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Public Statements

Disadvantaged Business Enterprise Program

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Date:
Location: Washington, DC


DISADVANTAGED BUSINESS ENTERPRISE PROGRAM -- (Senate - July 29, 2005)

Mr. KENNEDY. Mr. President, the Department of Transportation's Disadvantaged Business Enterprise Program is vital to ensuring that businesses owned by women and minorities have an equal opportunity to compete for Federal highway construction contracts, and I commend the conferees for supporting this important program in this year's highway bill.

Since the program was created in 1982 and expanded to include women in 1987, the construction industry has changed significantly. Although we still have far to go to fully address the effects of discrimination in the industry, the program has opened many doors of opportunity for women and minorities in what was once a virtually all-male, all-white construction industry. The program deserves high marks in combating the effects of discrimination in highway construction. But on the extensive information available to us in considering its reauthorization, it is also clear that the program is still very much needed to achieve a level playing field for all qualified contractors, regardless of race or gender.

Since Congress first began examining this problem, it has been clear that the construction industry generally, and highway construction in particular, have been predominantly an insiders' business that often exclude women and minorities for discriminatory reasons. The persistence of this festering problem has denied opportunities for African American-, Asian American-, Latino-, Native American-, and women-owned firms in the industry.

Our extensive hearings and other information gathered over the years made clear that women and minorities historically have been excluded from both public and private construction contracting. When Congress last reviewed the program in 1998, there was strong evidence of discriminatory lending practices that deny women and minorities the capital necessary to compete on an equal footing. Much of that information is cited and described in three leading rulings by Federal courts of appeals--the Eighth Circuit's opinion in Sherbrooke Turf. Inc. v. Minnesota Department of Transportation, the Tenth Circuit's opinion in Adarand Constructors v. Pena, and the Ninth Circuit's opinion in Western States Paving Company v. Washington State Department of Transportation, all of which upheld the program as constitutional, and found that it is narrowly tailored to deal with the Government's compelling interest in remedying discrimination.

I will not detail all of the information previously considered, but a few examples illustrate the breadth of the problem. A bank denied a minority-owned business a loan to bid on a public contract worth $3 million, but offered a loan for the same purpose to a nonminority-owned firm with an affiliate in bankruptcy. An Asian-lndian American businessman in the San Francisco Bay area testified at a public hearing that he was unable to obtain a line of unsecured credit from mainstream banks until he found a loan officer who shared his heritage. A Filipino owner of a construction firm testified that he had difficulty obtaining bank financing, although white-owned firms with comparable assets could obtain similar loans.

Overt discrimination and entrenched patterns of exclusion prevented many female- and minority-owned businesses from obtaining surety bonds.

Minorities also have been consistently under-utilized in Government contracting. In 1996, the Urban Institute released a report documenting wide statistical disparities between the share of contract dollars received by minority- and women-owned firms compared to firms owned by white males. Minority firms received only 57 cents in Government contracts for every dollar they should have received based upon their eligibility.

For specific racial groups, the disparities were even more severe. African American-owned firms received only 49 cents on the dollar; Latino-owned firms, 44 cent; Asian-American owned firms, 39 cents; Native American-owned firms, 18 cents; women-owned firms, 29 cents.

These statistics are particularly troubling, because they exist despite affirmative action programs in many of the jurisdictions. Without such programs, their plight would have been far worse. The Urban Institute report found that the disparities between minority- and women-owned firms and other firms were greatest in areas in which no affirmative action program was in place.

When only areas and years in which affirmative action is not in place were considered, the percentage of awards to women fell from 29 percent to 24 percent. For African Americans, the percentage dropped from 49 percent to 22 percent; for Latinos, from 44 percent to 26 percent; for Asians, from 39 percent to 13 percent; and for Native Americans, from 18 percent to 4 percent. These figures show that affirmative action programs are not only effective, but are still urgently needed.

We also had extensive evidence of discrimination by prime contractors, unions, and suppliers of goods and materials, who expressly favored white males over minorities and women. In addition, the information we received established that exclusionary practices by State and local governments also contributed to the problem. As a result, female and minority contractors were disadvantaged in their efforts to compete fairly for both public and private construction projects.

The history of discrimination in contracting provides important context for the information that has been developed since the program was last reauthorized. We must not and do not assume that because the program was necessary in 1998, it must be reauthorized. Before deciding to continue the program, we have a constitutional duty to determine whether it is still needed today.

The information we have seen since then confirms that there is still a need for a national program. New studies completed since 1998 show that minority- and women-owned companies are underutilized in government contracting. The Department of Transportation identified 15 detailed studies of State and local governments showing significant disparities between the availability and utilization of minority- and women-owned firms in government contracting. Studies showed underutilization in Nebraska; in Maryland; in Colorado; in Georgia; in Kentucky; in Ohio; in Wilmington, DE; in Dekalb County, GA; in Broward County, FL; in Dallas, TX; in Cincinnati, OH; in Tallahassee, FL; and in Baltimore, MD. Several other studies have also been completed since 1998. Furthermore, expert evidence presented to the trial courts in Sherbrooke and in Gross Seed v. Nebraska Department of Roads included statistical evidence of underutilization of minority- and women-owned firms in Minnesota and Nebraska.

In the past, we have seen a striking reduction in participation in the regions where government programs designed to provide a level playing field in the construction industry are curtailed or eliminated. That pattern has continued in recent years. For example, in the State of Minnesota, during 1999, after a Federal court had enjoined the State department of transportation from implementing a previous program--participation dropped from over 10 percent to slightly more than 2 percent. In addition, the General Accountability Office, GAO, issued a 2001 study showing that contracting under the Federal program had ``dramatically declined'' when similar local programs were terminated in the jurisdictions it examined.

We also have received considerable new anecdotal evidence of discrimination in highway construction contracting:

Herta Bouvia, the female co-owner of a company that competes for building contracts and highway construction contracts in Nebraska, testified in Gross Seed v. Nebraska Department of Roads that she faced hostility, slurs, and other forms of harassment on construction jobs because of her gender.

Stanford Madlock, an African-American owner of a DBE trucking company in Nebraska, testified in the same case that he had suffered discrimination because of his race, including being denied contracts despite submitting the low bid for the work and being denied access to capital.

The Tenth Circuit's 2003 opinion in Concrete Works v. City and County of Denver included extensive anecdotal evidence of discriminatory behavior by lenders, majority-owned firms, and individual employees in the Denver metropolitan area, which the court characterized as ``profoundly disturbing.'' In that case, a senior vice president of a large, white-owned construction firm testified under oath that when he worked in Denver, he received credible complaints from minority- and women-owned construction firms that they were subject to different work rules than majority-owned firms; that he frequently observed graffiti containing racial or gender epithets on job sites in the Denver area; and that, based on his own experience, many white-owned firms refused to hire minority or women-owned subcontractors because of biased views that such firms were not competent.

Witnesses from minority- and women-owned firms testified that they were treated differently than their white male competitors in attempting to prequalify for public and private projects or to obtain credit. They also testified that prime contractors rejected the lowest bids on construction projects when those bids had been submitted by a minority or woman, and that female- and minority-owned firms were paid less promptly by prime contractors and were charged more for supplies than white male competitors on both public and private projects.

The case also included extensive evidence that Latino, African-American, and female contractors were subjected to verbal and physical abuse because of their race or gender. Even more disturbing was the testimony that minority and female employees working on construction projects were physically assaulted and fondled, spit on with chewing tobacco, and pelted with 2-inch bolts thrown by males from a height of 80 feet.

Disparity studies completed since the Disadvantaged Business Enterprise Program was last reauthorized also contain significant anecdotal evidence:

A disparity study by the State of Delaware described the difficulties of African-American firms in obtaining loans, including the experience of an African-American contractor who could obtain credit only after a white friend working at the bank interceded on his behalf.

The 2003 Ohio study also included the account of an African-American general contractor in the construction business whose ability to perform the work was questioned by an administrator for a project conducted by the State. The African-American contractor related that he ``had a lot of problems out of that particular agency,'' and was told that Government affirmative action programs are ``a form of n--gger welfare.'' The same contractor found that he was expected only to work on projects that were part of an affirmative action program.

The study included anecdotal evidence that female construction contractors were often forced to justify their ability to do the job. One contractor related that she was frequently required to demonstrate her knowledge of the construction business. She said, ``You are challenged, no matter your age, no matter your position, you are challenged quite frequently and asked very simple construction quiz questions just to prove you [know] construction acumen.'' She said that male contractors assume women lack knowledge of the business. One female contractor stated that she was forced to answer basic questions about construction before being permitted to perform work on a job.

A 1999 study of contracting in Seattle includes accounts by a female contractor with 14 years' experience in construction. It found that general contractors assume minority-and women-owned firms do substandard work. It also includes information about women contractors subjected to sexually inappropriate or demeaning comments by men in the construction industry.

The 1999 Seattle study contained troubling anecdotal evidence of lending discrimination against minorities. A Latino construction contractor had difficulty obtaining credit for his business until his white employee began dealing with the bank and easily obtained the loan from the same loan officer who had previously ignored the Latino contractor's application. The Latino owner also said that he later tried to help six other minority contractors--two African Americans, two Latinos, and two Native Americans--obtain credit after his company expanded, and always had difficulty. He stated that bankers told him, ``Jeez, you know how much these types of firms fail?'' and that the African American and Native American contractors he sought to help were verbally mistreated by bank employees.

The same study noted that one Seattle bank placed so many increasing financial requirements on an Asian American construction contractor that the contractor was unable to get credit until he no longer needed it.

The study also included anecdotal evidence of bid shopping by prime contractors that disadvantaged minority firms and discriminated against African-American and Latino construction contractors in seeking bonding and insurance.

A 1999 study of contracting in Minnesota included the account of an African-American construction contractor, who stated that a white construction worker refused to report to an African-American worker, that there was racial harassment on job sites ``all the time,'' and that African Americans had been called ``monkeys'' on the job and had their work sabotaged.

The Minnesota study also included statements by an Asian contractor who endured racial slurs or harassment from others in his business ``at least once a month.''

In light of the extensive evidence of continuing discrimination in construction contracting, the additional information available to Congress since 1998 makes clear that the Disadvantaged Business Enterprise Program is still needed. Given the importance of this question, I will ask unanimous consent to include further evidence in the RECORD.

In reauthorizing the Disadvantaged Business Enterprise program, we are well aware that in seeking to expand inclusion in the American dream, we must not unduly burden any other group. The program achieves the proper balance. The Department of Transportation's regulations expressly prohibit the use of rigid quotas, and require States administering the program to use race-conscious measures only as a last resort when race-neutral efforts to combat discrimination have been shown to be insufficient. If a State finds that it can create a level playing field on which all contractors have a fair chance to compete without using race-conscious means, the regulations require it to set the race-conscious portion of its goal of minority participation at zero, so that no race-conscious measures are used at all. We know that the program is also flexible in fact, because some States have set the race-conscious portion of the goal at zero.

The process by which firms may be certified for the program does not rigidly classify firms based on race, ethnicity or gender. Instead, the certification process is designed to identify victims of discrimination. Although firms owned by women and minorities are presumed to be eligible to participate in the program, that presumption may be rebutted, and their owners must submit a notarized statement declaring that they are, in fact, socially and economically disadvantaged. Firms owned by white males who can show that they are socially and economically disadvantaged can also qualify to participate in the program.

Finally, the program is inherently flexible. It imposes no penalty on States for failing to meet annual goals for participation. It requires only that prime contractors exercise good faith in seeking to meet the DBE participation goals on individual contracts; no penalty is imposed if their good-faith efforts are unsuccessful.

Given the magnitude and pervasiveness of the historical exclusion of women and minorities from construction contracting, it is not surprising that this problem has not yet been fully corrected. But the difficulty of the problem does not absolve us of our duty to address the effects of discrimination, and to continue our effort to achieve a level playing field in government contracting. As the Supreme Court stated in Adarand Constructors v. Pena, ``[g]overnment is not disqualified from acting in response to the unhappy persistence of both the practice and the lingering effects of racial discrimination against minority groups in this country.'' Indeed, we have a duty to ensure that federal dollars are not used to subsidize discrimination.

As President Kennedy stated in his landmark message to Congress on civil rights in June 19, 1963:

Simple justice requires that public funds, to which all taxpayers of all races [and both genders] contribute, not be spent in any fashion which encourages, entrenches, subsidizes, or results in ..... discrimination.

The Disadvantaged Business Enterprise program enables a diverse group of contractors to contribute to the important projects financed by this major legislation. Everyone benefits when the recipients of Federal opportunities reflect all of America.

The program ensures that all Americans have a fair opportunity to participate in the construction projects and other activities authorized in this legislation and that those who benefit from Federal contracting opportunities reflect our Nation's diversity, and I commend my colleagues on both sides of the aisle for including this still urgently needed program in this major legislation.

Mr. President, I commend to my colleagues the National Economic Research Associates Disadvantaged Business Enterprise Availability Study prepared for the Minnesota Department of Transportation.

I ask unanimous consent that several letters be printed in the RECORD.

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