The Contractor's Side: DBE Program Unconstitutional

DBE program rules unconstitutional

Article December 28, 2000
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I am sure that by now most readers know that on Aug. 31, 1998, the U.S. Federal District Court in Minnesota ruled that the Federal DBE legislation, the regulations promulgated thereunder at 49 C.F.R. Part 23 and the Minnesota DOT (MnDOT) program are unconstitutional as applied to highway construction contracts in the state of Minnesota. In re Sherbrooke Sodding, involved speciality subcontractors who challenged the Minnesota DBE program. Readers also are likely aware that in February the U.S. DOT (U.S. DOT) finally issued the new DBE regulations, which are specifically designed to overcome this court decision.

Strict scrutiny

In their lawsuit, the plaintiff specialty subcontractors challenged ISTEA’s congressionally mandated DBE program and its administration by MnDOT, claiming that the program violates the Equal Protection Clause of the U.S. Constitution. In discussing the legal precedence, the court referred to the Adarand case where the Supreme Court had found that “federal racial classifications, like those of a state, must serve a compelling governmental interest and must be narrowly tailored to further that interest.”

In applying the strict scrutiny test, the court first established that the government bears the burden of proving that the DBE program is constitutional on the basis that the DBE race and gender classifications “serve a compelling governmental interest, and . . . [are] narrowly tailored to further that interest.” In other words, the contractors did not have the burden of proving the DBE program unconstitutional.

The court first examined the compelling governmental interest test. While it is unclear whether the court believed the case had been made for purposes of the motions before the court, the court found a compelling governmental interest.

Next, the court turned to the second half of the strict scrunity analysis: “Is the program before the court narrowly tailored to serve the established compelling governmental interest?” Factors to be considered “include the necessity for the relief and the efficacy of alternative remedies; the flexibility and duration of the relief, including the availability of waiver provisions; the relationship of the numerical goals to the relevant labor market; and the impact of the relief on the rights of third parties.” The court found no evidence that Congress had considered alternatives to ISTEA’s DBE program. The court, as a result, found that the U.S. had not established that Congress considered any race-neutral alternatives.

With respect to the limited duration test, the court found that factor to be neutral. Essentially, the court believed that Congress may or may not reconsider DBE issues when it re-enacts highway construction funding statutes.

The court ruled against the U.S. DOT on the issue of unreasonable burden. The U.S. DOT argued that Sherbrooke Sodding’s gross revenues had either been steady or increased over the past five years. As a result, U.S. DOT argued that the burden, if any, of the DBE program imposed upon Sherbrooke is relatively light. In response, the plaintiffs argued that the DBE program’s impact falls particularly, and disproportionately, hard on speciality subcontractors. The court obviously understood the nature of the highway construction industry when it found that the DBE program did fall heavily upon the shoulders of plaintiffs and other speciality contractors and as a result plaintiffs bear an undue burden under the DBE program.

With respect to the flexibility, the U.S. DOT argued that the DBE program provides for flexible waivers and certifications, noting that a challenger can rebut the statutory regulatory presumption of disadvantaged. The court essentially found the DBE program was a quota, stating “Government-granted preferences, based on immutable conditions acquired at birth, confer benefits on those who have done nothing to earn them, and conversely, impose burdens on those who have done nothing to requirement to be shouldered.” The court also stated: “If there are circumstances under which such preferences comport with the U.S. Constitution, and its Equal Protection Clause, they do not exist here. Whatever the terminology or palliative applied, whether the program be called an ‘aspirational goal’ or ameliorated by a ‘flexible waiver,’ the bottom line is that there still is a quota that is imposed by the government. This quota penalizes some and advantages others, each without Constitutional justification.”

Court rules

Finally, the court found that U.S. DOT was unable to demonstrate the connection between the presumed individuals upon whom the DBE status has been conferred by Congress and the regulations, and any present or past discrimination against the races or gender of those individuals. As a consequence of the discussion above, the court concluded that the DBE program was not narrowly tailored to serve a compelling government interest and on that basis is unconstitutional.

Comment: I made the same arguments discussed above in a case filed in Tennessee 13 years ago. The U.S. DOT attorneys also made the same arguments they made in the Minnesota case. We lost our case. I understand that U.S. DOT has appealed the court’s ruling. What a difference changes in the Supreme Court makes.

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