Opinion ID: 679519
Heading Depth: 2
Heading Rank: 1

Heading: Discrimination in the Award of Public Contracts

Text: 47 We begin by considering the evidence that Denver presents to demonstrate underutilization of MBEs and WBEs in the award of city contracts from the mid 1970s to 1990. As described more fully below, Denver offers persuasive pieces of evidence that, considered in the abstract, could give rise to an inference of race- and gender-based public discrimination on isolated public works projects. 10 However, the record also shows that MBE and WBE utilization on public contracts as a whole during this period was quite strong in comparison to the total number of MBEs and WBEs within the local construction industry. Denver offers a rebuttal to this more general evidence, but it is clear that the weight to be given both to the general evidence and to the specific evidence relating to individual contracts presents genuine disputes of material facts. What follows is an analysis of the factual record and an identification of the genuine material issues of fact arising from the parties' competing evidence. 48 (1) Federal Agency Reports of Discrimination in Denver 49 First, Denver offers federal agency reports of discrimination in Denver public contract awards. The record contains a summary of a 1978 study by the United States General Accounting Office (GAO), which shows that between 1975 and 1977 minority businesses were significantly underrepresented in the performance of Denver public contracts that were financed in whole or in part by federal grants. Aplt.App. at 349-51. Of the $56 million in federally-funded construction contracts that the DPW awarded between July 1975 and December 1977, only about $2.5 million (or less than five percent) was awarded to minority contractors. Id. at 351. According to GAO estimates at the time of its study, approximately 11 percent of the construction firms in the Denver MSA were owned by minorities. In addition, GAO identified certain DPW practices that adversely affected minority contractors' likelihood of participating in public works projects. 11 50 Concrete Works argues that a material fact issue arises about the validity of this evidence because the 1978 GAO Report was nothing more than a listing of the problems faced by all small firms, first starting out in business. However, Concrete Works ignores the GAO Report's empirical data, which quantifies the actual disparity between the utilization of minority contractors and their representation in the local construction industry. In addition, we note that the GAO Report reflects the findings of an objective third party. Because this data remains uncontested, notwithstanding Concrete Works' conclusory allegations to the contrary, the 1978 GAO Report provides evidence to support Denver's showing of discrimination. 51 Added to the GAO findings is a 1979 letter from the United States Department of Transportation (US DOT) to William H. McNichols, Mayor of the City of Denver, describing the US DOT Office of Civil Rights' study of Denver's discriminatory contracting practices at Stapleton International Airport. Aplt.App. at 266-68. US DOT threatened to withhold additional federal funding for Stapleton because Denver had denied minority contractors the benefits of, excluded them from, or otherwise discriminated against them concerning contracting opportunities at Stapleton, in violation of Title VI of the Civil Rights Act of 1964 and other federal laws. Id. at 266. 12 52 The following data reflects the low level of MBE and WBE utilization on Stapleton contracts prior to Denver's adoption of an MBE and WBE goals program at Stapleton in 1981: for the years 1977 to 1980, respectively, MBE utilization was 0 percent, 3.8 percent, .7 percent, and 2.1 percent; data on WBE utilization was unknown for the years 1977 to 1979, and it was .05 percent for 1980. Aplt.App. at 265. 53 Like its unconvincing attempt to discredit the GAO Report, Concrete Works presents no evidence to challenge the validity of US DOT's allegations. Instead, Concrete Works contends that because the district court in the 1979 suit between Denver and the US DOT determined that this letter constituted only initial determinations and not final findings following a hearing, Denver cannot use the letter as factual support in the instant case. However, Concrete Works fails to introduce evidence refuting the substance of US DOT's information, attacking its methodology, or challenging the low utilization figures for MBEs at Stapleton before 1981. Thus, Concrete Works has failed to create a genuine issue of fact about the conclusions in the US DOT's report. 54 In sum, the federal agency reports of discrimination in Denver's contract awards support Denver's contention that race and gender discrimination existed prior to the enactment of the challenged Ordinance. 55 (2) Denver's Reports of Discrimination 56 Denver points to evidence of public discrimination prior to 1983, the year that the first Denver ordinance was enacted. 13 A 1979 DPW Major Bond Projects Final Report, which reviewed MBE and WBE utilization on projects funded by the 1972 and 1974 bond referenda and the 1975 and 1976 revenue bonds, showed strong evidence of underutilization of MBEs and WBEs. Aplt.App. at 353-55. 14 Based on this Report's description of the approximately $85 million in contract awards, there was 0 percent MBE and WBE utilization for professional design and construction management projects, and less than 1 percent utilization for construction. Id. at 354-55. The Report concluded that if MBEs and WBEs had been utilized in the same proportion as found in the construction industry, 5 percent of the contract dollars would have been awarded to MBEs and WBEs. 57 To undermine this stark data, Concrete Works alleges that the DPW Report contained no information about the number of minority or women owned firms that were used on these bond projects. Aplt.App. at 173. However, the Report's description of MBE and WBE utilization in terms of contract dollars provides a more accurate depiction of total utilization than would the mere number of MBE and WBE firms participating in these projects. Thus, this line of attack by Concrete Works is unavailing. 58 On the other hand, Concrete Works advanced expert testimony that Denver's data demonstrates strong MBE and WBE utilization on the total DPW contracts awarded between 1978 and 1982. Aplt.App. at 104, 356. For example, although MBEs represented 2 percent of the construction firms in the Denver MSA in 1977, MBEs received 6 percent of all DPW contract dollars--in other words, a disparity index of 3. Aplt.App. at 356. Further, the MBE disparity ratio for DPW contracts in 1982 was 12, because MBEs still represented 2 percent of the construction firms, yet received 24 percent of DPW contract dollars. Id. 15 59 The same discrepancy between underutilization of MBEs and WBEs on some specifically identified DPW projects, and strong utilization in the overall DPW data exists as well in the post-1983 evidence on which Denver relies. Concrete Works observed that, for the years 1983 to 1989, the MBE disparity index was at least 3 in the overall DPW data and that MBEs received an average of 17.4 percent of DPW contract dollars. Id. at 105, 318. 60 However, Denver forcefully responds by pointing out that because federal and city affirmative action programs were in place from the mid-1970s to the present, this overall DPW data reflects the intended remedial effect on MBE and WBE utilization of these programs. Id. at 274. 16 Based on its contention that the overall DPW data was therefore tainted and distorted by these pre-existing affirmative action goals programs, Denver asks us to focus instead on the data generated from specific public contract programs that were, for one reason or another, insulated from federal and local affirmative action goals programs, i.e. non-goals public projects. Given that the same local construction industry performed both goals and non-goals public contracts, id. at 275, Denver argues that data generated on non-goals public projects offers a control group with which we can compare MBE and WBE utilization on public contracts governed by a goals program and those insulated from such goal requirements. Denver argues that the utilization of MBEs and WBEs on non-goals projects is the better test of whether there has been discrimination historically in Denver contracting practices. 61 In any event, the first data from non-goals public projects that Denver identifies are MBE and WBE disparity indices on Denver Department of General Services (DGS) contracts, which represent one-third of all city construction funding and which, prior to the enactment of the 1990 Ordinance, were not subject to the goals program instituted in the earlier ordinances for DPW contracts. Id. at 297. 17 The DGS data reveals extremely low MBE and WBE utilization. For MBEs, the DGS data shows a .14 disparity index in 1989 and a .19 disparity index in 1990--evidence of significant underutilization. Aplee.App. at 298-301. For WBEs, the disparity index is .47 in 1989 and 1.36 in 1990--the latter showing greater than full participation and the former demonstrating underutilization. Id. 62 These MBE disparity indices for DGS projects approximate those in other cases where courts have applied the strong basis in evidence standard in Croson. 18 The Eleventh Circuit held that a .11 disparity clearly constitutes a prima facie case of discrimination indicating that the racial classifications in the County plan were necessary under Croson. Cone Corp., 908 F.2d at 916. In light of a disparity index of .22, the Ninth Circuit upheld the denial of a preliminary injunction to a challenger of the City of San Francisco's affirmative action program based upon an equal protection claim. Associated Gen. Contractors, Inc. v. Coalition for Economic Equity, 950 F.2d 1401, 1414 (9th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1670, 118 L.Ed.2d 390 (1992). Similarly, the Third Circuit concluded that a disparity of .04 was probative of discrimination in City contracting in the Philadelphia construction industry. Contractors Ass'n, 6 F.3d at 1005. 19 63 Denver's DGS evidence is more comprehensive than the evidence in O'Donnell Constr. Co. v. District of Columbia, 963 F.2d 420, 424-28 (D.C.Cir.1992), where the court reversed a denial of a preliminary injunction for the challenger because the District of Columbia failed to demonstrate a strong basis in evidence for its contract program. There, the District of Columbia provided data of minority utilization for construction contracts let by only one government agency in one year. Although this data showed that 3.4 percent of the construction dollars went to minority firms, the data also revealed that the same agency awarded in excess of 30 percent of repairs, improvement, and architectural contracts, and nearly 25 percent of material management contracts, to minority firms. The District of Columbia additionally failed to provide any data about discrimination in the private construction industry and relied on data generated before an amendment to the ordinance narrowed the eligibility pool to firms whose principal place of business was the District of Columbia or who successfully demonstrated that they were local business enterprises. 64 The second set of data reflecting distinct MBE and WBE underutilization on non-goals public projects consists of separate DPW projects on which no goals program was imposed. 20 In this category, Denver offered data about MBE and WBE utilization on the 1985 Housing Bond and Museum of Natural History Projects and unnamed bond projects between 1972 and 1977. Aplt.App. at 274-75. 21 For the Housing Bond Project, the MBE disparity index was .43 and WBE disparity index was .09. Id. at 275. Similarly, the MBE disparity index for the Museum Project was .48 and the WBE figure was .40. Id. And finally, the MBE disparity index on the 1972 to 1976 bond projects was .63, while the WBE disparity index was .29. Id. 65 Concrete Works attempts to trivialize the significance of this data by contending that the projects, in dollar terms, reflect a small fraction of the total Denver MSA construction market. But Concrete Works misses the point. The data is not intended to reflect conditions in the overall market; it instead speaks solely to the utilization levels for city-funded projects on which no MBE and WBE goals were imposed. It is particularly telling that the disparity index significantly deteriorates on projects for which the city did not establish minority and gender participation goals. Insofar as Concrete Works does not attack the data on any other grounds, we consider it as persuasive evidence of underlying discrimination in the Denver construction market. 66 The third evidentiary item supporting Denver's contention that public discrimination existed prior to enactment of the challenged Ordinance is empirical data from 1989, generated after Denver modified its race- and gender-conscious program. In the wake of Croson, Denver amended its program by eliminating the minimum annual goals program for MBE and WBE participation and by requiring MBEs and WBEs to demonstrate that they had suffered from past discrimination. Aplt.App. at 312. This modification resulted in a noticeable decline in the share of DPW construction dollars awarded to MBEs. From 1985 to 1988 (prior to the 1989 modification of Denver's program), DPW construction dollars awarded to MBEs ranged from 17 to nearly 20 percent of total dollars. However, the figure dropped to 10.4 percent in 1989, after the program modifications took effect. Id. at 318. Like the DGS and non-goals DPW projects, this 1989 data further supports the inference that MBE and WBE utilization significantly declines after deletion of a goals program or relaxation of the minimum MBE and WBE utilization goal requirements. 67 Nonetheless, we must consider Denver's empirical support for its contention that public discrimination existed prior to the enactment of the Ordinance in the context of the overall DPW data, which shows consistently strong MBE and WBE utilization from 1978 to the present. Although Denver's argument may prove persuasive at trial that the non-goals projects are the most reliable indicia of discrimination, the record on summary judgment contains two sets of data, one that gives rise to an inference of discrimination and the other that undermines such an inference. This discrepancy highlights why summary judgment was inappropriate on this record. 68 The uncertainty about the capacity of MBEs and WBEs in the local market to compete for, and perform, the public projects for which there was underutilization of MBEs and WBEs further highlights why this record is not ripe for summary judgment. Although Denver's data uses as its baseline the percentage of firms in the local construction market that are MBEs and WBEs, Concrete Works argues that a more accurate indicator would consider the capacity of local MBEs and WBEs to undertake the work. See Croson, 488 U.S. at 501-02, 109 S.Ct. at 726 ([W]here special qualifications are necessary, the relevant statistical pool for purposes of demonstrating discriminatory exclusion must be the number of minorities qualified to undertake the particular task.) (emphasis added). Concrete Works hypothesizes that, given the relatively small average size of local MBEs and WBEs, there may not have been MBEs available to perform work on DGS contracts or DPW projects on which no goals were imposed. Aplt.App. at 107-09. 69 We agree with the other circuits which have interpreted Croson impliedly to permit a municipality to rely, as does Denver, on general data reflecting the number of MBEs and WBEs in the marketplace to defeat the challenger's summary judgment motion or request for a preliminary injunction. See Contractors Ass'n, 6 F.3d at 1005 (comparing MBE participation in city contracts with the percentage of [MBE] availability or composition in the 'population' of Philadelphia area construction firms); Associated Gen. Contractors, 950 F.2d at 1414 (relying on availability data to conclude that city presented detailed findings of prior discrimination); Cone Corp., 908 F.2d at 916 (statistical disparity between the total percentage of minorities involved in construction and the work going to minorities shows that the racial classification in the County plan [was] necessary). 70 Nevertheless, Concrete Works has identified a legitimate factual dispute about the accuracy of Denver's data and questioned whether Denver's reliance on the percentage of MBEs and WBEs available in the marketplace overstates the ability of MBEs or WBEs to conduct business relative to the industry as a whole because M/WBEs tend to be smaller and less experienced than nonminority-owned firms. Aplt.App. at 107. In other words, 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. 22 We do not mean to imply that availability is not an appropriate barometer to calculate MBE and WBE utilization, nor do we cast aspersions on data that simply uses raw numbers of MBEs and WBEs compared to numbers of total firms in the market. However, once credible information about the size or capacity of the firms is introduced in the record, it becomes a factor that the court should consider. 71 Denver has several responses. It argues that a construction firm's precise capacity at a given moment in time belies quantification due to the industry's highly elastic nature. Aplt.App. at 279. Furthermore, DPW contracts represent less than 4 percent of total MBE revenues and less than 2 percent of WBE revenues in 1989, thereby strongly implying that MBE and WBE participation in DPW contracts did not render these firms incapable of concurrently undertaking additional work. Aplt.App. at 273. Denver presented evidence that most MBEs and WBEs have never participated in city contracts, although almost all firms contacted indicated that they were interested in City work. Aplt.App. at 273, 278. Of those MBEs and WBEs who have received work from DPW, available data showed that less than 10 percent of their total revenues were from DPW contracts. Id. 72 Again, all of this back and forth argument highlights that there are genuine and material factual disputes in the record. Such disputes about the accuracy of Denver's data should not be resolved at summary judgment. Liberty Lobby, 477 U.S. at 249, 106 S.Ct. at 2510-11. 73