Disadvantaged business program unconstitutional, says legal group

The California Department of Transportation's (Caltrans) race and gender-conscious disadvantaged businesses enterprise (DBE) program is being challenged as unconstitutional by a legal group representing the San Diego Chapter of the Associated General Contractors of America.

The Pacific Legal Foundation (PLF) alleges that the DBE program violates Proposition 209, which California voters passed in 1996 to prohibit the state from considering race or gender in public employment, education, and contracting, and the 14th Amendment to the United States Constitution, which also bars the discrimination or granting of preferential treatment on the basis of race and gender.

“This new Caltrans program represents a backward step—a return to quotas—by the agency,” said a press release on the PLF website. “In 2006, after PLF sent a demand letter arguing that the scheme violated state and federal law, Caltrans abandoned a previous policy of using quotas in contracting. However, soon after going “race neutral” in response to PLF’s letter, the agency began seeking a route to bring quotas back—by trying to exploit the exception to Proposition 209 for cases where federal funds would be lost if race-conscious policies were not implemented.”

Caltrans suspended its race and gender-conscious DBE program in 2006 after the Ninth Circuit Court ruled that race and gender-based quota systems were legal only if there was evidence of intentional discrimination against indentified disadvantaged groups (Western States Paving v. Washington State Department of Transportation).

In early March 2009, Caltrans re-implemented the race and gender-conscious component of the DBE program after an Availability and Disparity study discovered that women, African Americans, Asian-Pacific Americans, and Native American-owned companies experienced continued discrimination. Labeling these firms underutilized disadvantaged business enterprises (UDBEs), the department set an aspirational UDBE goal of 6.75 percent – meaning that 6.75 percent of all contracts receiving federal funding for the fiscal year would be awarded to UDBE firms.

In their suit, the PLF contends that the methodology of the Availability and Disparity study is flawed and, as a result, Caltrans' policies contravene existing law.

“Caltrans’ vague and defective “disparity study” provides no such evidence of discrimination by Caltrans,” says the PLF.

When it comes to defending Proposition 209 in cases of public contracting, the PLF has been successful. The foundation was victorious in 2000 and 2004 against local governments and currently has a case against San Francisco's race and gender-based contract requirements being heard by the state's Supreme Court.

At the time of this article's writing, Caltrans has yet to comment directly about the lawsuit. A department spokesman has said, however, that the Federal Highway Administration supports the agency's efforts to increase DBE participation.

To read the lawsuit documents, visit: http://www.sacbee.com/static/weblogs/the_state_worker/2009/06/read-
the-caltrans-lawsuit-docu.html

Governor, partners push for public-private infrastructure projects

Public-private partnerships (PPPs) may be the wave of the future for infrastructure projects if three state governors have their way. In a blog post on the influential Huffington Post website earlier this month, California's Arnold Schwarzenegger, New York State's David Paterson, and Pennsylvania's Ed Rendell pressed the federal government and state officials to seriously consider PPPs as a means of funding improvements to the nation's decrepit infrastructure.

“The moment for public-private partnerships is now,” said the governors' piece. “Our nation's infrastructure needs to be repaired and expanded. With 10 million Americans out of work, we need to create jobs. And, due to the recession, states and local governments are facing large deficits, limiting our ability to build.”

Public-private partnerships involve private companies investing their own money in public projects in return for a financial stake. Usually, the companies are responsible for maintaining and operating the project with minimal government oversight for a determined period of time, after which the government can either re-lease management to a private company or manage the project themselves.

The governors stressed that the American Recovery and Reinvestment Act, which is pumping over $100 billion into infrastructure improvements, aims to stimulate the economy by creating jobs and, accordingly, does not provide the financial investment required to adequately upgrade the nation's infrastructure.

“By combining government oversight with private-sector efficiencies, we can build more projects; we can build them more quickly; we can improve services for our citizens; and we can lower costs for taxpayers.”

The budget California lawmakers passed in February includes a provision encouraging private investment in state infrastructure. The California Chapter of the Associated General Contractors of America has come out in support of PPPs, writing: “Not only will the state be able to stretch limited infrastructure dollars to the fullest under this reform, it will also mean more private-sector jobs.”

While there are many advocates of the partnerships, some academic studies have discovered that the benefits of private participation are often exaggerated. The detractors say that soaring project costs and delays are frequently downplayed and that the private companies' expected returns are often overestimated.

Governor Schwarzenegger has been a strong proponent of PPPs and, last year, said that the partnerships could provide $75 billion to $100 billion toward the $500 billion required to fully upgrade California's infrastructure.

To read the governors' full blog post, visit: http://www.huffingtonpost.com/gov-david-a-paterson/the-moment-for-
public-pri_b_210972.html

California budget update

The State of California is once again embroiled in a debate over how to close a gaping budget hole. Updated as the news happens, DBE Goodfaith's California Stimulus & Budget Blog highlights budget-related issues pertinent to firms doing business with the state. The blog aggregates budget news from multiple sources, offers insightful commentary, and provides updates from state agencies and departments.

If you have any suggestions, comments, or questions about the blog or its content, please contact us at blog@dbegoodfaith.com. We are always looking for better ways to serve you!

To read DBE Goodfaith's California Stimulus & Budget Blog, visit : www.dbegoodfaith.com/cabudgetblog.

What is DBE Goodfaith?

DBE Goodfaith Inc. is an outreach assistance firm dedicated to providing a reliable web-based service solution for businesses seeking socially and economically disadvantaged business (DBE/UDBE/DVBE/WBE/SBE/MBE/HUB) participation on government-funded projects.

With the help of our services, businesses can comply with the Good Faith Effort requirements of state and local government disadvantaged business programs. By placing subcontracting opportunity ads on our website and directly soliciting disadvantaged business firms via email, fax, and telephone, we help take the stress out of the Good Faith Process and allow firms to concentrate on building quality, competitive bids. To ensure that all disadvantaged businesses are included in our outreach procedures, we maintain an up-to-date database of all registered disadvantaged firms in California, Nevada, New York, and soon Texas. When customers search our online database, they can easily find disadvantaged businesses by their location and/or the type of goods and services or work they provide.

Also, in an effort to inform and educate the community on procurement, construction, and other pertinent topics, we publish electronic newsletters throughout the year. In our e-newsletter, businesses can find in-depth discussions on procedures and regulations effecting disadvantaged business programs, analysis of current events, and other valuable resources such as events listings. We also offer construction trade and focus information on our website related to DVBE, DBE, MBE, WBE, and other programs.

For more information on our services, please visit our website at: http://www.dbegoodfaith.com