Study to decide if state highway contracts are fair

Research looks at treatment of companies owned by minorities

Posted: Tuesday, May 16, 2006

ANCHORAGE - The state Department of Transportation and Public Facilities will study whether there is discrimination in contracting for state-funded highway projects.

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The results will affect how the state issues contracts to minority-owned companies for road construction projects.

"We need to determine the level and extent that discrimination is absent or present in highway work in Alaska," said Jon Dunham, DOT/PF civil rights office manager.

A request for proposals to conduct the study is due out this month. The study will focus on contractors certified through the state-administered Disadvantaged Business Enterprise program. DBE certifications are awarded to small, minority-owned businesses that meet certain financial and ownership specifications laid out in federal regulation.

Minority or female small-business owners are generally considered socially and economically disadvantaged and can get preferences in contract awards. Nearly 300 contractors are in Alaska's DBE directory.

Government agencies set goals dictating that a certain percentage of dollars spent on each project go to minority-owned businesses. They are referred to as "race-conscious" programs.

Alaska DOT/PF used to follow "race-conscious" guidelines. In January, the department adopted a "race-neutral" policy. Instead of setting goals for each project, it has one goal for the entire highway program.

The study will determine the number of potential businesses that could participate in the program, whether those contractors are capable of doing work and if they are being sufficiently used. It also will determine if there is discrimination in letting contracts.

DOT/PF set aside $600,000 to pay for the study. Some 28 communities and organizations, including the municipality of Anchorage, the city of Juneau, the Fairbanks North Star Borough and the Alaska Railroad Corp., will follow recommendations of the results.

The study is in response to a 9th Circuit Appeals Court decision in a discrimination case filed against the Washington state transportation department. Western States Paving Co., which is owned by a white male, filed suit claiming that minority-owned DBE-certified businesses were unfairly given contracts in at least two instances where Western had the lowest bid.

The court said that DBE programs were constitutional, but Washington state had not sufficiently shown the need for a "race-conscious" program. DBE programs certify businesses that are socially and economically disadvantaged, but do not show specific evidence of discrimination, the court said.

The court cited an 8th Circuit Court decision, where the transportation departments in Minnesota and Nebraska had hired outside consulting firms to conduct statistical analyses of the availability and capacity of DBEs in their local markets.

With the court's decision, states within the 9th Circuit Court's district, including Alaska, must conduct their own studies.

The Alaska DOT/PF says it wants the study performed by a firm that can support its findings in court.

"The study will put us on firmer ground as far as contracts, but we expect it to be challenged at some point," Dunham said.

Since the state has adopted its "race-neutral" policy, Dunham said, he has seen detrimental effects to minority contractors. The department this year anticipated that 4 percent of all highway money spent - 65 contracts paying an estimated $500 million - would go toward minority contractors. Minority-owned businesses so far have received only 1 percent of the nearly $110 million that has been awarded in 30 contracts.

"That will have a detrimental effect on the disparity study," he said. "It may show there is discrimination."

Washington state used to have a DBE goal of 12 percent for minority contracts. Once the state dropped to "race-neutral," awards dropped to 3 percent. Results from Washington's study came back with a recommendation to set a goal of 20 percent, Dunham said.

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