WSDOT Excludes Non-Minority Women-Owned DBEs from Participation Goals

A drastic change has been implemented by the Washington State Department of Transportation (“WSDOT”) to the Disadvantaged Business Enterprise (“DBE”) Program in Washington. Effective June 1, 2017, WSDOT has implemented a “waiver” to exclude women-owned DBEs[i] from qualifying toward Condition of Award (“COA”) Goals on federally-funded projects. This move is significant. It will likely result in long-lasting detrimental impacts on the DBE community, women-owned businesses, and the entire construction community in Washington. The construction industry should be in an uproar over this change. Instead, it has largely gone unnoticed (likely because its impacts have not yet been felt). It is a de facto exclusion of women-owned businesses from the DBE program, and the severity of this change cannot be overstated.

Under the waiver, women-owned businesses no longer satisfy COA Goals on federally-funded projects (i.e., projects receiving funding from the Federal Highway Administration) advertised after June 1, 2017. Existing contracts are not impacted and may continue to utilize women-owned DBEs to satisfy COA Goals until the project is complete. The waiver is not retroactive.

The waiver does not apply to all WSDOT projects, however. Purely state-funded projects, Federal Transit Administration and Federal Aviation Administration projects are not impacted. In addition, the DBE programs of Sound Transit and the Port of Seattle are also not impacted. Attached here is a link to a document authored by Roger Miller, Secretary of Transportation and Keith Metcalf, Deputy Secretary of Transportation, with additional details on this waiver.

Why this waiver?

It is hard to understand why WSDOT moved to exclude women-owned DBEs from a program created by Congress with the goal of increasing women and minority-owned business participation in federally-funded transportation contracting—a bit of background and legal context is helpful.

To withstand constitutional scrutiny, each state must tailor its implementation of the DBE program to the specific discrimination found to exist in that state.[ii] Every three years, therefore, WSDOT must conduct a “Disparity Study,” aimed at statistically measuring the “discrimination” in the marketplace, i.e., the level of DBE participation that would be expected in that state, absent the effects of discrimination. 49 C.F.R. 26.45(b). WSDOT’s DBE program is based upon the findings of its then current Disparity Study.

A previous, and now outdated, Disparity Study from 2009-2011 conducted by BBC Research & Consulting of Denver, Colorado shockingly concluded that women-owned firms do not face "substantial disparities," or discrimination, in the federally-funded transportation contracting market in Washington.

Given this conclusion of the BBC Disparity Study, in December 2013, WSDOT announced its intent to seek a waiver from the United States Department of Transportation (“USDOT”) to exclude women-owned firms from qualifying for COA Goals. The initial request to USDOT was made on March 28, 2014 and was supplemented on November 9, 2015 and March 3, 2016. Many thought (and/or hoped) that the waiver would never be approved.

Unfortunately, three years after the initial request, on December 8, 2016—and just before the change in the administration with the inauguration of President Donald Trump—USDOT granted the waiver. See USDOT letter attached here. It has now been implemented by WSDOT, effective June 1, 2017.

The BBC Disparity Study, and its conclusion that women-owned firms do not face "substantial disparities” in the federally-funded transportation contracting market in Washington, has faced numerous criticisms. First, it used now highly antiquated data (from 2009 to 2011). Furthermore, BBC’s statistical methodology was criticized by many as flawed and unreliable. See letter authored by lawyers of Ahlers & Cressman on January 9, 2014 (attached here) and the Associated General Contractors of Washington (see article here). The BBC Disparity Study has been highly criticized as unrepresentative of true marketplace conditions. See our earlier blog articles more fully explaining the background and this flawed conclusion here and here.

While the waiver was pending with USDOT, WSDOT hired a new firm, Colette Holt & Associates (“CHA”), to conduct an updated Disparity Study. The findings of the CHA Study have not yet been released. Upon announcement of the waiver implementation on June 1, however, WSDOT represented that the new, CHA Disparity Study was nearing completion and would be based on more recent data. WSDOT has stated it will evaluate any potential appropriate actions to take concerning the waiver after the CHA study is completed. WSDOT expects to be provided with a draft study for internal review within a few weeks of implementing this waiver on June 1, 2017.

A Call to Action

In order to withstand constitutional scrutiny, WSDOT (and all states) must implement the DBE program based upon solid and reliable data that accurately reflects true marketplace conditions. The question becomes whether the BBC Disparity Study—with its flawed conclusions and based on old marketplace data from 2009-2011—can meet this standard.

In 2005, the Ninth Circuit Court struck down WSDOT's implementation of the DBE program as unconstitutional because WSDOT's statistical data and analysis was inadequate.[iii] Given the problems with the BBC Disparity Study, the same result may occur here.

In addition, this wavier implementation is problematic as it is occurring despite the impending CHA Disparity Study, expected to be completed in just a few weeks. What will occur if the CHA Disparity Study concludes differently from the BBC Disparity Study, finding that women-owned DBEs do, in fact, face "substantial disparities” in the federally-funded transportation contracting market in Washington?

WSDOT’s action, implementing this waiver on June 1, essentially under the radar without adequate contractor education, will inevitably lead to confusion and significant impact to both woman-owned DBEs and general contractors, including a likely increase in bid protests (at taxpayer expense) as contractors are forced to account for the waiver in future bidding.

Those seeking further information on this topic should contact Ellie Perka at (206) 529-3005 or Lindsay Taft at 206-529-3017.

[i] This change impacts only non-minority women-owned DBEs as minority women-owned DBEs will be classified under their minority status, not by gender. For simplicity, in this article, I refer to non-minority women-owned DBEs as “women-owned DBEs.”

[ii] Western States Paving Co., Inc. v. Washington State Dep't of Transp., 407 F.3d 983, 988 fn. 3 (9th Cir. 2005).

[iii] See Western States, 407 F.3d at 988.

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