2017 Disparity Study - Illinois Department of Transportationidot.illinois.gov/Assets/uploads/files/Doing...The study team conducted an analysis of federal regulations, case law, and

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Table of Contents

BBC RESEARCH & CONSULTING i

ES. Executive Summary A. Analyses in the Disparity Study ........................................................................................... ES–2 B. Availability Analysis Results ................................................................................................. ES–3 C. Utilization Analysis Results .................................................................................................. ES–4 D. Disparity Analysis Results .................................................................................................... ES–6 E. Overall DBE Goal .................................................................................................................. ES–9 F. Program Implementation .................................................................................................. ES–11

1. Introduction

A. Background ........................................................................................................................... 1–2 B. Study Scope ........................................................................................................................... 1–3 C. Study Team Members ........................................................................................................... 1–7

2. Legal Framework

A. Program Elements ................................................................................................................. 2–1 B. Legal Standards ..................................................................................................................... 2–3

3. Marketplace Conditions

A. Human Capital ....................................................................................................................... 3–2 B. Financial Capital .................................................................................................................... 3–6 C. Business Ownership .............................................................................................................. 3–9 D. Business Success ................................................................................................................. 3–11 E. Summary .............................................................................................................................. 3–13

4. Collection and Analysis of Contract Data

A. Overview of Contracting Policies .......................................................................................... 4–1 B. Collection and Analysis of Contract Data .............................................................................. 4–3 C. Collection of Vendor Data ..................................................................................................... 4–5 D. Relevant Geographic Market Area ........................................................................................ 4–6 E. Relevant Types of Work ......................................................................................................... 4–6 F. Collection of Bid and Proposal Data ...................................................................................... 4–7 G. Agency Review Process ......................................................................................................... 4–7

Table of Contents

BBC RESEARCH & CONSULTING ii

5. Availability Analysis A. Purpose of the Availability Analysis ...................................................................................... 5–1 B. Potentially Available Businesses ........................................................................................... 5–1 C. Businesses in the Availability Database ................................................................................. 5–3 D. Availability Calculations ........................................................................................................ 5–4 E. Availability Results ................................................................................................................. 5–6 F. Base Figure for Overall DBE Goal ........................................................................................... 5–9 G. Implications for DBE Contract Goals ................................................................................... 5–10

6. Utilization Analysis

A. Overview of Utilization Analysis ............................................................................................ 6–1 B. Utilization Analysis Results .................................................................................................... 6–1

7. Disparity Analysis

A. Overview of Disparity Analysis .............................................................................................. 7–1 B. Disparity Analysis Results ...................................................................................................... 7–5 C. Statistical Significance of Disparity Analysis Results ............................................................. 7–9 D. Case Study Analysis ............................................................................................................. 7–12

8. Overall DBE Goal

A. Establishing a Base Figure ..................................................................................................... 8–1 B. Considering a Step‐2 Adjustment .......................................................................................... 8–2

9. Program Measures

A. Is there evidence of discrimination within the local transportation contracting marketplace for any racial/ethnic or gender groups? .......................................................... 9–2 B. What has been the agency’s past experience in meeting its overall DBE goal? ................... 9–2 C. What has DBE participation been when the agency did not use race‐or

gender‐conscious measures? ................................................................................................ 9–3 D. What is the extent and effectiveness of race‐ and gender‐neutral measures

that the agency could have in place for the next fiscal year? ............................................... 9–3 10. Program Implementation

A. Elements of the Federal DBE Program ................................................................................ 10–1 B. Additional Considerations ................................................................................................. 10–10

Table of Contents

BBC RESEARCH & CONSULTING iii

Appendices A. Definition of Terms B. Legal Framework and Analysis C. Quantitative Analyses of Marketplace Conditions D. Qualitative Analyses about Marketplace Conditions E. Availability Analysis Approach F. Disparity Tables

CHAPTER ES.

Executive Summary

BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER ES, PAGE 1

CHAPTER ES. Executive Summary

TheIllinoisDepartmentofTransportation(IDOT)retainedBBCResearch&Consulting(BBC)toconductadisparitystudytohelpinformtheagency’simplementationoftheFederalDisadvantagedBusinessEnterprise(DBE)Program.AsaFederalHighwayAdministration(FHWA)fundrecipient,IDOTimplementstheFederalDBEProgramtoaddresspotentialdiscriminationagainstDBEsintheawardandadministrationofFHWA‐fundedcontracts.Todoso,IDOTusesvariousmeasurestoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitsFHWA‐fundedcontractsincludingbothrace‐andgender‐neutralmeasuresandrace‐andgender‐consciousmeasures.Race‐andgender‐neutralmeasuresaremeasuresthataredesignedtoencouragetheparticipationofallbusinessesinIDOTcontracting,regardlessoftherace/ethnicityandgenderoftheowners.Incontrast,race‐andgender‐consciousmeasuresaredesignedtospecificallyencouragetheparticipationofminority‐andwoman‐ownedbusinessesinIDOTcontracting.Aspartofthedisparitystudy,BBCassessedwhethertherewereanydisparitiesbetween: Thepercentageofcontractingdollars(includingsubcontractdollars)thatminority‐and

woman‐ownedbusinessesreceivedontransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawardedbetweenOctober1,2012andSeptember30,2016(i.e.,utilization);and

Thepercentageoftransportation‐relatedconstructionandprofessionalservicescontractingdollarsthatminority‐andwoman‐ownedbusinessesmightbeexpectedtoreceivebasedontheiravailabilitytoperformspecifictypesandsizesofIDOTprimecontractsandsubcontracts(i.e.,availability).

Thedisparitystudyalsoexaminedotherquantitativeandqualitativeinformationrelatedto: ThelegalframeworksurroundingIDOT’simplementationoftheFederalDBEProgram; Localmarketplaceconditionsforminority‐andwoman‐ownedbusinesses;and ContractingpracticesandbusinessassistanceprogramsthatIDOTcurrentlyhasinplace.IDOTcouldusestudyinformationtohelprefineitsimplementationoftheFederalDBEProgram,including: SettinganoverallDBEgoalfortheparticipationofminority‐andwoman‐ownedbusinesses

initstransportation‐relatedcontracts; Determiningwhichprogrammeasurestousetoencouragetheparticipationofminority‐

andwoman‐ownedbusinesses;and Determiningwhichgroupswouldbeeligibletoparticipateinrace‐andgender‐conscious

measuresthattheagencydecidestouseaspartofimplementingtheFederalDBEProgram.


BBCsummarizeskeyinformationfromthedisparitystudyinfiveparts:A. Analysesinthedisparitystudy;B. Availabilityanalysisresults;C. Utilizationanalysisresults;D. Disparityanalysisresults;E. OverallDBEGoal;andF. Programimplementation.

A. Analyses in the Disparity Study Alongwithmeasuringdisparitiesbetweentheparticipationandavailabilityofminority‐andwoman‐ownedbusinessesinIDOTcontracts,BBCalsoexaminedotherquantitativeandqualitativeinformationrelatedtoIDOT’simplementationoftheFederalDBEProgram: Thestudyteamconductedananalysisoffederalregulations,caselaw,andother

informationtoguidethemethodologyforthedisparitystudy.Theanalysisincludedareviewoffederal,state,andlocalrequirementsrelatedtotheFederalDBEProgramandotherminority‐andwoman‐ownedbusinessprograms(seeChapter2andAppendixB).

BBCconductedquantitativeanalysesofthesuccessofminorities;women;andminority‐andwoman‐ownedbusinessesthroughoutIllinois.Inaddition,BBCcollectedqualitativeinformationaboutpotentialbarriersthatminority‐andwoman‐ownedbusinessesfaceinthelocalmarketplacethroughin‐depthinterviews,telephonesurveys,publicmeetings,andwrittentestimony(seeChapter3,AppendixC,andAppendixD).

BBCanalyzedthepercentageofIDOT’stransportation‐relatedcontractingdollarsthatminority‐andwoman‐ownedbusinessesareavailabletoperform.Thatanalysiswasbasedontelephonesurveysthatthestudyteamcompletedwithbusinessesthatworkinindustriesrelatedtothespecifictypesoftransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawards(seeChapter5andAppendixE).

BBCanalyzedthedollarsthatminority‐andwoman‐ownedbusinessesreceivedonthetransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawardedduringthestudyperiod(seeChapter6).

BBCexaminedwhethertherewereanydisparitiesbetweentheparticipationandavailabilityofminority‐andwoman‐ownedbusinessesonthetransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawardedduringthestudyperiod(seeChapter7).

BBCreviewedIDOT’scurrentoverallDBEgoalandprovidedguidancerelatedtosettingitsnextoverallDBEgoal(seeChapter8).

BBCreviewedIDOT’scurrentcontractingpracticesandmeasurestoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitscontractingandprovidedguidancerelatedtoadditionalprogramoptionsandpotentialrefinementstothosepracticesandmeasures(seeChapter9).


BBCreviewedrequirementsoftheFederalDBEProgramaswellasIDOT’scompliancewiththoserequirementsandprovidedguidancerelatedtopotentialrefinementstotheagency’simplementationoftheprogram(seeChapter10).

B. Availability Analysis Results BBCusedacustomcensusavailabilityanalysistoanalyzetheavailabilityofminority‐andwoman‐ownedbusinessesthatareready,willing,andabletoperformonIDOT’stransportation‐relatedconstructionandprofessionalservicesprimecontractsandsubcontracts.BBC’sapproachreliedoninformationfromsurveysthatthestudyteamconductedwithpotentiallyavailablebusinesseslocatedthroughoutIllinoisthatperformworkwithinrelevantworkspecializations,orsubindustries.ThatapproachallowedBBCtodeveloparepresentative,unbiased,andstatistically‐validdatabaseofpotentiallyavailablebusinessesandestimatetheavailabilityofminority‐andwoman‐ownedbusinessesinanaccurate,statistically‐validmanner.Overall results.FigureES‐1presentsoveralldollar‐weightedavailabilityestimatesbyracial/ethnicandgendergroupforthetransportation‐relatedconstructionandprofessionalservicesprimecontractsandsubcontractsthatIDOTawardedduringthestudyperiod.Overall,theavailabilityofminority‐andwoman‐ownedbusinessesforthosecontractsis19.9percent.Inotherwords,onewouldexpectminority‐andwoman‐ownedbusinessestoreceive19.9percentofthetransportation‐relatedcontractingdollarsthatIDOTawardsbasedontheiravailabilityforthatwork.Non‐Hispanicwhitewoman‐ownedbusinesses(13.6%)andHispanicAmerican‐ownedbusinesses(2.9%)exhibitedthehighestavailabilityamongtherelevantbusinessgroups.Figure ES‐1. Availability estimates by racial/ethnic and gender group

Note: Numbers rounded to nearest tenth of 1 percent and thus may not sum exactly to totals. For more detail and results by group, see Figure F‐2 in Appendix F. Source: BBC Research & Consulting availability analysis.

Results by contract goal status.IDOTusedDBEcontractgoalstoawardmostofitscontractsduringthestudyperiodtoencouragetheparticipationofminority‐andwoman‐ownedbusinesses.IDOT’suseofDBEcontractgoalsisarace‐andgender‐consciousmeasure.ItisusefultoexamineavailabilityanalysisresultsseparatelyforcontractsthatIDOTawardswiththeuseofDBEcontractgoals(goalcontracts)andcontractsthatIDOTawardswithouttheuseofthosegoals(no‐goalcontracts).FigureES‐2presentsavailabilityestimatesseparatelyforgoalandno‐goalcontracts.AsshowninFigureES‐2,theavailabilityofminority‐andwoman‐ownedbusinessesconsideredtogetherislowerforgoalcontracts(19.1%)thanforno‐goalcontracts(29.4%).

Business group

Asian Pacific American‐owned 0.5 %Black American‐owned 1.5Hispanic American‐owned 2.9Native American‐owned 0.0Subcontinent Asian American‐owned 1.4Non‐Hispanic white woman‐owned 13.6 %Total Minority‐ and Woman‐owned 19.9 %

Availability %


Figure ES‐2. Availability estimates by contract goal status

Note: Numbers rounded to nearest tenth of 1 percent and thus may not sum exactly to totals. For more detail, see Figures F‐18 and F‐19 in Appendix F. Source: BBC Research & Consulting availability analysis.

Results by contract role. Manyminority‐andwoman‐ownedbusinessesaresmallbusinessesandthusoftenworkassubcontractors.Becauseofthattendency,itisusefultoexamineavailabilityestimatesseparatelyforprimecontractsandsubcontracts.FigureES‐3presentsthoseresults.AsshowninFigureES‐3,theavailabilityofminority‐andwoman‐ownedbusinessesconsideredtogetherislowerforIDOTprimecontracts(15.2%)thanforIDOTsubcontracts(34.4%). Figure ES‐3. Availability estimates by contract role

Note: Numbers rounded to nearest tenth of 1 percent and thus may not sum exactly to totals. For more detail, see Figures F‐7 and F‐8 in Appendix F. Source: BBC Research & Consulting availability analysis.

C. Utilization Analysis Results BBCmeasuredtheparticipationofminority‐andwoman‐ownedbusinessesinIDOT’stransportation‐relatedcontractingintermsofutilization—thepercentageofprimecontractandsubcontractdollarsthatminority‐andwoman‐ownedbusinessesreceivedonIDOTprimecontractsandsubcontractsduringthestudyperiod.Overall results.FigureES‐4presentsthepercentageofcontractingdollarsthatminority‐andwoman‐ownedbusinessesconsideredtogetherreceivedontransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawardedduringthestudyperiod(includingbothprimecontractsandsubcontracts).AsshowninFigureES‐4,overall,minority‐andwoman‐ownedbusinessesreceived15.5percentoftherelevantcontractingdollarsthatIDOTawardedduringthestudyperiod.Themajorityofthosecontractingdollars—13.1percent—wenttocertifiedDBEs.Non‐Hispanicwhitewoman‐ownedbusinesses(6.9%)andHispanicAmerican‐ownedbusinesses(5.2%)exhibitedhigherlevelsofparticipationonIDOTcontractsthantheotherrelevantgroups.

Business group

Asian Pacific American‐owned 0.5 % 0.2 %Black American‐owned 1.5 1.8Hispanic American‐owned 2.5 7.7Native American‐owned 0.0 0.1Subcontinent Asian American‐owned 1.4 1.5Non‐Hispanic white woman‐owned 13.2 % 18.1 %Total Minority‐ and Woman‐owned 19.1 % 29.4 %

Goal statusGoal

contractsNo‐goal contracts

Business group

Asian Pacific American‐owned 0.2 % 1.4 %Black American‐owned 1.5 1.5Hispanic American‐owned 1.5 7.6Native American‐owned 0.0 0.0Subcontinent Asian American‐owned 1.2 1.9Non‐Hispanic white woman‐owned 10.9 % 22.1 %Total Minority‐ and Woman‐owned 15.2 % 34.4 %

Contract rolePrime contract Subcontract


Figure ES‐4. Overall utilization results

Note: Numbers rounded to nearest tenth of 1 percent. Numbers may not add to totals. For more detail, see Figure F‐2 in Appendix F. Source: BBC Research & Consulting utilization analysis.

Results by contract goal status.IDOTusedDBEcontractgoalstoawardmanycontractsduringthestudyperiodtoencouragetheparticipationofminority‐andwoman‐ownedbusinesses.Itisinstructivetocomparetheparticipationofminority‐andwoman‐ownedbusinessesbetweengoalcontractsno‐goalcontracts.Doingsoprovidesusefulinformationaboutoutcomesforminority‐andwoman‐ownedbusinessesoncontractsthatIDOTawardedinarace‐andgender‐neutralenvironmentandtheefficacyofDBEcontractgoalsinencouragingtheparticipationofminority‐andwoman‐ownedbusinessesinIDOT’stransportation‐relatedcontracts.FigureES‐5presentsutilizationresultsseparatelyforIDOTgoalcontractsandno‐goalcontracts.AsshowninFigureES‐5,minority‐andwoman‐ownedbusinessesconsideredtogethershowedhigherparticipationingoalcontracts(15.9%)thaninno‐goalcontracts(11.5%).ThoseresultsindicatetheeffectivenessofDBEcontractgoalsinencouragingtheparticipationofminority‐andwoman‐ownedbusinessesinIDOT’stransportation‐relatedcontracts.Figure ES‐5. Utilization results by contract goal status

Note: Numbers rounded to nearest tenth of 1 percent. Numbers may not add to totals. For more detail, see Figures F‐18 and F‐19 in Appendix F. Source: BBC Research & Consulting utilization analysis.

Results by contract role. Manyminority‐andwoman‐ownedbusinessesaresmallbusinessesandthusoftenworkassubcontractors,soitmightbereasonabletoexpecthigherparticipationofminority‐andwoman‐ownedbusinessinsubcontractsthaninprimecontracts.FigureES‐6presentsutilizationresultsforminority‐andwoman‐ownedbusinessesseparatelyforprime

Minority‐ and Woman‐ownedAsian Pacific American‐owned 0.5 %Black American‐owned 1.7Hispanic American‐owned 5.2Native American‐owned 0.2Subcontinent Asian American‐owned 1.0Non‐Hispanic white woman‐owned 6.9Total Minority‐ and Woman‐owned 15.5 %

DBEsAsian Pacific American‐owned 0.5 %Black American‐owned 1.7Hispanic American‐owned 5.2Native American‐owned 0.1Subcontinent Asian American‐owned 0.7Non‐Hispanic white woman‐owned 4.9Total DBE 13.1 %

Utilization %

Business group

Asian Pacific American‐owned 0.5 0.2 %Black American‐owned 1.7 1.8Hispanic American‐owned 5.4 7.7Native American‐owned 0.2 0.1Subcontinent Asian American‐owned 1.0 1.5Non‐Hispanic white woman‐owned 7.0 6.7Total Minority‐ and Woman‐owned 15.9 11.5 %

Goal contracts

No‐goal contracts

Goal status


contractsandsubcontracts.AsshowninFigureES‐6,theparticipationofminority‐andwoman‐ownedbusinessesconsideredtogetherwasinfactmuchhigherinIDOTsubcontracts(47.9%)thanprimecontracts(5.2%).Figure ES‐6. Utilization results by contract role

Note: Numbers rounded to nearest tenth of 1 percent. Numbers may not add to totals. For more detail, see Figures F‐7 and F‐8 in Appendix F. Source: BBC Research & Consulting utilization analysis.

D. Disparity Analysis Results Althoughinformationabouttheparticipationofminority‐andwoman‐ownedbusinessesinIDOTcontractsisusefulonitsown,itisevenmoreusefulwhenitiscomparedwiththelevelofparticipationthatmightbeexpectedbasedontheavailabilityofminority‐andwoman‐ownedbusinessesforIDOTwork.BBCcomparedtheparticipationofminority‐andwoman‐ownedbusinessesinIDOTprimecontractsandsubcontractswiththepercentageofcontractdollarsthatthosebusinessesmightbeexpectedtoreceivebasedontheiravailabilityforthatwork.BBCcalculateddisparityindicesforeachrelevantbusinessgroupandforvariouscontractsetsbydividingpercentparticipationbypercentavailabilityandmultiplyingthatquotientby100.Adisparityindexof100indicatesanexactmatchbetweenparticipationandavailabilityforaparticulargroupforaparticularsetofcontracts(referredtoasparity).Adisparityindexoflessthan100indicatesadisparitybetweenparticipationandavailability.Adisparityindexoflessthan80indicatesasubstantialdisparitybetweenparticipationandavailability.Overall results.FigureES‐7presentsdisparityindicesforallrelevantprimecontractsandsubcontractsthatIDOTawardedduringthestudyperiod.Thelinedrawnatadisparityindexlevelof100indicatesparity,andthelinedrawnatadisparityindexlevelof80indicatesasubstantialdisparity.AsshowninFigureES‐7,overall,theparticipationofminority‐andwoman‐ownedbusinessesincontractsthatIDOTawardedduringthestudyperiodwassubstantiallylowerthanwhatonemightexpectbasedontheavailabilityofthosebusinessesforthatwork.Thedisparityindexof78indicatesthatminority‐andwoman‐ownedbusinessesconsideredtogetherreceivedapproximately$0.78foreverydollarthattheymightbeexpectedtoreceivebasedontheiravailabilityfortransportation‐relatedcontractsthatIDOTawardedduringthestudyperiod.DisparityanalysisresultsbyindividualgroupindicatedthatSubcontinentAsianAmerican‐ownedbusinesses(disparityindexof70)andnon‐Hispanicwhitewoman‐ownedbusinesses(disparityindexof51)exhibitedsubstantialdisparities.

Business group

Asian Pacific American‐owned 0.3 1.2 %Black American‐owned 0.6 5.0Hispanic American‐owned 0.9 18.7Native American‐owned 0.0 0.6Subcontinent Asian American‐owned 0.8 1.4Non‐Hispanic white woman‐owned 2.5 20.8Total Minority‐ and Woman‐owned 5.2 47.9 %

Contract rolePrime contracts Subcontracts

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Figure ES‐10. Availability components of the base figure

Note: Numbers rounded to nearest tenth of 1 percent and thus may not sum exactly to totals.

Source: BBC Research & Consulting availability analysis.

Considering a step‐2 adjustment. TheFederalDBEProgramrequiresIDOTtoconsiderapotentialstep‐2adjustmenttoitsbasefigureaspartofdeterminingitsoverallDBEgoalandoutlinesseveralfactorsthattheagencymustconsiderwhenassessingwhethertomakeanyadjustment: CurrentcapacityofDBEstoperformwork,asmeasuredbythevolumeofworkDBEshave

performedinrecentyears; Informationrelatedtoemployment,self‐employment,education,training,andunions; AnydisparitiesintheabilityofDBEstogetfinancing,bonding,andinsurance;and Otherrelevantdata.4BBCcompletedananalysisofeachoftheabovestep‐2factors.MuchoftheinformationthatBBCexaminedwasnoteasilyquantifiablebutisstillrelevanttoIDOTasitdetermineswhethertomakeastep‐2adjustment.Takentogether,thequantitativeandqualitativeevidencethatthestudyteamcollectedaspartofthedisparitystudymaysupportastep‐2adjustmenttothebasefigureasIDOTconsiderssettingitsoverallDBEgoal.Basedoninformationfromthedisparitystudy,therearereasonswhyIDOTmightconsideranupwardadjustmenttoitsbasefigure: IDOTmightadjustitsbasefigureupwardtoaccountforbarriersthatminoritiesand

womenfaceinhumancapitalandowningbusinessesinthelocalcontractingindustry.Suchanadjustmentwouldcorrespondtoa“determinationofthelevelofDBEparticipationyouwouldexpectabsenttheeffectsofdiscrimination.”5

IDOTmightalsoadjustitsbasefigureupwardinlightofevidenceofbarriersthataffectminorities;women;andminority‐andwoman‐ownedbusinessesinobtainingfinancing,

449CFRSection26.45.549CFRSection26.45(b).

a. Business group

Asian Pacific American‐owned 0.4 % 1.7 % 0.4 %Black American‐owned 0.6 8.9 0.9Hispanic American‐owned 2.6 1.8 2.6Native American‐owned 0.0 0.0 0.0Subcontinent Asian American‐owned 0.9 4.5 1.0Non‐Hispanic white woman‐owned 12.9 10.6 12.7Total potential DBEs 17.3 % 24.8 % 17.6 %Industry weight 97 % 3 %

Base figure componentb. Construction d. Totalc. Professional Services


bonding,andinsuranceandevidencethatminority‐andwoman‐ownedbusinessesarelesssuccessfulthancomparablebusinessesownedbynon‐Hispanicwhitemen.

TherearealsoreasonswhyIDOTmightconsideradownwardadjustmenttoitsbasefigure.IDOT’sutilizationreportsforFFYs2012through2016indicatedmedianannualDBEparticipationof14.6percentforthoseyears,whichislowerthanitsbasefigure.USDOT’s“TipsforGoal‐Setting”suggeststhatanagencycanmakeastep‐2adjustmentbyaveragingthebasefigurewithpastmedianDBEparticipation.BBC’sanalysisofDBEparticipationinIDOT’sFHWA‐fundedcontractsalsoindicatesDBEparticipation(12.6%)thatislowerthanthebasefigure.IfIDOTweretoadjustitsbasefigurebasedonpastDBEparticipation,itmightconsidertakingtheaverageofthe17.6basefigureandthe14.6percent(or12.6percent)pastDBEparticipation.USDOTregulationsclearlystatethatIDOTisrequiredtoreviewabroadrangeofinformationwhenconsideringwhetheritisnecessarytomakeastep‐2adjustment—eitherupwardordownward—toitsbasefigure.However,IDOTisnotrequiredtomakeanadjustmentaslongasitcanexplainwhatfactorsitconsideredandcanexplainitsdecisionaspartofitsgoal‐settingprocess.

F. Program Implementation Chapters9and10reviewadditionalinformationrelevanttoIDOT’simplementationoftheFederalDBEProgramincludingprogrammeasuresthattheagencycouldconsiderusingtoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitscontracting.IDOTshouldreviewthatinformationaswellasotherrelevantinformationasitmakesdecisionsconcerningthefutureimplementationoftheFederalDBEProgram.Tothatend,BBCpresentsthefollowingareasofpotentialrefinementforIDOT’sconsideration: IDOTshouldconsidercontinuingitseffortstonetworkwithminority‐andwoman‐owned

businesses,buttheagencymightalsoconsiderbroadeningitseffortstoincludemorepartnershipswithlocaltradeorganizationsandotherpublicagencies.IDOTmightalsoconsidercreatingaconsortiumoflocalorganizationsandpublicagenciesthatwouldjointlyhostquarterlyoutreachandnetworkingeventsandtrainingsessionsforbusinessesseekingpublicsectorcontracts.

Tofurtherencouragetheparticipationofsmallbusinesses—includingmanyminority‐andwoman‐ownedbusinesses—IDOTshouldconsidermakingeffortstounbundlerelativelylargecontractsintoseveralsmallercontracts.Doingsowouldresultinthatworkbeingmoreaccessibletosmallbusinesses,whichinturnmightincreaseopportunitiesforminority‐andwoman‐ownedbusinessesandresultingreaterminority‐andwoman‐ownedbusinessparticipation.

IDOTshouldconsiderexploringwaystoincreaseprimecontractingandsubcontractingopportunitiesforsmallbusinesses,includingmanyminority‐andwoman‐ownedbusinesses.Withregardtoprimecontractopportunities,IDOTmightconsidersettingasidesmallprimecontractsforsmallbusinessbiddingtoencouragetheparticipationofminority‐andwoman‐ownedbusinessesasprimecontractors.Withregardtosubcontractopportunities,IDOTcouldconsiderimplementingaprogramthatrequiresprimecontractorstoincludecertainlevelsofsubcontractingaspartoftheirbidsandproposals.


Disparityanalysisresultsindicatedthatmostracial/ethnicandgendergroupsdidnotshowdisparitiesoncontractsthatIDOTawardedwiththeuseofDBEcontractgoalsduringthestudyperiod.Incontrast,mostracial/ethnicandgendergroupsshowedsubstantialdisparitiesoncontractsthatIDOTawardedwithouttheuseofDBEcontractgoals.IDOTshouldconsidercontinuingitsuseofDBEcontractgoalsinthefuture.Theagencywillneedtoensurethattheuseofthosegoalsisnarrowlytailoredandconsistentwithotherrelevantlegalstandards(fordetails,seeChapter2andAppendixB).

IDOTshouldconsiderimplementingprocessestohelpensurethatitcollectscomprehensiveinformationonalltheprimecontractsandsubcontractsthatitawardsandthatthosedataaremaintainedandorganizedinanintuitivemanner,includingdataonpass‐throughcontractingthattheCityofChicagoawards.DoingsowillallowIDOTtomonitortheparticipationofminority‐andwoman‐ownedbusinessesasaccuratelyaspossible.

Aspartofthedisparitystudy,thestudyteamalsoexaminedinformationconcerningconditionsinthelocalmarketplaceforminorities;women;andminority‐andwoman‐ownedbusinessesincludingresultsfordifferentracial/ethnicandgendergroups.IDOTshouldreviewthefulldisparitystudyreport,aswellasotherinformationitmayhave,indeterminingwhetheritneedstocontinueusingrace‐orgender‐consciousmeasuresaspartofitsimplementationoftheFederalDBEProgram,andifso,indeterminingwhatactionsitmighttakebasedonstudyresults.

CHAPTER 1.

Introduction

BBC RESEARCH & CONSULTING – FINAL REPORT CHAPTER 1, PAGE 1

CHAPTER 1. Introduction

TheIllinoisDepartmentofTransportation(IDOT)isresponsiblefortheplanning,construction,operation,andmaintenanceofthetransportationsystemthroughoutIllinoisincludinghighwaysandbridges;airports;publictransit;railfreight;andrailpassengersystems.AsaUnitedStatesDepartmentofTransportation(USDOT)fundrecipient,IDOTimplementstheFederalDisadvantagedBusinessEnterprise(DBE)Program.TheFederalDBEProgramisdesignedtoaddresspotentialdiscriminationagainstDBEsintheawardandadministrationofUSDOT‐fundedcontracts.IDOTretainedBBCResearch&Consulting(BBC)toconductadisparitystudytohelpevaluatetheeffectivenessofitsimplementationoftheFederalDBEPrograminencouragingtheparticipationofminority‐andwoman‐ownedbusinessesinitsfederally‐fundedcontracts.Aspartofthedisparitystudy,BBCexaminedwhetherthereareanydisparitiesbetween: Thepercentageofcontractdollars(includingsubcontractdollars)thatIDOTspentwith

minority‐andwoman‐ownedbusinessesduringthestudyperiod(i.e.,utilization);and Thepercentageofcontractdollarsthatminority‐andwoman‐ownedbusinessesmightbe

expectedtoreceivebasedontheiravailabilitytoperformspecifictypesandsizesoftheIDOT’sprimecontractsandsubcontracts(i.e.,availability).

BBCalsoassessedotherquantitativeandqualitativeinformationrelatedto: ThelegalframeworksurroundingIDOT’simplementationoftheFederalDBEProgram; Localmarketplaceconditionsforminority‐andwoman‐ownedbusinesses;and ContractingpracticesandbusinessassistanceprogramsthatIDOTcurrentlyhasinplace.ThereareseveralreasonswhythedisparitystudywillbeusefultoIDOTasitmakesdecisionsaboutitsimplementationoftheFederalDBEProgram: ThetypesofresearchthatBBCconductedaspartofthedisparitystudyprovideinformation

thatwillbeusefultoIDOTasitmakesdecisionsaboutdifferentaspectsofitsimplementationoftheFederalDBEProgram(e.g.,settinganoverallDBEgoal);

Thedisparitystudyprovidesinsightsintohowtoimprovecontractingopportunitiesforsmallbusinessesaswellasminority‐andwoman‐ownedbusinesses;

Anindependent,objectivereviewoftheparticipationofminority‐andwoman‐ownedbusinessesinIDOT’scontractingwillbevaluabletoagencyleadershipandtoexternalgroupsthatmaybemonitoringIDOT’scontractingpractices;and

StateandlocalagenciesthathavesuccessfullydefendedimplementationsoftheFederalDBEProgramincourthavetypicallyreliedoninformationfromdisparitystudies.


BBCintroducesthe2017IDOTDisparityStudyinthreeparts:A. Background;B. Studyscope;andC. Studyteammembers.

A. Background TheFederalDBEProgramisaprogramdesignedtoincreasetheparticipationofminority‐andwoman‐ownedbusinessesinUSDOT‐fundedcontracts.AsarecipientofUSDOTfunds,IDOTmustimplementtheFederalDBEProgramandcomplywithcorrespondingfederalregulations.Setting an overall goal for DBE participation.AspartoftheFederalDBEProgram,everythreeyears,anagencyisrequiredtosetanoverallgoalforDBEparticipationinitsUSDOT‐fundedcontracts.1Althoughanagencyisrequiredtosetthegoaleverythreeyears,theoverallDBEgoalisanannualgoalinthattheagencymustmonitorDBEparticipationinitsUSDOT‐fundedcontractseveryyear.IfDBEparticipationforaparticularyearislessthantheoverallDBEgoal,thentheagencymustanalyzethereasonsforthedifferenceandestablishspecificmeasuresthatenabletheagencytomeetthegoalinthenextyear.TheFederalDBEProgramdescribesthestepsanagencymustfollowinestablishingitsoverallDBEgoal.Tobeginthegoal‐settingprocess,anagencymustdevelopabasefigurebasedondemonstrableevidenceoftheavailabilityofDBEstoparticipateintheagency’sUSDOT‐fundedcontracts.Then,theagencymustconsiderconditionsinthelocalmarketplaceforminority‐andwoman‐ownedbusinessesandmakeanupward,downward,ornoadjustmenttoitsbasefigureasitdeterminesitsoverallDBEgoal(referredtoasa“step‐2”adjustment).Projecting the portion of the overall DBE goal to be met through race‐ and gender‐neutral means. Accordingto49CodeofFederalRegulations(CFR)Part26,anagencymustmeetthemaximumfeasibleportionofitsoverallDBEgoalthroughtheuseofrace‐andgender‐neutralprogrammeasures.2Race‐andgender‐neutralmeasuresaremeasuresthataredesignedtoencouragetheparticipationofallbusinesses—orallsmallbusinesses—inanagency’scontracting(forexamplesofrace‐andgender‐neutralmeasures,see49CFRSection26.51(b)).Participationinsuchmeasuresisnotlimitedtominority‐andwoman‐ownedbusinessesortocertifiedDBEs.Ifanagencycannotmeetitsgoalsolelythroughtheuseofrace‐andgender‐neutralmeasures,thenitmustconsideralsousingrace‐andgender‐consciousprogrammeasures.Race‐andgender‐consciousmeasuresaredesignedtospecificallyencouragetheparticipationofminority‐andwoman‐ownedbusinessesinanagency’scontracting(e.g.,usingDBEgoalsonindividualcontracts).TheFederalDBEProgramrequiresanagencytoprojecttheportionofitsoverallDBEgoalthatitwillmeetthroughrace‐andgender‐neutralmeasuresandtheportion

1http://www.gpo.gov/fdsys/pkg/FR‐2011‐01‐28/html/2011‐1531.htm249CFRSection26.51.


thatitwillmeetthroughanyrace‐orgender‐consciousmeasures.USDOThasoutlinedanumberoffactorsforanagencytoconsiderwhenmakingsuchdeterminations.3Determining whether all groups will be eligible for race‐ and gender‐conscious measures.Ifanagencydeterminesthatrace‐orgender‐consciousmeasures—suchasDBEcontractgoals—areappropriateforitsimplementationoftheFederalDBEProgram,thenitmustalsodeterminewhichracial/ethnicorgendergroupsareeligibleforparticipationinthosemeasures.Eligibilityforsuchmeasuresislimitedtoonlythoseracial/ethnicorgendergroupsforwhichcompellingevidenceofdiscriminationexistsinthelocalmarketplace.USDOTprovidesawaiverprovisionifanagencydeterminesthatitsimplementationoftheFederalDBEProgramshouldonlyincludecertainracial/ethnicorgendergroupsintherace‐orgender‐consciousmeasuresthatituses.

B. Study Scope InformationfromthedisparitystudywillhelpIDOTcontinuetoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitsfederally‐fundedcontracts.Inaddition,informationfromthestudywillhelpIDOTcontinuetoimplementtheFederalDBEPrograminalegally‐defensiblemanner.Definitions of minority‐ and woman‐owned businesses.Tointerpretthecoreanalysespresentedinthedisparitystudy,itisusefultounderstandhowthestudyteamtreatsminority‐andwoman‐ownedbusinessesandbusinessesthatarecertifiedasDBEswithIDOT.Itisalsoimportanttounderstandhowthestudyteamtreatsbusinessesownedbyminoritywomeninitsanalyses.Minority‐ and woman‐owned businesses.Thestudyteamfocuseditsanalysesontheminority‐andwoman‐ownedbusinessgroupsthattheFederalDBEProgrampresumestobedisadvantaged:AsianPacificAmerican‐,BlackAmerican‐,HispanicAmerican‐,NativeAmerican,SubcontinentAsianAmerican‐,andnon‐Hispanicwhitewoman‐ownedbusinesses.Thestudyteamanalyzedthepossibilitythatrace‐orgender‐baseddiscriminationaffectedtheparticipationofminority‐andwoman‐ownedbusinessesinIDOTworkbasedspecificallyontherace/ethnicityandgenderofbusinessownership.Therefore,thestudyteamcountedbusinessesasminority‐orwoman‐ownedregardlessofwhethertheywere,orcouldbe,certifiedasDBEsthroughIDOT.Analyzingtheparticipationandavailabilityofminority‐andwoman‐ownedbusinessesregardlessofDBEcertificationallowedthestudyteamtoassesswhethertherearedisparitiesaffectingallminority‐andwoman‐ownedbusinessesandnotjustcertifiedbusinesses.DBEs.DBEsareminority‐andwoman‐ownedbusinessesthatarespecificallycertifiedassuchthroughIDOT.AdeterminationofDBEeligibilityincludesassessingbusinesses’grossrevenuesandbusinessowners’personalnetworth(maximumof$1.32millionexcludingequityinahomeandinthebusiness).Someminority‐andwoman‐ownedbusinessesdonotqualifyasDBEs

3http://www.dotcr.ost.dot.gov/Documents/Dbe/49CFRPART26.doc


becauseofgrossrevenueornetworthrequirements.4BusinessesseekingDBEcertificationinIllinoisarerequiredtosubmitanapplicationtoIDOT.Theapplicationisavailableonlineandrequiresbusinessestosubmitvariousinformationincludingbusinessname;contactinformation;taxinformation;workspecializations;andrace/ethnicityandgenderoftheirowners.IDOTreviewseachapplicationforapproval.Thereviewprocessmayinvolveon‐sitemeetingsandadditionaldocumentationtoconfirmbusinessinformation.BecausetheFederalDBEProgramrequiresagenciestotracktheparticipationofcertifiedDBEs,BBCreportsutilizationresultsforallminority‐andwoman‐ownedbusinessesandseparatelyforthoseminority‐andwoman‐ownedbusinessesthatarecertifiedasDBEs.However,BBCdoesnotreportavailabilityordisparityanalysisresultsseparatelyforcertifiedDBEs.Potential DBEs.PotentialDBEsareminority‐andwoman‐ownedbusinessesthatareDBE‐certifiedorappearthattheycouldbeDBE‐certifiedbasedonrevenuerequirementsdescribedin49CFRPart26(regardlessofactualcertification).ThestudyteamdidnotcountbusinessesthathavebeendecertifiedorhavegraduatedfromtheDBEProgramaspotentialDBEs.BBCexaminedtheavailabilityofpotentialDBEsaspartofhelpingIDOTcalculatethebasefigureofitsoverallDBEgoal.Figure1‐1providesfurtherexplanationofpotentialDBEs. Minority woman‐owned businesses.BBCconsideredfouroptionswhenconsideringhowtoclassifybusinessesownedbyminoritywomen: Classifyingthosebusinessesasbothminority‐ownedandwoman‐owned; Creatinguniquegroupsofminoritywoman‐ownedbusinesses; Classifyingminoritywoman‐ownedbusinesseswithallotherwoman‐ownedbusinesses;and Classifyingminoritywoman‐ownedbusinesseswiththeircorrespondingminoritygroups.

4Businessesownedbynon‐HispanicwhitemencanbecertifiedasDBEsifthosebusinessesmeettherequirementsin49CFRPart26.

Figure 1‐1. Definition of potential DBEs

To help IDOT calculate its overall DBE goal, BBC did not include the following types of minority‐ and woman‐owned businesses in its definition of potential DBEs:

Minority‐ and woman‐owned businesses that have graduated from the DBE Program and have not been recertified;

Minority‐ and woman‐owned businesses that are not currently DBE‐certified but that have applied for DBE certification with IDOT and have been denied; and

Minority‐ and woman‐owned businesses that are not currently DBE‐certified that appear to have average annual revenues over the most recent three years so high as to deem them ineligible for DBE certification.

At the time of this study, the overall revenue limit for DBE certification was $22,410,000 based on a three‐year average of gross receipts. There were lower revenue limits for specific subindustries according to United States Small Business Administration (SBA) small business size standards. Only a few minority‐ and woman‐owned businesses appeared to have exceeded those revenue limits based on information that they provided as part of availability surveys.

Business owners must also meet USDOT personal net worth limits for their businesses to qualify for DBE certification. The personal net worth of business owners was not available as part of this study and thus was not considered when determining potential DBE status.


BBCchosenottocodebusinessesasbothwoman‐ownedandminority‐ownedtoavoiddouble‐countingcertainbusinesseswhenreportingdisparitystudyresults.Creatinggroupsofminoritywoman‐ownedbusinessesthatweredistinctfrombusinessesownedbyminoritymen(e.g.,BlackAmericanwoman‐ownedbusinessesversusbusinessesownedbyBlackAmericanmen)wasalsounworkablebecausesomeminoritygroupsexhibitedsuchlowparticipationthatfurtherdisaggregationbygenderwouldhavemadeitevenmoredifficulttointerprettheresults.Afterrejectingthefirsttwooptions,BBCthenconsideredwhethertogroupminoritywoman‐ownedbusinesseswithallotherwoman‐ownedbusinessesorwiththeircorrespondingminoritygroups.BBCchosethelatter(e.g.,groupingBlackAmericanwoman‐ownedbusinesseswithallotherBlackAmerican‐ownedbusinesses).Thus,woman‐ownedbusinessesinthisreportreferstonon‐Hispanicwhitewoman‐ownedbusinesses.Majority‐owned businesses.Majority‐ownedbusinessesarebusinessesthatarenotownedbyminoritiesorwomen(i.e.,businessesownedbynon‐Hispanicwhitemen).Incoredisparitystudyanalyses,thestudyteamcodedeachbusinessasminority‐,woman‐,ormajority‐owned.Analyses in the disparity study.Thedisparitystudyexaminedwhetherthereareanydisparitiesbetweentheparticipationandavailabilityofminority‐andwoman‐ownedbusinessesonIDOTcontracts.Thestudyfocusedontransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawardedbetweenOctober1,2012andSeptember30,2016(i.e.,thestudyperiod).Duringthestudyperiod,IDOTappliedDBEcontractgoalstomanyofthefederally‐fundedcontractsthatitawarded.Inadditiontothecoreutilization,availability,anddisparityanalyses,thedisparitystudyalsoincludes: AreviewoflegalissuessurroundingimplementationoftheFederalDBEProgram; Ananalysisoflocalmarketplaceconditionsforminority‐andwoman‐ownedbusinesses; AnassessmentofIDOT’scontractingpracticesandbusinessassistanceprograms;and OtherinformationforIDOTtoconsiderasitrefinesitsimplementationoftheFederalDBE

Program.Thatinformationisorganizedinthedisparitystudyreportinthefollowingmanner:Legal framework and analysis.Thestudyteamconductedadetailedanalysisofrelevantfederalregulations,caselaw,statelaw,andotherinformationtoguidethemethodologyforthedisparitystudy.TheanalysisincludedareviewoffederalandstaterequirementsconcerningIDOT’simplementationoftheFederalDBEProgram.ThelegalframeworkandanalysisforthestudyissummarizedinChapter2andpresentedindetailinAppendixB.Marketplace conditions.BBCconductedquantitativeanalysesofthesuccessofminoritiesandwomenandminority‐andwoman‐ownedbusinessesinthelocalcontractingindustries.BBCcomparedbusinessoutcomesforminorities,women,andminority‐andwoman‐ownedbusinessestooutcomesfornon‐Hispanicwhitemenandmajority‐ownedbusinesses.Inaddition,thestudyteamcollectedqualitativeinformationaboutpotentialbarriersthatsmallbusinesses


andminority‐andwoman‐ownedbusinessesfaceinIllinoisthroughin‐depthinterviews.InformationaboutmarketplaceconditionsispresentedinChapter3,AppendixC,andAppendixD.

Data collection and analysis.BBCexamineddatafrommultiplesourcestocompletetheutilizationandavailabilityanalyses.Inaddition,thestudyteamconductedtelephonesurveyswiththousandsofbusinessesthroughoutIllinois.Thescopeofthestudyteam’sdatacollectionandanalysisasitpertainstotheutilizationandavailabilityanalysesispresentedinChapter4. Availability analysis.BBCanalyzedthepercentageofminority‐andwoman‐ownedbusinessesthatareready,willing,andabletoperformonIDOTprimecontractsandsubcontracts.ThatanalysiswasbasedonIDOTdataandtelephonesurveysthatthestudyteamconductedwiththousandsofIllinoisbusinessesthatworkinindustriesrelatedtothetypesofcontractingdollarsthatIDOTawards.BBCanalyzedavailabilityseparatelyforbusinessesownedbyspecificminoritygroupsandnon‐Hispanicwhitewomenandfordifferenttypesofcontracts.ResultsfromtheavailabilityanalysisarepresentedinChapter5andAppendixE. Utilization analysis.BBCanalyzedcontractdollarsthatIDOTspentwithminority‐andwoman‐ownedbusinessesontransportation‐relatedcontractsthattheagencyawardedbetweenOctober1,2012andSeptember30,2016.Thosedataincludedinformationaboutassociatedsubcontracts.5IDOTappliedDBEcontractgoalstomanyofthosecontracts.BBCanalyzedutilizationseparatelyforbusinessesownedbyspecificminoritygroupsandnon‐Hispanicwomenandfordifferenttypesofcontracts.ResultsfromtheutilizationanalysisarepresentedinChapter6.Disparity analysis.BBCexaminedwhethertherewereanydisparitiesbetweentheutilizationofminority‐andwoman‐ownedbusinessesoncontractsthatIDOTawardedduringthestudyperiodandtheavailabilityofthosebusinessesforthatwork.BBCanalyzeddisparityanalysisresultsseparatelyforbusinessesownedbyspecificminoritygroupsandnon‐Hispanicwhitewomenandfordifferenttypesofcontracts.Thestudyteamalsoassessedwhetheranyobserveddisparitieswerestatisticallysignificant.BBCfurtherexploredresultsforsubsetsofIDOTcontractsandexaminedbidandproposalinformationforrelevantIDOTcontracts.ResultsfromthedisparityanalysisandfurtherexplorationsofdisparitiesarepresentedinChapter7andAppendixF.Overall DBE goal.Basedoninformationfromtheavailabilityanalysisandotherresearch,BBCprovidedIDOTwithinformationthatwillhelptheagencysetitsoverallDBEgoalincludingthebasefigureandconsiderationofastep‐2adjustment.InformationaboutIDOT’soverallDBEgoalispresentedinChapter8.Race‐ and gender‐neutral measures. BBCreviewedinformationregardingevidenceofdiscriminationintheIllinoiscontractingmarketplace;analyzedIDOT’sexperiencewithmeetingitsoverallDBEgoalinthepast;andprovidedinformationaboutIDOT’spastperformancein 5Primecontractors—notIDOT—actuallyawardsubcontractstosubcontractors.However,forsimplicity,throughoutthereport,BBCreferstoIDOTasawardingsubcontracts.


encouragingtheparticipationofminority‐andwoman‐ownedbusinessesusingrace‐andgender‐neutralmeasures.InformationfromthoseanalysesispresentedinChapter9.Federal DBE Program.BBCreviewedIDOT’simplementationoftheFederalDBEProgram.BBCprovidedguidancerelatedtoadditionalprogramoptions.Thestudyteam’sreviewandguidanceispresentedinChapter10.

C. Study Team Members TheBBCstudyteamwasmadeupofsevenfirmsthat,collectively,possessdecadesofexperiencerelatedtoconductingdisparitystudiesinconnectionwiththeFederalDBEProgram.BBC (prime consultant).BBCisaDenver‐baseddisparitystudyandeconomicresearchfirm.BBChadoverallresponsibilityforthestudyandperformedallofthequantitativeanalyses.B2B Consulting. B2BConsultingisaBlackAmericanwoman‐ownedconsultingandtrainingfirmlocatedinNorthRiverside,Illinois.B2BConsultingconductedin‐person,in‐depthanecdotalinterviewswithbusinessownersandtradeassociationrepresentativesandhelpedfacilitatecommunityengagementeffortsthroughoutthelocalmarketplace. Customer Research International (CRI).CRIisaSubcontinentAsianAmerican‐ownedsurveyfieldworkfirmbasedinSanMarcos,Texas.CRIconductedtelephonesurveyswiththousandsofIllinoisbusinessestogatherinformationfortheutilizationandavailabilityanalyses.Holland & Knight. Holland&Knightisalawfirmwithofficesthroughoutthecountry.Holland&Knightconductedthelegalanalysisforthestudy.Keen Independent Research (Keen Independent).KeenIndependentisanArizona‐basedresearchfirm.KeenIndependenthelpedmanagethein‐depthinterviewprocessaspartofthestudyteam’squalitativeanalysesofmarketplaceconditions.SC‐B Consulting. SC‐BConsultingisanon‐Hispanicwhitewoman‐ownedmanagementandbusinessconsultingfirmlocatedinUrbana‐Champaign,Illinois.SC‐BConsultingconductedin‐person,in‐depthanecdotalinterviewswithbusinessownersandtradeassociationrepresentativesthroughoutthelocalmarketplace.Zann & Associates.Zann&AssociatesisaBlackAmericanwoman‐ownedmanagementconsultingfirmbasedinChicago,Illinois.Zann&AssociatesreviewedthepracticesandproceduresthatIDOTusestoawardcontractsandthemeasureitusestoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitscontracting.

CHAPTER 2.

Legal Framework

BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER 2, PAGE 1

CHAPTER 2. Legal Analysis

AsarecipientofUnitedStatesDepartmentofTransportation(USDOT)funds,theIllinoisDepartmentofTransportation(IDOT)implementstheFederalDisadvantagedBusinessEnterprise(DBE)Program.TheFederalDBEProgramisgovernedby49CodeofFederalRegulations(CFR)Part26andrelatedfederalregulations.BBCResearch&Consulting(BBC)presentstheLegalAnalysisforthe2017IDOTDisparityStudyintwoparts:A. Programelements;andB. Legalstandards.

A. Program Elements TheFederalDBEProgramisdesignedtoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinanagency’scontracting,andmorespecifically,initsUSDOT‐fundedcontracts.1AspartoftheFederalDBEProgram,everythreeyears,anagencyisrequiredtosetanoverallgoalforDBEparticipationinitsUSDOT‐fundedcontracts.2Althoughanagencyisrequiredtosetthegoaleverythreeyears,theoverallDBEgoalisanannualgoalinthattheagencymustmonitorDBEparticipationinitsUSDOT‐fundedcontractseveryyear.IfDBEparticipationforaparticularyearislessthantheoverallDBEgoalforthatyear,thentheagencymustanalyzethereasonsforthedifferenceandestablishspecificmeasuresthatwilladdressthedifferenceandenabletheagencytomeetthegoalinthenextyear.Definition of DBE.Accordingto49CFRPart26,aDBEisabusinessthatisownedandcontrolledbyoneormoreindividualswhoaresociallyandeconomicallydisadvantagedaccordingtotheguidelinesintheFederalDBEProgram.ThefollowinggroupsarepresumedtobesociallyandeconomicallydisadvantagedaccordingtotheFederalDBEProgram: AsianPacificAmericans; BlackAmericans; HispanicAmericans; NativeAmericans; SubcontinentAsianAmericans;and Womenofanyraceorethnicity.Adeterminationofeconomicdisadvantageincludesassessingbusinesses’grossrevenuesandbusinessowners’personalnetworth(maximumof$1.32millionexcludingequityinahomeandinthebusiness).Someminority‐andwoman‐ownedbusinessesdonotqualifyasDBEsbecause 1BBCconsidersacontractasUSDOT‐fundedifitincludesatleastonedollarofUSDOTfunding.2http://www.gpo.gov/fdsys/pkg/FR‐2011‐01‐28/html/2011‐1531.htm


ofgrossrevenueornetworthrequirements.Businessesownedbynon‐HispanicwhitemencanbecertifiedasDBEsifthosebusinessesmeettherequirementsin49CFRPart26.Certification requirements.BusinessesseekingDBEcertificationinIllinoisarerequiredtosubmitanapplicationtoIDOT.Theapplicationisavailableonlineandrequiresbusinessestosubmitvariousinformationincludingbusinessname;contactinformation;taxinformation;workspecializations;andrace/ethnicityandgenderoftheowners.IDOTreviewseachapplicationforapproval.Thereviewprocessmayinvolveon‐sitemeetingsandadditionaldocumentationtoconfirmrequiredbusinessinformation.Measures to encourage DBE participation. Regulationsthatgovernanagency’simplementationoftheFederalDBEProgramrequirethattheagencymeetsthemaximumfeasibleportionofitsoverallDBEgoalthroughtheuseofrace‐andgender‐neutralmeasures.3Race‐andgender‐neutralmeasuresaredesignedtoencouragetheparticipationofallbusinesses—or,allsmallbusinesses—inanagency’scontracting.Participationinsuchmeasuresisnotlimitedtominority‐andwoman‐ownedbusinessesortocertifiedDBEs.IfanagencycannotmeetitsoverallDBEgoalsolelythroughrace‐andgender‐neutralmeans,thenitisrequiredtoconsiderusingrace‐andgender‐consciousmeasuresaspartofitsimplementationoftheFederalDBEProgram.Race‐andgender‐consciousmeasuresaredesignedtospecificallyencouragetheparticipationofminority‐andwoman‐ownedbusinessesinanagency’scontracting(e.g.,usingDBEgoalsonindividualUSDOT‐fundedcontracts).Giventhatcontext,thereareseveralapproachesthatagenciescouldusetoimplementtheFederalDBEProgram.1. Using a combination of race‐ and gender‐neutral and race‐ and gender‐conscious measures with all DBEs considered eligible.Manyagenciesuseacombinationofrace‐andgender‐neutralandrace‐andgender‐consciousmeasureswhenimplementingtheFederalDBEProgramwithallcertifiedDBEsbeingconsideredeligibletoparticipateintherace‐andgender‐consciousmeasures.Thoseagenciesusevariousmeasuresthataredesignedtoencouragetheparticipationofsmallandemergingbusinessesintheircontracting.Inaddition,theyalsouseDBEcontractgoalsonindividualcontracts,andtheparticipationofallcertifiedDBEs—regardlessofrace/ethnicityorgender—counttowardmeetingthosegoals.IDOTimplementstheFederalDBEPrograminthismanner.Theagencyusesacombinationofrace‐andgender‐neutralandrace‐andgender‐consciousmeasuresandconsidersallcertifiedDBEsaseligibletoparticipateinrace‐andgender‐consciousmeasures.2. Applying a combination of race‐ and gender‐neutral and race‐ and gender‐conscious measures with only certain DBEs considered eligible. SomeagencieslimitDBEparticipationinrace‐andgender‐consciousmeasurestocertainracial/ethnicorgendergroupsbasedonevidenceofthosegroupsfacingdiscriminationwithintheagencies’respectiverelevantgeographicmarketareas(underutilizedDBEs,orUDBEs).Forexample,theCaliforniaDepartmentofTransportation(Caltrans)setsDBEcontractgoalsforwhichonlyUDBEs—whichdonotincludeallDBEgroups—areconsideredeligible.CaltranscountstheparticipationofallDBEstowardmeetingitsoverallDBEgoal,butonlyUDBEparticipationcountstowardprimecontractorsmeetingDBEcontract 349CFRSection26.51.


goalsonindividualcontracts.CaltransdeterminedwhichDBEgroupswereUDBEsbyexaminingresultsofadisparitystudyforindividualracial/ethnicandgendergroups.TheColoradoDepartmentofTransportationandtheOregonDepartmentofTransportation,amongotheragencies,haveimplementedtheFederalDBEPrograminsimilarways.3. Applying a combination of race‐ and gender‐neutral and more aggressive race‐ and gender‐conscious measures in extreme circumstances.TheFederalDBEProgramprovidesthatanagencymaynotusemoreaggressiverace‐andgender‐consciousprogrammeasures—suchassettingasidecontractsexclusivelyforDBEbidding—exceptinlimitedandextremecircumstances.Anagencymayonlyusesetasideswhennoothermethodcouldbereasonablyexpectedtoredressegregiousinstancesofdiscrimination.4SpecificquotasforDBEparticipationarestrictlyprohibitedundertheFederalDBEProgram.4. Operating an entirely race‐ and gender‐neutral program.SomeagencieshaveimplementedtheFederalDBEProgramwithouttheuseofDBEcontractgoalsorotherrace‐andgender‐consciousmeasures.Instead,thoseagenciesonlyuserace‐andgender‐neutralmeasuresaspartoftheirimplementationsoftheFederalDBEProgram.Forexample,theFloridaDepartmentofTransportationandthePortofSeattleimplementtheFederalDBEProgramusingonlyrace‐andgender‐neutralprogrammeasures.

B. Legal Standards IDOT’suseofDBEcontractgoalsisconsideredarace‐andgender‐consciousmeasure.PrimecontractorscanmeetDBEcontractgoalsbyeithermakingsubcontractingcommitmentswithcertifiedDBEsubcontractorsatthetimeofbidorbyshowingthattheymadeallreasonablegoodfaitheffortstomeetthegoalsbutcouldnotdoso.TheUnitedStatesSupremeCourthasestablishedthatgovernmentprogramsthatincluderace‐andgender‐consciousmeasuresmustmeetthestrictscrutinystandardofconstitutionalreview.5ThetwokeyU.S.SupremeCourtcasesthatestablishedthestrictscrutinystandardforsuchmeasuresare: The1989decisioninCityofRichmondv.J.A.CrosonCompany,whichestablishedthestrict

scrutinystandardofreviewforrace‐consciousprogramsadoptedbystateandlocalgovernments;6and

The1995decisioninAdarandConstructors,Inc.v.Peña,whichestablishedthestrictscrutinystandardofreviewforfederalrace‐consciousprograms.7

Anagencymustmeetboththecompellinggovernmentalinterestandthenarrowtailoringcomponentsofthestrictscrutinystandard.Aprogramthatfailstomeeteithercomponentisunconstitutional.

449CFRSection26.43.5CertainFederalCourtsofAppealsapplytheintermediatescrutinystandardtogender‐consciousprograms.AppendixBdescribestheintermediatescrutinystandardindetail.6CityofRichmondv.J.A.CrosonCompany,488U.S.469(1989).7AdarandConstructors,Inc.v.Peña,515U.S.200(1995).


Compelling governmental interest.Anagencymustdemonstrateacompellinggovernmentalinterestinremedyingpastidentifieddiscriminationinordertouserace‐orgender‐consciousmeasures.Anagencythatusesrace‐orgender‐consciousmeasuresaspartofaminority‐orwoman‐ownedbusinessprogramhastheinitialburdenofshowingevidenceofdiscrimination—includingstatisticalandanecdotalevidence—thatsupportstheuseofsuchmeasures.Agenciescannotrelyonnationalstatisticsofdiscriminationinanindustrytodrawconclusionsabouttheprevailingmarketconditionsintheirownregions.Rather,theymustassessdiscriminationwithintheirownrelevantmarketareas.8Itisnotnecessaryforagovernmentagencyitselftohavediscriminatedagainstminority‐orwoman‐ownedbusinessesforittoact.InCityofRichmondv.J.A.CrosonCompany,theSupremeCourtfound,“if[thegovernmentalentity]couldshowthatithadessentiallybecomea‘passiveparticipant’inasystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry…[i]tcouldtakeaffirmativestepstodismantlesuchasystem.”Manyagencieshaveusedinformationfromdisparitystudies—specifically,evidenceofdisparitiesbetweentheparticipationandavailabilityofminority‐andwoman‐ownedbusinesses—aspartofdeterminingwhethertheircontractingpracticesareaffectedbyrace‐orgender‐baseddiscrimination.InCityofRichmondv.J.A.CrosonCompany,theU.S.SupremeCourtheldthat,“[w]herethereisasignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractorswillingandabletoperformaparticularserviceandthenumberofsuchcontractorsactuallyengagedbythelocalityorthelocality’sprimecontractors,aninferenceofdiscriminatoryexclusioncouldarise.”LowercourtdecisionssinceCityofRichmondv.J.A.CrosonCompanyhaveheldthatacompellinggovernmentalinterestmustbeestablishedforeachracial/ethnicandgendergrouptowhichrace‐andgender‐consciousmeasuresapply.Narrow tailoring.Inadditiontodemonstratingacompellinggovernmentalinterest,anagencymustalsodemonstratethatitsuseofrace‐andgender‐consciousmeasuresisnarrowlytailored.Thereareanumberoffactorsthatcourtsconsiderwhendeterminingwhethertheuseofsuchmeasuresisnarrowlytailoredincluding: Thenecessityofsuchmeasuresandtheefficacyofalternative,race‐andgender‐neutral

measures; Thedegreetowhichtheuseofsuchmeasuresislimitedtothosegroupsthatactuallysuffer

discriminationinthelocalmarketplace; Thedegreetowhichtheuseofsuchmeasuresisflexibleandlimitedinduration,including

theavailabilityofwaiversandsunsetprovisions; Therelationshipofanynumericalgoalstotherelevantbusinessmarketplace;and Theimpactofsuchmeasuresontherightsofthirdparties.9

8Seee.g.,ConcreteWorks,Inc.v.CityandCountyofDenver(“ConcreteWorksI”),36F.3d1513,1520(10thCir.1994).9See,e.g.,AGC,SDCv.Caltrans,713F.3dat1198‐1199;Rothe,545F.3dat1036;WesternStatesPaving,407F3dat993‐995;SherbrookeTurf,345F.3dat971;AdarandVII,228F.3dat1181;Eng’gContractorsAss’n,122F.3dat927(internalquotationsandcitationsomitted).


Meeting the strict scrutiny standard.Manyprogramshavefailedtomeetthestrictscrutinystandard,becausetheyhavefailedtomeetthecompellinggovernmentalinterestrequirement,thenarrowtailoringrequirement,orboth.However,manyotherprogramshavemetthestrictscrutinystandardandcourtshavedeemedthemtobeconstitutional.AppendixBprovidesdetaileddiscussionsoftherelatedcaselaw.

CHAPTER 3.

Marketplace Conditions


CHAPTER 3. Marketplace Conditions

Historically,therehavebeenmyriadlegal,economic,andsocialobstaclesthathaveimpededminoritiesandwomenfromacquiringthehumanandfinancialcapitalnecessarytostartandoperatesuccessfulbusinesses.Barrierssuchasslavery,racialoppression,segregation,race‐baseddisplacement,andlabormarketdiscriminationproducedsubstantialdisparitiesforminoritiesandwomen,theeffectsofwhicharestillapparenttoday.Thosebarrierslimitedopportunitiesforminoritiesintermsofbotheducationandworkplaceexperience.1,2,3,4Similarly,manywomenwererestrictedtoeitherbeinghomemakersortakinggender‐specificjobswithlowpayandlittlechanceforadvancement.5Inthe19thandearly20thcenturies,minoritiesinIllinoisfacedbarriersthatweresimilartothosethatminoritiesfacednationwide.DiscriminatorytreatmentwascommonforminoritiesinIllinois.BlackAmericanswereforcedtoliveinracially‐segregatedneighborhoodsandsendtheirchildrentosegregatedschools.Intheearlytomid‐20thcentury,BlackAmericanswereforcedtouseseparatefacilitiesatarearestaurantsandculturalinstitutions.Disparatetreatmentalsoextendedintothelabormarket.BlackAmericanswereconcentratedinlowwageworkinmanufacturingindustrieswithfewopportunitiesforadvancement.6,7Inthemiddleofthe20thcentury,manylegalandworkplacereformsopenedupnewopportunitiesforminoritiesandwomennationwide.Brownv.BoardofEducation,TheEqualPayAct,TheCivilRightsAct,andTheWomen’sEducationalEquityActoutlawedmanyformsofrace‐andgender‐baseddiscrimination.Workplacesadoptedformalizedpersonnelpoliciesandimplementedprogramstodiversifytheirstaffs.8Thosereformsincreaseddiversityinworkplacesandreducededucationalandemploymentdisparitiesforminoritiesandwomen.9,10,11,12However,despitethoseimprovements,minoritiesandwomencontinuetofacebarriers—suchasincarceration,residentialsegregation,andfamilyresponsibilities—thathavemadeitmoredifficulttoacquirethehumanandfinancialcapitalnecessarytostartandoperatebusinessessuccessfully.13,14,15FederalCourtsandtheUnitedStatesCongresshaveconsideredbarriersthatminorities;women;andminority‐andwoman‐ownedbusinessesfaceinalocalmarketplaceasevidencefortheexistenceofrace‐orgender‐baseddiscriminationinthatmarketplace.16,17,18TheUnitedStatesSupremeCourtandotherfederalcourtshaveheldthatanalysesofconditionsinalocalmarketplaceforminorities;women;andminority‐andwoman‐ownedbusinessesareinstructiveindeterminingwhetheragencies’implementationsofminority‐andwoman‐ownedbusinessprogramsareappropriateandjustified.Thoseanalyseshelpagenciesdeterminewhethertheyarepassivelyparticipatinginanyrace‐orgender‐baseddiscriminationthatmakesitmoredifficultforminority‐andwoman‐ownedbusinessestosuccessfullycompetefortheircontracts.Passiveparticipationindiscriminationmeansthatagenciesunintentionallyperpetuaterace‐orgender‐baseddiscriminationsimplybyoperatingwithindiscriminatorymarketplaces.Manycourtshaveheldthatpassiveparticipationinanyrace‐orgender‐baseddiscrimination


establishesacompellinggovernmentalinterestforagenciestotakeremedialactiontoaddresssuchdiscrimination.19,20,21Thestudyteamconductedquantitativeandqualitativeanalysestoassesswhetherminorities;women;andminority‐andwoman‐ownedbusinessesfaceanybarriersintheIllinoisconstructionandprofessionalservicesindustries.Thestudyteamalsoexaminedthepotentialeffectsthatanysuchbarriershaveontheformationandsuccessofminority‐andwoman‐ownedbusinessesandontheirparticipationinandavailabilityforcontractsthattheIllinoisDepartmentofTransportationawards.Thestudyteamexaminedlocalmarketplaceconditionsprimarilyinfourareas: Humancapital,toassesswhetherminoritiesandwomenfaceanybarriersrelatedto

education,employment,andgainingmanagerialexperienceinrelevantindustries; Financialcapital,toassesswhetherminoritiesandwomenfaceanybarriersrelatedto

wages,homeownership,personalwealth,andaccesstofinancing; Businessownershiptoassesswhetherminoritiesandwomenownbusinessesatrates

thatarecomparabletothatofnon‐Hispanicwhitemen;and Successofbusinessestoassesswhetherminority‐andwoman‐ownedbusinesseshave

outcomesthataresimilartothoseofbusinessesownedbynon‐Hispanicwhitemen.TheinformationinChapter3comesfromexistingresearchintheareaofrace‐andgender‐baseddiscriminationaswellasfromprimaryresearchthatthestudyteamconductedofcurrentmarketplaceconditions.AdditionalquantitativeandqualitativeanalysesofmarketplaceconditionsarepresentedinAppendixCandAppendixD,respectively.

A. Human Capital Humancapitalisthecollectionofpersonalknowledge,behavior,experience,andcharacteristicsthatmakeupanindividual’sabilitytoperformandsucceedinparticularlabormarkets.Factorssuchaseducation,businessexperience,andmanagerialexperiencehavebeenshowntoberelatedtobusinesssuccess.22,23,24,25Anyrace‐orgender‐basedbarriersinthoseareasmaymakeitmoredifficultforminoritiesandwomentoworkinrelevantindustriesandpreventsomeofthemfromstartingandoperatingbusinessessuccessfully.Education.Barriersassociatedwitheducationalattainmentmayprecludeentryoradvancementincertainindustries,becausemanyoccupationsrequireatleastahighschooldiploma.Someoccupations—suchasoccupationsinprofessionalservices—requireatleastafour‐yearcollegedegree.Inaddition,educationalattainmentisastrongpredictorofbothincomeandpersonalwealth,whicharebothshowntoberelatedtobusinessformationandsuccess.26,27Nationally,minoritieslagbehindnon‐Hispanicwhitesintermsofbotheducationalattainmentandthequalityofeducationthattheyreceive.28,29Minoritiesarefarmorelikelythannon‐Hispanicwhitestoattendschoolsthatdonotprovideaccesstocoreclassesinscienceandmath.30Inaddition,BlackAmericanstudentsaremorethanthreetimesmorelikelythannon‐Hispanicwhitestobeexpelledorsuspendedfromhighschool.31Forthoseandotherreasons,minoritiesarefarlesslikelythannon‐Hispanicwhitestoattendcollege;enrollathighly‐ormoderatelyselectivefour‐yearinstitutions;orearncollegedegrees.32

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Intergenerational business experience.Havingafamilymemberwhoownsabusinessandisworkinginthatbusinessisanimportantpredictorofbusinessownershipandbusinesssuccess.Suchexperienceshelpentrepreneursgainaccesstoimportantopportunitynetworks;obtainknowledgeofbestpracticesandbusinessetiquette;andreceivehands‐onexperienceinhelpingtorunbusinesses.However,atleastnationally,minoritieshavesubstantiallyfewerfamilymemberswhoownbusinessesandbothminoritiesandwomenhavefeweropportunitiestobeinvolvedwiththosebusinesses.50,51Thatlackofexperiencemakesitmoredifficultforminoritiesandwomentosubsequentlystarttheirownbusinessesandoperatethemsuccessfully.

B. Financial Capital Inadditiontohumancapital,financialcapitalhasbeenshowntobeanimportantindicatorofbusinessformationandsuccess.52,53,54Individualscanacquirefinancialcapitalthroughmanysourcesincludingemploymentwages,personalwealth,homeownership,andfinancing.Ifrace‐orgender‐baseddiscriminationexistsinthosecapitalmarkets,minoritiesandwomenmayhavedifficultyacquiringthecapitalnecessarytostart,operate,orexpandbusinesses.Wages and income.Wageandincomegapsbetweenminoritiesandnon‐Hispanicwhitesandbetweenwomenandmenarewell‐documentedthroughoutthecountry,evenwhenresearchershavestatisticallycontrolledforvariousfactorsunrelatedtoraceandgender.55,56,57Forexample,nationalincomedataindicatethat,onaverage,BlackAmericansandHispanicAmericanshavehouseholdincomesthatarelessthantwo‐thirdsthoseofnon‐Hispanicwhites.58,59Womenhavealsofacedconsistentwageandincomegapsrelativetomen.Nationally,themedianhourlywageofwomenisstillonly84percentthemedianhourlywageofmen.60Suchdisparitiesmakeitdifficultforminoritiesandwomentouseemploymentwagesasasourceofbusinesscapital.BBCobservedwagegapsinIllinoisconsistentwiththegapsthatresearchershaveobservednationally.Figure3‐5presentsmeanannualwagesforIllinoisworkersbyrace/ethnicityandgender.AsshowninFigure3‐5,BlackAmericans,HispanicAmericans,NativeAmericans,andotherraceminoritiesinIllinoisearnsubstantiallylessthannon‐Hispanicwhites.Inaddition,womenworkersearnsubstantiallylessthanmen.BBCalsoconductedregressionanalysesto

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