February 27, 2013

Caltrans: "Disparate impact justifies racial preferences."

By Caltrans: "Disparate impact justifies racial preferences."

In my last post about our case Associated General Contractors of America, San Diego Chapter  v. California Department of Transportation (Caltrans), I described how Caltrans implements the federal Disadvantaged Business Enterprise (DBE) program in a way that requires prime contractors to discriminate against subcontractors on the basis of race and sex.  Specifically, I noted how Caltrans imposes a “one-size-fits-all” racial preference that could never be narrowly tailored statewide due to California’s size and diversity.  This post focuses on the manner in which Caltrans improperly relies upon a disparate impact theory of discrimination to justify its race-conscious measures.

The disparate impact theory of discrimination holds that when an action is taken without discriminatory intent, but has a disproportionate effect on some protected class, it can be challenged as illegal discrimination.  This is quite different from a disparate treatment lawsuit, where the plaintiff must prove that the defendant intentionally discriminated.  The United States Supreme Court held in Washington v. Davis, that laws having a racially disparate impact, but that were enacted without discriminatory intent, do not violate the United States Constitution.  Thus, findings of a disparate impact alone do not justify a government’s use of racial preferences, which can only be imposed to remedy patterns of deliberate exclusion.

An example of an important race-neutral law that was enacted without discriminatory intent, but that results in a disparate impact, is section 10180 of the California Public Contract Code.  Section 10180 states:  “On the day named in the public notice, the department shall publicly open . . . sealed bids and award . . . contracts to the lowest responsible bidders.”  Caltrans complies with section 10180 by awarding all transportation construction prime contracts in a race- and sex-neutral manner to the lowest responsible bidder.  But this results in a disproportionate impact on certain minority groups.  In 2007, for example, a disparity study showed that women contractors, and contractors of every minority group except Subcontinent Asians, were underutilized on these large, highway contracts.  In 2012, a new disparity study showed that Caltrans’ race- and sex-neutral contract award procedures resulted in a disparate impact on all minority groups, but not women, on highway construction prime contracts.

Despite these studies, it would be ridiculous for any group to claim that Caltrans intentionally discriminates in the award of prime contracts.  True, the Supreme Court holds that a law that is neutral on its face may be unconstitutional if it was enacted with discriminatory intent and results in disparate impact on a protected class.  But both federal and state courts recognize that competitive bidding laws, such as section 10180, are indeed constitutional.  They are enacted to protect taxpayers from corruption and prevent the waste of public funds.  Competitive bidding requirements are not enacted to disadvantage racial minorities, but to prevent public officials from awarding contracts uneconomically on the basis of bribery, political co-partisanship, racial/ethnic affinity, or any combination of these.

What is the cause of the disparate impact resulting from the state’s race- and sex-neutral competitive bidding law?  Since Caltrans does not know, we can only speculate.   Disproportionate effects may be caused by the past exclusion of minorities and women from skilled construction trade unions and training programs, deficiencies in working capital, inability to meet bonding requirements, unfamiliarity with bidding procedures, disability caused by an inadequate track record, and disparities in educational opportunities.  While it is imperative that the state investigate and redress these harms, Caltrans may not rely upon them to justify its race-conscious program.  In City of Richmond v.J.A. Croson Co., the Supreme Court rejected any argument that these sorts of injuries, which it labeled societal discrimination, justify the extreme measure of resorting to racial preferences.

Nevertheless, Caltrans decides which groups are eligible for preferences by combining the contracting data from prime contracts and subcontracts.  By merging these statistics, Caltrans derives an über racial preference which it then imposes across the state on all federally assisted transportation subcontracts to remedy societal discrimination.  But this mixing of prime contracting data does not reinforce the disparities from the subcontracting data, it changes them.  For example, in 2007, the data on for state-funded construction subcontracts (awarded without racial preferences) showed no substantial disparities for firms owned by Native Americans.  But disparities were created after the contracting data was massed.  As a result, Native Americans receive racial preferences on construction subcontracts even though the statistics from the Caltrans disparity study fails to infer discrimination against Native Americans on those types of contracts.  Not surprisingly, the latest statistics on construction subcontracts continues to show no inference of discrimination against Native Americans.  However, Caltrans’ one-size-fits-all remedy still grants preferences to Native Americans on construction subcontracts.   There are many other examples.

The Equal Protection Clause provides that no state shall deny to any person within its jurisdiction the equal protection of the laws.  Caltrans seems to have forgotten this requirement.

What to read next