GAO

United States General Accounting Office

Report to Congressional Committees

June 2001 DISADVANTAGED 

BUSINESS 

ENTERPRISES

Critical Information Is 

Needed to Understand 

Program Impact

GAO-01-586

Page 1 GAO-01-586 Disadvantaged Business Enterprises

Contents

Letter 3

Appendixes Appendix I: Section of the Transportation Equity Act for the 21st Century 

Requiring GAO’s Study 46

Appendix II: GAO’s Survey Instrument and Overall Results 48

Appendix III: Objectives, Scope, and Methodology 74

Appendix IV: Comments From the U.S. Department of Transportation 79

Appendix V: GAO Contacts and Staff Acknowledgments 84

Figures Figure 1: Percentage of Federal Highway Contract Dollars Awarded to 

DBEs, Fiscal Year 1999 21

Figure 2: DBEs’ Participation in Federal Transportation Contracting in 

Minnesota, 1995-2000 39

Figure 3: MBE/WBEs’ Participation in Louisiana’s State-Funded 

Transportation Contracting, 1992-2000 41

Abbreviations

DBE Disadvantaged Business Enterprise

DOCR Department of Transportation's Office of Civil Rights

DOJ Department of Justice

FHWA Federal Highway Administration

FTA Federal Transit Administration

GAO General Accounting Office

MBE/WBE Minority Business Enterprise/Women Business Enterprise

SBA Small Business Administration

TEA-21 Transportation Equity Act for the 21st Century

UCP Unified Certification Program

USDOT Department of Transportation
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Page 3 GAO-01-586 Disadvantaged Business Enterprises

United States General Accounting Office

Washington, D.C. 20548

Letr

June 1, 2001

Congressional Committees

The U.S. Department of Transportation’s (USDOT) Disadvantaged Business 

Enterprise (DBE) program is designed to remedy the effects of current and 

past discrimination against small businesses owned and controlled by 

socially and economically disadvantaged individuals and to foster equal 

opportunity in transportation contracting. The Surface Transportation 

Assistance Act of 1982 contained the first statutory DBE provision for 

federal highway and transit programs, requiring that at least 10 percent of 

the funds provided be expended with DBEs, unless the Secretary of 

Transportation determined otherwise. From 1983 through 1999, about $35 

billion of the federal funds expended through USDOT-assisted highway and 

transit contracts went to DBEs. Congressional debate preceding the 

passage in 1998 of the Transportation Equity Act for the 21st Century (TEA21), which reauthorized the DBE program, focused largely on the need for 

and impact of the DBE program. USDOT issued new regulations in 1999 

that significantly altered the DBE program. These regulations were 

designed to respond to issues raised in the congressional debate and the 

Supreme Court’s 1995 decision in Adarand Constructors, Inc. v. Pena.

In addition to reauthorizing the DBE program, TEA-21 required that we 

review the program’s impact throughout the United States and directed us 

to include analyses of specific program-related issues in our review.1

 (See 

app. I for the section of TEA-21 requiring our study.) Accordingly, this 

report provides information on (1) important changes made to the DBE 

program since 1999, (2) characteristics of DBEs and non-DBEs that receive 

USDOT-assisted highway and transit contracts, (3) evidence of 

discrimination and other factors that may limit DBEs’ ability to compete for 

USDOT-assisted contracts, and (4) the impact of the DBE program on 

costs, competition, and job creation and the impact of discontinuing the 

federal and nonfederal DBE programs.

1

Under TEA-21, at least 10 percent of the highway, transit, and research funds authorized by 

the act are to be expended with DBEs, unless the Secretary of Transportation determines 

otherwise. This report focuses on the DBE program applicable to state departments of 

transportation and transit authorities with respect to USDOT-assisted highway and transit 

contracts rather than on direct expenditures of federal funds by USDOT. 
Page 4 GAO-01-586 Disadvantaged Business Enterprises

To address these issues, we conducted a nationwide mail survey in October 

2000 of the 52 state departments of transportation (including those of the 

District of Columbia and Puerto Rico) and the 36 largest transit 

authorities.2

 We received responses to our survey from all 52 state 

departments of transportation (states) and 31 transit authorities, for an 

overall response rate of 94 percent. Our survey instrument and overall 

results are included in appendix II and selected survey results are available 

at www.gao.gov/special.pubs/dbe. We also assessed USDOT’s DBE 

program data, reviewed court cases addressing the constitutionality of 

USDOT’s DBE program since 1995, and analyzed transportation-specific 

disparity studies.3

 This report is not a compliance review and therefore 

does not address whether states and transit authorities followed the DBE 

program regulations or how USDOT enforced those regulations, 

particularly with respect to the certification of DBEs. (See app. III for a 

more detailed discussion of our report’s scope and methodology.)

Results in Brief The DBE program has changed significantly since USDOT issued new 

regulations in 1999, in part, to respond to a 1995 Supreme Court decision 

that heightened standards for federal programs that use race or ethnicity as 

a criterion in decision-making. The new regulations overhauled the DBE 

goal-setting process. States and transit authorities are no longer required to 

justify goals lower than 10 percent—the amount identified in the statutory 

DBE provision. Rather, goals are to be based on the number of “ready, 

willing, and able” DBEs in local markets. In addition, states and transit 

authorities must now use race-neutral measures (i.e., measures intended to 

help all small businesses, not just DBEs), such as outreach and technical 

assistance, to the greatest extent possible to achieve their DBE goals. 

Furthermore, the new regulations revised the eligibility requirements to 

2

Transit authorities provide local or regional multiple-occupancy-vehicle passenger services 

for general public use. We planned to survey all transit authorities required to submit DBE 

program plans. However, the Federal Transit Administration (FTA) could not provide an 

accurate list of these transit authorities. Therefore, we surveyed the 36 largest transit 

authorities (as defined by the number of unlinked passenger trips in 1999) across the nation. 

These transit authorities accounted for two-thirds of the federal transit grant funds 

obligated in 1999.

3

These disparity studies measure the availability and utilization of minority- and womenowned businesses in transportation contracts. We chose to review only transportationspecific disparity studies published between 1996 and 2000, in part, because the DBE 

regulations state that any disparity study used in the DBE goal-setting process should be as 

recent as possible and focused on the transportation contracting industry.
Page 5 GAO-01-586 Disadvantaged Business Enterprises

include a personal net worth cap of $750,000 for the individuals who own 

and control DBEs. States and transit authorities were required to submit to 

USDOT new DBE program plans that reflected the new regulations in 

August 1999. About three-fourths of the states and transit authorities 

responding to our survey reported that the new regulations have made it 

more difficult for them to administer the DBE program. Furthermore, over 

half of the states and transit authorities indicated that the new regulations 

made it more difficult for DBEs to apply to the program. These views are 

probably attributable to the new goal-setting process that states and transit 

authorities must complete and the additional paperwork that DBEs must 

submit.

A lack of key information prevents anyone from gaining a clear 

understanding of the firms that participate in the DBE program and how 

these firms compare with the rest of the transportation contracting 

community. For example, we cannot calculate the total number of certified 

DBEs nationwide because of duplication in states’ and transit authorities’

DBE directories. In addition, about two-thirds of our survey respondents 

could not provide information on the annual gross receipts of DBEs or the 

personal net worth of the individuals who own and control DBEs—

information that is required to determine eligibility for the program but is 

not reported to USDOT. The primary reason states and transit authorities 

cited for not being able to provide this information was that the 

information was not in an electronic database and therefore would be too 

difficult and time-consuming to compile. Moreover, states and transit 

authorities are just starting to collect personal net worth information as 

required by the new regulations. In addition, about 95 percent of the states 

and transit authorities we surveyed could not provide information on the 

annual gross receipts of non-DBEs, and none could provide information on 

the personal net worth of the individuals who own and control non-DBEs. 

Although financial information on DBEs and non-DBEs is lacking, the 

majority of the states and transit authorities could provide basic 

information on DBEs, such as the total number of prime contracts awarded 

to the firms—information that is regularly reported to USDOT. These data 

indicate that DBEs received about 7 percent of the prime contracts 

awarded and 2 percent of the federal dollars awarded for prime contracts 

in fiscal year 2000.

A variety of sources could provide information relevant to whether 

discrimination limits the ability of DBEs to compete for USDOT-assisted 

contracts. These sources include relevant court cases; studies of lending, 

bonding, and business practices affecting the formation and competition of 
Page 6 GAO-01-586 Disadvantaged Business Enterprises

such firms; state and local disparity studies; and discrimination complaints. 

Our review focused on court cases addressing the constitutionality of the 

federal DBE program; transportation-specific disparity studies; and written 

complaints of discrimination filed by DBEs with states, transit authorities, 

and USDOT. We focused on these sources because they are directly related 

to transportation contracting and the federal DBE program. In summary, 

we found the following:

• The federal courts that have considered the constitutionality of 

USDOT’s DBE program under the standard adopted by the Supreme 

Court in 1995 have concluded that discrimination adversely affects 

DBEs. These decisions were based on various types of evidence, 

including studies of business practices affecting DBE formation and 

competition, and disparity studies. In these cases, the courts found that 

the evidence of discrimination presented was sufficient for them to 

conclude that the federal DBE program serves a compelling 

governmental interest, namely, providing a remedy for that 

discrimination.

• Studies finding statistical disparities between the availability and 

utilization of minority- and women-owned firms in transportation 

contracting are recognized as a potential source of evidence of 

discrimination. As a result, numerous state and local governments have 

conducted disparity studies to support their minority contracting 

programs and to help set their federal DBE participation goals. All 14 

studies we reviewed found that there were disparities between the 

availability and utilization of minority- and women-owned businesses in 

transportation contracts. Taken as a whole, these studies suggest that 

disparities exist; however, we found significant weaknesses in the 

disparity studies we reviewed. For example, the studies consistently 

overstated the number of qualified, willing, and able firms or 

understated firms’ utilization in transportation contracts. The 

weaknesses we identified create uncertainties about the studies’

findings—that is, they could result in either an overstatement or an 

understatement of minority- and women-owned businesses availability 

and utilization.⋅

• USDOT does not systematically track information on complaints of 

discrimination filed with the Department by DBEs—information that 

could shed light on the existence of discrimination against DBEs. For 

example, although USDOT receives written discrimination complaints 

filed by DBEs, it could not provide the total number of such complaints, 

the total number of investigations launched, or the outcomes of the 

investigations. We also asked states and transit authorities about written 
Page 7 GAO-01-586 Disadvantaged Business Enterprises

discrimination complaints filed by DBEs in 1999 and 2000. Eighty-one 

percent of the states and transit authorities reported that they did not 

receive any written complaints of discrimination filed by DBEs during 

this period. Nineteen percent of the states and transit authorities 

reported that they received a total of 31 written discrimination 

complaints from DBEs in 1999 and 2000. Of the 31 complaints filed, 29 

had been investigated. Four of these investigations resulted in findings 

of discrimination.

Other factors may also limit the ability of DBEs to compete for USDOTassisted contracts. According to our survey results, the majority of the 

states and transit authorities we surveyed had not conducted any type of 

analysis to identify these factors. Using anecdotal information, we 

identified a number of factors, or barriers, such as a lack of working capital 

and limited access to bonding, that may limit DBEs’ ability to compete for 

contracts. However, there was little agreement among the officials we 

contacted on whether these factors were attributable to discrimination.

Limited data prevent a thorough assessment of the impact of the DBE 

program, including the impact on DBEs of discontinuing the federal or 

nonfederal DBE programs. We identified one state and one transit authority 

that had discontinued their federal DBE programs as a result of court 

decisions. In addition, through our survey, we identified 10 other states and 

transit authorities that had participated in nonfederal DBE programs that 

had been discontinued. Ten of these 12 states and transit authorities could 

not provide sufficient data for us to fully evaluate the impact of this action. 

The data provided from the remaining two states indicate that 

discontinuing the federal and nonfederal programs had a negative impact 

on minority- and women-owned businesses.

Our report contains several recommendations to USDOT designed to (1) 

enhance the collection of data so that more and better information will be 

available to evaluate the impact of the DBE program and (2) help states and 

transit authorities set DBE participation goals that reflect the availability of 

ready, willing, and able DBEs in the relevant market. We recognize that 

implementing these recommendations may result in some additional costs 

for USDOT, states, and transit authorities. However, given existing data 

collection requirements and the benefits associated with these 

recommendations, we believe such costs are warranted. We provided 

USDOT with a draft of this report for review and comment. USDOT did not 

comment on our recommendations but offered comments on such areas as 

the role of disparity studies in the DBE program, the need for states and 
Page 8 GAO-01-586 Disadvantaged Business Enterprises

transit authorities to use the best available data in DBE goal-setting, and 

the status of DBE and non-DBE participation data.

Background USDOT established a minority and women’s business enterprise program 

for its highway, airport, and transit programs by regulation in 1980. The 

Surface Transportation Assistance Act of 1982 contained the first statutory 

DBE provision for federal highway and transit programs, requiring that a 

minimum of 10 percent of the funds provided by the act be expended with 

small businesses owned and controlled by socially and economically 

disadvantaged individuals, unless the Secretary of Transportation 

determined otherwise. Nonminority women were not included as socially 

and economically disadvantaged individuals. The Surface Transportation 

and Uniform Relocation Assistance Act of 1987 continued the program and 

included nonminority women in the statutory definition of socially and 

economically disadvantaged individuals, thereby allowing states to use 

contracts with both minority- and women-owned businesses to meet their 

DBE goals. The Intermodal Surface Transportation Efficiency Act of 1991 

and TEA-21 (1998) reauthorized the program, continuing the combined 10-

percent provision for participation by minority-owned and nonminoritywomen-owned DBEs. The percentage of federal funds expended through 

USDOT-assisted highway and transit contracts with DBEs increased from 

9.9 percent in 1983 to 12.8 percent in 1999.

TEA-21 and USDOT’s regulations establish the basic eligibility 

requirements for participation in the DBE program. The program is limited 

to small businesses owned and controlled by socially and economically 

disadvantaged individuals. Women and members of certain minority 

populations, such as African-, Hispanic-, and Native-Americans and other 

minorities found to be disadvantaged by the Small Business Administration 

(SBA), are presumed to be socially and economically disadvantaged unless 

proved otherwise.4

 These individuals must own at least 51 percent of 

thefirm and actually control its operations. To qualify as a small business, a 

firm must have average annual gross receipts over a 3-year period that do

4

Firms owned and controlled by those who are not presumed to be socially and 

economically disadvantaged may qualify for the program if the owner can demonstrate 

disadvantage. However, no individual whose personal net worth exceeds $750,000 may be 

considered economically disadvantaged. This amount does not include the individual’s 

interest in the business or equity in a primary residence.
Page 9 GAO-01-586 Disadvantaged Business Enterprises

not exceed either (1) the applicable SBA small business size standards5 or 

(2) a USDOT-specific cap ($17.4 million).6

 There is no legislative or 

administrative requirement limiting the length of time firms can participate 

in the program. However, DBEs become ineligible, or “graduate,” when 

their average annual gross receipts over a 3-year period exceed the 

applicable SBA small business size standards or the USDOT-specific cap. 

According to our survey results, most of the states and transit authorities 

did not have any DBEs graduate in 2000. In addition, about one-quarter of 

the states and transit authorities we surveyed could not provide this 

information. States and transit authorities are not required to track this 

information, and graduation is not a goal of the DBE program. Moreover, as 

we reported in 1994,7

 because average annual gross receipts do not reliably 

indicate DBEs’ success, graduation is not a useful measure of the success 

of the program as a whole.

USDOT administers the DBE program through the Office of the Secretary 

and the Department’s operating administrations, including the Federal 

Transit Administration (FTA) and the Federal Highway Administration 

(FHWA). USDOT develops program policies, instructions, and procedures; 

reviews and approves states’ and transit authorities’ DBE program plans; 

and provides technical assistance, among other things. States and transit 

authorities must certify that program applicants meet the eligibility criteria, 

reassess annually the eligibility of certified businesses, and establish 

overall annual goals for the participation of DBEs in their USDOT-assisted 

contracts. DBE participation goals are expressed as a percentage of all 

federal highway and transit funds expended on USDOT-assisted contracts 

in a fiscal year.

5

SBA’s size standards define the maximum size at which a firm can be considered a small 

business. The size standards are usually defined by the number of employees or the average 

annual receipts. 

6

TEA-21 established a cap of $16.6 million, but authorized the Secretary of Transportation to 

adjust this amount for inflation. In August 2000, USDOT raised this cap from $16.6 million to 

$17.4 million. Since the change was effective only for the last 2 months of fiscal year 2000, 

we used the $16.6 million figure when we asked in our questionnaire for fiscal year 2000 

data on annual gross receipts.

7

Highway Contracting: Disadvantaged Business Program Meets Contract Goal, but 

Refinements Are Needed (GAO/RCED-94-168, Aug. 17, 1994).
Page 10 GAO-01-586 Disadvantaged Business Enterprises

One of the sources states and transit authorities may use to help set their 

overall federal DBE participation goals is data derived from disparity 

studies, which measure the availability of minority- and women-owned 

businesses compared with their utilization in contracting. States and transit 

authorities also use disparity studies to support state and local minority 

business contracting programs. The significance of disparity studies as 

evidence of discrimination in this context was discussed in a 1989 Supreme 

Court decision.8

 In City of Richmond v. J.A. Croson Co.,9 the Court held 

that state and local programs that use race or ethnicity as a factor in 

apportioning public contracting opportunities are subject to strict 

scrutiny.10 This means that the programs must serve a compelling 

governmental interest and be narrowly tailored—that is, designed to be no 

broader than necessary—to meet that interest. 

8

This decision does not address state and local governments’ implementation of the federal 

DBE program. Furthermore, several members of the Court stated that, unlike state and local 

governments, the Congress legislates on a nationwide basis and has inherently broader 

powers to remedy discrimination. Therefore, the Congress may deserve greater deference 

than state and local governments. Also, we note disparity studies are not required to support 

their participation in the federal program.

9

488 U.S. 469 (1989).

10The purpose of strict scrutiny is to ensure that the goal of the program is important enough 

to warrant treating people differently on the basis of their race or ethnicity and that the 

means chosen to achieve the goal fit it so closely that there is little or no possibility that an 

illegitimate prejudice or stereotype is the motive for such different treatment. Programs that 

use gender as a factor in decision-making are subject to a more lenient standard than those 

involving race or ethnicity. These programs must be substantially related to the achievement 

of an important governmental interest.
Page 11 GAO-01-586 Disadvantaged Business Enterprises

The Court found that combating racial discrimination is a compelling 

interest. However, it held that the city had not presented sufficient 

evidence of discrimination to justify its minority contracting plan. In 

evaluating the city’s evidence, the Court found, among other things, that the 

city had inappropriately relied on the disparity between the number of 

prime contracts awarded to minority firms and the minority population of 

Richmond. It stated that an appropriate disparity evaluation would 

compare the percentage of qualified minority contractors with the 

percentage of dollars actually awarded to minority businesses.11 While 

courts have favorably cited disparity studies in some cases,12 many courts 

have rejected the studies’ findings, often because of methodological 

weaknesses, when considering whether a compelling interest exists for 

state or local minority contracting programs.13 These decisions provide 

varying degrees of guidance on the data and methodology that need to be 

used in disparity studies to produce reliable evidence of discrimination.

11Several members of the Court emphasized that an inference of discrimination could arise 

from a significant statistical disparity between the number of qualified, willing, and able 

minority contractors and the number actually engaged to perform a particular service. 

12See, e.g., Cone Corp. v. Hillsborough County, 908 F.2d 908 (11th Cir. 1990), cert. denied, 

498 U.S. 983 (1990) and Concrete General, Inc. v. Washington Suburban Sanitary Comm’n, 

779 F. Supp. 370 (D. Md. 1991)(both finding that statistical analyses presented in connection 

with motions for summary judgment did not suffer from the defects identified by the 

Supreme Court in Croson). 

13See, e.g., W.H. Scott Construction Co., Inc. v. City of Jackson, 199 F.3d 206 (5th Cir. 

1999)(study did not include an analysis of the availability and utilization of qualified 

minority subcontractors, the relevant statistical pool for the city’s program); Engineering 

Contractors Ass’n of South Florida, Inc. v. Metropolitan Dade County, 122 F.3d 895 (11th Cir. 

1997), cert. denied, 523 U.S. 1004 (1998)(marketplace study included the number of licensed 

construction contractors rather than the number of firms willing, able, or qualified to 

perform work on county construction contracts and data on certain minority and women 

contractors did not contain any statistically significant unfavorable disparities after 

accounting for firm size); Concrete Works of Colorado, Inc. v. City and County of Denver, 86 

F. Supp. 2d 1042 (D. Col. 2000)(studies assumed that all existing firms were available to 

perform within applicable time constraints and aggregated available minority firms 

regardless of their size or the services they performed); Phillips & Jordan, Inc. v. Watts, 13 F. 

Supp. 2d 1308 (N.D. Fla. 1998)(study assumed that every firm included in selected standard 

industrial codes was qualified, willing, and able to bid on road maintenance contracts and 

calculated availability and utilization rates on a statewide basis, even though contracts were 

let on the district level).
Page 12 GAO-01-586 Disadvantaged Business Enterprises

A 1995 Supreme Court decision had a significant impact on the federal DBE 

program, as well as other federal programs that use race or ethnicity as 

factors in decision-making. Adarand Constructors, Inc. v. Pena14 involved 

FHWA’s use of a subcontracting compensation clause in direct federal 

contracting to implement the DBE provision and provisions of the Small 

Business Act.15 Adarand Constructors, a nondisadvantaged contractor, 

initiated the litigation in 1990 after it was denied a subcontract on a federal 

lands highway project. In 1992, the district court held that the programs at 

issue were constitutional, and in 1994 the Tenth Circuit Court of Appeals 

affirmed that decision.16 In 1995, the Supreme Court set aside the Court of 

Appeals’ decision and sent the case back to the lower courts, directing 

them to apply the strict scrutiny standard and thus determine whether the 

programs were narrowly tailored to further a compelling governmental 

interest. Applying this standard, the district court held that the 

subcontracting compensation clause and related statutory provisions were 

unconstitutional in 1997.17 This decision was the subject of considerable 

discussion during the congressional debate over the reauthorization of the 

DBE program as part of TEA-21, which was enacted in 1998.18

14515 U.S. 200 (1995).

15The subcontracting compensation clause provided prime contractors additional 

compensation for hiring subcontractors certified as small businesses controlled by socially 

and economically disadvantaged individuals. 

16Adarand Constructors, Inc. v. Pena, 16 F.3d 1537 (10th Cir. 1994); Adarand Constructors, 

Inc. v. Skinner, 790 F. Supp. 240 (D. Colo. 1992). 

17Adarand Constructors, Inc. v. Pena, 965 F. Supp. 1556 (D. Colo. 1997). On appeal, the 

Tenth Circuit Court of Appeals found that the case was moot since Adarand Constructors 

had been certified as a DBE after the district court’s decision. Adarand Constructors, Inc. v. 

Slater, 169 F.3d 1292 (10th Cir. 1999). However, the Supreme Court held that the case was 

not moot and directed the Tenth Circuit Court of Appeals to consider the district court’s 

1997 decision. Adarand Constructors, Inc. v. Slater, 528 U.S. 216 (2000). 

18USDOT believes that the Congress established a compelling governmental interest in the 

DBE program through the body of evidence that supporters of the program presented 

during the congressional debate over the program and the subsequent reauthorization of the 

DBE provision in TEA-21.
Page 13 GAO-01-586 Disadvantaged Business Enterprises

Responding largely to the Supreme Court’s 1995 decision and congressional 

debate over the DBE program, USDOT issued regulations in 1999 to ensure 

that the DBE program is narrowly tailored. In addition, the regulations are 

designed to ensure nondiscrimination in the award and administration of 

USDOT-assisted contracts, remove barriers to the participation of DBEs in 

such contracts, and provide appropriate flexibility to the recipients of 

federal funds in establishing and providing opportunities to DBEs, among 

other things. In September 2000, the Tenth Circuit Court of Appeals upheld 

the constitutionality of the current DBE program because it found that the 

program served a compelling governmental interest and was narrowly 

tailored, largely because of structural changes in the program resulting 

from USDOT’s new regulations.19 Adarand Constructors requested that the 

Supreme Court review the Court of Appeals’ decision in November 2000. In 

March 2001, the Supreme Court agreed to hear the case.20

USDOT’s New 

Regulations 

Significantly Changed 

the DBE Program

USDOT’s 1999 DBE regulations made significant changes to the DBE 

program. For example, the new regulations overhauled the program’s goalsetting process, including the use of race-neutral measures (e.g., technical 

assistance) and revised its eligibility requirements. In addition, the new 

regulations required that states and transit authorities develop bidders lists 

and unified certification programs, among other things, to make the DBE 

program more streamlined and efficient. However, 72 percent of the states 

and transit authorities responding to our survey indicated that the new 

regulations have made it more difficult for them to administer the program. 

In addition, over half of the states and transit authorities indicated that the 

new regulations have made it more difficult for DBEs to apply to the 

program.

19Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000). By the time of the 

Tenth Circuit Court of Appeals’ decision, FHWA had discontinued its use of the 

subcontracting compensation clause.

20Adarand Constructors, Inc. v. Mineta, 121 S. Ct. 1401, amended by 69 U.S.L.W 3670 (U.S. 

Apr. 13, 2001) (No. 00-730). The Supreme Court will address the following two questions: (1) 

Did the court of appeals misapply the strict scrutiny standard in determining if Congress had 

a compelling interest to enact legislation designed to remedy the effects of racial 

discrimination? and (2) Is USDOT’s current DBE program narrowly tailored to serve a 

compelling government interest?
Page 14 GAO-01-586 Disadvantaged Business Enterprises

New Goal-Setting Process 

Shifts Focus of Program

The new goal-setting process shifted the focus of the program from 

achieving the maximum feasible extent of DBE participation in USDOTassisted contracting to achieving a “level playing field”—that is, the amount 

of participation DBEs would be expected to achieve in the absence of 

discrimination. For example, under the prior regulations, states and transit 

authorities were required to justify goals lower than 10 percent—the 

amount identified in the statutory DBE provision. The regulations 

established a direct link between the amount of participation identified in 

the statute and the goals set by states and transit authorities. In contrast, 

the new regulations require states and transit authorities to base their DBE 

participation goals on demonstrable evidence of the number of “ready, 

willing, and able” DBEs available in local markets relative to the number of 

all businesses “ready, willing, and able” to participate in USDOT-assisted 

contracts in such markets—representing the level of DBE participation 

expected in the absence of discrimination.21

The regulations outline a two-step process for goal-setting. First, states and 

transit authorities must establish a base figure that represents the “ready, 

willing, and able” DBEs in the state or transit authority’s market relative to 

all “ready, willing, and able” firms in that market (i.e., relative availability of 

DBEs). To determine the relative availability of DBEs, the new regulations 

require that states and transit authorities use the best available data and 

suggest that states and transit authorities use DBE directories and Census 

Bureau data, bidders lists, disparity studies, or the goal of another 

recipient. Second, states and transit authorities must adjust their base 

figure to account for other factors affecting DBEs, such as the capacity of 

DBEs to perform work in USDOT-assisted contracts and findings from 

disparity studies. According to our survey results, the most common 

sources used to set states’ and transit authorities’ fiscal year 2000 

participation goals were DBE directories, historical utilization patterns, 

Census Bureau data, and bidders lists. Under the new goal-setting process, 

the average DBE participation goal decreased from 14.6 percent in fiscal 

year 1999 to 13.5 percent in fiscal year 2000.

21According to the new regulations, the 10-percent goal established in TEA-21 is an 

aspirational goal at the national level that USDOT will use as a means of evaluating the 

overall performance of the DBE program nationwide; however, it is not tied to individual 

states and transit authorities and does not require that states and transit authorities set a 10-

percent goal. 
Page 15 GAO-01-586 Disadvantaged Business Enterprises

The new regulations also require that states and transit authorities meet the 

maximum feasible portion of their overall DBE goals using race-neutral 

measures rather than race-conscious measures. The prior regulations did 

not require the use of race-neutral measures (e.g., outreach and technical 

assistance), which are designed to increase contracting opportunities for 

all small businesses, and do not involve setting specific goals for the use of 

DBEs on individual contracts. A race-conscious measure is one that is 

focused solely on assisting DBEs. An example of a race-conscious measure 

is a contract goal—that is, a DBE participation goal set for a specific 

contract or project. While quotas are prohibited and set-asides are allowed 

only in the most extreme cases of discrimination, states and transit 

authorities must use contract goals to meet any portion of their overall 

goals they do not expect to meet using race-neutral measures.22 States and 

transit authorities must submit their overall DBE participation goals, 

including the methodology used to set the goals and the projected use of 

race-neutral and race-conscious measures, to USDOT for approval on an 

annual basis. The states and transit authorities we surveyed indicated that, 

on average, they used race-neutral measures to achieve slightly over onethird of their overall DBE participation goals in fiscal year 2000.

New Eligibility Requirement 

Focuses on Owners’

Personal Wealth

The new regulations established a personal net worth cap for individuals 

whose ownership and control of a business determines DBE eligibility. 

According to USDOT, this new eligibility requirement is designed to ensure 

that the program is limited to firms owned and controlled by genuinely 

disadvantaged individuals. Prior to the new regulations, the absence of a 

limit on personal net worth led to criticism that wealthy individuals could 

benefit from the program. Under the new regulations, to qualify as 

economically disadvantaged, individuals who own and control DBEs must 

have a personal net worth that does not exceed $750,000. USDOT chose 

the $750,000 cap because it is a well-established standard for the SBA’s 

programs. According to our survey results, the number of firms that 

exceeded this limit and became ineligible for the DBE program in fiscal 

year 2000 ranged from 0 in 14 states and transit authorities to 39 in 1 state. 

Twenty-two percent of the states and transit authorities we surveyed 

reported that this information was not available.

22To the extent that race-conscious measures are no longer needed to achieve overall goals, 

states and transit authorities must discontinue their use.
Page 16 GAO-01-586 Disadvantaged Business Enterprises

New Regulations Include 

Other Requirements to 

Improve the DBE Program

The new regulations include other changes designed to improve the 

effectiveness and efficiency of the DBE program. For example, states and 

transit authorities are now required to create and maintain a bidders list, 

which is a record of all firms that bid on prime and subcontracts for 

USDOT-assisted projects. The list must include each firm’s name, its status 

as a DBE or non-DBE, its years in operation, and its annual gross receipts.23 

The list is intended to count all firms that are participating, or attempting to 

participate in USDOT-assisted contracts; however the regulations do not 

specify how often the bidders list must be updated, for example, to ensure 

that firms no longer available are removed from the list. USDOT believes 

that the bidders list is a promising tool for states and transit authorities to 

accurately measure the relative availability of “ready, willing, and able”

DBEs when setting their DBE goals. Sixty percent of the states and transit 

authorities we surveyed reported that they are in the process of developing 

or implementing their bidders lists while 27 percent indicated that their 

lists are fully implemented. Eight percent of the states and transit 

authorities reported that they had not yet started developing their bidders 

lists. The remaining 5 percent of the states and transit authorities reported 

that their bidders lists were in some other stage of development.

23USDOT issued an interim final rule in November 2000, specifying that states and transit 

authorities could collect annual gross receipts information from firms in ranges rather than 

exact figures.
Page 17 GAO-01-586 Disadvantaged Business Enterprises

Another change designed to improve the efficiency of the DBE program is 

the requirement that states and transit authorities develop and participate 

in a unified certification program (UCP). A UCP provides “one-stop 

shopping” for DBEs because it makes all DBE certification decisions within 

a state. All recipients within a state must honor the certification decisions 

of the UCP. Prior to the new regulations, DBEs often had to obtain 

separate certifications from multiple recipients within one state. For 

example, in California there were about 60 certifying agencies throughout 

the state. Under the new regulations, DBEs will have to be certified by only 

one agency to participate in the DBE programs administered by all 

recipients in that state. By March 2002, the state DOT and all transit 

authorities within each state must sign an agreement establishing the UCP 

for that state and submit an implementation plan to USDOT for approval. 

The UCP must be fully operational no later than 18 months after USDOT 

approves the plan. The majority of the states and transit authorities (72 

percent) we surveyed indicated that their UCPs were in some stage of 

development or implementation while 7 percent indicated that their UCPs 

were fully implemented; 14 percent reported that they had not yet started 

to develop their UCPs; and the remaining 6 percent noted that their UCPs 

were in some other stage of development.24

New Regulations Make 

Application to and 

Administration of the DBE 

Program More Difficult

Fifty-four percent of the states and transit authorities we surveyed 

indicated that the new regulations had made it somewhat or much more 

difficult for DBEs to apply to the DBE program. This view could be 

attributable to the requirement for additional documentation that DBEs 

must now submit—specifically, documentation of the personal net worth of 

the individuals who own and control the firms. Furthermore, when states 

and transit authorities were asked to identify barriers to firms’

participation in the DBE program, the two most common barriers cited 

were (1) reluctance to provide personal information and (2) the time 

required for certification paperwork. Despite these problems, most states 

and transit authorities (58 percent) indicated that they believe the benefits 

to firms participating in the DBE program outweigh any costs.

24Percentages do not add to 100 percent because of rounding.
Page 18 GAO-01-586 Disadvantaged Business Enterprises

In addition, states and transit authorities reported that the new regulations 

made it more difficult to administer the program. For example, 59 of 82 

states and transit authorities we surveyed reported that the new 

regulations had made it somewhat or much more difficult to administer the 

DBE program while 9 states and transit authorities indicated that the new 

regulations had made it easier to administer the program.25 Fourteen states 

and transit authorities reported that there was no change or they had no 

basis to judge. It is not surprising that most states and transit authorities 

reported that the new regulations made it more difficult to administer the 

DBE program, since the new regulations required that they completely 

overhaul their DBE goal-setting process and collect more information from 

DBEs and non-DBEs.

One source of frustration for states and transit authorities appears to be the 

process for developing and approving the new DBE program plans. The 

new regulations required that states and transit authorities develop and 

submit plans for fiscal year 2000 that reflected the requirements and 

changes under the new regulations to USDOT by August 31, 1999—about 6 

months after the effective date of the new regulations. During the approval 

process, USDOT sometimes sent the DBE plans back to states and transit 

authorities multiple times for revisions and clarifications.26 One state 

noted that even after it had worked closely with USDOT’s local office to 

develop its plan, USDOT headquarters twice rejected the plan. On average, 

it took USDOT 8 months to approve the 2000 DBE plans. According to our 

survey results, one state and seven transit authorities reported that their 

2000 DBE plans had yet to be approved.

Limited Data Are 

Available on the 

Characteristics of 

DBEs and Non-DBEs

A lack of key information prevents anyone from gaining a clear 

understanding of firms that participate in the DBE program and how they 

compare with the rest of the transportation contracting community. For 

example, we cannot use the information provided by the states and transit 

authorities we surveyed to calculate the total number of certified DBEs 

nationwide because of duplication in the states’ and transit authorities’

DBE directories. In addition, almost two-thirds of our survey respondents 

could not provide information on the annual gross receipts of DBEs or the 

personal net worth of the individuals who own and control DBEs—

25One survey respondent did not answer this question.

26According to USDOT, the plans were reviewed to ensure that they met legal requirements.
Page 19 GAO-01-586 Disadvantaged Business Enterprises

information that is used to determine firms’ eligibility for the program but 

is not reported to USDOT and was not readily available. Furthermore, 

almost 95 percent of the states and transit authorities we surveyed could 

not provide information on the annual gross receipts of non-DBEs and 

none could provide information on the personal net worth of the 

individuals who own and control non-DBEs. While financial information on 

DBEs and non-DBEs is lacking, most states and transit authorities could 

provide some other type of information on DBEs, such as the total number 

of prime contracts awarded to DBEs—information that is regularly 

reported to USDOT. These data indicate, among other things, that DBEs 

received about 7 percent of the prime contracts awarded and 2 percent of 

the federal dollars awarded for prime contracts in fiscal year 2000.

Duplication and Data 

Problems Preclude 

Thorough Analysis of the 

DBE Community

We cannot calculate the total number of certified DBEs nationwide 

because of duplication in states’ and transit authorities’ DBE directories. 

States and transit authorities are required to maintain DBE directories that 

list all the DBEs they have certified.27 However, DBEs can be certified in 

multiple locations. For example, a DBE may be certified by Virginia, 

Maryland, Pennsylvania, and the District of Columbia. Unlike the SBA’s 

Small and Disadvantaged Business program, which gives a unique 

identification number to each certified small and disadvantaged business, 

the DBE regulations do not require states and transit authorities to assign 

unique identifiers to certified DBEs. As a result, a DBE certified with four 

states would be listed in four different DBE directories. Because of this 

duplication, aggregating the number of certified DBEs listed in states’ and 

transit authorities’ DBE directories would significantly overstate the 

number of firms certified. While we cannot provide the total number of 

certified DBEs nationwide, our survey results indicate that the number of 

certified DBEs per state and transit authority varies greatly. For example, 

in fiscal year 2000, the number of certified DBEs per state or transit 

authority ranged from 39 in the state of Maine28 to 3,350 in the Metropolitan 

Atlanta Rapid Transit Authority, with an average of 551 per state and transit 

authority.

27The DBE directories must be updated at least annually.

28The Metropolitan Transit Authority of Harris County (Houston, Texas) reported that it had 

no certified DBEs in 2000. According to USDOT, the Metropolitan Transit Authority has a 

DBE program, with a goal intended to be met with all race-neutral participation, but does 

not certify firms itself.
Page 20 GAO-01-586 Disadvantaged Business Enterprises

Although FHWA could provide information on the demographics of DBEs 

that obtain highway contracts, FTA could not provide comparable data. As 

a result, the demographics of the entire DBE community are unknown. 

FHWA’s data on DBE participation indicate that nonminority-womenowned businesses obtain a significant portion of contracts. Prior to 1987, 

states and transit authorities could not generally count contracts with 

nonminority-owned businesses toward DBE goals. The Surface 

Transportation and Uniform Relocation Assistance Act of 1987 included 

nonminority-women-owned businesses in the statutory definition of 

socially and economically disadvantaged individuals and thus allowed 

states and transit authorities to use contracts with both minority- and 

nonminority-women owned businesses to meet their DBE goals. According 

to FHWA’s data, nonminority-women-owned businesses have become one 

of the most competitive groups in the DBE community since 1987. For 

example, in 1999 (the latest year for which these data are available), 

nonminority-women-owned businesses accounted for about 48 percent of 

all federal highway contract dollars awarded to DBEs; minority-owned 

businesses (those owned by both men and women) combined accounted 

for about 52 percent. (See fig. 1.) FTA was unable to provide reliable data 

on the demographics of the DBEs that were awarded federal transit 

contracts, even though transit authorities must provide this information to 

FTA on a quarterly basis.29 According to FTA, it does not centrally compile 

this information.

29States and transit authorities must submit certain information about DBEs to USDOT on a 

quarterly basis, such as number of firms awarded prime and subcontracts, the ethnicity of 

the firms’ owners, and the type of work the firms perform.
Page 21 GAO-01-586 Disadvantaged Business Enterprises

Figure 1: Percentage of Federal Highway Contract Dollars Awarded to DBEs, Fiscal 

Year 1999

Source: FHWA.

Data Are Available to 

Calculate Participation Rate 

of DBEs in Prime Contracts 

but Are Limited for 

Subcontracts

The majority of the states and transit authorities we surveyed (78 percent) 

provided sufficient data—that is, the number and value of prime contracts 

awarded to DBEs and non-DBEs—to determine DBEs’ participation rates 

in prime contracts.30 According to the data we obtained from these states 

and transit authorities, DBEs received about 7 percent of the prime 

contracts awarded and 2 percent of the federal dollars awarded for prime 

contracts in fiscal year 2000. In comparison, about 70 percent of the states 

and transit authorities could not provide both the number and value of 

subcontracts awarded to DBEs and non-DBEs—information necessary to 

calculate DBEs’ participation rates in subcontracts. Because DBEs are 

small businesses and are more likely to compete for subcontracts, which 

generally require fewer resources (e.g., capital, equipment, and employees) 

than prime contracts, the lack of subcontracting data prevents anyone from 

30We measured DBEs’ participation rates in USDOT-assisted contracts using both the 

number and value of the prime and subcontracts awarded.
Page 22 GAO-01-586 Disadvantaged Business Enterprises

gaining a complete understanding of DBEs’ participation in transportation 

contracting. The data provided from about one-third of the states and 

transit authorities indicate that DBEs received about 33 percent of all 

subcontracts awarded and 26 percent of the federal dollars awarded 

through subcontracts in fiscal year 2000. However, because this 

information is based on a small number of states and transit authorities, it 

may not be representative and therefore should not be generalized to the 

entire DBE community.

The participation rates of DBEs in both prime and subcontracts in fiscal 

year 2000 indicate that they received a relatively small percentage of 

federal prime and subcontracts and dollars when compared with nonDBEs. However, we do not know whether the percentage is 

disproportionately low. Such a determination cannot be made without an 

accurate measure of the availability of DBEs—that is, the number of DBEs 

“ready, willing, and able” to participate in prime and subcontracts 

compared with the number of non-DBEs.

Financial Profile of DBEs 

Cannot Be Determined With 

Current Data

The majority of states and transit authorities responding to our survey 

could not provide information on the annual gross receipts of DBEs. 

Specifically, 60 percent of these states and transit authorities could not 

provide information on the annual gross receipts of the DBEs that were 

awarded prime or subcontracts in fiscal year 2000. Furthermore, 75 percent 

of the states and transit authorities could not provide information on the 

annual gross receipts of the DBEs that were not awarded prime or 

subcontracts in fiscal year 2000. While the annual gross receipts of a DBE 

are required to determine the firm’s eligibility for the program, this 

information is not reported to USDOT. The primary reason survey 

respondents cited for not being able to provide the information was that 

the information is not in an electronic database and therefore would be 

difficult and time-consuming to compile. The information that was 

provided from a limited number of states and transit authorities indicates 

that most DBEs’ annual gross receipts are below $5 million—well below 

the current USDOT-specific cap of $17.4 million. Furthermore, 85 percent 

of the DBEs awarded contracts in fiscal year 2000 had annual gross 

receipts of less than $5 million. In comparison, 94 percent of the DBEs that 

did not receive a contract in fiscal year 2000 had annual gross receipts of 

less than $5 million. However, because this information is based on only a 

small percentage of the states and transit authorities we surveyed, it may 

not be representative and therefore should not be generalized to the entire 

DBE community. (For more detailed information see app. II.)
Page 23 GAO-01-586 Disadvantaged Business Enterprises

The majority of the states and transit authorities we surveyed could not 

provide information on the personal net worth of the individuals who own 

and control DBEs. Specifically, about 65 percent of the states and transit 

authorities indicated that they could not provide information on the 

personal net worth of the owners of DBEs that were awarded prime 

contracts in fiscal year 2000. Sixty-seven percent of the states and transit 

authorities reported that they could not provide information on the 

personal net worth of the owners of DBEs that were awarded subcontracts 

in fiscal year 2000. In addition, 81 percent of the states and transit 

authorities indicated that they could not provide information on the 

personal net worth of the owners of DBEs that were not awarded prime 

contracts in fiscal year 2000. Seventy-eight percent of the states and transit 

authorities indicated that they could not provide information on the 

personal net worth of the owners of DBEs that were not awarded 

subcontracts in fiscal year 2000. Similar to the information on a firm’s 

annual gross receipts, personal net worth information is required to 

determine a firm’s eligibility for the program but is not reported to USDOT. 

Since this eligibility requirement was introduced in the new regulations, 

states and transit authorities are just starting to collect this information.31

Over 60 percent of the states and transit authorities indicated that they 

could not provide this information because it is not electronically 

maintained and therefore would be difficult and time-consuming to 

compile and report.

The information that was provided from a limited number of states and 

transit authorities indicates that over half of the DBEs that received prime 

and subcontracts in fiscal year 2000 had owners whose personal net worth 

was less than $250,000. Additionally, the data indicate that the personal net 

worth of the owners of DBEs receiving prime contracts was higher than the 

personal net worth of the owners of DBEs receiving subcontracts. 

However, because this information is based on the responses of a small 

percentage of all states and transit authorities, it may not be representative 

and therefore should not be generalized to the entire DBE community. (For 

more detailed information see app. II.)

31According to the regulations, firms applying to the DBE program must provide a signed 

and notarized statement of personal net worth from the individuals whose net worth is used 

to determine the firms’ DBE eligibility. Firms that were participating in the program before 

the effective date of the new regulations (Mar. 1999) would have to submit the information 

the next time they applied for recertification, which occurs every 3 years. Hence, 

information on personal net worth may not be collected from all DBEs until fiscal year 2002.
Page 24 GAO-01-586 Disadvantaged Business Enterprises

Lack of Data Prevents a 

Financial Profile of NonDBEs

Currently, the financial status of DBEs cannot be compared with that of the 

transportation contracting community as a whole because most states and 

transit authorities do not collect or maintain financial information on nonDBEs. For instance, over 90 percent of the states and transit authorities 

responding to our survey could not provide information on the annual 

gross receipts of non-DBEs. The primary reason for not being able to report 

the information was not having it in an electronic database. The new 

regulations require states and transit authorities to collect information on 

the annual gross receipts of the non-DBEs that bid on their USDOT-assisted 

contracts. This information is to be included in the states’ and transit 

authorities’ bidders lists. According to USDOT, states and transit 

authorities have expressed concern about their ability to collect this 

information because non-DBEs have been reluctant to share this 

information.

No survey respondent could provide information on the personal net worth 

of the owners of non-DBEs that were awarded prime or subcontracts in 

fiscal year 2000. The majority of the states and transit authorities (61 

percent) indicated that they do not currently collect this information or 

plan to do so in the future. Only 8 percent reported that they plan to collect 

this information in the future. States and transit authorities are not required 

to collect information on the personal net worth of the owners of nonDBEs.

Information on 

Discrimination and 

Other Barriers That 

May Limit DBEs

There are numerous sources that could contain information relevant to 

whether discrimination limits the ability of DBEs to compete for USDOTassisted contracts, including studies of lending, bonding, and business 

practices affecting the formation and competition of minority firms; state 

and local disparity studies; discrimination complaints; and relevant court 

cases. We focused our review on court cases involving the federal DBE 

program since the Supreme Court’s 1995 decision in Adarand Constructors, 

Inc. v. Pena, transportation-specific disparity studies published between 

1996 and 2000; and written complaints of discrimination filed by DBEs with 

states, transit authorities, and USDOT. We focused on these sources 

because they are directly related to transportation contracting and the 

federal DBE program. However, we did not address whether the DBE 

program satisfies the requirements of strict scrutiny and is therefore 

constitutional. In our review, we found the following:
Page 25 GAO-01-586 Disadvantaged Business Enterprises

• The courts that have considered the constitutionality of the federal DBE 

program under the standard articulated in the Supreme Court’s 1995 

decision in the Adarand case have concluded that discrimination 

adversely affects DBEs.

• All 14 studies we reviewed found that there were disparities between 

the availability and utilization of minority- and women-owned business 

enterprises (MBE/WBEs) in transportation contracts.32 Taken as a 

whole, these studies suggest that disparities exist. However, none 

provide reliable evidence of disparity because the limited data used to 

calculate disparities, compounded by methodological weaknesses, 

create significant uncertainties about the studies’ findings—that is, they 

could result in either an overstatement or an understatement of 

MBE/WBEs’ availability and utilization.

• USDOT does not systematically track information on the discrimination 

complaints filed by DBEs—information that could shed light on the 

existence of discrimination against DBEs.

In addition, a number of factors are often cited by agency officials and 

representatives from both industry and minority associations as limiting 

DBEs’ ability to compete for contracts. These factors include a lack of 

working capital and limited access to bonding. However, there was little 

agreement among the officials we contacted about whether these factors 

are attributable to discrimination or are barriers that all small businesses 

face.

32Two studies did not have enough data to perform a statistically valid disparity ratio 

analysis of transportation-specific contracts, and instead conducted disparity analyses of 

contracts awarded by several agencies including the transportation agencies. Several 

studies analyzed disparity separately within sub-groups of MBE/WBEs. Disparity was found 

in at least one subgroup, but not in all of them.
Page 26 GAO-01-586 Disadvantaged Business Enterprises

Courts Have Found 

Sufficient Evidence of 

Discrimination to Justify the 

Federal DBE Program

In order to uphold a program, such as the federal DBE program, that uses 

race or ethnicity as a criterion for decision-making, a court must find 

sufficient evidence of discrimination to conclude that the program serves a 

compelling governmental interest. Therefore, cases considering the 

constitutionality of the federal DBE program can indicate whether 

discrimination adversely affects DBEs’ participation in transportation 

contracting. The courts that have addressed the DBE program under the 

standard articulated by the Supreme Court’s 1995 decision in Adarand 

Constructors, Inc. v. Pena (discussed on page 13 of this report) have found 

that the evidence of discrimination presented was sufficient for them to 

conclude that the program serves a compelling governmental interest, 

specifically, remedying the effects of discrimination against DBEs.33

Most recently, in its review of the DBE program in Adarand, the Tenth 

Circuit Court of Appeals concluded that discrimination adversely affects 

both the formation of qualified minority subcontracting businesses and 

their ability to successfully compete for highway construction 

subcontracts.34 On the basis of the evidence presented,35 the court found 

33Several additional challenges to the constitutionality of the DBE program are in various 

stages of litigation. In addition, in 1996, a district court in Texas concluded that the DBE 

program of the Metropolitan Transit Authority of Harris County was unconstitutional and 

called into question the constitutionality of the federal DBE program as well. See Houston 

Contractors Ass’n v. Metropolitan Transit Authority of Harris County, 993 F. Supp. 545 (S.D. 

Tex. 1997). The court did not, however, assess whether the programs served a compelling 

governmental interest. The Fifth Circuit Court of Appeals set aside the district court’s 

decision and sent the case back to the district court for further review. 

34As discussed earlier, the Tenth Circuit Court of Appeals reversed a 1997 district court 

decision finding that the subcontracting compensation clause and DBE provision were 

unconstitutional. The district court had found that the programs at issue served a 

compelling interest, but were not narrowly tailored. The district court’s findings regarding 

discrimination were adopted by another district court addressing a constitutional challenge 

to the DBE provision, the Department of Transportation’s implementing regulations, and the 

state of Minnesota’s federal DBE program. In that case, the district court found that the DBE 

program satisfied the first element of strict scrutiny on the basis of the district court’s 1997 

decision in Adarand. However, as in Adarand, the court concluded that the program was not 

narrowly tailored to serve the identified compelling interest. See In re: Sherbrooke Sodding, 

17 F. Supp. 2d 1026 (D. Minn. 1998).

35Throughout its decision, the court referred to the congressional investigations, hearings, 

statistical and anecdotal evidence, and other studies cited in a 1996 Department of Justice 

review entitled “The Compelling Interest for Affirmative Action in Federal Procurement,” 61 

Fed. Reg. 26050 (1996). As a preliminary matter, the court found that the federal government 

need not be as geographically limited as states and local governments in remedying the 

effects of discrimination in markets created by the disbursement of federal funds.
Page 27 GAO-01-586 Disadvantaged Business Enterprises

that discrimination by prime contractors, unions, and lenders impedes the 

formation of qualified minority businesses in the subcontracting market 

nationwide. The court also acknowledged the causal link between the 

availability of capital and the ability to implement public works 

construction projects and found that the studies cited by the government 

strongly supported a finding of discrimination in lending. For example, it 

cited a survey of 407 business owners in the Denver area that found 

significant differences in the loan denial rate for white, African-American, 

and Hispanic business owners, even after controlling for other factors like 

size and net worth.

The court also addressed barriers to competition by existing minority 

businesses. Citing congressional hearings and statistical evidence, among 

other things, the court found that minority businesses are often excluded 

by business networks of prime and subcontractors from opportunities to 

bid on construction projects. The court also discussed bonding 

requirements, finding another barrier to competition. For example, it cited 

a Louisiana study finding that minority firms were nearly twice as likely to 

be rejected for bonding; three times more likely to be rejected for bonding 

in amounts over $1 million; and, on average, charged higher rates for the 

same bonding policies than white firms with the same experience. 

Similarly, the court accepted evidence of suppliers’ withholding price 

discounts from minority subcontractors, thus driving up their bids. In light 

of this evidence, the court rejected Adarand Constructors’ argument that 

minority businesses face the same problems as all new businesses, 

regardless of the race of the owners.
Page 28 GAO-01-586 Disadvantaged Business Enterprises

Finally, the court considered disparity studies conducted by state and local 

governments.36 In doing so, the court accepted the government’s finding, 

based on a review of disparity studies, that minority construction 

subcontracting firms received 87 cents for every dollar that they would be 

expected to receive given their availability. The court also acknowledged 

the potential for weaknesses in the data and methodology used in disparity 

studies and stated that particular evidence undermining the reliability of 

specific studies would be relevant to a determination regarding 

discrimination. However, it noted that Adarand Constructors had not 

provided it with evidence undermining the studies’ reliability.37

Furthermore, the court found that Adarand Constructors had failed to 

introduce credible, specific evidence to refute the government’s showing of 

a compelling interest.38 As a result, it held that there was sufficient 

evidence of discrimination to justify the use of racial and ethnic criteria in 

transportation contracting.

36Although states and local governments do not conduct disparity studies to justify the 

federal DBE program, the Department of Justice review stated that disparity studies 

conducted by states and local governments throughout the country in connection with their 

own programs are of particular relevance to affirmative action measures in federal 

programs providing grants to such entities.

37The court acknowledged the need for studies to take into account the special 

qualifications needed to undertake the task at issue. However, the court stated that it was 

unaware of such qualifications, aside from the general qualifications necessary to operate a 

construction contracting business, and that the record was without evidence that the 

subcontractors who had been utilized had performed inadequately or otherwise 

demonstrated a lack of necessary qualifications.

38The court also “[took] notice” of evidence of the link between the discontinuance of a raceconscious program and minority business participation in the relevant market. The court 

stated that this evidence supported the claim of discriminatory barriers to participation by 

minority contractors.
Page 29 GAO-01-586 Disadvantaged Business Enterprises

Data and Methodological 

Weaknesses Limit the 

Findings of TransportationSpecific Disparity Studies

Fourteen recent, transportation-specific disparity studies39 concluded that 

disparities existed between the utilization of MBE/WBEs in transportation 

contracts and availability of these firms in the marketplace.40 Numerous 

state and local governments have used disparity studies to support their 

minority contracting programs and in setting their federal DBE goals. For 

example, about 30 percent of the states and transit authorities we surveyed 

reported that they used a disparity study to help set their fiscal year 2000 

DBE participation goals. However, our review of the 14 disparity studies 

found that the limited data used to calculate disparities, compounded by 

methodological weaknesses, create uncertainties about the studies’

findings.41 Rather than discuss the limitations of each study specifically, we 

have chosen to discuss some of the more common problems we found. 

While not all studies suffered from every problem, each suffered from 

enough problems to make its findings questionable. We recognize that 

there are difficulties inherent in conducting disparity studies and that such 

limitations are common to social science research; however, the disparity 

studies we reviewed did not sufficiently address such problems or disclose 

their limitations. It is not clear what conclusions a court would draw about 

the studies’ findings.

The studies we reviewed relied on a disparity ratio—that is, a comparison 

of the availability of MBE/WBEs to their utilization in contracts—as an 

39We defined recent, transportation-specific disparity studies as studies published between 

1996 and 2000 containing a separate disparity analysis on transportation contracting.

40We chose to review transportation-specific disparity studies published between 1996 and 

2000, in part, because the new DBE regulations recommend that any disparity study relied 

on in the DBE goal-setting process should be as recent as possible and focused on the 

transportation contracting industry. We reviewed two additional transportation-specific 

studies published between 1996 and 2000 that examined minority- and women-owned 

business procurement. One of these studies did not use a traditional disparity ratio and thus 

is not included in our discussion. However, we did review the study and found that it 

contained methodological weaknesses that create uncertainties about its findings. The 

other study was considered a work in progress and thus was not included in our discussion. 

Both of these studies used new approaches to identify barriers to full and active MBE/WBE 

participation. For example, one study disaggregated the procurement process into discrete 

components to determine if any individual procurement practice negatively affects 

MBE/WBEs. USDOT has not conducted any disparity studies or any other type of analysis 

examining discrimination in federal transportation contracting because it believes such 

studies or analyses are not needed to justify the federal DBE program. 

41Because our review of transportation-specific disparity studies was limited, our 

conclusions cannot be generalized to disparity studies as a whole. Moreover, the findings in 

any disparity study would be limited to the geographical scope of that particular study.
Page 30 GAO-01-586 Disadvantaged Business Enterprises

indicator of discrimination. However, the data necessary to properly 

calculate such ratios—complete and accurate lists of MBE/WBEs’

availability and utilization—are often lacking. An availability list should 

include all qualified, willing, and able firms in the relevant market area, 

grouped by industry subspecialties and by MBE/WBE or non-MBE/WBE 

status. A utilization list should include all firms in the relevant market area 

that were awarded prime and subcontracts, grouped by industry 

subspecialty and MBE/WBE or non-MBE/WBE status. Because these data 

are often lacking, some proxies (i.e., substitute information) have been 

used to calculate disparity ratios.

To develop proxies of availability, the disparity studies we reviewed used 

sources including Census Bureau data, directories or other listings of firms, 

prequalification lists,42 and/or bidders lists. These could be useful data 

sources. However, all of these data sources have shortcomings, whether 

used separately or in combination, that must be taken into account when 

using them as proxies for availability. Such shortcomings would result in 

availability lists that could either under- or overstate the number of firms 

available for transportation contracting. The limitations of using these data 

sources as proxies for availability include the following:

• Census Bureau data cannot adequately indicate whether a firm is truly 

available, that is, whether it has the qualifications, willingness, or ability 

to complete contracts. However, in using Census Bureau data, the 

studies depicted all operational firms as available for contracting. Some 

studies attempted to account for the qualifications of firms by including 

only firms in the relevant two-digit Standard Industry Classification 

(SIC) codes in their availability lists.43 Using a finer degree of distinction 

(e.g., classification by the four-digit SIC code level) would help to ensure 

that firms are similar enough for comparison. For example, some 

studies used the two-digit SIC code for heavy construction, a category 

that includes firms as diverse as general contractors for highway 

construction and general contractors for radio tower construction.

42A prequalification list, sometimes referred to as a precertification list, includes all firms 

that have been prequalified by states or transit authorities to compete for contracts.

43SIC codes are used to identify companies by their primary business activity. The activity is 

determined by the major product produced or service rendered. The coding system consists 

of major industries that are further divided into a multitude of minor groups identified by a 

four-digit SIC code.
Page 31 GAO-01-586 Disadvantaged Business Enterprises

• Directories and other listings do not contain information on firms’

qualifications, willingness, or abilities. This could result in an 

overstatement of how many firms are available for transportation 

contracting. In addition, some of the data obtained from directories and 

listings were inaccurate. For example, some of the disparity studies we 

reviewed indicated that as many as 16 percent of the firms included in 

the directories and listings were unreachable because of such problems 

as disconnected telephones, wrong telephone numbers, incorrect 

addresses, or dissolution of the firms.

• Prequalification and bidders lists may be better sources of availability 

than Census Bureau data or directories because they better 

approximate firms’ qualifications, willingness, and ability to compete for 

contracts. However, the mechanisms used by states and transit 

authorities to compile them may limit their reliability. In the studies we 

reviewed, we found four problems. First, some studies we reviewed 

used bidders and prequalification lists that were updated infrequently or 

had no mechanism to ensure that firms no longer available were 

removed from the list. For example, one study used a list that never 

removed firms, increasing the risk that it contained firms no longer in 

business in the relevant market area. Second, some studies we reviewed 

used bidders or prequalification lists that were maintained for multiple 

city agencies, ranging from school districts to port authorities. 

Businesses qualified to perform school district work may not be 

qualified to perform port authority work. Third, the lists grouped all 

potential firms together, failing to take into account their industry 

subspecialty and capacity. Because of these problems, availability lists 

based on this information would overstate the number of firms that 

were qualified, willing, and able to perform transportation contracts. 

Finally, prequalification and bidders lists could under represent capable 

firms. Firms may refrain from participating because of perceived or 

actual barriers. For example, one study we reviewed surveyed firms and 

found that only 22 percent of those firms that expressed an interest in 

contracting with the transit agency had actually attempted to obtain 

such work in the past.

The disparity studies we reviewed made few efforts to mitigate the 

problems with using these data sources as proxies for availability, nor did 

they disclose the limitations of their use. For example, the disparity studies 

did not sufficiently account for the lack of information on firms’

qualifications when the availability lists were developed. One aspect of a 

firm’s qualifications is its capability to handle transportation contracting. 

Some studies used average yearly revenue as a proxy for capability. 
Page 32 GAO-01-586 Disadvantaged Business Enterprises

However, revenue does not adequately explain the differences in firms’

capability. For example, two firms could have similar yearly revenues, but 

one firm might have performed 100 small contracts throughout the year 

because it did not have the capacity to perform large contracts, whereas 

the second firm might have performed two very large contracts. If revenue 

were used as a proxy for capability, these two firms would be considered 

equivalent.

In addition to determining the availability of firms, disparity studies must 

measure the utilization of MBE/WBEs to determine if disparities in 

contracting exist. This requires an analysis of both the number and dollar 

amount of contracts awarded to MBE/WBEs and non-MBE/WBEs. Such 

measurement is difficult because some states and transit authorities have 

incomplete records of the prime and subcontracts they have awarded. For 

example, several studies we reviewed did not include any analyses of 

subcontracting and therefore may understate the utilization of firms. 

Because MBE/WBEs are more likely to be awarded subcontracts than 

prime contracts, MBE/WBEs in particular may appear underutilized when 

the focus remains on prime contractor data. Furthermore, although some 

studies did include calculations based on the number of contracts, all but 

two based their determination of disparities on only the dollar amounts of 

contracts. Because MBE/WBEs tend to be smaller than non-MBE/WBEs, 

they are often unable to perform larger contracts. Therefore, it would 

appear that they were awarded a disproportionately smaller amount of 

contract dollars. A more complete indicator of utilization would consider 

both the dollar amount and the number of contracts awarded or to control 

for differences in contract dollar amounts.

USDOT Has Not Provided 

Criteria for Reliability of 

Disparity Studies Used to Set 

DBE Goals

In March 2001, USDOT advised states and transit authorities that disparity 

studies used to set their DBE participation goals should be reliable. While 

pointing out that all or part of a disparity study pertaining to a local market 

area could provide a rich source of information for the goal-setting process, 

USDOT did not explain how states and transit authorities could evaluate 

the reliability of such studies. USDOT’s guidance does not, for instance, 

caution against using studies that contain the types of data and 

methodological problems that we identified above. Without explicit 

guidance on what makes a disparity study reliable, states and transit 

authorities risk using studies that may not provide accurate information in 

setting their DBE goals.
Page 33 GAO-01-586 Disadvantaged Business Enterprises

Data on Written 

Discrimination Complaints 

Are Inconclusive

USDOT receives written complaints of discrimination from DBEs but does 

not systematically track or analyze information on these complaints.44 As a 

result, this information is not readily available to shed light on the absence 

or presence of discrimination against DBEs. USDOT could not provide the 

total number of written complaints filed by DBEs for two reasons. First, 

while USDOT’s Office of Civil Rights (DOCR) records the complaints and 

assigns identification numbers before routing them to FTA or FHWA for 

investigation, DOCR’s records may not include complaints filed directly 

with those agencies. Second, DBEs may file complaints of discrimination 

under the DBE regulations or regulations issued under title VI of the Civil 

Rights Act of 1964; however, DOCR does not record which title VI 

complaints are filed by DBEs. Similarly, FTA does not separately track the 

title VI complaints filed by DBEs. Because of these two problems, 

information provided by USDOT would likely understate the number of 

complaints of discrimination filed by DBEs.

In addition, USDOT could not provide the total number of investigations 

launched as a result of the written discrimination complaints filed by DBEs 

or information on the outcomes of these investigations. In order to 

determine whether the discrimination complaints filed by DBEs have 

merit, the number of investigations launched and the outcomes of the 

investigations are critical pieces of information. USDOT officials stated 

they do not track the number of investigations of written discrimination 

complaints filed by DBEs or the number of times discrimination was found 

through their investigations. To gather this type of information, USDOT 

officials stated one would need to go through each case file individually—

nearly 100 over the last several years, not including title VI complaints.

We also asked the states and transit authorities we surveyed about written 

discrimination complaints filed by DBEs in fiscal years 1999 and 2000. 

Eighty-one percent of the respondents reported that they had not received 

any written discrimination complaints filed by DBEs during this period. 

Nineteen percent of the states and transit authorities reported that they had 

received a total of 31 written discrimination complaints filed by DBEs in 

1999 and 2000. Of the 31 complaints filed, 29 had been investigated. Four of 

these investigations resulted in findings of discrimination. While the 

number of complaints filed by DBEs with states and transit authorities may 

seem low, it is important to note that DBEs that believe they have been the 

44We did not review USDOT’s response to individual written complaints of discrimination.
Page 34 GAO-01-586 Disadvantaged Business Enterprises

victims of discrimination have several options and may have elected to 

pursue action elsewhere. For example, a DBE could file a complaint with 

the responsible state or transit authority, USDOT, and/or the courts. In 

addition, USDOT officials stated that the number of written discrimination 

complaints filed (at any level) probably understates the level of 

discrimination for two reasons. Specifically, DBEs may choose not to file 

complaints because they believe the process is too time-consuming or 

burdensome or because they fear retribution (i.e., they would be denied 

future work).

Other Barriers May Limit 

DBEs’ Ability to Compete 

for Contracts

Other factors may also limit the ability of DBEs to compete for USDOTassisted contracts. However, there was little agreement among the officials 

we spoke with as to whether these factors are due to discrimination or the 

nature of small businesses. According to our survey results, 80 percent of 

the states and transit authorities responding had not conducted any type of 

analysis on this subject.45 In addition, neither USDOT, nor SBA, nor the 

industry groups we contacted had conducted any type of study on factors 

that may limit the ability of DBEs to obtain contracts.46 The industry 

officials we spoke with often cited such factors as contract bundling; 

limited access to bonding, working capital, and credit; and prequalification 

requirements.

The most common factors cited as limiting DBEs’ ability to compete for 

contracts are a lack of working capital and limited access to credit and 

bonding. For example, according to an association representing small 

minority-owned businesses, DBEs frequently lack the capital needed to 

finance jobs without drawing on credit and are denied credit because they 

lack sufficient cash flow. Since these factors are widely perceived as 

limiting the ability of DBEs to compete for contracts, USDOT has 

established a number of services, including short-term lending and bonding 

assistance, to help overcome these barriers.

45Eight of the 17 states and transit authorities that had conducted such analyses reported 

that the analyses were included in their disparity studies.

46The 1996 Department of Justice review contained information on these factors.
Page 35 GAO-01-586 Disadvantaged Business Enterprises

Another factor often cited as a barrier to DBEs’ ability to compete for 

contracts is contract bundling. Contract bundling is the consolidation of 

two or more procurement requirements previously provided or performed 

under separate, smaller contracts into a solicitation of offers for a single 

contract.47 The resulting contract is likely to be unsuitable for award to 

small businesses, such as DBEs, because of (1) the diversity, size, or 

specialized nature of the elements of the performance specified; (2) the 

aggregate dollar value of the anticipated award; (3) the geographic 

dispersion of contract performance sites; or (4) any combination of these 

three factors. USDOT officials stated that they believe contract bundling is 

one of the largest barriers for DBEs in competing for transportation 

contracts. GAO recently reported that there is limited government-wide 

data on the extent of contract bundling and its effect on small businesses.48

Prequalification requirements are also cited as a barrier for DBEs. Most 

states require that firms competing for prime contracts be prequalified, 

meaning they must prove to the state that they are capable of performing 

contracts. For example, firms must show that they have an adequate line of 

credit and are bonded. According to USDOT officials, these requirements 

can hurt DBEs because the firms may not have the working capital and 

access to credit required for prequalification.

Impact of the DBE 

Program

Several measures could be used to help determine the impact of the DBE 

program. TEA-21 directed us to analyze:

• the impact of the DBE program on costs, including the costs of 

administering the program;

• the impact of the DBE program on competition and the creation of jobs; 

and

• the impact of discontinuing federal or non-federal DBE programs on 

DBEs.

47A similar concept is contract consolidation. Contract consolidation occurs when agencies 

combine existing contracts into fewer contracts as a means of streamlining as well as 

reducing procurement and contract administration costs.

48Small Businesses: Limited Information Available on Contract Bundling’s Extent and 

Effects (GAO/GGD-00-82, Mar. 31, 2000).
Page 36 GAO-01-586 Disadvantaged Business Enterprises

Impact of the DBE Program 

on Costs, Competition, and 

the Creation of Jobs 

USDOT, states and transit authorities incur costs in implementing and 

administering the DBE program. USDOT estimates that it incurred about $6 

million in costs (including salaries and training expenses) to administer the 

DBE program for highways and transit authorities in fiscal year 2000.49

Sixty-nine percent of the states and transit authorities responding to our 

survey estimated that they incurred a total of about $44 million in costs, 

including certification costs, to administer the DBE program in fiscal year 

2000. The costs incurred ranged from a high of $4.5 million to a low of 

about $10,000. In addition, 13 states and transit authorities incurred a total 

of about $250,000 in litigation costs in fiscal year 2000 that they attributed 

to the federal DBE program. Although it has been asserted that the DBE 

program increases the costs of contracting (referred to as additional 

construction costs), 99 percent of the states and transit authorities we 

surveyed had not conducted a study or analysis to determine whether the 

DBE program has an impact on their contract costs.50 USDOT has also not 

conducted such an analysis.

Almost none of the states and transit authorities responding to our survey 

have analyzed the impact of the DBE program on competition and the 

creation of jobs. Nor has USDOT conducted this type of analysis. 

According to USDOT officials and representatives from transportation 

associations, the DBE program does not create jobs; rather it shifts jobs to 

individuals who might not receive the jobs otherwise. As USDOT officials 

noted, USDOT-assisted contracts will be let regardless of the DBE program, 

and the program encourages greater racial and gender diversity within 

transportation contracting.51 However, there is less agreement about the 

effects of the program on competition. Officials from USDOT and a 

minority business group stated that the DBE program does not hurt 

competition, noting that the DBE program does not use quotas and that 

DBEs must compete with non-DBEs to receive USDOT-assisted contracts. 

Moreover, these officials commented that the DBE program enhances 

49According to USDOT, the costs incurred in fiscal year 2000 are higher than typical because 

of the work associated with the new regulations, such as training and reviews of recipients’

new programs and goal-setting methods. USDOT indicated that, during a typical year, it 

would incur about $3.5 million to administer the DBE program.

50The Dallas Area Rapid Transit (DART) reported that it is collecting information to 

determine the overall costs of unbundling larger contracts.

51We did not look at the make-up and number of employees that work for DBEs compared 

with non-DBEs.
Page 37 GAO-01-586 Disadvantaged Business Enterprises

competition because it encourages greater participation by more firms. In 

contrast, representatives from transportation associations believe that the 

DBE program stifles competition in certain subcontracting areas (e.g., 

guardrail work) where there is an overconcentration of DBEs. Because of 

this overconcentration of DBEs, according to the transportation 

associations, non-DBEs do not have an opportunity to work in those fields. 

Although USDOT does not have data indicating that overconcentration is a 

serious, nationwide problem, the new regulations authorized states and 

transit authorities to remedy situations in which an overconcentration of 

DBEs is limiting non-DBEs’ ability to compete for contracts, such as 

varying the use of contract goals in these areas.

Impact of Discontinuing 

Federal and Nonfederal 

DBE Programs

Limited data prevent a thorough assessment of the impact of suspending or 

repealing (discontinuing) federal or nonfederal DBE programs on DBEs’

participation in transportation contracting. As evidence that the DBE 

program is needed, supporters often cite statistics on DBEs’ participation 

in transportation contracting after minority- and women-owned business 

contracting programs are discontinued. An example used during the 

congressional debate preceding the passage of TEA-21 was the effect of 

discontinuing the state of Michigan’s minority business contracting 

program in 1989. According to evidence cited during the debate, within 9 

months of the suspension, the proportion of state highway dollars awarded 

to minority-owned businesses had dropped from 5 percent to 0 percent, 

while the proportion of state highway dollars awarded to women-owned 

businesses had declined from about 10 percent to 1 percent. Moreover, 

these new low rates of participation in state transportation contracting by 

minority-and women-owned businesses were contrasted with these firms’

participation rates in USDOT-assisted contracts, which were significantly 

higher.52 USDOT has not conducted studies or analyses measuring the 

impact of discontinuing federal or nonfederal DBE programs.

52Michigan could not provide us with minority- and women-owned business participation 

data in state highway contracting for the years immediately before and after it discontinued 

its program. Furthermore, Michigan officials stated that the analysis showing the decline 

that is often cited was a one-time-only analysis and that the analysis is no longer available. 

Consequently, we cannot verify the numbers cited during the debate.
Page 38 GAO-01-586 Disadvantaged Business Enterprises

Most states and transit authorities that participated in federal DBE 

programs or nonfederal minority business enterprise and women business 

enterprise (MBE/WBE) contracting programs that were discontinued could 

not provide data that would allow us to thoroughly evaluate the impact of 

that action. For example, we identified one state and one transit authority 

that had discontinued their federal DBE programs as a result of a court 

order.53 However, only the state could provide participation data that would 

allow us to evaluate the impact of discontinuing the federal DBE program. 

We also identified 10 states and transit authorities that had participated in 

nonfederal MBE/WBE programs that were discontinued prior to 2000.54

Only one state could provide sufficient data for us to evaluate the impact of 

the action. Conversely, officials from six states and transit authorities, 

including Michigan, told us that participation data for minorities and 

women in state transportation contracting for the years immediately before 

and after the discontinuance of their nonfederal MBE/WBE programs were 

not available. In addition, few of the states and transit authorities could 

provide equivalent data on non-MBE/WBEs. This information is important 

to determine whether changes in MBE/WBEs’ participation rates in state 

transportation contracting were similar to the changes in the participation 

rates of non-MBE/WBEs or unique to the MBE/WBE community. 

Consequently, we could not evaluate the impact of discontinuing these 

programs. 

Two states—Minnesota and Louisiana—were able to provide sufficient 

data to assess the impact of discontinuing a federal and nonfederal 

program, respectively. We measured DBEs’ and MBE/WBEs’ participation 

using two indicators—(1) the number of transportation contracts awarded 

and (2) the dollar amounts awarded through those contracts. The 

participation data from these states suggest that discontinuing these 

programs had a negative impact on DBEs’ and MBE/WBEs’ participation in 

transportation contracting. For example, in Minnesota, DBEs’ participation 

53In 1998, Minnesota’s Department of Transportation (MNDOT) discontinued its federal DBE 

program when it was declared unconstitutional; however, MNDOT reinstituted its federal 

program under the new DBE regulations in 2000. The Metropolitan Transit Authority of 

Harris County in Houston discontinued its federal DBE program in 1996 when its 

constitutionality was called into question. In 1998, it established a race and gender-neutral 

small business program, which FTA approved as its federal DBE program. 

54Two other transit authorities had participated in minority- and women-owned business 

contracting programs that were discontinued in 2000. We did not try to obtain information 

from these two transit authorities because not enough time has elapsed for us to evaluate 

the impact of this action.
Page 39 GAO-01-586 Disadvantaged Business Enterprises

in federal transportation contracting remained relatively stable from 1995 

to 1998. However, after the discontinuance of Minnesota’s federal DBE 

program in 1998, DBEs’ participation in federal transportation contracting 

dramatically declined. (See fig. 2.)

Figure 2: DBEs’ Participation in Federal Transportation Contracting in Minnesota, 

1995-2000

Source: GAO’s analysis of data from Minnesota’s Department of Transportation.
Page 40 GAO-01-586 Disadvantaged Business Enterprises

Similarly, the data provided by Louisiana indicate that MBE/WBEs’

participation in transportation contracting declined after Louisiana’s 

nonfederal program was discontinued. As shown in figure 3, MBE/WBEs’

participation in state transportation contracting increased from 1992 to 

1995. In 1996, the year the nonfederal program was discontinued, the 

participation rate of MBE/WBEs in state transportation contracting 

dropped and continued to decline over the next 4 years.55 An official from 

Louisiana attributed the decline in MBE/WBEs’ participation in state 

transportation contracting to the removal of affirmative action 

requirements on state funded projects and the realization by contractors 

that efforts to include MBE/WBEs were no longer necessary.

55We also obtained data on DBE participation in Louisiana’s federal DBE program from 1995 

to 2000. In our review of data on DBE and MBE/WBE participation in federally-assisted and 

state contracting, we did not observe a shift of MBE/WBEs to federally-assisted contracts 

after the Louisiana’s MBE/WBE program was discontinued.
Page 41 GAO-01-586 Disadvantaged Business Enterprises

Figure 3: MBE/WBEs’ Participation in Louisiana’s State-Funded Transportation 

Contracting, 1992-2000

Source: GAO’s analysis of data from Louisiana’s Department of Transportation.

Conclusions The Congress identified and directed us to collect information that would 

shed light on the impact of the DBE program across the nation—including 

information on who benefits from the program, the financial status of the 

DBE community compared with that of the non-DBE community, and 

degree to which DBEs participate in transportation contracting. However, 

much of this information is not readily available from USDOT, states and 

transit authorities, and industry groups. Without this information it is 

impossible to define the universe of DBEs, compare them with the 

transportation contracting community as a whole or gain a clear 

understanding of the overall impact of the DBE program. In some cases, 

USDOT has mechanisms in place, such as its quarterly reporting 

requirement, that could be used to collect additional information, including 

the annual gross receipts of DBEs and non-DBEs as well as non-DBEs’

participation in subcontracting. In other cases, new mechanisms to collect 
Page 42 GAO-01-586 Disadvantaged Business Enterprises

or process the information are needed such as a method for determining 

the total number of certified DBEs nationwide. USDOT could also do more 

to analyze the information that is currently collected. By not systematically 

tracking and evaluating the total number of discrimination complaints filed 

by DBEs, the number of investigations launched, and the outcomes of the 

investigations, USDOT misses an opportunity to obtain information that 

could be used to identify trends and problem areas that may need attention. 

USDOT could also identify ways to improve the effectiveness of its own 

policies and guidance to states and transit authorities, and ultimately 

DBEs, by collecting and analyzing the information that the Congress has 

identified. Such information would help USDOT contribute to an informed 

congressional debate on the impact of the DBE program in connection with 

its reauthorization in 2003 and more effectively administer the program.

USDOT could also look for ways to provide more guidance to the states 

and transit authorities that are implementing the DBE program. 

Specifically, USDOT’s new regulations put a mechanism in place for setting 

DBE goals and identified Census Bureau data and DBE directories, bidders 

lists, and disparity studies as data sources that states and transit authorities 

could use in setting these goals. However, in our review of disparity 

studies, we identified problems with these data sources that should be 

avoided or mitigated to help ensure that goals set by states and transit 

authorities are based on the level of DBE participation expected in the 

absence of discrimination—specifically, a level consistent with the 

availability of ready, willing, and able DBEs in the relevant market. USDOT 

provided examples of how to set DBE goals in its regulations, but has 

issued minimal guidance to the states and transit authorities on how to 

avoid the types of data and methodological problems we identified and 

ensure that the data sources used to set goals are as reliable as possible. 

USDOT could provide additional guidance to help states and transit 

authorities carry out the program.

Recommendations for 

Executive Action

To assist USDOT in administering the DBE program and to help inform the 

Congress about the impact of the program, we recommend that the 

Secretary of Transportation take the following steps:

• Develop and implement a method for states and transit authorities to 

assign unique identification numbers to DBEs so that the total number 

of DBEs certified nationwide can be determined.

• Amend the quarterly reporting requirements for states and transit 

authorities to include information on the annual gross receipts of DBEs 
Page 43 GAO-01-586 Disadvantaged Business Enterprises

and non-DBEs and the number and dollar amount of the subcontracts 

awarded to non-DBEs. This information could be used to gain a more 

complete understanding of the participation rate of DBEs in 

subcontracting and of their financial status compared with other 

transportation contracting firms. Furthermore, USDOT should compile, 

analyze, and publish (in aggregate format) the information collected in 

the quarterly reports.

• Compile and analyze data on written complaints of discrimination filed 

by DBEs with USDOT in order to (1) determine trends in the number 

and types of complaints filed and (2) identify problem areas that require 

action.

• Periodically compile information on DBEs, through a survey or other 

appropriate mechanism, to better understand the types of programs 

needed to assist these firms.

To better assist states and transit authorities in implementing the DBE 

program and help ensure that DBE participation goals reflect the 

availability of ready, willing, and able DBEs in the relevant market, we 

recommend that the Secretary of Transportation provide specific guidance 

to states and transit authorities on strategies to mitigate the potential 

problems associated with using Census Bureau data and DBE directories, 

disparity studies, and bidders lists to set their DBE goals.

We recognize that the implementation of these recommendations may 

result in some additional costs for USDOT, states, and transit authorities. 

However, given existing data collection requirements and the benefits 

associated with these recommendations, we believe such costs are 

warranted.

Agency Comments and 

Our Evaluation

We provided USDOT with a draft of this report for review and comment. 

On May 1, 2001, the Assistant Secretary for Administration responded for 

USDOT. USDOT did not comment on our recommendations. Instead, 

USDOT offered comments to clarify the role of disparity studies in the DBE 

program, the evidentiary value of disparity studies, the need for states and 

transit authorities to use the best available data in DBE goal-setting, and 

the status of DBE and non-DBE participation data. During recent meetings 

and discussions, USDOT provided similar comments, which we considered 

and incorporated where appropriate. Therefore, we believe that the 

majority of USDOT’s comments are already reflected in the report. 

USDOT’s comments and our responses are located in Appendix IV.
Page 44 GAO-01-586 Disadvantaged Business Enterprises

We conducted our review from August 2000 through April 2001 in 

accordance with generally accepted government auditing standards.

We are sending copies of this report to congressional committees with 

responsibilities for the activities discussed in this report; the Honorable 

Norman Y. Mineta, Secretary of Transportation; the Honorable Mitchell 

Daniels, Director of the Office of Management and Budget; Hiram Walker, 

Acting Deputy Administrator, Federal Transit Administration; and Vincent 

F. Schimmoller, Deputy Executive Director, Federal Highway 

Administration. We will make copies available to others upon request.

If you or your staff have any questions about this report, please call me at 

(202) 512-2834. Key contributors to this report are listed in appendix V.

Sincerely yours,

John H. Anderson, Jr.

Managing Director, Physical Infrastructure Issues
Page 45 GAO-01-586 Disadvantaged Business Enterprises

List of Committees

The Honorable Phil Gramm 

Chairman

The Honorable Paul Sarbanes 

Ranking Member

Committee on Banking, Housing, and 

Urban Affairs

United States Senate

The Honorable Bob Smith 

Chairman

The Honorable Harry Reid 

Ranking Member

Committee on Environment and 

Public Works

United States Senate

The Honorable Don Young 

Chairman

The Honorable James L. Oberstar 

Ranking Democratic Member

Committee on Transportation and 

Infrastructure

House of Representatives
Page 46 GAO/XXXX-??-?? Document Name

Appendix I

Section of the Transportation Equity Act for Apendxies

the 21st Century Requiring GAO’s Study ApendxiI

The following is the text of the section of the Transportation Equity Act for 

the 21st Century (1998) requiring GAO’s study. 

Section 1101(b)(6):

(6) Review by comptroller general.—Not later than 3 years after the date of 

enactment of this Act, the Comptroller General of the United States shall 

conduct a review of, and publish and report to Congress findings and 

conclusions on, the impact throughout the United States of administering 

the requirement of paragraph (1), including an analysis of-

(A) in the case of small business concerns certified in each State under 

paragraph (4) as owned and controlled by socially and economically 

disadvantaged individuals—

(i) the number of the small business concerns; and 

(ii) the participation rates of the small business concerns in prime contracts and 

subcontracts funded under titles I, III, and V of this Act;

(B) in the case of small business concerns described in subparagraph (A) 

that receive prime contracts and subcontracts funded under titles I, III, and 

V of this Act—

(i) the number of the small business concerns; 

(ii) the annual gross receipts of the small business concerns; and 

(iii) the net worth of socially and economically disadvantaged individuals that own and 

control the small business concerns; 

(C) in the case of small business concerns described in subparagraph (A) 

that do not receive prime contracts and subcontracts funded under titles I, 

III, and V of this Act—

(i) the annual gross receipts of the small business concerns; and 

(ii) the net worth of socially and economically disadvantaged individuals that own and 

control the small business concerns;

(D) in the case of business concerns that receive prime contracts and 

subcontracts funded under titles I, III, and V of this Act, other than small 

business concerns described in subparagraph (B)—

(i) the annual gross receipts of the business concerns; and 

(ii) the net worth of individuals that own and control the business concerns;
Appendix I

Section of the Transportation Equity Act for 

the 21st Century Requiring GAO’s Study

Page 47 GAO/XXXX-??-?? Document Name

(E) the rate of graduation from any programs carried out to comply with 

the requirement of paragraph (1) for small business concerns owned and 

controlled by socially and economically disadvantaged individuals;

(F) the overall cost of administering the requirement of paragraph (1), 

including administrative costs, certification costs, additional construction 

costs, and litigation costs;

(G) any discrimination on the basis of race, color, national origin, or sex 

against small business concerns owned and controlled by socially and 

economically disadvantaged individuals;

(H)(i) any other factors limiting the ability of small business concerns 

owned and controlled by socially and economically disadvantaged 

individuals to compete for prime contracts and subcontracts funded under 

titles I, III, and V of this Act; and (ii) the extent to which any of those 

factors are caused, in whole or in part, by discrimination based on race, 

color, national origin, or sex;

(I) any discrimination, on the basis of race, color, national origin, or sex, 

against construction companies owned and controlled by socially and 

economically disadvantaged individuals in public and private 

transportation contracting and the financial, credit, insurance, and bond 

markets;

(J) the impact on small business concerns owned and controlled by 

socially and economically disadvantaged individuals of—

(i) the issuance of a final order described in paragraph (5) by a Federal court that 

suspends a program established under paragraph (1); or 

(ii) the repeal or suspension of State or local disadvantaged business enterprise 

programs; and

(K) the impact of the requirement of paragraph (1), and any program 

carried out to comply with paragraph (1), on competition and the creation 

of jobs, including the creation of jobs for socially and economically 

disadvantaged individuals.
Page 48 GAO-01-586 Disadvantaged Business Enterprises

Appendix II

GAO’s Survey Instrument and Overall Results ApendxiI

GAO’s Survey Instrument and Overall Results

 U.S. General Accounting Office

GAO

Survey of State DOTs and

Transit Authorities Concerning Their

 U.S. Department of Transportation Disadvantaged Business Enterprise Programs

October 2000

U.S. General Accounting Office

441 G Street, NW

Washington, D.C. 20548-0001
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Page 49 GAO-01-586 Disadvantaged Business Enterprises

Introduction

The Transportation Equity Act for the

21st Century required the U.S. General

Accounting Office (GAO) to examine the

Department of Transportation’s

Disadvantaged Business Enterprise

(DBE) program.

As part of our study of the DBE program,

we are surveying Departments of

Transportation (DOTs) in each of the 50

states, the District of Columbia, and

Puerto Rico and selected Transit

Authorities.

We recognize that there are great

demands on your time; however, your

cooperation is critical to our ability to

provide current and complete

information to the Congress.

Instructions

This questionnaire asks for information

about the federal DBE program that your

agency administers and the firms in the

program.

For definitions of terms used throughout

this questionnaire, please see U.S. DOT’s

regulations on the DBE program.

Please complete and mail your

questionnaire within three weeks of

receipt.

If the enclosed envelope is misplaced,

the questionnaire should be returned to:

Nikki Clowers

U.S. General Accounting Office

441 G Street, NW, Mail Room 6K17R

Washington, D.C. 20548

If you have any questions, please contact

Nikki Clowers at clowersa.rced@gao.gov

or (202) 512-4010.

Reporting Dates

We would prefer to have data based on

the federal fiscal year (FY) (October 1 to

September 30). Please indicate the way

the data from your agency will be

provided: (N=83)

89% Federal Fiscal Year

5% State Fiscal Year

Dates for State Fiscal Year:

_________ to _________

month/day month/day

2% Calendar Year

(Note: Four percent of respondents

indicated that they provided data based

on their agency’s fiscal year.)

Note: Please use the same reporting

year throughout the questionnaire.
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Page 50 GAO-01-586 Disadvantaged Business Enterprises

Section I:

Your Federal DBE Program

and Participants

1. What are your total DBE

participation goals for FY 1999 – FY

2001, and for FY 2000 and FY 2001,

your goals to be achieved through

race-conscious and race-neutral

programs? (Please indicate the

percentage to be achieved through

each type of program and the total

percentages.)

Fiscal Type of Program

Year RaceConscious

RaceNeutral

Total

Participation

Goal

1999

14.6% (avg.)

(N=67)

2000

 8.6% (avg.)

(N=70)

5.4% (avg.)

(N=73)

13.5% (avg.)

(N=80)

2001

 8.2% (avg.)

(N=69)

5.2% (avg.)

(N=73)

13.1% (avg.)

(N=78)

2. Which of the following sources were

used to set your FY 2000 DBE

participation goal? (Check all that

apply.) N=82

48.8% Census Bureau data

80.5% DBE Directory

36.6% Bidder’s list

29.3% Disparity study/studies

59.8% Historical utilization patterns

data

6.1% DBE goal(s) from another

agency/agencies

26.8% Other Please specify:

_____________________________

_____________________________

_____________________________

3. What race-neutral programs did your

agency use in FY 2000 to achieve your

DBE participation goal? (Check all that

apply.) N=79

8.7% Mentor-protégé program

22.8% Business development

program

26.6% Dividing larger contracts into

smaller contracts

83.5% Outreach

72.2% Technical assistance

51.9% Training

21.5% Assistance obtaining bonding

13.9% Other Please specify:

_____________________________

_____________________________

_____________________________

4. How many certified DBE firms were

available (i.e., in your database or

directory) to your agency in FY 1999

and FY 2000? (Enter number. If

none, enter 0.)

FY 1999: 559.4 (avg.) (N=78)

FY 2000: 551.5 (avg.) (N=81)
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5. Please indicate the number of DBE firms that were awarded prime contracts through your

agency, the number of prime contracts that were awarded to these firms, and the total value

of these prime contracts for FY 1999 and FY 2000. (Enter numbers and dollar amounts. If

none, enter 0.)

Fiscal

Year

Number of DBE firms

awarded prime

contracts

Total number of prime

contracts awarded to

these DBE firms

Total value of prime

contracts awarded to

these DBE firms

1999 # of Firms: 19.1 (avg.)

 (N=70)

# of Contracts: 40.4 (avg.)

 (N=79)

$ 8,203,394 (avg.)

(N=78)

2000 # of Firms: 18.4 (avg.)

(N=71)

# of Contracts: 37.4 (avg.)

(N=77)

$ 6,585,338 (avg.)

(N=76)

6. Please indicate the number of DBE firms that were awarded subcontracts through your

agency, the number of subcontracts that were awarded to these firms, and the total value of

these subcontracts for FY 1999 and FY 2000. (Enter numbers and dollar amounts. If none,

enter 0.)

Fiscal

Year

Number of DBE firms

awarded

subcontracts

Total number of

subcontracts awarded to

these DBE firms

Total value of

subcontracts awarded

to these DBE firms

1999 # of Firms: 66.9 (avg.)

(N=72)

# of Subcontracts: 254.5 (avg.)

N=79)

$ 27,006,958 (avg.)

(N=79)

2000 # of Firms: 61.6 (avg.)

(N=71)

# of Subcontracts: 235.1 (avg.)

(N=79)

$ 24,427,942 (avg.)

(N=79)
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Page 52 GAO-01-586 Disadvantaged Business Enterprises

Note: Questions 7 – 14 have two parts— “a” and “b.” If you cannot answer part “a” of

these questions, please be sure to answer part “b.”

Note: Thirty agencies (36%) provided information for Part 7a, while 52 agencies (63%)

provided information for Part 7b. Two agencies gave estimates for Part 7a. One

agency did not answer question.

7a. What were the annual gross receipts of the DBE firms that were awarded prime and/or

subcontracts through your agency in FY 1999? Use the DBE firms’ most recent certification

or recertification to determine annual gross receipts. If you are not able to provide this

information, please answer Question 7b.

(Enter the number of firms for each category of annual gross receipts. If none, enter 0.)

Annual Gross Receipts of DBE Firms That Were Awarded

Prime Contracts and/or Subcontracts in FY 1999

Less than $1,000,000

$1,000,000 to

$5,000,000

$5,000,001 to

$10,000,000

$10,000,001 to

$16,600,000

# of Firms: 17.5 (avg.)

(N=29)

# of Firms: 16.1 (avg.)

(N=30)

# of Firms: 4.8 (avg.)

(N=30)

# of Firms: 1.2 (avg.)

(N=29)

7b. If you answered Question 7a (above), please go on to Question 8a. If you did not provide

the above information, please indicate the reason(s). (Check all that apply.)

15.4% Information is not collected.

15.4% Information is being collected, but is not yet available.

11.5% Our agency relies on the certification of other jurisdictions.

7.7% Information is verified during certification and recertification, but

it is not retained.

61.5% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

19.2% Other. Please explain:
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Page 53 GAO-01-586 Disadvantaged Business Enterprises

Note: Thirty-three agencies (40%) provided information for Part 8a, while 50 agencies

(60%) provided information for Part 8b. Two agencies gave estimates for Part

8a.

8a. What were the annual gross receipts of the DBE firms that were awarded prime and/or

subcontracts through your agency in FY 2000? Use the DBE firms’ most recent certification

or recertification to determine annual gross receipts. If you are not able to provide this

information, please answer Question 8b.

(Enter the number of firms for each category of annual gross receipts. If none, enter 0.)

Annual Gross Receipts of DBE Firms That Were Awarded

 Prime Contracts and/or Subcontracts in FY 2000

Less than $1,000,000

$1,000,000 to

$5,000,000

$5,000,001 to

$10,000,000

$10,000,001 to

$16,600,000

# of Firms: 15.6 (avg.)

(N=33)

# of Firms: 14.7 (avg.)

(N=33)

# of Firms: 4.3 (avg.)

(N=33)

# of Firms: 1.2 (avg.)

(N=31)

8b. If you answered Question 8a (above), please go on to Question 9a. If you did not provide

the above information, please indicate the reason(s). (Check all that apply.)

12.0% Information is not collected.

24.0% Information is being collected, but is not yet available.

12.0% Our agency relies on the certification of other jurisdictions.

6.0% Information is verified during certification and recertification, but

it is not retained.

64.0% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

12.0% Other. Please explain:
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Page 54 GAO-01-586 Disadvantaged Business Enterprises

Note: Nineteen agencies (23%) provided information for Part 9a, while 63 agencies

(76%) provided information for Part 9b. One agency did not answer question.

9a. What were the annual gross receipts of the DBE firms that were not awarded prime or

subcontracts through your agency in FY 1999? Use the DBE firms’ most recent certification

or recertification to determine annual gross receipts. If you are not able to provide this

information, please answer Question 9b.

(Enter the number of firms for each category of annual gross receipts. If none, enter 0.)

Annual Gross Receipts of DBE Firms That Were Not Awarded

Prime Contracts or Subcontracts in FY 1999

Less than $1,000,000

$1,000,000 to

$5,000,000

$5,000,001 to

$10,000,000

$10,000,001 to

$16,600,000

# of Firms: 122.2 (avg.)

(N=19)

# of Firms: 37.2 (avg.)

(N=19)

# of Firms: 6.3 (avg.)

(N=19)

# of Firms: 2.5 (avg.)

(N=19)

9b. If you answered Question 9a (above), please go on to Question 10a. If you did not provide

the above information, please indicate the reason(s). (Check all that apply.)

22.2% Information is not collected.

14.3% Information is being collected, but is not yet available.

9.5% Our agency relies on the certification of other jurisdictions.

4.8% Information is verified during certification and recertification, but

it is not retained.

54.0% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

15.9% Other. Please explain:
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Page 55 GAO-01-586 Disadvantaged Business Enterprises

Note: Twenty-one agencies (25%) provided information for Part 10a, while 62 agencies

(75%) provided information for Part 10b. One agency gave estimates for Part

10a.

10a. What were the annual gross receipts of the DBE firms that were not awarded prime or

subcontracts through your agency in FY 2000? Use the DBE firms’ most recent certification

or recertification to determine annual gross receipts. If you are not able to provide this

information, please answer Question 10b.

(Enter the number of firms for each category of annual gross receipts. If none, enter 0.)

Annual Gross Receipts of DBE Firms That Were Not Awarded

Prime Contracts or Subcontracts in FY 2000

Less than $1,000,000

$1,000,000 to

$5,000,000

$5,000,001 to

$10,000,000

$10,000,001 to

$16,600,000

# of Firms: 102.3 (avg.)

 (N=21)

# of Firms: 33.2 (avg.)

(N=21)

# of Firms: 5.9 (avg.)

(N=20)

# of Firms: 2.5 (avg.)

(N=20)

10b. If you answered Question 10a (above), please go on to Question 11a. If you did not provide

 the above information, please indicate the reason(s). (Check all that apply.)

21.0% Information is not collected.

17.4% Information is being collected, but is not yet available.

9.7% Our agency relies on the certification of other jurisdictions.

4.8% Information is verified during certification and recertification, but

it is not retained.

54.8% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

12.9% Other. Please explain:
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Page 56 GAO-01-586 Disadvantaged Business Enterprises

Note: Twenty-eight agencies (34%) provided information for Part 11a, while 54

agencies (65%) provided information for Part 11b. One agency did not answer

question.

11a. What was the personal net worth of individuals who own and control DBE firms that were

awarded prime contracts through your agency in FY 2000? Use the DBE firms’ most recent

certification or recertification to determine personal net worth. We are aware that you may

not have personal net worth information for all DBE firms; however, please provide the

information that is available. If you cannot provide any personal net worth information,

please answer Question 11b.

 (Enter the number of firms for each category of personal net worth. If none, enter 0.)

Personal Net Worth of Individuals Who Own and Control DBE Firms

That Were Awarded Prime Contracts in FY 2000

Less than $100,000 $100,000 to $250,000 $250,001 to $500,000 $500,001 to $750,000

# of Firms: 1.4 (avg.)

(N=24)

# of Firms: 1.9 (avg.)

(N=24)

# of Firms: 1.8 (avg.)

(N=25)

# of Firms: 1.0 (avg.)

(N=24)

11b. If you answered Question 11a (above), please go on to Question 12a. If you did not provide

 the above information, please indicate the reason(s). (Check all that apply.)

5.6% Information is not collected.

16.7% Information is being collected, but is not yet available.

13.0% Our agency relies on the certification of other jurisdictions.

9.3% Information is verified during certification and recertification, but

it is not retained.

66.7% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

9.3% Other. Please explain:
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Page 57 GAO-01-586 Disadvantaged Business Enterprises

Note: Twenty-seven agencies (33%) provided information for Part 12a, while 56

agencies (67%) provided information for Part 12b.

12a. What was the personal net worth of individuals who own and control DBE firms that were

 awarded subcontracts through your agency in FY 2000? Use the DBE firms’ most

 recent certification or recertification to determine personal net worth. We are aware that

you may not have personal net worth information for all DBE firms; however, please provide

the information that is available. If you cannot provide any personal net worth information,

 please answer Question 12b.

 (Enter the number of firms for each category of personal net worth. If none, enter 0.)

Personal Net Worth of Individuals Who Own and Control DBE Firms

That Were Awarded Subcontracts in FY 2000

Less than $100,000 $100,000 to

$250,000

$250,001 to

$500,000

$500,001 to

$750,000

# of Firms: 11.9 (avg.)

(N=27)

# of Firms: 8.8 (avg.)

(N=26)

# of Firms: 6.1(avg.)

(N=27)

# of Firms: 3.7 (avg.)

(N=26)

12b. If you answered Question 12a (above), please go on to Question 13a. If you did not provide

 the above information, please indicate the reason(s). (Check all that apply.)

5.4% Information is not collected.

17.9% Information is being collected, but is not yet available.

12.5% Our agency relies on the certification of other jurisdictions.

8.9% Information is verified during certification and recertification, but

it is not retained.

67.9% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

7.1% Other. Please explain:
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Page 58 GAO-01-586 Disadvantaged Business Enterprises

Note: Fifteen agencies (18%) provided information for Part 13a, while 67 agencies

(81%) provided information for Part 13b. One agency did not answer question

13.

13a. What was the personal net worth of individuals who own and control DBE firms that were

 not awarded prime contracts through your agency in FY 2000? Use the DBE firms’

 most recent certification or recertification to determine personal net worth. We are aware

that you may not have personal net worth information for all DBE firms; however, please

provide the information that is available. If you cannot provide any personal net worth

information, please answer Question 13b.

 (Enter the number of firms for each category of personal net worth. If none, enter 0.)

Personal Net Worth of Individuals Who Own and Control DBE Firms

That Were Not Awarded Prime Contracts in FY 2000

Less than $100,000 $100,000 to

$250,000

$250,001 to

$500,000

$500,001 to

$750,000

# of Firms: 60.2 (avg.)

(N=14)

# of Firms: 35.6 (avg.)

(N=14)

# of Firms: 26.0 (avg.)

(N=15)

# of Firms: 12.9 (avg.)

(N=14)

13b. If you answered Question 13a (above), please go on to Question 14a. If you did not provide

 the above information, please indicate the reason(s). (Check all that apply.)

10.5% Information is not collected.

16.4% Information is being collected, but is not yet available.

10.5% Our agency relies on the certification of other jurisdictions.

7.5% Information is verified during certification and recertification, but

it is not retained.

64.2% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

6.0% Other. Please explain:
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Page 59 GAO-01-586 Disadvantaged Business Enterprises

Note: Eighteen agencies (22%) provided information for Part 14a, while 65 agencies

(78%) provided information for Part 14b.

14a. What was the personal net worth of individuals who own and control DBE firms that were

 not awarded subcontracts through your agency in FY 2000? Use the DBE firms’

 most recent certification or recertification to determine personal net worth. We are aware

that you may not have personal net worth information for all DBE firms; however, please

provide the information that is available. If you cannot provide any personal net worth

information, please answer Question 14b.

 (Enter the number of firms for each category of personal net worth. If none, enter 0.)

Personal Net Worth of Individuals Who Own and Control DBE Firms

That Were Not Awarded Subcontracts in FY 2000

Less than $100,000 $100,000 to $250,000 $250,001 to $500,000 $500,001 to $750,000

# of Firms: 46.4 (avg.)

(N=18)

# of Firms: 34.2 (avg.)

(N=17)

# of Firms: 21.8 (avg.)

(N=17)

# of Firms: 13.8 (avg.)

(N=17)

14b. If you answered Question 14a (above), please go on to Question 15. If you did not provide

 the above information, please indicate the reason(s). (Check all that apply.)

12.3% Information is not collected.

13.9% Information is being collected, but is not yet available.

10.8% Our agency relies on the certification of other jurisdictions.

7.7% Information is verified during certification and recertification, but

it is not retained.

64.6% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

6.2% Other. Please explain:
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Page 60 GAO-01-586 Disadvantaged Business Enterprises

15. How many DBE firms became ineligible for the DBE program in FY 1999 and FY 2000

because they exceeded the program’s statutory cap on annual gross receipts ($16.6 million)?

(Enter number. If none, enter 0.) N=83

FY 1999: 0.5 (avg.) (N=60)  Check here if information is not available.

FY 2000: 0.3 (avg.) (N=60)  Check here if information is not available.

16. How many DBE firms became ineligible for the DBE program in FY 1999 and FY 2000

because they exceeded applicable SBA small business size standards? (Enter number. If

none, enter 0.) N=83

FY 1999: 1.1 (avg.) (N=62)  Check here if information is not available.

FY 2000: 1.7 (avg.) (N=63)  Check here if information is not available.

17. How many DBE firms became ineligible for the DBE program in FY 2000 because individuals

who own or control the firm exceeded the program’s cap on personal net worth ($750,000)?

(Enter number. If none, enter 0.) N=83

FY 2000: 6.1 (avg.) (N=65)  Check here if information is not available.

18. Please estimate the cost of administering the DBE program in your agency? (In your

estimate include such things as salaries, certification costs, technical assistance, database

development and maintenance, and contracted studies/analyses.) N=83

FY 1999: $633,124 (avg.) (N=55)  Check here if information is not available.

FY 2000: $772,160 (avg.) (N=57)  Check here if information is not available.
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Page 61 GAO-01-586 Disadvantaged Business Enterprises

Section II:

Non-DBE Firms

19. Please indicate the number of non-DBE firms that were awarded prime contracts through

your agency, the number of prime contracts that were awarded to these firms, and the total

value of these contracts for FY 1999 and FY 2000. (Enter numbers and dollar amounts. If

none, enter 0. If this information is not available, put a check in the appropriate box on the

right side of the table below.)

Fiscal

Year

Number of nonDBE firms

awarded prime

contracts

Total number of

prime contracts

awarded to these

non-DBE firms

Total dollar value

of prime contracts

awarded to these

non-DBE firms

1999 # of Firms: 202.6 (avg.)

(N=58)

# of Contracts: 474.8 (avg.)

(N=67)

$ 313,477,141 (avg.)

(N=69)

 Check here if FY

1999 information is

not available.

2000 # of Firms: 185.2 (avg.)

(N=59)

# of Contracts: 454.2 (avg.)

(N=68)

$ 308,620,950 (avg.)

(N=69)

 Check here if FY

2000 information is

not available.

20. Please indicate the number of non-DBE firms that were awarded subcontracts through your

agency, the number of subcontracts that were awarded to these firms, and the total value of

these subcontracts for FY 1999 and FY 2000. (Enter numbers and dollar amounts. If none,

enter 0. If this information is not available, put a check in the appropriate box on the right

side of the table below.)

Fiscal

Year

Number of nonDBE firms

awarded

subcontracts

Total number of

subcontracts awarded to

these non-DBE firms

Total dollar value

of subcontracts

awarded to these

non-DBE firms

1999 # of Firms: 180.1 (avg.)

(N=28)

# of Subcontracts: 597.1 (avg.)

(N=27)

$ 92,747,776 (avg.)

(N=27)

 Check here if FY

1999 information is

not available

2000 # of Firms: 190.3 (avg.)

(N=29)

# of Subcontracts: 604.6 (avg.)

(N=28)

$ 96,320,366 (avg.)

(N=28)

 Check here if FY

2000 information is

not available
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Page 62 GAO-01-586 Disadvantaged Business Enterprises

Note: Questions 21 – 23 have two parts— “a” and “b.” If you cannot answer part “a”

of these questions, please be sure to answer part “b.”

Note: Three agencies (4%) provided information for Part 21a, while 80 agencies (96%)

provided information for Part 21b. Two agencies gave estimates for Part 21a.

21a. What were the annual gross receipts of the non-DBE firms that were awarded prime and/or

 subcontracts through your agency in FY 1999? If you are not able to provide this

 information, please answer Question 21b.

(Enter the number of firms for each category of annual gross receipts. If none, enter 0.)

Annual Gross Receipts of Non-DBE Firms That Were Awarded

Prime Contracts and/or Subcontracts in FY 1999

Less than

$1,000,000

$1,000,000 to

$5,000,000

$5,000,001 to

$10,000,000

$10,000,001 to

$16,600,000

Greater than

$16,600,000

# of Firms: 21.3

(avg.)

(N=3)

# of Firms: 36.0

(avg.)

(N=3)

# of Firms: 11.7

(avg.)

(N=3)

# of Firms: 11.7

(avg.)

(N=3)

# of Firms: 17.7

(avg.)

(N=3)

21b. If you answered Question 21a (above), please go on to Question 22a. If you did not provide

the above information, please indicate the reason(s). (Check all that apply.)

32.5% Information is not collected, but will be in the future.

18.8% Information is not collected, and there are no plans to collect it in

the future.

12.5% Information is being collected, but is not yet available.

31.3% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

11.3% Other. Please explain:
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Page 63 GAO-01-586 Disadvantaged Business Enterprises

Note: Five agencies (6%) provided information for Part 22a, while 78 agencies (94%)

provided information for Part 22b. Three agencies gave estimates for Part 22a.

22a. What were the annual gross receipts of the non-DBE firms that were awarded prime and/or

 subcontracts through your agency in FY 2000. If you are not able to provide this

 information, please answer Question 22b.

(Enter the number of firms for each category of annual gross receipts. If none, enter 0.)

Annual Gross Receipts of Non-DBE Firms That Were Awarded

Prime Contracts and/or Subcontracts in FY 2000

Less than

$1,000,000

$1,000,000 to

$5,000,000

$5,000,001 to

$10,000,000

$10,000,001 to

$16,600,000

Greater than

$16,600,000

# of Firms: 16.8

(avg.)

(N=5)

# of Firms: 20.6

(avg.)

(N=5)

# of Firms: 9.0

(avg.)

(N=5)

# of Firms: 7.8

(avg.)

(N=5)

# of Firms: 10.4

(avg.)

(N=5)

22b. If you answered Question 22a (above), please go on to Question 23a. If you did not provide

 the above information, please indicate the reason(s). (Check all that apply.)

29.5% Information is not collected, but will be in the future.

20.5% Information is not collected, and there are no plans to collect it in

the future.

16.7% Information is being collected, but is not yet available.

28.2% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

10.3% Other. Please explain:
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Page 64 GAO-01-586 Disadvantaged Business Enterprises

Note: No agency could provide information for Part 23a. Eighty-two agencies (99%)

provided information for Part 23b. One agency did not answer question.

23a. What was the personal net worth of individuals who own and control non-DBE firms that

were awarded prime and/or subcontracts through your agency in FY 2000. If you are not

able to provide this information, please answer Question 23b.

 (Enter the number of firms for each category of personal net worth. If none, enter 0.)

Personal Net Worth of Individuals Who Own and Control Non-DBE Firms

That Were Awarded Prime Contracts and/or Subcontracts in FY 2000

Less than

$100,000

$100,000 to

$250,000

$250,001 to

$500,000

$500,001 to

$750,000

Greater than

$750,000

# of Firms:

(No respondents

provided

information)

# of Firms:

(No respondents

provided

information)

# of Firms:

(No respondents

provided

information)

# of Firms:

(No respondents

provided

information)

# of Firms:

(No respondents

provided

information)

23b. If you answered Question 23a (above), please go on to Question 24. If you did not provide

 the above information, please indicate the reason(s). (Check all that apply.)

8.5% Information is not collected, but will be in the future.

62.2% Information is not collected, and there are no plans to collect it in

the future.

4.9% Information is being collected, but is not yet available.

19.5% Information is not maintained in an electronic database, and

would be difficult and/or time-consuming to report.

11.0% Other. Please explain:
Appendix II

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Results

Page 65 GAO-01-586 Disadvantaged Business Enterprises

Section III:

Litigation and Complaints

24. Has the federal DBE program

administered by your agency been the

subject of litigation? (Please check one.)

N=83

71% No Please go to Question 27.

29% Yes

25. What year(s) was this program under

litigation? N=24

Year(s): Responses ranged from 1986 to

2001

26. What were your litigation costs for FY

1999 and FY 2000? (Enter dollar

amount(s). If none, enter 0.) N=24

FY 1999:$ 7,166.7 (avg.) (N=15)

	
	







FY 2000: $ 19,897.3 (avg.) (N=13)

Check here if information is not available.

27. Were any formal written discrimination

complaints filed by DBE firms with your

agency in FY 1999 and FY 2000? (Please

check one.) N=83

81% No Please go to Question 31.

19% Yes

28. How many complaints were filed?

(Enter the number of complaints. If

none, enter 0.) N=16

FY 1999: 15 (sum) (N=16)

Check here if information is not available.

FY 2000: 16 (sum) (N=15)

Check here if information is not available.

29. Of the formal written discrimination

complaints filed by DBE firms in FY 1999

and FY 2000, how many were

investigated by your agency? (Enter the

number of complaints. If none, enter 0.)

N=16

Number of complaints investigated in

FY 1999: 15 (sum) (N=16)

Check here if information is not available.

Number of complaints investigated in

FY 2000: 14 (sum) (N=15)

Check here if information is not available.

30. With respect to the complaints and

investigations identified in Questions 27

to 29, how many times did your agency

find evidence of discrimination? (Enter

the number of times. If none, enter 0.)

N=16

FY 1999: 2 (sum) (N=14)

Check here if information is not available.

FY 2000: 2 (sum) (N=12)

Check here if information is not available.
Appendix II

GAO’s Survey Instrument and Overall 

Results

Page 66 GAO-01-586 Disadvantaged Business Enterprises

Section IV:

DBE-Related Studies

Conducted for Your Agency

31. Have you conducted, or are you conducting, any studies or analyses to determine if awarding

prime contracts to DBE firms affects contract costs? (Please check one.) N=83

 No

1.2% Yes

Please briefly describe:

32. Have you conducted, or are you conducting, any studies or analyses to determine if awarding

subcontracts to DBE firms affects contract costs? (Please check one.) N=83

98.8% No

1.2% Yes

Please briefly describe:
Appendix II

GAO’s Survey Instrument and Overall 

Results

Page 67 GAO-01-586 Disadvantaged Business Enterprises

33. Have you conducted, or are you conducting, any studies or analyses of discrimination against

DBE firms on the basis of race, color, national origin, or sex? (Please check one.) N=83

67.5% No

32.5% Yes Please briefly describe:

34. Have you conducted, or are you conducting, any studies or analyses of discrimination on the

basis of race, color, national origin, or sex against DBE construction firms by the financial,

credit, insurance, or bond markets and/or in other contracts? (Please check one.) N=82

84.2% No

15.9% Yes Please briefly describe:
Appendix II

GAO’s Survey Instrument and Overall 

Results

Page 68 GAO-01-586 Disadvantaged Business Enterprises

35. Have you conducted, or are you conducting, any studies or analyses of other factors that limit

the ability of DBE firms to compete for prime and/or subcontracts? (Please check one.)

N=83

79.5% No

20.5% Yes Please briefly describe:

36. Have you conducted, or are you conducting, any studies or analyses on the impact of the

DBE program on competition and the creation of jobs? (Please check one.) N=83

92.8% No

7.2% Yes Please briefly describe:
Appendix II

GAO’s Survey Instrument and Overall 

Results

Page 69 GAO-01-586 Disadvantaged Business Enterprises

Section V:

Other Related Programs

37. In addition to the federal DBE program, is your agency subject to the requirements of a nonfederal minority business enterprise (MBE), women-owned business enterprise (WBE), or

another DBE program? (Please check one.) N=83

65.1% No

34.9% Yes

38. Has your agency participated in a non-federal MBE, WBE, or DBE program that has been

suspended, repealed, or otherwise terminated? (Please check one.) N=83

85.5% No Please go to Question 40.

14.5% Yes

39. Please indicate the year(s) that program(s) were repealed and the type of program(s)

repealed.

Repealed Program: _______________________________________ Year Repealed: _________

Repealed Program: _______________________________________ Year Repealed: _________

Repealed Program: _______________________________________ Year Repealed: _________

Repealed Program: _______________________________________ Year Repealed: _________

Repealed Program: _______________________________________ Year Repealed: _________

Note: Years ranged from 1989 to 2000.
Appendix II

GAO’s Survey Instrument and Overall 

Results

Page 70 GAO-01-586 Disadvantaged Business Enterprises



Section VI:

Implementation of the Federal DBE Program

40. When was your FY 2000 DBE program

plan submitted to DOT? N=83

Month: _________ Year: _________

Note: All 83 agencies indicated that they

submitted a FY 2000 DBE program plan

to DOT.

41. Has your FY 2000 DBE program plan

been approved by DOT? (Please check

one.) N=83

10% No

90% Yes When was your program

approved?

Month: _________ Year: _________

Note: On average, it took DOT 8 months

to approve the FY ‘2000 DBE plans.

42. In your opinion, which of the following,

if any, are barriers to participation in the

DBE program? (Check all that apply.) N=83

19.3% The costs (e.g., hiring accountants,

 lawyers) associated with the

certification process

62.7% The time required for completing

certification paperwork

79.5% Reluctance to provide personal

information (e.g., personal net worth)

18.1% Lack of information about eligibility

requirements

32.5% Stigma associated with participating

in the DBE program

6.0% None of the above

24% Other Please briefly describe

43. In your opinion, which of the following

best describes the costs and benefits of

participation in the DBE program?

(Please check one.) N=79

3.8% The costs greatly outweigh the benefits

7.6% The costs somewhat outweigh the

benefits

7.6% The costs and benefits are about equal

25.3% The benefits somewhat outweigh the

costs

32.9% The benefits greatly outweigh the costs

22.8% No basis to judge

44. In your opinion, have the revised DBE

regulations made it easier or more

difficult for firms to participate in the

DBE program? (Please check one.)

N=81

0.0% Much easier for firms to participate

16.1% Somewhat easier for firms to participate

21.0% No change in the ease or difficulty of

participation

40.7% Somewhat more difficult for firms to

participate

13.6% Much more difficult for firms to

participate

8.6% No basis to judge
Appendix II

GAO’s Survey Instrument and Overall 

Results

Page 71 GAO-01-586 Disadvantaged Business Enterprises



45. How would you rate the guidance and

technical assistance you have received

from FTA on implementing the revised

DBE regulations? (Please check one.) N=83

8.4% Excellent

38.6% Good

26.5% Average

12.1% Below average

13.3% Poor

1.2% No basis to judge

46. How would you rate the guidance and

technical assistance you have received

from FTA on developing your FY 2000

DBE program plan? (Please check one.)

N=83

12.1% Excellent

38.6% Good

24.1% Average

10.8% Below average

13.3% Poor

1.2% No basis to judge

47. In your opinion, have the revised DBE

regulations made it easier or more

difficult to administer the DBE program?

(Please check one.) N=82

1.2% Much easier to administer

9.8% Somewhat easier to administer

9.8% No change in the ease or difficulty of

administering the DBE program

30.5% Somewhat more difficult to administer

41.5% Much more difficult to administer

7.3% No basis to judge

48. Has your uniform certification program

(UCP) been submitted to the U.S. DOT?

(Please check one.) N=82

91.5% No Please go to Question 50.

49. Has your uniform certification program

(UCP) been approved by the U.S. DOT?

(Please check one.) N=7

28.6% No

71.4% Yes When was your plan approved?

Month: _________ Year: _________

50. Which of the following best describes

the status of your uniform certification

program (UCP)? (Please check one.)

N=83

7.2% Our agency’s UCP is fully

implemented

10.8% Our agency is in the process of

implementing our UCP

61.5% Our agency is currently

developing our UCP

14.5% Our agency has not yet started

developing our UCP

6.0% Other Please briefly describe:

51. What is the current status of your

Bidder’s List? (Please check one.) N=83

26.5% Our agency’s Bidder’s List is fully

developed and fully implemented

21.7% Our agency is in the process of

implementing our Bidder’s List

38.6% Our agency is currently developing

our Bidder’s List

8.4% Our agency has not yet started

developing our Bidder’s List

4.8% Other Please briefly describe:

8.5% Yes When was your plan submitted?

Month: _________ Year: _________
Appendix II

GAO’s Survey Instrument and Overall 

Results

Page 72 GAO-01-586 Disadvantaged Business Enterprises



52. Do you use a computer database system

to track and monitor the information

identified in the revised DBE regulation?

(Please check one.) N=81

56.8% No

43.2% Yes When was your system

implemented?

Month: _________ Year: _________

53. Which of the following best describes the

status of your database system used to

track and monitor the information

identified in the revised DBE regulation?

(Please check one.) N=82

14.6% Our agency’s system is fully implemented

19.5% Our agency is in the process of

implementing our system

40.2% Our agency is currently developing our

system

9.8% Our agency has not yet started developing

our system

2.4% Our agency has no plans to develop a

computer database system to track this

information

13.4% Other Please briefly describe:
Appendix II

GAO’s Survey Instrument and Overall 

Results

Page 73 GAO-01-586 Disadvantaged Business Enterprises



Please provide the following information about the individual(s)

who completed this questionnaire:

(Note: We are planning to report contact names and phone numbers for

each DBE program included in this survey. Please check the box to the

right of the name of the person who should be listed for your program.)

Name:

Title:

 Check here to

list this person as

your program’s

contact.

Office/Department:

Phone Number:

Email Address:

Name:

Title:

 Check here to

list this person as

your program’s

contact.

Office/Department:

Phone Number:

Email Address:

Name:

Title:

 Check here to

list this person

as your

program’s

contact.

Office/Department:

Phone Number:

Email Address:

Thank you very much for taking time to complete this questionnaire. If you

would like to make additional comments concerning any of the questions or

comment on topics not covered, please feel free to use this page or to attach

additional pages.
Page 74 GAO-01-586 Disadvantaged Business Enterprises

Appendix III

Objectives, Scope, and Methodology ApendxiI

The Transportation Equity Act for the 21st Century directed us to evaluate 

the impact of the U.S. Department of Transportation’s (USDOT) 

Disadvantaged Business Enterprise (DBE) program throughout the nation 

and address 11 specific objectives. We grouped the statute’s 11 objectives 

into the following 4 researchable questions:

1. How has the DBE program changed since 1999?

2. What are the characteristics of DBEs and non-DBEs that receive 

USDOT-assisted highway and transit contracts?

3. What do selected sources indicate about discrimination or other factors 

that may limit DBEs’ ability to compete for USDOT-assisted contracts?

4. What is the impact of the DBE program on costs, competition, and job 

creation as well as the impact of discontinuing federal and nonfederal 

DBE programs?

To determine how the DBE program has changed since 1999 and to identify 

the characteristics of DBEs and non-DBEs that receive USDOT-assisted 

contracts, we reviewed USDOT’s regulations and guidance pertaining to 

the DBE program. We also interviewed USDOT officials and 

representatives from minority-owned business and transportation 

associations. In addition, we surveyed the departments of transportation 

of the 50 states, the District of Columbia, and Puerto Rico, and 36 transit 

authorities throughout the nation. (We planned to survey all transit 

authorities required to submit plans for a DBE program. However, the 

Federal Transit Administration could not provide an accurate list of these 

transit authorities.) The 36 transit authorities we surveyed are the largest 

transit authorities in the nation as defined by the number of unlinked 

passenger trips in 1999.1

 They also received about two-thirds of all federal 

transit grant funds obligated in 1999. Our survey was designed to obtain 

information on the issues that TEA-21 directed us to examine, including the 

participation rates of DBEs in USDOT-assisted contracts, the annual gross 

receipts of DBEs and non-DBEs, and the cost of administering the DBE 

program. 

1

Unlinked passenger trips represent the number of passengers who board public 

transportation vehicles. A passenger is counted each time he/she boards a vehicle even 

though he/she may be on the same journey from origin to destination.
Appendix III

Objectives, Scope, and Methodology

Page 75 GAO-01-586 Disadvantaged Business Enterprises

To help design our survey, we obtained input from USDOT, states, and 

transit authorities. After we developed our survey, we pre-tested the 

questionnaire with officials of 4 state departments of transportation 

(states) and 5 transit authorities. We selected states and transit authorities 

from a variety of geographical regions for our pre-tests. For each pre-test, 

members of our staff met with officials from the state or transit authority 

and simulated the actual survey experience by asking the officials to fill out 

the questionnaire. We also interviewed the officials after they had 

completed the questionnaire to ensure that (1) the questions were 

understandable and clear, (2) the terms used were precise, (3) the 

questionnaire did not place undue burden on state or transit authority 

officials, and (4) the questionnaire was unbiased. Appropriate changes 

were incorporated in the final survey based on our pre-testing. In addition, 

we provided a draft copy of our questionnaire to USDOT officials and 

incorporated comments from them, as appropriate.

To increase the response rate of our survey, we sent two additional 

reminders after the survey was mailed in October 2000, including (1) a 

postcard sent one week after the survey and (2) a follow-up letter and 

replacement survey to nonrespondents sent about 3 weeks after the initial 

mailing. In addition, we conducted follow-up phone calls to 

nonrespondents through January 2001. We received survey responses from 

all 52 states and 31 transit authorities for a response rate of 94 percent.

To evaluate the existence of discrimination against DBEs, we reviewed 

recent court cases that have addressed the constitutionality of the federal 

DBE program, transportation-specific disparity studies, and written 

discrimination complaints filed by DBEs with USDOT, states and transit 

authorities. Specifically: 

• We reviewed the court decisions that have addressed the 

constitutionality of the federal DBE program since the Supreme Court’s 

1995 decision in Adarand Constructors, Inc. v. Pena. We identified 

decisions meeting these criteria and consulted with officials from 

USDOT and the Department of Justice (DOJ) to ensure that we included 

all relevant decisions in our review. We also obtained information from 

USDOT and DOJ about pending cases concerning the constitutionality 

of the federal DBE program.

• We identified and reviewed all (14) transportation-specific disparity 

studies published between 1996 and 2000. We reviewed disparity 

studies because DOJ has stated that they are of particular relevance for 

affirmative action measures in federal programs providing grants to 
Appendix III

Objectives, Scope, and Methodology

Page 76 GAO-01-586 Disadvantaged Business Enterprises

states and local governments, and because courts have recognized them 

as a source of evidence of discrimination in considering the federal DBE 

program. In addition, USDOT has identified disparity studies as one 

source that states and transit authorities could use to help set their 

federal DBE participation goals. Numerous state and local governments 

have used them to support their minority business contracting programs 

and to set their federal DBE goals. We selected disparity studies that (1) 

were published between 1996 and 2000, (2) contained a separate 

disparity analysis on transportation contracting, and (3) used a disparity 

ratio—that is, a comparison of the availability of MBE/WBEs to their 

utilization in contracts—as a indicator of discrimination.2

 These criteria 

are generally consistent with USDOT’s regulations, which state that any 

disparity studies used in the DBE goal setting process should be as 

recent as possible and focused on the transportation contracting 

industry. To determine whether the disparity studies’ findings were 

reliable, we evaluated the methodological soundness of the studies 

using common social science and statistical practices. For example, we 

systematically examined each study’s methodology, including its 

assumptions and limitations, data sources, analyses, and conclusions.

To identify relevant disparity studies, we obtained information from 

USDOT, DOJ, the Policy Sciences Graduate Program of the University of 

Maryland Baltimore City, the Minority Business Enterprise Legal Defense 

and Education Fund, Inc. (MBELDEF). In addition, we obtained 

information from the five consulting firms most noted for conducting 

disparity studies: National Economic Research Associates, Inc., BBC 

Research and Consulting, MGT of America, Mason-Tillman Associates, Ltd., 

and DJ Miller and Associates, Inc. 

The evidence—along with its strengths and weaknesses—contained in any 

disparity study would be limited to the geographical scope of that 

particular study. Moreover, because we limited our review to 

transportation-specific disparity studies, our conclusions cannot be 

generalized to disparity studies pertaining to other industries. 

• We interviewed USDOT officials about written complaints of 

discrimination DBEs filed with USDOT. We also reviewed USDOT’s data 

on written complaints of discrimination filed by DBEs since fiscal year 

2

Only one transportation-specific disparity study published between 1996 and 2000 did not 

use a disparity ratio in its analysis and therefore was excluded from our review.
Appendix III

Objectives, Scope, and Methodology

Page 77 GAO-01-586 Disadvantaged Business Enterprises

1996. In addition, we analyzed information on written complaints of 

discrimination filed by states and transit authorities collected through 

our nationwide survey. 

We recognize that we did not review all of the information that could be 

relevant to the issue of discrimination in transportation contracting. 

However, we chose to review sources directly related to transportation 

contracting and the federal DBE program, including those suggested by 

USDOT and minority-owned business and transportation associations. 

Since we did not conduct an exhaustive review and evaluation of all 

evidence of discrimination, our results cannot be used to support or 

dismiss claims about the existence of discrimination against DBEs 

throughout the nation. Moreover, we did not address whether the DBE 

program satisfies the requirements of strict scrutiny and is therefore 

constitutional.

To identify factors, other than discrimination that may limit the ability of 

DBEs to compete for transportation contracts, we reviewed information 

collected in our nationwide survey and recent GAO reports. In addition, we 

interviewed officials from USDOT and the Small Business Administration 

(SBA) and representatives from the American Road and Transportation 

Builders Association, Associated General Contractors of America, Minority 

Business Enterprise Legal Defense and Education Fund, Inc., Women 

Construction Owners and Executives, and National Black Chamber of 

Commerce.

To determine the impact of the DBE program on costs, competition, and 

job creation, we collected data from states and transit authorities through 

our survey and from USDOT. In addition, we interviewed officials from 

USDOT and SBA as well as representatives from minority- and womenowned business groups and transportation associations.

To evaluate the impact of discontinuing a federal DBE program, we 

identified the states and transit authorities that had discontinued the 

federal DBE program through our review of the court decisions that have 

addressed the constitutionality of the federal DBE program since the 

Supreme Court’s 1995 decision in Adarand Constructors, Inc. v. Pena. We 

identified 1 state and 1 transit authority that had discontinued their federal 

DBE programs due to court decisions. We interviewed officials from the 

state and transit authority and requested DBE and non-DBE participation 

data in federal transportation contracting for the years immediately before 
Appendix III

Objectives, Scope, and Methodology

Page 78 GAO-01-586 Disadvantaged Business Enterprises

and after the discontinuance. Only the state DOT provided the requested 

data. 

To assess the impact of discontinuing a nonfederal DBE program, we used 

our survey to identify states and transit authorities that had participated in 

a nonfederal DBE program that was discontinued. Twelve survey 

respondents indicated that they had participated in such programs. We 

excluded the two transit authorities that had participated in nonfederal 

DBE programs that were discontinued in 2000 because sufficient time had 

not elapsed to determine the impact of this change. We contacted the 

remaining ten states and transit authorities and requested data on DBEs’

and non-DBEs’ participation in nonfederal and federal transportation 

contracting for the years immediately before and after the program was 

discontinued. Eight of the 10 states and transit authorities responded to 

our requests for data; however, only one state could provide the data 

necessary to thoroughly evaluate the impact of discontinuing its program—

that is, data on DBEs’ and non-DBEs’ participation in nonfederal 

transportation contracting before and after the nonfederal program was 

discontinued.

We conducted our review from August 2000 through April 2001 in 

accordance with generally accepted government auditing standards.
Page 79 GAO-01-586 Disadvantaged Business Enterprises

Appendix IV

Comments From the U.S. Department of 

Transportation ApendxiIV

See comment 1.
Appendix IV

Comments From the U.S. Department of 

Transportation

Page 80 GAO-01-586 Disadvantaged Business Enterprises

See comment 2.

See comment 3.
Appendix IV

Comments From the U.S. Department of 

Transportation

Page 81 GAO-01-586 Disadvantaged Business Enterprises

See comment 4.
Appendix IV

Comments From the U.S. Department of 

Transportation

Page 82 GAO-01-586 Disadvantaged Business Enterprises

GAO’s Comments The following are GAO’s comments on USDOT’s letter dated May 1, 2001. 

1. As noted on pages 24 and 74, our objective was not to address the 

question of whether the DBE program satisfies the requirements of strict 

scrutiny and is therefore constitutional as USDOT seems to suggest. In 

particular, we did not attempt to determine whether sufficient evidence of 

discrimination exists to demonstrate that the DBE program serves a 

compelling interest. Further, as stated on pages 11, 14, and 24, we 

recognize that disparity studies are not required to support the federal DBE 

program, represent one of several sources of evidence of discrimination, 

and are but one method that states and transit authorities could use to set 

their federal DBE goals. 

2. We agree with USDOT’s assertion that an inference of discrimination can 

be drawn from studies finding statistical disparities between the 

availability and utilization of MBE/WBEs. Consequently, we chose to 

review disparity studies as one source of evidence of discrimination. Also, 

as we stated on pages 6 and 29, all 14 studies we reviewed found disparities 

between the availability and utilization of MBE/WBEs in contracting, and 

taken as a whole, these studies suggest discrimination against MBE/WBEs. 

However, the data limitations and methodological weaknesses we 

identified create uncertainties about their findings. 

Furthermore, we agree with USDOT that we did not review all sources of 

evidence of discrimination against DBEs—a point we make repeatedly 

throughout the report. While we could not review all possible sources, we 

chose to review the sources directly pertaining to transportation 

contracting and the federal DBE program. As such, one of the sources we 

reviewed were transportation-specific disparity studies published between 

1996 and 2000. As noted on page 29, we defined transportation-specific 

studies as those containing a separate disparity analysis on transportation 

contracting. While the Urban Institute report cited by USDOT included 

several studies focusing on transportation contracting, it combined these 

studies with a variety of others in its analysis and did not contain a separate 

disparity analysis of transportation contracting. In addition, although the 

Urban Institute published its report in 1997, all of the disparity studies it 

examined had been published before 1996. Therefore, the Urban Institute 

report did not meet our criteria.

We did not discuss all of the details about the methods we used to analyze 

the 14 disparity studies because the methods are commonly used in social 
Appendix IV

Comments From the U.S. Department of 

Transportation

Page 83 GAO-01-586 Disadvantaged Business Enterprises

science research. To help clarify this for readers who are unfamiliar with 

these methods, we have added an example to our discussion in appendix 

III. 

3. We agree with USDOT that states and transit authorities must use the 

best available data in setting their DBE goals and that there are inherent 

limitations in conducting disparity studies. However, we disagree that we 

are seeking an unobtainable level of sophistication and detail in these 

endeavors. Rather, we believe we identified some basic problems with the 

data sources that should be recognized and, in most cases, could 

reasonably be avoided in conducting disparity studies and setting DBE 

goals. For example, if bidders lists are used to set DBE goals, they should 

be as up-to-date as possible in order to avoid overstating or understating 

the number of available firms. 

4. We disagree that the information necessary to calculate DBE 

participation rates in subcontracts is routinely made available to DOT. To 

calculate DBE participation rates in prime contracts and subcontracts, one 

needs the number and value of prime contracts and subcontracts awarded 

to DBEs and the number and value of prime contracts and subcontracts 

awarded to non-DBEs. We were able to calculate DBE participation rates in 

prime contracts because most states and transit authorities could provide 

the number and value of prime contracts awarded to DBEs and non-DBEs. 

However, the majority of states and transit authorities could not provide 

the number and value of subcontracts awarded to non-DBEs and therefore 

the data on DBEs’ participation rates in subcontracts are limited. 

Information on the number and value of subcontracts awarded to nonDBEs is not reported to USDOT and USDOT does not maintain this 

information. Most states and transit authorities provided the number and 

value of subcontracts awarded to DBEs—information that is routinely 

provided to USDOT. However, this information alone does not allow one to 

calculate DBEs’ participation rates in subcontracts. 
Page 84 GAO-01-586 Disadvantaged Business Enterprises

Appendix V

GAO Contacts and Staff Acknowledgments ApendxiV

GAO Contacts Ronald Stouffer, (202) 512-4416

Susan Fleming, (202) 512-4431

Acknowledgments In addition to those named above, the following staff members made key 

contributions to this report:

Physical Infrastructure 

Team

Nikki Clowers

Elizabeth Eisenstadt

Colin Fallon

Amy Gleason-Carroll

Phyllis F. Scheinberg

Office of General Counsel Alan Belkin

Helen Desaulniers

Office of Applied Research 

and Methods

Michele Fejfar

Bethany Letiecq

Sara Moessbauer 

Lynn Musser

Judy Pagano

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GAO Contacts and Staff Acknowledgments

Page 86 GAO-01-586 Disadvantaged Business Enterprises

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