Guidelines for Conducting a Disparity and Availability Study for the Federal DBE Program (2010) / Chapter Skim
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Pages 29-53
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From page 29... ...
In high-quality disparity and availability studies, the relevant geographic market area identifies those vendor locations that account for at least 75% of contract and subcontract102 dollar expenditures in the project database for the study period.103 The report should describe how the contract and subcontract data were used to make this determination and one or more tables should be presented showing the results. Location should be determined by linking the zip code of the contractor or subcontractor to the associated state and county.
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From page 30... ...
Without a dollar-weighted overall availability estimate, availability in an industry with only $1,000 of contract and subcontract spending has as much impact on the overall availability estimate as availability in an industry with $1,000,000,000 of contract and subcontract spending.111 Without availability estimates by detailed industry, the state DOT is deprived of an extremely useful tool for conducting contract-level goal setting. Without utilization and disparity analyses by detailed industry, a study can be criticized for ignoring aggregation issues.112 Estimation of DBE Availability Recommended Approach.
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From page 31... ...
Another ten studies relied primarily on internal state DOT lists of contractors and subcontractors, such as certified DBE directories, bidders lists, prequalified contractor lists, registered subcontractor lists, licensed contractor lists, plan-holder lists, or lists of winning contractors or subcontractors. Internal lists were sometimes supplemented with lists gathered from other sources.
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From page 32... ...
The Dun & Bradstreet data were then restricted to the relevant geographic market based on the location of contractors and subcontractors on federally assisted state DOT contracts. The data were further restricted to the relevant product market by matching the names and addresses of firms that had bid on state DOT contracts as prime contractors or first-tier subcontractors with the Dun & Bradstreet data to determine the relevant SIC or NAICS codes.
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From page 33... ...
The Tenth Circuit found the custom census approach to be "a more sophisticated method to calculate availability than the earlier studies."131 Likewise, this method was successful in the defense of the DBE Programs for Mn/DOT132 and IDOT,133 as well as the M/WBE construction program for the City of Chicago.134 The following are the seven steps to the custom census approach: (A) Create a database of representative, recent, and complete state DOT projects; (B)
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From page 34... ...
If the state DOT has not collected and maintained this data, then it will be necessary to either request the information directly from each relevant prime contractor or consultant or reconstruct the required information by other means.136 The project database must be representative of the type of work usually undertaken by the state DOT. It is therefore advisable to study several years' worth of contract and subcontract data so that atypical projects do not unduly affect the statistical analysis.137 Most state DOT disparity and availability studies have relied on a study period of 5 years -- typically the most recent five full fiscal or calendar years.138 Of the 28 state DOTs that have performed, or are currently performing, a disparity or availability study, we were able to obtain the number of years of contract and subcontract data studied for 25.
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From page 35... ...
North Carolina's current study is ongoing -- this figure is for its 2004 study; (d) figure is for construction contracts -- only 3 years of data were available for construction-related professional services and local assistance contracts.
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From page 36... ...
; • Total dollar amount paid through completion or substantial completion; • Business name of subcontractor or consultant; • Unique identification code for the subcontractor; • Street address, city, state, and zip code of subcontractor; • Telephone number of subcontractor; • Contact person name and title for subcontractor; • Certification status of subcontractor; • Race and gender of subcontractor ownership;147 and • Brief description of subcontractor work specialties. Steps B & C -- Identify the Relevant Markets.
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From page 37... ...
Crosswalk tables allowing conversion between SIC and the several editions of NAICS and vice versa are available online from the Census Bureau.152 In construction and construction-related professional services, a four-digit NAICS code is most comparable to a four-digit SIC code for general contracting categories.153 For specialty trades and professional services, a five-digit NAICS code is most comparable. Once NAICS codes are assigned to all firms in the project database, the percent of dollars awarded and/or paid to contractors and subcontractors in each detailed industry can be calculated to determine which ones are most relevant for a state DOT's contracting activity.
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From page 38... ...
SIC Code SIC Description Percentage Cumulative Percentage 1611 Highway and Street Construction 24.26 24.26 1622 Bridge, Tunnel, and Elevated Highway 22.10 46.35 1794 Excavation Work 14.69 61.04 1771 Concrete Work 11.43 72.48 1623 Water, Sewer, and Utility Lines 6.02 78.49 1542 Nonresidential Construction, n.e.c. 5.30 83.80 1629 Heavy Construction, n.e.c.
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From page 39... ...
Wright Construction Supplier Diversity Program Idaho Transportation Department King County Kroger Company Microsoft Supplier Diversity Program Montana Department of Transportation National Association of Minority Contractors National Association of Women Business Owners -- Inland Northwest Chapter National Association of Women in Construction (various Chapters) National Center for American Indian Economic Development National Minority Business Council Nevada Department of Transportation Nike Supplier Diversity Program 39 155This can be done by excluding all prime contracts below a certain dollar threshold, say $25,000, or by cumulating total spending by NAICS code and then excluding contract spending in those NAICS codes above a certain percentage cutoff, say 90%, or by some combination of these two methods.
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From page 40... ...
Supplier Diversity Program Washington Mutual Washington State Hispanic Chamber of Commerce Washington State Office of Minority & Women's Business Enterprise Wells Fargo Supplier Diversity Program Women and Emerging Small Business Women Business Owners of Puget Sound Women's Business Enterprise National Council Xerox Corporation. Not every agency in the list above ultimately provided a directory or listing to the study team.
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From page 41... ...
Listed DBE by SIC Code Grouping Percentage Actually White Male Owned Number of Businesses Interviewed NAICS 236 88.4 335 NAICS 237 88.6 140 NAICS 238 81.1 874 NAICS 327, 332 92.1 63 NAICS 484 67.6 145 NAICS 42 82.8 442 NAICS 5413 89.6 574 Balance of NAICS Codes 80.9 507 All NAICS Codes 83.6 Percentage DBE 11.6 11.4 18.9 7.9 32.4 17.2 10.4 19.1 16.4 3,080
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From page 42... ...
Overall percentage availability: (F4) The full estimated availability formula is therefore: Below we provide a numerical representation of how this formula was used to derive the Step 1 DBE availability figure of 24.34% in a state DOT study we recently completed, along with a detailed explanation of the derivation.
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From page 43... ...
The individual availability estimates, Ai, were calculated using formulas F1 and F2 above. Formula F2 says that each Ai is equal to the total number of listed DBE establishments in industry i, adjusted for misclassification and nonclassification (Dai)
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100 Relationship Between Choice of Availability Measure and Resulting Annual DBE Goals The difference between the custom census method and other methods is evident when the annual DBE goals set by state DOTs during FFYs 2006, 2007, and 2008 are examined. Table 13 shows the overall DBE goals set by each state DOT during this period, as well as their race-conscious portions.160 Using the goal information in Table 13, we calculated some summary statistics to compare DBE goals derived from disparity or availability studies to those derived using bidders lists, prequalified contractor list, or other types of contractor lists or from DBE directories and Census Bureau data.
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FHWA annual DBE goals submitted by state DOTs, FFYs 2006–2008. (continued on next page)
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(5) (bidders lists or other types of contractor lists)
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(5) (used bidders lists or other types of contractor lists)
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From page 48... ...
Data Impacted by Race-Conscious Contracting Requirements As already explained, performing a disparity analysis on contracting and subcontracting dollars that were subject to race-conscious affirmative action requirements, as is often the case for state DOTs, is of limited value in strict scrutiny analysis. Much more informative is disparity analysis on contracting and subcontracting dollars that were not subject to affirmative action requirements, at the state DOT, economywide, or both.
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From page 49... ...
• Comparing disparity ratios on state DOT projects subject to goals to disparity ratios from other public entities in the relevant market that do not use goals. • Comparing disparity ratios on state DOT projects subject to goals to disparity ratios from private entities in the relevant market.
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One other type of significance testing was observed in three of the studies we reviewed -- Monte Carlo simulation studies. Starting from the project database of contracts and subcontracts, all with differing dollar sizes, these studies simulate the award process by programming a computer to randomly assign contract awards to the several types of DBEs as well as to non-DBEs, based on their estimated availability percentage.
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From page 51... ...
argument and conclude that the district court's determination that the marketplace data was irrelevant was a legal error that significantly affected the court's analysis of Denver's evidence.175 A disparity studies should not ignore such evidence.176 Evidence of economy-wide discrimination in disparity and availability studies has taken several forms, including the following: • Regression analyses comparing business formation rates between minorities, women, and similarly situated nonminority males in the relevant markets. These have been implemented using the Census Bureau's 5% Public Use Microdata Samples (PUMS)
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From page 52... ...
anecdotal evidence is sometimes collected directly by the state DOT rather than the consultant and presented in its annual DBE goals submissions to the FHWA.
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From page 53... ...
Special emphasis should be placed on the experiences of DBEs that desire to obtain prime contracts as a measure of continuing barriers to full participation in the marketplace. Careful consideration of race-neutral measures is necessary to provide support for the state DOT's projection of the amount of the DBE goal it can meet solely through raceneutral measures.
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