Transportation Research Board of the National Academies 90th Annual Meeting Washington, D.C.

1. Transportation Research Board of the National Academies90th Annual MeetingWashington, D.C. Disadvantaged Business Enterprise Program: Private Sector Perspective on Legal Issues Colette Holt Attorney at Law 24 January 2011

2. 2010 Notice of Proposed RulemakingPrivate Sector Perspective • Accountability for Overall Goals • Loss of remedial focus • Failure to seriously think through what would the market look like “but for” discrimination • Politically motivated methodologies to reduce goals • Magical thinking about the effects of race-neutral approaches • Failure to measure results • Failure to provide adequate resources • Unintended consequence: lower goals? • Overall: support

3. 2010 Notice of Proposed RulemakingPrivate Sector Perspective, cont. • Goal Submission • Eases administrative burdens on recipients • Reduces stakeholder input • Reduces incentive & opportunity to revise goal setting methodologies • Overall: support • Focus on FTA & FAA recipients with fluctuating funding • Review annual recipients’ reviews of progress towards meeting overall goals

4. 2010 Notice of Proposed RulemakingPrivate Sector Perspective, cont. • Improving Program Oversight • Weakest link in the DBE Program • Problems • Lack of on site monitoring • Unauthorized DBE substitutions • Slow or no pay • Commercially useful function determinations • Balkanization of responsibility: “DBE compliance is not the project manager’s job”

5. 2010 Notice of Proposed RulemakingPrivate Sector Perspective, cont. • Sham joint ventures • Brokers • DBELO reporting to CEO on paper only • Inadequate staff resources • Inconsistent regional guidance • Wishing will not make it so • Increased training for regional offices • Imposition of penalties for poor Program administration • Criminal prosecutions filling the void • Commercially useful function investigations  indictments • Lack of expertise of prosecutors  confusion of Program standards • Overall: support

6. 2010 Notice of Proposed RulemakingPrivate Sector Perspective, cont. • Personal Net Worth Test • Indexing long overdue • Harmonizes Part 26 & Part 23 • Retirement accounts are wealth • “Illiquidity” argument is too broad • Total exclusion will benefit the wealthiest & least disadvantaged DBEs  racially disproportionate impact (i.e., helping white women) • Reduce to present value • No cap • Overall: support

7. 2010 Notice of Proposed RulemakingPrivate Sector Perspective, cont. • Interstate Certification • Balancing act between administrative ease & Program integrity • Rebuttable presumption reduces paperwork & provides an “out” for non-state UCP • Burden should be an the applicant, per usual approach & stance of seeking a government benefit • “Fast track” timetable may be difficult to follow • Publicize that there is no “recertification”; review eligibility triennially; create USDOT database of denials & decerts • Overall: support

8. 2010 Notice of Proposed RulemakingPrivate Sector Perspective, cont. • Fostering Small Business Participation • Critical element, too often honored in the discussion but not the execution; internal agency resistance • Possible approaches • Unbundling • Small business setasides • Waiving or reducing bonding • State law issues? • Federal solution?

9. 2010 Notice of Proposed RulemakingPrivate Sector Perspective, cont. • DBE Terminations & Substitutions • Primes must receive prior approval • Critical Program element • Unauthorized substitutions may be the largest contract performance problem • Reports of blatant discrimination • Overall: support • Counting DBE purchases & leases • Current rule prohibits credit for items purchases from the prime • Overall: support keeping present approach

10. 2010 Notice of Proposed RulemakingPrivate Sector Perspective, cont. • Certification Issues • NAICS codes • Procedure for code removal • Effect of code removal • Eligibility on the basis of current capacities • No unnecessary barriers reflecting future projections • Certifications don’t lapse or expire • Overall: support • Do require periodic site visits • Prohibit user fees from DBEs

11. Litigation Update • Kline v. Pocari & Maryland DOT • Pleading stage • New study & statute forthcoming  mootness? • AGC of San Diego v. Caltrans • Expert reports filed • Effect of exclusion of Hispanic & sub-continent Asian males? • Kevcon v. US • Expert reports filed • Dismissed by plaintiff with prejudice

12. Litigation Update, cont. • Midwest Fence v. Illinois DOT & Illinois Tollway • Pleading stage • Both agencies have draft disparity studies • Controlling case law upheld IDOT’s DBE Program in 2007

13. Federal Railroad AdministrationDisparity Study • RFI pending for study • Challenges • Data collection • Non-DBE subcontractor payments • Grantee records • Role of Congressional record for Part 26? • Regulatory structure like Part 26? • Time for completion • Cost • Follow National TRB Guidelines? http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_644.pdf

14. Colette Holt Attorney at Law 1730 North Clark Street Suite 4007 Chicago, IL 60614-5363 312.846.1438 (Office) 773.255.6844 (Cell) colette.holt@mwbelaw.com