The Caltrans Local Assistance Program: Money for discrimination

February 15, 2013 | By RALPH KASARDA

Earlier this week I participated in oral argument before the Ninth Circuit Court of Appeals for our case in Associated General Contractors of America, San Diego Chapter v. California Department of Transportation (Caltrans).  As a condition of taking federal highway funds, Caltrans administers a federal contracting program called the Disadvantaged Business Enterprise (DBE) Program.  The case concerns whether the Caltrans program violates the Fourteenth Amendment’s Equal Protection Clause.  In a series of short posts, I shall endeavor to explain troubling aspects of the Caltrans program that have been brought to the court’s attention.  One defect concerns the state mandate that local agencies enforce a “one-size-fits-all” race- and sex-based preference even though there may be no local evidence of discrimination against the preferred groups.

The Caltrans Local Assistance Program oversees more than one billion dollars annually in federal and state funds to over 600 cities, counties, and regional agencies for local transportation contracts.  Roughly 700 of 1,200 projects per year are related to transportation construction projects.  When local agencies accept any amount of federal money channeled through Caltrans for these transportation projects, they must abide by the Caltrans DBE program.  If the Caltrans DBE program prohibited all discrimination against contractors on the basis of race and sex, that would be wonderful.  Unfortunately, the Caltrans program requires discrimination on the basis of race and sex.

By combining contracting data from two different industries (construction and engineering), from different levels of contracts (prime contracts and subcontracts), and from local agencies (cities and counties from across the state), Caltrans derives and enforces a one-size-fits-all racial preference.  In 2009, Caltrans announced that the combined statewide contracting data showed substantial disparities against contractors who were African American, Asian Pacific American, Native American, and white women (Caltrans uses data for white women to infer discrimination against all women).  But Caltrans said there were no mass disparities for contractors who were Hispanic men, Subcontinent Asian men, or white men.  On Caltrans federally assisted contracts, Caltrans requires that prime contractors prefer subcontractors from the former groups, but not the latter.

The same preference is enforced on all Caltrans transportation construction contracts, engineering contracts, and all local agency construction and engineering contracts that use federal money in any amount funneled through Caltrans.  Whenever a local agency accepts federal funds from Caltrans for a transportation project, it must insist that prime contractors use the aggregate racial preference in the hiring of subcontractors.

For the purposes of this post only, we accept the dubious proposition that statistical disparities from the various categories and tiers of Caltrans contracts are inferences of intentional discrimination that can only be remedied by racial preferences.  We have rejected that proposition throughout the litigation in this matter for the reasons discussed in our opening brief.  But even if that proposition is true, can you identify the problem?  In a state as large and diverse as California, any one-size-fits-all racial preference won’t fit.

For instance, in the northern and southern areas of the state, there are disparities for Subcontinent Asian engineers that by Caltrans’ definition would infer intentional discrimination.  But these local disparities are hidden after all contracting data is merged.  The result is that Subcontinent Asian engineers receive no preferences in the local jurisdictions where Caltrans’ own disparity study shows they are substantially underutilized.

Caltrans’ data shows that in the San Francisco Bay Area, Asian Pacific contractors are not underutilized on Caltrans construction contracts.  But cities and counties in the Bay Area require prime contractors to give preferences to Asian Pacific contractors on Caltrans local assistance contracts even if one dollar is from federal funds.  The same thing can be said for white women in different areas of the state.   Caltrans’ contracting data showed no inferences of discrimination against white women on construction contracts from local agencies in Santa Barbara, San Luis Obispo, Monterey, San Benito, Orange and Santa Cruz Counties.  But white women must be given preferences there as subcontractors on federally assisted local assistance contracts.  Native American construction contractors are not overutilized in many of the central counties of the state, but they receive preferences even in those counties where there are no findings of discrimination.

How is all of this possible?  By combining data from cities and counties, findings of purported discrimination are extrapolated in one jurisdiction from the experience of another.  This practice has been condemned by both the Supreme Court (City of Richmond v. Croson), and the Ninth Circuit (Coral Construction Co. v. King County).  In Western States Paving Co., Inc. v. Washington State Department of Transportation, the Ninth Circuit held that an overinclusive race- and sex-conscious program provides minority contractors who have not encountered discriminatory barriers with an unlawful competitive advantage over minority contractors who may have actually suffered discrimination.  But that’s exactly what the Caltrans program requires across the state through its Local Assistance Program.

Caltrans has a new DBE Program.  But it still implements a one-size-fits-all race- and sex-based preference that can never be narrowly tailored to purported discrimination in the transportation construction industry, the engineering industry, and in all local jurisdictions across the state.