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FOR CALTRANS & LOCAL AGENCY USE

FREQUENTLY ASKED QUESTIONS (FAQS)

DISADVANTAGED BUSINESS ENTERPRISE (DBE)

RACE NEUTRAL PROGRAM

Updated May 5, 2006

Introductory Comments
to Readers: 

A Ninth
Circuit Court of Appeals ruling, on May 9, 2005, in the State of Washington
(Western States
Paving Co. vs. Washington State Department of Transportation), established new evidentiary standards necessary
to constitutionally support the use of race-conscious DBE goals on Federal
aid contracts.  The standards were focused on transportation contracting.

Since
California is also under the Ninth Circuit Court of Appeals jurisdiction
and Caltrans also used race conscious DBE goals on Federal aid contracts,
the ruling obligated Caltrans to examine the evidence it had to continue
a race-conscious DBE program.  Absent the evidence, Caltrans would
have to amend its program to a race-neutral program. 

Beginning
December 21, 2005 Caltrans conducted 21 public forums statewide, gathered
testimonials, disparity studies and other related evidence as required
by the ruling.

Caltrans reviewed the
public testimonials, studies and written evidence.  Both Caltrans
and the Federal Highway Administration (FHWA) concurred that the evidence
of discrimination in California in the transportation industry was insufficient
to support  continued use of race conscious measures (i.e. individual
contract DBE participation goals) and did not meet the legal standards
established in Western States Paving Co. Inc v. Washington State Department of Transportation
et al.

Therefore,
the information provided in this Frequently Asked Questions (FAQ)
update, dated May 4, 2006, reflects the California State Department
of Transportations (Department) decision, effective May 1, 2006, to
change to a race neutral DBE Program. This decision was jointly arrived
at by the Department and the FHWA. The following factors led to the
joint conclusion:

The data provided did not identify specific evidence of discrimination
suffered by any of the presumptively disadvantaged groups identified
in 49 CFR Part 26 in the transportation contracting industry in California.
The available
disparity studies conducted in California were limited in scope to a
local government agency or a project, geographically and chronologically
limited, and did not provide statistical evidence of discrimination
in transportation contracting.
The anecdotal
evidence related to transportation contracts in California could not
be verified.

All
affected Departmental Divisions/Offices and Local Agencies were immediately
notified on May 1, 2006, of this decision to change to a race neutral
program.

Caltrans
plans to award a Consultant contract for a DBE Availability and a DBE
Disparity Study. This change to an all race neutral DBE Program may
be an interim step depending on the results of the disparity study. 
The study is required to maintain Federal aid funding. The completion
of these studies by Caltrans will help determine what percent, if any,
of Californias overall statewide DBE goal may be obtained by the use
of race conscious measures, such as individual DBE contract participation
goals. The Department plans to have these studies completed within twelve
months after contract execution.

The
Department understands that this possible interim change to a race neutral
DBE program affects not only Caltrans, as the States primary recipient
of Federal aid funding, but also all of the Departments subrecipients,
the Local Agencies who receive Federal aid funding from FHWA and FTA,
through Caltrans.

As the
decision to change to a race neutral DBE Program was made by the Department,
effective May 1, 2006, the following FAQs provide a more detailed history
of why the decision had to be made, as well as answering more specific
questions about the differences in policy, procedures and administration
between a race conscious DBE Program and a race neutral DBE program

1. 
Q:  What
is a Race Neutral DBE Program?

A: 
Pursuant to 49 Code of Federal Regulations (CFR) Part 26.5, a race neutral

measure
or program is one that is used to assist all small businesses. Race
neutral measures focus on developing the business practices of all small
businesses.

Q:  If recipients will be operating an all-race neutral DBE program in
FY 

2006
or subsequent years, what should such a program include?

(Readers
please note - this question and answer was reviewed and approved by
the General Counsel of the United States Department of Transportation
as being consistent with the language and intent of 49 CFR Part 26,
and as such is being directly quoted. The word Department in this
answer therefore refers to the United States Department of Transportation)

With few exceptions, generally there is no difference in how the DBE

program
regulations apply to a race-and gender-neutral program (hereafter

race-neutral)
as compared to a race-and gender-conscious program

(hereafter
race-conscious).

In
a wholly race-neutral program (e.g., the annual overall DBE goal has
been approved with no portion of it projected to be attained by using
race-and gender-conscious means) the recipient does not establish individual
contract goals for DBE participation on any of its US DOT-assisted contracts
as part of its efforts to meet its statewide DBE participation goal.

Recipients should take affirmative steps to use as many of the race-neutral

means of achieving DBE participation
identified at 49 CFR 26.51(b) as possible to meet the overall goal and
to demonstrate that you are administering your program in good faith. 
The Department expects that recipients using all race-neutral programs
will use methods such as unbundling of contracts, technical assistance,
capital and bonding assistance, business development programs, etc.,
rather than waiting passively for DBEs to participate.

The
good faith efforts requirements in 49 CFR 26.53 that apply to the use
of race-conscious measures (i.e., individual contract DBE participation
goals) do not apply when a recipient is implementing a race-neutral
program.  However, recipients must continue to collect the data
required to be reported in the Uniform Report of DBE Awards or Commitments
and Payments Form (see §26.11) and to monitor compliance with the commercially
useful function requirements.

The
prompt payment and retainage requirements of 49 CFR 26.29 are race-neutral
mechanisms designed to benefit all subcontractors, DBEs and non-DBEs
alike.  Recipients using all race-neutral programs must continue
to implement them.

The
requirement that DBEs must perform a commercially useful function to
receive credit toward the overall goal applies to race neutral programs
just as it does to programs that use race-conscious means to meet program
objectives.