allegations of discrimination in the construction industry, the Act contains geographic limitations that are overbroad on the present record and the Act is unlimited in duration.
Croson makes it clear that at a minimum, the District must have a "strong basis in evidence" to support its racially-based program. 488 U.S. at 499-500, 109 S. Ct. at 724-25. The District cannot simply rely on broad expressions of purpose or general allegations of historical or societal racism. Rather, as the Court of Appeals noted, "its legislation must rest on evidence at least approaching a prima facie case of racial discrimination in the relevant industry. . . [and] must also be narrowly tailored to achieve its end." O'Donnell, 295 U.S. App. D.C. at 321, 963 F.2d at 424.
Thus, the court concluded that the record is devoid of any evidence that agencies of the District of Columbia had been favoring white contractors over non-whites, or that the typical bidding process was somehow rigged to have this effect. Id. 295 U.S. App. D.C. at 322, 963 F.2d at 425. Nevertheless, while the City Council's Employment and Economic Development Committee (the "Committee") issued a Report filled with statistics detailing the difference between the ability of MBEs to perform construction work and the amount actually awarded, the court concluded that "by no means do the Committee's figures show -- as they must under Croson -- 'any identified discrimination in the District of Columbia construction industry.'" Id, 295 U.S. App. D.C. at 323, 963 F.2d at 426 (citations omitted).
The original Act contained no geographic limitations on the MBEs eligible for preferential treatment. However, the Act as reenacted provides that "preference shall be given to those minority businesses with principal offices located in the District of Columbia." D.C.Code Ann. § 1-1149(2); see also D.C.Code Ann. § § 1-1149(13) and 1-1149(13)(A). The Court of Appeals found that because of the limiting amendment that "the original findings are now overbroad." 295 U.S. App. D.C. at 325, 963 F.2d at 428.
Finally, the Act as reenacted by the District in 1980 deleted the sunset provision. The Supreme Court in Croson warned that if "amorphous" claims of past discrimination were sufficient, racial preferences of any "duration" could be justified. Croson, 488 U.S. at 499, 505, 109 S. Ct. at 724, 727. As the Court of Appeals noted, The District has not suggested that an end is in sight . . . [and] the District has no way of measuring when the wrong will be righted because it has not identified the wrong with any degree of specificity." O'Donnell, 295 U.S. App. D.C. at 325, 963 F.2d at 428.
Using the guidelines provided by the Court of Appeals, this Court notes that nothing has changed in the record that would lead this Court to conclude that the Act can pass constitutional muster. Therefore, this Court concludes that for the reasons stated above the District of Columbia Minority Contracting Act is unconstitutional. Thus, the District is permanently enjoined from enforcing the Act as it is presently authorized. However, this does not prohibit the District from implementing a new version of the Minority Contracting Act as long as it is in conformity with the teachings of the Supreme Court.
B. Disadvantaged Business Enterprise Program
With respect to the Department of Public Works' Disadvantaged Business Enterprise Program, O'Donnell does not challenge the federal statute, its implementing regulations, or the District's decision to apply for these highway construction funds. Instead, O'Donnell argues that the set-aside program, as implemented by the District, is not narrowly tailored. Specifically, O'Donnell contends that the District's DBE program, on its face and in practice, far exceeds the race-conscious remedial relief mandated by Congress under STURAA in the form of a 10% set-aside for disadvantaged business enterprises. O'Donnell asserts that there is no independent basis--i.e evidence of past discrimination--to justify the significantly higher 37% figure established by the District's DBE program.
As a preliminary matter, the District has unconvincingly argued that the DBE program is not race-based because the classification is defined as "disadvantaged" rather than "minority." While DBEs do not necessarily have to be minority owned, the regulations provide various racial and ethnic groups with a presumption of social and economic disadvantage. Anyone who is not a member of these groups must prove that s/he is actually socially and economically disadvantaged. In Milwaukee County Pavers Ass'n v. Fiedler, 922 F.2d 419, 421-22 (7th Cir. 1991), the Seventh Circuit held that for the purposes of equal protection analysis the racial presumption in STURAA is in itself a form of racial discrimination. This Court agrees.
In ruling on the preliminary injunction, this Court did not resolve the issue of whether the 37% figure is outside the bounds of federal authority under STURAA since it appeared to the Court that the legislative findings of discrimination in the local construction industry which were analyzed in connection with the Minority Contracting Act may also justify a 37% set-aside goal for federally funded construction projects.
O'Donnell argues that the Court should apply Croson to the percentage above 10% of road construction contracts that the District awards as set-asides. However, not STURAA itself, nor the federal regulations, nor Fullilove, nor Croson requires the District as a recipient of federal funds to conduct any inquiry to determine the existence of prior discrimination in the District construction industry in implementing STURAA. Rather, federal regulations direct the District to follow a number of steps to determine an appropriate goal. See Milwaukee County Pavers Ass'n v. Fiedler, 922 F.2d 419 (7th Cir. 1991); Tennessee Asphalt Co. v. Farris, 942 F.2d 969 (6th Cir. 1991); Ellis v. Skinner, 753 F. Supp. 329 (D. Utah 1990); and Harrison & Burrowes Bridge Constructors Inc. v. Cuomo, 743 F. Supp. 977 (N.D.N.Y. 1990).
The District, on the other hand, contends that it has followed those steps and received federal approval through the United States Department of Transportation ("USDOT") of the 37% set-aside goal pursuant to 49 C.F.R. sections 23.64(d) and 23.66(a) and thus the District's DBE program is merely the implementation of the federal program.
O'Donnell's argument is similar to those raised by the plaintiffs in Milwaukee County Pavers Ass'n v. Fiedler, 731 F. Supp. 1395 (W.D. Wis. 1990), aff'd, 922 F.2d 419 (7th Cir. 1991). Milwaukee County Pavers also involved a constitutional challenge to a state DBE program implemented pursuant to STURAA. The Wisconsin DBE program established a set-aside goal of not less than 10%, and in practice the actual expenditure amounted to 13.1% to 15.7% in various years. As in the instant case, plaintiffs therein conceded the constitutionality of the federal act but argued that Wisconsin's implementation of the program was unconstitutional. First, they argued that the program was not narrowly tailored because the state had not made findings of past discrimination in Wisconsin. Second, they argued that the state's administration of its DBE program exceeded its authority under STURAA.
The district court rejected plaintiffs' initial argument, and held that it would be inconsistent with Fullilove to require states to make findings of prior discrimination to ensure that their implementation of the federal statute is narrowly tailored. Id. at 1409-1410. The Seventh Circuit affirmed this ruling, and further explained that under the authority of the Fourteenth Amendment, Congress can "engage in affirmative action with a freer hand than states and municipalities. And one way it can do that is by authorizing states to do things that they could not do without federal authorization. That was Fullilove; it is this case as well." 922 F.2d at 424.
The Milwaukee County Pavers district court also found Wisconsin's use of the program to be outside the bounds of federal authority in three aspects and thus unconstitutional in those areas, namely: "(1) in setting goals for disadvantaged business subcontractor participation in projects funded exclusively by the state, (2) in requiring disadvantaged business prime contractors to make good faith efforts to use disadvantaged business subcontractors, and (3) in extending the Wisconsin program past the date for which the [federal] program is authorized." 731 F. Supp. at 1399 . In so holding, the district court stated: "The constitutionality of the state's program depends on its character as an implementation of the federal program. To the extent that the state steps beyond the boundaries of this federal authority, it is acting on its own authority and must base its action on specific findings of identifiable discrimination." Id. at 1414.
This principle is not inconsistent with Fullilove. Although the federal statute at issue in Fullilove was held to be constitutional on its face, the Supreme Court noted that "questions of specific application must await future cases." Fullilove, 448 U.S. at 486, 100 S. Ct. at 2779. The question to be decided in this case is whether the District's set-aside goal of 37% exceeds its authority under the federal statute and, if so, whether this goal is supported by specific findings of identifiable discrimination such that the program is nevertheless narrowly tailored.
Under STURAA, recipients of federal funds must set an overall goal of 10% or more for participation by DBEs. Where a state seeks to impose an overall goal of less than 10%, the regulations specifically set forth the necessary information which must be supplied to justify such a request. See 49 C.F.R. section 23.65 The regulations also clearly contemplate that recipients may set a goal larger than the 10% minimum,
so long as the figure is "practical and related to the availability of DBEs in desired areas of expertise." 49 C.F.R. section 23.45(g).
As a recipient of federal highway aid, each year the DPW must and does, pursuant to the federal requirements, submit to the USDOT a goal for that year's expenditures with disadvantaged businesses in federally assisted highway contracts. It appears to the Court that the District has submitted the DBE plan annually and that it has repeatedly been approved by the USDOT.
Where, as in this case, the District's program is enacted to implement federal legislation imposing specified requirements on the District and the legislation is an integral part of the federal-District legislative framework, the District program should be considered a subsidiary element of the federal legislation. However, such a relationship does not divest this Court of its responsibility to determine whether the District has exceeded its authority in implementing STURAA.
The mere fact that the USDOT has consistently approved the District's DBE plan does not make such approval a Congressional finding of discrimination in the construction area. Rather, it appears to the Court that the USDOT's approval is pro forma and that the USDOT does not undertake any type of independent investigation to determine whether the District's implementation of the 37% set-aside is related to actual and identifiable discrimination in the construction industry in the District of Columbia.
The contested District statute is intended to improve the District's implementation of the federal program. Pursuant to 49 C.F.R. section 23.45(g)(3)(i): Recipients shall submit their overall goals and a description of the methodology used in establishing them with their [DBE] program. . . ." Thus, it appears to the Court that the District's submission of its DBE program is based upon the findings that are the underpinings of the Minority Contracting Act.
Based upon the earlier discussion of the constitutionality of the Minority Contracting Act, supra at 17-21, this Court cannot but conclude that the 37% figure is outside the bounds of federal authority under STURAA since it appears that the legislative findings of discrimination in the local construction industry are insufficient. Thus, as the foregoing discussion shows, the contested District statute is the subsidiary of a federal program and is not supported by adequate findings of past discrimination and therefore is not narrowly tailored, the Court has no choice but to conclude that the District has exceeded its authority in implementing STURAA.
Thus, the Court must conclude that the District's Disadvantaged Business Enterprise Program is unconstitutional to the extent that the DBE program's 37% set-aside is based upon the factual predicate discussed herein. Therefore, the District must refrain from enforcing its DBE program in a manner that deprives O'Donnell of the equal opportunity to compete for city road construction contracts. However, the District is not prohibited from awarding road construction contracts in conformity with the 10% DBE set-aside established under STURAA.
An appropriate Order accompanies this Memorandum.
Date: DEC 22 1992
JOHN GARRETT PENN