Opinion ID: 163083
Heading Depth: 4
Heading Rank: 1

Heading: Size and Experience

Text: 103 In Concrete Works II, this court reversed the grant of summary judgment, in part, because it was unclear from the record whether the 1990 Study overstated the availability of M/WBEs in the Denver construction market. We noted that a disparity index calculated on the basis of the absolute number of MBEs in the local market may show greater underutilization than does data that takes into consideration the size of MBEs and WBEs. Concrete Works II, 36 F.3d at 1528. At trial, both parties had the opportunity to present evidence on the effect firm size and capacity had on the disparities shown in Denver's studies. 104 CWC challenges Denver's disparity studies as unreliable because the disparities shown in the studies may be attributable to firm size and experience rather than discrimination. CWC's argument is based on a report submitted by its expert, George LaNoue, which contains an extensive discussion of firm size and experience. LaNoue first asserts that M/WBEs are generally smaller and less experienced than majority firms. He then contends that smaller and less experienced firms are less qualified and less able to undertake City construction projects. He concludes that because Denver's disparity studies do not control for firm size and experience, the M/WBE availability figures used in those studies are inflated. Thus, CWC argues the disparity indices calculated in the studies are unreliable because they are not based on the availability of only those firms qualified, willing, and able to work on City projects. 105 The district court noted that Denver's disparity studies contain no analysis of the actual qualifications and capacities of the MBEs and WBEs in the Denver MSA, but instead assume that, at any given time, all M/WBEs are available to perform each contract. Concrete Works III, 86 F.Supp.2d at 1065-66. The court criticized Denver's assumption as implausible and concluded that [a]ggregating all of the MBEs and WBEs in estimating availability without regard for the size of the businesses ... is a serious flaw in the methodology and impairs the value of the results. Id. at 1066, 1068. 106 Denver acknowledges that M/WBEs are generally smaller than majority-owned firms in terms of revenues and number of employees and are slightly less experienced. Additionally, in his written report, another CWC expert, John Lunn, asserts that the only conclusion that can be drawn from Denver's studies is that minority-and women-owned firms are smaller and less experienced than the average of all construction firms in the Denver construction market. Although CWC did not conduct its own marketplace disparity study that controlled for firm size and experience, its argument that the disparity studies are unreliable because they fail to control for size and experience is deserving of consideration in light of the uncontroverted evidence that M/WBEs are generally smaller and less experienced than majority firms. 107 Denver counters, however, that a firm's size has little effect on its qualifications or its ability to provide construction services and that M/WBEs, like all construction firms, can perform most services either by hiring additional employees or by employing subcontractors. At trial, Denver introduced evidence that the median number of employees of all construction firms in the Denver MSA is three and presented testimony that even firms with few permanent employees can perform large, public contracts by hiring additional employees or subcontractors and renting equipment. Additionally, the district court found that most firms have few full-time permanent employees and must grow or shrink their performance capacity according to the volume of business they are doing. Id. at 1064. 108 CWC responds that elasticity itself is relative to size and experience; M/WBEs are less capable of expanding because they are smaller and less experienced. The district court found that a firm's ability to expand depends upon [its] access to increased resources, including workers with the needed skills, equipment, material and operating capital. Id. The court did not find that a firm's size affected its ability to obtain these resources but concluded that the firm's access to information, its reputation in the community and the skills of its managers all had an effect. Id. Thus there is no finding by the district court that smaller, less experienced firms are less able to expand. 109 Even if we assume that M/WBEs are less able to expand because of their smaller size and more limited experience, CWC does not respond to Denver's argument and the evidence it presented showing that experience and size are not race-and gender-neutral variables and that M/WBE construction firms are generally smaller and less experienced because of industry discrimination. The lending discrimination and business formation studies both strongly support Denver's argument that M/WBEs are smaller and less experienced because of marketplace and industry discrimination. In addition, Denver's expert David Evans testified that discrimination by banks or bonding companies would reduce a firm's revenue and the number of employees it could hire. Robin Hackett, the owner of a WBE, testified that she has difficulty finding and retaining white male employees because they are ridiculed by others in the industry for working at a WBE. Hackett also testified that she is excluded from participating in a labor pool of non-union employees shared by other local firms. Those firms sharing this labor pool are able to bid a bigger volume of work and not worry about manning the projects. Even Lunn, CWC's expert, admitted during cross-examination that the size and revenue differences between M/WBEs and majority-owned firms could be due in part to the presence of discrimination. 110 Denver also argues that CWC's argument lacks merit because the 1990 Study, the DGS Study, the 1995 Study, and the NERA Study all controlled for size and the 1995 Study controlled for experience. It asserts that the 1990 Study measured revenues per employee for construction M/WBEs and concluded that the resulting disparities, suggest[] that even among firms of the same employment size, industry utilization of MBEs and WBEs was lower than that of non-minority male owned firms. Similarly, the 1995 Study controlled for size, calculating, inter alia, disparity indices for firms with no paid employees which presumably are the same size. CWC responds by simply making the bald allegation that the 1995 Study's control for size is a pretense and that the control is meaningless. This glib response is wholly inadequate to rebut Denver's argument and the conclusions drawn in the disparity studies. 111 Based on the uncontroverted evidence presented at trial, we conclude that the district court did not give sufficient weight to Denver's disparity studies because of its erroneous conclusion that the studies failed to adequately control for size and experience. Denver is permitted to make assumptions about capacity and qualification of M/WBEs to perform construction services if it can support those assumptions. The assumptions made in this case are consistent with the evidence presented at trial and support the City's position that a firm's size does not affect its qualifications, willingness, or ability to perform construction services and that the smaller size and lesser experience of M/WBEs are, themselves, the result of industry discrimination. Further, CWC did not conduct its own disparity study using marketplace data and thus did not demonstrate that the disparities shown in Denver's studies will decrease or disappear if the studies controlled for size and experience to CWC's satisfaction. Consequently, CWC's rebuttal evidence is insufficient to meet its burden of discrediting Denver's disparity studies on the issue of size and experience. 112