Wainwright.
I think it was Ms. Norman who mentioned that one of the side
effects of that blood pressure medication could just be creating a
check box program.
Ms. Norman, I kind of heard that from Ms. Lerdahl’s testimony,
that she had done amazing work, built amazing relationships, and
as soon as she was excluded from the program, all of that hard
work disappeared because those folks were not prioritizing her re-
lationships or her quality work. They were focused on getting that
check box done.
Could you speak a little bit more about your concern that it is
turning into a check box program and maybe some ideas about how
we can solve that so that these relationships and these good work
ethics can be continued?
Ms. NORMAN. So while I do not want to just say it is a check
box—in essence, it is—but without it, sir, they would not get these
opportunities.
So it is very important to have that, to have these demonstrated
goals requirements, not just an aspiration, but a requirement to
make sure that part of the process that the DBEs and women-
owned businesses get that fair opportunity to bid and compete and
win those contracts.
The other part that can assist with that as Virginia, we have
what they call the Virginia Small Business Enterprise Program,
and that allows us to de-bundle some of these contracts on the con-
struction side of the house and the professional services side of the
house, $750,000 or less or up to $1 million, looking at those
projects to see for a subcontractor to then step into the arena of
being a prime.
So a lot of times these larger businesses forget that they started
out as a small business as well.
However, we have been fortunate on the construction side of the
house. We still have some work to do on the professional services
side of the house of identifying those kinds of projects.
So while we say it is a check box, without that check box these
small businesses and women-owned businesses would not have
that opportunity.
Ms. NORTON. Well, thank you.
Mr. WOODALL. I certainly recognize to Chairwoman Norton’s
point. When we have our next hearing on this topic, it hurts to
hear the fears of graduating from the program. Graduation should
be something that we are aspiring to.
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But I hope we will be able to make some changes and explore
some ways to make them a more comfortable transition.
Chairwoman, thank you for your indulgence. I yield back.
Ms. NORTON. I thank the gentleman for his questions.
We hear next from Representative Sires.
Mr. SIRES. Thank you, Ms. Norton.
And thank you for the people that are giving testimony today. It
is very important.
Mr. Ali, thank you very much. My question will be directed to
you.
I represent a portion of the Newark Airport with my colleague,
Don Payne. We both represent the airport. You have said that
without the Disadvantaged Business Enterprise programs some of
the contracting opportunities for minorities are gone.
Well, as you know, Newark Airport, the new terminal 1 is being
built, and they are probably now going through the process of se-
lecting bids. I am hopeful that minority women-owned businesses,
minority-owned Black businesses, and minority Latino businesses
get to participate in this process and are able to secure some of
these bids.
Would you know what percentage of minority women and Latino-
owned businesses currently represent airport concessions across
the country?
Mr. ALI. No, sir, I do not have that answer. That is something
the fiscal guy can tell you, the doctor. I do not have all of those
stats.
Mr. SIRES. So you would not know anything about New Jersey
either, right?
Mr. ALI. No, sir, I am sorry. Not about specific or, I mean, in
general, no, sir.
Mr. SIRES. Well, I think it would help if there would be some
data about how many minority businesses are participating in
these airports because we do not know if there are enough or there
are too many or there are not enough.
Mr. ALI. Yes, sir.
Mr. SIRES. So I do not know who would put those statistics to-
gether.
Mr. ALI. Yes, sir, Congressman. I believe that the FAA should be
able to provide you with that information, sir, as well as the DOT
Office of Civil Rights.
Mr. SIRES. So I am going to get my staff on that because I am
very concerned that this new wing that we have in Newark, this
terminal 1, that the minorities get their fair share of concessions
in that new wing.
Mr. ALI. Yes, sir.
Mr. SIRES. What role do you think that the DBE program plays
in the recovery of businesses like yours with this pandemic? How
has that impacted?
Mr. ALI. Sir, the businesses that we represent I will tell you that
COVID has adversely affected businesses in that they have been
able to have to deal with it. Most of the contracts for ACDBEs have
been secured against contracts with the airports, and those airports
have used contracting to get rents, and those rents and those pay-
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ments all go to pay for bonding and other things inside of the air-
port and aviation business.
So when you have a slowdown in traffic and those ACDBEs are
no longer able to get passengers to pay the facility charges or the
costs, it becomes a really critical role of making sure that we have
the ACDBEs involved, but they also lose out when the airport in-
dustry is inhibited by the lack of passengers.
Mr. SIRES. And have you noticed where there is big investment
in airports across the country where the minority businesses are
able to take part after such investments in some of these airports,
or do you feel that maybe they are cast out some places?
Mr. ALI. Yes, thank you. That is a really good question.
I do believe that you have offered, in your funding to these air-
ports, you have offered the opportunity for them to share that with
their concessionaires and the ACDBEs. It is my understanding that
each airport has the authority to make a determination of how
much they will share or if they will share.
I think each area would need to be audited for that particular
concern. So if you are interested in New Jersey and New York, I
think you should ask if the resources that you provide for them,
how much of that were they able to share with the ACDBEs.
Mr. SIRES. Yes, I am concerned about New Jersey and New York,
but quite frankly, I am concerned about the rest of the country also
because there is big investment in some of these airports, and I
would like to see minority-owned business not be cast out because,
well, you know how it works.
Mr. ALI. We have heard from our members that there has not
been shared prosperity with those resources. Those resources have
not necessarily been shared.
So members have asked airport directors and airport authority
members to share and find resources. I know of a particular case
out West where an ACDBE constituency group was concerned that
a major airport got a lot of resources, but those resources have not
been shared.
As a result, there has been a multimillion-dollar business that
may have to come back to the city council and ask for additional
funding because the airport did not share in the resources to help
them stay in business.
Mr. SIRES. Well, if I can ever be of service.
Ms. NORTON. Thank you very much.
Mr. SIRES. Thank you.
Ms. NORTON. The next question is from Representative Carol
Miller.
Mrs. MILLER. Thank you, Acting Chairwoman Norton.
With some of your comments that you made earlier, the thought
came into my mind about how grateful I am that over the last few
years our educators are focusing more on STEAM and STEM edu-
cation, which will give the opportunity to all our children, the little
girls, the minority children, the opportunity to learn what they
need in order to have some of these businesses, like mother-daugh-
ter engineering.
And thank you all, all of you, for being here today as witnesses.
I am grateful for the opportunity to hear from the stakeholders
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that do represent DBEs and ACDBEs. The initials are still kind of
hard for me.
As these organizations attempt to cultivate their businesses, it is
important that we continue to monitor discrimination so that we
can continue to build and expand on this program to allow for fair
and equal opportunities to have access.
Mr. Ali, could you please speak about the difference between di-
rect and indirect discrimination and what your suggestions would
be so that we could ensure that minority-owned businesses are
properly represented?
Mr. ALI. Yes. Thank you, Congresswoman.
I think it is important that you strengthen the program in the
way that you evaluate it and open up opportunities.
Direct discrimination is organizations making the determination
that they really are not going to have inclusion. They say they will
have inclusion.
I will tell you an example of the time I was in an airport direc-
tors’ meeting, and someone indicated that they were going to do
maybe 5 percent with minorities and try to do another 5 percent
to get to the 10 percent.
And I indicated back with them at the meeting, well, then maybe
we will try to sign your contract.
The attitudes change really quickly. Within 48 hours they were
able to attain the other 5 percent to make sure they had the 10
percent.
So to really enforce the utilization of good faith effort at inclusion
is going to be important.
Some of the other issues around institutional discrimination are
really cultural, and a lot of that has to be really developed through
organizations and sometimes through policy, where people are not
really allowing ACDBEs or DBEs to come to the table, where they
may put them inside of a contract, as you heard from earlier testi-
mony, but not have them actually really participate and grow their
business so that they cannot just be airport-side. They can grow
their business to be on the private sector side that would help them
make it to the 80-percent level.
So this is truly not just a groundbreaking way to get minorities
and women into the transportation industry, but a lot of them use
this and catalyze this and leverage this opportunity to be able to
go to the private side, which allows them to really grow their busi-
ness and, as you would say, graduate, but to really bifurcate their
portfolio so they can diversify it long enough so that they can be
able to build sustainable businesses.
Mrs. MILLER. Thank you so much.
Mr. McDonald, following the COVID–19 pandemic, Broward
County has had to adjust and adapt their business practices to help
the DBEs stay on their feet. Could you speak to how Broward
County utilized current resources to prepare the DBEs for the pan-
demic?
Did the county use the funds to prepare the DBEs for the pan-
demic or to help them respond to the pandemic?
Mr. MCDONALD. Thank you for that question, a good question.
We actually did both. We were able, based on our programming
and our activity, and specifically projects, because we had already
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scheduled some projects with aviation, and we have some other
county projects that also spoke to transit rather than to our DBE
activity that we already had funds for.
So when we recognized the troubles of COVID, one of the things
that the commission had moved forward was to make sure that
projects that were aligned with dollars, we could still continue
those projects.
But in the meantime, as we also look forward to rolling those
projects out, we made sure in the economic development side of our
office that we also involved the necessary handholding as our DBEs
and other small businesses, minority and women, were looking to
identify if they could qualify for PPP, EIDL, our regular State
bridge loan program.
We also made sure that we worked closely with our Miami office
of the Small Business Administration to take other additional re-
sources that have always been available, but make sure that those
virtual workshops were in front of all of our DBEs.
And where we are right now, we are beginning to roll out
projects and activities that we, again, have the funding for, and
since aviation traffic as one example is still slow, some of the
projects that our airport director was looking to do, we can now
start those projects. We can begin to align those goals, and we can
have a way for our DBEs to participate.
So we were able to at least juggle some opportunities on the
frontend, use projects the county had already committed as a way
to stabilize some of our DBEs, as well as to rejuvenate our economy
with those projects, but more importantly, it did take time to make
sure that those were projects that may not be available, but were
able to take advantage of those Federal funds and other financial
resources that were available.
Ms. NORTON. Thank you very much.
The gentlelady’s time has expired.
I want to call next on Representative Eddie Bernice Johnson.
Ms. JOHNSON OF TEXAS. Thank you very much, Madam Chair,
and thanks to all the witnesses present.
Let me say that this is my 28th year on this committee, and this
is the most prevailing concern that has been expressed to me
around the country since I have been a member of this committee,
most especially with my own area.
It was one of the first issues that I started working on when I
came to this committee. Secretary LaHood, who came from this
committee to become Secretary of Transportation, worked with us
on language in order to make sure that when the language was put
in the RFPs, there would be some sanctions if they were not fol-
lowed.
What we have gotten since we put this in place is a lot of RFPs
that included minorities, but never got them involved once they got
the RFP.
I have been visited with women, minority women from all over
this country complaining about that. He helped us come up with
language, but we could not get Chairman Mica to support it at the
time.
And I notice there that is still overwhelming evidence of discrimi-
nation, and really when we first started looking at this, there were
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companies that were putting the name of the company into the
spouse’s name in order to get Anglo women qualified. And so all
of that has been experienced.
And I really have a great interest in fairness and opportunity
with it. So I have heard great testimony. I appreciate everyone
being here, but I want to know from the witnesses when these
RFPs are sent out and the minority participation is dictated, have
you experienced any reason to believe that it is a serious effort to
include minorities?
Let me start with Mr. McDonald.
Mr. MCDONALD. Thank you for the question.
I believe that to your point, and you have certainly been at it
longer than I have, but you are 100 percent correct. The language
that was put in, it is my job as a Disadvantaged Business Enter-
prise Liaison Officer to make sure and work with aviation and/or
transit. When those RFPs cross our desk, I have to make sure that
language is there that even supersedes that good faith effort.
I have to make sure that there is language that is not impedi-
ments or hurdles to the minority. So, yes, I do believe there have
been situations, as the agency prepared the RFPs, that that lan-
guage that supports DBEs is silent and those things that give op-
portunity to overwrite the program are present.
But it is the responsibility of individuals like myself, UCPs, as
we are reviewing these, to catch that and to address that, and I
can say at least in my 7 years here in Broward, especially the last
3 years, working with my aviation director and my transit director,
they have worked with me to assure that their RFPs, and with
their staff, we are addressing that.
But it is certainly has happened in the past, no question.
Ms. JOHNSON OF TEXAS. Thank you very much.
Mr. McDonald, I have had minority women visit me in Dallas,
Texas, from Florida complaining that their names went into the
RFPs, but they never got a call or even a word after the contract
was let.
Have you heard any reports of that?
Mr. MCDONALD. Yes, I have, and one of the examples I can ex-
plain is that when the DBEs are a part of the process and we do
the letters of interest and the prime has to identify which DBEs
they are going to be working with, as you can imagine, most primes
go out and find five or six to try to reach that 10, 15, or 20 percent
goal.
When they submit their RFP, they have to identify specifically
which of the DBEs they are going to use. It is that review that we
do, and what we have started doing is asking our agency. But the
primes notify the non-DBEs or the nonminorities that you are not
going to use them.
But we require that they submit who they are actually going to
use as a part of the bid, and as a part of that posting, we list that.
So it is true that a prime would have five or six to try to reach
their goal, but they only need two or three, and it is the two or
three they submit on the bid we hold them two, but yes, the other
ones should be notified that they were not used.
But we definitely record minority and women and the participa-
tion.
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Ms. JOHNSON OF TEXAS. Thank you very much.
I have heard from my own city, the DART, which is the Dallas
Area Rapid Transit, that they have no power to insist that the RFP
that was selected include what they have in a contract; that they
cannot enforce the fact that they have named the minority firm,
and then they do not hire them.
Do you have difficulty looking at the language to see whether or
not there is enforcement language there? Because it is not being
done in Dallas, Texas.
And I just wonder if any of you have any experience with saying
that their hands are tied of the local authorities for not sticking
with the contract once it is let.
Mr. Ali? Unmute.
Mr. ALI. Yes, ma’am. Congresswoman, I apologize.
I not aware of the situation. I have heard many stories like you
have heard from Mr. McDonald of contracts like that, but I am not
aware of any specific situation where that has occurred.
I have had members express this to me, but I have not been wit-
ness to any of the information on it.
Ms. NORTON. The gentlelady’s time has expired.
Ms. JOHNSON OF TEXAS. Yes, ma’am.
Ms. NORTON. The gentlelady’s time has expired.
Ms. JOHNSON OF TEXAS. Thank you.
Ms. NORTON. Representative Babin.
Dr. BABIN. Yes, ma’am. Thank you so much, Madam Chair.
I want to thank all of you for your giving your time to participate
as witnesses today, and I appreciate the work that went into set-
ting up today’s hearing.
However, I think we can all agree that the Department of Trans-
portation Disadvantaged Business Enterprise program is a very
important program and one that is overwhelmingly and
bipartisanly supported here in Congress.
And to suppose that anyone on this committee feels otherwise I
think would be misleading and politically motivated.
Now, with that said, I will keep this short. Every single day that
focuses on identity politics is a day that we are not focusing on
finding solutions to very real problems, problems like a debilitating
national debt; a poor southern border where our interstates and
our highways are being used to transport millions of tons of deadly
drugs into our country; a port system that today is being use to fa-
cilitate the real institution of modern day slavery, and that is
human trafficking.
All of these issues and more deserve our full attention. But we
are here using our time and resources celebrating a program that
is already supported by the Trump administration, by congres-
sional Democrats and Republicans.
I am not saying that this program is not worthy at all. It is cer-
tainly worthy of our attention, but much the opposite, as we heard
from Ms. Boyer’s testimony earlier today, and that as long as we
emphasize identity politics, we can expect to see more division,
more exclusion.
We are one America, folks, all sexes, all races, all creeds, and
identity politics is dividing us and in many ways keeps vulnerable
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communities oppressed through perceived grievances and resent-
ment.
The American dream has produced prosperity and liberty, with-
out a doubt, but some here maintain that it has increased inequal-
ity, and we are seeing the consequences of that right now all across
this great land and Nation of ours.
My earnest prayer is that we could come together and effectively
address the many issues within our committee’s jurisdiction that
are not getting the attention that they deserve.
I would like to thank you, Madam Chair, and I will yield back.
Ms. NORTON. The gentleman yields back.
This is an oversight hearing, and we have an obligation to do
oversight, especially since we have just passed one of the few bills
that has passed this time, which has been the transportation infra-
structure bill.
I am pleased to recognize Representative Hank Johnson.
Mr. JOHNSON OF GEORGIA. Thank you, Madam Chair.
This country was born out of the soil of racism. Slavery is what
built this country, free labor off the backs of Black people. For 250
years, Black people were enslaved in this country, and then for 100
years thereafter we had Jim Crow apartheid imposed upon us.
And then to say that in the 400-year history, 401-year history we
should now consider Black businesses to compete on the same play-
ing field, starting from the same starting point as White busi-
nesses, some of which have been in existence in this country, you
know, for 200, 300 years; to say that those Black businesses must
compete with those White businesses from a level playing field, it
is impossible.
And that is why affirmative action has always been necessary,
and as it was said earlier today, if you have got high blood pres-
sure and you take medication for it, just because your medication
has produced equilibrium, that does not mean that you stop taking
the medication.
So that is where we are in this country with the DBE program.
And, Mr. Ali, in response to Congressman Larsen’s question, you
revealed some of the specific challenges that airport DBEs are
grappling with to survive during the ongoing COVID–19 pandemic.
Are there any other challenges that minority airport conces-
sionaires currently face that you want to bring to our attention?
And are there any foreseeable challenges that DBEs are likely to
face as they seek to compete in a post-pandemic recovery?
Mr. ALI. Yes, I thank you, Congressman.
I think it is important that we either focus on the short-term
issues of the underwriting requirements, and so the constraints of
what is making the private sector investment in these public as-
sets. I mean, you do not have the same type of collateral.
You cannot pledge the same kind of assets. You cannot give peo-
ple the same sort of security interest in the underlying assets of
your business when you are doing this work.
And so the crippling effect of there is a quote that when one com-
munity gets a cold, the other one gets pneumonia. I would say the
other one may be getting COVID, and it is a slow kill.
So it becomes quintessential that in these public-private partner-
ships that we are able to find resources like with the SBA and the
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EIDL loan program or the Main Street Lending Program, that
there is some attention to not just providing resources for airports,
but providing resources for the ACDBEs to be able to get maybe
MAG abatement—minimal annual guarantee—fees abated.
Right now there is currently a $3.5 billion proposal in the Senate
bill which will include relief for concessionaires, and we are hoping
that that will be addressed and may be in the bill for the CR.
Mr. JOHNSON OF GEORGIA. Thank you.
Ms. Boyer, in your testimony you argued for a national DBE cer-
tification process as opposed to the current process which adheres
to a State-by-State certification process. You contend that the 50-
State certification process serves as an additional and unnecessary
barrier to competition that women- and minority-owned businesses
already face.
Do you have anything else to tell us about the difficulties that
the 50-State DBE certification process poses to your company’s
ability to grow and compete?
And do you believe that the 50-State certification process was
put into place as an intentional barrier?
Ms. BOYER. No, I certainly do not think it was an intentional
barrier. Until something is lived, we have no idea to understand
what the challenges are with it.
So I think the program that was put in place was a great start,
but because of the challenges that we have had, it’s just there to
light that we do not have the same opportunities as large compa-
nies that are more nimble, that can cross State lines.
And when we develop a relationship with a large engineering
firm, let’s say, that uses our expertise, they want us to be their
partners, and we both together have a better ability to win projects
by moving from State to State.
It is just that they can just move State to State and get a busi-
ness license. We have to get a business license and then start a
certification process, and then on top of it we have to get a
prequalification with the State that we are going to.
So just to have that nimbleness of a unified DBE certification in
the 50 States, I think, again, it just takes a little bit of the chal-
lenge away, and any layer of challenge that we can eliminate just
helps all of us.
Mr. JOHNSON OF GEORGIA. Thank you.
Ms. Williams, your company is certified in many areas, and one
of your strengths has been that you are able to provide transit
market research. In your company’s work and research, have you
uncovered disparities in transit availability and equity that per-
haps larger private companies overlook?
And what factors enable DBEs to be uniquely positioned to pro-
vide transit data that most affects underrepresented communities
or communities facing transit inequity?
And would a greater presence of DBEs on transit projects result
in reducing transit inequity in underrepresentative communities?
Ms. WILLIAMS. Wow, that was a tall order. I am going to try and
remember the question.
One of the things you mentioned, transit market research. So we
know that transit agencies typically service 70 percent of their rid-
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ers may come from low-income or disadvantaged or underrep-
resentative neighborhoods.
What has helped us in the transit market research business is
the ability to go out and talk to these folks, to gather the informa-
tion that is necessary for transit systems to make great decisions
on routes and how they are serving the public.
Then a minority firm is doing the market research. Typically we
hire people that look like so. So we are able to connect.
One of the things that was not mentioned here is on the IDIQ
and task order type contracts, a lot of times what is happening
these days is that you see a lot of these type contracts where you
are included in the team, but your—and I hear the bell—your num-
ber is never pulled.
So you are with a big firm. You are on the team, but because it
is a service order contract, they will just tell you your services were
never required or never came up. And I have lost a lot of business
on just that.
Ms. NORTON. The gentleman’s time has expired.
I want to call next on Representative Garcia.
Mr. GARCIA OF CALIFORNIA. Thank you, Madam Chair.
I really appreciate the opportunity here. A very important discus-
sion, obviously. As a business owner myself and my wife a small
business owner, I do understand the value of this and support the
cause.
Just going back to a statement that I believe Ms. Boyer made,
it may have been Ms. Lerdahl made the statement as well. The
frustrations with a formal mentorship program, I have been in sev-
eral mentorship programs that are frustrating because they end up
creating more work and more bureaucracy, and it sometimes slows
us down while the intent is to help us speed up.
I would just encourage a more informal mentorship program or
network of mentors and mentees to where you could connect folks
within industry to help each other out and synergize as much as
possible.
I know that is probably beyond the reach of any one of your char-
ters or even the DBE’s charter, but I think that will pay off huge
dividends if we can figure out how to get these sort of informal
mentorships in motion and make those connections happen for the
various folks.
My question is somewhat along those lines. But do individual
members, do individual business owners have access to a repository
of some sort where there is a list of best practices or lessons
learned from previous engagements or different agencies and equi-
ties that you can point someone in the right direction and just say,
‘‘Hey, when this type of RFP comes out with this sort of turn-
around time, this is where we have seen the most success. Contact
this agency first, this agency second’’?
I do not know what those solutions would be. You guys would,
but is there a database somewhere or some sort of a repository that
is made available to folks that can tap into those lessons learned
and not make some of the mistakes that we all have made in the
past as we navigate these competitions, which is what they are?
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Is there a place that has the right contact plans, the right cap-
ture plans, and sort of the lessons learned from several, probably
hundreds of different captures?
And I guess, you know, that is directed to Mr. Wainwright, Ms.
Boyer, and Ms. Williams as well.
Mr. WAINWRIGHT. Well, I will jump in. I am not sure I am the
perfect person to answer that, but I would think that organizations
like those that are represented here today, COMTO, AMAC, ACCA,
that is where people go every year and multiple times a year to
network with their colleagues, to share those ideas they have, cer-
tification levels for their own people as their trainers get better and
better at what they know.
And I am sure Ms. Williams and Mr. Ali can speak more to that,
but that would be probably the first place I would think where that
kind of institutional knowledge is deposited.
Mr. GARCIA OF CALIFORNIA. And before you jump in, guys, I
think my question is: is it memorialized somewhere? Is it a link or
a database somewhere that folks can access and get sort of the uni-
formity of it, but also the consistency and making sure that every-
thing is actually memorialized?
Mr. WAINWRIGHT. That I do not know. My guess is it comes and
I know in my experience with those associations, every annual
meeting I go to I come away with reams of good, solid information
that I did not have before.
Whether it is easy to get to as a link, I doubt, but Ms. Williams
and Mr. Ali may know better about that, Representative.
Thank you.
Ms. WILLIAMS. This is Eve Williams.
In regard to COMTO, as you said, Mr. Wainwright, there is a
tremendous amount of outreach [inaudible].
A database of sorts that might [inaudible], with APTA, which is
the American Public Transportation Association, is to develop such
a database, and we have talked about it a number of times and to
become more of a free source for small and disadvantaged busi-
nesses so they can reach us and get information on how to do cer-
tain things.
This is the type of work that comes for people to actually have.
They are so difficult to [inaudible], and until somebody comes up
with a question that is typically not an answer, but an app that
we did not have, industry standards and [inaudible] have a lot of
things that are available to our members, as well as COMTO.
Mr. GARCIA OF CALIFORNIA. OK. Thank you.
I see I am out of time. I yield back, Madam Chair.
Ms. NORTON. Thank you very much.
We will hear next from Representative Maloney.
Representative Maloney, are you muted?
[No response.]
Ms. NORTON. We will pass on then to Representative Brownley.
Representative Brownley, are you muted?
[No response.]
Ms. NORTON. Then we will go to Representative Payne.
Mr. PAYNE. Thank you, Madam Chair.
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Before I start, I cannot help but comment on one of my col-
leagues, two gentlemen prior to me on the other side of the aisle
representing identity politics.
Well, on a topic such as this, and I appreciate the chairwoman
pointing out our oversight duties, which is the bottom line, it just
appears that one of the reasons that we are in the situation are
statements and opinions such as that.
So the good ol’ boys network is still in place.
Mr. Ali, what tools does the Airport Minority Advisory Council
organization use [inaudible] from airports on the runway side and
the horizontal-vertical side of civil builders? [Inaudible] airports?
Ms. NORTON. I am not sure that the question was received. Do
you receive the question? Part of it was——
Mr. ALI. No, ma’am, I could not receive the question.
Ms. NORTON. Could I ask Representative Payne to repeat the
question?
Representative Payne, part of the question was not heard by us
or by the gentleman you asked to respond. So could you repeat
your question again?
You may be muted. Could you unmute, Representative Payne?
Mr. PAYNE. Is that better?
Ms. NORTON. Yes.
Mr. PAYNE. Oh, I am sorry. I am so sorry.
Mr. Ali, what tools does the Airport Minority Advisory Council
use to get more DBE contractors ready for work at airports on the
air runway side and the horizontal and vertical side of civil build-
ers?
Can the Federal Government play a stronger role in developing
more industry contractors at airports?
Mr. ALI. I thank you, Congressman.
Before COVID, we had lots of training and development that we
did face to face at our annual conference when we talked around
service delivery as well on the construction side and the service
side.
During the pandemic side, we have moved to webinars to be able
to facilitate some of that training. As you can imagine, certain con-
tracts in construction are for the DBE program, but a lot of that
is your social networks.
And so social networks and business allow for people to partici-
pate more readily than others. So we recognize that. So we try to
make sure we do matchmaking with the larger contractors with the
people that we may have in our database so they can have some
great opportunities.
We also have regional directors throughout the country so that
it can align and find themselves to do more partnerships with that.
And then as you continue to move forward, I think if you were
looking at ways for the Federal Government to create policies that
would be important or impactful is how do we look at PFCs in the
future.
As we know, a lot of the funding has moved from AIP funding
to PFC funding, is to ensure that the DBE regulation as you go for-
ward will have or also include PFC dollars. As many people can tell
you here, the AIP dollars or airport improvement dollars have the
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DBE program. The PFCs, which is the passenger facility charges,
do not have the DBE grant assurances.
So as a result, I believe, you will start seeing a diminishing of
utilization of DBEs.
Mr. PAYNE. OK. Thank you.
Mr. McDonald, we have heard positive things about Broward
County’s funded capital construction program. What type of success
have you had with providing work to local DBE firms?
And can your program plan be implemented in other areas?
[Interruption to audio.]
Ms. NORTON. Thank you.
Continue please.
Mr. PAYNE. Thank you.
Mr. McDonald, should MWDBE participation in your program re-
quire third party determination and signoff before majority primes
sign contracts with DBE inclusion?
Mr. MCDONALD. Thank you, Congressman, for that question.
Yes. Our program can be duplicated. Again, running an economic
development and a small business office and administering the
Federal program, we understand the importance from my local
small businesses all the way to my DBEs where they need the ad-
ditional assistance.
So one of the things we do, similar to what Mr. Ali just shared,
we do as many meet and greets, whether purchasing does pre-bids
or not.
During COVID and pre-COVID, we did pre-meetings or what we
call meet and greets as possible, for sure, that from an agency per-
spective, we speak to the DBEs about all of the opportunities that
are on the route.
From potential prime perspective, we call them in as potential
primes and explain the program and the expectations of the office.
As mentioned earlier to one of the speakers, we actually do have
a requirement as a part of that LOI, whoever you submit you are
married to unless it goes through a process of my office and my
final signature that there is a reason to substitute.
So it is the idea that the program tries to enforce exactly what
49 CFR requires us to do. It is the idea that I do have the support
of the county commission, the county administrator, and my agency
that support the bid all the way to the utilizations of the primes.
And we do believe that as a model—and nothing is perfect, I am
not acting as if it is—there is an opportunity to empower primes
to recognize that this requirement is one that we also want, as you
have heard, to develop and nurture those relationships.
Mr. PAYNE. OK.
Mr. MCDONALD. We were given an [inaudible] a few years ago
to not set a goal just to see. I refused. I knew that without the goal
they would not do it.
So we are crystal clear. I just had a primes meeting last month—
a virtual—to let them know that this is not only a requirement. It
is also monitored and reported, and we will act on it.
So it really requires us to do what the law allows us to do.
Mr. PAYNE. Thank you very much.
And, Madam Chair, I yield back.
Ms. NORTON. The gentleman’s time has expired. I thank you.
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Representative Palmer.
Mr. PALMER. Thank you, Madam Chairman.
Ms. Boyer, in 2013, the Office of Inspector General issued a re-
port saying that there were DBE firms that were deliberately lim-
iting the amount of new contract dollars in order to stay eligible
for the program.
Do you think that that is harmful to those programs?
And I will explain why I asked this in a moment.
Is she still there?
Ms. BOYER. Yes. Yes, I am.
I do think it is harmful to the program. I believe that the pro-
gram is about empowering firms to get a leg up, get a start, get
a lot of experience, and be able to step out and perform on a level
playing field.
I think it is the fear that overcomes a small business to step out
because it is that, you know, we hear so often that if there is not
a DBE goal, then we are going to do it ourselves.
So I think it is a fear, and I just think there needs to be more
of a ladder in between.
Mr. PALMER. Well, the reason I bring this up and the possibility
that there needs to be some term limits for how long you can stay
in the program is you made another point earlier about lacking the
nimbleness that larger firms have.
And is that not largely a function of resources, your undercapital-
ized cash flow issues, that you do not have the nimbleness that the
other firms have?
Ms. BOYER. Yes, certainly. I mean, it is nimbleness when it
comes to being able to move to opportunities. I think within our
company, we are actually were able to move fairly quickly, but we
are mostly undercapitalized. It is very difficult to get capital, and
it takes years and years.
So my company is only 16 years old. So it takes years and years
to get to a point where you can sustain yourself.
Mr. PALMER. My point about this is that I am kind of odd in my
reading choices. Where some people read novels, I tend to read re-
ports.
But there was a report from the Federal Reserve Bank, I think
one from St. Louis and one from Atlanta, that talked about how
minority-owned and women-owned businesses are undercapitalized.
And one of the things that I think we need to do to address this
situation is to follow on what President Trump has done with the
Opportunity Zones and maybe do a broader version of that that
incentivizes financial institutions to work with minority-owned and
women-owned businesses to help them to get to a stronger position
in terms of available capital, which will help address this
nimbleness issue that you raised.
But I think it is also important in the DBE program that we not
incentivize companies that are in that program to stay in that pro-
gram because you will never grow. And I would just like your
thoughts on that and maybe Mr. Wainwright weigh in on that as
well.
Ms. BOYER. Sure. So I mean, it would help to have the financial
institutions more onboard in helping minority- and women-owned
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businesses. I mean, it is definitely something that holds most peo-
ple back.
For me, our company always kids that we are in the basement
of the bank. They always ask, ‘‘Is there a man that is involved in
your decisionmaking?’’
And, we have been building a successful business and doing well
being run by women. So I think it would help.
Mr. PALMER. And your answer is you don’t need no stinking
man?
Ms. BOYER [Laughter.] In collaboration and, yes, in support.
Mr. PALMER. You just need a good banker.
Ms. BOYER. And good bankers are hard to find for women and
minorities. I mean, we know the banking industry. It is always a
challenge. It really is.
Right now I am using a very small bank from my hometown, not
even in the State that I am working in. Because of the personal
relationships, they know my family. They know my brothers and
sisters, and they trust me.
Mr. PALMER. Madam Chairman, I know we are in the midst of
a highly partisan election, but I think what we need to at least give
some credit to the Trump administration on the Opportunity Zones,
and we need to think about how we expand this to make more cap-
ital available to minority-owned and women-owned businesses.
And I would recommend that our colleagues look at these reports
from the Federal Reserve Banks and start thinking about how at
some point we work together to address this.
And I yield back.
Ms. NORTON. I thank the gentleman for his suggestion, and as
he notes, this is a very bipartisan committee, and this issue is very
bipartisan. So I believe the chairman will take note of what you
have asked astutely.
Representative Plaskett.
Are you muted, Representative Plaskett, who is next?
[No response.]
Ms. NORTON. Then we will move to Representative Carbajal.
Mr. CARBAJAL. Thank you, Madam Chair.
Dr. Wainwright, today we have heard business owners tell us
they believe discrimination would prevent them from being success-
ful in business in the absence of this program. Statistical analysis
can shed further light on the question by comparing situations
where a DBE program is in effect with situations in the same juris-
diction the program is not in effect.
Do you agree and do you believe doing that provides useful evi-
dence?
And if so, what does the evidence you have reviewed dem-
onstrate?
Mr. WAINWRIGHT. Thank you, Representative.
We have heard from Ms. Lerdahl about what has happened in
Washington DOT. The overwhelming majority of examples of so-
called parity that I am familiar with are quite recent, and as some
DBE programs have matured and programs like them.
In my experience they are rarely statistically significant, which
means they do not necessarily show parity at all, which is what we
learned with the subsequent disparity study that was performed by
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Washington DOT, despite U.S. DOT ignoring those results when
the request to rescind the waiver came in.
But second, these results in the rare instances that they occur
are statistically significant in the context in which availability fig-
ures have been artificially depressed due to discrimination.
You remember I testified that minority- and women-owned firms
are forming at much lower rates than similarly situated majority
firms because of discrimination. If such firms were forming at the
same rate as majority male firms, there would be few, if any, find-
ings of parity.
Third, you really should not consider a category of DBE to have
achieved parity until you have seen the same result appear consist-
ently in the private sector, that is, in the census data.
Again, this is like the blood pressure metaphor I have used pre-
viously.
Remember the only markets in which there has been any at-
tempt to level the playing field are the public contracting markets,
like the federally assisted transportation market.
And the far larger and more lucrative private sector DBE pro-
grams are rare to nonexistent, and majority male-owned firms gen-
erally get almost all of the business.
We also have to remember that majority male-owned firms have
literally had centuries to grow and establish their firms with effec-
tively zero competition from minorities and women.
Early on, the lack of competition was a direct result of laws that
intentionally and explicitly disadvantaged women and minorities.
Later it was the result of discriminatory practices that were per-
mitted to continue despite civil rights laws.
Finally, we should consider the practical effects of suspending
the operation of the program every time some subcategory of pro-
gram participant achieves a modicum of success. This will not re-
duce discrimination. It will just tend to increase bankruptcies, as
we have heard so poignantly from Ms. Lerdahl, and then those
same entrepreneurs or others like them will need to be added right
back into the program.
Thank you.
Mr. CARBAJAL. Thank you.
Dr. Wainwright, this committee has received reports that some
State and local transportation agencies have excluded certain mi-
nority ethnic or gender groups from their programs because these
groups have finally reached or exceeded, quote, unquote, ‘‘parity’’
according to a disparity study.
Do you believe excluding from the program certain groups who
reach some measure of parity in the market is the right approach?
Mr. WAINWRIGHT. No, it is not, and I believe that was what I just
addressed in my previous response. So maybe I misunderstood your
initial question.
Mr. CARBAJAL. Thank you.
I have limited time. So, Ms. Lerdahl, you stated in your testi-
mony that after being excluded from the DBE program, you bid on
several contracts, but were unsuccessful.
To your knowledge, did those contracts go to other DBEs?
Ms. LERDAHL. Thank you, Representative, for the question.
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No, absolutely not. They went to large electrical companies that
were not DBE firms, and in fact, our experience in the State of
Washington was when the waiver was enacted, prior to that, the
DBE community had about 17 percent participation, and after the
waiver was enacted, that fell to about 8 percent or 81⁄2 percent par-
ticipation, approximately.
So those DBE dollars did not go to other DBE firms. They actu-
ally went to the prime contractors who self-performed that work.
Mr. CARBAJAL. Thank you very much.
Madam Chair, I yield back.
Ms. NORTON. Thank you very much.
Representative Graves, and thank you, Representative Carbajal.
We now go to Representative Graves.
Mr. GRAVES OF LOUISIANA. Thank you. Thank you, Madam
Chair.
Witnesses, I want to thank you very much for your testimony
and participation today.
My first question is for Mr. Ali.
Mr. Ali, in the 2018 FAA reauthorization bill, we changed the
size standard for DBEs in the legislation in regard to FAA DBE
participation. I am just curious if you have any reflection or reac-
tion to that law change and how it might have caused an impact
on DBE contracts within the aviation space.
Mr. ALI. Yes, I think it was good that we had, in regard to that
position, when you start looking at it, we had to have the size to
equal the SBA. I mean, that helped with DBEs because some of the
size standards were not working. They were not equivalent.
So we really appreciate what the committee has done and argued
for this inclusion of this kind in the Moving Forward Act we
thought.
Mr. GRAVES OF LOUISIANA. Thank you.
I want to first ask Mr. McDonald and perhaps Ms. Norman. Our
State department of transportation in Louisiana has indicated that
some of their success in growing DBE participation has been the
result of these community partnerships that they have helped to
establish and sort of create a larger market within the DBE com-
munity for some of the contractors to be able to hit their DBE
goals.
Have you all established any type of partnerships or any other
strategies that have resulted in increasing DBE participation?
Mr. MCDONALD. I would say that we have, and as I mentioned
earlier, the idea that we extend that same olive branch to our
primes that I do with my DBEs. I actually hold virtual workshops
now during COVID, but prior, meet and greets with the primes to
make sure that they understand the county’s program, that they
understand the Federal program; they understand our expecta-
tions.
And certainly, we want to entertain any questions or concerns
they may have historically had with our DBEs. We also then do the
same with the primes and the DBEs.
The model I am trying to describe is that the more we know
about the project price, the more we extend the information to the
DBE community as well as the prime community before the bid
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ever comes out helps to build the relationship so that they under-
stand the county is serious about the Federal program.
We are going to adhere to the 49 CFR regulations, and that is
not against the prime. That just makes sure that the prime under-
stands that it’s a commitment for our great economy to use our mi-
norities and women and, yes, to allow our minorities and women
as DBEs to get in front of our primes early for the pre-qualifiers.
So that’s one of the things that we do on a regular basis to try
to assure that who the primary themselves who have the DBE,
they maintain them and also to let us know that we are having
challenges with our DBE so that we can continue to try to develop
them.
So we do the collaboration regularly.
Mr. GRAVES OF LOUISIANA. Thank you. Thank you. I appreciate
that.
Ms. Norman, I don’t know if there is anything you wanted to
add.
Ms. NORMAN. Yes, same here. We do our collaboration opportuni-
ties with our primes.
We also have what we call the TDAC. It is the DBEs, our Trans-
portation DBE Advisory Committee. It is where the DBEs come to-
gether along with the primes. They have their president, their vice
president, secretary, and treasurer. We meet quarterly.
Out of that they build relationships. Every year we hold what we
call a DBE symposium, where we bring in primes, where we bring
in DBEs who have graduated from the program.
We also have, as you enter the workshop, we have what we call
a matchmaking event so that we can match some of the DBEs with
the primes, some of the scope of work opportunities, and so we do
that often.
We also seek out, as someone talked about earlier, mentorship
programs, partnering with large firms like within the tolling indus-
try where there are not a lot of DBEs who have that skill set;
partnering with those kinds of agencies to build the capacity for
our DBE firms.
So it is about partnership, and it is about collaboration.
Mr. GRAVES OF LOUISIANA. Thank you, Ms. Norman. Thank you
and Mr. McDonald.
The last question, I am going to kind of bring those two together.
So years ago I ran a large infrastructure program, and often we
would meet with DBEs that wanted more work.
The type of work that we did in some cases was a very special-
ized area, and so we would be sitting there with contracts of tens
of millions or maybe even hundreds of millions of dollars, and as
you can understand, somewhat cautious or concerned about giving
a contract to a firm that maybe does not have that resume or that
portfolio of expertise in the field.
You have both talked about partnerships and mentoring pro-
grams. So on the one hand, we have eliminated the gross receipts
cap in the FAA, the H.R. 2. The highway bill that is moving
through also eliminates that nearly $24 million gross receipts cap.
I am trying to figure out how do you strike that right balance
of not giving contracts to folks that do not have the right expertise,
but at the same time do not allow these huge contracts to slide in
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under a DBE label whenever they are taking work from smaller
businesses.
Ms. Boyer, do you want to comment on that at all?
Ms. BOYER. I think one of the things that we have done in Illi-
nois for the Illinois Department of Transportation is we do a lot of
teaming between small firms and large firms, and that seems to
really work well. It gives the small firms the ability to lead the
project, but it has the support of the larger firms that have the
breadth of experience and really a workforce that can help us out
when we need the extra manpower.
So I think joint mentoring and teaming opportunities between
prime and DBE firms is really important, and I think it is a way
to advance us all because what it also does is the prime firm learns
or the bigger firm learns how to be a sub. They learn that informa-
tion needs to flow up and down, and sometimes if they never have
the opportunity to work as a subconsultant or a subcontractor, they
never understand the importance of passing on information in a
timely manner.
They do not even have any idea what it is like to be a DBE firm.
So I think overall it strengthens the entire industry.
Mr. GRAVES OF LOUISIANA. Thank you very much. I appreciate
it.
I yield back, Ms. Chair.
Ms. NORTON. I thank the gentleman for his question.
Representative Stanton.
Mr. STANTON. Thank you very much, Madam Chair. Thank you
for holding this important hearing.
Thank you to the witnesses for being here.
As people on the committee know, I am a new Member to Con-
gress. My former job was mayor of a large city, mayor of the city
of Phoenix, and I am a huge fan of the DBE program.
I witnessed with my own eyes when we were lucky enough to do
a large infrastructure program at our airport or advanced light rail
in my city or build a water treatment plant the opportunity to get
businesses, often small businesses led by women, led by people of
color, an opportunity to get a portion of that work and see them
build their companies, grow employment, build their own wealth.
It is really great for the city, and a benefit of this program also
that I witnessed over and over again is that the DBE firm leader-
ship often would become the leadership of the city. As those compa-
nies grew in size and importance in our community, I would tap
the leadership of those companies for important boards and com-
missions or nonprofit board seats, et cetera.
They tend to be some of the most civically active business leaders
in a community. The DBE program is critically important to open-
ing the door for small businesses owned by socially and economi-
cally disadvantaged individuals to compete for important federally
funded projects.
Today I want to highlight just one DBE success story in Arizona.
Arizona Heat Contracting, a woman-owned DBE company, had
only one contract with our State DOT prior to joining the South
Mountain Freeway Team, the largest project to date in Arizona at
almost $2 billion. The company was contracted to perform trucking
activities on this new 22-mile freeway.
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The original contract was for $25,000. That was just the start.
The company did well and kept growing and growing, got in new
contracts, ultimately got contracts valued up to $9 million, and
then they were able to subcontract with over 81 DBE and non-DBE
trucking firms to assist in delivering the main portion of the
project’s trucking needs.
That is a great success story. They were successful in maintain-
ing ownership and control of the trucking operations on a project
which had an aggressive schedule and many requirements.
Arizona Heat was able to quickly adapt to take the necessary
steps in a very short period of time in order to sustain the needs
of the project and increase its capacity.
I mean, that story has played out over and over and over again
in communities throughout this country. It is just one example of
many successful DBE programs in my State and has been in so
many other States.
I have a question for Ms. Williams.
Ms. Williams, the committee recently enacted a provision which
was included in H.R. 2, the Moving Forward Act, to remove the
gross receipts cap under the DBE provisions applicable to the Sur-
face Transportation Program.
If enacted, certified DBEs would be eligible to participate in fed-
erally funded highway and transit projects based upon their Small
Business Administration size standard, as is the case in the avia-
tion DBE program.
Ms. Williams, how would such a change benefit certified DBEs
seeking to participate on highway and transit projects?
Ms. WILLIAMS. Thank you. That is a great question.
I think it will help if those caps were lifted. However, many
times the problems for graduating or the problem existed that
pushes people out of the program is not the cap on gross receipts.
It is the cap on personal net worth.
If I do not have the personal net worth to go after a $24 million
project, then it does not behoove me to go after it. I do not have
the resources to fund it.
And so I think a greater emphasis should be put on looking at
the personal net worth cap as well.
Mr. STANTON. All right. You have given this committee a lot of
food for thought with that good advice. I appreciate that, Ms. Wil-
liams.
Mr. Ali, how has participation in the DBE and ACDBE programs
made AMAC members more competitive outside of the DBE pro-
gram?
Mr. ALI. Yes, thank you for the question.
What we found, as you heard earlier, the joint ventures that you
heard from Ms. Boyer, those joint ventures and those teaming ar-
rangements, that you have seen that happen more often, and as a
result, they have been able to take some of those partnerships out-
side of the airport industry into other transportation industries as
well as into the private industry, which allows them to build rela-
tionships.
We should never forget business is done with people in business
with people you know, people you like, and people you trust. And
that is really done in this space where you get people to engage.
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So the DBE program kind of helps to align for some of that, par-
ticularly since there has been so much discrimination in the past,
that this provides a way for people to partner and grow and learn
to work and build together so they can do exactly what you said.
People get to know who they are and be able to put them on board
commissions together.
Mr. STANTON. Thank you, Mr. Ali.
Thank you, Madam Chair. It has been an excellent, excellent
hearing. I yield back.
Ms. NORTON. I thank the gentleman.
Representative Fletcher. Representative Fletcher.
Mrs. FLETCHER. Yes. Thank you, Chairwoman, and thank you
and also Ranking Member Graves and Chairman DeFazio for hold-
ing the hearing today.
Thank you so much to the witnesses for taking the time to tes-
tify. Your stories have been very powerful.
I also want to thank my colleagues for their thoughtful questions
and their ongoing support of the important work we are doing here
today, especially Mr. Johnson from Georgia, who reminded us all
why this program exists and why it matters.
As we have heard, the DOT Disadvantaged Business Enterprise
program is an important program created to ensure that minority-
and women-owned businesses have a fair chance to compete for
Federal DOT funds, a program that has historical roots that, as we
have heard from our witnesses, is very much needed today.
For more than 40 years, the program has opened access to small
businesses across the country who would otherwise not be able to
compete for many of these projects, and we have seen the results
in my hometown, for example.
Thanks to this program, more than 30 percent of both George
Bush Intercontinental Airport and William P. Hobby Airport con-
tracting and concessions goes to ACDBEs.
But as we have heard today, the committee has an important
role in ensuring that the marketplace for DOT-assisted contracts is
free from artificial and discriminatory barriers for women- and mi-
nority-owned businesses who wish to compete on a level playing
field.
So I want to use my time here today to follow up on a few ques-
tions that some of my colleagues have already asked, and I actually
want to start with Ms. Williams.
In your opening statement, I think the end of your opening state-
ment was interrupted, and so I would like to give you the oppor-
tunity to just repeat the concluding sentence, the thing that you
wanted to say in conclusion of your opening remarks.
Ms. WILLIAMS. Well, thank you so much.
I will repeat that. So in conclusion, I wanted to say that the pro-
gram is not a handout. It is a leg up. It forces big companies and
public transit agencies or public transportation authorities to do
business with minority companies.
Without the DBE program, we would probably be out of business
at the end of the life cycle of our contracts that are in the pipeline.
And my last statement there was that we need to be protected
like we protected the bald eagle.
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Mrs. FLETCHER. Well, thank you so much, Ms. Williams. I did
want to hear you full statement, and I want to follow up with you
on a particular question kind of following up on what Chairman
DeFazio was asking in his questions to Dr. Wainwright about pub-
lic versus private projects.
Can you share with us kind of the percentage of your work or
your revenues that comes from public versus private projects?
And talk about kind of the effect of the DBE program, public
versus private, and how that might help particularly in the bidding
process in Dallas, but also more generally.
Ms. WILLIAMS. Private work is null. We have probably done a
few private projects in the past. They tend not to come frequent
enough to sustain us, and they also come with other issues that we
do not face when we do public work, like getting paid. That is im-
portant.
As far as the contracts that we do have in the public sector, those
have been our lifeline. I think that without those projects, we
would not be in business. We just simply would not because we de-
pend on the DBE program.
Would I like to graduate? I would, but as others have mentioned,
it is frightening because I know what happens when you pull the
covers back.
I think sustainability is really important, and sustainability hap-
pens when there is continuity between projects, when you are able
to retain staff between projects, when the team you have worked
with is continuing on to another project together.
And so there is a lack of continuity, and what happens is you are
forced to lose your resources because you cannot sit them on a
bench. And so this cycle just starts over and over and over again.
Thank you.
Mrs. FLETCHER. Thank you very much, Ms. Williams.
And I want to use the remaining time that I have, which is not
a lot, to direct a question to Dr. Wainwright.
In your testimony, you stated that statistically significant dis-
parities facing minority-owned and women-owned businesses per-
sist to this day, according to research, and looking at the dispari-
ties, what gaps do you feel your research reveals where the DBE
program could be used to further reduce the existing and currently
present disparities?
Mr. WAINWRIGHT. I want to make sure I understand your ques-
tion, Representative. Is it what more could the DBE program be
doing?
Mrs. FLETCHER. Yes. I mean, does your research reveal gaps
where the DBE program could be used to further reduce the con-
tinuing and existing disparities?
And very quickly. I think I have gone over my time here.
Mr. WAINWRIGHT. Yes. It is kind of a policy question, a little bit
out of my wheelhouse. I guess I would say quickly, seeing these
programs, there are still a lot of cities and counties and States
around the country that do not run comparable programs, and it
would be nice, and as one of them I would say also within the Fed-
eral Government outside U.S. DOT.
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So it would be good to see a more consistent and widespread ef-
fort to promote contracting diversity in the public sector and, of
course, to see that spill over into the private sector.
Ms. NORTON. I thank the gentleman.
Mrs. FLETCHER. Thank you very much, Dr. Wainwright, and
Madam Chairwoman, I yield back.
Ms. NORTON. I thank the gentlelady for her question.
Representative Espaillat.
Representative Espaillat, are you muted?
Mr. ESPAILLAT. Yes, I am here.
Ms. NORTON. All right.
Mr. ESPAILLAT. How are you?
Ms. NORTON. Go ahead.
Mr. ESPAILLAT. Yes. Thank you, Madam Chair, and thank you to
all the panelists for being here.
This is an incredibly important hearing. I am grateful to come
from a State and a city like New York which has programs in the
transportation and construction sector that go well beyond the re-
quirements of disadvantaged business enterprises. But there are so
many underlying issues that I believe we need to address.
Last year I held a meeting with my local Transportation Task
Force to discuss better inclusion of DBEs. I have had our local con-
tractors association provide us a thorough examination to a num-
ber of community groups and leaders so they could ensure small
businesses in the city have a good sense of how the DBE program
works.
One of the biggest take-aways from the meeting was that even
though New York is full of diversity and has very aggressive diver-
sity goals, there is still a pipeline issue in the construction sector.
That is why I am working closely with former congressman
Charlie Rangel and City College of New York to develop a state-
of-the-art infrastructure training program because we feel that
there is just not enough young people particularly ready for the po-
tential jobs that may be coming towards the future.
So I believe that as we invest in infrastructure, we also need to
invest in training the diverse field of candidates for the jobs that
will come along the way.
Another issue has been brought to my attention is the NAICS
issue. The NAICS size standard negatively impacts the ability of
DBEs to grow.
So I want to ask the panelists: have you faced similar issues?
Do you believe that changes need to be made to the INVEST in
America Act to sufficiently resolve these issues?
And is there more that we can do to ensure that DBEs are not
held back?
Any of the panelists.
Ms. WILLIAMS. This is Eve Williams.
I would like to address the NAICS standards on senior [inaudi-
ble] architectural services, and it puzzles me as to why engineering
[inaudible] service. The engineering cap on gross revenue is some-
where near $14 million over an average 3-year period, but yet engi-
neering architecture services are near $7 million.
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I think in speaking for the architects, I think that they are se-
verely held back because of the NAICS code standards or cap on
just architectural services.
Mr. ALI. Yes, this is Farad Ali from AMAC.
I would say that there needs to be some real evaluation of what
Ms. Williams was talking about earlier, which is personal net
worth. I think it is unreasonable to believe. I think you create some
kind of economic discrimination by keeping the number so low and
then expect for businesses to, quote, unquote, ‘‘graduate’’ or to ‘‘per-
form better.’’
It is hard to continue to have a small net worth and expect that
people can grow to $30 million or $40 million or $15 million. I
mean, it is almost unreasonable.
That is the problem that we ran into in the car rental industry
because you have got a $1.3 million net worth requirement, net
standard, that means you cannot have over that, but yet you have
the cars.
If you wanted to be a dealer for rental cars when you have got
$50 million of rental cars, if you only have a net worth of $1.3 mil-
lion, you could not even get a contract to do that work.
So I think there should be some real intensive studies on under-
standing the impact of keeping the net worth at its current level
and how that has also created some economic discrimination until
you start really raising that so people can have growth and share
in the prosperity.
Mr. ESPAILLAT. Anything on the pipeline issue from anybody or
do you find that there are not enough trained folks for the jobs that
may be coming our way in the future?
And what can we do about it?
Mr. MCDONALD. No, the pipeline actually is an issue, and you
are absolutely correct.
So we are working here within our State and with our county to
expand our apprenticeship program in addition to what we are try-
ing to do to prepare for DBEs.
As the county we, too, just decided that we are going to align our
own county procurement with apprenticeship, requiring primes to
use a percentage of their activity with the contracts they win from
the county to be done with apprenticeship.
So we are believing that we are going to able to grow that in a
similar manner over with the DBE, but the pipeline is an issue
that we are trying to address right now because we do not have
disciplines as we go forward and infrastructure begins to grow and
bloom as opportunities for small businesses.
Mr. ESPAILLAT. Thank you, Madam Chair. I yield back.
Ms. NORTON. I thank the gentleman for his question.
Representative Garcı́a? Representative Garcı́a? Are you muted or
are you present?
[No response.]
Ms. NORTON. Then I am going to move on to Representative
Cohen.
Representative Cohen, are you muted?
[No response.]
Ms. NORTON. Then the last Member who has not been heard is
Representative Carson.
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Representative Carson, are you muted?
[No response.]
Ms. NORTON. I want to thank all of the witnesses for their testi-
mony today. I think this hearing has been very telling and essen-
tial.
It was particularly essential this year when we are seeing dem-
onstrations over racial discrimination. It is one thing to dem-
onstrate to take down a Confederate statute that was erected dec-
ades ago and be successful at that.
It is quite another thing to make sure to raise up the ability of
minorities and women to participate in Government programs.
That is an issue for today and in keeping with the kinds of reck-
oning that are happening in our country.
The comments of our witnesses today have been very helpful.
They will be taken into consideration, especially your comments
calling for changes in the statute itself.
I want to thank each of the witnesses for your testimony, your
very informative and helpful testimony.
I ask unanimous consent that the record of today’s hearing re-
main open until such time as our witnesses have provided answers
to any questions that may be submitted to them in writing.
I also ask unanimous consent that the record remain open for 15
days for any additional comments and information submitted by
Members or witnesses to be included in the record of the day’s
hearing.
Without objection, so ordered.
If no other Members have anything to add, the committee stands
adjourned.
Thank you very much.
[Whereupon, at 1 p.m., the committee was adjourned.]
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SUBMISSIONS FOR THE RECORD
Prepared Statement of Hon. Eddie Bernice Johnson, a Representative in
Congress from the State of Texas
Almost four decades ago, the Disadvantaged Business Enterprise program was en-
acted to address the stubborn and harmful institutionalized bias and systemic rac-
ism people of color were facing in the transportation industry. Since its enactment,
the program has made progress, but that progress has been far too slow. This com-
mittee has collected enormous amounts of evidence that illustrates just how difficult
it is for DBEs to succeed in today’s environment. The bottom line is that DBEs must
fight twice as hard and still usually end up getting far less money than goes to
firms owned by non-minority males.
Discrimination greatly increases the difficulty for women and minority owned
firms to succeed. A recently published disparity study conducted for the Texas De-
partment of Transportation used Census data to examine this issue. The study
found that the business formation rate for white males was 5.4 percent, but the rate
for African Americans was less than a third of that—1.6 percent. For Hispanic
Americans it was 2 percent, for Native Americans it was 2.9 percent, and for white
women it was 3.1 percent. For Asian/Pacific Islanders it was better—5.2 percent but
still lower than for white males.1
The disparities for firm formation in construction in Texas were even worse.
White men formed construction firms at a rate of 10.3 percent, but for Asian/Pacific
Islanders the rate was only 9.5 percent. For white women it was 8.9 percent.
Shockingly the construction firm formation rates for Native Americans, Hispanic
Americans and African Americans were 4.9 percent, 3.5 percent and 2.9 percent re-
spectively.
Think about what this means—as bad as the economic disparities are for firms
owned by minorities and women, the current data actually understates the problem,
since it doesn’t take into consideration all the firms that could never even get off
the ground. How can minorities and women ever erase the gaps in business inequal-
ity if discrimination keeps them from even forming the businesses they need to com-
pete?
This is exactly what makes the DBE program so important—while it doesn’t fully
level the playing field, it provides a demand for businesses owned by minorities and
women and gives those businesses that do exist at least a fighting chance to com-
pete.
It is my hope that this hearing today will help us better understand the impor-
tance of this program along with the areas where this program can be improved
upon. I look forward to hearing from our witnesses. Thank you.
f
Prepared Statement of Hon. Rick Larsen, a Representative in Congress
from the State of Washington, and Chairman, Subcommittee on Aviation
Thank you, Chair DeFazio and Subcommittee Chair Norton, for holding today’s
hearing on the importance of the U.S. Department of Transportation’s Disadvan-
taged Business Enterprise (DBE) Program.
Women and minority-owned businesses are fundamental to economic growth in
Northwest Washington and the success of U.S. transportation.
I saw this firsthand when I met with Marques Warren of Warren’s News and
Gifts at SeaTac Airport in Seattle.
1 Texas Department of Transportation Disparity Study 2019, Colette Holt & Associates, 2019,
at 133.
(133)
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Marques’ father, Ardie Warren, opened the family’s first store, Northwest Encoun-
ter, at SeaTac in 1994. The news and gift store has now grown to 18 locations in
the airport in partnership with the Hudson Group.
To launch their business, the Warrens depended on Airport Concessions Dis-
advantaged Business Enterprise (ACDBE) loans, which help level the playing field
for airport concessionaires.
The needs of U.S. transportation industry are as diverse as the passengers it
serves.
Congress must work to improve equity in the industry and increase economic op-
portunity for women and minority business owners.
One of the ways Congress can support these efforts is through preserving and im-
proving the Disadvantaged Business Enterprise (DBE) Program.
According to the American Community Survey, women and minorities signifi-
cantly establish fewer businesses and earn less from those businesses than their
white male counterparts.
To address these disparities, the DBE program aims to increase the participation
of women and minority-owned businesses in federally funded transportation and in-
frastructure projects.
The Port of Seattle is one example of the DBE program’s positive impact.
According to the Port, DBE firms received more than $4.9 million for work per-
formed on Federal Aviation Administration (FAA) funded projects, including taxi-
way improvements and residential noise insulation.
The Port’s Diversity in Contracting program tripled the number of women and mi-
nority-owned businesses doing business with the Port. Last year, the program met
its five-year goal of increasing the amount of spend on these contracts to 15 percent.
The DBE program is key to improving economic opportunity for small businesses
in U.S. transportation, but Congress can do more to meet the needs of women and
minority entrepreneurs.
Last year, the Washington State Department of Transportation (WSDOT) con-
ducted a disparity study, which found:
• Smaller airports want more assistance from the FAA and WSDOT to increase
DBE participation; and
• Without the program, DBEs would be effectively shut out of the market with
devastating impacts to these businesses, among other conclusions.
I look forward to hearing from today’s witnesses, including the Airport Minority
Advisory Council (AMAC), regarding the critical need to continue the DBE program
and ways to improve it for women and minority-owned businesses, particularly in
aviation.
Diversity in hiring and contracting is essential to strengthening the nation’s
transportation and infrastructure, and to keep the country competitive in the global
market.
Today’s witnesses are important partners in these efforts.
f
Letter of July 13, 2020, from Lawrence T. Green, President, Divine Cement,
Inc., Submitted for the Record by Hon. Peter A. DeFazio
JULY 13, 2020.
Mr. PETER DEFAZIO,
Chairman,
House Committee on Transportation and Infrastructure, United States House of Rep-
resentatives, Washington, DC.
Re: In Response to the Request from the Committee on Transportation and Infra-
structure for a Letter or Statement on the Disadvantaged Business Enterprise Pro-
gram
DEAR CHAIRMAN DEFAZIO,
Construction is an area that has historically excluded black workers. This in-
cludes the unionized portion of the industry. Giving minority workers access to good
paying jobs has always been an important part of closing our large and persistent
racial wage inequities. This is a critical issue that must be addressed and resolved.
Trade unions have had a complicated and often ugly history with race. That history
has helped shut blacks and Hispanics out of these highly coveted lines of work.
I have worked in the construction industry since the age of sixteen. I worked as
a cement finisher another sixteen years before starting my own company, Divine Ce-
ment, Inc.
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The construction trade has always been employment set aside for predominately
Caucasian men. During high school, I remember vividly my white counterparts
landing summer jobs in the trades while my black and hispanic counterparts
worked in the fast food industry or retail such as clothing and shoe stores at the
local mall.
In June 1971 the New York Times wrote, ‘‘The building of houses, offices and fac-
tories, of bridges and dams and highways is still largely white man’s work in Amer-
ica.’’
Despite Government-imposed quotas and timetables, despite voluntary ‘‘hometown
solutions’’ and ‘‘outreach’’ programs to train inner-city youths along with seemingly
constant litigation, the number of black and other minority workers entering the
construction industry remains a thin trickle.
There is some evidence that these efforts have forced open the door to employ-
ment in the construction trades at least a crack. The number of blacks now entering
construction jobs is still insignificant in terms of their need for employment and
higher income. The crack is so insignificant, light can’t shine through.
According to a 2018 Crain’s New York Business article, ‘‘In 2015, the Center for
Union Facts, released data on the racial pay disparities in the construction unions.
We noted that only 25% of unionized construction workers were black, compared
with 53% and 43% in the health care and transportation sectors, respectively. Addi-
tionally, we found white workers were getting better-paid job assignments than mi-
norities, who often had lower-paying apprenticeships. Fast forward to current re-
search and those figures confirms there has been little to no change.’’
The reasons for Black invisibility at street construction sites are racist exclusion,
cheap labor, and the refusal of city and county officials to enforce anti-discrimina-
tion labor laws. While the laws are in place, they are routinely circumvented allow-
ing discrimination to continue. But most importantly, the reason is racist exclusion
and it starts with the unions. The long history of racial closed doors toward African
Americans in the trades is well-known and documented with construction at the top
of the list. These are the plum paying and plum benefit jobs in the construction in-
dustry. They have long been jealously guarded as the sole preserve of blue-collar
whites as cited in ‘‘The Hutchinson Report’’ by author and political analyst Earl
Ofari Hutchinson.
Some of my personal experiences begin with unfair practice of how and when mo-
bilization is paid out. When my company is selected as the subcontractor, we have
a significant amount of work to perform and rely on mobilization monies to pur-
chase equipment and materials to start the job. We are forced to wait until two
weeks prior to the scope of work starting before being paid mobilization. Often
times, we do not receive mobilization until after the scope of work has begun.
More importantly, we are forced to wait sometimes months after the general con-
tractor is paid before we receive payment. More times than not, we are forced to
call the general contractor numerous times requesting we be paid and this is after
confirming they have been paid by the owner. It is extremely frustrating to complete
a job on or ahead of schedule, with complete satisfaction of the general contractor
only to be sent a perceived message of, ‘‘You’ll get paid when I feel like paying you
and not a day before!’’ It is extremely disheartening.
The DBE Program has enhanced Divine’s opportunities in the highway, transit,
and airport construction industries simply by existing. The consequences of not hav-
ing the program would be our business would not exist. But for the Disadvantage
Business Enterprise and the requirements to use minority owned businesses, Divine
Cement, Inc. would not a reality because general contractors would self-perform.
Securing working capital is extremely difficult for minority owned businesses. Per-
sonally, I am repeatedly forced to secure loans with interest rates that mirror loans
from merchant cash advances. While the interest rates are uncomfortably high, the
loans are necessary to make payroll and purchase the equipment and materials
needed to perform the job in the absence of mobilization.
Our saving grace has been that the consistent superior quality of work Divine Ce-
ment provides has afforded us the opportunity for additional work. Moreover, addi-
tional contracts are awarded after the realization that Divine Cement’s performance
surpasses expectation. One of the visions of Divine is to create a state-of-the-art
training center to equip other minorities to provide a more diverse group of highly
trained and qualified tradesmen thereby opening the door for my more successful
minority owned companies like Divine Cement, Inc.
Sincerely,
LAWRENCE T. GREEN,
President, Divine Cement, Inc.
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f
Letter of July 15, 2020, from Linda Moen, P.E., LEED BD+C, President and
Managing Member, EFK Moen, Submitted for the Record by Hon. Peter
A. DeFazio
JULY 15, 2020.
Hon. PETER DEFAZIO,
Chair,
House Committee on Transportation and Infrastructure, United States House of Rep-
resentatives, Washington, DC.
Re: Request from the Committee on Transportation and Infrastructure on the Dis-
advantaged Business Enterprise (DBE) Program
DEAR MR. DEFAZIO,
My company, EFK Moen, is a woman-owned civil engineering design firm with of-
fices in Missouri, Illinois, and Georgia. I own 57% of the company and I worked in
the public sector as a highway design engineer, project leader and regional design
& operations manager for 13 years before starting my company. I have a strong
background in highway design and in management of public highway projects, but
it was still difficult for me to get approval in the DBE program—the state Depart-
ment of Transportation (DOT) I first applied for DBE certification with challenged
me to prove that my father (a retired construction engineer with no design experi-
ence and no involvement with my company) or the other men who worked at my
company were not the ‘‘brains’’ or ‘‘influencers’’ of my company. I stood firm, over-
came those hurdles and have been in business for over 22 years (1998 to the
present). I have grown my company from 4 to 54 engineers and surveyors; with 5
offices in Missouri-Illinois-Georgia; and EFK Moen has a respected position in the
industry as an experienced design firm capable of leading large highway and bridge
infrastructure projects and as a valued teaming partner with other national civil en-
gineering design firms. Without the DBE program, I expect I would be dabbling on
very small project assignments or I would be out of business.
The construction industry is built on managing risk and trusting that others will
be able to do their job well and contribute to a project’s profitability. For an agency
or a prime contractor to take a chance on a new/unknown/small firm there needs
to be an incentive. Women-owned and Minority-owned firms are ‘‘unknowns’’ be-
cause we are seen as strangers to this industry—still after over 30 years of DBE–
MBE–WBE programs—because we do not fit the typical image of construction work-
ers and project managers. There are individuals who are interested in giving firms
a chance, but when they see it could impact their bottom line it is a very hard call
to make without an incentive. The DBE program provides incentive and has been
very successful in the markets I work in. The program gives me enough value-poten-
tial to have the initial discussions with a potential client—whether that is an agen-
cy or prime contractor/consultant. Then my company can prove that we are capable
and have value on our own, beyond the DBE incentives. We can build relationships
that break the pattern and help women and minorities become part of the ‘‘face of
the industry’’. EFK Moen has successfully become one of the top engineering design
firms in the Missouri public works market with MoDOT and with local counties and
municipalities; we have successfully become a valued part of the very large engi-
neering design industry in Illinois; and we are starting out strong in the Georgia
engineering public highway and bridge design market. In each new market, our
DBE certification has provided us opportunities to team with other engineering
firms and prove our value.
The DBE programs run by the state DOT’s we work with are very strong, inclu-
sive and ethical. The DOTs provide training opportunities on how to do business
with government agencies (which is quite a bit different than doing private work)
and facilitate introductions to prime firms in the industry. Business owners in the
program support each other and support the philosophy of bringing other disadvan-
taged people and firms into the industry. The FHWA and state DOT commitment
to the program sets the tone for the industry to value the program also, and to
strive to build up the industry’s woman-owned and minority-owned firms to match/
represent the communities where those tax dollars are spent. The state success in
supporting capable DBE firms creates a pool of women-owned and minority-owned
firms who are available to do work in their region on projects outside the program
also.
The culture created by the DBE program is valuable to our industry and supports
a healthy inclusive environment for firms and for diverse individuals who are
under-represented in our industry. Engineers’ and surveyors’ potential is not based
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on their skin tone, ethnicity, culture or gender—success in technical fields is based
on a love of problem solving. Encouraging diversity in our industry pushes that re-
ality forward and teaches us not to judge a person’s capabilities based on the ap-
pearance of other capable engineers we have worked with in the past. As in any
process, it is ‘‘easier’’ to continue the status quo, to continue doing business with
the same type of people you have always worked with. But the reward for the com-
munity comes when we try a little harder and reach out with opportunities for ev-
eryone.
Thank you for accepting my letter of support for the DBE program. It has been
very valuable to me, to my company, to the engineering/construction industry and
to our community.
With warm regards,
LINDA MOEN, P.E., LEED BD+C,
President and Managing Member, EFK Moen.
f
Letter of July 1, 2020, from Carla M. Williams, DBELO, Director of Commu-
nity and Business Engagement, Hillsborough Area Regional Transit Au-
thority, and President, COMTO Central Florida Chapter, Submitted for
the Record by Hon. Peter A. DeFazio
JULY 1, 2020.
Hon. PETER DEFAZIO,
Chair,
House Committee on Transportation and Infrastructure, United States House of Rep-
resentatives, Washington, DC.
RE: The Hillsborough Transit Authority’s (HART) Support for the Reauthorization
of the DOT’s DBE Program
The Hillsborough Transit Authority’s (HART) is responding to the request from
the Committee on Transportation and Infrastructure for a statement on the Dis-
advantaged Business Enterprise Program.
The DBE program has enhanced transit in the Tampa Bay area, in Florida. Over
a ten-year period (2010–2019), awards, with federal dollars to primes averaged
about $4.1 million, while about 11.1% of $4.1 million went to DBE’s. The major con-
struction projects during this period (2010–2013) included:
• CNG Fueling Facility
• TECO Streetcar Line Phase II
Contracts to DBE’s spiked in 2011 to 108 DBE’s. The final construction was com-
pleted by 2014 and overall federal funds levelled off after 2015 to average about 14.6
DBE contract awards.
CONSEQUENCES IF THE PROGRAM WERE NOT TO RECEIVE REAUTHORIZATION
It would be unimaginable to discontinue the DBE program during these tumul-
tuous, economic strained times. The COVID–19 crisis hit with people of color strug-
gling to stay healthy, provide for their families, and keep their small businesses
going, while still striving to stay safe from enforcement brutality or worst. The
death toll of this pandemic has been reported to hit Black and Brown skinned peo-
ple in the United States at a higher proportion than others. Removal of continued
support to Disadvantaged businesses would be like adding an accelerant to an al-
ready well burning fire.
If the country’s goal is to maintain a level playing field, assistance is still needed
for the minority disadvantaged business. Yes, there has been improvement since the
1982 inception of the DBE program. However, the scale of fairness and the Good
Ole Boy Network still is vibrant and not willing to yield to inclusion.
Still most of the subcontracting opportunities on HART projects are only filled
with a DBE when a goal is set because of federal funding (Race Conscious). HART
has experienced a major, well-known and highly utilized company agreeing to hire
DBE’s but backed out and said that the DBE was not cooperating on their expected
salary. When in truth the DBE Company was never contacted and the conversation
about salary never took place. The prime contractor found a non-DBE with a similar
name and attempted to pass the company off as the DBE. This deviousness only
surfaced when the DBE firm called the HART DBE Coordinator to ask what was
going on and when they could expect to start work.
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PROCUREMENT ISSUES
Issue 1: Open and Transparent Communication of Informing DBE’s of Upcoming Op-
portunities
Notifying DBE’s on regular solicitation lists. Currently DBE’s, registered in the
HART Vendor System, are not notified automatically when opportunities arise. The
solicitations are advertised on the HART website, however since the procurement
solicitation is not linked to the vendor registration system it can’t automatically
search for vendors with the NAICS codes.
The vendor is required to download the bonfire software to their individual com-
puter for automatic notifications and to get details of a solicitation.
Our DBE staff is collaborating with the Procurement Department to improve the
process to ensure the information can be transmitted to qualified DBE’s, who are
registered in the HART Vendor System in a timely manner so that they are aware
of the bid opportunities and have time to prepare the appropriate paperwork.
Issue 2: Good Faith Efforts to Sub-Contract DBE’s
DBE Goal Waived by the Director of Procurement: HART experienced a prime con-
tractor who came unbelievably close to the project’s Independent Cost Estimation.
The eligible, federally funded project allowed for a DBE goal. When the solicitation
was examined none of the selected subcontractors were Unified Certification Pro-
gram (UCP) DBE’s. This procurement required the use of the Good Faith Efforts
clause. After efforts were made to obtain UCP DBE’s and the results were exam-
ined, the additional expense to the prime contractor would have been $66. HART
DBE Compliance ruled the additional price was not sufficient enough to stop the
use of UCP DBE’s on the project. The Procurement Director had the last say. The
Procurement Director ruled the prime contractor had completed all that was asked
of them and because of that, the utilization of DBE’s on the project was not re-
quired.
Dropping DBE subcontractors from projects: After collaborating with Hillsborough
County DBE staff, they saw a pattern where the same Prime Contractors solicit bids
naming the DBE on their contract and later on dropped the DBE from the project.
While it may be a legitimate reason, there may be a need to be notified by procure-
ment staff at the time of solicitation when the same Prime Contractor keeps repeat-
ing the pattern.
Continuing the DBE Program will assist HART in continuing to make transit a
viable travel option for residents within the Tampa Bay Region and attaining the
objective to support transit projects that promote economic development and job cre-
ation. HART strongly supports the continuation of the DBE Program.
Sincerely,
CARLA M. WILLIAMS, DBELO,
Director of Community and Business Engagement, Hillsborough Area Regional
Transit Authority.
President, COMTO Central Florida Chapter.
f
Letter of September 19, 2020, from Colette Holt, Colette Holt & Associates,
Submitted for the Record by Hon. Peter A. DeFazio
SEPTEMBER 19, 2020.
Hon. PETER DEFAZIO,
Chairman,
House Committee on Transportation and Infrastructure, United States House of Rep-
resentatives Washington, DC.
DEAR CHAIRMAN DEFAZIO:
I write in support of the continuation of the Disadvantaged Business Enterprise
program for federally-assisted transportation projects. My law and consulting firm,
Colette Holt & Associates, has been involved in the DBE program and other con-
tracting supplier diversity programs for over 25 years. I have conducted or partici-
pated in over 75 high-quality disparity and availability studies in recent years.
These research projects evaluated whether there was sufficient evidence of discrimi-
nation for relevant jurisdictions to continue or to enact remedial race- and gender-
based programs for public sector contracts. The statistical and anecdotal evidence
gathered in these studies is necessary to support the use of race- and gender-con-
scious goals to combat discrimination and to ensure that program elements meet ap-
plicable constitutional standards.
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This discussion focuses on the salient evidentiary findings that emerge from the
following 23 Colette Holt & Associates studies. My conclusions are also informed by
my decades of work with federal agencies, including USDOT and state and local
government agencies across the country. Over 30 years of research reveals a stark
truth:
DBE goals remain necessary to ensure that minority- and woman-owned
businesses have full and fair opportunities to compete for USDOT-funded
contracts. Without goals, DBEs receive little to no work. There is also no
doubt that the availability and capabilities of these firms are depressed by
the effects of past and current race and gender discrimination. The DBE
program therefore remains essential to ensure that the federal government
does not function as a passive participant in ongoing discrimination in the
market for USDOT-funded contracts.
This finding is supported by two types of proof: 1. Quantitative or statistical evi-
dence looks at the utilization and availability of minority and woman firms, and
where necessary for agencies located in the Ninth Circuit Court of Appeals, dispari-
ties between the utilization and availability of DBEs. 2. Qualitative or anecdotal
data that describes the experiences of business owners in their market areas with
discriminatory barriers.
QUANTITATIVE EVIDENCE FROM RECENT COLETTE HOLT & ASSOCIATES DISPARITY
STUDIES
A high quality disparity or availability study provides detailed results of an anal-
ysis of the recipient’s utilization of DBEs, measured in dollars paid as a percentage
of all firms’ receipt of dollars paid. Contract records must include prime contract
dollars and all subcontractor dollars, not just those paid to DBE subcontractors.
These records must be examined at the 6-digit North American Industry Classifica-
tion System (‘‘NAICS’’) code level to ensure the results are ‘‘narrowly tailored’’ to
the recipient’s own contracting activities.
Next, a study must estimate the availability of minority- and woman-owned busi-
nesses at the 6-digit level in the recipient’s market area that provide the types of
services and goods purchased by the recipient, as established by the utilization anal-
ysis.
Where there is a large gap between utilization and availability, the courts have
held that such disparities can support an inference of discrimination. A ratio of 80
percent or lower supports a prima facie inference that the cause of the disparity
might be discrimination. This ‘‘disparity testing’’ is not required for recipients out-
side the Ninth Circuit, since Congress, through the legislative process has pre-
viously determined that discrimination constitutes a failure in the market for
USDOT-funded contracts. Even where statistical analyses is not required, the gulf
between the minority- and woman-owned firms that could have received dollars and
the actual dollars such businesses received presents strong evidence that remedial
intervention through the use of narrowly tailored DBE contract goals is necessary
and supportable.
It can also be illuminating to contrast the results of the DBE program, that uses
contract goals to ensure equal opportunities, with programs in the same market
area that do not take affirmative steps to remedy discrimination. Again, we found
that without the use of goals, DBEs received little or no work.
We have provided our studies to the Committee. Please allow me to highlight a
few results:
• Our 2017 Disparity Study for the Washington State Department of Transpor-
tation (‘‘WSDOT’’) found that DBEs received dollars close to their availability
on Federal Highway Administration funded contracts: DBE availability was
13.80 percent, and they were paid 12.90 percent of the dollars, yielding a dis-
parity ratio of 93.30 percent. However, on state-funded highway construction
projects on which WSDOT is prohibited from setting race- and gender-conscious
goals by a state constitutional amendment, DBE availability was 19.0 percent 1,
but they received only 6.40 percent of the dollars, yielding a disparity ratio of
33.50 percent. Clearly, the use of goals is what drove the FHWA results.
• Even when DBE contract goals are set, disadvantaged firms often received sig-
nificantly less than would be expected in a discrimination-free market. For ex-
ample, DBEs constituted 8.90 percent of the firms available to perform on
FHWA-funded contracts awarded by the Texas Department of Transportation in
1 The availability estimates vary by funding source because the types of contracts are some-
what different in scope and scale.
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our 2019 Disparity Study, yet their availability was 28.10 percent, yielding a
disparity ratio of 31.67 percent.
• Our 2019 State of Washington Disparity Study, which examined state-funded
contracts other than for highway construction, found that minority and woman
firms constituted 16.53 percent of the available firms but received only 9.00 per-
cent of the dollars, for a disparity ratio of 54.43 percent.
• Even in the FHWA DBE program, DBEs, especially Black-owned businesses,
often received few dollars in the recipient’s core contracting activities. For ex-
ample, in NAICS code 237310, Highway, Street and Bridge Construction, non-
DBEs received 94 percent of contract dollars from NCDOT; Blacks received 0.3
percent. In the same subindustry in Washington State, non-DBEs received 88
percent of contract dollars; Blacks received zero dollars. Likewise, in code
237990, Other Heavy and Civil Engineering
• Construction, non-DBEs received 100 percent of contract dollars from NCDOT;
DBEs received nothing. In the same subindustry in Washington State, non-
DBEs received 94 percent of contract dollars; Blacks received zero dollars.
These and many more reports make it clear that discrimination continues to im-
pede opportunities on the basis of race and gender, and that without the use of con-
tract goals, the ‘‘playing field’’ for federal-aid contracts would remain tilted in favor
of long established firms that enjoy the benefits of historic and ongoing structural
exclusion that advantages White males.
QUALITATIVE EVIDENCE FROM RECENT COLETTE HOLT & ASSOCIATES DISPARITY
STUDIES
Qualitative evidence gathered through surveys and personal interviews from
these and other studies further supports the conclusion that racism and sexism con-
tinue to impede the entrepreneurial aspirations of DBEs seeking government con-
tracts. Some representative comments follow.
Discriminatory Attitudes and Negative Perceptions of Competency and Profes-
sionalism
Many minority and women business owners reported that they continue to en-
counter discriminatory attitudes, stereotypes and negative perceptions of their
qualifications and core competencies and capabilities by other firms and government
officials. Explicit and implicit biases impact their attempts to obtain contracts and
to be treated equally. Respondents reported that White men frequently display neg-
ative attitudes relative to their competency, skill, and professionalism.
‘‘When people meet me, [being an MBE] they assume certain things. As
they get to know me and understand that I can speak construction, that
I’m bilingual, that I speak engineering, then I get the comment, ‘Oh you’re
different.’ Or, ‘You’re educated.’ ’’ (2019 Dallas Fort Worth Int’l Airport Dis-
parity Study).
‘‘The perception is just there that if you’re Black or if you’re a woman you
probably don’t know how to do X, Y, and Z type of work. So, they’ve already
put [you] in that pigeonhole.’’ (2014 State of Missouri Disparity Study).
‘‘[State personnel] look down on us as some kind of beggars for percent-
ages.’’ (2016 Illinois State Toll Highway Authority).
Minority- and woman-owned businesses reported that they were perceived to lack
the capacity to do additional or more complex work.
‘‘There is significant evidence that the larger the goals are, the higher the
capacity building . . . . People will take the opportunities. Because we’re
women or we’re minorities doesn’t mean that we’re not entrepreneurs and
we don’t seize opportunity. It’s just that the opportunity doesn’t exist in the
current market.’’ (2015 State of Illinois Disparity Study).
Many women reported unfair treatment or sexual harassment in the workplace.
‘‘I still do find the initial contact with specifically, a general contractor,
there is somewhat that attitude of you’re a woman, let me tell you how to
do this.’’ (2019 Texas Dept. of Transportation Disparity Study).
‘‘I am the female, and they bring me like a tiny, little role in this large con-
tract. They bring me to the interview to make the showing because I inter-
view well and so they’re going to put me in front of people . . . Then no work
comes out of it.’’ (2017 Washington State Department of Transportation
Disparity Study).
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‘‘If you go into a construction zone, and you got wall-to-wall men construc-
tion in concrete, whether it’s Mexican, it doesn’t matter, but you feel like
you’re the only woman there. I got a gun with me all the time, all the time.’’
(2019 State of Washington Disparity Study).
‘‘Let’s just be honest. I’m a woman who’s in construction so that just equals
bulls’ eye . . . Other contractors who come in behind you and they call you
[trade] chicks . . . Or, they tell you, what has the world come to because
you’re [trade] chicks . . . Men come out and they complain that a woman is
running the crew . . . Even the men that I hire—I’m giving you a pay-
check—struggle with taking orders from a woman . . . Someone comes to the
job and they go to one of the guys [I employ] and they say, are you the lead
there?’’ (2016 Illinois State Toll Highway Authority).
‘‘ ‘Here comes that big titted blonde’. That’s what they’ll say, right out loud,
in front of everybody. And all the guys will just laugh. And I’ve got to suck
it up and just do my job . . . [Even my employees often won’t stand up for
me.] If I react, that’s just going to make me more belittled and [look] petty.’’
(2019 State of Washington Disparity Study).
Access to Industry and Professional Networks
Relationships are pivotal to obtaining public transportation work as subcontrac-
tors and to opportunities to work as prime vendors. Both minority and women re-
spondents reported difficulty in accessing networks and fostering relationships nec-
essary for professional success and viability. Business owners frequently stated that
there is a ‘‘good old boy’’ network. Barriers extended to agency staff; DBEs were un-
able to gain access to and communicate with key agency decisionmakers.
‘‘The transportation industry as a whole is dominated by the civil engineers,
which typically the folks graduating in civil engineering are White men.
You have a very low proportion of women and minorities with those de-
grees. Inherently, then in the workplace, you’re seeing very low amounts of
diversity. Same thing in environmental services. You don’t get a lot of
women who are wildlife biologists. Someone with that type of experience
typically has been hunting and fishing with his father and his grandpa
their entire lives and they have a good old boys club. They go drinking, they
go fishing, they go playing golf.’’ (2019 Texas Department of Transportation
Disparity Study).
‘‘It’s not being respected in the room, and it is body language. It’s relation-
ships, which I heard over and over again here, as a side word for experi-
ence. It’s really, ‘Do I have experience with you?’ And somebody I’m more
comfortable with, because they look like me, I’m going to choose the person
I’m more comfortable with because they look like me.’’ (2017 Washington
State Department of Transportation Disparity Study).
‘‘People have relationships with people that they feel that they can identify
with. And that might be a problem because they’re not willing to open the
door for you and let you get in.’’ (2014 Metropolitan Nashville Airport Au-
thority Disparity Study).
Obtaining Work on an Equal Basis
DBEs were in almost unanimous agreement that contract goals remain necessary
to level the playing field and equalize opportunities. Without contract goals, they
would receive little or no work. Race- and gender-neutral approaches alone are
viewed as inadequate and unlikely to ensure a level playing field.
‘‘If those DBE goals had not been in there, we absolutely would not have
been considered . . . . In fact, we were point blank told on a contract because
they didn’t have a DBE goal of some kind, they didn’t even need to consider
us.’’ (2014 Metropolitan Nashville Airport Authority Disparity Study).
‘‘I remember when the Tollway had no goals, and it was absolutely abys-
mal. There was never a minority or a female that worked on a Tollway job,
ever. And we would tell them, DOT has goals. They find women and mi-
norities to do work. It’s the same kind of work that the Tollway does, and
the DOT does. And it wasn’t until the Tollway started to have some goals
that we started to get work on Tollway projects.’’ (2016 Illinois State Toll
Highway Authority).
‘‘If there is no goal-setting, you don’t have any opportunity to perform as
a subcontractor.’’ (2016 Kansas City Consortium Disparity Study).
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‘‘[Prime contractors] use us because they have to.’’ (2017 Washington State
Department of Transportation Disparity Study).
‘‘If you’re not a DBE or HUB or SBE, you’re not going to be considered for
any work as a consultant for TxDOT because they’re going to use these leg-
acy firms for most of their work on the consulting side.’’ (2019 Texas Dept.
of Transportation Disparity Study).
CONCLUSION
The findings from our studies and other reports provide strong quantitative and
qualitative evidence that Congress has a strong basis in evidence to continue to re-
quire recipients to implement the remedial DBE program. The studies provide proof
of pervasive and systemic discrimination against women and minorities in the mar-
ket for federal-aid contracts and support the need for appropriate race- and gender-
conscious measures.
Thank you for the opportunity to submit this information.
Very truly yours,
COLETTE HOLT,
Colette Holt & Associates.
f
Letter of June 16, 2020, from Katherine M. Cloonen, President, JK Steel
Erectors, Inc., Submitted for the Record by Hon. Peter A. DeFazio
JUNE 16, 2020.
Hon. PETER DEFAZIO,
Chairman,
House Committee on Transportation and Infrastructure, United States House of Rep-
resentatives, Washington, DC.
DEAR MR. DEFAZIO:
Regarding the DBE program and discrimination faced by female contractors, I am
writing to provide a few examples of how, after owning my own business for nearly
thirty years, I, the female owner, still face discrimination in the construction field.
My company specializes in the installation of structural steel and rebar. The fol-
lowing examples punctuate the need to continue the DBE program in the 2020 high-
way bill:
• I asked a truck dealer for the bottom price on a pickup truck. A male employee
called the same dealer for the bottom price on the same truck from the same
sales rep, and he was able to get a lower price, even though my name was on
the check written for the purchase.
• A prime contractor calls asking for the estimator of the company. When I say
that I am the estimator, the person hangs up the phone.
• A salesperson calls and asks for the man in charge of buying the tools, and I
say that I am the woman in charge of buying tools. The person hangs up the
phone.
• When I am owed money by a contractor, and I call to ask about the funds, the
accounts payable person 1) is not available, 2) has misplaced my check, 3) has
misplaced my invoice or other required paperwork, or 4) simply does not return
my call. When a male employee from my company calls, the money suddenly
is on its way.
• The project manager of a prime contractor always called my foreperson, who
was a male, for scheduling, he would not call me, even though I told him I was
in charge of scheduling.
• A male project manager lied in a meeting as to what was said in a phone con-
versation with me. That particular lie cost me nearly $100,000 even though I
stated he clearly lied.
• After a deadline for a bid, I found that I was not asked to bid a project because
they ‘‘don’t need no women on the job.’’
• A contractor called and asked me if I wanted to make more money. Instead of
giving me an invitation to bid, he invited me to a meeting to sell health and
beauty products for a multi-level marketing company. I told him that if I had
to sell the beauty products in order to be a subcontractor for him, I would not
do it. I have not done business with that company since then.
There are more examples over the years, but this is a sample of what still hap-
pens in the construction industry. Thank you for your consideration.
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Sincerely.
KATHERINE M. CLOONEN,
President, JK Steel Erectors, Inc.
f
Letter of June 24, 2020, from Carol L. Kwan, Carol Kwan Consulting LLC,
Submitted for the Record by Hon. Peter A. DeFazio
JUNE 24, 2020.
Hon. PETER DEFAZIO,
Chairman,
House Committee on Transportation and Infrastructure, United States House of Rep-
resentatives, Washington, DC.
Subject: Testimony Regarding the Disadvantaged Business Enterprise Program
DEAR MR. DEFAZIO:
I am responding to the request from the Committee on Transportation and Infra-
structure for a letter or statement on the Disadvantaged Business Enterprise (DBE)
Program.
My company began in 2003 after I was laid off from a large residential develop-
ment corporation. My daughter was one-year old and had been very sickly, making
it difficult for me to perform my duties reliably. It was a mutually agreed upon lay
off. My former employer gave me a generous severance package and has been one
of my clients occasionally since that time.
For the first several years, I focused on private clients until my daughter became
healthier. Beginning in 2008, I returned to working in construction, mostly smaller
projects. Because of the recession, by 2011 most of my work had dried up. My net
income that year was $4,000 and I considered myself lucky that it was in the black.
I had become aware of the DBE program several years earlier but was busy enough
at the time not to bother with it. Desperate times call for desperate measures, and
I set about having my company certified as a DBE. That came through in 2012, and
I started getting more work. Two large general contractors subcontracted with me
on DBE projects, one with EPA funding and one with DOT funding. The first com-
pany had contacted me for the EPA funded project. A year or so later, I was bidding
on a non-DBE project and contacted the company about providing a bid. The man
that I spoke with seemed reluctant, as though he doubted that I could do the work.
I encounter that often as a woman working in construction. Fortunately, he checked
with the project manager for the contract that I already had with the company, who
vouched for me. I have had many contracts with both the first and second contrac-
tors since then, both DBE and non-DBE projects.
As a Certified Arborist, there are few of us who work in the construction industry
here in Hawaii. My primary competitor has been doing this type of work for over
five decades and was the first person that contractors thought of when they needed
tree protection work. He is a nice man and highly qualified, but a formidable com-
petitor for a company like mine that was trying to get established. The DBE pro-
gram gave me a foot in the door in being able to compete against him. My net in-
come (basically my salary as a 1-person company) has gone from around $40,000
a year to around $80,000–$120,000 a year, a much more livable income in the State
of Hawaii, in large part because of the network of clients that I have built as a DBE
company.
I still encounter contractors who refuse to hire a woman, either as a subcontractor
or an employee. Some of these contractors are small, ethnic companies with cultural
backgrounds that are strongly opposed to nontraditional roles for women. Occasion-
ally one of them will hire me because they are desperate and are unable to find any-
one else. It can make for an uncomfortable working situation, but I do it in part
because I look at it as chipping away at their preconceived biases of what women
can and cannot do. The DBE program helps to do that. By forcing contractors out
of their comfort zone, it helps to chip away at societal biases and makes the playing
field a little more level.
I hope that Congress will act to continue the DBE program. It is worthwhile and
it does make a difference. Should you have any questions or would like additional
information, I can be reached at [redacted].
Very truly yours,
CAROL L. KWAN,
Carol Kwan Consulting LLC.
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f
Letter of May 26, 2020, from Sarah Imberman, S. Levy Foods, Submitted for
the Record by Hon. Peter A. DeFazio
MAY 26, 2020.
To: Peter DeFazio—Chairman of the House Committee on Transportation and
Infrastructure
Re: Statement on the Disadvantage Business Enterprise Program
DEAR MR. DEFAZIO,
I am writing to convey the importance of the Disadvantage Business Enterprise
(DBE) Program. I started my company in 2004, making chocolate out of my mom’s
kitchen. After operating my bakery in Chicago for five years, I learned about the
DBE program and first became certified as an Airport Concession Disadvantage
Business Enterprise (ACDBE) in 2009.
I have often felt discriminated against and treated differently because of the fact
that I am a woman in business. I will never forget when the owner of a local Chi-
cago bank asked for a meeting and wanted to discuss my decision to close my street
side operation in order to focus on growing my business bringing local restaurants
to airports. I remember leaving the meeting feeling like I had been ‘‘called into the
principal’s office’’ as he said things to me like, ‘‘I think your decision was rash and
immature.’’ Do I think he would have said this to me if I was a businessman instead
of businesswoman? No. It turns out that closing my street side location to focus on
growing the airport business was the best business decision that I had made, albeit
an extremely difficult one. I am so fortunate that the ACDBE program exists, as
it has allowed me to grow my business beyond my mom’s apartment and into seven
airports across the country.
I have benefited greatly from the DBE program and cannot imagine what my
business would become without it. Because of the ACDBE program, I have a seat
at the table in the airport industry, even when others don’t want me to.
Sincerely,
SARAH IMBERMAN,
S. Levy Foods.
f
Letter of June 17, 2020, from Constance Macolino, President, Puget Sound
Steel Co., Inc., Submitted for the Record by Hon. Peter A. DeFazio
JUNE 17, 2020.
Mr. PETER DEFAZIO,
Chairman,
House Committee on Transportation and Infrastructure, United States House of Rep-
resentatives, Washington, DC.
RE: Disadvantaged Business Enterprise Program
DEAR CHAIRMAN DEFAZIO:
I am writing to you to request your support for the authorization of the DBE pro-
gram in the upcoming 2020 highway bill. My firm is a reinforcing steel fabricator
with over fifty years in business in the State of Washington and I can attest to the
real need for this program for women-owned businesses in the transportation con-
struction marketplace. The plain and simple fact is that disadvantaged businesses
do not face a level playing field and continue to suffer discriminatory barriers to full
and fair access to construction contracts.
By way of illustration, in June of 2017, majority women were waived out of the
WSDOT DBE program due to the results of a disparity study. In the two years
prior, Puget Sound Steel was awarded a total of 23 contracts with WSDOT totaling
almost 3,000 tons of steel and over $4,000,000.00 in revenue. Since June 2017, we
have bid in excess of 7,000 tons of WSDOT work and have been awarded 1 job, for
a total of 185 tons and $259,000.00 in revenue. Most, if not all, of that work went
to public companies listed on the NYSE.
Then there are the anecdotal examples of why this program is needed. Puget
Sound Steel has supplied reinforcing steel to a number of prime contractors who do
both commercial and civil work; when the primes don’t know we are a women owned
business (commercial arena) we are awarded jobs based on price and past perform-
ance. When we designate as a DBE (civil arena) and without set DBE goals on a
given project, we are passed over for work. On multiple occasions I have had to ask
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employees at the same company to please walk across the hall and tell their civil
division that our firm is competent and able to perform the work on any given
project.
I cannot over-state how important this program is to small businesses, such as
mine. Prime contractors, most of whom are owned publicly or by white males, al-
ready receive almost ninety percent of federal contract dollars in construction. This
program allows us the opportunity to participate, which is all we ask.
I would welcome the opportunity to give additional information to your committee,
if you would find that helpful, and thank you in advance for your continued support
of this necessary program.
Very truly yours,
CONSTANCE MACOLINO,
President, Puget Sound Steel Co., Inc.
f
Letter of September 9, 2020, from Robert S. Bright, Founder and President,
Talson Solutions, LLC, Submitted for the Record by Hon. Peter A. DeFazio
SEPTEMBER 9, 2020.
Mr. MATT LEASURE,
Special Assistant to the Chairman,
House Committee on Transportation and Infrastructure.
Re: Disadvantaged Business Enterprise Program—Personal Net Worth
MR. LEASURE:
I am pleased to submit my comments and suggestion for change to the Disadvan-
taged Business Enterprise (DBE) Program. I am Robert S. Bright, Founder and
President of Talson Solutions, LLC (Talson), a DBE, Minority Business Enterprise
(MBE) and Small Business Enterprise (SBE). Founded in 2001 and headquartered
in Philadelphia, Talson is a capital project consulting firm with domestic United
States and international experience in the transportation and infrastructure indus-
tries. Our clients include Allegheny Port Authority, LA Metro, New Jersey Transit,
Panama Canal Authority, Sound Transit, and Denver International Airport to name
a few.
I wish to bring to your attention with the Personal Net Worth (PNW) requirement
to establish and maintain the DBE status. In essence, the PNW requirement of $1.32
million has not changed or been adjusted for inflation in approximately ten years.
However, the price of labor, goods and services (Consumer Price Index) have in-
creased. DBE’s PNW are typically based on the value of an owner’s retirement ac-
count or other forms of investment that are not readily available without adverse
tax consequences. As a result, the growth of these assets has significantly increased
with advances in the United States stock market (i.e. S&P Index). As the value of
the investment may increase, this potentially causes the PNW to increase without
day-to-day management from the DBE owner. Although this may appear good, it is
not for the DBE owner whom is worried about exceeding the initial PNW base and
thereby losing the DBE status. The DBE owner is then forced to concentrate on the
PNW value and not the business operation. In addition, the DBE owner may choose
to take drastic steps or sell equities with tax disadvantages in order to maintain
the required PNW. The loss of DBE status for many firms would cause irrevocable
harm leading to business interruption and loss revenue preventing long-term firm
growth for value generation.
The State of Maryland Department of Transportation and New York recognized
the need for increases in the PNW. As a DBE firm grows, the Owner’ s PNW typi-
cally increases due to retirement investments and asset purchases. This allows the
DBE to increase their confidence to take on greater risks and larger value contracts.
However, if the DBE exceeds its PNW, there is a substantial risk that DBE partici-
pation in future contracts will decrease due to the lack of the DBE certification. The
following two examples reflect an adjustment by the Maryland Department of
Transportation and a petition from New York on the need for changes in PNW:
(1) In December 2019, The Maryland Department of Transportation announced
that the Personal Net Worth (PNW) cap applied to the Minority Business En-
terprise (MBE) Program will increase from $1,749,347 to $1,771,564, effective
January 1, 2020. As required by Maryland law, the State’s MBE Program ad-
justs its PNW cap annually based on the Consumer Price Index.
(2) New York’s Governor Cuomo rejected a petition to eliminate the $3.5 million
personal net worth requirement especially for those in both the construction
and financial sectors, in order to grow and participate in government con-
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tracts. These sectors have minimum income requirements that need to be met
in order to be eligible to bid, win mid-size projects, and gain access to capital.
It will also enable prime contractors to fulfill their 30% MWBE sub-con-
tracting goal.
Failure to adjust the PNW requirement prevents real growth for DBEs and the
introduction of new DBEs. Additionally, without an annual PNW adjustment, the
USDOT may fail to capture the importance of the overall DBE program by allowing
DBEs to grow and build long-term investment in the business and communities in
which we live.
Thank you for your consideration to review the maximum PNW requirement for
DBEs. Consideration for annual adjustment (i.e., Consumer Price Index) is strongly
recommended and can only reflect current economic trends.
Respectfully yours,
ROBERT S. BRIGHT,
Founder and President, Talson Solutions, LLC.
cc: Ms. Nicole Christus, American Public Transportation Association
f
Letter of September 8, 2020, from Lorenzo Thompson, Principal, Thompson
Civil, LLC, Submitted for the Record by Hon. Peter A. DeFazio
SEPTEMBER 8, 2020.
Hon. PETER DEFAZIO,
Chair,
House Committee on Transportation and Infrastructure, United States House of Rep-
resentatives, Washington, DC.
Re: Request from the Committee on Transportation and Infrastructure on the Dis-
advantaged Business Enterprise (DBE) Program
DEAR MR. DEFAZIO,
I am Lorenzo Thompson and Principal of Thompson Civil, LLC. The only way for
my firm to enjoy the work we perform is to be a part of a program that provides
project participation from diverse firms. We are located in St. Louis, Missouri, and
Illinois. We have only been in the program for 3 years and it has highly contributed
to our success.
The construction industry is built on managing risk and trusting that others will
be able to do their job well and contribute to a project’s profitability. For an agency
or a prime contractor to take a chance on an unknown firm there needs to be an
incentive. Women-owned and Minority-owned firms are ‘‘unknowns’’ because women
and many minorities are seen as strangers to this industry—still after over 30 years
of DBE–MBE–WBE programs—because we do not fit the typical image of the con-
struction workers and project managers. The DBE program provides incentive and
has been very successful in the state Department of Transportation (DOT) markets.
The Federal Highway Administration (FHWA) and state DOT commitment to the
DBE program sets the tone for the industry to value the program and to strive to
build up the industry’s woman-owned and minority-owned firms to match/represent
the communities where the tax dollars are spent. The state DOT success in sup-
porting capable DBE firms creates a pool of women-owned and minority-owned
firms who are available to do work in their region on projects outside the program
also.
The culture created by the DBE program is valuable to our industry and supports
a healthy inclusive environment for diverse firms and for diverse individuals who
are under-represented in our industry. Engineers’ and surveyors’ potential is not
based on their skin tone, ethnicity, culture, or gender—success in technical fields
is based on a love of problem solving. Encouraging diversity in our industry pushes
that reality forward and teaches us not to judge a person’s capabilities based on the
appearance of capable engineers we have worked with in the past. As in any proc-
ess, it is ‘‘easier’’ to continue the status quo, to continue doing business with the
same type of people you have always worked with. But the reward for the commu-
nity comes when we try a little harder and reach out with opportunities for every-
one.
Thank you for accepting this letter of support for the DBE program. It has been
very valuable to my company, to the engineering/construction industry and to our
community.
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With warm regards,
LORENZO THOMPSON,
Principal, Thompson Civil, LLC.
f
Letter of July 1, 2020, from Katey Doman, President, TyE Bar LLC,
Submitted for the Record by Hon. Peter A. DeFazio
JULY 1, 2020.
Mr. PETER DEFAZIO,
Chairman,
House Committee on Transportation and Infrastructure, United States House of Rep-
resentatives, Washington, DC.
RE: Disadvantaged Business Enterprise Program
DEAR CHAIRMAN DEFAZIO:
With the upcoming 2020 Highway Transportation Bill being discussed, I felt com-
pelled to reach out to you for your support of the DBE Program to be included in
the proposed bill. As owner of TyE Bar LLC, a DBE reinforcement steel and con-
crete paving hardware manufacturer, I still consider myself a start-up company
since we have only been in existence for just 5 years. Without having my DBE Cer-
tification, I firmly believe my company wouldn’t have made it this far when com-
peting against the conglomerate steel manufacturing companies across our nation’s
landscape.
In 2015 I felt compelled to start a manufacturing business in the heart of Pitts-
burgh, to bring manufacturing jobs back to an area that has been left abandoned
over the last few decades. I knew that it wouldn’t be possible to compete in the mar-
ket unless I was able to receive my DBE certification. Prior to receiving my certifi-
cation, I had only been awarded contracts that totalled $800,000, once my certifi-
cation had been granted, I picked up an additional $1,800,000 of revenue in just 3
months—my revenue had more than doubled.
Being a start-up company with over a million dollars in loans, it is inevitable that
I am not the low price to the DOT Contracting Communities. With no ties to steel
mills I am receiving raw material from my very own competitors—I can never be
low for that reason alone. Without DOT Agency’s having DBE Programs in place
there wouldn’t be an arena that I could possibly compete in due to the disadvan-
tages I face as a woman-owned, independent, start-up manufacturer.
What does the DBE Program do for the American People?
In 2015 I had employed 4 blue-collared employees and five years later I am proud
to have 34 employees helping manufacture products that go into the roads and
bridges that our American people travel every day. Last year our revenue has grown
to $11,000,000 and if the DBE program remains in effect for the 2020 Transpor-
tation Bill I anticipate with my past growth rate that by 2022 we will employ more
than 70 people and manufacture over $23 million dollars in heavy highway prod-
ucts.
The inclusion of the DBE Program is vital to helping small businesses such as
TyE Bar. Without the DBE Program I would lose more than three quarters of my
business, most likely TyE Bar would cease to exist. The DBE Program allows for
us to participate, doesn’t guarantee us work, but gives us the opportunity to be con-
sidered.
Mr. Chairman, I ask that you consider what the DBE Program brings to small
businesses and the American People. If there is any additional information that you
would find helpful, please don’t hesitate to reach out to me.
Thank you kindly for your consideration,
KATEY DOMAN,
President, TyE Bar LLC.
f
Statement of Joann Payne, President, Women First National Legislative
Committee, Submitted for the Record by Hon. Peter A. DeFazio
Chairman Peter DeFazio, Congressman Sam Graves and Chairwoman Eleanor
Holmes Norton——
Thank you for the opportunity to submit a statement for the Congressional Record
on behalf of Women First National Legislative Committee (Women First). Women
First is a nonpartisan, national grassroots advocacy group that promotes and pro-
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tects the interests of women owned businesses certified in the United States Depart-
ment of Transportation Disadvantaged Business Enterprise (DBE) Program. Found-
ed in 1985, Women First has been advocating for small women owned businesses
in the highway construction industry for the past 35 years.
INTRODUCTION
In 2001, Women First submitted an Amicus Brief to the Supreme Court in
Adarand Construction v. Mineta. In the brief, it said, ‘‘they have experienced first-
hand the detrimental effects of the discriminatory practices, which, to this day, con-
tinue to plague the construction industry. As a result of this discrimination, the
ability of women owned businesses to compete for government contracts in the
transportation related area has been severely hampered.’’ 1
And in 2020 those words are still true today.
From the day Eve took a bite out of the apple in the Garden of Eden, women have
been submitted to systemic sex discrimination in every aspect of their social, eco-
nomic, and political lives. They have been undervalued and remain underrep-
resented in position of power.
A study conducted by the Pew Research Center found that two-thirds of women
in the United States believe we still have a way to go to achieving equality. Women
executives, doctors, lawyers, and professional athletes earn less money than men.
According to a 2019 study done by McKinsey & Company women earn more bach-
elor’s degrees then men, but men obtain more entry-level positions in corporate
America. The study also found that men outnumber women in management-level
positions 62% to 38%. There are only 7% of Fortune 500 CEOs that are women.
Congress in 2020 is 75% men.
When I testified in 1986 to the Senate Environment and Public Works Committee
supporting the inclusion of women in the DBE program, I testified that women
made 70 cents to a man’s dollar. Today, a woman makes 79 cents to a man’s dollar.
The US Women’s Soccer Team has won four World Cups, four Olympic gold medals,
and eight Gold Cups, yet they are grossly underpaid, lack the necessary training
facilities and poor travel conditions that are not equal to the US Men’s Soccer Team,
who has not been as successful as the women’s team.
Like the men’s soccer team, the women’s soccer team is governed under the US
Soccer Federation (USSF) with the same rules, regulations and international com-
petition agenda. The US Women’s Soccer Team filed a gender discrimination lawsuit
against the USSF. USSF response to the lawsuit was Men were superior to women
because they have greater physical strength and skills . . . need I say more?
PROGRAM OVERVIEW
The DBE Program is a competitive small business program that has an innovative
goal setting economic development program that produces results year after year.
The program:
• Creates jobs—approximately 125,000 jobs are created by DBE companies annu-
ally
• Serves as an engine of growth for our nation’s economy even in with the Pan-
demic
• Establishes a tax base from women and minority owned businesses;
• Promotes competition in an industry where there was very little for years;
• Levels the playing field by opening access
• Promotes diversity
The DBE Program has proven to be an equal opportunity program, which benefits
all Americans by promoting the development and competitiveness of America’s small
businesses. In fact, the DBE Program is the most successful small business con-
tracting program for women. For example, the DBE Program has significantly in-
creased the percentage of women owned construction firms. Women DBE participa-
tion has increased from 1.6% in 1986 to over 7% in 2018.
RESPONSES FROM DBES
Women First collected about 40 letters from DBEs across the country asking them
to submit to the Committee on Transportation & Infrastructure their stories and
why the DBE program should continue.
1 Brief of Women First National Legislative Committee, et al., Amici Curiae in Support of Af-
firmance of the Tenth Circuit Court of Appeals.
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Wisconsin: ‘‘I am writing to emphasize the importance of the reauthorization of
the Federal DBE Program in the Highway Transportation Bill. We are a minority-
owned business of color and we have been shut out of many opportunities to partici-
pate on projects. I would like to see more opportunity for disadvantaged business
enterprises of Hispanic Americans’’.
Washington State: ‘‘Against many challenges, both from individuals and firms
within the male-dominated construction industry, labor unions, lack of capital and
bonding, my firm rose to become the only female-owned, union electrical contractor
specializing in highway electrical work in the State of Washington. From 2010–2017
my firm successfully completed 122 projects valued at nearly $ 80 million. That is,
until the agency that was supposed to support women and minority owned busi-
nesses, WSDOT Office of Equal Opportunity, removed white women from the federal
DBE program in June of 2017. My firm went from doing nearly $ 9 million a year,
preparing to graduate from the program, to being out of business in only 18
months’’.
Missouri: ‘‘The construction industry is built on managing risk and trusting that
others will be able to do their job well and contribute to a project’s profitability. For
an agency or a prime contractor to take a chance on a new/unknown/small firm
there needs to be an incentive. Women-owned and Minority-owned firms are ‘‘un-
knowns’’ because we are seen as strangers to this industry—still after over 30 years
of DBE–MBE–WBE programs because we do not fit the typical image of construc-
tion workers and project managers. The DBE program provides incentive and has
been very successful in the markets I work in. The program gives me enough value-
potential to have the initial discussions with a potential client—whether that is an
agency or prime contractor/consultant. Then my company can prove that we are ca-
pable and have value on our own, beyond the DBE incentive’’.
Illinois: ‘‘More importantly, we are forced to wait sometimes months after the gen-
eral contractor is paid before we receive payment. More times than not, we are
forced to call the general contractor numerous times requesting we be paid and this
is after confirming they have been paid by the owner. It is extremely frustrating
to complete a job on or ahead of schedule, with complete satisfaction of the general
contractor only to be sent a perceived message of, ‘You’ll get paid when I feel like
paying you and not a day before!’ It is extremely disheartening. The DBE Program
has enhanced our opportunities in the highway, transit, and airport construction in-
dustries simply by existing. The consequences of not having the program would be
our business would not exist. But for the Disadvantage Business Enterprise and the
requirements to use minority owned businesses, we would not in reality because
general contractors would self-perform. Securing working capital is extremely dif-
ficult for minority owned businesses. Personally, I am repeatedly forced to secure
loans with interest rates that mirror loans from merchant cash advances. While the
interest rates are uncomfortably high, the loans are necessary to make payroll and
purchase the equipment and materials needed to perform the job in the absence of
mobilization.’’
Massachusetts: ‘‘Small businesses, especially women-owned firms, need to be
given a chance to prove themselves. The DBE program does just that by high-
lighting firms that may otherwise have doors permanently closed. I have experi-
enced discrimination in the construction industry through the years, and, have been
pushed off projects that I was equally qualified to do. I am thankful for the DBE
program. It serves a vital role by providing checks and balances to assure that all
companies, large, small, women, and minorities are allowed the equal opportunity
to participate.’’
CHANGES TO THE DBE PROGRAM
The DBE program only applies to highway, transit, and airport construction and
related industries. One purpose of the DBE program is to develop minority and
women construction businesses so they can gain experience and expertise to com-
pete for federal, local, and state contracts.
The perceived outcome is DBEs would achieve three consecutive years of gross re-
ceipts of $23.980 million and graduate out of the program and successfully compete
equally with majority male firms for federal, state, and local contracts. Unfortu-
nately, the beneficiaries of the statutory size cap of 23.980 million applies only to
a small percentage of DBEs.
In reality, the DBE program is a subcontracting program where ninety-nine per-
cent of DBEs are limited to the Small Business Size Standard and the cap governed
by the North American Industry Classification System (NAICS) Code. Depending on
the code classification, highway, transit, and airport construction, specialty trade
sub contractors may have a cap that is between $3 million to $17 million. By con-
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necting the subcontractors to the size standard in the NAICS Codes, it prohibits
DBEs from developing into prime/ general contractors and puts them at a disadvan-
tage with non-DBE companies.
Additionally, it creates an endless cycle of DBEs graduating out of the program
to finding their company has lost fifty percent or more of its business and a need
to reapply back into the program after one year. One of the main reasons this cycle
continues to escalate is the rise in material cost in the construction industry espe-
cially in the last three years.
RECOMMENDATIONS:
1. Gross Receipts
There should be two statutory gross receipts levels. One for DBE companies that
compete as prime contractors and one for the Specialty and sub-contractors. Once
the DBE graduates out of the Small Business levels, Congress should create a new
medium-size business program that would include all medium size companies (ma-
jority males included) with goals, certification, limited personal worth and gross re-
ceipts.
2. DBE Procurement Disagreements with Prime Contractors and Recipients
The Secretary should take additional steps and procedures to ensure that recipi-
ents report immediately to the Federal Administrator any procurement disputes
that may develop between DBEs, general contractors and or recipients. There has
been an increase in procurement disputes between DBEs general contractors and
state DOTs. DBEs have contract agreements with general contractors. The states
try to stay out of the mix but are asked to notify FHWA if conflict arises, however,
they have been slow to report problems. This has resulted in millions of dollars lost
by DBE firms. Let us not forget that firms that are certified in the program are
there because they are at a disadvantaged over non-minority firms.
3. Disparity Studies
The Secretary should create a Disparity Study Committee to develop guidelines
for firms and recipients conducting Disparity Studies. The Committee should in-
clude, but not limited to representatives from disparity study firms, DBEs, DBE ad-
vocates, Federal Highway’s Office of Civil Rights, department lawyers, and state de-
partment of transportation. Presently, there are no guidelines in place for firms who
conduct disparity studies or recipients who want the studies conducted. This situa-
tion has resulted in an unresolved issue in Washington State that has left one of
the protected groups out of the ‘‘goal-counting’’ on federal projects.
4. Unbundling
Require the Secretary to create an incentive program for state department of
transportation and other recipients to unbundle mega-contracts and create contracts
that are $2 million dollars or less for DBEs to compete for as primes.
IF THE PROGRAM DOES NOT CONTINUE
In representing women-owned DBEs for thirty-five years, I have heard women
discuss the problems they face in the construction industry with Members of Con-
gress and the Administration. These women, everyday, have to face the assumption
by others that they can not do the work and run their businesses. Women owned
businesses still have problems obtaining loans and bonding and after years in busi-
ness they still have to explain that they are the boss to men on the jobs who refuse
to believe that a woman can be the boss.
If the DBE Program were not to continue, I believe not just women and minority
owned companies will be severely affected, but small majority owned sub-con-
tracting businesses will be affected as well. The only small business program in the
highway, airport and transit industries will disappear. There would be no reason
for sub-contract work even to majority firms thus competition would be eliminated
and prices will climb.
The trend of the industry the last several years has been the prime contractors
are doing more of the work in-house. A great example is what happen in Wash-
ington State when women were removed from the goal setting program. The group
that benefited the most and increase in percentage was the large majority firms.
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CONCLUSION
I had a member of the Women First Board of Trustees tell me when asked why
she still felt the burn of discrimination after years in business. She said to me that
when she attends meetings there are very few women, if any, around the table.
She thinks, ‘‘Well it will be ok because I am at the table, I know these people,
I’ve worked with them and I make a pretty good living—so why do I still feel the
subtle discrimination—and then I realized why.’’ She continued, ‘‘It’s because I am
not like them, I will never be like them, I am different and they don’t understand
the importance of that.’’
I have thought about her statement a lot and I believe this awareness should em-
power her and other women owned businesses, because they contribute and make
better an industry that is vital to our country’s daily life. And it also why diversity
is so important in the highway industry and in our nation. Our diversity is what
strengthens and binds us together. We are a government for all the people and all
of our people deserve a chance to compete and to contribute.
f
Statement of the American Road & Transportation Builders Association,
Submitted for the Record by Hon. Sam Graves of Missouri
Chair DeFazio and Ranking Member Graves, thank you for allowing the American
Road & Transportation Builders Association (ARTBA) to offer our views as part of
today’s hearing on the Disadvantaged Business Enterprise (DBE) Program.
Established in 1902, ARTBA is the oldest national transportation construction-re-
lated association. ARTBA’s more than 8,000 members include public agencies and
private firms and organizations that own, plan, design, supply and construct trans-
portation projects throughout the country and world. The industry we represent
generates more than $500 billion annually in U.S. economic activity and sustains
more than 4 million American jobs.
In the midst of the current pandemic, ARTBA remains a steadfast advocate for
increased federal transportation investment. Given additional resources, the trans-
portation construction industry can help lead the nation’s economic recovery. It is
important to view the DBE program—and its potential opportunities—in this con-
text.
Compliance with the DBE program, which has been in place for nearly 40 years,
is a key task for transportation agencies and contractors on federal-aid transpor-
tation projects. The program’s purposes include developing DBE firms and ensuring
a level playing field in contracting for federal-aid projects. As with other regulatory
requirements, the transportation construction industry seeks to comply with the
DBE program rule while carrying out its core objective of delivering projects in an
efficient, timely and safe manner. Moreover, the integrity of the DBE program is
critical.
While Congress authorizes and establishes parameters for the DBE program, the
U.S. Department of Transportation (USDOT), its modal administrations, and state
and local transportation agencies are responsible for the program’s implementation.
This includes USDOT rulemaking and issuance of guidance, in which the industry
always maintains great interest. Our submission today references a number of these
administrative actions and policies. While we know the committee wants to stay
abreast of these activities because of its oversight responsibilities, we also hope you
consider our proposed improvements as potential future legislative provisions, such
as in the next surface transportation reauthorization bill.
We seek to highlight ways in which the DBE program can be run more efficiently
and effectively, including for the benefit of those emerging businesses for which the
program was developed. Similarly, we point out specific aspects of the current DBE
rule and guidance where the opposite often results. We are informed in our com-
ments by examples of collaborative efforts to structure and implement state-level
DBE programs around the country, in which various ARTBA members and affiliated
chapters have participated.
In describing our proposed improvements, we cite (with page numbers) USDOT’s
DBE guidance entitled ‘‘Official Questions and Answers (Q&A’s) Disadvantaged
Business Enterprise Program Regulation (49 CFR 26),’’ dated April 25, 2018 (and
referred to as the ‘‘guidance’’ or ‘‘Q&A’’); and one of its addenda, the single-page
‘‘Procedures for Submitting Good Faith Efforts Information on Design-Bid-Build
Contracts,’’ dated June 20, 2018.
Our four primary themes are the following: 1.) identification of policies that di-
verge markedly from customary and efficient industry practices, which can add
project costs and sometimes work to the detriment of DBE firms themselves, 2.) in-
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consistencies in USDOT’s adherence to its own DBE guidance document, which ex-
plicitly advises recipient-agencies to craft aspects of their DBE programs using ‘‘in-
formation about the real world of contracting in the recipient’s contracting area,’’
because ‘‘[r]ecipients know their own markets’’ [p. 61]; 3.) lack of meaningful con-
sultation with the industry and other legitimate stakeholders about important policy
changes; and 4.) failure to modernize the DBE guidance to reflect evolving business
practices in the industry (especially those involving emerging technologies), with nu-
merous Q&A sections dating back to the previous century. ARTBA hopes to see a
collaborative effort to improve DBE program implementation in these respects.
GOOD FAITH EFFORT AND SUBMISSION OF DBE COMMITMENTS
USDOT conducted a significant DBE rulemaking in 2012–14, issuing its final rule
on October 2, 2014 (79 CFR 59565). A key and contentious issue was the depart-
ment’s initial proposal to abolish the longstanding ‘‘responsibility’’ option, through
which recipient-agencies had the option of accepting DBE utilization plans from bid-
ders (or sometimes just the apparent low bidder) within a reasonable number of
days after the bid on design-bid-build projects. Had the department stayed with its
original position, as ARTBA and numerous other commenters noted, prime contrac-
tors and DBE subcontractors, among others, would have been overwhelmed with the
mandate to gather or submit quotes for numerous projects at the same time, many/
most/all of which would be for projects in which they would not eventually partici-
pate, which is the nature of the letting process. The potential for added administra-
tive costs was obvious. For example, at the time of the rulemaking, Illinois had a
state ‘‘no cure’’ law similar to USDOT’s proposed provision. While Illinois’ law was
in effect, fewer projects met the DBE goal. Worse yet, some DBE subcontractors
overcommitted themselves during the bidding process, leading to their demise.
Ultimately, to the great relief of industry and many recipients, the department
settled on a maximum seven-day window (later to be shortened to five days) for the
submission of DBE commitments under the responsibility option. To the best of our
knowledge, in a series of written, audio and video communications rolling out the
DBE rule changes in late 2014 and early 2015, no one from USDOT averred recipi-
ents would now need to require all bidders to submit their DBE commitments in
all circumstances. The practice among the states would continue to vary permis-
sibly, in that some states only required this information from the lowest apparent
bidder, others the lowest two bidders, and so forth.
In fact, in the publication of its final rule in 2014, USDOT described the responsi-
bility option as follows: ‘‘We think it reasonable ultimately to limit the time to a
maximum of 5 calendar days to protect program beneficiaries and overall program
integrity.’’ In a related footnote, ‘‘Due to the definition of ‘days’ adopted in this final
rule, bidders or offerors will have 5 calendar days (i.e., not business days) to submit
the necessary information. Thus, if a bid is submitted on Thursday, the apparent
low bidder would have until Tuesday to submit the information’’ [emphasis added].
It was therefore shocking and disappointing when the department issued a one-
page guidance on June 20, 2018, ordering that on design-bid-build contracts, ‘‘all
bidders . . . submit credible documentation of DBE commitments and/or good faith
efforts either with their sealed bid, as a matter of responsiveness; or no later than
five days after bid opening, as a matter of responsibility’’ [emphasis in original]. De-
partment officials have since contended this revised guidance was not a change in
policy, but a restated means of reviewing the performance of all bidders and their
respective good faith efforts. Under that reasoning, the pronouncements made upon
publication of the final rule were misleading and/or opaque—whether intentional or
not. (On at least two occasions, a department official publicly stated or implied re-
cipients could maintain current options for implementing the responsibility ap-
proach, if they abided by the newly-prescribed time limit.)
It is puzzling the department would let 1,357 days (or three years, eight months
and 18 days) elapse between publication of its final rule and this supposed clarifica-
tion of related, existing policy. (If it was part of longstanding policy, why not make
that clear while rolling out the rule changes?) Had ARTBA and other stakeholders
been given the opportunity to submit public comments, we would have made a com-
pelling argument this change in policy will add costs to many projects, in direct con-
travention of the administration’s regulatory reform principles.
To be certain, implementation of this good faith effort guidance provision will in-
crease project costs in a number of states. In the past, we have seen this draconian
approach result in fewer bidders among prime contractors, DBE contractors’ quoting
too few projects (for fear of overcommitment) or too many (sometimes leading to
their dissolution) and decreased achievement of DBE project goals. In 2013, ARTBA
facilitated a survey of nearly 300 transportation construction contractors, who over-
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whelmingly anticipated the proposed new DBE regulations (such as one similar to
the 2018 guidance) would increase the cost of projects because of added compliance
burdens.
Moreover, proponents of the ‘‘all bidders’’ approach ignore—and have no coherent
response for—the fact that most DBE firms (which are small businesses, and often
start-ups) do not have the capacity to provide quotes for a large number of projects
at the same time, as part of the same letting, especially given the likelihood they
will participate in just a few of them, at best.
It is also troubling that USDOT has forced this ‘‘misguidance’’ provision on recipi-
ent-agencies and contracting communities in states with DBE programs considered
successful and effective by all parties.
USDOT should reverse this back-door rulemaking and work with all parties—in-
cluding DBE and non-DBE contractors—to address any concerns that led to its
adoption in the first place. That is far preferable to the department’s issuing man-
dates in conflict with its own rules.
GOOD FAITH EFFORT PARAMETERS
After nearly four decades, the DBE rule and guidance still do not provide objective
descriptions of good faith efforts to be undertaken by prime contractors. USDOT
should compile examples of successful good faith effort practices nationwide, which
would function similarly to case law in the legal realm. At the same time, while the
department advises that prime contractors need not accept DBE subcontractors’
prices which are ‘‘excessive or unreasonable,’’ the guidance has never provided in-
sight as to how to define those terms.
ARTBA members have noted examples of recipient-agencies in their respective
markets that do not maintain current or accurate databases or lists of DBE firms
actually ready, willing and able (as the rule states) to participate in a transportation
project. These lists—if they exist at all—commonly include firms in disciplines unre-
lated to transportation or construction, not qualified or certified to work on a project
for that agency, or out of business or unreachable. The related concept of ‘‘potential
DBEs,’’ as used in assessing good faith effort or setting overall DBE goals in a juris-
diction, strains the limits of credulity.
For all these reasons, USDOT should direct recipients to compile and maintain
information for legitimate and relevant DBE firms. The current rule also suggests
a prime contractor use the services of community organizations and business assist-
ance offices as part of its good faith effort. That role is more properly assigned to
the recipient, for the benefit of all prime contractors and DBE firms.
PROMPT PAYMENT AND RETAINAGE
There have been ongoing concerns that the USDOT guidance on prompt payment
and retainage (pp. 4–9) does not reflect the ‘‘real world of contracting.’’ In the recent
past, ARTBA members reported a development at the state level, in which prime
contractors were prohibited from withholding funds for a DBE subcontractor’s pro-
rated bond, as well as their state/local association dues. This prevents a common
industry practice and puts affected DBE subcontractors at a disadvantage, in that
their non-DBE counterparts are able to address surety protection and association
membership as part of the contractual relationship with their prime contractor. To
address this and related prompt payment issues, we suggest a collaborative effort
with recipients and industry to better understand everyone’s respective views of the
payment process.
PRIME CONTRACTOR/DBE SUBCONTRACTOR RELATIONSHIP
In some notable cases, the department’s Q&A prohibits DBE credit for that firm’s
carrying out customary and efficient industry practices. Generally, the cost of equip-
ment purchased or leased by a DBE subcontractor from a prime contractor does not
count for DBE credit (p. 12). (Similarly, materials purchased from a prime con-
tractor do not count either.) Given that it is common for ‘‘primes and subs’’ to under-
take these types of transactions, the rule and guidance actually put DBE firms at
a disadvantage in this regard. Industry has long made the point that materials sup-
pliers may be limited in a given geographic area, and as a result it may be nec-
essary for a prime contractor, who is also the sole/dominant supplier there, to sell
material to the DBE subcontractor. The DBE rule should stop ignoring the realities
of that circumstance, and instead allow counting of the material for DBE credit
when appropriate.
USDOT’s Q&A also directs prime contractors to consult with their recipient-agen-
cy about the appropriateness of their relationship with a DBE subcontractor. Unfor-
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tunately, the recipient’s assessment can count for little or nothing should law en-
forcement question the relationship at a future time. A future legislative revision
to the DBE program should designate these agency assessments as a safe harbor
for the contracting parties should they follow the agency’s parameters.
REGULAR DEALERS
In another issue addressed in the 2012–14 rulemaking, the department initially
explored abolishing the regular dealer designation for DBE firms. The final rule
mandated those firms’ status would be determined on a project-by-project basis.
The Q&A betrays a strong presumption that drop shipment of supplies or mate-
rials to a project site downgrades a DBE supplier’s status from regular dealer to
that of expediter or broker. In that case, the prime contractor may not count any
of the materials cost (other than the DBE firm’s commission) for DBE credit, and
the practice also calls into question the subcontractor’s commercially useful function.
This viewpoint is outdated and shows unawareness of current business practices
in the industry, in which emerging technologies and efficiencies continue to develop.
The ‘‘case-by-case’’ approach is also excessively subjective and puts this determina-
tion in the hands of perhaps one agency official.
In recent years, USDOT has conducted at least one ‘‘listening session’’ on the reg-
ular dealer issue, but limited the number of participants and did not include a rep-
resentative cross-section of the industry. The department should commit to improv-
ing this 2014 provision to reflect the decade (and century) we are in, while collabo-
rating with all interested stakeholders in doing so.
COMMERCIALLY USEFUL FUNCTION
This section of the USDOT Q&A (pp. 40–42) addresses the requirement for DBE
firms to meaningfully participate in a project, rather than assuming a role contrived
so DBE goals can be achieved. Again, however, the guidance does not capture cur-
rent industry practices and potential roles on a transportation improvement project.
The material in this section dates back to 1999 and 2012. Technology and other de-
velopments have created new opportunities and potential responsibilities for sub-
contractors, DBE and otherwise. (One example of many is a social media coordinator
for a major project, where public communications are vital.) The department should
initiate a dialogue with industry to bring this section up to date.
JOINT CHECKS
It is common industry practice for a prime contractor to issue a check jointly to
its first-tier subcontractor and that subcontractor’s material supplier. Joint checks
are used regardless of a subcontractor or supplier’s status as a DBE. Many such
firms prefer this method of payment. Yet USDOT’s DBE Q&A deems the use of joint
checks as a ‘‘ ‘red flag’ calling for further scrutiny.’’ Again, the department should
make an effort to better understand typical industry transactions and not approach
this practice with a presumption of guilt.
MENTOR-PROTÉGÉ PROGRAMS
More than 20 years ago, the department’s Q&A recognized the use of mentor-
protégé programs in DBE development. Many members of the industry—including
emerging DBE firms—believe in their value as well. However, USDOT’s guidance
provides virtually no direction as to the permissible structure of such a program,
instead giving responsibility to the private sector. Prime contractors may have little
incentive to participate, especially considering the legal risk they may incur if law
enforcement later accuses the parties of an improper relationship that undercuts the
DBE firm’s commercially useful function.
A better approach would be directing recipients to initiate mentor-protégé pro-
grams in consultation with the industry in their market. Again, the department
should compile permissible practices for all to see, and stand behind them as a legal
safe harbor for program participants.
ALTERNATIVE CONTRACTING & PROCUREMENT METHODS
In 2018, the Federal Highway Administration’s Office of Civil Rights published
the ‘‘Disadvantaged Business Enterprise Program Administration and Oversight on
Projects with Alternative Contracting & Procurement Methods Handbook.’’ A major
premise of the document is that planning and implementing DBE compliance on de-
sign-build and similar projects, where the scope and specifics of subcontracting op-
portunities evolve over its life, require a more collaborative and flexible approach
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than for ‘‘design-bid-build’’ projects. However, ARTBA believes some of the same
methods outlined in the handbook would also be appropriate for use in many such
‘‘traditional’’ projects. We hope to explore wider use of these innovations with the
agency when possible.
GOVERNMENT ACCOUNTABILITY OFFICE (GAO) STUDY
ARTBA, various members of this committee, and others involved in today’s hear-
ing have pointed out shortcomings of and potential improvements for the DBE pro-
gram. This is an opportune time for the Government Accountability Office (GAO)
to conduct a study of the DBE program’s first four decades, focused on assessing
the program’s fulfillment of its stated purposes and recommendations for program
improvements to achieve its desired outcomes. In carrying out the study, the GAO
should seek a full range of stakeholder views.
ARTBA suggests that this committee include direction for this GAO study in its
next draft of surface transportation reauthorization legislation. It will serve as a
catalyst for all interested stakeholders—including the U.S. Department of Transpor-
tation, state agencies, contractors and the minority- and women-owned business
communities—to collaborate on improving the DBE program’s efficiency and effec-
tiveness.
CONCLUSION
By exploring and incorporating the improvements described above, the DBE pro-
gram can be a more productive component of federal-aid transportation programs
that maximize business opportunities and put Americans to work, while operating
with efficiency and integrity. We appreciate this committee’s consideration of
ARTBA’s views and hope to engage in a continuing dialogue as the surface transpor-
tation reauthorization process moves forward.
f
Letter of October 7, 2020, from James V. Christianson, Vice President, Gov-
ernment Relations, Associated General Contractors of America, Sub-
mitted for the Record by Hon. Sam Graves of Missouri
OCTOBER 7, 2020.
Hon. PETER DEFAZIO,
Chairman,
Committee on Transportation, United States House of Representatives, Washington,
DC.
Hon. SAM GRAVES,
Ranking Member,
Committee on Transportation, United States House of Representatives, Washington,
DC.
RE: Hearing entitled, ‘‘Driving Equity: The U.S. Department of Transportation’s
Disadvantaged Business Enterprise Program’’
DEAR CHAIRMAN DEFAZIO AND RANKING MEMBER GRAVES:
On behalf of the Associated General Contractors of America (AGC or Associa-
tion)—the leading association in the construction industry representing more than
27,000 firms, including America’s leading general contractors and specialty-con-
tracting firms—thank you holding the important hearing entitled: ‘‘Driving Equity:
The U.S. Department of Transportation’s Disadvantaged Business Enterprise Pro-
gram.’’ AGC respectfully puts forward the following comments on fostering diversity
and inclusion in the construction industry and recommendations for the U.S. De-
partment of Transportation’s (U.S. DOT) Disadvantaged Business Enterprise (DBE)
program.
THE CONSTRUCTION INDUSTRY
The construction industry is large, diverse, and fragmented. In 2018, the construc-
tion industry had 733,689 firms and 6,814,979 million paid employees. In that same
year, ninety-one percent (666,697) of construction firms had fewer than 20 employ-
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ees; one percent (8,666) of construction firms had 100 or more employees; the aver-
age construction firm had fewer than 9 employees.1
As with other industries, construction is not free of discrimination. However, con-
struction is an intensely competitive industry and that competition penalizes any
company that resorts to discrimination. The unique nature of the construction bid-
ding process can also help prevent discrimination from occurring. Most public own-
ers are subject to legal requirements for open competitive bidding, which typically
include a publicly announced deadline for the submission of sealed bids, the public
opening of the bids, and contract award to the lowest responsive and responsible
bidder, eliminating the ability for public owners to engage in unlawful discrimina-
tion. The resulting pressure on prime contractors makes it necessary to select sub-
contractors based on experience, price, and quality.
DIVERSITY AND INCLUSION
Nevertheless, AGC is committed to fostering a business climate that enhances op-
portunities for all companies and employees in the construction industry. AGC fully
embraces diversity among its employees and within its membership. People of di-
verse backgrounds, opinions, perspectives, experiences, and ideas bring creativity
and vitality that maximizes member engagement at all levels of the Association.
Fostering an environment that is welcoming and inclusive to all individuals is es-
sential to achieving the Association’s mission and places members in a position to
contribute to the construction industry’s future success. In furtherance of this com-
mitment, AGC undertook several efforts over the years, many of which are ongoing.
Some of these efforts are described in further detail below.
• Established a Diversity and Inclusion Council (Council) within AGC in 2017.
The goal of the Council is to foster an environment both in the Association and
in the industry that is welcoming and inclusive to all individuals regardless of
one’s background, opinions, perspectives, experiences, or ideas. A key strategy
of the Council’s is to identify barriers that prevent individuals from underrep-
resented groups from pursuing a career in construction and developing re-
sources to eliminate those roadblocks.
• Authored and released a report, titled ‘‘The Business Case for Diversity & Inclu-
sion in the Construction Industry,’’ that outlines six reasons why diversity and
inclusion are strategically valuable in generating corporate/industry innovation,
increasing profitability, and ensuring a positive and sustaining legacy of
progress for a company.
• Partnered with AGC of Washington to create an initiative called the Culture
of CARE. Launched nationwide in March 2020, the Culture of CARE seeks to
advance the construction industry as the industry of choice for diverse and tal-
ented workers by building inclusive work environments in construction firms
nationwide. The Culture of CARE is built on four principles 2. There are two
ways to participate in the Culture of CARE. The first is that a company can
commit to a Culture of CARE by signing the company pledge. The second is
that an employee can sign an individual pledge. To date, approximately 375
companies and 950 individuals took the pledge. Upon taking the pledge, there
are resources available to a company such as tools to communicate a company’s
pledge, a model human resources policy and best practices, and kits for toolbox
talks, with additional resources continuing to be developed.
• Created the annual Diversity and Inclusion Excellence Awards in 2018 to honor
AGC members that are champions in advancing diversity and fostering a cul-
ture of inclusion within their workforce, supply chain, and in the communities
they serve. By showcasing and recognizing best practices from companies that
are developing and delivering diversity and inclusion initiatives with demon-
strable success, award winners have the opportunity to share their track record
of achievement and commitment, which will help spur other companies to estab-
lish or improve their own initiatives.
1 All Sectors: County Business Patterns by Legal Form of Organization and Employment Size
Class for U.S., States, and Selected Geographies: 2018. U.S. Census Bureau. https://rb.gy/xtybhe
(link shortened). Accessed: October 1, 2020.
2 Culture of CARE’s four principles: (1) commit to hire and pay based on skill and experience
regardless of age, ethnicity, gender identity, nationality, race, religion, sex, or sexual orientation;
(2) attract prospective employees by creating inclusive workplaces that are free from harass-
ment, hazing and bullying; (3) retain high-performing employees by identifying and removing
barriers to advancement; and (4) empower every employee to promote a culture of diversity and
inclusion.
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DBE PROGRAM
The DBE program (or program) plays a pivotal role in fostering diversity and in-
clusion in the construction industry by ensuring that certified small businesses
owned and controlled by socially and economically disadvantaged individuals can
compete for federally funded highway, public transit, and airport projects. The pro-
gram was originally established by regulation in 1980. In the years since, Congress
included provisions in certain transportation laws that established goals for a cer-
tain amount of federal funding to be expended through DBEs.
Most recently, Congress continued the goal that not less than 10 percent of cer-
tain federal funding, including funding for highways and public transit projects, be
expended through DBEs in the Fixing America’s Surface Transportation Act (FAST
Act; P.L. 114–94). In addition, the FAST Act authorized up to $10 million of the
total amount authorized for the administrative expenses of the Federal Highway
Administration each fiscal year to be used for the Disadvantaged Business Enter-
prises–Supportive Services (DBE–SS) program. The Federal Aviation Administra-
tion Reauthorization Act of 2018 (FAA Reauthorization Act of 2018; P.L. 115–254)
continued the goal that at least 10 percent of certain federal funding for airports
be expended through DBEs or qualified HUBZone small business. Notably, it also
amended the definition of a ‘‘small business concern’’ for the construction industry,
tying it to the ‘‘size standard for the North American Industry Classification System
Code 237310, as adjusted by the Small Business Administration’’ for the purposes
of the DBE program. The DBE program and associated goals are administered by
the Departmental Office of Civil Rights, the relevant modal administrations within
U.S. DOT, and recipients of certain federal funding.
THE CHALLENGES AND RECOMMENDATIONS:
First and foremost, AGC supports the continuation of the DBE program. As with
any federal program, there are important improvements to the DBE program that
should be made to ensure its continued success. AGC is having ongoing conversa-
tions with its members to develop both legislative and regulatory recommendations
to help improve the DBE program. In the near-term, AGC respectfully urges the
Committee to consider the following recommendations.
Definition of a ‘‘Small Business Concern’’
Challenge: To meet the definition of a ‘‘small business concern’’ for the purpose
of the DBE program for federal highway and public transit funding a company’s av-
erage annual gross receipts during the preceding three fiscal years must not exceed
$23,980,000, under the FAST Act. The amount is adjusted annually for inflation by
the Secretary of Transportation. The amount was previously $22,410,000, adjusted
annually for inflation, under the Moving Ahead for Progress in the 21st Century Act
(P.L. 112–141). This definition limits the ability of DBEs to grow their companies
into sustainable, long-term businesses. Instead, the definition can force DBEs out
of the program prematurely or require a DBE to sell off a part of their business.
When this occurs, the capacity of certified DBEs in a state dwindles, making it dif-
ficult to achieve DBE goals, which undermines the very intent of the DBE program.
Recommendation: Congress should amend the definition of a ‘‘small busi-
ness concern’’ for the purposes of the DBE program. Specifically, the defini-
tion should provide for a significant increase in the annual gross revenue
receipts during the preceding three fiscal years. This new amount should
continue to be adjusted for inflation. The increase will help ensure that
DBEs that exceed the amount are more likely to succeed outside of the
DBE program and it will help address capacity issues.
Reciprocity of DBE Certifications
Challenge: Prior to being eligible to participate in a state’s DBE program, a com-
pany must go through a rigorous certification process. The company bears the ‘‘bur-
den of demonstrating to you, by a preponderance of evidence, that it meets the re-
quirements of this subpart concerning group membership or individual disadvan-
tage, business size, ownership, and control’’ (49 CFR 26.61). Federal regulations (49
CFR 26 Subparts D and E) set forth the standards and procedures for making a
certification decision for an applicant company by a state certification agency.
Once a company is certified as a DBE, it remains certified until or unless a state
certification agency removes its certification in whole or in part through a separate
process outlined in federal regulations. A state certification agency cannot require
a certified DBE to reapply for certification or undergo a re-certification process.
However, a state certification agency may conduct a certification review of a DBE
if appropriate. A certified DBE is required to inform a state certification agency of
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any changes to its circumstances (i.e., disadvantaged or economic status) that affect
its ability to meet federal requirements or its application and it must provide a state
certification agency with a sworn affidavit on an annual basis that affirms that
there have not been any changes to the company’s circumstances.
While the federal regulations allow for a state certification agency to accept an-
other state’s certification of a DBE, there is discretion given to a state certification
agency in terms of accepting that certification (49 CFR 26.85) and the process for
doing so is also rigorous. The lack of direct reciprocity for states’ DBE certifications
artificially limits the ability of DBEs to expand their businesses. In addition, it
hinders the ability for a prime contractor to address any capacity constraints in a
state that impacts its ability to meet DBE goals.
Recommendation: Congress should facilitate increased reciprocity of DBE
certifications between states by establishing in law a streamlined process
through which a state certification agency must accept another state’s cer-
tification, which is in keeping with the Uniform Certification Program that
allows for a DBE certification to be honored by all recipients in a state. The
process should provide for an exception in the event that the state certifi-
cation agency can demonstrate good cause for rejecting another state’s cer-
tification.
Business Development and Supportive Services
Challenge: The DBE–SS program (23 USC 140 (c)) provides training, assistance,
and services to DBEs with the objective of furthering the development of their com-
panies. As previously noted, Congress authorized up to $10 million each fiscal year
for the DBE–SS program. While federal regulations provide guidance regarding the
types of training, assistance, and services that should be provided (23 CFR 230 Sub-
part B) and allow a recipient to establish their own business development program
(49 CFR 26.35), these well-intentioned efforts can fall short of effectively supporting
DBEs. AGC members are concerned that emphasis on certain services is misplaced
and that the consultants hired by recipients to offer services can miss the mark.
Recommendation: Congress should reinvigorate the DBE–SS program to en-
sure that it focuses on providing the education, training, technical assist-
ance, and services that bolster the success of DBEs. Specifically, Congress
should place an emphasis on securing financial and bonding services, cer-
tification assistance, bidding and estimating, increasing awareness of and
compliance with federal requirements for projects, and procuring new
equipment and technologies. In addition, Congress should ensure that con-
sultants hired to provide any of these resources are have appropriate tech-
nical and industry expertise. Finally, Congress should continue to provide
funding for the DBE–SS program.
Administration of the DBE Program
Challenge: The DBE program evolved over the years through various legislative
and regulatory changes. AGC members remain concerned with the interpretation of
the requirements of the DBE program. In addition, there is not always uniformity
in the way the recipients administer the requirements through their respective pro-
grams. The construction industry wants to ensure the success of the DBE program.
However, the uncertainty and confusion associated with the DBE program’s require-
ments, which is in part due to issues with the program’s regulations and guidance,
poses a real concern for all contractors. Contractors found to be in violation of the
DBE program’s requirements can face suspension, debarment, or civil and/or crimi-
nal prosecution—any of these can put a company out of business and a business
owner in prison.
Recommendation: Congress should initiate a thorough and balanced review
of the DBE program. The review should focus on the administration of the
program, rely on quantitative and qualitative analyses, and provide ample
opportunities for input from all affected or interested parties. The review
should also include recommendations for Congress and U.S. DOT’s consid-
eration that will ensure the continued success of DBE program in the fu-
ture.
CONCLUSION
Again, AGC thanks the Committee for holding this important hearing and looks
forward to working with the Committee as works to ensure the continued success
of the DBE program.
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Sincerely,
JAMES V. CHRISTIANSON,
Vice President, Government Relations, Associated General Contractors of America.
f
Statement of the Airport Restaurant and Retail Association, Submitted for
the Record by Hon. Rick Larsen
Mr. Chairman and Members of the Committee:
Thank you for holding this hearing today. The Airport Restaurant & Retail Asso-
ciation (ARRA), representing the businesses, including many small, minority and
women owned Airport Concession Disadvantaged Business Enterprises (ACDBEs),
that operate the retail stores and restaurants serving airports and air travelers na-
tionwide, is seeking your support to ensure the Disadvantaged Business Enterprise
(DBE) Program and the ACDBE Program continue and that the ACDBE companies
survive this unprecedented air-traffic downturn due to the COVID–19 pandemic.
This hearing, focusing on the DBE Program at the Department of Transportation
(DOT), is well timed. While we are writing to emphasize that there is a continuing
need and compelling government interest in the federal DBE and ACDBE programs
and register our strong support thereof, our message today is that unless Congress
acts quickly, many of these companies and these programs may not have a future.
Without immediate aid, many DBEs and ACDBEs and the important benefits these
programs provide our nation’s airports, highway and public infrastructure will be
lost. It is that simple.
The DBE program is essential to remedy discrimination and its effects on
women- and minority-owned businesses while ensuring all businesses can
compete for Federal transportation dollars on a level playing field.
DOT’s DBE program, since its inception, has been devoted to combatting discrimi-
nation, and the continuing effects of past discrimination, in federally assisted high-
way, transit and airport programs and projects. ARRA fully supports the core goals
and objectives of the DBE program, which are to level the playing field by providing
small businesses, like the airport concessionaires within our membership, that are
owned and controlled by socially and economically disadvantaged individuals, with
fair and significant opportunities to compete for federally funded transportation con-
tracts and compete in contracting and business opportunities.
The ACDBE program has been instrumental in providing opportunities for small
minority and women owned disadvantaged companies to participate in the aviation
industry and the airport concessions business. Airports are very challenging envi-
ronments in which to start up and operate a business. These companies face large
upfront capital expenditures, high construction costs, limited access to capital, high
rents and minimum annual guarantees (MAGs} that are required to operate in air-
port spaces, and higher operating costs due to the federally regulated safety and se-
curity requirements at airports.
Even with the DBE/ACDBE programs the barriers to entry are many and sub-
stantial. The challenge of survival has never been greater than it is now during the
COVID–19 pandemic. While ACDBEs have grown under the Department of Trans-
portation and Federal Aviation Administration’s guidance and oversight, and oppor-
tunities expanded during the period of continuous growth of air travel, we now face
a real threat to the ACDBE program and many small companies and individual
owners/operators.
Operating within the heavily restricted airport environment, airport conces-
sionaires are highly dependent on passenger traffic for their customers and sales.
After a period of record passenger growth, within only a few months the pandemic
cost airports and their concessionaires about 95% of their passengers and business.
Concessionaires were forced to furlough 80–95% of their employees, close the vast
majority of their stores and drastically reduce operations for those few that were
able to continue operating. Unlike other restaurants and retail operators, airport
concessionaires cannot conduct business with the general public outside the airport
environment, and thus have not been able to sustain any business through drive-
thru, delivery or carry-out sales. They are totally captive to the number of air trav-
elers at the airport.
Unless Congress acts quickly to provide immediate aid, many of the DBE/
ACDBE companies, the program itself and the important benefits these pro-
grams provide our nation’s airports, highway and public infrastructure will
be lost.
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In talking to our members around the country and in every airport, the story is
the same. Business has effectively come to a standstill and passengers won’t return
until people feel comfortable and safe traveling again.
Airline travel has been devastated by the COVID–19 pandemic, and the res-
taurant and retail airport industry has been particularly impacted. We have experi-
enced, and continue to experience, mounting losses in jobs and revenues. Beyond air
carriers and airport operators, our members, airport concessionaires, are the third
major partner in the aviation ecosystem that serve air travelers. Airport conces-
sionaires completely transform empty airport terminals into vibrant shopping and
dining destinations that enhance the travel experience, generate $10B in sales an-
nually and employ more than 125,000 workers in steady jobs that provide good pay
and benefits and opportunities for advancement. Moreover, airport concessionaires
contribute $2.5B in non-aeronautical revenue to airports (approximately 10% of all
airport operating revenues) under contracts and agreements that deliver services
that travelers and airports need and fuel airport operations, development, bond fi-
nancing, and growth.
For our members to survive, and continue to make the DOT DBE/ACDBE pro-
gram vibrant and effective, we need at minimum:
• $3.5B in relief for airport concessionaires; and
• $10B for airports in the next COVID–19 package.
It is vital that these funds be added to any final negotiated legislation on COVID–
19 relief. ARRA, together with the Airport Minority Advisory Council (AMAC), the
International Association of Airport Duty Free Stores (IAADFS), the American Car
Rental Association (ACRA) and the National Parking Association (NPA), along with
the airport trade associations—the Airports Council International-North America
(ACI–NA) and the American Association of Airport Executives (AAAE)—are united
in requesting at least $13.5B in grants to airports, with $3.5B dedicated to support
Minimum Annual Guarantee (MAG) and rent abatement for airport concessionaires
at airports across the country.
In our reports (attached for the hearing record) Facing Facts: The Survival and
Revival of Shopping and Retail Concessions at Airports, ARRA demonstrates that
concessionaires cannot survive at current traffic levels and have little chance until
passenger traffic returns to near pre-pandemic levels. Airport restaurant and retail
concessionaires will lose an estimated $3.4B between now and the end of 2021. In
the next 18 months, they will lose 3 years of profit.
Most airline, FAA and industry projections show that it will be at least 18–36
months, and possibly five years, before the aviation industry returns to normal.
Without immediate federal relief, many DBE/ACDBEs and other concessionaires
will not survive. Since these companies operate in a highly restricted and federally
regulated airport environment, they will live or die based on government policies,
travel restrictions, airline schedules, public confidence in the health safety of air
travel and other factors over which they have no control—including whether the
Congress appropriates targeted relief funding.
Airport concessionaires include more than 3,500 small minority and women-owned
businesses who operate under the Congressionally authorized ACDBE program,
which is administered by DOT/FAA. These businesses’ survival is threatened by the
pandemic’s disproportionate negative impact on them. Our fear is that many airport
concessionaires will fail to weather this storm without significant financial assist-
ance from the federal government and relief from airport rents and MAG payments.
Air travel demand must increase substantially beyond what it is now for airport
concessionaires to generate sufficient revenue, meet airport rent obligations, pay
debt service and rebound as the key component of the aviation system that they
were prior to the pandemic.
The CARES Act (Phase III) provided passenger air carriers with $50B and air
cargo carriers with $8B. Airports received $10B and air carrier associated contrac-
tors received $3B in immediate financial aid and for future recovery. Airport conces-
sionaires received $0.
The $3.5B and the additional $10B airports and concessionaires are requesting
are vital to the airport community, and we urge you to ensure that it is included
in any legislation aiding the industry. These funds will help sustain airports and
speed their recovery by helping them offset the drastic loss of operating revenue,
meet debt service obligations and provide MAG and rent abatement to airport con-
cessionaires. The requested $3.5B for airport concessionaires MAG and rent abate-
ment is the first step in assuring companies survive in the short term but like the
airlines and airports, many ACDBEs and airport restaurant and retail conces-
sionaires will also need additional financial assistance for continuing operating ex-
penses, debt payments, and reopening and rehiring employees to be part of the air-
port and aviation industry’s recovery. ARRA is supportive of programs such as the
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Payroll Protection Program (PPP) and Main Street Lending Program (MSLP), how-
ever these programs are not designed and do not meet the needs of airport conces-
sionaires given their unique circumstances and operating characteristics. We sup-
port improvements to these programs that are designed to enable ACDBEs and con-
cessionaires to benefit, and other legislative and administrative initiatives to give
airport concessionaires, and ACDBEs in particular, better access to federal grants
and no- or low-interest loan programs, such as SBA and MSLP lending programs
and other forms of financial assistance.
The requested $13.5B for airport and airport concessions relief—necessary to help
airports and concessionaires survive the months ahead—in combination with addi-
tional grants and loan programs targeted for airport concessionaires, will help en-
sure the continued vitality and survival of DOT’s ACDBE program. ACDBE firms
and concessionaires at airports across the country desperately need the support of
Congress in order to assure the survival and speedy recovery of our industry and
the nation’s economy.
We are submitting this statement both to voice our strong support for the DBE
and ACDBE programs and to urge Congress to pass financial relief and assistance
specifically for airport restaurateurs and retailers and ACDBEs given the unprece-
dented and disastrous long-term business impact caused by the pandemic. We are
also attaching for the record the statements and testimonials of individual ACDBE
companies in strong support of the DBE/ACDBE program. If airport concessionaires
do not receive this immediate critical relief, many will cease to exist and this critical
program will disappear.
For these reasons, ARRA urges Congress to SAVE OUR INDUSTRY and include
financial relief and direct assistance to airport concessionaires as it works to miti-
gate the severe economic and public health impacts of this unprecedented pandemic.
Thank you.
ABOUT ARRA
ARRA represents the companies who operate restaurant and retail stores and
shops at airports across the U.S. More than 80% of ARRA Members are ACDBEs—
small minority and women-owned businesses. ARRA’s mission is to work collabo-
ratively with the airport community and the aviation industry on matters of policy
decision-making, with a collective impact on restaurant and retail operators, and
also to empower small, minority, women-owned, and disadvantaged businesses to
participate in and contribute to the aviation industry.
ATTACHMENTS
Letters and testimonial statements from ACDBE companies
[The letters and testimonials are retained in committee files.]
ARRA Reports: ‘‘Facing Facts 2: The Survival and Revival of Airport Shopping and
Dining—July 2020’’
[This report is available online at https://www.arra-airports.com/uploads/1/3/2/1/
132108975/arralfacinglfactsl2lthelsurvivallandlrevivalloflairportl
shoppinglandldining.pdf and is retained in committee files.]
‘‘Facing Facts: The Survival of Airport Shopping and Dining—June 2020’’
[This report is available online at https://www.arra-airports.com/uploads/1/3/2/1/
132108975/microsoftlwordl-lfinallarral10lfactsl.pdf and is retained in com-
mittee files.]
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APPENDIX
QUESTION FROM HON. TROY BALDERSON TO SANDY-MICHAEL E. MCDONALD, DIREC-
TOR, OFFICE OF ECONOMIC AND SMALL BUSINESS DEVELOPMENT, BROWARD COUN-
TY, FLORIDA
Question 1. Federal and state Miller Acts help protect subcontractors against loss
by requiring payment and performance bonds for infrastructure projects. However,
some delivery methods, including public-private partnerships do not require the
same levels of protection. To help ensure these protections are in place, Rep. Lynch
and I introduced H.R. 6359, the Promoting Infrastructure by Protecting Our Subcon-
tractor and Taxpayers Act, which would ensure that these protections are applied
to TIFIA finance projects. A recent Op-ed from in the Daily Kos, ‘‘Protecting the
Builders Rebuilding America,’’ from Wendell Stemley, the Emeritus Director of the
National Association of Minority Contractors, spoke in support of H.R.6359, specifi-
cally the benefits of ensuring proper payment and performance security is in place
on infrastructure projects to protect subcontractors, including Disadvantaged Busi-
ness Enterprise program participants.
We believe these requirements are needed now more than ever as states are can-
celling transportation projects due to the reduced funding. This puts additional risk
on contractors’ financial solvency, and therefore adds risk to subcontractors that are
part of those projects.
Can you speak to the importance of having these protections in place for DBE’s
that are subcontracted on large scale multimillion-dollar infrastructure projects if
the lead contractor falls into insolvency or experiences financial difficulty, and is un-
able to complete the project?
ANSWER. Thank you for the question you provided and the opportunity to respond
to what I believe is another substantive opportunity to support our DBE’s.
One of the main reasons small businesses fail is due to a lack of access to capital.
According to Forbes 1, it is the number two reason small businesses or entre-
preneurs go out of business—Access to Capital. Unfortunately, many entrepreneurs
and small businesses with good plans, innovative ideas and genuine intentions, fall
short due to running out of cash and not being able to access capital. This also holds
true when you take into consideration the obligations and risk that is taken on
every day by the Minority and Woman Owned Businesses who serve as our Dis-
advantaged Business Enterprises (DBEs) under Department of Transportation
(DOT) contracts. If they are successful in navigating the typical roadblocks of start-
ing a business, they must then be able to maintain and continue to get over the
hurdles associated with slow payments and address the risks of not being covered.
This is stated in your H.R. 6359 as, ‘‘appropriate payment and performance secu-
rity’’.
Representative Balderson, as you have indicated, now more than ever, and cer-
tainly as an impact of COVID–19, DBEs need support. With the reduction in fund-
ing projects, they need security and financial assistance as soon as possible. The
daily risks that are taken on projects are greater for our smaller businesses and
subcontractors then the risks experienced by the prime contractors. What should be
an incentive for taking a contract must not also be a deterrent in fear of ‘‘what could
happen’’ if I am not protected or covered.
The nature of subcontracting places small businesses in the position to be second
and third tier performers on a project. It is the consequence of being the second or
third tier performer that also dictates the payments and possible profit margins to
be made by these companies. They are typically here due to their size and financial
capacity. To consider a scenario where a multimillion-dollar project does not con-
tinue and the prime contractor, that is a multimillion-dollar company, would have
1 Burns, Stephanie. (April 30, 2019). Why Entrepreneurs Fail: Top 10 Causes of Small Busi-
ness Failure. Forbes.
(163)
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recourse and resources if they fell into insolvency is the challenge subcontractors are
faced with. Without necessary support and guarantees, our DBE’s are at more risk.
With this risk, contracts that should be favorable and inviting from DOT, unfortu-
nately, appear far more intimidating and extremely risky.
H.R. 6359, established from the principles of the Miller Act is progress in the
right direction. More importantly, it is the necessary incentive, security, and protec-
tion the subcontractors need. Whether the responsible party is local or state govern-
ment, payments and performance securities for the subcontractor are the right pro-
tection. DOT taking the responsibility to ensure that these protections are in place,
would speak to several of the objectives of the DBE program; e.g.:
1) To create a level playing field on which DBE’s can compete fairly for DOT as-
sisted contracts;
2) To help remove barriers to the participation of DBE’s in DOT assisted con-
tracts;
3) To assist the development of firms that can compete successfully in the mar-
ketplace outside of the DBE program.
In conclusion, the opportunity to share my feedback and perspective is greatly ap-
preciated. To allow our DBE’s to grow their businesses, account for their company’s
fiscal growth, and to compete in competitive markets where competition is the true
concern; rather than losing their revenue or their business because of insolvency
due to the financial difficulty of the prime contractor is essential. H.R. 6359 is the
road now and in the future for our DBE’s to travel with the support of DOT.
QUESTIONS FROM HON. PETER A. DEFAZIO TO JON S. WAINWRIGHT, PH.D.,
AFFILIATED CONSULTANT, NERA ECONOMIC CONSULTING
Question 1. Some critics say disparity studies should not be given any credibility
because they do not adjust for the capacity of DBEs. Is that true?
ANSWER. No. That is not true.
First, most disparity studies address capacity in many meaningful ways. They
consider, for example, qualities like education level, labor market experience, geo-
graphic and industry location, and dollar weighting to account for specific industry
spending patterns by government agencies.
Second, many studies also conduct statistical regression analysis, which dem-
onstrates that disparities remain even when holding capacity-related factors con-
stant between groups.
Third, we must recognize that some aspects of what people think of as ‘‘capacity’’
are themselves negatively impacted by current and historical discrimination. There
is a long list of examples here, with credit and capital discrimination being the most
obvious, differences in firm size and access to formal and informal business net-
works both running a close second. Such differences in ‘‘capacity’’ are not evidence
of a lack of discrimination. On the contrary, they point to the existence of pervasive
discrimination.
It’s critical, from a good social science perspective, that in trying to measure dis-
crimination, we do not treat factors that are themselves the result of discrimination
as endogenous variables.
Question 2. Some state and local transportation agencies have excluded certain
minority, ethnic or gender groups from their programs because these groups have
reached or exceeded ‘‘parity’’ according to a disparity study. Is this the right ap-
proach in your opinion?
ANSWER. No. It is not the right approach.
First, the overwhelming majority of examples of ‘‘parity’’ are quite recent, as some
DBE programs have matured, and in my experience they are very rarely statis-
tically significant, which mean they don’t actually show ‘‘parity’’ at all.
Second, these results, in the rare instances they occur and are also statistically
significant, appear in a context in which availability figures have been artificially
depressed due to discrimination. As I testified, minority- and women-owned firms
are forming at much lower rates than similarly-situated majority male firms be-
cause of discrimination. If such firms were forming at the same rate as majority
male firms there would be few, if any, findings of ‘‘parity’’.
Third, it’s inappropriate to consider a category of DBE to have achieved parity
until you see the same result occurring consistently in the private sector—that is,
in the Census data. Again, this is like checking the blood pressure of a patient with
high blood pressure who is on medication—seeing it’s 120 over 80 and concluding—
wrongly—that the patient is cured and can stop their medication.
Remember: The only markets in which there has been any attempt to level the
playing field are the public contracting markets—like the federally-assisted trans-
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portation markets. In the far larger and more lucrative private sector markets, DBE
programs are rare to non-existent and majority male-owned firms generally get al-
most all of the business.
We also have to remember that majority male-owned firms have literally had cen-
turies to grow and establish their firms with effectively no competition from minori-
ties and women. Early on the lack of competition was a direct result of laws that
intentionally and explicitly disadvantaged minorities and women. Later it was the
result of discriminatory practices that were permitted to continue despite civil rights
laws.
Finally, we should consider the practical effects of suspending the operation of the
program every time some subcategory of program participant achieves a modicum
of success. This won’t reduce discrimination, it will just tend to increase bank-
ruptcies and then those same entrepreneurs, or others like them, will need to be
added right back into the program.
Question 3. Does it provide useful evidence, in your professional opinion, to com-
pare situations where a DBE program is in effect with situations in the same juris-
diction where such a program is not in effect?
ANSWER. Yes. This evidence can be very powerful when it is available and it tends
to highlight the profound importance of the DBE program. Three examples come im-
mediately to mind:
First, in the immediate aftermath of the Croson and Adarand decisions we saw
programs shut down from fear of litigation or enjoined as the result of litigation and
we can compare the data from before and after these events.
Second, we often see agencies that use goals for their federal DBE program but
not for exactly similar spending with their state or local funds.
Third in some of the disparity studies I have authored, I’ve had the opportunity
to compare DBE participation on contracts with goals to contracts without.
In almost every one of the aforementioned cases, when DBE goals are absent
minority- and women-owned firms’ participation plummets. This type of evidence
shows the profound importance of the DBE program.
I would add this one caveat, however. Just because this evidence is powerful does
not mean we always want to have it or create it. You have heard testimony during
your September 23rd hearing from business owners who explained that without the
DBE program they would not get any work at all. We should not undertake experi-
ments that end up resulting in harm to disadvantaged firms.
Question 4. Are you concerned about so called ‘‘overconcentration’’ of DBEs in spe-
cific markets? Why or why not?
ANSWER. I see several potential problems that might fall under the category of
‘‘overconcentration’’.
First, one of the problems is that ‘‘overconcentration’’ has been, defined differently
by different people, and this has the potential to lead to hasty and ill-advised policy
decisions. For instance, it is demonstrably incorrect to say that simply increasing
the number and percentage of DBEs participating in subcontracting on federally as-
sisted contracts constitutes ‘‘overconcentration’’. That’s not overconcentration—it’s
evidence of the first steps of addressing centuries of discrimination.
Second, my experience has been that most examples of so-called overconcentration
are recent, temporary, and rarely statistically significant, meaning they don’t really
show ‘‘overconcentration’’ at all. We should not permit anomalous improvements in
DBE participation to lead to the suspension of DBE programs for some or all DBEs.
As I stated above, we should not consider improvements in DBE participation to
constitute overconcentration unless they are sustained, statistically significant and
reflected in the broader private contracting market.
Third, I am concerned about the history of shunting minority- and women-owned
firms into those industry areas that tend to have the lowest profit margins and the
highest risk. That’s wrong and sadly, that is where we are most likely to see ‘‘over-
concentration’’ first. Instead, we should be helping DBEs expand beyond such low
margin industries where they have often been concentrated due to discrimination
such as lack of access to capital and business networks.
Finally, I must add, and as my written testimony demonstrates, that for every
single instance in which DBEs have made progress in a particular industry, I can
provide dozens of examples of industries in which minority- and women-owned firms
are largely, or even completely, excluded.
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Question 5. How do you know that the DBE program is working? How do you
know that any reduction in disparities is due to the program?
ANSWER. I think there are two ways to answer this. First, with reference to the
quantitative and qualitative evidence I have seen, and second, with respect to my
own first-hand observations of these programs over the years.
With respect to evidence, two important data points come to mind. First, in al-
most every case where DBE type goals are removed, DBE participation rates subse-
quently plummet. That suggests a pretty close relationship between the program
and participation rates. Second, in my own studies, I also conducted surveys and
interviews to capture what firms actually experience in their day-to-day operation.
Minority- and women-owned firms almost universally report that the DBE program
is invaluable to them in helping them win contracts and grow their firms. A number
of majority male-owned firms also report that they think the program is a positive
thing.
Second, I have my first-hand observations. The DBE program has made real
changes on the ground. Previously there was not staff assigned to monitor con-
tracting diversity and provide training and information to DBEs and ACDBEs. To
the extent any staff were dedicated to the issue at all, they were fairly low level.
Now the rules require that senior DBE staff have direct access to the agency CEO.
Previously the federal government did not require prompt pay provisions in every
contract funded with federal dollars—now they do. That makes a huge difference—
and by the way, those prompt pay provisions help all firms, not just DBEs. There
are a lot of changes caused by the DBE Program that I think are genuinely impor-
tant in beginning to chip away at the ingrained effects of discrimination. Moreover,
as the DBE program has grown and matured, it has improved in its effectiveness.
For instance, in recent years recipients of federally assisted transportation funding
have dramatically improved the accuracy of goals due to DOT regulations requiring
that goal-setting be data-driven. In addition, the program has improved the detec-
tion of fraud, abuse and unfair business practices that have long injured DBEs and
other small businesses.
With all of that said, however, I cannot emphasize enough that we still have a
long way to go. The statistics I presented in my testimony are devastating. More-
over, I am deeply concerned about the effect this pandemic will have. Remember,
all of the data I presented pre-dates the pandemic and it still shows incredibly bad
results for firms owned by minorities and women. My colleague Professor Bob
Fairlie has already raised the alarm that minority- and women-owned firms are dis-
appearing during the pandemic at a much higher rate than majority male-owned
firms.1
If you really want to say that the program has been such a success that it is no
longer needed, you would of course need to see the elimination of disparities in the
public sector where goals are utilized and you would want to see that those gains
are matched by similar gains in the private sector where goals are generally not
used. As my testimony demonstrates, we are definitely not there yet.
Question 6. Your research utilizes an impressive amount of federally collected
data. Do you have the data you need to conduct these studies and are their other
types of data you might need?
ANSWER. This is a timely question. As the country rightfully grapples with our
national history of racism, Congress is well-positioned to expand the collection of
data for researchers like myself who are interested in studying the effects of racial
and gender discrimination. This is especially important in the context of the Su-
preme Court’s increasingly stringent requirements on legislators who seek to rem-
edy discrimination. I would be happy to work with the Committee to discuss this
issue at length as it is terribly important. In this context, however, I would raise
two actions that the Congress could take immediately:
First, reinstate the collection of data that was previously compiled by the Survey
of Small Business Finances (SSBF) so that we can monitor discrimination in credit
for small businesses owned by women and minorities. The SSBF, previously con-
ducted under the auspices of the Federal Reserve Board, in conjunction with the
Small Business Administration, was a very detailed survey that oversampled mi-
norities and women and therefore allowed us to assess discrimination in access to
business credit for small businesses while controlling for many common balance
sheet factors. The fact that the government stopped conducting this survey in 2008
means that we lost an important source of data that might have helped us better
understand the special vulnerability of minority and women owned firms to both the
1 Fairlie, Robert (2020). ‘‘The Impact of COVID–19 on Small Business Owners: Continued
Losses and the Partial Rebound in May 2020.’’ Working Paper.
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Great Recession and the more recent, and ongoing, pandemic-related economic re-
cession and dislocations. It is often said that credit is the life blood of business. If
that is true, we must work harder to eliminate discrimination in business lending.
That process begins with understanding the problem, not ignoring it by ceasing to
collect the data required to understand it.2
Second, reverse the elimination of the collection and reporting of information on
non-employer firms that recently occurred when the Census Bureau’s Survey of
Business Owners (SBO) was eliminated and absorbed into a new survey called the
Annual Business Survey (ABS). While there are certain improvements in the ABS
compared to the SBO, such as reporting data annually rather than twice per decade,
these are dwarfed in importance by the elimination of data on non-employer firms,
which constitute more than 80 percent of all businesses in the United States. Non-
employer firms are, obviously, a hugely important component of the small business
market, and ignoring them in the only federal survey dedicated to collecting infor-
mation on minority- and women-owned businesses and business owners is a huge
mistake.
Æ
2 Robb, A. (2010). ‘‘Beyond the late, lamented Survey of Small Business Finances,’’ Newsletter
of the Association of Public Data Users, 33, no. 2, March/April.
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