[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




                                ------                                
                       THE DEPARTMENT OF
                TRANSPORTATION'S DISADVANTAGED BUSINESS
                           ENTERPRISE PROGRAM

=======================================================================

                                (111-18)

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               ----------                              

                             MARCH 26, 2009

                               ----------                              

                       Printed for the use of the
             Committee on Transportation and Infrastructure


                                   ____


                           THE DEPARTMENT OF
                TRANSPORTATION'S DISADVANTAGED BUSINESS
                           ENTERPRISE PROGRAM

=======================================================================

                                (111-18)

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 26, 2009

                               __________


                       Printed for the use of the
             Committee on Transportation and Infrastructure





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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman

NICK J. RAHALL, II, West Virginia,   JOHN L. MICA, Florida
Vice Chair                           DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon             THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois          HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of   JOHN J. DUNCAN, Jr., Tennessee
Columbia                             VERNON J. EHLERS, Michigan
JERROLD NADLER, New York             FRANK A. LoBIONDO, New Jersey
CORRINE BROWN, Florida               JERRY MORAN, Kansas
BOB FILNER, California               GARY G. MILLER, California
EDDIE BERNICE JOHNSON, Texas         HENRY E. BROWN, Jr., South 
GENE TAYLOR, Mississippi             Carolina
ELIJAH E. CUMMINGS, Maryland         TIMOTHY V. JOHNSON, Illinois
ELLEN O. TAUSCHER, California        TODD RUSSELL PLATTS, Pennsylvania
LEONARD L. BOSWELL, Iowa             SAM GRAVES, Missouri
TIM HOLDEN, Pennsylvania             BILL SHUSTER, Pennsylvania
BRIAN BAIRD, Washington              JOHN BOOZMAN, Arkansas
RICK LARSEN, Washington              SHELLEY MOORE CAPITO, West 
MICHAEL E. CAPUANO, Massachusetts    Virginia
TIMOTHY H. BISHOP, New York          JIM GERLACH, Pennsylvania
MICHAEL H. MICHAUD, Maine            MARIO DIAZ-BALART, Florida
RUSS CARNAHAN, Missouri              CHARLES W. DENT, Pennsylvania
GRACE F. NAPOLITANO, California      CONNIE MACK, Florida
DANIEL LIPINSKI, Illinois            LYNN A WESTMORELAND, Georgia
MAZIE K. HIRONO, Hawaii              JEAN SCHMIDT, Ohio
JASON ALTMIRE, Pennsylvania          CANDICE S. MILLER, Michigan
TIMOTHY J. WALZ, Minnesota           MARY FALLIN, Oklahoma
HEATH SHULER, North Carolina         VERN BUCHANAN, Florida
MICHAEL A. ARCURI, New York          ROBERT E. LATTA, Ohio
HARRY E. MITCHELL, Arizona           BRETT GUTHRIE, Kentucky
CHRISTOPHER P. CARNEY, Pennsylvania  ANH ``JOSEPH'' CAO, Louisiana
JOHN J. HALL, New York               AARON SCHOCK, Illinois
STEVE KAGEN, Wisconsin               PETE OLSON, Texas
STEVE COHEN, Tennessee
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey
DONNA F. EDWARDS, Maryland
SOLOMON P. ORTIZ, Texas
PHIL HARE, Illinois
JOHN A. BOCCIERI, Ohio
MARK H. SCHAUER, Michigan
BETSY MARKEY, Colorado
PARKER GRIFFITH, Alabama
MICHAEL E. McMAHON, New York
THOMAS S. P. PERRIELLO, Virginia
DINA TITUS, Nevada
HARRY TEAGUE, New Mexico

                                  (ii)
























                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................     v

                               TESTIMONY

Aranza, Gilbert, Chief Executive Officer, Star Concessions, Ltd..     7
Cloonen, Katherine M., President and Owner, JK Steel Erectors, 
  Inc............................................................     7
Clyburn, Hon. James E., a Representative in Congress from the 
  State of South Carolina........................................     4
Covington, Chuck, Chief Executive Officer, People's Transit......     7
Cunningham, Julie A., President and Chief Executive Officer, 
  Conference of Minority Transportation Officials................    38
Hall, Amy, Member of DBE Task Force, Associated General 
  Contractors of America, President, Ebony Construction Company..    38
Kim, K. Dennis, President, EVS, Inc..............................     7
O'Bannon, Don T., Esq., Chairman, Airport Minority Advisory 
  Council (AMAC), Vice President of Business Diversity 
  Development, Dallas-Fort Worth International Airport...........    38
Payne, Joann, President, Women First National Legislative 
  Committee......................................................    38
Szabat, Hon. Joel, Acting Assistant Secretary for Transportation 
  Policy, U.S. Department of Transportation, accompanied by 
  Robert C. Ashby, Deputy Assistant General Counsel for 
  Regulation and Enforcement, U.S. Department of Transportation..     7
Thompson, Anthony, President and CEO, Kwame Building Group, Inc..     7
Wainright, Dr. Jon S., Vice President, NERA Economic Consulting..     7
White, Richard, Vice President of Properties and Business 
  Development, Memphis-Shelby County Airport Authority, Chairman 
  of the Business Diversity Committee, Airports Council 
  International-North America, accompanied by Sara L. Hall, Vice 
  President and General Counsel, Memphis-Shelby County Airport 
  Authority......................................................    38

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Brown, Hon. Corrine, of Florida..................................    63
Clyburn, Hon. James, of South Carolina...........................    66
Duncan, Hon. John J., of Tennessee...............................    71
Johnson, Hon. Eddie Bernice, of Texas............................    76
Mitchell, Hon. Harry E., of Arizona..............................   197
Norton, Hon. Eleanor Holmes, of the District of Columbia.........   200
Oberstar, Hon. James L., of Minnesota............................   202

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Aranza, Gilbert..................................................   206
Cloonen, Katherine M.............................................   212
Covington, Chuck.................................................   216
Cunningham, Julie A..............................................   222
Hall, Amy........................................................   228
Kim, K. Dennis...................................................   280
O'Bannon, Don T..................................................   284
Payne, Joann.....................................................   297
Szabat, Hon. Joel................................................   306
Thompson, Anthony................................................   319
Wainright, Dr. Jon S.............................................   323
White, Richard...................................................   381

                       SUBMISSIONS FOR THE RECORD

Johnson, Hon. Eddie Bernice, a Representative in Congress from 
  the State of Texas:

  Sanchez, Thomas W., Stolz, Rich, and Ma, Jacinta S, ``Moving to 
    Equity: Addressing Inequitable Effects of Transportation 
    Policies on Minorities,'' The Civil Rights Project at Harvard 
    University: Cambridge, MA (2003).............................    80
  Swanstrom, Todd, ``The Road to Good Jobs: Patterns of 
    Employment in the Construction Industry,'' Public Policy 
    Research Center, University of Missouri, St. Louis (September 
    30, 2008)....................................................   148
Napolitano, Hon. Grace F., a Representative in Congress from the 
  State of California, letter from Will Kempton, Director, 
  California State Department of Transportation, to the 
  transportation construction community..........................   198
Payne, Joann, President, Women First National Legislative 
  Committee, written statement of Beth Doria, Federation of Women 
  Contractors....................................................   304
Szabat, Hon. Joel, Acting Assistant Secretary for Transportation 
  Policy, U.S. Department of Transportation, responses to 
  questions from Rep. Napolitano.................................   315
Wainright, Dr. Jon S., Vice President, NERA Economic Consulting:

  Responses to questions from the Committee......................   373
  Index of additional materials submitted for the record.........   380

                        ADDITIONS TO THE RECORD

Asian American Justice Center, Aimee Baldillo and Aarathi 
  Deshmukh, written statement....................................   392
Committee on Transportation and Infrastructure, index of all 
  disparity studies submitted for the record by witnesses and 
  others.........................................................   398
U.S. Department of Transportation, index of materials submitted 
  for the record.................................................   400
Women Construction Owners & Executives, USA, Theresa Kern, 
  President, Deborah Wilder, Past President, written statement...   401


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

 
 HEARING ON THE DEPARTMENT OF TRANSPORTATION'S DISADVANTAGED BUSINESS 
                           ENTERPRISE PROGRAM

                              ----------                              


                        Thursday, March 26, 2009

                   House of Representatives
    Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:00 a.m., in Room 
2167, Rayburn House Office Building, the Honorable James 
Oberstar [Chairman of the Committee] presiding.
    Mr. Oberstar. The Committee on Transportation and 
Infrastructure will come to order.
    The purpose of today's hearing is a very serious and deeply 
felt need to establish a record on the need for continuation of 
the Disadvantaged Business Enterprise program. The DBE program 
was established by regulation in 1980, following the Civil 
Rights Act of 1964. It has been expanded and adjusted and 
adapted through a series of four highway and aviation 
reauthorization legislative initiatives, the purpose of which 
have been to correct past discrimination, current 
discrimination against minority, against women-owned businesses 
to ensure they have equal opportunity to compete for Federal 
funds in our highway, transit, and airport programs.
    Major infrastructure investments as the ones we make in 
aviation and surface transportation program are important 
sources of revenue to local construction and engineering firms. 
But for very long, a very, very long time, disadvantaged and 
minority-owned businesses were not to win portions of those big 
contracts because of barriers to entry in the sector. They were 
unable to compete with larger firms who were bidding on these 
projects. And that is why there was need for the Minority 
Business Enterprise program.
    In 1980, I said it was a regulatory initiative to establish 
such a program under the Civil Rights Act of 1964. In 1983, 
there was legislation enacted to establish a national 10 
percent aspirational participation goal for firms certified as 
DBEs for surface transportation programs, for Federal aid to 
airports for procurement, for construction, for professional 
services contracts, and for airport concessionaires.
    The regulations of DOT require beneficiaries of Federal 
aid--State and local transportation agencies and airport 
operators--to establish annual aspirational DBE participation 
goals that reflect their participation and reflect what 
participation would be in the absence of discrimination. And 
that is for prime contracts of more than $250,000.
    Now, it is important to understand that technical term. The 
recipient's goal is aspirational only. Quotas and set-asides 
are not permitted.
    Recipients are required to use race-neutral means to meet 
as much of their overall goal as possible: providing help for 
bonding, financing, unbundling large contracts to make them 
more accessible to small businesses, establishing informational 
programs on contracting procedures, programs to inform small 
business enterprises on specific contract opportunities.
    But, if a recipient is unable to meet, if a large 
contractor or the agency contracting is unable to meet its 
overall DBE participation goal through race-neutral means, then 
that beneficiary, that agency must establish contract goals, 
which are deemed race conscious, for DBE participation. So 
that, in technical real-world terms, means that the recipient 
has determined that without the use of race-conscious measures, 
minority-and women-owned businesses would not have an adequate 
opportunity to participate in these contracts.
    The DBE program has faced a number of legal and legislative 
challenges, but I am very satisfied and very pleased that, with 
the work that we have done in this Committee over a number of 
years, the program has withstood those challenges. In 1995, the 
U.S. Supreme Court ruled, in the Adarand v. Pena case, which 
everyone knows is the Adarand case, that a race-conscious 
programs were subject to a strict scrutiny standard of legal 
review. That gave us a lot of headaches in the TEA-21 
legislation. And we have as our lead witness one of those who 
had the biggest headache, among others, Eleanor Holmes Norton 
of this Committee, Maxine Waters, who was of great counsel, 
Eddie Bernice Johnson, now Chair of our Water Resources 
Subcommittee. All of us counseled together and Mr. Clyburn, 
then a Member of the Committee, with his resonant voice, was 
able to bring everybody together. He doesn't need a gavel; he 
just needs to speak.
    So that ruling required that all affirmative action 
programs be ``narrowly tailored to serve a compelling 
governmental interest.'' That sent everybody scurrying. How do 
we narrowly tailor? What do we establish as a compelling 
government interest? The DOT tried to address that with new 
regulations to ensure non-discrimination, and every court since 
then that has reviewed DOT regulations has found them to be 
constitutional.
    Now, our Committee has compiled volumes of evidence, actual 
and word-of-mouth, case-by-case, that discrimination continues 
to adversely affect minority-and women-owned businesses across 
the Country. And these data demonstrate that there is a 
significant difficulty remaining for small and disadvantaged 
businesses to compete. If we can expand access to Federal 
contracts, and have much greater, much more expansive Federal 
program that will go in the range of $450 billion to $500 
billion over the next six years, then we are going to be doing 
something really significant for the minority community in this 
Country. Make them full partners in reducing congestion, 
improving mobility, and keeping America competitive. To keep 
America competitive, all have to be able to compete, and that 
is where this legislation comes in.
    We on this Committee have supported the continuation of DBE 
in both Democratic majorities and Republican majorities, 
although it was a pretty tough negotiation and an intense 
conference between the House and Senate in 1998 that I want to 
say Mr. Clyburn played a very, very pivotal role. I am grateful 
for your contribution, Mr. Clyburn.
    Mr. Oberstar. Mr. Petri?
    Mr. Petri. Thank you very much, Mr. Chairman, and thank you 
for calling today's hearing to review the Department of 
Transportation's Disadvantaged Business Enterprise, or DBE, 
program. It is important that we review the status of and the 
need for these programs on a regular basis.
    It has been over 25 years since Congress created these 
programs, which were intended to increase participation in 
federally-assisted State and local contracts by small 
businesses owned and controlled by disadvantaged individuals. 
It is an admirable goal and I look forward to hearing from 
today's witnesses as to the progress that we have made toward 
its realization.
    Three Department of Transportation administrations, 
including the FAA, oversee DBE programs. Allowing fair 
competition for airport construction projects and airport 
concession contracts is clearly important. It is a goal I 
support as long as it is determined that there is a compelling 
need for the program and as long as the program is conducted in 
a fair, transparent, and legal way.
    I look forward to hearing from the Department of 
Transportation and the aviation and airport representatives on 
the status of the DBE programs in the aviation sector.
    Given the current state of the economy and its particular 
impact on the airline and airport industry, I am interested in 
learning how the program is assisting small businesses to 
compete for newly funded airport improvement projects. 
Likewise, I look forward to learning more about how the airport 
concession program is working post-9/11 and during these very, 
very trying times.
    Again, I would like to thank you, Mr. Chairman, for calling 
this hearing and our witnesses for taking the time to join us 
today, and particularly someone I admire a great deal, my 
friend, the Majority Whip from the State of South Carolina, Jim 
Clyburn, who is kicking things off for this hearing. Thank you.
    Mr. Oberstar. Thank you very much, Mr. Petri.
    I might add Mr. Mica is at a meeting, a roundtable 
discussion with handicapped persons in our Subcommittee hearing 
room. I just left that meeting a few moments ago, and he will 
join the hearing later on.
    I would like to ask unanimous consent that Representative 
Sheila Jackson Lee, in due course, be allowed to sit on the 
dais, but not to ask questions or to make comments as the 
hearing proceeds. Without objection, so ordered.
    Mr. Clyburn, please proceed.
    I will ask other Members to withhold comments because we 
are going to have votes fairly soon, unless the Whip changes 
that schedule.
    [Laughter.]

    STATEMENT OF HON. JAMES E. CLYBURN, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF SOUTH CAROLINA

    Mr. Clyburn. Thank you very much, Mr. Chairman, Mr. Petri, 
other Members of the Committee. Thank you all so much for 
allowing me to be a part of this process here today.
    I am very honored and pleased to appear before you today. 
As a former Member of this Committee, I know firsthand the 
significance of the many programs and various matters that fall 
within your jurisdiction. I am also aware and stand in awe of 
the tremendously positive impact this Committee's work has on 
our Country.
    I want to discuss with you today one of those various 
matters that is of great importance and concern not only to me 
personally, but I believe to our Nation as a whole, and that is 
the issue of effectively confronting historical inequities 
occurring in our Nation's transportation industries.
    The hearing today focuses on the Disadvantaged Business 
Enterprise, DBE, programs authorized by Congress and 
administered by the Department of Transportation. As the 
Committee is aware, the Department of Transportation DBE 
programs apply to airports and surface transportation. They 
have been enacted by Congress to address historic 
discrimination against minority-owned firms in transportation 
and to ensure that minority-and women-owned businesses have a 
fair opportunity to participate in contracting opportunities 
made possible by Federal financial assistance.
    Mr. Chairman, the word discrimination is a tough term. It 
conjures up images of past times and past acts that many people 
would like to forget. Any discussion of it makes many people 
uncomfortable. In this regard, I am reminded of the debate that 
ensued when Attorney General Holder observed essentially the 
same point last month.
    Mr. Chairman and Members of this Committee, although an 
uncomfortable discussion at times, it is absolutely essential 
that we, as Members of Congress and as citizens, be willing to 
talk about the continuing challenges that racial and gender 
discrimination and, for that matter, other forms of 
discrimination raises for public policy.
    This Committee has demonstrated on a bipartisan basis its 
commitment to fairness and to tackling this issue, and for this 
reason I commend you for holding this hearing today.
    Mr. Chairman, sometimes I hear pundits argue that there is 
no current need for the DOT DBE programs. They reason that 
times have changed and that America is much more enlightened 
than when the first statutory DBE program was enacted back in 
1983 during the Reagan Administration. Critics and opponents 
often argue that the DBE programs are legally or 
constitutionally suspect.
    However, despite such assertions, it is my strong belief 
that discrimination is still a problem, that DOT DBE programs 
remain necessary, and that the programs are constitutionally 
sound.
    Mr. Chairman, it is true times for minority and women 
entrepreneurs have improved from what they were when the first 
DBE programs were enacted. Although I readily acknowledge and 
celebrate these improvements, I also know that it does not mean 
that discriminatory conduct has ended. Indeed, there are 
numerous academic and statistical studies demonstrating the 
lingering effects of past discrimination and that there are 
ongoing incidences of racial discrimination.
    Equally compelling are the anecdotal stories that I hear 
from minority and women businesses in my congressional district 
and from around the Country. For the most part, these 
entrepreneurs have to find ways in which to persevere and to 
overcome. Some are successful and some are not.
    I also urge the Committee to keep in mind that 
discrimination can be both direct and indirect. Either method 
is just as harmful and just as wrong. For example, beyond the 
denial of a contract, discriminatory practices can be evident 
in how a contract is structured. It is in the eligibility 
criteria for the work, in quotes for materials from suppliers, 
in the practices of prime contractors towards subcontractors, 
or in credit or bonding determinations.
    Mr. Chairman and Members of the Committee, I speak to this 
issue from personal experiences. For more than 17 years, 
immediately before coming to this body, I supervised the 
investigations of thousands of these cases in my native State 
of South Carolina. I did so under four governors, to Democrats 
and two Republicans. Many of those cases had no merit. But, 
unfortunately, many of them did. The academic and statistical 
studies and stories of individual entrepreneurs are poignant 
and painful reminders to us as legislators that progress is not 
a reasonable justification, or legal or moral, to stop 
combating inequities and discrimination.
    Although we should acknowledge and celebrate the fact that 
the policies that were first developed in this Committee have 
helped minority-and women-owned firms participate in the 
transportation industry, we should also understand that there 
is ongoing work required if the playing field is going to 
become truly level.
    Earlier, I mentioned that the term discrimination makes a 
lot of people feel uneasy. Perhaps this is particularly 
understandable for airport owners, State DOT officials, transit 
agencies and the like whose leaders are committed to inclusion, 
who truly engage in good faith efforts for DBE participants, 
and who fully comply with Federal DBE participation goal 
requirements. To these leaders I tell you that your commitment 
is understood and appreciated, and your accomplishments are 
noted.
    Further, I urge you to understand that congressional 
efforts redress continuing barriers to participation in no way 
diminishes your good work. To my way of thinking, it is quite 
the opposite. Your efforts represent a model of best practices 
that should be emulated.
    Mr. Chairman, while addressing discrimination and working 
to ensure fairness is the right policy, this Committee should 
not overlook the clear economic case for inclusion and 
diversity. Our Nation suffers when those who are talented, who 
have new ideas, and who want to work hard are denied the 
opportunity to compete because of their ethnic background, 
race, or gender.
    Mr. Chairman, before closing, I want to say a word about 
the constitutional soundness of the DOT DBE programs. I 
mentioned previously the DBE programs are intended to remedy 
discrimination in order to make it possible for all firms to 
have a fair chance to participate in the business opportunities 
arising from Federal transportation spending. The DOT DBE 
statutes and regulations have been carefully crafted and 
narrowly tailored to meet the rigorous, strict scrutiny 
constitutional standards established by the United States 
Supreme Court in the Adarand decision in 1995. In fact, all of 
the full United States Circuit Courts of Appeal that have 
considered the constitutionality of the DOT DBE programs since 
Adarand and new regulations put in place after that decision 
have found that the program is constitutional. This conclusion 
has been affirmed by the 7th, 8th, 9th, and 10th Circuits.
    Mr. Chairman, in closing, I want to share with you a very 
personal experience. A few days after being appointed to run 
the work training programs for Charleston County, South 
Carolina, I received a phone call from a Mrs. Rowena Tobias, 
someone I knew only by reputation and the society pages in the 
local newspapers. She invited me to her home on Charleston's 
South Battery, where the two of us spent the better part of an 
hour reflecting on Charleston's history. She shared with me the 
fact that Charleston was once the leading economic engine on 
the Country's East Coast. Whenever there were problems, she 
said, people would sit down to talk and work their way through 
them, except for one. She said to me on that day that 
Charleston lost its standing because whenever the issue of race 
came up, people would stop talking. She told me that we are not 
going to be able to work our way through the issues of race if 
we continue to stop talking whenever the subject came up. She 
asked me to promise her that I would never stop talking until 
we solve this very important problem.
    Mr. Chairman, I commend you and this Committee for 
reviewing and discussing the DOT's DBE programs and the issues 
of discrimination and fairness, and I thank you for allowing me 
another opportunity to continue keeping the promise I made to 
Mrs. Rowena Tobias over 40 years ago. Thank you so much for 
allowing me to be here, and I will answer any questions you may 
have.
    Mr. Oberstar. Mr. Whip, thank you very much for that very 
compelling, powerful, and moving statement.
    Mr. Clyburn. I want.
    Mr. Oberstar. Is Ms. Tobias still----
    Mr. Clyburn. No, she is no longer with us, Mr. Chairman.
    Mr. Oberstar. We will keep your promise to her. We will 
never stop talking----
    Mr. Clyburn. I appreciate it.
    Mr. Oberstar.--about race----
    Mr. Clyburn. Thank you.
    Mr. Oberstar.--about its effect. It may be a different 
color, but I remember as a kid going out looking for jobs when 
I was in high school, and you would go to the mining companies 
and they would say bohunks need not apply. It has the same 
effect. They can tell by your name, if not by your skin color.
    Mr. Clyburn. Absolutely.
    Mr. Oberstar. Mr. Petri, do you have any comments?
    Mr. Petri. No.
    Mr. Oberstar. I think we will thank you for your testimony 
and for your participation, and I will always remember in the 
markup the conference in 1998 on the TEA-21 legislation, when 
just having Jim Clyburn at the table, having him say his name 
and shake his head was enough to confirm the House position on 
minority business enterprise issues in that legislation.
    Mr. Clyburn. Well, thank you, Mr. Chairman, for your 
kindness, and I thank Mr. Petri for his long friendship. He is 
one of the people that I really admire a whole lot, and I want 
him to know that the counsel he gave to me during those trying 
times will never be forgotten. Thank you.
    Mr. Oberstar. There are a series of votes on the floor, the 
nine minutes remaining; 420 have not yet voted, so there is 
plenty of time. We will continue with the next panel and at 
least let them get started, and that will be beginning with 
Joel Szabat, Deputy Assistant Secretary for Transportation 
Policy, accompanied by Mr. Robert Ashby, Deputy Assistant 
General Counsel for Regulation and Enforcement; Dr. Jon 
Wainwright, Vice President for NERA Economic Consulting; Chuck 
Covington, Chief Executive Officer, People's Transit; Ms. 
Katherine Cloonen, President and Owner of JK Steel Erectors; K. 
Dennis Kim, President of EVS; Mr. Gilbert Aranza, Chief 
Executive Officer, Star Concessions; Mr. Anthony Thompson, 
President and CEO, Kwame Building Group, Incorporated.
    We will begin Deputy Assistant Secretary Szabat.
    It is probably Hungarian, Szabat.
    Mr. Szabat. Almost, sir. It is Polish.
    Mr. Oberstar. Polish. Close, but not related. Hungarians 
are a different ethnic origin than Poles.
    Mr. Szabat. And nothing but respect for them, sir.
    [Laughter.]
    Mr. Oberstar. Well, they are neighbors to my ancestral land 
of Slovenia.
    I read your testimony and read it twice last night, and I 
thank you for the thoroughness of the presentation, the 
excellent examples that you provided, and for the very 
substantive contribution it makes to the purpose of this 
hearing. Please proceed, summarize your statement.
    After Mr. Szabat's presentation, we will recess for votes 
and reconvene immediately thereafter.

   TESTIMONY OF THE HONORABLE JOEL SZABAT, ACTING ASSISTANT 
    SECRETARY FOR TRANSPORTATION POLICY, U.S. DEPARTMENT OF 
    TRANSPORTATION, ACCOMPANIED BY ROBERT C. ASHBY, DEPUTY 
ASSISTANT GENERAL COUNSEL FOR REGULATION AND ENFORCEMENT, U.S. 
   DEPARTMENT OF TRANSPORTATION; DR. JON S. WAINRIGHT, VICE 
  PRESIDENT, NERA ECONOMIC CONSULTING; CHUCK COVINGTON, CHIEF 
  EXECUTIVE OFFICER, PEOPLE'S TRANSIT; KATHERINE M. CLOONEN, 
 PRESIDENT AND OWNER, JK STEEL ERECTORS, INC.; K. DENNIS KIM, 
PRESIDENT, EVS, INC.; GILBERT ARANZA, CHIEF EXECUTIVE OFFICER, 
  STAR CONCESSIONS, LTD.; AND ANTHONY THOMPSON, PRESIDENT AND 
                CEO, KWAME BUILDING GROUP, INC.

    Mr. Szabat. Thank you, Mr. Chairman, Members, and thank you 
for inviting the U.S. Department of Transportation here today 
to review the status of our----
    Mr. Oberstar. Turn that microphone closer to you.
    Mr. Szabat.--to review the status of our Disadvantaged 
Business Enterprise program.
    I am Joel Szabat, the Deputy Assistant Secretary for 
Transportation Policy. Joining me today is Bob Ashby, our 
Deputy Assistant General Counsel for Regulation and the man, as 
much as anyone, sir, who is responsible for the detailed 
information that was provided in our written testimony.
    The Department of Transportation has a proud record of 
reaching out to work with small and minority businesses. We 
send twice as much of our business to small businesses as a 
typical Federal agency. Over 40 percent of the Federal Aviation 
Administration's direct contracting dollars go to small 
businesses, and the rest of the Department finds small 
businesses suitable for over half of our contract work.
    The DBE program is even more important to minority-owned 
firms in the transportation field, providing them with an equal 
opportunity to participate in over $30 billion worth of DOT-
assisted highway, transit, and airport contracts each year. In 
fiscal year 2008, DBEs were awarded $3.3 billion, or 11 percent 
of DOT's total assisted contracting. Additionally, this year 
the Recovery Act entrusted $48.1 billion to the Department of 
Transportation. Over $35 billion of these monies will be 
provided through assisted contracts covered by the DBE program, 
creating another $3 billion to $4 billion in job-creating 
business opportunities for DBEs.
    Transportation's DBE program works. As Chairman Oberstar 
and Congressman Clyburn have already noted, every Federal court 
that has examined our rule has agreed it is constitutional. The 
program is narrowly tailored to redress the continuing effects 
of discrimination. There are no quotas or set-asides. Goals are 
set based on evidence and no one is sanctioned or loses a 
business opportunity just for failing to hit a number.
    There is powerful evidence of the continuing compelling 
need for the DBE program. Recipients can set race conscious 
goals for DBEs only when they conclude, based on the evidence, 
that racial neutral measures alone cannot create a 
nondiscriminatory market for DBEs. From 2004 to 2008, 
recipients found it necessary to use race conscious goals 81 
percent of the time. Without this tool, they could not have 
properly addressed the effects of discrimination.
    A 2005 Federal court decision drove this point home by 
demonstrating the debilitating effect of denying the use of 
race conscious goals. This decision barred jurisdictions on the 
West Coast from using race conscious measures until they had 
conducted disparity studies. Despite the use of race neutral 
measures by assisted contract recipients, DBE participation 
declined in 7 of the 9 affected States, 18 of 28 airport 
districts, and 7 of 9 transit authorities over the three year 
period.
    Disparity studies are providing important statistical 
evidence of the presence and effects of discrimination in the 
marketplace. These studies paint an indelible picture of a 
nationwide problem not limited to any particular minority group 
or any region of the Country. Disparity studies also collect 
firsthand stories of how discrimination affects individuals 
trying to compete on an uneven playing field.
    With your permission, the Department will submit summaries 
of statistical and anecdotal evidence in our additional 
material for the record.
    Mr. Oberstar. Without objection, that information will be 
received and included in the record at this point, following 
your testimony.
    Mr. Szabat. Thank you, Mr. Chairman.
    The anecdotal and survey information provided by disparity 
studies illustrates a continuing barrier to participation 
encountered by DBEs; that a lack of access to the informal 
network of communication and relationships that are crucial to 
success in the contracting business. Most of us depend on a 
network of trusted friends and colleagues for advice and 
recommendations. Unfortunately, in the world of contracting, as 
in elsewhere, those networks frequently are limited to people 
of the same race or gender. Possibly the most important 
function our program performs is to help correct this lack of 
access.
    When there is a race conscious goal in a contract, primes 
must make good faith efforts to contact qualified DBE firms 
whose owners may not be part of their normal networks. This 
process creates business relationships that lead to 
opportunities for DBEs, and our data shows that this process 
has been successful where other good faith efforts have failed.
    The information we have submitted to the Committee for the 
record demonstrates a clear, compelling, continuing, nationwide 
need for the DBE program. Within DOT, we are continually 
working to improve the program to meet this need.
    Thank you, Mr. Chairman, Members. Mr. Ashby and I will be 
happy to respond to any questions you may have.
    Mr. Oberstar. And we will come back to the rest of the 
panel. There are two minutes remaining on this vote. We will 
all have to leave for the House floor and reconvene as quickly 
as possible after the last vote.
    The Committee will resume its sitting and the Chair can 
confidently announce there will be no more interruptions from 
the House floor. The last votes have occurred. Now we will 
proceed with the hearing and thank Secretary Szabat for his 
presentation.
    Mr. Ashby, you are next. You are not speaking separately, 
Mr. Ashby?
    Mr. Ashby. No, sir. I am in the capacity of assisting with 
answering questions that you may have.
    Mr. Oberstar. You are support services for----
    Mr. Ashby. Exactly, sir.
    Mr. Oberstar. All right. Okay. Very good.
    Dr. Wainwright.
    Mr. Wainwright. Thank you, Mr. Chairman, Mr. Guthrie, other 
members of the Committee. Thank you for your invitation to 
appear here today. My name is Jon Wainwright. I am a Vice 
President with NERA Economic Consulting. I hold a doctorate in 
economics from the University of Texas at Austin.
    With the Committee's permission, I would like to include my 
written testimony in the record as if read in full.
    Since 1989, I have devoted my professional life to studying 
race and sex discrimination and its impact on business 
enterprise. I have served as the project director or principal 
investigator for over 40 studies of business discrimination. I 
have authored a book on the subject and have provided expert 
testimony in Federal and State courts on these and related 
matters.
    The primary bulwark against business discrimination has 
been the use of public sector purchasing power to promote fair 
and full access to government contracting opportunities for 
minority-and women-owned businesses, and to mitigate the impact 
of such discrimination in the private sector. The USDOT DBE 
program is a key example of such policies at the Federal level.
    Because the DBE program is subject to the strictest 
standard of constitutional scrutiny, it is important that any 
DBE studies used to assess discrimination and to assess the 
presence of DBEs in the transportation sector are of high 
quality, independent and objective, academically rigorous, and 
incorporate as much relevant evidence as possible. It is also 
important that DBE studies be carried out by economic and 
statistical experts who can be qualified in Federal court to 
testify regarding their data, methods, and findings if called 
upon to do so.
    In 1999, Congress reviewed and revised the DBE program's 
authorizing statute and implementing regulations. As already 
mentioned, every court that has considered the issue has found 
the DBE regulations to be constitutional on their face. Whether 
USDOT grant recipients can withstand an as-applied challenge, 
however, turns at least in part on whether they went to court 
prepared with a high quality DBE study and an expert to testify 
about it.
    For example, when the DBE programs in Minnesota and 
Illinois were challenged, such studies played important roles 
in successfully defending the constitutionality of the programs 
applied by each agency. In contrast, when the program at 
Washington State was challenged, no study or expert was 
proffered at all. As a result, the 9th Circuit lacked the 
benefit of any guidance on the correct economic analysis of 
discrimination and made several serious errors as a result.
    Although unrelated to the USDOT DBE program, a similar 
situation recently occurred in the Federal Circuit Court of 
Appeals in the Rothe case, concerning the DoD program for small 
disadvantaged businesses. Here again, the defendants proffered 
no study of their own, nor an expert to testify about such a 
study, and once again the court made several serious errors in 
its economic reasoning, concluding, for example, that factors 
such as firm size should be factored into study estimates of 
DBE availability.
    Since 2000, I have directed 16 studies at NERA where one or 
more of the participating entities was a State Department of 
Transportation, transit authority, or airport. With the 
Committee's permission, I would like to provide copies of these 
studies for the record. The studies span the Country. Of the 75 
Members in this Committee, 50 hail from States represented in 
the studies submitted. Despite their geographic diversity, the 
study findings show much more similarity than difference. DBEs 
throughout the Nation continue to face large disparities in 
almost every aspect of business activity that can be 
quantified.
    It is fair to ask whether these disparities result 
primarily from discrimination or from other factors. Our DBE 
studies have put such questions to the test using the most 
recent available data. Our studies find that even when other 
nondiscriminatory attributes are held constant, the disparities 
between DBEs and non-DBEs tend to remain large, adverse, and 
statistically significant.
    In addition to statistical evidence, we have conducted 
thousands of surveys and hundreds of in-person interviews with 
DBEs and non-DBEs alike, and the results are strikingly similar 
across the Country and across different industries. There is 
general agreement that without the use of affirmative remedies 
such as the DBE program, these firms would receive few 
opportunities on government contracts, as is the case on public 
contracts without goals, and especially in the private sector.
    Our studies' findings strongly suggest a continuing need 
for the USDOT DBE program to help remedy the ill effects of 
business discrimination in the transportation sector. The 
economic consequences of that program are significant. It has 
improved economic opportunities for minorities and women in 
business, and thereby improved the overall competitiveness and 
efficiency of the American economy.
    Thank you. I would be glad to answer any questions.
    Mr. Oberstar. Thank you very much, Dr. Wainwright. Those 
are very compelling statistics and reports that you cited in 
your testimony. We will come back to that later. And the 
information you requested will be received for the hearing and 
perhaps, depending on the volume of the documentation, included 
in the hearing record at this point. If it is too voluminous, 
it will be included in the Committee files.
    Mr. Covington.
    Mr. Covington. Good morning, Mr. Chairman.
    Mr. Oberstar. Please put your microphone on, please.
    Mr. Covington. Good morning, Mr. Chairman and Members of 
the Committee. My name is Chuck Covington, and I am the 
President and CEO of People's Transit in Detroit, Michigan. My 
company provides vehicles and crews for ground transportation, 
including Detroit Metropolitan Airport.
    Thank you for the chance to talk about the airport DBE 
program. Small and minority businesses are the backbone of this 
Country. Without the DBE program, big business would steam roll 
right over us. I believe that tendency is partially responsible 
for the economic trouble we face today. One thing is clear: 
small minority businesses are not the ones that have brought 
our Nation's financial system to the brink.
    I have dealt with discrimination my entire life, and I 
still deal with it. Last year, one of my employees receive a 
quote on new tires. The supplier quoted us more than $613 for 
each tire. I called a white business associate and learned that 
he had only paid $400 per tire for the same tires, from the 
same supplier. My employee who obtained the original quote has 
what might be described as an ethnic sounding voice. So I used 
a white voice, called the tire supplier, and got the $400 
price.
    When asked why we had initially been given the higher 
price, nothing the supplier said justified the actions. A 50 
percent markup on one of the most basic supplies in my business 
puts me at a huge disadvantage. Today's business climate is 
tough, and it has been tough in Michigan for years. No business 
person can succeed if they are paying a race-based markup on 
supplies.
    Some other examples are important. Even those of us who 
have accumulated wealth, for instance, equity in our homes, 
face more difficulty getting loans than similarly situated 
white entrepreneurs. Housing discrimination is real. Early in 
my career I responded to an ad for an apartment, but when I 
showed up, I was told that the apartment had been rented. I 
knew what was going on, but I had my white secretary call and 
inquire. She was told the unit was still available.
    Housing discrimination matters, because, for many minority 
businesses, our homes represent our best source of collateral. 
Given Congress's investigations, you know that minorities pay 
higher mortgage rates. We also pay higher business loan rates, 
if we can get them. As long as housing and lending 
discrimination persists, minority business owners will be at a 
disadvantage.
    Sadly, I have to deal with bigoted business people. Not 
long ago, I was sued by a white subcontractor. We resolved the 
case to my advantage, and later I heard that outside the 
courtroom the CEO that sued me had said that he never believed 
that N word and his Jew lawyer would take the case so far.
    That slur says nothing against me, but it says a lot about 
the person that used it. One thing that it tells me is that I 
still have to work harder than the majority of business owners 
to succeed. Unfortunately, the good ol' boy network still 
exists. Breaking into that network is critical. I have seen 
situations in which unqualified majority firms were hired over 
me.
    In a recent job involving shuttle services at a local mall, 
my bid was rejected and a non-minority firm was hired. I was 
brought in as a subcontractor and my drivers frequently had to 
manage the job and fill in when the prime's drivers did not 
show up. I was paid the same price that I had originally quoted 
the mall. I was more qualified; my price was fair; so why 
didn't I get the prime contract? I believe it has to do with 
the networks.
    I serve in many public service and civic roles in my 
hometown, Van Buren Township, Belleville, Michigan. In these 
roles, I sometimes attend events at a local private club called 
the Eagles Club, one of the main places that business people in 
my area network. But the Eagles Club has an unwritten rule: 
African-Americans cannot be members. It sickens me that this 
club in my community would exclude me and my daughters because 
of our race. And this also impacts my business. If business 
people do business with those with whom they are comfortable, 
how am I supposed to succeed if I can't even join the club 
where they socialize?
    The current DBE program helps enormously. Still, the 
program can be improved.
    Thank you, Mr. Chairman, for the provisions already 
included in H.R. 915 to improve certification training and 
adjust the personal net worth cap for inflation. I believe that 
the DBE program should also be extended beyond AIP funds to 
include TSA and PFC funding. The discrimination that DBEs face 
is not limited by funding source, and other efforts to end 
discrimination should not be limited either.
    Thank you again for the opportunity to speak here today. I 
would be happy to take any questions you might have.
    Thank you very much for that very powerful testimony. I 
appreciate your being here. We will return to that theme later.
    Ms. Cloonen.
    Ms. Cloonen. Good morning. Thank you for inviting me to 
testify. My name is Katherine Cloonen. I am President and Owner 
of JK Steel Erectors, a small construction company. I started 
the company in 1991. We specialize in rebar and wire mesh 
installation in concrete and structural steel erection for 
transportation and other projects. The geographical area we 
cover is the rural area south and west of Chicago, Illinois.
    JK Steel Erectors is certified as a Disadvantaged Business 
Enterprise with the Illinois Department of Transportation. I 
was certified by IDOT in November of 2000.
    This testimony will be on three issues: one, the difference 
the DBE program has made; two, the discrimination I have faced; 
three, why the Disadvantaged Business Enterprise program needs 
to remain.
    The difference the DBE program has made is dramatic. Since 
being certified, my sales have more than quadrupled. Before 
being certified, there was a lack of opportunity. Very few 
prime contractors used me. I was limited to a very small 
geographic radius and could not expand. I could not get my foot 
in the door. In many cases, smaller companies are not given a 
chance by the larger companies unless they are certified as a 
DBE.
    Certification helps JK Steel and companies like mine 
increase in size. Once we are in the program, we are able to 
bid on larger jobs, get better bonding, get better loans, and 
purchase more equipment.
    The certification has given JK Steel Erectors exposure. 
Being certified doesn't guarantee a job, but it does open 
doors. I still have to be the low bidder.
    Discrimination has been, and still is, a factor for women 
and minorities in the construction business. I will illustrate 
a few examples. One company called and, instead of giving me an 
invitation to bid, the man asked if I wanted to make more money 
and he gave me an invitation to a meeting to sell health and 
beauty products for a pyramid company. I told him that if I had 
to sell his company's products in order to be a subcontractor 
for him, I would not do it. I have not done any business with 
that company since then.
    Another instance of discrimination is that there are 
companies that will not do construction business with a female. 
I sent one of my male employees to negotiate a job and to be a 
project manager with such a company. When the owner understood 
that I had the day-to-day control, he never asked me again for 
another quote.
    Often, I will get a call asking for the person in charge of 
estimating, and I say that I am that person, and then the 
caller hangs up. Once in a while the person says, well, I want 
the boss or the man in charge, and I say I am the boss, I am 
the man in charge; and I still hear a click on the other end of 
the phone. I was not taken seriously by contractors or union 
business agents.
    Women are not afforded the networking opportunities that 
men are allowed, and without the DBE program many prime 
contractors just would not hire me.
    The Disadvantaged Business Enterprise program needs to 
remain in the Department of Transportation. Even though I am 
now certified, I still have to prove myself on a day-to-day 
basis, and we are rated in several categories. It is not enough 
for the State of Illinois to say that I am qualified to do the 
work; I have to be low bidder for the steel and rebar on the 
project. We have to perform in a timely manner according to the 
IDOT specifications and turn in all the required documentation. 
I am responsible for several people's wages, benefits, and tax 
burdens.
    Small businesses, including women-and minority-owned 
businesses, are the driving force in the United States economy. 
It is vital that, as the big companies merge, the smaller 
companies such as the DBE companies remain to help fuel the 
local communities. This is particularly true of areas away from 
the urban regions, where there is still a lack of true 
diversity.
    If women and minorities were not a part of the DBE program, 
our companies would not get jobs just because some contractors 
feel that we are incapable of running a construction company on 
a day-to-day basis. Our businesses would take a backwards step 
to the struggles of where we were before we were certified. We 
are simply asking for the opportunity to bid and receive 
projects without bias.
    I am grateful for the DBE program. Being certified with 
IDOT has given my company credibility. I am a director on the 
board of Associated General Contractors of Illinois. I serve on 
the Ironworkers Mid-America Pension Plan, and I am a trustee on 
the Ironworkers Local 444 Joint Apprenticeship Training 
Committee. These appointments would not have happened without 
the DBE program.
    For these reasons, the DBE program should remain a part of 
the Department of Transportation. Thank you very much for your 
time and consideration.
    Mr. Oberstar. Well, thank you for the courage to speak 
forthrightly about your experiences. We will come back to that 
testimony.
    Mr. Kim.
    Mr. Kim. Thank you, Mr. Chairman and Members of the 
Committee. My name is Dennis Kim. I am the President of EVS, 
Incorporated. EVS is an engineering company in the Twin Cities, 
Minnesota. As you know, Minnesota is Mr. Chairman's home State. 
I came to Minnesota in 1969 from South Korea. I attended the 
University of Minnesota when I arrived. Oftentimes, people ask 
me why do you still live in Minnesota when it is so cold. As 
you know, it can go down to 20 or 30 below zero. Usually, I 
answer that it is cold, we got frozen in Minnesota.
    So I joined EVS when there were four people at the company, 
hoping some day I can become a successful business man. In 1982 
I took over EVS. One of the ways to grow the business was to 
get involved in government contracting, so in 1984 I obtained a 
DBE certification. It was time-consuming, also a difficult 
process.
    Currently, we have 22 employees, with an annual revenue of 
$2.5 million to $3 million. We are civil engineers land 
surveyors working on infrastructure projects.
    I am proud of what I do as a small business person. In 
1990, we designed four lake dams in Minnesota, which was a 
finalist for American Society Civil Engineers award for 
excellent engineering work. We also designed the decision 
driving course at Dakoma Technical College in the Twin Cities. 
The driving course is still being used to train police 
officers, firefighters, and commercial truck drivers. This 
project also received an outstanding award from another 
engineering group.
    On a personal level, because I am from Korea, I eat Korean 
food. Some of you may know kimchi as supposed to be very good, 
healthy food, but it is also stinky. So people think it is 
really stinky because there is a lot of garlic in it. As you 
know, a lot of medical studies show garlic is good for our 
health. But, anyway, you know, people complain about the smell, 
so I have to mask the smell, so I have to brush and use 
mouthwash and drink milk, because I read somewhere drinking 
milk will mask stinky smell. Nobody has proved it yet, but I 
still try.
    I want to talk about one instance which made me humiliated 
as a small business owner. In 1998, I first learned of a 
subcontracting opportunity with a white owned company. It was a 
highway design project with Rochester District of Minnesota 
Department of Transportation. The company was successful in 
winning the contract. The contract was to design several miles 
of highway. EVS was chosen as a subcontractor because we had 
contacted that company about this project. Also, there was a 
requirement of DBE requirement.
    However, the project was delayed over a year because the 
scope of the project had been expanded after the contract was 
awarded, then there had been a number of issues with the 
project, including expanding the scope of work, delay of the 
work, and other engineering problems.
    In 2003, I was summoned to a meeting in Rochester. When I 
walked in, there were three people in the room from the company 
and DOT. They were all while male Caucasians. I was told that I 
was at fault for the many problems with the project. Then they 
kicked me off the project, even with my protest. Later on, they 
hired another subcontractor owned by a Caucasian male. I felt 
that their reason for unfairly targeting me in this way is that 
I am Asian-American. They would not have done this to me if I 
were Caucasian. That is what I thought.
    I did not complain to anyone about this because I was 
afraid of retaliation, and I did not want to be labeled as 
another minority contractor whining because I have enough 
comments about some people saying many DBEs complain without 
any good reason. Later on I learned we were blacklisted anyway 
because, when I tried to get the project, we were not 
successful.
    I welcome the opportunity to do more work with the 
Minnesota DOT. In particular, I am excited about the stimulus 
package for infrastructure and reasonable energy projects. 
Since stimulus dollars have been available, I contacted the 
Minnesota DOT about the new opportunities. I noticed that they 
became a lot more friendlier, and I hope this will continue. I 
really help that my story will motivate you to not only 
reauthorize the DBE program, but to improve it. Thank you.
    Mr. Oberstar. Thank you very much for your testimony. Your 
comments about your English and the accent, had I been with 
you, I would have said to any of those folks, come and walk the 
streets of Iron Range communities in Minnesota when I was 
growing up. There you could hear accents of Slovenian, 
Croatian, Serbian, Italian, Finn, Norwegian, Swede. They all 
sounded different from British English.
    Mr. Kim. Thank you, sir.
    Mr. Oberstar. Mr. Aranza.
    Please use your microphone.
    Mr. Aranza. Good afternoon, Mr. Chairman----
    Mr. Oberstar. We want to hear every word you have to say.
    Mr. Aranza. Okay.--and Members of the Committee. My name is 
Gilbert Aranza, and I am the CEO of Star Concessions. Thank you 
for holding this hearings and inviting me to testify.
    Star Concessions is a 100 percent minority-owned DBE 
operating food and beverage and retail concessions in airports, 
including DFW and Love Field. My company has excellent 
credentials, delivers top national brands and is highly 
qualified. Even so, we face race discrimination that makes it 
much harder to succeed. I have no doubt that, without programs 
like the FAA's ACDBE program, I would not have had any 
opportunities to succeed in the airport environment.
    I don't believe the leaders of major companies are 
inherently bad people, but experience has taught me that many 
of these leaders do not see diversity as being good for the 
bottom line. Although these leaders advocate diversity, without 
the ACDBE program, I do not believe they would provide 
opportunities for minority-owned companies.
    Our Nation has made progress against racial and ethnic 
discrimination. However, much remains to be done. 
Discrimination still negatively impacts minority businesses in 
many areas. Four of them are capital and financing, business 
networks, treatment by suppliers, and enduring stereotypes.
    Discrimination in capital markets makes it incredibly 
difficult for minority entrepreneurs to obtain regular bank 
loans. For instance, I might be able to obtain 15 or 16 percent 
money, while a majority player has a greater chance of 
obtaining 7 or 8 percent money. I have been lucky with some 
banks, but 90 percent of my financing comes from lenders 
chartered by the Federal Government like the SBIC program to 
work with small and minority-owned businesses.
    In terms of business networks, the good ol' boy network 
still prevails. Conventional wisdom says if we go to the right 
schools and join the right clubs, we will build good business 
networks. These business networks are essential to success, but 
minorities are often shut out.
    I graduated from the University of Texas at Austin, one of 
the State's flagships schools, and from Harvard Law School. 
However, these degrees have not benefitted me in the same way 
that they have benefitted non-minority graduates. Nor have they 
insulated me from discrimination. As a minority, joining a 
professional club in Dallas came at a price. Being a Member 
meant I had to tolerate discrimination in the form of racist 
jokes and having fellow Members mistake me for a waiter at 
various functions.
    While airports and other public entities have laws 
enforcing equal opportunity, private businesses do not. 
Consequently, another problem faced by minority entrepreneurs 
is discrimination by vendors. I have worked with distributors 
who have been responsive to my needs. I have also had to deal 
with the opposite: distributors who ignored me completely. 
Price is also a problem. I had one supplier who said he was 
giving me mom and pop prices, prices that were ridiculously 
high. I believe that my race is one of the reasons for this 
treatment. I suspect that most of my suppliers still think, oh, 
he is just a minority. But now they have to think twice about 
acting on that attitude. Because of the DBE program, I had a 
chance to succeed and I have. Now, most suppliers who want 
access to the large customer market available in the airports 
where I work understand that I represent their best access to 
that market.
    Still, I am certain that if the DBE program disappeared, 
many of these large majority-owned firms would stop doing 
business with minorities altogether. Enduring stereotypes may 
be one of the reasons for that. Recently, a distributor came 
into one of my stores and demanded to speak to the owner. Based 
on his rude and dismissive tone, I knew it hadn't even entered 
his mind that the Hispanic guy in front of him might be the 
owner.
    I try to practice what I preach. I extend the benefits of 
the DBE program to others. For me, hiring and partnering with 
African-Americans is a priority. I don't have to do it; I am 
already 100 percent minority-owned. I do I because I believe it 
is the right thing to do. Fostering diversity and making money 
are not conflicting goals; it is good for business and good for 
society.
    I am very supportive of the DBE program, the SBIC program, 
and other programs that assist minority business owners. If it 
weren't for those programs, I would not be where I am today. 
That said, there are ways that these programs could be 
improved. In the current economic climate, minority businesses 
need more and better access to credit and venture capital, and 
newer, smaller DBEs need proactive information and assistance 
from airport staff.
    Thank you for the opportunity to speak to you today. I am 
happy to take any questions you might have.
    Mr. Oberstar. Thank you very much for your testimony as 
well. We greatly appreciate your contribution.
    Mr. Thompson.
    Mr. Thompson. Thank you. My name is Anthony Thompson. I am 
the President and CEO of the Kwame Building Group. We are a 
local construction management company in St. Louis, Missouri, 
but we do have offices in Pittsburgh, Dallas, and now recently 
Seattle. My undergrad is an architectural engineering from the 
University of Kansas. I also have a degree in architecture for 
environmental design from the University of Kansas. I have an 
MBA in Finance and a Masters in Engineering from Washington 
University.
    After working with the Corps of Engineers, Monsanto 
Chemical Company, and Anheuser-Busch, one of the largest 
brewers at one time in the world, I decided to start my own 
business, and I was surprised at the challenges that I was 
faced with coming from the private sector with so much 
experience in construction management and the education to be 
successful in the business. I decided to start my own business 
and go through the exhaustive process of becoming certified and 
so forth. It was surprising to me that unless I was certified 
or unless I had gone through the rigorous process of being 
certified, none of the white or prime contractors really wanted 
to do business with us unless they had to, unless it was a 
requirement. So there was no opportunity for me to show my 
experience or what I was capable of without having that 
certification.
    So after getting the certification, we began to win work. 
We were subcontractors to various firms throughout the Country, 
and the opportunity became very exciting for me because now I 
was able to employ other African-Americans, and women. I am 
proud to say that we currently have about 75 employees, of 
which 70 percent are minorities and women in senior and 
leadership positions. The average salary within our 
organization is $70,000 a year, and we give back to the 
community because also, like Mr. Aranza, we employ other 
minority vendors, we employ other minority and African-American 
suppliers and subcontractors.
    We could easily say we don't need to do that because I am a 
100 percent minority owned business, but I have an obligation 
to give back to the community. My mother has told me that none 
of us have made it until all of us have made it. I live by 
that, I run my business that way, and the opportunities are 
great. And the return on the investment that the DBE process 
has given us allows us to give back philanthropically in our 
community as well. We donate to various causes, mentoring 
programs, as well as scholarships. We have $600,000 worth of 
endowed scholarships for minority youth that we have 
established. We are trying to make that $1 million within the 
next four years.
    The growth of our organization has been great, but doing 
business with minority firms and the DBE program should be a 
business imperative, not just a feel good sort of program. It 
does not cost more money to do business with minorities. It is 
more economical to do business with minorities and DBEs. For 
example, the east terminal for Southwest Airlines that was 
constructed in St. Louis was $15 million over budget when it 
was initially presented to start construction. They could not 
start the project because they did not have the funds. We were 
brought on to augment the existing staff to do value 
engineering and support estimates to get the cost down within 
the budget. We were able to find those $15 million worth of 
savings and, as a result of that, they hired us on to be the 
construction manager to oversee the entire construction of that 
project.
    Our fee for the four years that we managed that project was 
$4 million, so that was a pretty good return on investment for 
a $15 million savings on a project of that magnitude. That led 
to us being a joint venture partner with two of the largest 
construction companies in the world on the $1.5 billion 
expansion at Lambert International Airport, of which we gained 
experience and were able to lead the team at that point. That 
led to us now recently being prime contractor selected for some 
taxiway expansions and renovations at Lambert, as well as 
Seattle Airport.
    So, as you can see, the growth and development I tried to 
create opportunities, I think you may have this book in front 
of you that lists several of our transportation-related 
projects throughout the Country that have been led by our 
organization, and there are a lot of minorities within our 
organization that would not have a chance to lead major 
projects had they not come to work for a Disadvantaged Business 
Enterprise.
    So thank you very much, and I would be glad to answer any 
questions as we move forward.
    Mr. Oberstar. Well, yours is certainly a wonderful success 
story. Great to have that contribution.
    Let me ask Ms. Brown if she has some comments.
    Ms. Brown. I am ready, Mr. Chairman. First of all, let me 
just thank Mr. Chairman for holding this hearing and thank the 
participants for coming and giving their stories.
    We just passed the largest stimulus bill, the recovery 
bill, billions of dollars, and it seems as though there is some 
push-back from some of the different agencies as far as 
minority participation, and particularly in the area of 
transportation, whether I am talking about the airport or 
transit. I want to know is there anything in the bill from the 
Department that would cause the push-back? Because, as you just 
heard, I feel that minority participation is crucial. When we 
passed that stimulus bill, I look at it like my grandmamma's 
sweet potato pie: I want my slice hot out of the oven. And I am 
sure that is what you want too. And we all contribute to that 
pie, and I want to hear from the Department on this issue.
    Mr. Szabat. Madam Congresswoman, I don't know that we will 
get our Recovery Act money hot out of the oven, but we do 
intend to move it very quickly. But of the $48 billion that was 
entrusted to the Department in Recovery Act monies, over $35 
billion will be distributed as formula grants through Federal 
Highways, through the Federal Transit Administration, and 
through our Airport Grant and Aid program. All of those monies 
are--I say again, are--covered by the DBE program. We estimate 
that that will lead to, conservatively, at least $3 billion, 
probably closer to $4 billion in business opportunities for 
DBEs.
    Ms. Brown. To follow up, there was a bonding program 
because some minorities have problems. Can you tell me what is 
the status of the bonding program?
    Mr. Szabat. Yes, Madam Congresswoman. There is a $20 
million program for bonding assistance for DBEs that was 
included in the Federal Highway portion of Transportation's 
Recovery Act. We are working with the Small Business 
Administration in order to craft an assistance program. If we 
use the money straight for bonding, we would be able to help 
fewer than 200 small businesses. So what we are looking at is 
to a program where we would actually cover the costs of small 
businesses that participate in the Small Business 
Administration's bonding program, in which case we could 
actually assist far more businesses with that $20 million.
    As you might expect, working between two agencies with two 
different programs, there are some technical matters for us to 
work through, but we are confident that we will have something 
set up within the next few months.
    Ms. Brown. And I guess I just want to follow up again 
because it seems like there have been some push-backs from some 
of the airports that received dollars prior to the stimulus. 
What would cause them to think that the program is not----
    Mr. Ashby. Madam Congresswoman, we had received some 
expressions of concern from recipients in various modes along 
the lines that because the stimulus funding was going to 
increase the amount of funding available for projects as much 
as it is, that somehow they might not be able to find 
sufficient DBE capacity in order to do the job. We weren't 
convinced by that. We put out guidance very early on after the 
passage of the legislation that said, I think very plainly, 
that not only do the DBE programs apply to this stimulus 
funding, but that we expected our recipients to do further 
outreach to use some of their underutilized DBE capacity, of 
which there is some, and to make sure that the promise of these 
stimulus funds extended to all businesses wanting to work with 
us, including DBEs.
    Ms. Brown. Thank you.
    Mr. Oberstar. Ms. Johnson, our Chair of the Water 
Resources; Ms. Brown, Chair of our Rail Subcommittee, thank 
you.
    Ms. Johnson?
    Ms. Johnson. Thank you very much, Mr. Chairman. Let me 
commend you for having this hearing, and I would like to ask 
unanimous consent to place my opening remarks in the record.
    Mr. Oberstar. Without objection, so ordered.
    Ms. Johnson. From the Department of Transportation, I have 
read your testimony, and you cite some commonly known barriers 
to success for DBEs, such as the lack of bonding, in addition 
to a host of other issues. As you may know, largely due to the 
leadership of this Committee, the recently enacted American 
Recovery and Reinvestment Act provides $20 million for that 
bonding, and I have written to the Secretary inquiring as to 
how these funds would be allocated. You just finished giving 
some on that, but I would like to hear a little bit more in 
depth. And we will be having some local meetings in order to 
get this word out so that, in case it might be able to assist 
some of the DBEs.
    You know, it has not been easy over the years. Back when I 
was in the State Senate, I had to write the Department and ask 
them to withhold money from Texas until they worked out 
something, and it took so long I forgot I had written that when 
Texas called and asked if I would release it. But very often 
these contracts are made very, very large purposefully, but 
they don't have to be. So do you do anything actively to get 
the information out to prime contractors?
    Mr. Szabat. Yes, Madam Congresswoman. To handle your 
questions in order, first, regarding the $20 million in 
assistance, the Department will commit to working with you and 
your staff as we develop criteria in conjunction with the Small 
Business Administration, to share that with you, with any other 
Member of the Committee who is interested, before we actually 
go out and make a public announcement of what we intend to do 
so that you are aware of what we are trying to accomplish and 
how we intend to accomplish that.
    In terms of getting the information out to prime 
contractors, remember, our program is essentially three 
distinct programs. The Federal Aviation Administration, the 
Federal Highway Administration, and Federal Transit 
Administration each run their own. They have a series of 
seminars, nowadays webinars that they use to get the words out. 
And I think many of the contractors here would indicate that 
Federal Register notices and the other ways that you normally 
use announcements to get information out to contractors is one 
of our more effective ways.
    But, again, we would be happy to share with you information 
from each of our three modes and how they communicate their 
programs to the community.
    Mr. Ashby. And if I might add, with respect to the issue 
about unbundling larger contracts, that is something that we 
have always endorsed and supported in our regulations. It is 
specifically mentioned there. We also recognize, though, that 
unbundling is often something that has been easier to praise 
than implement, and for that reason, in some regulatory 
proposals that we anticipate publishing in hopefully the very 
near future, we are going to be seeking comment and suggestions 
on additional ways that we, as the Department of 
Transportation, can do more to encourage or push grant agencies 
to unbundle their contracts and divide them into smaller chunks 
that are more readily able to be performed by small businesses.
    Ms. Johnson. Thank you. Now, I hear what you are saying and 
I can appreciate it very much. You know that these projects 
have to be started within a certain period of time, but you are 
going to move expeditiously to make sure that you are on target 
with them having opportunity to participate?
    Mr. Ashby. That is certainly our objective.
    Mr. Oberstar. If the gentlewoman would yield just a moment.
    Ms. Johnson. Yes.
    Mr. Oberstar. That is a very important point that you have 
raised, about the size of contracts. The reverse side of that 
coin is that when State DOTs want to achieve some other 
objective, they segment contracts into smaller pieces and award 
this piece and that piece at a time in order to avoid, as they 
have done in certain circumstances, avoid Davis-Bacon 
requirements. And we certainly don't want to see that kind of 
avoidance either. But breaking contracts down into more 
manageable pieces as part of an overall project so that there 
are elements that can be bid by minority enterprises is an 
important factor.
    Are there regulations that deal with this or is there 
guidance, is there policy guidance for State DOTs as they 
undertake these projects?
    Mr. Ashby. Our existing regulations specifically talk about 
unbundling as one of the key race neutral efforts to help small 
businesses, including DBEs, realizing that I think everyone 
perceives there is more needing to be done in that area. As I 
said, we are in the process of proposing regulations and asking 
for comment on additional ways of encouraging unbundling by our 
grant recipients.
    Mr. Szabat. I will add to that, Mr. Chairman. There is, as 
the Congresswoman alluded to, there is an inherent tension with 
what we are trying to accomplish with the Recovery Act, to get 
the money out quickly to create jobs. We are aware of that. 
Depending on whether it is an airport, a transit or a highway 
project, we have between 120 and 180 days, the recipients do, 
to get half of their money obligated. In those cases, to be 
obvious and honest, our hope is to work with them to find 
projects that are ready to go, and if they have contracts that 
are ready to go, we will be less enthusiastic about pressing 
them to unbundle them if it means a delay in getting people to 
work. That is an honest answer.
    Having said that, those contract opportunities are still 
covered by the goaling of DBE. So if there is in fact a 
tradeoff, the tradeoff is between the opportunity of having 
more prime contracts and increasing the subcontracting 
opportunities. We hope it doesn't come to that, but we do 
recognize that there is a tension there, and we are watching 
that very closely.
    Ms. Johnson. I know my time has expired, but give me----
    Mr. Oberstar. No, time has not expired. I took some of the 
time.
    Ms. Johnson. Oh, thank you, Mr. Chairman.
    Give me a frame of time that you have in mind to achieve 
this.
    Mr. Szabat. If I could ask you to expand the question, to 
achieve which goal, Madam Congresswoman?
    Ms. Johnson. Going to Small Business Administration. You 
know, sometimes government works slowly, and I was just trying 
to determine how long you anticipated working that out so you 
can----
    Mr. Szabat. For the DBE granting, I would be surprised if 
it took us more than three months to have that out the door.
    Ms. Johnson. By that time, those contracts will be out 
there, because if they don't get them started by then, they 
have to send the money back. So you are going to have to move 
faster than that to give us some opportunities.
    Mr. Szabat. Then we will do it faster than that.
    Ms. Johnson. Okay. Could you keep in touch with me?
    Mr. Szabat. We will make it a point to.
    Ms. Johnson. Thank you.
    Mr. Oberstar. Following up on Ms. Johnson's questions, I 
first want to observe that, thus far in the recovery program, 
OMB has allocated to DOT $40 billion for highway and transit 
funding, and an additional amount to wastewater treatment. 
Thirty-three States have been approved for 800 projects, 
totaling $2.9 billion, which is 10 percent of the recovery 
funds. And I also note for the record that the Congressional 
Budget Office was wrong, Office of Management and Budget was 
wrong, Larry Summers was wrong. They said that they would send 
out only 2 percent. They were wrong, and I said so. And now you 
have proven them wrong and the States have proven them wrong. 
Eleven contracts in my own State of Minnesota have already been 
awarded for a net of 1,000 new jobs created, just as one 
example. Federal Transit Administration has awarded grants for 
500 transit vehicles--trolleys, buses, vans, ferries, and bus 
shelters. Amtrak has sent $938 million in capital improvement 
grants out, contracts out, and for rehabilitation of 68 
passenger cars for Amtrak at a value of $82 million on that 
contract; replacing a bill on the Niantic River for Amtrak.
    This is evidence that the Department is really moving out, 
the States are moving out smartly and they are doing the things 
they need to do. The question is on the size of these 
contracts, those that I have seen are in the range from 
$500,000 to $10 million or $12 million. There are a couple that 
are in the range of $100 million. Do you have information on 
sort of the average size of contract that Mr. Thompson, as a 
prime contractor, would bid on or that Mr. Aranza, Mr. Kim 
would bid as a subcontractor or Ms. Cloonen?
    Mr. Szabat. Mr. Chairman, we don't have that information in 
yet, and that is because it has only been in the last two weeks 
that we have started collecting information that we have 
actually had outlays going out the doors for these contracts. 
That information is coming in. It is coming in very rapidly and 
we are in the process of setting up our systems to capture 
that. So we can easily pull together, within the next week or 
so, snapshots and crosscuts of that information, but it will 
probably be a month or more, probably two months, closer to two 
months before we actually have the systems up and running so 
that we are actually able, on a real time basis, to reflect 
that level of granularity in tracking contract data.
    Ms. Brown. Mr. Chairman?
    Mr. Oberstar. Yes. The gentlewoman from Florida.
    Ms. Brown. On that point, could I raise another point? I 
think what we have had is eight years of not monitoring the 
departments, so I am very interested in the follow-up, making 
sure we are monitoring it and let the agencies that we are 
watching them. They have programs in place, they have 
minorities in place that they work with, and we want to make 
sure that they get part of those contracts. So I think it is 
the feedback. What you said, generally, for them to report back 
to us, to report back to us on the progress of the money going 
out, but also what kind of minority and female participation. 
See, those agencies then will keep that in mind as they award 
these programs. This is not anything new. We just want them to 
do their jobs. But we need to monitor what they are doing.
    Mrs. Napolitano. Would the gentleman yield?
    Mr. Oberstar. The gentlewoman from Texas has the time.
    Ms. Johnson. Yes, I will yield.
    Mrs. Napolitano. I will be very short. Thank you, madam, 
for yielding to me.
    On the same point, Ms. Brown is correct, we have been 
dealing with this for many years, since I was in the State 
House. How do we know that this is being enforced? Is there 
anything that tells us that you audit some of these for 
unbundling? Is there something that can tell this Committee how 
effective that has been or not been, following up on Ms. 
Brown's question? Is there a follow-up to be able to indicate 
whether or not, even if you unbundle, many of those who are 
testing to be minorities are fraudulent minorities; and are you 
going after the fraud perpetrators and blacklisting them for a 
few years, at least, to allow the legitimate minorities to be 
able to be successful?
    Mr. Szabat. Yes, Congresswoman. Whenever you have a program 
like this, there are at least two enticements for fraudulent 
behavior. One is, as you say, the people who will falsely 
represent themselves to be minorities, and the second one is 
that you will have prime contractors who will either establish 
fronts or will bring in a DBE firm and then discard it after 
they have won the contract. We look for both of those.
    Now, given how many DBEs at any one time--there are 27,000 
or so out there and other firms that are interested in 
applying--and how many contractors active at any one time, our 
single best source of information is other people, especially 
other contractors, filing complaints to indicate that they 
believe that there is fraudulent behavior. Every one of those 
complaints is investigated by our staff and civil rights 
offices within each of the modes or within the Office of the 
Secretary, and, separately, the Inspector General's Office has 
also conducted investigations.
    Mr. Ashby. If I may add, Congresswoman, our Inspector 
General's Office has made DBE fraud a primary emphasis area. 
They have had a great deal of success over the last five years 
or so. They have taken action. This resulted in something like 
49 indictments, 43 convictions, millions of dollars in fines or 
forfeitures, and a lot of jail time. I personally had the 
privilege, a year and a half ago or so, of testifying in a DBE 
fraud case brought by our IG and U.S. Attorney folks in Miami 
which resulted in someone who had done a classic pay a DBE not 
to do the work scheme, five years in jail.
    Mrs. Napolitano. You say you do by complaint. Do you 
actually do any audits to be able to ferret out any of those?
    Mr. Ashby. There are audits by our operating 
administrations of DBE program performance in general. Our 
certification office in the civil rights office looks at phony 
certifications.
    Ms. Johnson. Reclaiming my time.
    Mrs. Napolitano. I am sorry. Go ahead.
    Mr. Ashby. So there is a good deal of work that our people 
do both by themselves and to insist that our recipients look at 
what is happening in their own programs.
    Ms. Johnson. But you indicated here in the testimony that 
there were some contractors that would make commitments long 
enough to get the contract, and then that commitment would 
disappear. Is that fraud?
    Mr. Ashby. It may not necessarily be fraud in the legal 
sense. It is certainly a sharp practice which is contrary to 
the provisions and intent of our program. In the forthcoming 
rulemaking actions, one of the things that we are seeking to do 
is to put into place provisions that would require written 
consent of the airport or the transit authority or the highway 
department before a prime contractor was able to drop a 
subcontractor, a DBE subcontractor that they had relied upon to 
get the contract. That was an issue that was brought up in our 
stakeholder meetings that we have been having over the last 
several months and one of considerable concern in the community 
that we are responding to.
    Ms. Johnson. When you find something of this sort, do you 
refer to the Inspector General or how do you handle it?
    Mr. Szabat. It depends on the nature of the complaint. All 
fraud complaints goes to the Office of the Inspector General. 
If there are complaints about a rule being misinterpreted, 
about sloppy bookkeeping, about a State not following our 
standards, those things are handled with our auditors and 
through our normal chain of command, working directly with the 
States, with the transit districts, or with the airport 
authorities.
    Ms. Johnson. Could I make a request? Could you send me, 
about every couple months, a report of different findings that 
you have in this area? I am not asking you to tell me all of 
what you have done--I will find that out when I get the 
report--but just tell me about the various incidences that you 
have noticed.
    Mr. Szabat. We will make it a point to do so.
    Ms. Johnson. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Oberstar. Now the Chair recognizes the gentleman from 
Louisiana, Mr. Cao.
    Mr. Cao. Thank you very much, Mr. Cao.
    I just wanted to follow up on the questions that have been 
presented. I want to know whether or not the DOT programs and 
operations could be strengthened by administrative sanctions.
    Mr. Ashby. As of now, the main sanction available with 
respect to our grantees, to the airports and highway 
departments and so forth, themselves, is simply that compliance 
is a condition of receiving financial assistance, and that is a 
pretty powerful incentive. In some of our other civil rights 
programs, for example, in our aviation disability program, 
there is the option of civil penalties, which must be granted 
legislatively. In addition, we have an existing tool of 
suspension and debarment that can be used not only for criminal 
activity on the part of contractors and other participants, but 
also for essentially unethical business practices, and that is 
a tool which I think can be used profitably to deal with folks 
whose conduct might not rise to the level of criminal conduct, 
but who are engaging in activities that undermine the program. 
Of course, with respect to firms that are certified improperly, 
we have the existing sanction of removing their certification 
so they can no longer participate.
    Mr. Cao. Now, how does the DBE program assist minorities in 
attaining needed financing, and is there appropriate oversight 
of this process?
    Mr. Ashby. Again, the DBE program itself, in terms of our 
regulations, does not directly assist people in getting 
financing. We do talk about things like bonding, capital 
assistance programs as among the race neutral measures that our 
recipients are directed to take in order to get as much DBE 
participation as they can through race neutral means. Through 
the bonding initiative that we have discussed in the recovery 
package, through our Office of Small and Disadvantaged Business 
Utilization, which has a short-term lending program, and, of 
course, through cooperation with the programs of the Small 
Business Administration, there is that kind of assistance that 
is available to at least some DBEs. Our Federal Highway 
Administration also has a program which has been repeatedly 
authorized by this Committee and Congress to provide supportive 
services to DBEs.
    Mr. Cao. Based on my experience with minority contractors 
from the 2nd Congressional District for New Orleans, a lot of 
the minority groups who want to be involved in the rebuilding 
process have the problem of meeting all the criteria required 
in order to qualify for certain projects, so I see there might 
be a need to assist them in that area. Do you see that same 
problem in other areas of the United States besides the New 
Orleans area?
    Mr. Ashby. I think that the information we have suggests 
that there are a number of barriers that typically exist that 
help prevent DBEs from getting a fair opportunity of the jobs. 
The studies that Dr. Wainwright mentions identify in 
substantial detail the capital and bonding and prequalification 
and other barriers that may be more difficult for some minority 
companies to surmount than larger, well established non-
minority companies. So I think one does see evidence of that 
kind of barrier across the board, and the studies that Dr. 
Wainwright and others have submitted for the record I think 
give ample evidence of that.
    Mr. Cao. I don't have any further questions, Mr. Chairman. 
Thank you.
    Mr. Oberstar. Thank you, Mr. Cao.
    Mrs. Napolitano, gentlewoman from California.
    Mrs. Napolitano. Thank you, Mr. Chair, and I thank my two 
ladies for allowing me some time.
    Mr. Szabat, I want to continue the dialog and the 
questioning in regard to the bundling issue and to the 
enforcement issue, the audit issue. Would you be able to 
provide this Committee the number of those fraudulent cases 
where you found convictions necessary as a percentage of the 
total number of complaints? In other words, are we going after 
them? Are you finding enough of those that discourage others 
from trying to attempt fraud in seeking contractors, or is it 
just too lucrative for them to worry about any penalties?
    Mr. Szabat. We will find that information and we will 
provide it to the Committee.
    Mrs. Napolitano. I guess, maybe, Mr. Chair, I am very 
concerned because I just spoke to Ms. Velazquez, Chair of the 
Small Business Committee, and she was indicating that, in Small 
Business, the hub zones have been found to be very fraudulent, 
to the fact that she is suspending the hub zones designation 
because, after the second round of audits and investigations, 
there were 17 left. Of those 17, 10 had ben found to be 
questionable. So that goes down to 7, and that is nationwide; 
and that is a sad story for our administration not be having a 
handle on. So that brings concern about what other agencies are 
not actually enforcing or going after those fraudulent cases 
and doing enough to where it means something to the public who 
is being left out.
    Mr. Szabat. Your point is well received.
    Mrs. Napolitano. Thank you. One of the other areas is how 
do the DBE regulations ensure that the race neutral methods are 
used as much as possible?
    Mr. Ashby. If I may answer, Congresswoman, we have a 
process by which when a recipient proposes its overall goal for 
everything it is doing during the given year, that level 
playing field for nondiscriminatory participation, they are 
required to show us--we always tell them show your work--they 
are required to show us what is the evidence they have for 
being able to make a particular amount of their goal through 
race neutral means and what are the race neutral means they are 
using, as well as what evidence they have for needing to use 
race conscious means for the other portion of their goal; and 
our FTA, FHWA, FAA staff initially in the field and, where 
necessary, later in headquarters, review those submissions and 
can and have gone back to the States and said, wait a minute, 
your evidence may not support your conclusions, why are you 
making this assumption. So there is a fair amount of direct 
Federal oversight of those decisions.
    Mrs. Napolitano. Does this also include the other general 
race--what is the other term that they use?
    Mr. Ashby. Race conscious.
    Mrs. Napolitano. Race conscious, right.
    Mr. Ashby. Yes, that is true for both those aspects of the 
goal program.
    Mrs. Napolitano. I guess maybe I have a concern that 
because many minorities cannot apply for prime contracts 
because of their size and their ability to find the funding, so 
they become subcontractors. And if there is a way of being able 
to ace them out, if you will, of being able to be participants 
based on those reasonings, what can we do to be able to assure 
that the minorities are served well? And I am talking about all 
minorities.
    Mr. Ashby. Again, I think that our program has fairly clear 
criteria for the size of the businesses. We don't age people 
out in the same sense that the SBA program does, but we do have 
size criteria; and the success stories that we provided for the 
record talk about a number of cases in which DBE companies who 
started out as subcontractors have become more successful, the 
term that is used is graduated from the program, and become 
successful prime contractors in their jurisdiction. So that 
kind of thing can and does happen, and obviously one of the 
objectives of our program is to provide all the possible 
assistance so that----
    Mr. Szabat. And if I may follow up with Mr. Ashby's answer, 
Congresswoman, for us in the Department, sometimes it is 
important for us to remember that this program is one tool in 
the toolkit, it doesn't cover all of the needs. Both you, 
Congresswoman Johnson and Congressman Cao have talked about the 
importance of bonding and financing. This program makes no 
pretensions to do that. We have never had a significant bonding 
program of our own; we had a small one in the Department a few 
years ago. Until we have the $20 million with the Recovery Act, 
and that, in and of itself, is very small. Those sorts of 
assistance--the financing, the bonding guarantees--will 
primarily come through SBA or other agencies, Federal or 
otherwise.
    Having said that, we think that this program is very 
meritorious for all of its other reasons. But we don't pretend 
that it meets all of the needs for all of the witnesses and all 
of the other companies that participate in the DBE program.
    Mrs. Napolitano. Okay, is there an issue because of the 
number of subprimes that you have a problem in being able to go 
through all of them and assert that they are legitimate or that 
they are worthy or that they will be able to be prospective 
contractors?
    Mr. Ashby. We have in the program a very significant 
certification element which goes through the bona fides of each 
firm applying to participate in significant detail, and that 
program is the first line of defense to make sure that the 
firms that participate are genuinely eligible for this program. 
We also have oversight of those certification efforts by our 
operating administrations, and when there is a disagreement 
about whether someone should be certified, that often comes to 
our Office of Civil Rights for decision, and they do a very 
thorough job of looking at the record and seeing if the right 
decision----
    Mrs. Napolitano. Which goes back to my question of being 
able to audit and figure out whether they are legitimate or 
not.
    Mr. Szabat. And there is more that we can do in that area, 
Congresswoman, and more that we are doing. One of the 
challenges we have had is for many years, and up to this day in 
some areas, our program has been paper based. So we had 50 
States, numerous airport authorities, transit districts, all of 
them certifying on their own, all of them turning this in to us 
in to three different modes--aviation, highways and transit. So 
when I tell you that there are 27,000 DBEs out there, I can't 
give you an exact number because we are not accounting for 
duplications, whether one of these companies is certified in 
more than one State or if they are certified both on the 
airport side as well as on the transit side, for example.
    The Federal Aviation Administration has already moved to 
automated system, a system that is called DOORS, and we are in 
the planning phases to do that also with transit and with 
highways. When this information is automated, it will be much 
easier for us to automate because we will be able to make more 
real-time comparisons of the data as it comes up from the 
States, from the transit districts, and from the airport 
authorities.
    Mrs. Napolitano. Thank you.
    Mr. Chair, I would like to ask you to receive into the 
record a letter from Caltrans in regard to some of the issues 
that have just been covered, and thank you very much for the 
time.
    Mr. Oberstar. Without objection, the Caltrans letter from 
Director Will Kempton will be included in the record at this 
point. And we will work with the gentlewoman and USDOT on the 
specific issues raised in that letter.
    Mr. Cohen, gentleman from Tennessee.
    Mr. Cohen. Thank you, sir. I am pleased that I have guests 
that will be here testifying before the second panel. We are 
still on the first panel, are we not?
    Mr. Oberstar. Yes, we are.
    Mr. Cohen. So I am premature or you are premature, but I am 
ready and fired up and ready to go.
    [Laughter.]
    Mr. Oberstar. Well, thank you very much.
    I appreciate most of the questions have been directed at 
our DOT witnesses, but I do want to come to a very important 
matter raised by Mr. Szabat's testimony and Ms. Cloonen, Mr. 
Aranza and other witnesses, and that is these informal 
networks. You described it very well as old boy networks. That 
really does exist, doesn't it? There is an exclusion. If you 
don't happen to be in the same golfing group or the hunting 
group. In Minnesota it would be ice fishing. You have all seen 
Grumpy Old Men. That really exists, people really do get pretty 
testy about their fish houses on the ice; and if you are not 
part of that group, it is sort of maybe we can't call it an 
invisible exclusion or discrimination, but it certainly is a 
discrimination. How can we address those matters outside of 
the--or perhaps within regulation or within the legal 
structure?
    Do you have some ideas, Ms. Cloonen?
    Ms. Cloonen. Thank you. One of the ways that I am able to 
meet with more male-owned contractors is that I join 
associations that allow the women in. But I still don't go on 
the Canadian fishing outings. So I don't know, legally, other 
than offering or encouraging the associations to be open to 
female and minorities being a part of that, I am not really 
sure another way to do that legally.
    Mr. Oberstar. But the DBE provisions give you access, is 
that right, Mr. Kim, Mr. Aranza, Mr. Thompson? Why don't you 
pick it up from there?
    Mr. Kim. Thank you, Mr. Chairman. As Ms. Cloonen mentioned, 
sometimes it is tough to get access to these major consultants 
or contractors, but with the DBE program they are kind of 
forced to talk with you, so that is the first step. So when we 
have opportunity, we have to perform, we have to deliver what 
we promise; otherwise, we are going to be in trouble. But it 
takes more than that.
    As you indicated, there are some groups out there, 
something you don't see always, but how do you get over with 
it? That is not easy, but one way I found out is partially 
successful, I try to participate in civic organizations and I 
serve as a board member for a number art music organizations, I 
serve in Rotary Committee. So by these community organizations 
I get to meet other people, expand my contacts. As you all 
know, it is all relationship driven. We need to build 
relationships with decision-makers. That is one way to get in, 
but it is always not that easy, so we have to work really hard.
    Mr. Oberstar. Thank you. I was intrigued by your comment 
about food. It reminded me of the days when I worked in the 
summers in the iron ore mines and in the concrete block factory 
in my hometown of Chisholm, and we had Swedes, Norwegians, 
Finns, Serbs, Croatians, and the aromas were wonderful when 
they opened their lunch pails at lunchtime. Nobody complained. 
They all wanted to share their respected foods.
    Mr. Aranza.
    Mr. Aranza. Yes, sir. Unfortunately, those networks exist, 
and I have found the only way to change it is to use political 
power, to go to my city council friends that are minority or to 
go to my Congress friends like Congresswoman Johnson and 
basically tell them what I believe is happening and try to 
change the makeup of the boards that govern airports, to put 
people like Don O'Bannon, who is here, to oversee that the good 
ol' boy network doesn't continue to permeate and control every 
piece of business that goes on, in my case, in the city of 
Dallas. So, without political power, I don't know how 
minorities or you could effectively change what happen despite 
our collective abilities to perform.
    Mr. Oberstar. Mr. Thompson.
    Mr. Thompson. Yes. That is really a key issue. I said a lot 
of great things about my organization, but I failed to mention 
all of the discriminatory experiences, because there are so 
many. We would be here all day if I talked about all the 
discrimination that I had to deal with on a day-to-day basis. 
It is real. One of the things we have to be concerned about 
also is, once you graduate from the program, you are no longer 
protected, so to speak, by the DBE program. Then the real 
troubles begin, because now, if there is no incentive for the 
prime contractors to do business with you, they won't, and you 
go back to being destitute and looking for work, unless you can 
quickly move to the private sector, establish yourself as a 
competent professional firm that people will want to do 
business with, because it is the right thing to do but, more 
importantly, because it is economically feasible to do so.
    But if it weren't for organizations, from a networking 
standpoint, like COMTO, the Conference of Minority 
Transportation Officials, that is where the relationships and 
the networking helps organizations like mine. Those conferences 
and a lot of the programs that they provide puts us with prime 
contractors and also puts us in line to be considered for 
priming. The gentleman, Mr. Aranza, mentioned Don O'Bannon of 
Dallas. There is an excellent program that he headed up down 
there, the GMax program, that we were able to be a part of. We 
partnered with a minority disadvantaged business and, through 
our professional management expertise and their local 
construction knowledge, we had a GMax prime contractor for 
about three years through that particular program. But it was 
all as a result of the DBE program.
    Mr. Oberstar. Thank you.
    Mr. Covington, do you have any observations on that 
subject? Please use your microphone.
    Mr. Covington. It is direct and it is indirect, as you have 
seen, and it also puts a subconscious cloud on a lot of 
minority and women. When you do participate in your community, 
when you give back to your community, like Mr. Kim and Mr. 
Aranza have, and yet you can go to places where they will hold 
a civic event or a fundraiser and you know that, by your race 
or your sex, you are not allowed to join, it dampens your 
enthusiasm a bit. And to know that we are adults, we have been 
through some of this, but when it falls down as far as your 
children, you know that your children aren't allowed to join 
these same organizations that house the same people that you 
see, that you have to work with daily to try to advance your 
business, it is a psychological disadvantage.
    The DBE program does help, because all we are asking for is 
to get our time at bat, just our time to play. The DBE program 
does help there. It does help with airports as far as AIP 
funds. But we also think that, to help level the field, it 
needs to be expanded to TSA and PFC funds as well. That is 
another way that we can help attempt to level this playing 
field.
    Mr. Oberstar. I would think that, under the construct of 
the PFC, when the language--which I wrote in 1990, that we said 
it is applicable to and eligible for anything that AIP is 
applied for, that the rules for AIP should apply to PFC. So if 
that is not the case, then before we bring this aviation 
reauthorization bill to the House floor in a manager's 
amendment, we will have to address that issue.
    Mr. Covington. We appreciate it, Mr. Chairman.
    Mr. Oberstar. Thank you.
    Mr. Cohen, before I go to you, I want to recognize the 
gentlewoman from the District of Columbia, our legal scholar 
who was partner in our wordsmith and legal craftswoman when we 
responded to the Adarand decision. I am grateful for your 
counsel, your guidance as we went through that difficult time. 
We had Mr. Clyburn here earlier and I recognized his 
contributions at that time. Thank you for being here, Ms. 
Norton.
    Ms. Norton. Well, thank you very much, Mr. Chairman. And 
despite the hearings going on, I certainly had to make it my 
business to be here. But I particularly want to thank you for 
making this a Full Committee hearing, indicating that this is a 
matter of great importance to the entire Committee. Before I 
came to Congress, you had already established yourself and the 
reputation of those who had worked under you for the priority 
you have always given to these issues, including, as my 
question shall indicate, something that you put in some prior 
bills.
    Those before us understand that this hearing is being held 
not simply because the Members of this Committee feel strongly 
about the matter at hand. It is being held as part of our 
constitutional and legal obligation. Title VI of the 1964 Civil 
Rights Act bars the expenditure of funds that discriminate 
based on race, sex, and in a number of other ways, and that is 
taken from the 14th Amendment of the United States 
Constitution. So we are only carrying out our required duty, 
and these statutes simply implement the 14th Amendment and 
Title VI.
    I have been very interested to here especially the 
questions on minority and women business enterprises. Because 
they have been so thoroughly explored, I would like to go to a 
section of the stimulus bill that is of equal importance to 
many of us, and I think this question is best addressed to the 
two Department of Transportation representatives, because they 
go both to policy and to enforcement.
    This is a jobs bill. For the first time, the stimulus bill, 
at least, could allow minorities and women to get a foothold in 
the construction industry. In about 1980, the program that the 
Federal Government had set up in conjunction with management 
and labor that would have integrated the construction trades 
was abruptly dropped by the administration at hand. What that 
meant was that people had to find their way into these top 
paying construction jobs. That wasn't easy, although it should 
be said for the record that the construction trades have long 
left the discriminatory policies for which they had become so 
infamous.
    But there has not been a training tract for people who 
weren't already a part of the industry or didn't already know 
how to get in the industry. In fact, before this economy 
collapsed, there were jobs shortages in the trades. Now, we are 
not going to put out this kind of money all at one time, say 
spend it all at one time for a long time, so my question goes 
to pre-apprentice and apprenticeship programs. I don't think we 
need to have a war between the journeymen and the minorities 
who look to see that all the jobs are going to people that look 
like everybody except me, especially since minorities and women 
have not had the same opportunity to become journeymen.
    That is why, in the wisdom of the Chairman, we are carrying 
out something that he has had in the full transportation bill, 
at least in the transportation section, for at least the last 
two authorizations or reauthorizations for the transportation 
bill. These were sections that allowed a very large sum of 
money, when you imagine how much money gets put out, this is 
the biggest blob of money to come out of the Congress. One half 
of one percent could have gone to training.
    When the stimulus bill came, we did our homework and we 
found that only 17 States in either of--we don't even know if 
that is in any one authorization--and don't worry, you are 
going to provide us with that information. Only 17 States had 
taken advantage of it. We don't have any information on how the 
Department administered this or looked at this. Seventeen 
States out of 50 States, all of which hunger covered this 
money. But it was optional. So you would have had to care 
enough about who the jobs went to in order to take one half of 
one percent of this great big highway appropriation to use in 
this way.
    So we did it differently this time. We said it is not 
optional. You will take--and we gave specific amounts of money. 
Too little, in my estimation, but they are specific amounts of 
money. In the highway section we say you will use up to $20 
million, not you can take it. It is out of the money you get, 
but you will use that. And the other out of the section that 
comes under my own Subcommittee that has control of GSA, FEMA, 
etcetera, but especially GSA, it says $3 million. This is not 
optional money.
    Now, I dare believe that the reason 17 States have failed 
to do it or not do it, based on their druthers, is because the 
Department took no leadership one way or the other. So forgive 
me if I ask what leadership have you taken since this money is 
now required to be used and spent in a bill which the President 
said is first and foremost for making jobs for the American 
people?
    Mr. Szabat. Thank you, Congresswoman. I will take that in 
two segments. The first is, of course, the $20 million that we 
have specifically for the bonding assistance and other training 
assistance.
    Ms. Norton. Just a moment. I am not sure the money is for 
bonding assistance. The $20 million, I think, is for--I know my 
$3 million is for jobs, sir.
    Mr. Oberstar. There are two separate accounts. There is an 
account for training and then there is an account for surety 
bonds and assurance to cover the unique and special needs of 
minority business enterprises.
    Ms. Norton. Thank you, Mr. Chairman. Indeed, I am now 
informed it is $20 million each.
    Mr. Oberstar. Twenty each, yes.
    Ms. Norton. Twenty million each for bonding. Nobody is 
saying out of that little bit of money take bonding and 
training. So would you inform this Committee what the 
Department has done this time to see that the States implement 
this money?
    Mr. Szabat. Well, and keeping in mind, as you have alluded 
to, $20 million is a very, very small sum of money in order to 
provide meaningful training assistance for these programs 
nationwide, the Federal Highway Administration has incorporated 
guidance to the States as to how they can use this money, and I 
would be delighted to share that information with you and with 
Members of the Committee as to what the guidance is and to how 
the guidance has been disseminated.
    Ms. Norton. Since the Chairman has put everybody on 
deadlines, could I ask that in 10 days you get to the Chairman 
of this Committee what that guidance is?
    Mr. Szabat. We will have it to you by close of business 
tomorrow, ma'am.
    Ms. Norton. Appreciate that, sir. And we would like this as 
well: we would like to know the nature of your outreach beyond 
guidance. Guidance says this is what to do, this is how you 
access it, these are what the rules are. Very important. But I 
would like to know, in addition, what the Department is doing, 
given how few States have taken advantage of this appropriation 
in the past. Therefore, these States, along with the Federal 
Government, are responsible for the fact that there are so few 
minority and female journeymen. And, by the way, whatever there 
are, we better make sure they get some work and we are in touch 
with the White House on beefing up the Office of Federal 
Contract Compliance and the EEOC. But what we know is that this 
was a section of the law which nobody paid any attention to, 
they just used their own money, their last dime on the last bit 
of highway with the same workforce, a workforce that is aging 
out, sir. Don't worry any more about the sons and the cousins 
being handed construction jobs; they don't want to do it. You 
know, they want to do low tech, if I may say so, because too 
few of them go on to the kinds of jobs we would like them to do 
because it would take a great deal of education. So they are 
sitting behind some machine while people are looking for people 
who can become journeymen.
    So I want to know what kind of outreach to the States you 
are prepared to do to encourage the States to use this money, 
because I can assure you this Chairman is going to be keeping 
track of just what has happened to this money and how many 
people and what kinds of people have been trained under this 
money, especially since he was the author of it for two 
reauthorizations and the States just let the money lie there 
or, worse, used it for other purposes.
    Mr. Szabat. We will provide that information as well.
    Ms. Norton. Thank you, sir, also within 10 days.
    Thank you very much, Mr. Chairman.
    Mr. Oberstar. I thank the gentlewoman.
    Mr. Cohen.
    Ms. Norton. Mr. Chairman, I have a statement which I would 
like----
    Mr. Oberstar. Without objection, the statement will be 
included in the record.
    Mr. Cohen. Thank you, Mr. Chairman. My questions are going 
to go toward the surety bond issue. I have had a lot of people 
in my community, minorities who have had trouble getting work 
because they can't make the bond, and bonds and other 
safeguards are there to protect the public on many occasions, 
but at the same time they make it impossible for new 
businesses, often minority businesses, to get business.
    If Mr. Thompson shakes his head or anybody else has any 
thoughts, have there been creative ways to get around the 
bonding problem in communities or projects that you are 
familiar with?
    Mr. Thompson. Sure, I would like to speak to that. First, I 
would like to say that the bonding is a really interesting 
phenomenon because it costs the project, in most cases, more 
money by even having the bonding in the first place. A lot of 
the prime contractors on the private sector work are not 
required to bond the private sector work. Therefore, they are 
storing up their bonding capacity so that when the large public 
projects come along, they have the capacity. I can assure you 
that if every major prime contractor had to bond every job that 
they performed, they would not have enough bonding capacity to 
do the public work.
    But on the private work, they would require those that at 
least are seeking out minority assistance, they require the 
minority subs to bond the work that they are not bonding as a 
prime. So, therefore, the capacity that those minority 
contractors did have are no longer available when public sector 
projects come around.
    So what I have suggested and has worked on some public 
projects is that, first of all, if you are a general 
contractor, if you are a minority and you are going after a 
prime contract, why should you bond the entire $10 million job 
if you are only self-performing five percent or if 80 to 90 
percent of the work is subcontracted? If each of the 
subcontractors only bonded their portion of the work, and even 
the prime contractor, bond the work that you are self-
performing. There is no value in layering all these bonds on 
these various projects.
    So that is more from a general contractor standpoint. But 
from a subcontractor standpoint, depending on the role that he 
is performing, there are ways that they can bond their portion 
of the work or even phase the bonding so that, when they 
complete 40, 50 percent of the bond, release that bond so they 
can have that capacity for other projects. The problem is most 
of the sub or minority contractors are not able to go and 
secure additional work because it is tied up on one particular 
job until the project is entirely completed, and we all know 
through litigation and other issues that come up on a project, 
that one project could tie up his bonding capacity for two or 
three years and will prevent his ability to bid on additional 
work. That has been my experience.
    Mr. Cohen. Is there a way around it? Is there some type 
of----
    Mr. Thompson. Well, I think the way around it is, depending 
on the complexity of the job or the timing of the job, 
sometimes these projects, particular stimulus work, they are 
such fast turnaround projects, if there is a general contractor 
that has deep pockets and has the capacity to bond, why even 
require that the sub or minority contractor bond it at all? You 
are already protected by the general contractor. If the work 
has to be done in a short period of time, there is not a lot of 
time for anybody to get in trouble.
    Mr. Cohen. Anybody else want to comment?
    [No response.]
    Mr. Cohen. I noticed in the testimonies Dr. Wainwright and 
I believe Mr. Aranza both hit on the point that minority firms 
are more likely to be denied credit than non-minority firms. 
Are there other factors like bonding requirements that might 
act as a defacto means of discrimination that work against 
minorities other than the credit and bonding? Mr. Aranza?
    Mr. Aranza. Well, in my business, I am in the airport 
concessions business, and we basically don't have anything that 
we can mortgage. We get concession rights and as much as the 
airports should be thanked for providing us that opportunity, 
it further makes it difficult for us to get financing. I have 
many friends in Dallas who are minority contractors that I try 
to use on every one of my projects, and bonding is the largest 
issue; and in some cases I am able to assist them, but 
primarily because my projects are all half a million or less 
and we get them done rather quickly, so we sort that out. But 
in a lot of cases for major construction projects on airports 
themselves, the bonding is the big deterrent to their ability 
to get a job.
    Mr. Cohen. I think there would be problems. Mr. Covington, 
I was interested in hearing your statement about clubs that you 
go to where you can't be a member. Those clubs exist in my 
community as well, and you can't be a member based on your 
race, and often, also, your religion. And I have commented just 
recently I am a minority in my district. I represent a majority 
African-American district, and I have never felt more like a 
minority in my life than at the country club that wouldn't 
accept you or me. There I not only felt totally estranged and 
unwelcome, but I knew if I was in a situation, I was looking 
for votes and/or contributions. You would be looking for 
possibly contacts later on for jobs and/or for maybe loans from 
the banks, because that is where the bankers and the members of 
the board all reside, and they provide those loans and those 
jobs to the people they sit around with in the plaid shirts and 
the plaid pants at the country club that wouldn't have us as 
members. So I relate and that is going to take a long time, but 
much of it is systemic and it goes back to slavery and it goes 
through Jim Crow, and we need to end it.
    Mr. Covington. Absolutely, sir. It has been said that 
people do business with people they like. People get 
information from people that they feel comfortable with. And 
under the circumstances that you were talking about, it is 
impossible for us to gain the same access.
    Mr. Oberstar. Thank you very much.
    The Member of our Committee who was most responsible for 
the provisions in the stimulus package on bonding, Mr. 
Cummings, the issue was raised at a meeting of the 
Congressional Black and Hispanic Caucus, which I was 
participating, and Mr. Cummings made the contribution that the 
State of Maryland had a program to deal with this, and he 
provided me with that information. The Committee staff took 
that language, we crafted it into Federal legislative language 
for the stimulus program, and that $20 million is there because 
Mr. Cummings is the godfather of it.
    I would like to recognize the gentleman at this time.
    Mr. Cummings. Mr. Chairman, thank you very much. I will be 
very brief. I know, folks, we have another panel. I just wanted 
to make one quick statement.
    First of all, I want to thank you, Mr. Chairman, for making 
sure those provisions were included in that legislation.
    Mr. Chairman, as you can see--and I have not heard all the 
testimony because I had three other hearings today, but, as you 
can see, bonding is a phenomenal impediment that prevents folks 
from participating in these programs. Even in the Maryland 
program, when we created, through the Maryland Small Business 
Financing Authority, a way to guarantee the bonds, the bonding 
community still found ways to not bond, which is phenomenal, 
which is incredible. So I think that this is something that we 
are going to--I think that what we have done is a great start, 
Mr. Chairman, but I think we have to keep digging a little 
deeper so that we can make sure that we strike down all of 
these barriers.
    You know, for the life of me, I can't figure out why it is 
that, in 2008, that we still have folks that bend over 
backwards not to allow people into these opportunities. But the 
fact is that they still exist. And I am very curious, with 
regard to my folks from Transportation, panelists, to see what 
you all present to Ms. Johnson, because I realize that $20 
million is very limited, and I am just wondering if you all, in 
this new era of Obama, who, by the way, I supported a million 
percent, I think that if we are going to have a color-blind 
society, then we should have a color-blind society that goes to 
the point of eliminating this wall that blocks so many people 
from opportunity.
    Let me just end on this, Mr. Chairman. I have now lived 
long enough and see enough to know that there are so many 
people that have given their blood, their sweat, their tears in 
the area of minority contracting; they have given their very, 
very best. They banged on doors, they have done it right, they 
have been honest, they have applied for this, they have 
responded to proposals. They have done it over. And over and 
over and over again they see and feel the wind from a door 
being shut in their faces over and over and over again, and 
they do get tired of going home to their children and their 
children asks them, mommy, how did you make out on that 
contract, and they get tired of saying I didn't get it.
    But, you know, the most painful thing about it, Mr. 
Chairman, is that they go through all of that, denied 
opportunity over and over again, and then they die. They die. 
They die while banging on the door of opportunity that has been 
shut in their faces. And this bonding issue is one I think if 
we are able to accomplish nothing else but striking down this 
issue--and there are many more we need to deal with--then I 
think we will have accomplished a lot.
    And, Mr. Chairman, I don't want you for one moment to take 
this in any way but to say that I think we have you as a 
partner in this fight because I know that you are very, very 
sensitive to these issues. And I also know something else about 
you: you don't like the idea of trying to break down a wall 
only to find out that somebody else is putting a wall up 
simultaneously. So some kind of way hopefully we can work with 
this Administration and our Congress to continue in the 
community, the contracting community--and I am not trying to 
say all contractors are like have been described, but the fact 
is that it is still a barrier, and I have seen it over and over 
again. I saw it as a lawyer going before what is called our 
Board of Investments in Baltimore, where people just could not 
get that bond; and these were qualified folks who did great 
work; were dependable.
    But with that, Mr. Chairman, I see my time is running out 
and I thank you.
    Mr. Oberstar. Thank you very much for your comments, for 
your observations, for your kind words. But with the experience 
we have had in the stimulus and on this bonding issue, I assure 
you, when we do the long-term transportation bill, this element 
will be a part of it. We will make it permanent law. With this 
experience in hand and with the testimony at today's hearing on 
the specifics of this issue, we establish an extraordinarily 
solid record, and to extend it also to the aviation law and to 
the wastewater treatment program, where we extended DBE 
provisions for the first time in the history of that program 
because it hadn't been authorized in the last 14 years. We 
moved it through the House in the last Congress; it didn't get 
through the Senate. We moved it through the House in this 
Congress, and we hope we get to conference with the Senate on 
it. We are making progress in all of these arenas and we are 
not going to stop.
    Just one closing observation. Ms. Cloonen, you talked about 
your experience with the ironworkers and the building trades, 
and, if I recall rightly, you are now on their board of 
advisors for the ironworkers union, is that right?
    Ms. Cloonen. Yes, I sit on the Ironworkers Mid-America 
Pension Plan.
    Mr. Oberstar. Oh, the pension plan, yes.
    Ms. Cloonen. But I also sit on the Ironworkers Local 444 
Apprentice Program Committee.
    Mr. Oberstar. Are the other building trades accepting not 
just you, but women, other minority enterprises?
    Ms. Cloonen. Not too many. I was the first female on the 
pension board and I was the first female on the apprentice 
board.
    Mr. Oberstar. Well, the ironworkers and the other building 
trades are frequent participants at our hearings, and they are 
frequent supporters of our initiatives, vigorous supporters of 
our initiatives. I think we will have a little conversation 
with them about this matter.
    [Laughter.]
    Ms. Cloonen. That is great. Thank you.
    Mr. Oberstar. And if it isn't a successful one, I have a 
woodshed to which I will invite them.
    I thank this panel for your candor, for your information. I 
want to thank the DOT for vigorously pursuing this issue and 
all of its ramifications, and for the specific examples, Mr. 
Szabat, in your testimony, which, of course, is included in 
full in the record. Thank you all very, very much for your 
presentation.
    We will now receive the second panel: Don O'Bannon, 
Chairman of the Airport Minority Advisory Council; Mr. Richard 
White, the Memphis-Shelby County Airport Authority. And I will 
turn to Mr. Cohen for an introduction. Ms. Sara Hall, also the 
Memphis-Shelby County Airport Authority; Ms. Joann Payne, Women 
First National Legislative Committee; Ms. Julie Cunningham, 
President and CEO, Conference of Minority Transportation 
Officials; Ms. Amy Hall, member of the DBE Task Force of AGC 
and President of Ebony Construction Company.
    Welcome.

   TESTIMONY OF DON T. O'BANNON, ESQUIRE, CHAIRMAN, AIRPORT 
 MINORITY ADVISORY COUNCIL (AMAC), VICE PRESIDENT OF BUSINESS 
DIVERSITY DEVELOPMENT, DALLAS-FORT WORTH INTERNATIONAL AIRPORT; 
   RICHARD WHITE, VICE PRESIDENT OF PROPERTIES AND BUSINESS 
DEVELOPMENT, MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY, CHAIRMAN 
     OF THE BUSINESS DIVERSITY COMMITTEE, AIRPORTS COUNCIL 
INTERNATIONAL-NORTH AMERICA, ACCOMPANIED BY SARA L. HALL, VICE 
 PRESIDENT AND GENERAL COUNSEL, MEMPHIS-SHELBY COUNTY AIRPORT 
    AUTHORITY; JOANN PAYNE, PRESIDENT, WOMEN FIRST NATIONAL 
LEGISLATIVE COMMITTEE; JULIE A. CUNNINGHAM, PRESIDENT AND CHIEF 
   EXECUTIVE OFFICER, CONFERENCE OF MINORITY TRANSPORTATION 
 OFFICIALS; AND AMY HALL, MEMBER OF DBE TASK FORCE, ASSOCIATED 
 GENERAL CONTRACTORS OF AMERICA, PRESIDENT, EBONY CONSTRUCTION 
                            COMPANY

    Mr. Oberstar. Mr. O'Bannon, you are first on our list and 
you get yourself situated there, turn the microphone on. 
Welcome.
    Mr. O'Bannon. Thank you, sir.
    Mr. Oberstar. Glad to have you with us.
    Mr. O'Bannon. It is a pleasure to be here. Good morning, 
Chairman Oberstar, Congresswoman Johnson, who is a proud Member 
of the Texas delegation, and other Members of the Committee. My 
name is Don O'Bannon. I am Chair of the Airport Minority 
Advisory Council and I am pleased to have the opportunity to 
appear before the Committee in support of the Federal Aviation 
Administration's Disadvantaged Business Enterprise program and 
the Airport Concessions Disadvantaged Business Enterprise 
program.
    AMAC is the only national, nonprofit organization dedicated 
to fostering the full and fair participation of DBE businesses 
in airport contracting and concessions, and the inclusion of 
minorities and women in employment within the airport industry. 
As this Committee is aware, racial and gender discrimination, 
as heard from the panel before us, continues to present a 
serious problem in our Nation. As AMAC Chair, and with eight 
years of experience in the airport industry, I routinely see 
firsthand the impact of discrimination against DBE firms in all 
aspects of the airport industry, from contracting, 
construction, to concessions.
    My testimony will detail the impact of discrimination on 
DBE contracting and concessions businesses, and will address 
policies that AMAC believes should be adopted as part of the 
FAA reauthorization.
    Airport DBE contracting and concessions programs have 
started to address inequities faced by DBE firms, but there is 
compelling evidence demonstrating that there is ongoing need 
for these programs to address current discrimination faced by 
DBE firms. In testimony before and in statements submitted to 
Congress over the past six months, AMAC has submitted numerous 
disparity studies that through detailed, statistical, and 
anecdotal evidence demonstrate continuing discrimination 
against women and minorities in the aviation industry and the 
industry sectors with which airports and other transportation 
agencies conduct business. These studies represent every region 
of the Country, both urban and rural. These studies also 
demonstrate that discrimination faced by women and minority 
groups--African-Americans, Hispanics, Asian, and Native 
Americans--comes in a variety of forms. Each of these studies 
provides significant quantitative evidence of discrimination 
against DBE firms in the industries that are related to airport 
contracting.
    While statistical analysis presents quantitative evidence 
of discrimination, they do not tell the entire story. We can 
much better understand the seriousness of these statistics from 
stories that are told by the businesses themselves. Here are 
just three examples. A Hispanic contractor reported that a 
general contractor called him to express that he did not want 
any Mexicans on the job and that he had been called wetback, 
dumb Mexican, and my little Mexican friend. A white woman 
business owner reported that she encounters people who assumes 
that she is a front for male-owned businesses or that she is 
not qualified. Men she encounters on particular jobs have asked 
her what are you doing here. An African-American business man 
reported that people assume he does not understand relatively 
simple matters related to his work. On one occasion, as part of 
the bidding process for a concrete contract, an individual 
spoke to him very slowly to make sure that the African-American 
business man understood.
    These studies provide strong statistical and anecdotal 
evidence of discrimination against minorities and women, and 
demonstrate that there is a continuing need for the airport 
contracting and concessions DBE program. As part of my 
testimony, with the permission of the Chair, I have submitted 
six additional studies and ask that they be included in the 
record.
    Mr. Cummings. [Presiding] Without objection, so ordered.
    Mr. O'Bannon. Mr. Chairman, we would also like to thank you 
for addressing two issues related to the DBE program in H.R. 
915. Although the airport DBE program is governed by a single 
set of Federal regulations, certifying officials often 
interpret and apply these rules differently. Section 135 of the 
bill would greatly ameliorate this problem by directing DOT to 
establish a mandatory certification training program and 
requiring those persons responsible for DBE eligibility and 
certification to complete the training.
    Second, Section 137 of H.R. 915 addresses another aspect of 
DBE program eligibility, the personal net worth cap contained 
in DOT regulations. The personal net worth cap in the DBE 
program has not been adjusted for inflation since its inclusion 
in 1989. Section 137 directs the DOT to issue final regulations 
to initially adjust PNW for inflation that has occurred since 
1989 and provides for yearly adjustment thereafter. AMAC 
believes this provision is an excellent addition to H.R. 915, 
as well as a matter of economic common sense and fairness.
    Mr. Chairman, AMAC greatly appreciates the Committee's 
leadership on the important issue of diversity and inclusion in 
the airport industry. We thank you for the opportunity to 
provide testimony and for your consideration of our comments 
and views, and we look forward to working with this Committee 
in the future.
    Mr. Cummings. Thank you very much.
    It is my understanding that Mr. Cohen will introduce our 
next witness. Is that correct, Mr. Cohen?
    Mr. Cohen. Yes, sir.
    Mr. Cummings. I yield.
    Mr. Cohen. Thank you, Mr. Chairman.
    I am pleased today that we have two witnesses from my home 
city, Memphis, Tennessee, and the great airport that we have 
there, as witnesses here on the U.S. Department of 
Transportation's Disadvantaged Business Enterprise: Mr. Richard 
White, Vice President of Properties and Business Development at 
the Memphis-Shelby County Airport Authority; and Ms. Sara Hall, 
who is the Vice President and Legal Counsel and former legal 
counsel for the city of Memphis, but now for the city and 
County Airport Authority. I had the pleasure of being toured 
around the airport for specific aspects at one point, and I 
appreciate their courtesies.
    The Memphis-Shelby County Airport Authority is one of the 
Nation's largest and leading airports, number one cargo airport 
in the Country, and it has demonstrated its dedication and 
inclusion of minority-owned and women-owned Disadvantaged 
Business Enterprises in contracting and procurement. And I 
don't know if it is for that reason or for the quality of the 
food that is served, but if you come to the Memphis Airport, 
you will smell the best ribs in all of America, in fact, all of 
the world permeating the concourses there, particularly Neely's 
has the smell that permeates and is just as good as the smell.
    Five years ago, the Memphis-Shelby County Airport Authority 
led the way in compiling a study on whether discrimination 
existed for minorities and women. The 2008 Memphis study 
validated the importance of our affirmative action program and 
the continued prevalence of discrimination, which unfortunately 
exists in our business community. Minorities and women are 
still lacking equal opportunity to compete for Department of 
Transportation-assisted highways, HOT transit, and airport 
contracts, which the DBE program provides.
    I am delighted to introduce these witnesses, to see them 
here in my other home city, Washington, and appreciate their 
sharing their information with the Members of the Committee, 
and I thank the Chairman for the opportunity to introduce these 
two fine Memphians.
    Mr. Cummings. Thank you very much, Mr. Cohen.
    You are recognized, Mr. White.
    Mr. White. Chairman Cummings, Congressman Steve Cohen, 
Members of the House Transportation and Infrastructure 
Committee, thank you for allowing me to participate in this 
important hearing. My name is Richard White. I am the Vice 
President of Properties and Business Development at the 
Memphis-Shelby County Airport Authority. Today, I am testifying 
in my capacity as Chairman of the Airport Council 
International-North America's Committee on Business Diversity.
    Airports are an integral part of their community. They not 
only provide economic development, but are a part of the 
community in which airport staff like me live, work, and raise 
our families. As such, insuring inclusion and eliminating 
discrimination is always our focus. We strive not only to meet 
the letter of the law, but to embrace the spirit of the law, as 
well as by ensuring that diversity of our community is evident 
in business and employment opportunities at our airport.
    ACI-NA's Business Diversity committee plays a vital role in 
providing a forum to develop proactive outreach educational 
programs, best practices that allow fair participation for MWB 
businesses. Our committee produced a comprehensive white paper 
of airport DBE programs, and in 2007 we conducted a 
Disadvantaged Business Enterprise program survey to evaluate 
what was working and what was not. The survey found that 
finding certified DBEs continues to be a major barrier, and 
here is where the DBE program is important. In a recent meeting 
with a prime concessionaire at Memphis International Airport, I 
was told by that prime that they could not find a ACDBE in 
Memphis, Tennessee that could cook or provide barbeque for one 
of our restaurants in our airport.
    The problem is if he couldn't find a certified minority to 
cook barbeque in Memphis, Tennessee, he just wasn't looking.
    [Laughter.]
    Mr. White. But with the help of this program, we can help 
make those types of contacts.
    Still, the certification process can be a barrier. We at 
ACI support the provisions of H.R. 915 that would require 
mandatory certification training. It is imperative that the 
certification process become more uniform so that DBEs with 
limited resources are able to get access to more opportunities. 
We have taken steps towards working more closely with DOT and 
FAA and other stakeholders to improve the certification process 
and make the program work better for everyone. In February of 
this year, ACI-NA joined the Airport Minority Council and the 
American Association of Airport Executives in sending a letter 
to DOT and FAA asking them to partner with us in order to take 
the next step forward in the UCP program.
    The Memphis-Shelby County Airport Authority and sister 
airports have taken steps to ensure DBE participation in 
contracting. The Wayne County Airport Authority took extra 
steps to ensure good turnouts in their outreach sessions by 
providing free membership to their vendor list for all those 
that attended. Dallas-Fort Worth, in one four-month period, had 
12 outreach events or meetings explaining the potential 
opportunities for retail food and beverage concessionaires in 
their new Terminal D.
    Many airports have DBE programs for projects that are not 
funded with Federal money. The Metropolitan Washington Airport 
Authority runs an extensive local Disadvantaged Business 
Enterprise program focused on small business. In my airport, we 
have a business diversity development program for projects 
funded with general operating funds. The program is being 
revised based on results of the diversity study we just 
completed at the end of 2008.
    My colleague, Sara Hall, is here with me today and will be 
happy to provide a brief overview of the disparity study 
conducted by Memphis-Shelby County Airport Authority and answer 
questions you might have.
    Having an effective DBE program that opens the doors for 
participation for all people is always our focus. ACI-NA is 
committed to continuing this work to improve the program. Thank 
you for your time.
    Mr. Cummings. Thank you very much, Mr. White.
    Ms. Hall?
    Mr. Cohen. Mr. Chairman?
    Mr. Cummings. Yes.
    Mr. Cohen. Before she makes her remarks, I just remembered 
Interstate Barbeque does a great job too, as well as Neely's, 
and I want to get myself out of trouble.
    Mr. Cummings. Very well.
    Ms. Hall?
    Ms. Sara Hall. Chair Cummings, and particularly my 
Congressman, Steve Cohen, who has long had a record of 
advocating for civil rights, my name is Sara Hall, and I am the 
Vice President and General Counsel for the Memphis-Shelby 
County Airport Authority. I did have the privilege of being the 
former city attorney and former HR director for the city of 
Memphis as well.
    The Memphis-Shelby County Airport Authority has had a long 
history of inclusion of minority-owned, women-owned, and 
Disadvantaged Business Enterprises, M/W/DBEs, in contracting 
and procurement. Recently, we commissioned NERA to engage in a 
study to study the status of M/W/DBEs and the airport community 
and the Memphis metropolitan statistical area.
    Despite progress, our study shows that discrimination still 
exists in the marketplace for minorities and women, 
particularly in the private sector, where these goals rarely 
exist. As a result, minorities and women continue to be under-
represented and under-utilized both in MSCAA and non-MSCAA 
contracting, and in business ownership and in business 
earnings. For example, although 19.4 percent of all firms in 
the Memphis metropolitan areas are owned by blacks, less than 1 
percent of sales and receipts go to these firms. The numbers 
for women are no better.
    These results are not atypical. In talking with airports 
across the Country and looking at their disparity studies, I 
can tell you that the results are the same. Despite meaningful 
efforts by all the people you see here and our airport 
community, statistical and anecdotal evidence of discrimination 
still exists in airport contracting and in our communities. The 
conclusions of our study conducted by NERA are supported by 
over six years of contracting data, over 1,200 contracts and 
subcontracts, and over $900 million of work.
    We applaud this Committee for examining this difficult 
issue. We encourage you to continue to look at disparities that 
exist in our communities, and we hope you will join us in our 
efforts to eliminate discrimination in our own backyards and 
across our Country. Thank you.
    Mr. Cummings. Thank you very much.
    Ms. Payne.
    Ms. Payne. Yes, sir. Before I start my testimony, if I may, 
sir----
    Mr. Cummings. You may want to turn your mic on. Is it on?
    Ms. Payne. Thank you. Before I start my testimony, if I 
may, for the record submit two other testimonies. One is from 
the Federation of Women Contractors out of Illinois and the 
other is Women Construction Owners and Executives. They are 
part of Women First and they are nonprofit associations across 
the Country. If I may do so.
    Mr. Cummings. Without objection, we will make them a part 
of the record.
    Ms. Payne. Thank you, sir. Also, that my full testimony 
also be part of the record, since I really cut this one down.
    Mr. Cummings. Without objection, so ordered.
    Ms. Payne. Thank you, sir.
    Mr. Chairman, thank you so much for the opportunity to be 
here today. I am President of Women First Legislative National 
Committee. Women First represents the interest of women-owned 
businesses certified in the Disadvantaged Business Enterprise 
program. Mr. Chairman, I wish with all my heart I could look 
you straight in the eye and say to you that this Committee does 
not need to authorize the DBE program. But, sadly, I cannot 
testify to that statement.
    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 firsthand the detrimental 
effect of discriminatory practices, which, to this day, 
continue 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.''
    And in 2009 those words are still true.
    In 2004, during the transportation authorization process, 
Senator Max Baucus, on behalf of Women First, submitted for the 
record 15 letters from women-owned businesses from different 
States who had continued to face discrimination in the highway 
construction industry. And in 2009 those words and those 
letters are still true today.
    I am here to give voice to women DBEs who continue to face 
discrimination on a daily basis.
    In surveying the DBEs across the Country regarding 
discrimination they have faced, I was not surprised by the 
anecdotal evidence of discrimination that was sent to me as 
these women-owned businesses continue to face a number of the 
same challenges they have been facing for years.
    Said one DBE, when I applied for my first business line of 
credit, the bank loan officer actually said couldn't you get a 
man to cosign? Your husband perhaps?
    Another DBE from Indiana told me that I own my own 
companies 100 percent, but I still face discrimination. 
Example: when a project's resident engineer won't speak to me 
on the job, but directs all his comments to the male standing 
to the left of me.
    A women-owned DBE from Illinois wrote, my company is 23 
years old and I have been in highway construction since 1971. 
Yet, I still deal with discrimination on a regular basis.
    A DBE from Michigan wrote that she is still asked, after 25 
years in business as a contractor, who runs the company? Who 
shall I call?
    A DBE in Delaware wrote she had a disagreement with one of 
her prime contractors. The prime kept on calling her office, 
but always asked to talk to the male foreman rather than her. 
This went on for many, many, many months. The foreman kept 
telling the contractor he needed to talk to the boss. The 
contractor decided to take another approach: he called the 
DBE's home phone number and asked for her husband. Her husband 
had nothing to do with the contract or the company. The 
contractor said in the message that they needed to sit down and 
talk about this to get it straightened out, and we don't have 
to involve your wife. When this failed to get a meeting, the 
contractor had no other choice but to meet with the boss, the 
woman who owns the company. The first thing he said to her, and 
I quote, ``I am sorry this has taken so long, but I don't like 
dealing with women.'' Unbelievable.
    In representing women-owned DBEs for about 23 years now, I 
have heard women discuss the problems they face in the 
construction industry many times with Members of Congress and 
with different administrations. These women, every day, have to 
face the assumption by others that their companies cannot do 
the work and they do not run their own businesses. Women-owned 
businesses still have problems obtaining loans and bonding, and 
after years in business they still have to explain that they 
are the boss to men on job sites who refuse to believe that 
women actually have the ability to be a boss.
    If the DBE program were not to continue, I believe not just 
women and minority companies will be severely affected, but 
small majority-owned subcontracting businesses will be affected 
as well. The only small business program in the highway, 
airport, and transit industries will disappear. There will be 
no reason for subcontract work, even to majority firms. Thus, 
competition will be eliminated and prices will climb.
    In conclusion, I had a member of the Women First Trustee 
Board tell me, when I 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, and I quote, ``Well, it will be 
okay because I am at the table. I know these people; I work 
with these people. I make a pretty good living. So why do I 
still feel discrimination?'' And then she realized why. She 
told me, and I quote, ``It's because I'm not like them. I will 
never be like them. I'm different and they don't understand the 
importance of that.''
    I have thought about her statement so many times, and I 
believe this awareness should empower her and other women, 
because they contribute and make better an industry that is 
vital to our Country's daily life; and it is also why diversity 
is so important in the highway construction industry and in our 
Nation. Our diversity is what strengthens and bonds us 
together. We are a government for all the people, and all of 
our people deserve a chance to compete and contribute.
    Recently,--and I am about finished, Mr. Chairman--a 
Minnesota-based DBE told a local radio station about the work 
that she and other women and minority-owned firms performed on 
par, equal to, any other contractor on the 35W bridge project, 
and this is what she said: I think we have been given a chance 
to show that a contractor can value the DBE experience. We can 
add value to the final product and to the taxpayers of 
Minnesota. And, Mr. Chairman, I think that pretty well says it 
all. Thank you.
    Mr. Oberstar. [Presiding.] Thank you for raising that last 
example, Ms. Payne, because I am very much aware of that. At 
the outset of that bridge construction project, I made it very 
clear to the State DOT that they are going to adhere to the DBE 
program and they are going to culture and nourish and support, 
and Flatiron Construction Company, to their great credit, made 
very vigorous outreach effort.
    Ms. Payne. Outstanding. They did a great job, yes, sir.
    Mr. Oberstar. But the need persists.
    Ms. Payne. Yes, sir.
    Mr. Oberstar. Ms. Cunningham.
    Ms. Cunningham. Thank you, sir.
    Mr. Oberstar. Please touch your microphone.
    Ms. Cunningham. Mr. Chairman, I would like to thank you and 
Members of this Committee for this hearing, and I would also 
like to start out by thanking you for your long-term support of 
our organization, appearing at our policy forums over the years 
and really making sure that you understand what are the issues 
of our membership. Then I have to acknowledge Congressman 
Cummings, who is the official host and the godfather of our 
annual Transportation Braintrust, and has been so for, I 
believe, what is going to be 15 years. So I want to do that.
    My name is Julie Cunningham, and I represent the Conference 
of Minority Transportation Officials. Our organization is 
celebrating 38 years of service as a voice for the 
transportation community, and today we are the only multi-modal 
association for minorities in all of the transportation 
industry. Because of the legacy of inequity in employment and 
business for minorities within the industry, our mission is as 
relevant today as ever: to level the playing field in 
transportation for individuals, businesses, and communities of 
color.
    Our membership spans 29 cities and includes individuals, 
public transit agencies, airports, State DOTs, private 
businesses, academic institutions, and last, but certainly not 
least, small and Disadvantaged Business Enterprises. Several of 
our member firms are here today. You have heard from one from 
St. Louis who was on the first panel; Dallas, Mr. Al Brunson, 
Mr. Kevin Potter from St. Louis, and Mr. Prescott Sherrod from 
Virginia Beach.
    As you know, COMTO has been at the forefront of this issue 
for quite some time. Our advocacy on behalf of DBEs has 
received national recognition. In 2006, the Department of 
Transportation awarded us the DBE Advocate of the Year. We have 
also partnered with the DOT and published the FTA's, the 
Federal Transit Administration's first CD on DBE methodology 
for Federal grantees. For the last two years we have conducted 
Title VI training workshops across the Country on behalf of the 
DOT, and the training components in these workshops includes 
information on DBE goal-setting, the certification process, and 
fraud detection.
    In 2007, when the Wahlberg Amendment threatened to 
neutralize the DBE program, it was COMTO that made our voices 
heard here on the Hill and also in Chairman Olver's office, 
because it was an appropriations issue. Our chapters across the 
Country petitioned their congressional representatives and we 
met with Congressman Olver to ensure the voices of the DBE 
community were heard. We were effective and we thank Chairman 
Olver for his great support.
    Mr. Chairman, as you have reminded our membership on more 
than one occasion, both you and the Majority Whip, the battle 
that was fought to include the DBE provision in TEA-21 in 1998 
was no less fierce than the battle is today. Majority Whip 
Clyburn outlined in his testimony here this morning that the 
program has stood up in court over and over again, and that 
testimony was supported by members on the first panel. So I 
don't want to spend a lot of time defending the fact that the 
program is in fact constitutional.
    But what I want to do is talk to you a little bit about the 
concerns that my members have expressed. This week, I canvassed 
our membership and talked to a number of our DBE firms, a few 
transportation professionals who have responsibility for 
running State DBE programs, and I want to recognize Ms. 
Grimley-Johnson from Virginia DOT, one of our members, is here 
and is one of those people. I also visited with a senior 
partner from Booz Allen Hamilton, which is one of the Country's 
largest consulting firms and has one of the strongest mentor-
protege programs in the Country. And each of these discussions 
resulted in the overlying theme from the members, so I just 
want to focus a little bit on what they said, really briefly.
    The first thing that they said was that there needs to be 
more specific language in the RFPs issued by Federal grantees 
to ensure the integrity of good-faith efforts. Currently, there 
are no teeth in good faith and there is too much inconsistency 
from agency to agency. In the COMTO membership, our DBEs refer 
to good faith as drive-bys. In other words, primes will drive 
by and the drive-by could be faxing an organization like COMTO 
or making a phone call, and then they call it good faith and 
they say we couldn't find any.
    Number two, we need a national uniform certification 
program. It is long overdue. As of 2008, all 50 States had 
established uniform certification programs. However, there is 
no national database or central repository for the vital data. 
The certification process is cumbersome and time-consuming and 
expensive for DBEs. And even though the DBE program is governed 
by a single set of Federal rules, the information requested by 
one certifying entity is far too often not the same information 
required by another.
    Number three, there needs to be more aggressive and 
consistent compliance monitoring of the DBE program. And we 
heard the questions from Congresswoman Brown and Congresswoman 
Eleanor Holmes Norton, as well as Congresswoman Eddie Bernice 
Johnson, and they kept saying are we monitoring it. Well, there 
needs to be more monitoring, and COMTO recommends funding for 
the establishing, maintenance, and monitoring of a national DBE 
and ACDBE program to ensure and guarantee the success.
    And, lastly, we believe that there should be the 
development of a national mentor-protege program. We recommend 
the creation of outreach opportunities in collaboration with 
federally-funded transportation entities to connect the prime 
contractors with DBE firms around the Country.
    During the transition process for President Barack Obama, I 
had the opportunity to serve on the transition team at the DOT 
Agency Review Group, and I saw firsthand that what this Nation 
is faced with is more about bricks and mortar and concrete and 
steel. It is about people and it is about jobs, and too often 
we forget that the golden nuggets of our industry are the 
people who participate in the DBE program and the thousands 
upon thousands of people that they employ.
    COMTO DBE firms touch the full spectrum of projects, 
offering everything from engineering services to advanced 
technologies to traffic engineering to professional services 
for legal, real estate, capital investments. They are suppliers 
that provide goods and services to the industry. They run the 
gamut from the very established businesses to the startups 
which are poised to partner in a mentor-protege relationship. 
We have as members of our organization the only minority-owned 
manufacturer of heavy duty brakes and clutches for trucks, 
buses, trains, and power equipment. We have the only minority-
owned railway engineering services firm. And we have one of the 
largest minority-owned firms whose primary business is to lay 
track.
    So we must take into consideration that our reason for 
being here is not just a DBE issue; it is also a workforce 
issue. Small businesses hire, employ 70 percent of the 
workforce.
    Congressman Cummings, as the Chairman of Government 
Oversight and Reform, you know that when we talk about cleaning 
up government, we must also talk about cleaning the program. We 
have to strengthen the program, not dismantle it, not eliminate 
it. Last week I was in St. Louis facilitating stakeholder 
meetings on behalf of the Missouri DOT for the new Mississippi 
River Bridge, a brand new bridge whose ground will be broken in 
the fall of this year. There were probably 150 people in 
attendance, most of them principals or employees of DBEs from 
both sides of the Mississippi River, the metropolitan St. Louis 
area and East St. Louis, which has an unemployment rate of 14.9 
percent. They are the stakeholders wanting to contribute to the 
building of something new and exciting in their community, and 
a chance to play their part to help our economy recovery, 
wanting some of the business and some of the jobs of building 
that new bridge that will impact their community and make it 
more livable.
    I will leave you with this. Recently, Secretary LaHood 
said, and I quote, ``In a very short time, your cities will be 
humming with construction workers, engineers, maintenance 
crews, and many others. You will see roads repaved, 
interchanges improved, and bus and rail systems repaired, 
upgraded, and expanded.'' Well, I am very excited about the 
fact that the COMTO Board of Directors and I have a meeting 
with Secretary LaHood next week, and what we want to offer to 
him is that with that wonderful humming in the construction 
industry, we want to also hear the sweet chorus of our Nation's 
DBE firms, and also added to that the harmonies of all of their 
workforce--their engineers, their planners, their 
administrative workforce, their carpenters.
    With that kind of chorus, with that kind of humming and 
melody all together, we can enhance our Nation's 
infrastructure, decrease discrimination, and harness the power 
of all our Nation's people and businesses to get our economy 
back on track. The members of COMTO stand ready to do our part. 
To dismantle or neutralize the existing DBE program will result 
in a very chilling effect not only minorities and women who 
have been demonstratively under-represented in federally-funded 
transportation contracts across the Country, but also a 
chilling effect against our very Nation.
    Mr. Chairman, COMTO applauds the efforts of the T&I 
Committee to protect the DBE program and we support your 
efforts to advance inclusiveness in the industry. Thank you for 
the opportunity to testify.
    Mr. Oberstar. Thank you for your splendid testimony. Really 
appreciate your comments and your remarks about my work in 
particular on this matter.
    Ms. Hall, on behalf of AGC of America.
    Ms. Amy Hall. Mr. Chairman and Members of the Committee, 
thank you for the opportunity to present testimony today on the 
U.S. Department of Transportation Disadvantaged Business 
Enterprise program. I am Amy Hall, President of Ebony 
Construction, located outside Toledo, Ohio, representing the 
Associated General Contractors of America.
    Ebony is a second generation family-owned business that 
performs asphalt paving and milling, primarily as a 
subcontractor, in Ohio, Michigan, and Indiana. We are a 
certified DBE company. My comments today will focus on how the 
USDOT DBE program is administered by the Federal Highway 
Administration.
    No industry as large, diverse, and fragmented as the 
construction industry is is entirely free of discrimination. 
While the vast majority of these men and women who work in our 
industry are good people, there are no doubt some bad seeds. 
AGC is working to foster a business climate that enhances 
opportunities for all businesses. The contracting community has 
concerns about the administration of the DBE program. Many 
program requirements are contradictory and/or ambiguous. In 
addition, there can be lack of uniformity in the ways each 
State handles these various requirements. These problems are 
real concerns for contractors because stepping over the line 
can lead to suspension, disbarment, and Federal prosecution. 
Any of these penalties can, at the very least, put a company 
out of business and have far graver consequences.
    These concerns led the AGC to meet with then Federal 
Highway Administrator Mary Peters and then DOT Inspector 
General Ken Meade and other DOT representatives. The outcome of 
the meeting was the creation of an industry-government 
workgroup to: identify the contradictory and inconsistent 
program requirements; clarify the intent and the administration 
of these various requirements; and create guidance. This group 
met for over three years, and the end result was a document 
that we called the Tool Kit, which is initiated to help 
contractors comply with the program requirements. A copy of the 
Tool Kit is attached to my testimony.
    AGC believes that the document is very helpful in 
clarifying for all parties involved how this program, the 
requirements and how they are intended to be implemented. 
However, despite all of our efforts, the DOT informed us that 
they could not endorse this document. Unfortunately, that 
renders this document useless, because contractors and DBEs 
must have the confidence in their decisions that they make 
related to program compliance are based on some official 
guidance from DOT.
    AGC still believes there is a need for a document 
clarifying what contractors and DBEs can and cannot do in 
meeting the DBE program requirements. We believe there are real 
differences of opinion on how to administer the rules. Many of 
these issues also impede DBEs from being successful in the 
program and cause uncertainty and potential traps for 
contractors and DBEs attempting to meet these requirements. An 
example of how the implementation of this program seems to 
undermine its intended purpose are the rules related to the 
expertise of the DBE owner. Once again, DBE owners are being 
held to a different standard than non-DBEs. As part of the 
commercially-useful function reviews, DBE subcontractors are 
being asked to go to the field and actually perform field 
tasks. Let's remember, running a successful contracting 
operation does not require the owner to be able to operate the 
machinery or perform any of the actual construction tasks. 
However, running a business requires an entirely different set 
of skills.
    Another issue that was discussed as part of the Tool Kit is 
the type of assistance the general contractor is able to 
provide DBE subcontractors. It is industry standard practice to 
provide assistance to subcontractors with equipment, personnel, 
and material as the need exists. This assistance can be 
provided to the non-DBE subcontractor; however, if a prime 
contractor was to offer the same assistance to the DBE 
contractor, red flags are raised and both the contractor and 
the DBE could be subject to intense scrutiny or targeted for 
legal proceedings.
    An example of the regulation that works against the DBE's 
success in the program is an issue that directly impacts my 
company. The regulations allow for the cost of material that is 
purchased by the DBE work for on the contract to count towards 
goal achievement. However, if the DBE purchases material from 
an entity associated with the prime, rather than a third party 
source, that portion of the contract is not counted. Often, the 
third party is not an option because the plans call for 
specific material production. Frequently, the prime contractor 
then becomes the only source for that material. Not allowing my 
purchase of asphalt from the prime undermines the ability of 
the prime to not only meet their goals, but negatively impacts 
my business.
    Further meetings with the DOT resulted in the creation of 
the DBE Roundtable. Through this forum, issues can be raised 
and discussed in a public setting, resulting in guidance from 
DOT. AGC is hopeful that the Roundtable will continue. The 
Roundtable has addressed the use of joint checks, certification 
consistency, change orders, DBE capacity, and many more items. 
The issue I mentioned about material purchased from the prime 
has also been addressed, and we are awaiting OMB's response.
    We believe the program rules need to be written in a way 
that allows for more collaboration, mentoring, and assistance. 
AGC has always encouraged the creation of mentor-protege 
programs that allow contractors to work with DBE firms in a 
collaborative fashion to ensure a mutually beneficial result.
    Mr. Chairman and Members of the Committee, AGC has taken 
the approach that while the program is in place, we will work 
together to make it something that makes sense, does not impede 
the successful completion of the vitally needed transportation 
improvement projects, and does not create legal concerns for 
all participants. AGC is hopeful that the dialog that was 
started over the past years with DOT, the National Association 
of Minority Contractors, and the construction industry will 
continue.
    Thank you to the Committee for having this hearing on the 
administration of the program, and I would be happy to answer 
any questions you may have.
    Mr. Oberstar. Thank you, Ms. Hall. I want to thank AGC for 
their very active, assertive involvement in the DBE program and 
for the very significant contributions AGC has made. It is very 
much to their credit to have done it and have you as their very 
articulate witness.
    Ms. Amy Hall. Thank you.
    Mr. Oberstar. The sum of the testimony of these two panels 
is perhaps that three centuries of discrimination cannot be 
overcome in two decades, and that while there are successes, as 
noted in the DOT testimony and testimony of the various 
witnesses, there are still serious problems inherent in this 
program, and that those problems are reflective of the society 
in which we function. We can't change all of society, but we 
can sure change a good deal of it in this Committee and in the 
work that we do and the legislation that we move forward.
    We have heard continuing theme about informal networks, 
about the ol' boy networks, about bonding requirements, about 
insurance needs. We have had this initial experience on funding 
to cover bonding needs of DBEs in the stimulus, and it is too 
early for any of the panelists to say they had an experience 
with it, but comment on that for me and then offer your 
thoughts about whether this would be a good precedent for us to 
include such language in the long-term six-year surface 
transportation authorization bill coming up.
    Ms. Hall, it looks like you are ready to respond.
    Ms. Sara Hall. Well, certainly, I think anything that we 
can do that helps highlight some of the hidden barriers to 
participation. One of the things that we have certainly found 
is that even if your contract compliance department or your 
airport is serious about making bonding and insurance 
requirements that are possible and encourage participation, you 
sometimes have a disconnect in the process; and unless there is 
education on all fronts through programs such as the one 
sponsored, you are not going to have real results.
    What we have found is that you have to educate at every 
step of the way and make sure that there is not a step that is 
missed, because often, if that step is missed, then the barrier 
exists and you are simply not aware of it.
    Mr. O'Bannon. Mr. Chair, there must be a commitment to be 
robust in our application and implementation of the program. 
That really is where the rubber meets the road. If you impose 
these requirements without thinking about their impact, then 
you are in fact creating artificial barriers to participation.
    For example, you have a janitorial service contract, and as 
part of that solicitation you say we are requiring that you 
have five years worth of airport experience in doing janitorial 
work. Those are the types of artificial requirements and 
barriers in terms of criteria that really do prevent inclusion, 
and those are some of the things that you are going to have to 
focus on in terms of really implementing the program in such a 
way that that participation is both real and substantive.
    Mr. Oberstar. Are you referring to an actual requirement in 
a proposal?
    Mr. O'Bannon. Yes. I have seen those requirements.
    Mr. Oberstar. How in heaven's name, tell me how experienced 
janitorial service at an airport differs from janitorial 
service.
    Mr. O'Bannon. That is the issue on that particular contract 
that I had. But these are built in because sometimes the person 
drafting it is really drafting it from the perspective of what 
are we looking for. I mean, we are looking for people that 
frankly we don't have to supervise; we are looking for people 
who have been here for a while; we are looking for people who 
have the experience. And when you take that attitude in 
drafting these RFPs, you begin to exclude other potential 
providers from participating.
    Mr. Oberstar. Earlier, Mrs. Napolitano, our Member from 
California, raised the issue with DOT whether they have an 
actual active review process where they are looking for those 
circumstances where there is this--she didn't use this term, 
but unseen, under-the-surface discrimination. What you are 
saying is maybe we need some structural--by that I mean 
institutional--review of contracts to see whether they are 
discriminatory in their requirements.
    Mr. O'Bannon. Well, let me say this, Mr. Chair. The FAA 
Office of Civil Rights has done a great job with the resources 
that they have, but I can tell you from my personal experience 
they are understaffed. I mean, for the southwest region, we 
basically have one civil rights officer who is responsible for 
administering all of these programs across the board. She is 
the one who really is the day-to-day person who is responsible. 
But it is the DBE liaison officers at the individual agencies 
that are really responsible for implementing these programs, 
and if we are not aggressive, if we do not have experience, if 
we are not pushing this particular agenda, and if it is a 
stepchild of that agency, then we are not going to be 
successful.
    Mr. Oberstar. We don't want stepchildren in the historic 
sense of that word. They are sort of unwanted, unappreciated, 
unloved. I have stepchildren and I love them, and that love is 
returned, I must say.
    Section 136 of H.R. 915, the FAA Reauthorization Act, which 
has been reported from Committee--hasn't come to the House 
floor yet--provides: ``This Section requires the Secretary to 
establish not later than one year after date of enactment a 
mandatory program to train airport owners and operators on how 
to properly certify whether small businesses and airport 
concessions qualify as small business concerns owned and 
operated by socio and economically disadvantaged individuals.'' 
It doesn't say anything about the Office of Civil Rights. It 
doesn't say anything about the staffing of that office. It 
doesn't say anything about the numbers of personnel. And now 
that you have raised that issue, this is something we can 
address before we bring this bill to the House floor. We can 
include such adjustment in a manager's amendment.
    Mr. O'Bannon. Thank you.
    Mr. Oberstar. Why is it difficult for disadvantaged, small, 
minority, women-owned enterprises to discuss, in whatever 
forum, the discrimination they are confronting? What are those 
barriers to raising the issue?
    Yes, Ms. Cunningham.
    Ms. Cunningham. Mr. Chairman, if I may, what our members 
tell us--and I heard this last week in St. Louis from hollers. 
When they raise the issue, then they lose the work or they 
don't get the next job. So there are penalties. So they go 
along to get along so that they can get the next contract.
    Mr. Oberstar. So people are worried about sticking their 
neck out of the foxhole and getting it shot off?
    Ms. Cunningham. Yes.
    Mr. O'Bannon. That has been our experience as well. I mean, 
AMAC represents airport concessionaires and DBEs who do work in 
airport contracting, and even though they are willing to talk 
to us confidentially, their concern is they are going to be 
branded as firebrands or radical and simply people are not 
going to want to do business with them if they complain.
    Mr. Oberstar. We have protection for whistleblowers, and a 
number of programs under the jurisdiction of this Committee. We 
just recently did something very significant for Coast Guard. 
We have it for aviation, for reporting of near misses, for 
reporting of failure maintenance oversight. Maybe we need 
something of that nature here, a whistleblower protection for 
minority enterprises.
    Mr. Cummings. Godfather Cummings.
    Mr. Cummings. Oh, boy. Mr. Chairman, I want to pick up 
where you left off and tell you, Mr. Chairman, that one of the 
things that folks have a tendency to say when minority and 
women contractors raise issues, they have a tendency to say 
here they go again, meaning that a lot of times the legitimate 
complaints and concerns are dismissed, or they will say things 
like you are whining. That is a favorite word. But yet and 
still, people are not getting those opportunities. You can call 
it what you want, but the fact is that it doesn't take a rocket 
scientist to see the discrimination.
    With regard to the whistleblowers, I think one of the 
things that happens is that while folk may have the protection, 
may get the protection of a whistleblower statute, folks don't 
necessarily want to go through the process, because although 
you have the protection, they feel that you are going to suffer 
no matter what in the meantime. And I think our witnesses 
probably would agree with that, I think. So we have got to be 
careful with even how we do that, and not assume that it is 
going to be the solution to all the problems.
    But I want to come back to some of the things that you all 
have said, particularly you, Ms. Hall, and you, Mr. O'Bannon. 
In answer to one of the Chairman's questions, you all were 
talking about things that may be--and all of you, to a degree--
impediments of reaching true participation with equity and 
parity with regard to minorities and women. Can you think of 
other things that you have not maybe mentioned yet today that 
we could, say, incorporate in a SAFETEA-LU bill or, as the 
Chairman has said, the aviation bill? I just think that this is 
a prime opportunity to get some of these things done right now. 
Like I said, we have a Chairman that is sensitive to these 
issues, and hopefully we have a Congress that is sensitive to 
them.
    So I am just trying to make sure that we cover things 
that--I mean, if each one of you all maybe had something that 
you would like to see in legislation, that is practical, that 
is,--and when I say practical, going back to what you said, Mr. 
O'Bannon, taking into consideration everything involved and 
truly thinking it out to the nth degree and saying, okay, this 
is going to, in the end, when all the dust settles, this has 
the most likelihood of helping this situation. And in your 
answer I am trying to get to what are those things that we can 
do hopefully to memorialize something that lasts beyond us. 
Because one of the most important things I think for us to do 
is, during our watch, to try to put things in place that will 
last beyond us. And, of course, you have to take into 
consideration the law as it is now and making sure that it fits 
within the law, because certainly the other thing is that, from 
a practical standpoint, if it doesn't fit within the law, then 
we have got the constitutional challenges.
    So why don't we go right down the line? If you don't have a 
response, that is fine. But I think the Chairman is asking what 
can we do to try to--I don't want to make your trip in vein or 
your testimony in vein, so I want to make sure we are getting 
from you the very best that you have to offer as to what we 
might be able to do to help.
    Mr. O'Bannon. Well, let me say this. First of all, AMAC, as 
an organization, would be more than happy to sit down and work 
with this Committee or with any Subcommittee in terms of coming 
up with specific recommendations. I am the guy in the weeds. I 
administer the DFW Airport DBE, ACDBE program, our MWBE 
program, so I am a weeds kind of guy, because, to me, it is 
these little decisions that have greatest impact in terms of 
are you able to be successful at the end of the day.
    There are two or three areas that I would really ask this 
Committee to take a look at. One is we tried, at DFW, using an 
approach called subguard versus bonding. Subguard is an 
insurance program that replaces the bonding requirement. That 
approach can be successful if administered properly. And, 
again, the devil is in the detail. If you apply the same 
bonding standards for admission into the subguard insurance 
program, you have just traded one obstacle for another. But you 
can have a much looser set of criteria which still provides the 
protection for both the owner, the contractor, and the 
insurance company without some of the financial restrictions 
that go into the bonding requirement. So that is one approach 
that I think this Committee should take a look at.
    A second approach that I think this Committee should take a 
look at is financing. The critical battle for many smaller 
minority-and women-owned businesses is that mobilization fee 
and the time that it takes in a public sector job to get paid. 
At DFW--and I will use my airport as an example--we have a 
situation where you work 30 days, you then have 30 days by 
statute to pay. That is 60 days. Assuming that you are a 
subcontractor, that prime contractor can pay you within 10 to 
15 days from the date that they get paid. That is 75 days 
before you get your first check. You paid labor, material, and 
supplies. We must address the issue of providing adequate 
financing for mobilization.
    Mr. Cummings. And I want number three, but what you just 
said, in an economic time like we have right now, it is a death 
sentence to a small business, because most small businesses 
survive based upon lines of credit. If you don't have a line of 
credit, under those circumstances, you are dead; you can't buy 
supplies, you can't pay employees, you can't pay rent. So 
you're dead.
    Number three?
    Mr. O'Bannon. Number three is we should look at the 
delivery methods, everything from--and by that--I don't want to 
disparage the people who work in my capacity, but some of us--
you know, I am a lawyer by training, and what I had to do--and 
thank goodness our board supported this--was I went and I 
requested our board I need a construction expert. I need 
someone who has done construction so they can tell me how to 
speak constructiony to a construction person, because I found 
myself being--I would go in with the expectation of achieving a 
certain goal and simply get talked out of it because I simply 
didn't have the expertise to deal with it. So the staffing and 
the training of the DBE LEOs is critical. I mean, we must be 
able to critically, analytically assess the work, the scope of 
work. We must have experience in this area and enough training 
and background in order to impact the process. So it is the 
delivery of these services. If we do not have that training, we 
cannot be effective, and we either have to have the staffing 
that will bring that expertise to the forefront or the type of 
training that will make us more effective. You cannot take an 
HR person and say you are now the DBE LEO officer and expect 
that person to be successful.
    Mr. Cummings. Mr. White?
    Mr. Chairman, I know I am running over. I just wanted to 
get these answers.
    Mr. Oberstar. Please, just proceed. There are no other 
people clambering for the microphone right now.
    Mr. White. ACI's feeling is more of mandatory certification 
training where DOT and FAA really has a uniform process and 
where DBEs get certified as a DBE. That form they can use in 
Memphis, Tennessee, can go to Arkansas and do work, go to 
Mississippi and do work. I mean, in Memphis, Tennessee, we live 
right there in the region. You actually can do work in a four-
State area. But without that certification and being seen as a 
real certification uniformly throughout the United States, that 
is a very difficult process.
    Mr. Cummings. Yes, ma'am.
    Ms. Sara Hall. I would echo the two comments and just say 
that, certainly, anything that we can do on both sides of the 
equation, on the airport, the transportation, the DOT, FAA 
recipient side, and then also with the DMWBE to make the 
process easier is what we want to do. Uniform certification 
will do that; training will do that; as will the educational 
programs of AMAC and ACI, where they bring together the 
individuals and the airports who implement and carry out these 
regulations and really educate them about the hidden barriers 
and the well-meaning policies that, in effect, further 
discrimination and exclude people from the marketplace.
    Mr. Cummings. Ms. Payne?
    Ms. Payne. Well, I ditto all of the above as far as the 
highway construction industry is concerned.
    About 20 years ago, the prime contractor usually held the 
bonding. Today, the DBEs have got to get their own bonding, 
which is directly tied to the personal net worth issue. So the 
fact that we have addressed the personal net worth issue is 
extremely important.
    Secondly, part of that personal net worth issue, today, to 
accumulate or to count personal net worth, retirement plans are 
part of it. That should be eliminated. It is very, very 
difficult if you have been in business or you are my age, say, 
for example, and you have been putting into a retirement plan, 
and you have now--well, maybe now not now, but in the past two 
or $300,000. Well, that was $300,000 that went immediately to 
your personal net worth, even though your business--it would be 
stupid to touch it, you can't touch it, so on and so forth. So 
eliminating the retirement plans as part of the personal net 
worth accumulation or accounting would be helpful tremendously 
to DBEs.
    Also, I think in the highway construction industry people 
live and die by bank loans. You get a project, prime 
contractor, subcontractor, and you go to the bank to make sure 
you can do the work. Well, in this very bad economy, banks 
aren't loaning, and we have had a lot of women-owned businesses 
and minority-owned businesses actually go out of business 
because they couldn't get the loans necessary so they could do 
the work.
    Mr. White. Mr. Chairman, please excuse me. I need to go 
catch a flight, if I may.
    Mr. Oberstar. You are excused, Mr. White. We don't want an 
airport person missing an aviation flight.
    [Laughter.]
    Ms. Cunningham. I would like to echo members of the panel, 
but I think high on our list of the COMTO membership is the 
need for a national uniform certification program. I sat with 
Al Brunson, who is sitting behind me, so if he will raise his 
hand so you all see him. He also sits as the advisor to the 
COMTO Board of Directors on small and disadvantaged business 
issues, so he is a member of our national board. But last night 
we had dinner and I was asking him all the places that he does 
business, and every place he does business he has to get--every 
State; he is in several States--he has to get certified, and 
these are all federally-funded projects either in transit or in 
highways. So from State to State to State he has to go get 
another certification. Well, he has been established for about 
nine years, but what about the firms that are starting up or 
have been in business less than three to five years? That is a 
very expensive and cumbersome process for them.
    Mr. Oberstar. On that point, if the gentleman would yield. 
Are there significant differences State to State? Why does 
each--if you are doing this work under federally-funded out of 
the Highway Trust Fund, why does each State have to be so 
different?
    Ms. Cunningham. Now, I can't----
    Mr. Oberstar. Or are there real differences?
    Ms. Cunningham. I can't give you the specifics, but I would 
gladly give him my seat. I can get you the information. I can 
get it to you by close of business tomorrow. But I will tell 
you that our small businesses complain about the fact that they 
have a mound of paperwork like this for every certification, 
and maybe Ms. Hall can speak to that, I don't know.
    Ms. Amy Hall. We have found that when we have applied for 
certifications in other States outside our home State, that 
this is true, and that happens, and I think it is probably 
because, at the end of the day, the onus of that particular DBE 
and their efficacy and their actual ability to perform work, 
that particular State feels the need to do the investigation 
and to do all the things that are supposed to be standard under 
the UCF. Not the UCF, but the UCP. I am sorry. So I would 
imagine that creates the silos in which each State works.
    Mr. Oberstar. We could, I think, if the gentleman would 
continue to yield, we could provide guidance, direction to DOT 
to harmonize those requirements among the States. It is Federal 
funds, the same Federal Trust Fund dollars in the East Coast as 
on the West Coast and the northern border and the southern 
border. I don't understand why that is a problem.
    Yes, Ms. Payne.
    Ms. Payne. I was just going to say that I know it sounds 
like it is a really big problem, and it is. Please don't get me 
wrong. But in years past--actually, DOT does have a unification 
program, and the paperwork actually has been cut down by two-
thirds, believe it or not, from the past. However, the States, 
their domain, because our program is so unique, where, like an 
SBA, certification is all paperwork. Our certification is 
onsite. So one State, even though their peer, the State beside 
them, has certified a company, they don't know anything about 
that company, necessarily, and they want to know, so they will 
come in and they will do an onsite presentation. They don't 
have to, but generally they do, and that is one of the 
problems. And that is the good thing about our program. I mean, 
it is really scrutinized and it is very difficult to get 
certified. But, on the other hand, it does hinder the uniform 
certification process.
    Mr. Oberstar. Ms. Hall?
    Ms. Sara Hall. Chairman Oberstar, I can tell you that in 
the last 12 months, I have attended both AMAC and ACI 
conferences where this very issue and this problem has been 
discussed, and in transportation our dollars come from the FAA, 
they are Federal dollars and they flow through to the airports 
in the various States. The States do have uniform certification 
agencies, but they are at the State level. So what happens, for 
example, in Memphis, Tennessee, is in 30 minutes we have a firm 
from Arkansas who wants to come over, they have to be certified 
in Tennessee, their Arkansas certification does not count. A 
firm 15 minutes away in Mississippi must be certified in 
Tennessee, and ACI and AMAC have gone on record writing both 
the FAA and TDOT to request a meeting, which they agreed to 
grant us, and we are looking forward to that, to sit down and 
discuss this issue and this problem.
    And what we have heard is that while the rules are the 
same, as you know, the devil is in the details and they are all 
fact-specific. So each State may interpret a particular detail 
differently; may see an asset in a different way, especially 
when you are talking about joint assets; may view something 
differently; and literally the forms that are required are 
extensive. And when you are small, it takes all your resources 
to get certified; you really can't get ready for your jobs.
    Mr. O'Bannon. And under the existing regulations, it is 
optional for me to accept--I have the option, under the 
existing regulations, to accept certification from Virginia. 
Much of their hesitancy in doing that is concern about the 
integrity of their certification process.
    Mr. Cummings. Ms. Hall?
    Ms. Amy Hall. Our position and our point of view is that we 
feel that two-way communication is vital to promoting the DBE 
program. We have created the Tool Kit, which we hope at some 
point will be endorsed by the DOT. The Roundtable was also 
created last year. It is a forum in which contractors, both 
majority and minority contractors, get together with the 
various DOT agencies, and we are able to sit down and discuss 
the rules and the regulations that are currently in place that 
have the potential to negatively impact both the contractor, as 
well as the DBE subcontractor. And one of the challenges that 
the DBE program has is to shift the consciousness from 
protecting the efficacy of the program from fraud to moving the 
program to what it is supposed to be, to build the capacity of 
the DBEs. And so many things have been created to prevent the 
fraud from happening; however, simultaneously, it negatively 
impacts the DBEs' ability to carry on industry standard 
practices and business practices that other subcontractors can 
do, but the DBEs cannot.
    Mr. Cummings. Thank you very much. I want to thank all of 
you for your testimony. I appreciate it. All of these 
suggestions are very, very helpful, and, as the Chairman has 
said, there is nothing like hearing people who are having to 
deal with something every day, every day, because you are the 
experts. So thank you very much.
    And thank you, Mr. Chairman.
    Mr. Oberstar. Yes, I concur in those comments. You are the 
experts. You are the practitioners on the front line.
    Ms. Hall, you suggested that the DBE Tool Kit AGC developed 
be somehow incorporated in the Federal Highway Administration 
programming, is that the thrust of your----
    Ms. Amy Hall. Yes. We have, for over the past three years, 
worked in conjunction with FHWA in creating this Tool Kit, and 
what it does is it breaks down the DBE program and puts in 
layman's terms the guidance and the how to interpret these 
rules both for the contractor, as well as the DBE contractor, 
because what happens or what we have found is, from State to 
State, each State interprets these rules differently. So in 
order to provide like one common language, so to speak, so 
everybody is understanding and working with the same rules, the 
Tool Kit was created.
    Mr. Oberstar. It is a very intriguing idea, something we 
will have to evaluate further. Something of this nature takes 
on the character of law. We want to be very careful about how 
it is worded, how it is phrased, how it is practiced, and 
consequences that we haven't foreseen that might result from 
it. Have you talked to AASHTO about this Tool Kit----
    Ms. Amy Hall. Yes.
    Mr. Oberstar.--and considered having AASHTO included in 
their manual? Which is different from being a regulatory 
procedure.
    Ms. Amy Hall. Right. We have. At the conception and the 
development of this Tool Kit, all the organizations have been 
abreast of what has been going on, yes.
    Mr. Oberstar. Well, we have to evaluate that very 
intriguing suggestion, and we will work on that further.
    Was it Mr. O'Bannon I think you said you are concerned 
about the integrity of the certification process. What do you 
mean by that, that it might differ from State to State? Is that 
what you are saying?
    Mr. O'Bannon. The question always is how rigorous is that 
certification process, and you have heard some discussion about 
you have only a paper certification process in some 
jurisdictions; you submit your paperwork and then that 
basically is it. Other jurisdictions are much more concerned to 
make sure that there are onsite inspections. I mean, we have 
actually had experiences where you actually have gone onsite 
and the example I am using is the white female who was 
ostensibly the owner of this particular job was actually in a 
small clerical office in the back. Her husband was up front in 
a big office, and when you went on and did your onsite 
inspection, it really was apparent that the person running this 
company was the husband and not the wife. So those onsite 
inspections are valuable in determining and to make sure, to 
confirm that what is represented on paper is in fact what is 
going on.
    So as the person who is responsible for working with these 
businesses, I want to make sure that the benefit of the program 
goes to those businesses that are supposed to be the 
beneficiaries. So I trust, because I know, the local 
certification process. I have more concern about other 
jurisdictions because I am not as familiar with what they are 
doing.
    Mr. Oberstar. What you are really arguing for is a 
standardization of the certification process.
    Mr. O'Bannon. Absolutely.
    Mr. Oberstar. Which is interesting in another context at 
airports. The TSA accepts every State's driver's license as a 
verification of who that person is; it has their photo, it has 
their vitals, usually social security number and address, and 
so on. And TSA doesn't go behind that license to see whether 
every State has a good certification process for driver's 
licenses. But you are talking about something different here 
and we can craft language that will do this.
    Mr. O'Bannon. I don't want my airport or my office written 
up because of fraud. I do not want that. So we have to be 
concerned about the integrity.
    Mr. Oberstar. And it is clear that the civil rights 
offices, from previous testimony and from this panel's 
testimony, need more personnel.
    Mr. O'Bannon. Absolutely.
    Mr. Oberstar. They just don't have enough people. I think 
you said that earlier on your own.
    Mr. O'Bannon. Yes.
    Mr. Oberstar. Ms. Hall, you referenced a statistically 
significant wage disparities for all minority groups and white 
women. Is there a documentation for this?
    Ms. Sara Hall. Excuse me, Chairman. Our disparity study is 
318 pages. We have included it and submitted it to the 
Committee. We have also submitted a 20-page summary and then a 
shorter 2-page summary. We did use NERA. The study was quite 
extensive; it was six years of contracting data, over 1,200 
contracts, subcontracts; and over $900 million of contracts. 
And NERA looked at every aspect and it was reviewed by the 
airport in great detail, and the disparities were statistically 
significant and adverse in all minority groups.
    Mr. Oberstar. Let me just ask our counsel, Ms. 
Soumbeniotis, do we have that in our file?
    Ms. Soumbeniotis. We do have that in our file.
    Mr. Oberstar. Okay, we will make sure that that remains a 
part of the Committee file. We will make a reference to it in 
the Committee hearing. And if there is an abstract summary of 
some discreet length, we can include that at this point in the 
record.
    I want to be very clear in this hearing to establish the 
successes of the Minority Business Enterprise program, the 
obstacles to its full success, and the challenges that remain 
so that in some future court case, which is most surely to 
arise,--I have learned my years of legislating--that a court 
looks at it and says oh, there was a very substantial record in 
support of this legislation, and that is what we want. That was 
one of the main purposes of this legislation, is to build that 
record in the course of this hearing.
    I just want to sharpen your focus now in this question. 
What has been the impact of the MBE program in DOT, for all of 
its modes, in ensuring that women-owned, black-owned, Hispanic-
owned enterprises have been able to enjoy success?
    Mr. O'Bannon. DFW conducted an economic impact study that 
was done by the University of Texas, and for the period 
September 29, 2006 through August 30th, 2008, we looked at the 
MWBE concessionaires. Those DMWBE concessionaires produced more 
than $350 million in gross revenue, and DMWBE firms on 
contracting provided over $280 million in contracting services 
and procurement. That spending and concessions operated 
generated an astounding $1.2 billion in economic activity, 
creating 14,000 job years of employment and increasing labor 
income by more than $450 million.
    There is a positive economic contribution to removing 
discrimination and allowing these firms to participate in these 
opportunities both from a job creation standpoint, as well as 
State and local taxes, because my recollection--I don't have 
the statistics in front of me, but my recollection was $60 
million was paid in State and local taxes by DMWBE firms from 
the activities.
    Mr. Oberstar. That is an important part. Not only doing 
this work, they are paying taxes as well.
    Mr. O'Bannon. Absolutely.
    Mr. Oberstar. Employing people. People are paying taxes; 
the businesses are paying taxes. But can you say that without 
the presence of the MBE language, that much of this would not 
have occurred?
    Mr. O'Bannon. That is correct. You would have a bifurcation 
in society where a portion of my community and the business 
owners who live in my neighborhood would not be participating 
in these dollars, because when I go to the grocery store, I am 
seeing local contractors and subcontractors who live in my 
neighborhood, who have contracts at DFW, and they are 
benefitting that local community and our region because of this 
economic activity.
    Mr. Oberstar. Thank you.
    Ms. Hall?
    Ms. Sara Hall. Chairman Oberstar, there are a number of 
statistics and findings in our study. I think a few that might 
sum it up relatively quickly are that although black firm 
owners account for 19.4 percent of all firm owners in the 
Memphis metropolitan statistical area, they account for less 
than 1 percent of sales and receipts. For women, the number is 
women-owned firms account for 26.6 percent of all firms in the 
Memphis metropolitan statistical area, but account for less 
than 2.5 percent of sales and receipts. So we know that there 
is disparity.
    What we also know from our study is that our utilization of 
M/W/DBEs in our study period was approximately 17 percent, much 
higher than the 1 percent and the 2.5 percent numbers, while 
not apples-to-apples comparisons, but they give you a good idea 
of the progress.
    What is perhaps, as you said, it has taken us a long time 
to get here, and it will take us a long time to remedy these 
effects. What we found in our study was that the current 
availability of MWBEs in the Memphis metropolitan statistical 
area was 28 percent. And, again, these are broad numbers. So 
what we want to do is make sure that, in the public sector, 
that there are goals, that we encourage participation and 
inclusion, and that we allow those goals to reach out into the 
greater community, because what the anecdotal evidence of our 
disparity study said--and you can read it in a pretty large 
section--we both surveyed both by telephone, by written survey, 
and by individual interviews and group interviews, M/W/DBEs and 
non-M/W/DBEs alike, and what we found from the M/W/DBEs is 
that, in many instances, they told us that but for goals on 
public contracts, that they would not be included, and that by 
the very firms that used them as subcontractors when there were 
goals, those firms did not call them to submit quotes on 
projects without goals.
    So I think you see both the progress that we have made and 
the progress yet to be made, and those studies certainly 
illustrate that.
    Mr. Oberstar. That is very precise on point. Thank you, 
exactly what I am looking for.
    Ms. Payne.
    Ms. Payne. Well, Mr. Chairman, first of all, Women First 
has calculated that DBEs, women and minorities, certified, 
create about 100,000 jobs annually. So that would be number 
one. Secondly, for women, in 1988, women were at 1.6 percent 
nationwide. We are now over 6 percent. So that is the positive. 
There has been a tremendous increase as far as women 
participation and the dollars that they have generated.
    The negative part is that, in my testimony that I didn't 
verbally give, but submitted, I called 15 States and talked to 
their DBE coordinator in every State. Out of those 15 States, 
10 got me the information that I needed, and I asked two 
questions. Question number one was what was your DBE actual 
achievement goal for 2007 and 2008; and the second thing I 
asked was what was your 100 percent State funding achievement 
for DBEs. In every case other than one the DBE Federal program 
had a goal of between 7 and 12 percent. State was less than 2 
percent in most cases, with one exception to the rule.
    So that tells you, with the program in place, qualified 
women-owned businesses and minority-owned businesses can do the 
work. Here it is being used because it is required. In those 
areas that are not required, they don't use them, privately or 
actually public monies if it is a State 100 percent funding, 
and they don't have a program; and most States do not have a 
program.
    Mr. Oberstar. Thank you.
    Ms. Cunningham.
    Ms. Cunningham. I don't have the supporting statistics 
because I was told other people were going to do that, and they 
have done that very well, but I would like to draw a 
contrasting analogy, and that is--and I will just use public 
transit, because COMTO started out as public transit 
professionals.
    In that part of the industry, minorities fund 60 percent of 
the fares for public transit; African-Americans about 38 
percent, Hispanics 18 percent, and then the next group is 
American Indian and Asian-American. So almost 60 percent of 
fares are provided by people of color. Add to that the tax base 
that they support. Then you go around the Country and look at 
who is sitting behind the steering wheels of the buses and who 
is operating the railcars. So the impact of minorities in 
public transportation is significant in just their everyday 
living. I mean, they have to use public transportation.
    But when you look at the firms that are doing business or 
the folks that are CEOs of those agencies, it is horrendously 
low. In the employment part, of 1500 major public transit 
agencies around the Country, less than 40 are people of color. 
So even the people that are making the decisions about 
contracts do not look like--they are not women and they are not 
people of color.
    So, that said, I certainly can get you statistics from some 
of our collaborative organizations--AASHTO, AAPTA. I do not 
have those statistics today, but I can get them. But the impact 
of women-and minority-owned businesses I would believe is just 
as substantial as our use of the systems and the roads.
    Mr. Oberstar. Thank you.
    Ms. Hall.
    If you provide information, it need not be duplicative.
    Ms. Cunningham. It need not be? Okay.
    Ms. Amy Hall. The DBE program, independent of the inherent 
challenges and the nature that comes with that, has provided 
opportunities for myself, as well as other contractors, to 
participate in an arena in which had historically not seen such 
participation, and it has allowed people to create jobs and 
give their employees a quality of life, which they wouldn't 
have been able to do that prior to the DBE program. So 
independent of all the challenges we have, the good part of the 
program is that it gives access. It gives access for people and 
for groups of people who primarily and traditionally and 
historically have not had access.
    Mr. Oberstar. Those are the answers that we were looking 
for, the framing of the issue for which I scheduled this 
hearing, and very instructive. It reminds me of a Haitian 
expression: [indiscernible]. Behind the mountains are more 
mountains.
    Behind the problem are more problems. And while the 
language that is in place that we have been discussing during 
this hearing, making a move toward resolving these problems, 
there are still some issues yet unresolved.
    I am reminded of the first days of the Reagan 
Administration in 1981, when they were trying to dramatically 
change the scope and the nature of government, and, in effect, 
to repeal the great society issue of legislation of the Johnson 
era, the immediate post-civil rights legislative era. And one 
after another program David Stockman, Reagan's budget director, 
said REA has been a success, there is no longer a need for it; 
we recommend termination of this program. EDA, the Federal 
Economic Development Administration, has been a great success, 
there is no longer a need for it. And when one after another 
proclaimed victory and said we can now erase these programs 
from the book, without for a moment considering that there was 
no final victory; there was a job yet to be done and that we 
had really only made a start on attacking the problem.
    We have made a start with the DBE program. We now have to 
continue it. We have to open wider that door and address these 
fundamental underlying problems that you have addressed today 
in this panel and the previous panel. I thank you for your 
testimony.
    The Committee is adjourned.
    [Whereupon, at 3:53 p.m., the Committee was adjourned.]



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