[Congressional Record (Bound Edition), Volume 151 (2005), Part 14]
[Senate]
[Pages 19186-19189]
[From the U.S. Government Publishing Office, www.gpo.gov]




               DISADVANTAGED BUSINESS ENTERPRISE PROGRAM

  Mr. KENNEDY. Mr. President, the Department of Transportation's 
Disadvantaged Business Enterprise Program is vital to ensuring that 
businesses owned by women and minorities have an equal opportunity to 
compete for Federal highway construction contracts, and I commend the 
conferees for supporting this important program in this year's highway 
bill.
  Since the program was created in 1982 and expanded to include women 
in 1987, the construction industry has changed significantly. Although 
we still have far to go to fully address the effects of discrimination 
in the industry, the program has opened many doors of opportunity for 
women and minorities in what was once a virtually all-male, all-white 
construction industry. The program deserves high marks in combating the 
effects of discrimination in highway construction. But on the extensive 
information available to us in considering its reauthorization, it is 
also clear that the program is still very much needed to achieve a 
level playing field for all qualified contractors, regardless of race 
or gender.
  Since Congress first began examining this problem, it has been clear 
that the construction industry generally, and highway construction in 
particular, have been predominantly an insiders' business that often 
exclude women and minorities for discriminatory reasons. The 
persistence of this festering problem has denied opportunities for 
African American-, Asian American-, Latino-, Native American-, and 
women-owned firms in the industry.
  Our extensive hearings and other information gathered over the years 
made clear that women and minorities historically have been excluded 
from both public and private construction contracting. When Congress 
last reviewed the program in 1998, there was strong evidence of 
discriminatory lending practices that deny women and minorities the 
capital necessary to compete on an equal footing. Much of that 
information is cited and described in three leading rulings by Federal 
courts of appeals--the Eighth Circuit's opinion in Sherbrooke Turf. 
Inc. v. Minnesota Department of Transportation, the Tenth Circuit's 
opinion in Adarand Constructors v. Pena, and the Ninth Circuit's 
opinion in Western States Paving Company v. Washington State Department 
of Transportation, all of which upheld the program as constitutional, 
and found that it is narrowly tailored to deal with the Government's 
compelling interest in remedying discrimination.
  I will not detail all of the information previously considered, but a 
few examples illustrate the breadth of the problem. A bank denied a 
minority-owned business a loan to bid on a public contract worth $3 
million, but offered a loan for the same purpose to a nonminority-owned 
firm with an affiliate in bankruptcy. An Asian-lndian American 
businessman in the San Francisco Bay area testified at a public hearing 
that he was unable to obtain a line of unsecured credit from mainstream 
banks until he found a loan officer who shared his heritage. A Filipino 
owner of a construction firm testified that he had difficulty obtaining 
bank financing, although white-owned firms with comparable assets could 
obtain similar loans.
  Overt discrimination and entrenched patterns of exclusion prevented 
many female- and minority-owned businesses from obtaining surety bonds.
  Minorities also have been consistently under-utilized in Government 
contracting. In 1996, the Urban Institute released a report documenting 
wide statistical disparities between the share of contract dollars 
received by minority- and women-owned firms compared to firms owned by 
white males. Minority firms received only 57 cents in Government 
contracts for every dollar they should have received based upon their 
eligibility.
  For specific racial groups, the disparities were even more severe. 
African American-owned firms received only 49 cents on the dollar; 
Latino-owned firms, 44 cent; Asian-American owned firms, 39 cents; 
Native American-owned firms, 18 cents; women-owned firms, 29 cents.
  These statistics are particularly troubling, because they exist 
despite affirmative action programs in many of the jurisdictions. 
Without such programs, their plight would have been far worse. The 
Urban Institute report found that the disparities between minority- and 
women-owned firms and other firms were greatest in areas in which no 
affirmative action program was in place.
  When only areas and years in which affirmative action is not in place 
were considered, the percentage of awards to women fell from 29 percent 
to 24 percent. For African Americans, the percentage dropped from 49 
percent to 22 percent; for Latinos, from 44 percent to 26 percent; for 
Asians, from 39 percent to 13 percent; and for Native Americans, from 
18 percent to 4 percent. These figures show that affirmative action 
programs are not only effective, but are still urgently needed.
  We also had extensive evidence of discrimination by prime 
contractors,

[[Page 19187]]

unions, and suppliers of goods and materials, who expressly favored 
white males over minorities and women. In addition, the information we 
received established that exclusionary practices by State and local 
governments also contributed to the problem. As a result, female and 
minority contractors were disadvantaged in their efforts to compete 
fairly for both public and private construction projects.
  The history of discrimination in contracting provides important 
context for the information that has been developed since the program 
was last reauthorized. We must not and do not assume that because the 
program was necessary in 1998, it must be reauthorized. Before deciding 
to continue the program, we have a constitutional duty to determine 
whether it is still needed today.
  The information we have seen since then confirms that there is still 
a need for a national program. New studies completed since 1998 show 
that minority- and women-owned companies are underutilized in 
government contracting. The Department of Transportation identified 15 
detailed studies of State and local governments showing significant 
disparities between the availability and utilization of minority- and 
women-owned firms in government contracting. Studies showed 
underutilization in Nebraska; in Maryland; in Colorado; in Georgia; in 
Kentucky; in Ohio; in Wilmington, DE; in Dekalb County, GA; in Broward 
County, FL; in Dallas, TX; in Cincinnati, OH; in Tallahassee, FL; and 
in Baltimore, MD. Several other studies have also been completed since 
1998. Furthermore, expert evidence presented to the trial courts in 
Sherbrooke and in Gross Seed v. Nebraska Department of Roads included 
statistical evidence of underutilization of minority- and women-owned 
firms in Minnesota and Nebraska.
  In the past, we have seen a striking reduction in participation in 
the regions where government programs designed to provide a level 
playing field in the construction industry are curtailed or eliminated. 
That pattern has continued in recent years. For example, in the State 
of Minnesota, during 1999, after a Federal court had enjoined the State 
department of transportation from implementing a previous program--
participation dropped from over 10 percent to slightly more than 2 
percent. In addition, the General Accountability Office, GAO, issued a 
2001 study showing that contracting under the Federal program had 
``dramatically declined'' when similar local programs were terminated 
in the jurisdictions it examined.
  We also have received considerable new anecdotal evidence of 
discrimination in highway construction contracting:
  Herta Bouvia, the female co-owner of a company that competes for 
building contracts and highway construction contracts in Nebraska, 
testified in Gross Seed v. Nebraska Department of Roads that she faced 
hostility, slurs, and other forms of harassment on construction jobs 
because of her gender.
  Stanford Madlock, an African-American owner of a DBE trucking company 
in Nebraska, testified in the same case that he had suffered 
discrimination because of his race, including being denied contracts 
despite submitting the low bid for the work and being denied access to 
capital.
  The Tenth Circuit's 2003 opinion in Concrete Works v. City and County 
of Denver included extensive anecdotal evidence of discriminatory 
behavior by lenders, majority-owned firms, and individual employees in 
the Denver metropolitan area, which the court characterized as 
``profoundly disturbing.'' In that case, a senior vice president of a 
large, white-owned construction firm testified under oath that when he 
worked in Denver, he received credible complaints from minority- and 
women-owned construction firms that they were subject to different work 
rules than majority-owned firms; that he frequently observed graffiti 
containing racial or gender epithets on job sites in the Denver area; 
and that, based on his own experience, many white-owned firms refused 
to hire minority or women-owned subcontractors because of biased views 
that such firms were not competent.
  Witnesses from minority- and women-owned firms testified that they 
were treated differently than their white male competitors in 
attempting to prequalify for public and private projects or to obtain 
credit. They also testified that prime contractors rejected the lowest 
bids on construction projects when those bids had been submitted by a 
minority or woman, and that female- and minority-owned firms were paid 
less promptly by prime contractors and were charged more for supplies 
than white male competitors on both public and private projects.
  The case also included extensive evidence that Latino, African-
American, and female contractors were subjected to verbal and physical 
abuse because of their race or gender. Even more disturbing was the 
testimony that minority and female employees working on construction 
projects were physically assaulted and fondled, spit on with chewing 
tobacco, and pelted with 2-inch bolts thrown by males from a height of 
80 feet.
  Disparity studies completed since the Disadvantaged Business 
Enterprise Program was last reauthorized also contain significant 
anecdotal evidence:
  A disparity study by the State of Delaware described the difficulties 
of African-American firms in obtaining loans, including the experience 
of an African-American contractor who could obtain credit only after a 
white friend working at the bank interceded on his behalf.
  The 2003 Ohio study also included the account of an African-American 
general contractor in the construction business whose ability to 
perform the work was questioned by an administrator for a project 
conducted by the State. The African-American contractor related that he 
``had a lot of problems out of that particular agency,'' and was told 
that Government affirmative action programs are ``a form of n--gger 
welfare.'' The same contractor found that he was expected only to work 
on projects that were part of an affirmative action program.
  The study included anecdotal evidence that female construction 
contractors were often forced to justify their ability to do the job. 
One contractor related that she was frequently required to demonstrate 
her knowledge of the construction business. She said, ``You are 
challenged, no matter your age, no matter your position, you are 
challenged quite frequently and asked very simple construction quiz 
questions just to prove you [know] construction acumen.'' She said that 
male contractors assume women lack knowledge of the business. One 
female contractor stated that she was forced to answer basic questions 
about construction before being permitted to perform work on a job.
  A 1999 study of contracting in Seattle includes accounts by a female 
contractor with 14 years' experience in construction. It found that 
general contractors assume minority-and women-owned firms do 
substandard work. It also includes information about women contractors 
subjected to sexually inappropriate or demeaning comments by men in the 
construction industry.
  The 1999 Seattle study contained troubling anecdotal evidence of 
lending discrimination against minorities. A Latino construction 
contractor had difficulty obtaining credit for his business until his 
white employee began dealing with the bank and easily obtained the loan 
from the same loan officer who had previously ignored the Latino 
contractor's application. The Latino owner also said that he later 
tried to help six other minority contractors--two African Americans, 
two Latinos, and two Native Americans--obtain credit after his company 
expanded, and always had difficulty. He stated that bankers told him, 
``Jeez, you know how much these types of firms fail?'' and that the 
African American and Native American contractors he sought to help were 
verbally mistreated by bank employees.
  The same study noted that one Seattle bank placed so many increasing 
financial requirements on an Asian American construction contractor 
that the contractor was unable to get credit until he no longer needed 
it.

[[Page 19188]]

  The study also included anecdotal evidence of bid shopping by prime 
contractors that disadvantaged minority firms and discriminated against 
African-American and Latino construction contractors in seeking bonding 
and insurance.
  A 1999 study of contracting in Minnesota included the account of an 
African-American construction contractor, who stated that a white 
construction worker refused to report to an African-American worker, 
that there was racial harassment on job sites ``all the time,'' and 
that African Americans had been called ``monkeys'' on the job and had 
their work sabotaged.
  The Minnesota study also included statements by an Asian contractor 
who endured racial slurs or harassment from others in his business ``at 
least once a month.''
  In light of the extensive evidence of continuing discrimination in 
construction contracting, the additional information available to 
Congress since 1998 makes clear that the Disadvantaged Business 
Enterprise Program is still needed. Given the importance of this 
question, I will ask unanimous consent to include further evidence in 
the Record.
  In reauthorizing the Disadvantaged Business Enterprise program, we 
are well aware that in seeking to expand inclusion in the American 
dream, we must not unduly burden any other group. The program achieves 
the proper balance. The Department of Transportation's regulations 
expressly prohibit the use of rigid quotas, and require States 
administering the program to use race-conscious measures only as a last 
resort when race-neutral efforts to combat discrimination have been 
shown to be insufficient. If a State finds that it can create a level 
playing field on which all contractors have a fair chance to compete 
without using race-conscious means, the regulations require it to set 
the race-conscious portion of its goal of minority participation at 
zero, so that no race-conscious measures are used at all. We know that 
the program is also flexible in fact, because some States have set the 
race-conscious portion of the goal at zero.
  The process by which firms may be certified for the program does not 
rigidly classify firms based on race, ethnicity or gender. Instead, the 
certification process is designed to identify victims of 
discrimination. Although firms owned by women and minorities are 
presumed to be eligible to participate in the program, that presumption 
may be rebutted, and their owners must submit a notarized statement 
declaring that they are, in fact, socially and economically 
disadvantaged. Firms owned by white males who can show that they are 
socially and economically disadvantaged can also qualify to participate 
in the program.
  Finally, the program is inherently flexible. It imposes no penalty on 
States for failing to meet annual goals for participation. It requires 
only that prime contractors exercise good faith in seeking to meet the 
DBE participation goals on individual contracts; no penalty is imposed 
if their good-faith efforts are unsuccessful.
  Given the magnitude and pervasiveness of the historical exclusion of 
women and minorities from construction contracting, it is not 
surprising that this problem has not yet been fully corrected. But the 
difficulty of the problem does not absolve us of our duty to address 
the effects of discrimination, and to continue our effort to achieve a 
level playing field in government contracting. As the Supreme Court 
stated in Adarand Constructors v. Pena, ``[g]overnment is not 
disqualified from acting in response to the unhappy persistence of both 
the practice and the lingering effects of racial discrimination against 
minority groups in this country.'' Indeed, we have a duty to ensure 
that federal dollars are not used to subsidize discrimination.
  As President Kennedy stated in his landmark message to Congress on 
civil rights in June 19, 1963:

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

  The Disadvantaged Business Enterprise program enables a diverse group 
of contractors to contribute to the important projects financed by this 
major legislation. Everyone benefits when the recipients of Federal 
opportunities reflect all of America.
  The program ensures that all Americans have a fair opportunity to 
participate in the construction projects and other activities 
authorized in this legislation and that those who benefit from Federal 
contracting opportunities reflect our Nation's diversity, and I commend 
my colleagues on both sides of the aisle for including this still 
urgently needed program in this major legislation.
  Mr. President, I commend to my colleagues the National Economic 
Research Associates Disadvantaged Business Enterprise Availability 
Study prepared for the Minnesota Department of Transportation.
  I ask unanimous consent that several letters be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                           Molter Corporation,

                                    Frankfort, IL, March 29, 2004.
     Joann Payne,
     Women First Natl Legislative Committee,
     Washington, DC.
       Dear Ms. Payne: In 1987 I started my business. At that 
     time, I was not married. I am married now. You ask if I feel 
     there have been acts of discrimination, I most definitely 
     feel that is the case.
       When I started my company, I was involved in a specialty 
     type of construction, and tried to work for industrial 
     business. In 1987, rarely did you see women in plants, 
     workers or business owners. I was mocked and ridiculed by my 
     male counterparts. They blatantly said I did not know much 
     about the business, and that I would not be in business in 
     one year's time frame. (That was 16 years ago.)
       When I went to the bank for a loan--and that is still 
     happening, my husband has to sign all papers, though he is 
     retired from the restaurant business and has never been 
     involved in my business.
       Prime contractors tend to take advantage of small minority 
     or women business. They do not pay timely, do not process 
     change orders in a proper time frame. This leads to a cash 
     shortage for a small business.
       If the goals were eliminated, general contractors would not 
     use minority or women business owners. That has been proven 
     for those areas without goals. When they have a project, they 
     will only solicit your bid up to the amount of the goal, and 
     do not want to use me to any further limit.
       There is a good ole boy's network, be it on the golf 
     course, on trips, or dinner/lunch meetings.
       Given the opportunity, my company has proven our 
     exceptional capabilities. Just recently we were named 
     subcontractor of the year by IDOT. We performed shotcrete 
     work on a bridge over the river in Peoria, Illinois.
       The DBB program has been good for my company when we are 
     given the opportunity. It is extremely important that the 
     program continue.
           Sincerely,
     Loretta Molter.
                                  ____



                            Leajak Concrete Construction Inc.,

                             Mountlake Terrace, WA, July 20, 2005.
     U.S. Congress,
     Washington, DC.
       Dear Sir or Madam: I appreciate the opportunity to submit 
     evidence of my company's experiences with the DBE program as 
     it exists in Washington State.
       Located in Washington State, Leajak Concrete Construction 
     Incorporated has been in existence since 1992 and has been a 
     certified DBE since its inception. Leajak Concrete 
     Construction is a small general contractor specializing in 
     structural concrete work suitable for commercial buildings, 
     civil work, public works projects, transportation projects, 
     and many others. As a small DBE business our revenues average 
     approximately 3-3.5 Million, employing 8-10 full time 
     employees and 6-7 part time employees.
       Although the DBE program has assisted Leajak Concrete 
     Construction Incorporated to access some opportunities, it is 
     important to know that the barriers and obstacles that the 
     program is suppose to mitigate still exist. We continue to 
     encounter discrimination in the market place that keeps us 
     from participating in competitive bidding, negotiated work, 
     and receiving the necessary information we need to seek 
     business. Leajak Concrete Construction Incorporated 
     constantly pursues subcontracting work with Prime 
     contractors, but it continues to be our experience that the 
     Prime contractors do more to discourage us than to encourage 
     us to bid. For example, we are constantly at a disadvantage 
     because Prime contractors contact us at the last minute to 
     bid on complex and substantial contracts. This is indicative 
     of the ``Good Faith Effort'' we experience day in and day 
     out. Furthermore, when we have asked for feedback on our bid 
     and request post-bid reviews, we are ignored and disregarded.

[[Page 19189]]

       Washington State has the dubious distinction of being only 
     one of two states in the Union that have an anti-affirmative 
     law on the books RCW 49.60.400 (aka I-100). As a result, 
     spending with certified minority and women-owned businesses 
     had decreased dramatically; 7.8% in 1998 for minority firms 
     to 0.8% in 2003, and 6.1% in 1998 for women firms to 1.2% in 
     2003. I believe that the chilling effect of I-200 is event in 
     a lack of commitment, responsiveness and concern by the state 
     agencies responsible for managing and upholding the federal 
     DBE program. It is correct to say that the recipients and 
     sub-recipients of federal transportation dollars in 
     Washington State take a very passive approach to promoting 
     and communicating the DBE program to the affected parties.
       To summary, the DBE program as contained in TEA-21 should 
     be reauthorized, upheld, strengthened and improved. America's 
     certified DBE firms deserve fair and equitable access to 
     opportunities that are funded by our tax dollars, and the 
     federal DBE program is an important underpinning.
           Sincerely yours,
                                                 Fredell Anderson,
     President.
                                  ____

                                           Md. Washington Minority


                               Contractors' Association, Inc.,

                                     Baltimore, MD, July 21, 2005.
     Re Reauthorization of DBE Program.
     The U.S. Congress,
     Washington, DC.

       Dear Sir or Madam: I address this correspondence to you on 
     a matter of extreme importance. Discrimination against one's 
     racial, ethnic and gender make-up is still the number one 
     impediment for minority entrepreneurs starting and sustaining 
     their businesses in America today. As the leader of a 
     minority trade association in Baltimore, Maryland, I have 
     witnessed and received testimony from many who have 
     experienced first hand the evils of procurement 
     discrimination in Government and private sectors.
       The findings from disparity studies conducted throughout 
     Maryland indicate that countless minority businesses are not 
     being provided opportunities to grow their businesses because 
     of a lack of capital, bonding and retained earnings. Upon 
     attending a recent public hearing at the headquarters of the 
     Washington Suburban Sanitary Commission (WSSC) on the subject 
     of its recent disparity study, I heard a disadvantaged 
     business testify that if the WSSC suspends the DBE program, 
     his company would be out of business. This particular company 
     supplies valves and manhole covers to WSSC. The owner of the 
     business further stated that other water supply and treatment 
     centers in the region who do not have DBE programs won't buy 
     from him because he can't get the foundries to supply him. 
     The foundries that do supply him do so only to satisfy WSSC's 
     DBE program. If the DBE program is not reauthorized, the fate 
     of the majority businesses doing business under the program 
     is doomed. I urge you the continuance of the program without 
     haste.
           Sincerely,
                                            Wayne R. Frazier, Sr.,
     President.

                          ____________________