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OP-ED: Washington state agency taking advantage of federal waiver

Daily Journal of Commerce
June 27, 2017

Overview

As of June 1, the Washington State Department of Transportation (WSDOT) is excluding nonminority woman-owned businesses to meet Disadvantage Business Enterprise (DBE) goals on federally funded contracts.

In 2014, WSDOT submitted its initial waiver request to the United States Department of Transportation (USDOT) proposing that WSDOT be allowed to “set federal-aid highway program DBE contract goals that would exclude from consideration toward meeting the goal DBEs owned by non-minority women for whom no disparities between availability and utilization were found.”

As a part of its waiver request, WSDOT submitted a 2012 DBE Program Disparity Study conducted by BBC Research & Consulting that analyzed data from 2009 through 2011. The study, which has drawn criticism for being fundamentally flawed, concluded that non-minority woman-owned businesses do not face disparities in performing work on WSDOT projects. The waiver is valid until 2020 and may be extended at WSDOT’s request or “until it is no longer necessary.”

For state highway departments such as the Oregon Department of Transportation (ODOT) and WSDOT to receive federal funding, they are required by federal law to implement DBE programs. One of the objectives of a state DBE program is to ensure there is a level playing field for businesses owned by socially and economically disadvantaged individuals to participate in federally-funded projects.

All DBE programs must nevertheless be “narrowly tailored to further Congress’ compelling remedial interest,” according to Western States Paving v. WDOT. In western states, the Ninth Circuit Court of Appeals stated that a DBE program is narrowly tailored when the state can show a presence of “discrimination in the state’s transportation contracting industry” and the DBE goal “is limited to those minority groups that have actually suffered discrimination.”

Thus, every three years, states must submit their DBE goals, which can only include those groups for whom “significant disparities” exist based on evidence obtained from disparity and/or availability studies conducted in each state. WSDOT’s 2009-2011 disparity study prompted its request for waiver to exclude non-minority woman-owned businesses from meeting DBE goals.

Considering Oregon’s proximity to Washington, this change to WSDOT’s DBE goal participation will likely affect many Oregon-based contractors (including those Oregon non-minority womanowned businesses that are currently certified as Washington DBEs). As of June 1, 2017, all contractors bidding on WSDOT projects will not be able to use non-minority women-owned businesses to meet DBE goals on federally funded WSDOT projects. Thus, Oregon-based contractors bidding on WSDOT work will not be able to use non-minority woman-owned businesses to meet DBE goals through at least 2020.

This change, however, does not affect DBE goals on public contracts for other Washington state agencies, including Sound Transit and the Port of Seattle. The change also does not affect existing WSDOT contracts.

WSDOT is implementing the waiver by classifying all DBEs that are not non-minority womanowned businesses as “underutilized” disadvantaged business enterprises (UDBEs), and the waiver requires only UDBE utilization on all WSDOT federally funded projects. The “U” is a special designation specifically used by WSDOT – all UDBEs must still be certified as DBEs with the Washington State Office of Minority and Women’s Business Enterprises. WSDOT’s federally funded contracts will now include provisions requiring compliance with the waiver, including “UDBE commitments” and “UDBE condition of award goals.” The UDBE condition of award includes a “utilization certification form” and a “written confirmation form” that must be submitted with its bid. Firms certified only as DBEs without the “U” designation will not count toward the commitment amounts and condition of award goals. Failure to comply could result in a bid being rejected as non-responsive.

While Oregon and Washington are arguably very similar in many aspects, it is unlikely that ODOT will seek a similar waiver for non-minority woman-owned businesses anytime soon. Notably, ODOT’s 2016 disparity study, conducted by Keen Independent Research, found that there was “quantitative evidence of disparities for white women-owned firms in ODOT contracts and in the Oregon transportation contracting industry.”

Column first appeared in the Daily Journal of Commerce on June 27, 2017.

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