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Public Statements

Federal Aviation Administration Extension Act of 2008, Part II

Floor Speech

Location: Washington, DC



Mr. KERRY. Mr. President, I want to say a few words about the FAA's Disadvantaged Business Enterprise, DBE, Program and the Airport Concessions Disadvantaged Business Enterprise, ACDBE, Program. As we are all aware, case law over the past decade has made clear that Federal race-conscious programs are subject to strict constitutional scrutiny to ensure that programs serve a compelling governmental interest and are narrowly tailored to address that interest. Gender-conscious programs must meet heightened scrutiny to ensure that there is an exceedingly persuasive justification for the program. Still, under any reading of constitutional law, race- and gender-conscious programs are clearly permitted to remedy current discrimination and the present-day effects of past discrimination where there is a strong basis in evidence that such discrimination exists. As the Commerce Committee is aware, discrimination in business practices continues to be a serious problem. There are countless disparity studies and examinations of this topic and for that reason we have made only minor changes to the DBE and ACDBE program over time. Taken as a whole, the quantitative and qualitative evidence clearly suggests that discrimination remains a serious problem in our Nation.

I serve both as a member of the Commerce Committee and as chairman of the Senate Small Business Committee. In these roles, I have the opportunity to review enormous amounts of information about discrimination against women and minority entrepreneurs throughout our economy and across our Nation. While we have made very real progress over the time that I have been in the Senate, there is no doubt that a lot of work remains to be done. Programs such as the DBE and ACDBE programs are making an important difference by offering real opportunities to companies that otherwise might not ever get a chance to compete. These programs are critically important in airport-related industries as well as in other areas of Federal contracting.

The statistics are telling. On May 22, 2007, I held a hearing in the Small Business Committee addressing the effectiveness of SBA's programs for minority businesses. One economist who testified, Dr. Jon Wainwright, presented a number of troubling statistics to the committee. For instance, he explained that according to the most recent economic census data available, while African Americans constitute 12.7 percent of the population, they own only 5.3 percent of businesses and those businesses account for only 1 percent of business sales and receipts. Latinos are 13.4 percent of the population, but only 7 percent of businesses and 2.5 percent of business sales and receipts. Dr. Wainwright also noted that Asian and Pacific Islanders own 5 percent of businesses but earned only 3.8 percent of business sales and receipts and Native Americans constituted .9 percent of the business population but earned only .3 percent of business sales and receipts. For women the numbers are also shocking: women constitute 50.9 percent of the population but own only 28.9 percent of businesses and receive only 10.7 percent of business sales and receipts.

Dr. Wainwright went on to explain that these disparities in business ownership and earnings exist in all 50 States and the District of Columbia and that similar outcomes had been evident in all previous versions of this same survey over the past 35 years. He also stated that he had conducted further analyses to determine whether the types of disparities he had observed were caused by discrimination or some other factor. He explained that he had conducted regression analyses to account for geography, industry, labor market status, age, and education among other factors. Even when this regression analysis was conducted, the disparities remained large, negative, and statistically significant for African Americans, Hispanics, Asian/Pacific Islander Americans, Native Americans, and women suggesting that race and gender discrimination are the cause.

Also troubling were Dr. Wainwright's comments on small business finance issues. We know that credit is the lifeblood of entrepreneurship, but it turns out that minority business owners are far more likely to be denied credit than nonminority owners. Dr. Wainwright explained that these findings held up even when regression analyses were conducted to adjust for a number of balance sheet, credit history, and other characteristics. And Dr. Wainwright found that women were also likely to face some discrimination in credit markets. Dr. Wainwright was only one witness at the May 22 hearing and there were several others whose testimony was equally compelling. The fact is that discrimination remains a very serious problem in Federal contracting markets across this country.

More recently, on September 11, 2008, our committee held another hearing on discrimination against minority- and women-owned businesses which focused on discrimination in access to capital. During the hearing we heard testimony from several witnesses about the serious barriers that minority- and women-owned businesses confront when attempting to obtain capital to start up, grow, and flourish. In the context of the FAA extension bill before us today, I want to specifically highlight the testimony of Don O'Bannon who is the current chair of the Airport Minority Advisory Council or AMAC. Mr. O'Bannon explained that, in his experience, access to capital is an enormous hurdle for minority- and women-owned businesses in airport-related industries. He gave us specific real-life examples of firms that had attempted to obtain both venture capital and more conventional debt capital and encountered extraordinary barriers due to discrimination that compromised their ability to grow and succeed.

Of course, there are many other sources of information about discrimination in contracting. Literally hundreds of disparity studies have been conducted around the country that contain compelling statistical data about discrimination in the public and private marketplaces related to airport-related contracting. Just a few of the studies that have been conducted recently and include airport-related data were put into the record by Mr. O'Bannon during our recent hearing. These include: ``Race, Sex and Business Enterprise: Evidence from Denver, CO,'' NERA Economic Consulting, May 5, 2006; ``Dallas/Fort Worth International Airport Board Disparity Study Final Report,'' MGT of America, October 17, 2000; ``The City of Phoenix, Minority-, Women-Owned and Small Business Enterprise Program Update Study: Final Report,'' MGT of America, April 21, 2005; ``Race, Sex and Business Enterprise: Evidence from the State of Maryland,'' NERA Economic Consulting, March 8, 2006; ``Final Report: Broward County Small Disadvantaged Business Enterprise (SDBE) Disparity Study,'' MGT of America, Inc., April 3, 2001; and ``Final Report for Development and Revision of Small, Minority and Women Business Enterprise Program, Nashville International Airport, (BNA),'' Griffin and Strong, PC, September 19, 2007. There are hundreds of additional studies, including many relevant studies that cover entities other than airports but that analyze the same industries and enterprise populations that do airport-related work.

But the statistics can only tell part of the story. Overlooked aspects of disparity studies are the sections that address anecdotal evidence. These are the accounts that individual business people give about the challenges they confront in doing business. When you read these studies, it quickly becomes clear that discrimination remains a problem at literally every stage of the business process. It is harder for women and minority entrepreneurs to start companies. They often are denied credit even when they have the same creditworthiness of male, nonminority entrepreneurs. And because of past discrimination, minority entrepreneurs often do not have access to family wealth. As one African-American contractor reported in a study about discrimination in the state of Massachusetts:

Now I go to the bank--again I've been in business for 28 years, I've been very successful at times--I go to the bank and say ``Okay. I need a $250,000 line of credit.'' I walk out of there with $50,000. A [White] gentleman that used to work with me was a former partner of mine, left, went to the same bank, and walked away with $1.2 million. Okay? Now he walked away because his house is not mortgaged. So he has equity that they can touch to go back if he doesn't make payments. They are looking at me and saying, ``He's already leveraged himself. He doesn't have anything that I can touch.'' So they don't want to give me any money. And not that the fact of my business--my business is very solid. It's just they won't give it to me because I started with nothing and I've taken everything I've had and put it into the businesses. They still think I'm worth nothing. That's ..... discrimination ..... which is where minorities and women who start from scratch and build their businesses up, that's where we get hurt. That's where it comes back to backfire, because we don't have that same leverage that somebody who either inherited a business or had family that gave them land or some sort of inheritance that they got some money.

That is from ``Race, Sex and Business Enterprise: Evidence from the Commonwealth of Massachusetts,'' Volume 1, NERA Economic Consulting, at 218-219.

Even once minorities and women manage to start up a business they face serious discrimination in every stage of the contracting process. Sometimes that discrimination comes in the form of explicit gender or racial harassment. In a study dealing with the State of Texas, one Hispanic-American woman business owner related the following story:

Some [of my male colleagues] do not want to work with a woman. They feel they are wasting their time. [On one occasion] a guy took me to check on a project, and when he got out of his truck, he wanted me to touch him. I said, ``Come on, let's get back to work.'' I had to be very strong with him. There are not many women builders in the residential construction industry either.

That is from ``Update of the State of Texas Disparity Study,'' Mason Tillman Associates, Ltd., January 2007, at 9-8.

Another Hispanic-American woman contractor in Texas explained that sometimes the discrimination is not so direct, but it is still unmistakable. She stated:

As a young woman, there have been several occasions where I was told that if I really wanted an award, there were other ways I could get it. This was not said directly to me, it was implied [by] a White male [manager] at a [State] university.

That is from ``Update of the State of Texas Disparity Study,'' Mason Tillman Associates, Ltd., January 2007, at 9-8.

Sometimes the harassment rises to the level of threats of violence against a business owner or their property. In the NERA Commonwealth of Massachusetts study, one African-American businessman even gave an account of a threat to blow up his truck.

That is from ``Race, Sex and Business Enterprise: Evidence from the Commonwealth of Massachusetts, Volume 1,'' NERA Economic Consulting, at 219.

Even when discrimination does not involve explicit harassment or threats, it still poses barriers to minority and women business owners. Unfortunately, the ``old boy network'' continues to be a problem in many industries. An analysis of the experiences of business owners in a study of contracting by the airport in Nashville, TN, demonstrates that discrimination not only hurts minority- and women-owned businesses, but it can also drive up the price of doing business:

[One business owner] said his firm has tried to get in on airport work and, in one instance, partnered with a much more experienced firm to get into one particular area of construction only to find that ``a couple of firms had a lock on it''. According to [this firm], it is hard to get jobs because people tend to use the same companies. [The business owner] said he believes that subcontractors tell ``their'' bidders where to come in with their numbers and they tell them where they can make up the difference on the project and how to pursue change orders. By the end of a project, his competitors have been paid more than his original estimate, which was rejected for being too high.

That is from ``Final Report for Development and Revision of Small, Minority and Women Business Enterprise Program, Nashville International Airport,'' BNA, Griffin and Strong, PC, September 19, 2007, at 163.

Another business owner in Nashville was explicit about the informal networks that impose barriers on minority businesses and the need for programs like the DBE and ACDBE program to address these impediments. The study stated:

According to [one business owner], the airport made a mistake in disbanding SMWBE requirements because there are still a lot of ``good old boys'' playing golf and the like. Having a diversity manager helps ``level the playing field'' and provides ``checks and balances''.

That is from ``Final Report for Development and Revision of Small, Minority and Women Business Enterprise Program, Nashville International Airport,'' BNA, Griffin and Strong, PC, September 19, 2007, at 164.

Another point that these studies make clear is that discrimination against business owners is something that is experienced by all minority groups and women. It is not limited to only some groups. One study summarized its analysis of anecdotal evidence as follows:

Nineteen percent of the respondents indicated that they had experienced discrimination because of race, ethnicity, or gender on one or more occasions (three percent very often, 10 percent sometimes, and six percent seldom). Forty percent reported they had not experienced discrimination. The fact that 19 percent of respondents reported experiencing discrimination on at least an occasional basis suggests that discrimination is not confined to isolated incidents. The 19 percent that experienced discrimination account for 63 surveyed respondents categorized as follows: 22 African Americans, 17 Hispanic Americans, 16 non-minority females, two Asian Americans, two non-minority males, and one Native American. Three people reported discriminatory incidents but did not indicate their demographic background.

That is from ``Final Report: Broward County Small Disadvantaged Business Enterprise (SDBE) Disparity Study,'' MGT of America, Inc., April 3, 2001, at 6-30.

These examples I have given are but a few from the voluminous body of research about race and gender discrimination in business. The evidence is troubling and should cause all of us to redouble our efforts to ensure that we do everything we can to eliminate the barriers confronted by women and minority business owners. The DBE and ACDBE program are indispensable tools in this effort.

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