Contracting Barriers
and Factors Affecting
Minority Business Enterprises
A REVIEW OF EXISTING DISPARITY STUDIES
PREPARED FOR
Minority Business Development Agency
Under Contract SB1352-15-SE-0425
PREPARED BY
Premier Quantitative Consulting, Inc.
Orlando, FL
DECEMBER 2016
Foreword
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December 2016 | Minority Business Development Agency
Foreword
Winning contracts that buy your products, services, proprietary work processes, or intellectual
property is what every entrepreneur strives to accomplish when they go into business.
Contracts are the business barometer that measure the health of your business and determine
whether you grow, stagnate, or fail. For America to build a healthy and inclusive economy,
minority business enterprises (MBEs), must have full and fair access to the range of local, state
and federal contracting opportunities. Disparity studies conducted over the past 10 years at the
state and local levels tell a much different story.
This study, Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing
Disparity Studies, was commissioned by the U.S. Department of Commerce, Minority Business
Development Agency to expose the patterns and trends uncovered in these disparity studies
and to quantify the impact of discrimination in America’s procurement systems. In doing so, it
reveals that MBEs typically obtain a lower number and dollar value of contracts in proportion to
the number of MBEs available. The report also reveals that the industry groups experiencing the
highest ratios of disparity include construction, professional services, architecture, engineering
services, and goods and supplies.
Beyond the civil injustices that have been protested across the country and the
disenfranchisement of minority communities, there are distinct underlying issues that primarily
center on economic disparity. Unemployment, low workforce readiness, lack of transportation
infrastructure, a shortage of affordable housing, and social issues have negatively impacted
minority communities nationwide. While MBEs are contributing to the economic vitality of
these communities by addressing social issues in new ways, they must have the opportunity
to develop capacity and entry points into the industries of tomorrow. Local governments
must change their economic development models that enable MBEs to grow and create jobs,
serve as positive role models to disadvantaged youth, and expose residents to innovation
and emerging industries to generate wealth creation. These business owners seek new
opportunities that will allow them to engage with the entire community in order to make a
broader impact.
Contracting Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing Disparity Studies
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Minority Business Development Agency | December 2016
Civic participation is critical to MBEs as their dedication goes beyond economic success. If we
are to improve the government’s ability to advance community conditions capable of deterring
civil injustices and targeting of our law enforcement ofcers, then our federal response must be
guided by interagency collaboration, law enforcement understanding, public investment, and a
sense of urgency.
The ndings of this report raise questions about the current and future state of economic
development in the U.S., in particular as the population moves inexorably to ‘majority-minority’
status. It also points out implications for the Nation’s economic health should MBEs not have
the opportunity to fully participate in government contracting.
During the past 45 years, MBDA has provided MBEs with resources to support and advance
their success in growing the U.S. economy. Today, many MBEs have proven to be major catalysts
for economic growth, job creation, innovation, and entrepreneurship. Due to our unique
position, MBDA has distinct insight regarding current civil unrest issues that plague these
communities, which historically have beneted from the Agency’s funding and resources. This
long-term engagement has helped MBDA to identify promising business opportunities that
create jobs and generate wealth.
Since 2009, MBDA has helped minority-owned rms access more than $34.8 billion in contracts
and capital, which resulted in more than 153,000 jobs created and retained.*
We know that there is more to do. This report is presented for full consideration by corporate
CEOs and boards of directors, governors, state/local legislators, mayors, tribal leaders, law
enforcement/criminal justice and economic development leaders, procurement ofcers,
transportation and infrastructure ofcials, business owners, and pension fund managers and
investors, in the spirit of generating positive momentum toward the goal of shrinking, and
ultimately eliminating, disparities in contracting nationwide.
We encourage you to read the full report which covers the legal framework of disparity studies
and offers a primer for those embarking upon disparity studies at the state and local levels.
It also offers an in depth quantitative analysis of disparity ratios and a qualitative review of
anecdotal evidence. Our hope is that this report will give policy makers and MBE advocates the
information and data they need to make systemic changes.
Alejandra Y. Castillo Albert Shen
National Director National Deputy Director
Minority Business Development Agency Minority Business Development Agency
U.S. Department of Commerce U.S. Department of Commerce
*U.S. Department of Commerce, Minority Business Development Agency performance and CRM systems,
Retrieved December 12, 2016.
Executive Summary
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December 2016 | Minority Business Development Agency
Executive Summary
Analysis of public contracting data indicates that substantial disparities exist between minority
and non-minority business enterprises. Specically, the data show that minority business
enterprises (MBEs) typically secure a lower number and dollar amount of contracts in proportion
to the number of available MBEs in a relevant market. As a result, MBEs, agency ofcials,
policy makers, and advocates have a strong incentive to understand the factors that give rise
to observed contracting disparities. In order to advance the dialogue concerning contracting
disparities and inform the development of new and innovative solutions, the Minority Business
Development Agency (MBDA) requested a comprehensive review of existing data and studies
to address several key research questions:
• What factors create barriers and cause disparities in public contracting for MBEs?
• What information do existing studies provide stakeholders in assisting agencies address
observed disparities?
• What areas warrant further investigation and policy research with respect to contracting
disparities experienced by MBEs?
This research explored existing disparity studies conducted by a variety of economic consultants
that were commissioned by local and state governments nationwide. A disparity study is a
comprehensive effort that analyzes a wealth of data pertaining to the legal, legislative, and
contracting environment facing MBEs in a particular jurisdiction or when procuring contracts
from a specic federal, state or municipal agency. The ndings presented in this report are
drawn from a comprehensive review of 100 disparity studies, summaries, and reports that are
publicly-available and accessible via the internet. The selected set of disparity studies does
not represent the full universe of studies and includes a greater focus on recent studies with
information on contracting disparities affecting MBEs within the last ten years.
LEGAL PRECEDENT AND DISPARITY STUDY BASICS
The evolution and development of disparity studies arose from legal challenges to existing
afrmative action or race-conscious programs
1
enacted by government rules, legislation or
policies intended to alleviate perceived or actual discrimination against different racial, ethnic or
1
This report uses the terms “afrmative action programs,” “race-based programs,” and “race-conscious programs”
interchangeably, where the terms imply a government initiated program that specically includes racial or ethnic preferences in
alleviating discriminatory behavior.
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Minority Business Development Agency | December 2016
gender groups in public contracting. In response to the legal precedent,
2
government agencies
have commissioned disparity studies to examine the extent to which minority contractors are
underutilized in public procurement in a particular industry and geography, such that the agency
can determine whether a legally-defensible race-conscious program is justied or needed to
provide remedial relief given discriminatory or exclusionary behavior.
Disparity studies typically include an overview of the legal precedent that inuences the
key methodologies, computations, and evidence necessary to justify or support existing or
proposed contracting programs, including those that are race-conscious. City of Richmond v.
J.A. Croson Co.
3
(Croson) and Adarand Constructors Inc. v. Peña
4
(Adarand) are two seminal
legal decisions that established the evidentiary tests necessary to evaluate local, state, and
federal race-conscious contracting programs. These cases introduced several key concepts and
standards, including:
• Ensuring that disparities in contracting are specic to the relevant geographic and
product markets;
• Disparities are evaluated considering only rms that are ready, willing and able to bid on
and perform contracts;
• The importance of evidence related to marketplace discrimination to support race-
conscious contracting programs; and
• The importance of anecdotal evidence in supporting programs offering remedial relief
of discrimination in public contracting.
There have been a number of additional challenges to existing race-conscious contracting
programs. While the constitutionality of programs has been upheld, the legal decisions have
often brought forth key issues related to disparity study methodologies and the evidence
needed to support an inference of discrimination related to an observed disparity ratio.
In addition to the legal review, disparity studies typically include an overview of the rules,
regulations, and ordinances that govern public contracting for a particular agency. This
includes the existence of race-conscious programs to alleviate contracting disparities. In order
to determine the extent to which disparities exist among MBEs and different racial and ethnic
groups, disparity studies compute numerical disparity ratios using agency procurement data,
information on winning bidders, and a comprehensive analysis of actual and potential bidders
to determine which rms are ready, willing, and able to bid on contracts. Consultants use
this information to determine utilization and availability, the two inputs of the disparity ratio
calculation. Figure ES-1 shows a simplied illustration of the disparity ratio calculation, where
2
City of Richmond v. J.A. Croson Co. (488 US 469 (1989)) and Adarand Constructors Inc. v. Peña (515 US 200 (1995)) are two
seminal legal decisions that established the evidentiary tests necessary to evaluate local, state, and federal race-conscious
contracting programs.
3
488 US 469 (1989).
4
515 US 200 (1995).
Executive Summary
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December 2016 | Minority Business Development Agency
the numerator represents the utilization of MBEs and the denominator shows the availability
of MBEs.
5
FIGURE ES-1
DISPARITY RATIO COMPUTATION EXAMPLE
As a general rule of thumb, a disparity ratio of less than 0.80 (or 80 if expressed on a scale that
multiplies the disparity index by 100) indicates a substantial disparity.
6
Utilization and availability
are also specic to well dened geographic and product markets (i.e., the “relevant markets”).
Market denition is an economic concept that looks to substitutability and is intended to
determine who is competing for public contracts along geographic and product lines. Robust
and defensible disparity studies have an explicit denition of both geographic and product
markets, as these are required in order to determine who is competing for contracts and the
extent to which disparities exist among these market denitions.
DISPARITIES EXIST
The review of selected disparity studies provided 2,385 distinct high-level disparity ratios
presented in executive summaries, major ndings, and conclusions sections. These ratios
include observations for MBEs in the aggregate, as well as for the African American, Hispanic
5
This simplied example assumes uniform contract and rm sizes, such that the disparity ratio would be equivalent whether one
considers utilization based on the number of contracts or dollars awarded per contract.
6
Given the lack of standardization in evaluating the levels of underutilization, many studies employ the Equal Employment
Opportunity Commission’s (EEOC) “80 percent rule” in Uniform Guidelines on Employee Selection Procedures. In the context of
employment discrimination, an employment disparity ratio below 80 indicates a “substantial disparity” in employment.
Award = $100
Award = $300
MBE Utilization =
25%
UTILIZATION CALCULATION
MBE Availability
AVAILABILITY CALCULATION
MBEs
Non-MBEs
MBEs
Non-MBEs
Contracting Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing Disparity Studies
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Minority Business Development Agency | December 2016
American and Asian American categories.
7
In addition, studies computed disparity ratios
based on industry, with the majority reporting disparity ratios for major industry groups such
as construction, professional services, architecture and engineering services, and goods and
supplies. However, there is no standard disparity ratio reporting method and a review of the
disparity studies found wide variation in how disparity authors computed and reported disparity
ratios. Some studies included a single disparity ratio covering multiple years, while others
reported ratios for every calendar year or scal year for the time period under investigation.
Furthermore, some studies only reported disparity ratios on prime contracts, while other studies
distinguished between prime contracts and subcontracts.
As a result, the disparity ratios are not an “apples to apples” comparison when examining
results from one report compared to another. The studies were conducted by different authors,
for different agencies, using different product and geographic market denitions and for
different time periods. In addition, there are methodological differences in computing disparity
ratios among consultants. Nevertheless, the comprehensive nature of the review established a
distinct pattern of substantial contracting disparities for MBEs in the aggregate and for different
racial and ethnic groups across different industries. 78.2 percent of all disparity ratios drawn
from the set of disparity studies were less than 0.8, with a median value of 0.19. Considering
that less than 0.8 is a substantial disparity, these results indicate that contracting disparities for
MBEs are pervasive.
Furthermore, many studies tested whether these disparity ratios were statistically signicant,
where disparity study authors used statistical approaches to test whether the disparity could
have arisen due to chance, or some other factor such as discrimination. For those disparity
studies that explicitly indicated whether a disparity ratio was statistically signicant or not,
approximately 65 percent of all disparity ratio observations were classied as statistically
signicant by the study authors. However, this may be a conservative estimate since some
disparity study consultants only reported signicance at a highly aggregated level. Lastly,
99 percent of statistically signicant disparities identied by study authors were less than 0.8,
lending strong support for discriminatory behavior in contracting.
Despite the detail regarding underrepresentation presented in disparity calculations, the
existence of a disparity does not on its own support a conclusion of discrimination. Rather, the
numerical disparity ratios necessitate additional inquiries to explain why MBEs face signicant
7
This does not represent the totality of disparity ratios reported in the 100 studies. In certain cases, disparity study consultants
also included Native Americans and Subcontinent Asian Americans, but these instances were relatively few or often contained
inadequate data to compute a disparity ratio. In addition, most studies reported disparity ratios for women-owned businesses,
although differences existed with respect to approaches separating out Caucasian-owned WBEs versus non-Caucasian owned
WBEs. Furthermore, some studies reported an aggregate M/WBE disparity ratio, as opposed to just an MBE disparity ratio.
The results presented in this report include the combined M/WBE ratios, but do not include WBE-only disparity ratios. Lastly,
many studies provided hundreds of different additional disparity ratios based on smaller geographic regions, combining across
industries, looking at different funding sources, or looking at different time periods. In order to minimize double counting, the
research ndings in this study do not include the subset of disparity ratios based on the multiple iterations that some disparity
study consultants performed. The primary purpose of the disparity ratio review was to demonstrate that these studies identied
contracting disparities, sufcient to assess causal factors.
Executive Summary
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December 2016 | Minority Business Development Agency
contracting disparities compared to non-MBEs. In order to determine whether disparities are
the result of discrimination, disparity study consultants use both quantitative and qualitative
analyses to examine the root causes of disparities in public contracting. Most studies in the
research set included an analysis of marketplace discrimination, using regression analysis to
investigate disparities in business formation, business earnings, and loan denials between MBEs
and non-MBEs in the private sector. These analyses demonstrate the presence of discriminatory
behavior in private markets by showing race as a statistically signicant predictor of disparities in
business owner earnings, business formation and access to capital. As a result, these analyses
allow disparity studies to address whether or not public agencies were susceptible to or
engaging in passive discrimination in public contracting.
USING ANECDOTAL EVIDENCE TO EXPLORE CONTRACTING BARRIERS
AND CAUSES
Anecdotal evidence does not establish the predicate for race-conscious programs, but instead,
aids policymakers in evaluating whether a contracting program is needed and narrowly tailored
to address demonstrated discriminatory behavior. Anecdotal evidence provides rst-hand
accounts of barriers in public contracting and instances where discrimination is a factor in MBE
underrepresentation. Critics of the validity of anecdotal evidence argue that the accounts may
not be sufciently veried and that instead of detailing actual accounts of discrimination, the
evidence may only present perceptions of discrimination. Yet, legal proceedings have varied on
the level of verication needed to support the importance and relevance of anecdotal evidence.
In order to address these concerns, the most robust disparity studies will draw on multiple
techniques to obtain anecdotal accounts from individuals that have had actual, veriable
experiences in working with a procurement agency. It is through a wide number of reliable
sources that disparity studies can include instances of discrimination which are representative of
the experiences of multiple minority business owners.
The disparity studies reviewed for this study provided specic, veriable instances of
discrimination which were recorded, cataloged, and analyzed using content analysis. The most
robust studies identied barriers, discussed the harm that the improper conduct inicted on
the businesses in question, and examined the extent to which discriminatory exclusion and
impaired contracting opportunities are systemic rather than isolated or sporadic. Figure ES-2
summarizes the most frequently cited barriers in the disparity studies.
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FIGURE ES-2
MOST FREQUENTLY CITED CONTRACTING BARRIERS FACING MBES
Discrimination inuenced multiple contracting barriers, both from the marketplace, as well as
driven by either a contracting agency or non-MBE prime in the context of subcontracting. The
barriers identied varied from outright prejudicial treatment and instances of exclusion based
on racism, to marketplace barriers erected by systemic discrimination in both the private and
public market (e.g., access to capital). Disparity studies with substantial anecdotal evidence
supporting the presence of discriminatory barriers provide justication for the use of race-
conscious programs in those jurisdictions. In addition, there are multiple non-discriminatory
barriers, such as large project sizes, timely payment, and bid requirements that present
challenges to potential bidders regardless of the race or ethnicity of the owners. However, the
anecdotal evidence indicates that certain systemic discriminatory barriers can inuence the
perception of exclusionary practices with respect to some non-discriminatory barriers.
Arguably the most difcult barrier to address with respect to discrimination is the exclusionary
networks that MBEs encountered in public contracting. On one hand, network exclusion can
arise due to normal business operating procedures, often dictated by the desire to work with
companies that have prior experience, demonstrated work product, and a solid reputation. Yet,
in other instances, discriminatory attitudes of agency personnel and non-MBE primes facilitated
excluding MBEs from informal networks that inuence learning about and obtaining public
contracting opportunities.
Agency
Non-MBE
Prime
MBE
MBE as
Prime
MBE as
Subcontractor
Prime Level
Discriminatory
Barriers
•
Timely bid
notification
•
Explicit
discrimination
(stereotypes,
higher and double
standards)
•
MBE/DBE stigma
Subcontractor Level
Discriminatory
Barriers
•
Timely bid notification
•
Bid shopping
•
Held bid
•
Lack of good faith
effort
•
Only using an MBE if
required
•
Explicit discrimination
(stereotypes, higher
and double
standards)
•
MBE/DBE stigma
Prime Level
Non-Discriminatory
Barriers
•
Large project sizes
•
Bonding/insurance
•
Bid requirements
•
Timely payment
Pervasive Barriers**
•
Access to capital
•
Network access
•
Marketplace
discrimination
**Access
to Capital and Network Access barriers can arise due to both discriminatory and non-discriminatory reasons and also
influence
non-discriminatory barriers such as bonding and insurance
Executive Summary
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December 2016 | Minority Business Development Agency
The review of existing disparity studies yielded several common themes and insights beyond
the characterization of contracting barriers and evidence of discrimination. These included:
• The “needle has not moved” with respect to overcoming disparities. Every study
identied signicant contracting disparities and many supported these ndings with
additional quantitative and anecdotal evidence that supported the need for both race-
neutral and race-conscious remedial efforts. Yet, over time disparities were prevalent
even within the same jurisdiction.
• Disparity studies often reported the same race-neutral remedies (e.g., unbundling large
contracts, improving payment processes, improving data collection) and race-conscious
remedies (e.g., improved goal setting and monitoring) to address contracting disparities,
yet what is missing is the extent to which agencies have actually implemented and
measured the success or failure of these recommendations.
• Race-conscious programs typically helped MBEs when enacted; however the legal
history has illustrated that these programs need to comply with the strict scrutiny
standard and be narrowly tailored.
In addition to common observations, the disparity studies and anecdotal evidence highlighted
common problems and issues with contracting disparities experienced by MBEs. These include:
• Enforcement and accountability of race-conscious programs by contracting agencies.
There is a perception that prime contractors do not engage in good faith efforts to
comply with race-conscious programs and agencies do not monitor or enforce these
efforts.
8
• Resource constraints are a major issue facing contracting agencies. Many suggestions
for program improvements, both race-neutral and race-conscious, require a substantial
monetary investment (both human capital and infrastructure) at the public agency level.
Based on the political and economic environment, some of these recommendations are
prohibitive given lack of resources.
• There is often insufcient analysis and evidence of subcontracting activity at the agency
level. Given that subcontracting is an important and critical component of increasing
MBE participation in public contracting, greater oversight and accountability of
subcontracting behavior coupled with better and more reliable data collection should
be a priority
The disparity study review indicated that both discriminatory and non-discriminatory actions
lead to contracting disparities for MBEs. Additional research is needed to understand what
steps public agencies have taken to address these disparities. Specically, whether agencies
have been effective at implementing the common policy prescriptions most disparity studies
include and to what extent these policies have either succeeded or failed. Beyond this, there
are a number of areas to explore and research with respect to lessening barriers faced by
8
Numerous disparity studies included anecdotal accounts which touted the belief that without a race-conscious program in place,
prime contractors would never use an MBE.
Contracting Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing Disparity Studies
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Minority Business Development Agency | December 2016
MBEs in public contracting. MBEs, advocacy groups and policy makers should explore new
and innovative ways to increase engagement, oversight, enforceability and accountability
within the public contracting process. This requires leveraging data sharing and transparency,
exploring race-neutral means and the efcacy of these means, and also evaluating what race-
conscious methods have been not only defensible, but successful, in alleviating the effects of
discrimination.
Table of Contents
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December 2016 | Minority Business Development Agency
Table of Contents
Foreword ................................................................................................................................................ i
Executive Summary ............................................................................................................................ iii
Table of Contents ................................................................................................................................ xi
List of Figures ..................................................................................................................................... xii
List of Tables ...................................................................................................................................... xiii
Acknowledgements ........................................................................................................................... xv
1. Introduction ...................................................................................................................................1
2. Legal Review .................................................................................................................................5
Seminal Cases – Croson and Adarand ..............................................................................6
Concrete Works of Colorado .............................................................................................8
Western States Paving ........................................................................................................8
Rothe and DynaLantic ........................................................................................................9
3. Disparity Study Basics ...............................................................................................................11
General Overview of Disparity Studies ........................................................................... 12
Critical and Often Contentious Issues ............................................................................21
Importance of Anecdotal Information ............................................................................28
4. Disparities and Marketplace Discrimination Exist ................................................................31
Description of the Set of Disparity Studies ....................................................................31
Observed Disparities in Minority Contracting ...............................................................34
Subcontracting Analysis ................................................................................................... 38
Quantitative Data on Marketplace Discrimination ........................................................40
5. Anecdotal Analysis and Summary ...........................................................................................47
Importance of Anecdotal Evidence in Supporting Race-Based Programs ..................47
Disparity Study Review Findings on Collection Methods .............................................48
Characterizing Barriers Identied in Existing Disparity Studies ....................................52
Networking Barriers ..........................................................................................................55
Process-Based Barriers ..................................................................................................... 57
Discriminatory Attitudes and Perceptions ...................................................................... 63
Barriers Affecting Firm Financial Performance and Ability to Compete ......................67
6. Reserach Findings ......................................................................................................................69
There is a Need for Innovative Policies ...........................................................................71
Appendix A – List of Disparity Studies (Chronological) .............................................................. 75
Appendix B – Glossary ......................................................................................................................83
Contracting Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing Disparity Studies
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List of Figures
Figure ES-1. Disparity Ratio Computation Example .......................................................................... v
Figure ES-2. Most Frequently Cited Contracting Barriers Facing MBEs ...................................... viii
Figure 2-1. Timeline of Key Legal Cases by Decision Date ..............................................................6
Figure 2-2. Key Holdings in Croson and Adarand .............................................................................7
Figure 2-3. Key Holdings in the Rothe and DynaLantic Cases .......................................................10
Figure 3-1. Legal Review and Requirements for Disparity Studies ................................................12
Figure 3-2. Key Components of Procurement Data Analysis .........................................................13
Figure 3-3. Utilization Example using Contract Awards ..................................................................15
Figure 3-4. Methodologies for Calculating Availability and Disparity Indices .............................. 16
Figure 3-5. Disparity Computation Example .................................................................................... 17
Figure 3-6. Discrimination Assessment Analysis Summary .............................................................19
Figure 3-7. Evaluation and Recommendation Foci ..........................................................................21
Figure 3-8. Capacity Sensitivity Example ..........................................................................................24
Figure 4-1. Disparity Ratio Distribution for Minority-Owned Businesses.......................................35
Figure 4-2. Disparity Ratio Observations by Industry and Minority Category ...............................36
Figure 4-3. Regression Analysis Process and Results Example .......................................................43
Figure 5-1. Distribution of Anecdotal Data Collection Mechanisms ..............................................49
Figure 5-2. Barriers Faced by MBEs in Public Contracting .............................................................53
Figure 5-3. Frequency of Barriers Identied by M/WBEs ................................................................55
Figure 5-4. Example of Bid Shopping ...............................................................................................62
List of Figures/List of Tables
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December 2016 | Minority Business Development Agency
List of Tables
Table 4-1 Disparity Ratio Observations by Minority Category and Industry ................................. 37
Table 4-2 Median Disparity Ratios by Minority Category and Industry ......................................... 38
Table 4-3 Subcontracting Subset Analysis ........................................................................................ 40
Table 5-1 Summary of Anecdotal Evidence Collection Methods ................................................... 50
Acknowledgements
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December 2016 | Minority Business Development Agency
Acknowledgements
This research report would not have been possible without the support, guidance and direction
provided by Minority Business Development Agency (MBDA) personnel and stakeholders. As
the scope and direction of the research project shifted to focus on key issues facing minority
business enterprises in public contracting, the MBDA team was helpful in identifying the key
issues it sought to explore and understand as a result of this research effort. The research team
wishes to acknowledge the insight, guidance and direction provided by Bridget Gonzales,
Antavia Grimsley, Josephine Arnold, Efrain Gonzalez, Jr., Albert Shen, and Justin Tanner. In
addition, the research team is grateful to David Beede and Dr. Rob Rubinovitz, from the Ofce
of the Chief Economist at the United States Department of Commerce, for their contributions.
Lastly, the research team would like to thank our peer reviewers, who provided valuable
commentary that helped focus our research ndings as we strived to assist MBDA, stakeholders,
and elected ofcials address key issues in public contracting.
Chapter 1: Introduction
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December 2016 | Minority Business Development Agency
CHAPTER 1:
Introduction
Analysis of public contracting data indicates that disparities exist in contracting activity between
minority and non-minority business enterprises. Specically, the data show that minority
business enterprises (MBEs) typically secure a lower number and dollar amount of contracts in
proportion to the number of MBEs that are available in the marketplace to bid on and perform
contract work. In response, the Federal Government, state agencies, and local municipalities
have enacted a number of afrmative action, or race-conscious,
9
programs designed to
overcome both the perception and reality of discrimination against MBEs. The proliferation of
these programs led to an increase in the number of legal challenges to them. As a result, the
various legal challenges and court decisions provide a foundation for “disparity studies” that
assess and provide the basis for race-conscious programs.
Government agencies at the federal, state, and local level typically commission disparity
studies to examine the extent to which minority and women contractors are underutilized in
public procurement. Well-conducted disparity studies not only present information on actual
contracting disparities experienced by MBEs in a particular industry and geographic region,
but also facilitate an investigation into the extent to which discrimination is a prevalent issue
in the marketplace. In fact, the need for disparity studies often arises out of legal challenges
to existing programs, and the results of such studies can have broad application to a number
of other agency programs. Thus even if an agency is not experiencing litigation, it will be well
informed to ensure its existing or potential program complies with legal precedent.
Given evidence of disparities in existing studies, MBEs, agency ofcials, policy makers,
and advocates have a strong incentive to understand the factors that give rise to observed
contracting disparities. In order to advance the dialogue concerning contracting disparities and
inform the development of new and innovative solutions, the Minority Business Development
Agency (MBDA) requested a comprehensive review of existing data and studies to address
several key research questions:
• What factors create barriers and cause disparities in public contracting for MBEs?
• What information do existing studies provide stakeholders in assisting agencies address
observed disparities?
9
This report uses the terms “afrmative action programs,” “race-based programs,” and “race-conscious programs”
interchangeably, where the terms imply a government initiated program that specically includes racial or ethnic preferences in
alleviating discriminatory behavior against affected racial or ethnic minority business enterprises in public contracting.
Contracting Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing Disparity Studies
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Minority Business Development Agency | December 2016
• What areas warrant further investigation and policy research with respect to contracting
disparities experienced by MBEs?
To address these questions, a comprehensive review of publicly-available disparity studies,
summaries, and reports was conducted. The review of existing disparity studies includes a high-
level inventory of observed disparity ratios coupled with a qualitative review of the anecdotal
evidence presented in each disparity study that provides insight into causal factors for observed
numerical disparities.
Anecdotal evidence offers human experience and context for quantitative evidence such
as disparity calculations and regression analyses. Anecdotal evidence has also proven to
be one of the most important elements in evaluating potential discriminatory behavior and
barriers to minority-owned rms in public contracting. As a result, many disparity studies use
qualitative data to help address the fundamental questions of “why do disparities exist in public
contracting?” and perhaps more importantly, “why do disparities continue to exist in public
contracting despite the presence of many race-based contracting programs?” The collection
and analysis of this qualitative data provides a basis for challenging the status quo of pervasive
contracting disparities by helping advance the discussion with a focus on their key drivers.
This report begins with an overview of several legal challenges to race-conscious remedial
contracting programs. The legal precedent and case law informs the analyses contained in
disparity studies, such that accumulated evidence is either sufcient to justify remedial race-
based action, or alternatively, evaluate other means to address any identied contracting
disparities. Chapter 3 details the basics of disparity studies, guided in part by the legal
challenges and ndings discussed in Chapter 2. While not every disparity study adheres to
the same format or level of detail, each study generally covers a number of critical elements,
including analysis of applicable laws, regulations and ordinances, a description of contracting
data and sources, utilization and availability analyses, computing disparity ratios, exploring
third-party data sources on discrimination, collection and reporting of anecdotal evidence, and
when appropriate, evaluation of existing race-based contracting programs.
Chapter 4 presents a summary of disparity ratios drawn from the selected set of disparity
studies, summaries, and reports, which indicate widespread disparities in public contracting for
the jurisdictions and time periods covered by each study. Identication of potential disparity
studies entailed a thorough and comprehensive search of publicly-available studies posted
on agency, consultant, or other websites. A special focus was on disparity studies published
in the last ten years, to provide more recent insight into the public contracting landscape for
MBEs. As such, it is important to recognize that the selected set of disparity studies, summaries
and reports do not represent the universe of all disparity studies and are not intended to serve
as a nationally representative, statistically signicant sample of all disparity studies conducted.
Rather, the set of disparity studies, summaries and reports represent studies that are publicly-
available and accessible via the internet and this report did not exclude any identied studies,
Chapter 1: Introduction
3
December 2016 | Minority Business Development Agency
summaries or reports. Chapter 4 also summarizes general ndings from quantitative analyses
disparity study authors conducted with respect to analyzing marketplace discrimination.
Chapter 5 details the use of anecdotal evidence in disparity studies to help provide insight into
the different barriers MBEs face in public contracting. The chapter includes an overview of the
major barriers identied by disparity studies, with a particular focus on whether these barriers
are largely the result of discrimination or other factors. Chapter 6 provides conclusions and
recommendations for future research and discussion. The conclusion also includes potential
action items for addressing contracting disparities experienced by MBEs in public contracting.
Lastly, Appendix A includes a list of the publicly-available disparity studies, summaries and
reports identied and reviewed as part of this research project, while Appendix B contains a
glossary of terms that are commonly used in disparity studies.
Chapter 2: Legal Review
5
December 2016 | Minority Business Development Agency
CHAPTER 2:
Legal Review
Legal challenges to race-conscious contracting programs provide insight and guidance on
evaluating the evidence needed to identify and characterize discriminatory behavior in public
contracting. This chapter reviews the general legal framework of disparity studies, focusing on a
review of several key legal challenges to federal, state, or local contracting programs regarding
minority-owned businesses. The purpose of this chapter is not to advocate, condone or
recommend any legal conclusions drawn from the case law. Rather, the intent of this chapter is
to provide information on how legal precedent inuences the analysis of contracting disparities
affecting minority business enterprises at the federal, state, or local level.
10
This includes
investigating how legal precedent and court proceedings:
• Determine the evidentiary tests for assessing existing race-based contracting programs
for disadvantaged, minority, women, or small business enterprises;
• Dene parameters for evaluating potential disparities in contracting;
• Stress the importance of anecdotal evidence to investigate causes of disparities.
Figure 2-1 is a timeline of several key legal decisions that provide insight into these issues.
Although a full legal history includes numerous additional cases, these ten decisions capture
elements of legal challenges and disparity analyses that have broad applicability to assessing
potential discrimination and use of race-conscious programs in public contracting across
multiple industries and jurisdictions.
10
Most disparity studies include a comprehensive legal overview as part of the report, often with a longer and more in-depth
discussion attached as an Appendix to the main report. For a general legal review, see Connecticut Disparity Study: Phase 1, The
Connecticut Academy of Science and Engineering, August 2013. For a substantially more in-depth and contemporaneous review of
legal precedent see 2015-16 State of Indiana Disparity Study, BBC Research & Consulting, March 2016.
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FIGURE 2-1
TIMELINE OF KEY LEGAL CASES BY DECISION DATE
SEMINAL CASES – CROSON AND ADARAND
City of Richmond v. J.A. Croson Co.
11
(Croson) and Adarand Constructors Inc. v. Peña
12
(Adarand) are two seminal legal decisions that established the evidentiary tests necessary to
evaluate local, state, and federal race-conscious contracting programs. Figure 2-2 presents an
overview of key legal holdings in each case. Included in this summary is Adarand VII,
13
which
was the Tenth Circuit Court of Appeals decision following remand of the case.
11
488 US 469 (1989).
12
515 US 200 (1995).
13
Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000)
1990
1995 2000
2005
2010 2015
City of Richmond v. J.A.
Croson Co., 488 U.S. 469
(1989)
Adarand Constructors, Inc. v.
Pena, 515 U.S. 200 (1995)
Adarand Constructors, Inc. v.
Slater, 228 F.3d 1147 (10
th
Cir.
2000)
Dynalantic Corp. v. U.S.
Department of Defense, 885 F.
Supp. 2d 237 (D.D.C. 2012)
RotheDevelopment Corp. v. U.S.
Department of Defense, 545 F. 3d 1023
(Fed. Cir. 2008)
RotheDevelopment, Inc. v. U.S.
Department of Defense, Appeal
Ongoing (2016)
Concrete Works of Colorado,
Inc. v. City & County of Denver,
36 F.3d 1513 (10
th
Cir. 1994)
Concrete Works of Colorado, Inc. v. City
and County of Denver, 321 F. 3d 950 (10
th
Cir. 2003)
Memorandum Opinion, United States
District Court for the District of
Columbia, June 5, 2015, Rothe
Development, Inc. v. Department of
Defense, No. 12-CV-744 (filed D.D.C.
May 9, 2012)
Western States Paving Co. v.
Washington State DOT, 407 F.3d
983 (9th Cir. 2005)
Chapter 2: Legal Review
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December 2016 | Minority Business Development Agency
FIGURE 2-2
KEY HOLDINGS IN CROSON AND ADARAND
Croson continues to impact considerations of race-conscious contracting programs. First,
Croson established that a local government could not rely on society-wide discrimination as
the basis for a race-based program but, instead, was required to identify discrimination within
the local jurisdiction. Second, the case highlighted the need to present evidence grounded in
statistical analysis to justify the presence of discriminatory behavior. This includes evaluation
of ready, willing and able contractors when determining disparities. This evaluation is the
backbone of determining “available” businesses to use in computing disparity ratios, such that
the focus of any contracting program is narrowly tailored to affected businesses.
In contrast, the City of Richmond examined population gures to determine its race-conscious
contracting goal, without considering whether the goal reected the demographic make-up
of contractors that could actually perform the contracted work. An important outcome was
the Court declaration regarding the utility of anecdotal evidence as supporting and causal
information related to the quantitative analyses. The U.S. Supreme Court noted that anecdotal
evidence of discriminatory acts, when used in conjunction with statistical evidence, lends
support to broader remedial relief.
Adarand extended the strict scrutiny standard to federal programs, including the federal
DBE program related to use of U.S. Department of Transportation (DOT) funds by states and
municipalities. Adarand VII provided distinct areas for disparity consultants to investigate
and compile results that support the institution of race-conscious programs. Most of the
Key Holdings in Croson:
•Strict scrutiny is the appropriate standard of judicial review, such that a race conscious
program must be based on a compelling governmental interest in remedying past
discrimination or its present effects and be narrowly tailored to achieve its objectives
•Ruled in Croson’s favor : the evidence did not pass strict scrutiny because the program
was applied regardless of whether the individual MBE had suffered discrimination.
•Must be evidence of race-based discrimination for each individual group that is
granted racial, ethnic or gender preferences
• Programs must focus on ready, willing and able contractors in determining disparities
•Anecdotal evidence of discrimination, in conjunction with statistical evidence,
supports the local government’s use of broader remedial relief (e.g., race-based)
Key Holdings in Adarand and Adarand VII
• Adarand extended application of strict scrutiny standard to federal programs
• Adarand VII found that Congress had a compelling interest, key sources of evidence were:
•Analysis of disparities in earnings, commercial loan denial rates, and declining
participation of MBEs after removal of race-conscious programs
•Post-Adarand, Congress revised the federal disadvantaged business enterprise (DBE)
program to include key Adarand findings, including language on ready, willing and able
contractor data to determine disparities.
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disparity studies reviewed in this research contained both quantitative and qualitative analyses
investigating the issues explicitly discussed in Adarand VII.
CONCRETE WORKS OF COLORADO
Concrete Works of Colorado, Inc. v. City & County of Denver is a notable case involving a
challenge to municipality-enforced minority contracting programs.
14
This case is important
for two reasons: rst, it set the state and local standard for how courts evaluate compelling
interest with respect to race-preference programs. An inference of discrimination, not proof,
was acceptable for a government entity to justify a compelling interest in remediating
discrimination. Also, it placed the ultimate burden of proving a program’s unconstitutionality
on the plaintiff. Second, this was the rst local minority business program upheld after the
merits of a full trial.
15
Third, the case noted that anecdotal testimony revealed behavior that
was not merely “sophomoric or insensitive, but which resulted in real economic or physical
harm.”
16
The City and County of Denver provided credible witnesses who testied to witnessing
discriminatory treatment motivated by race or gender.
17
WESTERN STATES PAVING
Adarand challenged the implementation of the federal DBE program, as enacted by
Title 49 Code of Federal Regulations (CFR) Part 26. Since the initial constitutional challenge
led by Adarand, there have been a number of legal challenges with respect to State DOT
implementation of the federal DBE program. Although this report does not include
a comprehensive review of every challenge to DBE programs, it is important to recognize
that the legal history of these cases not only provides guidance to state DOTs implementing
programs to meet the concept of narrowly tailored, but also provides guidance with respect to
the types of evidence necessary to establish race-based programs and how to narrowly tailor
those programs.
14
Concrete Works of Colorado, Inc. v. City & County of Denver Colorado, 36 F. 3d 1513 (10
th
Cir. 1994) and Concrete Works of
Colorado, Inc. v. City and County of Denver, 321 F. 3d 950 (10
th
Cir. 2003) (Concrete Works IV).
15
Connecticut State Disparity Study, conducted by the Connecticut Academy of Science and Engineering, Phase I, 2013. After
a lengthy legal history, the Tenth Circuit Court of Appeals ruled in favor of Denver, noting that Denver did not hold the burden of
proving the existence of discrimination, rather it only had to demonstrate strong evidence of discrimination in the market to justify
the race- and gender-based remedial contracting programs (i.e., goals).
16
Concrete Works of Colorado, Inc. v. City and County of Denver, 321 F. 3d 950 (10
th
Cir. 2003).
17
The Court noted: “After considering Denver’s anecdotal evidence, the district court found that the evidence “shows that race,
ethnicity and gender affect the construction industry and those who work in it” and that the egregious mistreatment of minority and
women employees “had direct nancial consequences” on construction rms. Id. at 989, quoting Concrete Works III, 86 F. Supp.2d
at 1074, 1073. Based on the district court’s ndings regarding Denver’s anecdotal evidence and its review of the record, the court
concluded that the anecdotal evidence provided persuasive, unrebutted support for Denver’s initial burden. Id. at 989-90, citing Int’l
Bhd. of Teamsters v. United States, 431 U.S. 324, 339 (1977) (concluding that anecdotal evidence presented in a pattern or practice
discrimination case was persuasive because it “brought the cold [statistics] convincingly to life”).” (emphasis added)
Chapter 2: Legal Review
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December 2016 | Minority Business Development Agency
While ongoing litigation pertaining to state DOT implementation of federal DBE programs
exists as of the date of this report, the constitutionality of the federal DBE program has been
upheld in past proceedings. However, in Western States Paving Co. v. Washington State DOT
(Western States Paving),
18
the Ninth Circuit Court of Appeals found that although the State
of Washington DOT DBE program was constitutionally sound (i.e., it met the strict scrutiny on
its face), the program was not narrowly tailored. The main issue was the extent to which the
State of Washington considered the capacity of ready, willing and able DBE contractors, where
capacity represents a rm-level measure of whether a particular DBE contractor has the ability
to full the requirements of a particular contract (e.g., does it have the capacity to perform the
contracted work such that it can be considered ready, willing and able to bid on the project).
The Ninth Circuit found that the state had not adequately supported inclusion of capacity
considerations in determining the availability of DBE rms.
19
Further the Ninth Circuit determined that even where evidence of discrimination exists in a
recipient’s market, a narrowly tailored program can only apply to those minority groups who
have actually suffered discrimination. Thus, under a race- or ethnicity-conscious program, for
each of the minority groups to be included in any race- or ethnicity-conscious elements in
a recipient’s implementation of the federal DBE Program, there must be evidence that the
minority group suffered discrimination within the recipient’s marketplace.
20
ROTHE AND DYNALANTIC
Figure 2-1 highlighted a series of federal challenges to race-conscious contracting programs
separate from the Federal DBE DOT challenges. Figure 2-3 summarizes key ndings in legal
decisions related to Rothe Development Corporation and DynaLantic Corporation. The initial
Rothe case
21
involved a challenge to the Department of Defense’s implementation of the Small
Disadvantaged Businesses (SDB) program, while the DynaLantic
22
and second Rothe case
23
involved a challenge to the use of the 8(a) set-aside program.
18
Western States Paving Co. v. Washington State DOT, 407 F.3d 983 (9th Cir. 2005), cert. denied, 546 U.S. 1170 (2006)
19
Chapter 3 covers the concept of availability in greater detail. However, the methods of determining what constitutes an
“available” business for the purposes of analyzing disparities are often a signicant point of contention among practitioners. In
Croson, the City of Richmond failed to analyze specic MBEs, focusing only on the population of minorities in the surrounding
geographic area. As the Supreme Court noted, the appropriate standard is to look at the specic businesses that can compete for
and execute contracts within the particular industry and location. These are the available businesses that should be considered in
the disparity analysis.
20
As a result of the 2005 Western States Paving decision, numerous states implementing the federal DBE program using race-
conscious goals suspended existing programs to re-evaluate whether the programs were in compliance with the “narrowly tailored”
requirements.
21
Rothe Development Corp. v. U.S. Department of Defense, et al., 545 F.3d 1023 (Fed. Cir. 2008)
22
DynaLantic Corp. v. U.S. Department of Defense, 885 F.Supp. 2d 237 (D.D.C. 2012).
23
Memorandum Opinion, United States District Court for the District of Columbia, June 5, 2015, Rothe Development Corp.
v. Department of Defense, No. 12-CV-744 (led D.D.C. May 9, 2012).
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FIGURE 2-3
KEY HOLDINGS IN THE ROTHE AND DYNALANTIC CASES
The rst Rothe case dealt specically with an issue regarding “relative capacity” which, similar
to Western States Paving, involves the computation of rms that are ready, willing and able to
bid and perform on particular contracts. Relative capacity arguments center around whether
a particular rm can effectively bid on and handle multiple projects, or if the rm happened to
win a project whether it could have the resources to bid on and perform the work required on
subsequent contracting opportunities (i.e., would winning one contract stretch rm resources
too thin to perform other contracts at the same time).
Key Holdings in Rothe (2008 Federal Circuit Court of Appeals):
•Despite disparity study results offered by the Department of Defense (DoD), there was no
record regarding the studies’ methodology before the federal circuit.
•Court rejected compelling interest argument because studies failed to account for relative
capacity of firms.
•Court found that Congress did not have a strong basis in evidence before it to conclude
that the Department of Defense (DoD) was a passive participant in racial discrimination in
relevant markets across the country.
Key Holdings in DynaLantic
•DynaLantic argued that the government did not provide sufficient evidence of prior race-
based discrimination in contracting in the relevant market.
•The Court agreed, holding that while the 8(a) program was constitutional on its face, it was
unconstitutional as implemented in DynaLantic’s situation, as the government did not
provide sufficient evidence that the discrimination in the relevant market negatively impacts
contractors in that market.
Key Holdings in Rothe (District Court of District of Columbia, 2015)
•Rothe brought a facial challenge to the constitutionality of the 8(a) program.
•In the June 2015 ruling, the Court upheld the constitutionality of the program on its face.
•Rothe appealed, with hearings in March 2016 and a decision due later in 2016.
Chapter 3: Disparity Study Basics
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December 2016 | Minority Business Development Agency
CHAPTER 3
Disparity Study Basics
Conducting a disparity study is a comprehensive undertaking designed to analyze and inform
readers on the specic issues relevant to evaluating contracting behavior within a particular
geographic and industry area. In general, the primary purpose for conducting a disparity
study is to assess discrimination in public contracting when evaluating race- and gender-based
government actions designed to alleviate discriminatory behavior. As a result, the typical
disparity study covers multiple areas addressing the legal framework, applicable procurement
laws and regulations, denition of markets, identication of relevant businesses, measuring the
activity levels of the different businesses providing goods or services, utilizing independent
third-party data analysis to explore discriminatory behavior, incorporating anecdotal evidence,
and opining on the current state of existing race-neutral and race-conscious programs.
The central feature of a disparity study is a disparity analysis that determines the levels at which
minority, women, or disadvantaged business enterprises are utilized on public contracts. These
contracts can be at the federal, state, or local level and may encompass multiple industries.
Assuming a fair and equitable system of contracting, one would expect that the proportion
of contracts and contract dollar awards to minority, women or disadvantaged business
enterprises should be relatively close to the corresponding proportion of minority, women, or
disadvantaged business enterprises available to perform that work in the relevant market area.
24
In this respect, disparity studies seek to test whether observed differences are signicant, such
that inferences of discrimination support the observed disparities.
This section of the report focuses on explaining key components of the typical disparity study,
including denitions of key terms, calculations, and methodologies.
25
A typical disparity study
has the following components broken into ve general areas:
1. Foundation/Background (legal analysis, applicable laws, regulations, rules)
2. Procurement Data and Analysis (market denition and utilization analysis)
3. Availability/Disparity Computations (availability assessment and disparity
index computation)
4. Discrimination Assessment (statistical analyses, anecdotal evidence)
5. Evaluation & Recommendations (status of current programs, future goals and strategies)
24
Disparity Study: Metropolitan St. Louis Sewer District, Mason Tillman Associates, December 2012. See the Introduction and
p. 8-1 (as applied to subcontracts).
25
In addition, Appendix B contains a glossary of terms common to many disparity studies.
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The information presented in this chapter is drawn from the review of disparity studies, reports,
and summaries, and represents the most frequently observed study components. As a result,
each disparity study, or each consultant conducting a disparity study, may vary in approach to
these general components as necessitated by the specics of each investigation. This chapter
begins with a brief overview of key study report sections, before discussing some of the more
difcult and contentious topics in greater detail.
GENERAL OVERVIEW OF DISPARITY STUDIES
Foundation/Background
Two elements generally comprise the foundation and background sections of disparity reports.
The rst is a synopsis of relevant case law and legal precedent that provides the standards by
which consultants conduct disparity studies. The second is an understanding and overview
of rules, regulations, and ordinances that cover existing procurement procedures or enforce
existing contracting programs designed to alleviate or remediate contracting disparities.
The most cited example is requirements associated with the federal disadvantaged business
enterprise (DBE) program for federally-funded projects. Figure 3-1 outlines key components
of the legal review and applicable laws, regulations, and rules included in disparity studies.
FIGURE 3-1
LEGAL REVIEW AND REQUIREMENTS FOR DISPARITY STUDIES
Disparity studies typically include a legal review, as discussed in Chapter 2, but with greater
detail and application to the relevant jurisdiction and program type. As shown on the right
hand side of Figure 3-1, disparity studies also typically incorporate an overview of the relevant
regulations, rules, and ordinances surrounding agency contracting. For state DOTs using
federal funds for projects, this entails understanding the legislation in the federal DBE program,
including the considerations of legislation such as the Transportation Equity Act for the
Legal Analysis and Summary
•Seminal cases ( Croson)
•Strict scrutiny
•Compelling interest
•Narrowly tailored
•Jurisdictional cases
•Circuit courts (appellate rulings)
•District court
•State/county courts
Applicable laws, regulations, rules
•Existing regulations (e.g., Local
ordinances governing minority
programs)
• Procurement rules for particularly
agency
•Details/rules about M/WBE or DBE
programs in place
•Federal DOT DBE rules
•Per 49 CFR 26
•TEA-21 considerations
Foundation/Background:
Chapter 3: Disparity Study Basics
13
December 2016 | Minority Business Development Agency
21
st
Century (TEA-21). In contrast, disparity studies involving local or municipal agencies focus
on the general procurement rules in place for the particular agency, municipality, or state in
which the agency resides.
Procurement Data and Analysis
The next element in most disparity studies is a review of the underlying procurement data used
in conducting a disparity study. By denition, adequate procurement data (i.e., who, when,
where, what, and how much of contracts) is a prerequisite to determining whether contracting
disparities exist for minority business enterprises. Figure 3-2 illustrates the key components of
procurement data analysis.
FIGURE 3-2
KEY COMPONENTS OF PROCUREMENT DATA ANALYSIS
The left hand side of Figure 3-2 presents the concept of market denition, where a market is
dened along both geographic and product dimensions. Market denition is an economic
concept that looks to substitutability and is intended to determine who is competing for public
contracts along geographic and product lines. Almost every study had an explicit denition of
both geographic and product markets, as these are required in order to determine the extent to
which disparities exist among competitive market participants.
With respect to the geographic market denition, some studies dene the market based on
vendor locations that account for a certain percentage (e.g., 75 percent) of dollar expenditures
Figure 3-2
Key Components of Procurement Data Analysis
Market Definition
• Product
•Geographic
•Usually driven by analysis of
procurement records
•Where are contractors located
receiving awards?
•In what industries (e.g., NAICS)
are these awards?
•Typically some threshold measure
applied to dollars to define product
and geographic markets
•Typically state, MSA, county, city are
standard starting points
Utilization Analysis
•Identify all relevant procurement
records to:
•Determine award amounts
•Identify and classify recipients
•Typically look at both prime and
subcontracts
•Often quality issues with data,
particularly on subcontracts
•Goal is to compute the percentage of
contracts and/or dollars going to each
group in a specific geographic and
product market
•Example, African American
firms received 3.8% of total
construction prime dollars
awarded in 2009 within a
particular jurisdiction
Procurement Data -Based Analysis:
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in the study period. Other studies employed a less rigid threshold, but still examined vendor
locations where the “majority” or “most” contract dollars were awarded. The most common
units of geographic boundaries employed were state, county, city, or metropolitan statistical
area (MSA),
26
where study authors examined locations of vendors competing for and winning
procurement awards for the particular agency.
Existing disparity studies dene product markets in a similar fashion, with a focus on assessing
the economic parameters that indicate which rms compete for procurement actions given
particular contract requirements. For example, a construction rm and a janitorial supplies
rm may not compete on similar contract proposals given the difference in the industry in
which each company operates. In determining contract disparities, it is erroneous to assume
that these two rms are both “ready, willing and able” to compete and execute a large scale
construction project. In fact, only the rst rm is available within the dened product market
of construction. Study authors are especially focused on identifying competing rms within
particular product or industry categories such that any observed contracting disparities are
narrowed to the scope of potentially affected rms within the dened product market. In
most instances, the studies dened product markets at a very high level of aggregation, e.g.,
“Construction” or “Goods and Services.” In other instances, studies dened markets more
narrowly, grouping rms by North American Industry Classication System (NAICS) codes.
The right hand side of Figure 3-2 focuses on the extent to which minority-owned rms are
utilized in contracting by a particular government agency or agencies. Utilization is a core
disparity study concept and represents the share of prime and/or subcontract dollars that an
agency awarded to a particular type of business enterprise during a particular time period. It
is typically expressed as a percentage relative to the total amount awarded to all contractors
in the same time period. Calculating utilization follows dening applicable geographic and
product markets. Figure 3-3 illustrates a simple utilization calculation for hypothetical minority
business enterprises (MBEs) operating in a particular market.
26
MSAs are dened by the Ofce of Management and Budget (OMB) and are used by multiple agencies to delineate geographic
areas based on groupings of population data.
Chapter 3: Disparity Study Basics
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December 2016 | Minority Business Development Agency
FIGURE 3-3
UTILIZATION EXAMPLE USING CONTRACT AWARDS
Underlying the utilization computation are several key inputs. First, the process requires
identifying all relevant procurement records to determine award amounts and identify and
classify recipients by ownership type. Almost always, disparity study consultants are limited by
the quality of the procurement data collected and maintained by the government agency. In
some cases, data are incomplete, missing or simply not captured. A common example is that
a number of municipalities fail to capture subcontractor data in their procurement records.
Nevertheless, disparity studies typically attempt to examine both prime and subcontractor
data. Second, the process leverages the denition of the geographic and product markets to
determine the utilization within these markets.
Availability and Disparity Calculations
The market denition and utilization calculations discussed above only tell part of the
contracting disparity story. In order to measure actual contracting disparities, studies compute
the total number of businesses able to perform (or “available”) contract work within the dened
market areas. The denition of an “available” business is a critical element of disparity studies,
and as discussed in more detail below, one of the most contentious areas among consultants
and practitioners. Figure 3-4 highlights some of the different methods that have been used
over time to compute “available” businesses, while also outlining the disparity
index computation.
MBE
$100
Non-MBE
$500
Contracts within a Relevant:
•Geographic Market
•Product Market
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FIGURE 3-4
METHODOLOGIES FOR CALCULATING AVAILABILITY AND
DISPARITY INDICES
After determining the number of available businesses, disparity studies typically include
disparity indices for each business type (e.g., MBE, WBE or DBE) within each product and
geographic market. In most cases, existing disparity studies also compute these disparity
indices over multiple time periods and for individual racial and ethnic groups (e.g., African
American, Hispanic-American, etc.). Formulaically, the disparity index represents the utilization
divided by the availability. Some consultants multiply the resulting index by 100 as opposed
to expressing the result as a fraction. Figure 3-5 illustrates a simple hypothetical calculation of
a disparity index for African American construction rms operating in a particular geographic
market in one year.
Availability Assessment
•Measuring the number of ready,
willing and able firms by group within
market areas
•Numerous sources/methods over the
years
•City of Richmond’s erroneous
“population measure”
•Use of Census data on number
of businesses
•Use of bidder lists
•Use of vendor, government or
trade association lists
•Use of third-party data (e.g.,
D&B)
•Custom census approaches
•Often one of the most contentious
areas
•Also subject to arguments regarding
“capacity” of firms identified as ready,
willing and able
Disparity Index Computation
•Compute disparity indices for each
group within each product and
geographic market
•Determined by dividing utilization by
availability
•Often examined in “expected
dollar” terms
•Typically a rule of thumb of 0.80
is applied, e.g., a disparity
index of less than 0.80 (or 80 if
on a 100-based scale) indicates
a substantial disparity
•Importance of statistical significance
(ruling out “chance” as a predictor of
disparity)
Availability/Disparity Computations:
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December 2016 | Minority Business Development Agency
FIGURE 3-5
DISPARITY COMPUTATION EXAMPLE
In this simplied hypothetical example, the disparity index of 0.67 indicates that a disparity
between African American construction rms and other rms exists. As a general rule of thumb,
a disparity of less than 0.80 (or 80 if expressed on a scale that multiplies the disparity index
by 100) indicates a substantial disparity.
27
27
See City and County of Denver Minority/Women Owned/Disadvantaged Business Enterprise Disparity Study MGT of America,
Inc., July 29, 2013, at p. 5-5: “Since there is no standardized measurement to evaluate the levels of underutilization or overutilization
within a procurement context, MGT has appropriated the Equal Employment Opportunity Commission’s (EEOC) “80 percent rule”
in Uniform Guidelines on Employee Selection Procedures. In the context of employment discrimination, an employment disparity
ratio below 80 indicates a “substantial disparity” in employment. The Supreme Court has accepted the use of the 80 percent rule in
Connecticut v. Teal (Teal), 457 U.S. 440 (1982), and in Teal and other afrmative action cases, the terms “adverse impact,” “disparate
impact,” and “discriminatory impact” are used interchangeably to characterize values of 80 and below. Thus, a disparity index below
80.00 indicates a substantial level of disparity.”
AfricanAmerican
Contractor
Non-African American
Contractors
Award = $100
Award = $300
AfricanAmerican
Utilization = 25%
Utilization Calculation
African American
Contractors
Non-African American
Contractors
African American Availability
Availability Calculation
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The hypothetical example is a basic example that highlights some, but not all of the
considerations inherent in availability and disparity index computations. Additional elements
include whether to weight the calculations by contract values, or alternatively include limits on
the specic contracts considered in determining utilization and availability.
28
Study authors also
focus on testing the statistical signicance of the observed disparity. At the most rudimentary
level, statistical signicance is an outcome or result that is unlikely to have occurred as the result
of random chance alone.
29
The greater the level of statistical signicance, the less likely the
result occurred due to random chance. Study authors typically report statistical signicance
using p-values, which provide a numerical probability that an outcome or result is due purely
to chance.
30
Many studies that include statistical signicance will “test” whether the disparities
are signicant at a particular probability level or levels (e.g., at the 10 percent, 5 percent and
1 percent levels). Disparities that are signicant at the 1 percent level have greater statistical
signicance than those that are only signicant at the 10 percent level.
Discrimination Assessment
In the prior section, the hypothetical example yielded a disparity ratio of 0.67 for African
American rms in a relevant market for a particular period of time. While many disparity studies
test whether this is a statistically signicant disparity (i.e., not necessarily by “chance”), support
for remedial relief is also apparent with analysis of both economy-wide disparities and collection
of anecdotal evidence. The vast majority of the disparity studies reviewed contained regression
analysis
31
of public economic and employment data to demonstrate marketplace disparities
arising from discrimination, as well as detailed collection of anecdotal evidence that supported
the quantitative results. Figure 3-6 shows the key inputs for these two elements typically found
in disparity studies.
28
An example is only analyzing contracts in relevant markets that are less than a certain dollar amount.
29
Wainwright, Jon and Colette Holt. NCHRP Report 644: Guidelines for Conducting a Disparity and Availability Study for the
Federal DBE Program. Transportation Research Board, Washington, D.C. 2010, p. 98.
30
Ibid. For example, a p-value of 0.10 or 10 percent indicates that the chance a given statistical difference is due purely to
chance is 1 in 10.
31
Regression analysis is a statistical approach to measuring the relationships among variables.
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FIGURE 3-6
DISCRIMINATION ASSESSMENT ANALYSIS SUMMARY
Disparity studies that explore private sector or marketplace disparities typically include data
analysis driven by legal precedent and existing regulations. A review of existing disparity
studies indicates evidence of marketplace discrimination by relying on:
• Regression analysis comparing business formation rates between MBEs, WBEs and
non-M/WBEs in the relevant product and geographic markets;
• Regression analysis comparing the earnings of owners of MBEs and WBEs compared
to non-M/WBEs in the relevant product and geographic markets;
• Regression analysis comparing self-employment rates of MBEs and WBEs compared
to non-M/WBEs in the relevant product and geographic markets;
• Regression analysis related to access to capital barriers, such as commercial loan denial
rates for MBEs and WBEs compared to non-M/WBEs in the relevant product and
geographic markets; and
• Analysis of market share data between MBEs, WBEs and non-M/WBEs in the relevant
product and geographic markets.
32
As shown in Figure 3-6, qualitative data analysis incorporates rst-hand experiences supporting
the presence of discrimination, while also providing information on causal factors. Disparity
studies typically gather anecdotal evidence via interviews, focus groups, public hearings, and
written testimony. The evolution of disparity studies incorporates a shift towards including
more robust qualitative data to not only support quantitative ndings, but also to provide
insight into the causes of discrimination in public contracting. Over time, the collection of
32
This is not meant to be an exhaustive list, and, not all disparity studies included all of these analyses when examining economy-
wide discrimination.
Regression Analysis
•Analysis of private sector and potential
discriminatory behavior
•Typically look at business formation,
owner earnings, self-employment, access
to capital and credit
•Data sources include Census (Survey of
Business Owners, American Community
Survey), National Survey of Small
Business Finances and local data
•Others have looked at macroeconomic
trends, such as unemployment and
homeownership.
Anecdotal Evidence
•Seeking first hand experiences
•Identifies causal factors of disparities
•Insufficient as a stand-alone analysis
in justifying race-based remediation,
but very powerful when used with
statistical analysis
•Typically drawn from interviews,
focus groups, public hearings and
written testimony
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anecdotal evidence has become a critical element of well-dened and robust disparity studies.
However, it is important to note that anecdotal evidence is insufcient as a stand-alone analysis
in justifying race-based remediation programs, but valuable when used in conjunction with
statistical analysis.
High quality disparity studies incorporate anecdotal evidence sourced from multiple techniques
that is sufcient to withstand the strict scrutiny standard. In Croson, the Court dened the value
of anecdotal evidence, indicating that anecdotal evidence is particularly valuable when coupled
with robust statistical proof of disparities. As such, anecdotal evidence serves as an important
causal link for assessing contracting disparities observed via disparity ratios and discrimination
inferred from market-wide regression analysis. In fact, leading experts recognize that anecdotal
evidence is “essential if a government is to defend a MBE program successfully.”
33
Anecdotal
evidence is a necessary step for agencies that wish to remedy contracting disparities because
it provides context for disparity ratios and can explore outcomes related to discriminatory and
non-discriminatory behavior. This is accomplished by drawing anecdotal evidence from a broad
composition of stakeholders, including both minorities and non-minorities. Relying on a control
group of non-minority rms in the anecdotal data collection effort provides a complete picture
and reduces the potential for anecdotal evidence to be dismissed as “one-sided” or solely
based on the perceptions of the disaffected group. The most robust and reliable disparity
studies will implement this best practice by providing as complete an anecdotal analysis
as feasible.
Critics of the validity of anecdotal evidence argue that the accounts may not be sufciently
veried and that instead of detailing actual accounts of discrimination, the evidence may
only present perceptions of discrimination.
34
Legal proceedings have varied on the level of
verication needed to support the importance and relevance of anecdotal evidence. In one
proceeding, the Court rejected the need for widespread verication of anecdotal accounts
noting that anecdotal evidence is, at its core, “a witness’ narrative of an incident told from
the witness’ perspective and including the witness’ perceptions.”
35
Alternatively, a different
district court ruling found that “without corroboration [of anecdotal accounts], the Court
cannot distinguish between allegations that in fact represent an objective assessment of the
situation, and those that are fraught with heartfelt, but erroneous, interpretations of events and
circumstances.”
36
As a result of the potential pitfalls in failing to capture objective accounts of
contracting barriers and discrimination, disparity study best practices dictate that consultants
make every effort to use multiple data collection techniques, incorporating opinions from a
variety of contractors in the industry and geographic market being studied, and seek to nd
veriable anecdotal accounts. This reduces the reliance on single accounts, and instead builds
33
Hanson, Jeffrey. Hanging by Yarns: Deciencies in Anecdotal Evidence Threaten the Survival of Race-Based Preference
Programs for Public Contracting. Cornell Law Review 88:1433, 1447-48 (2002).
34
936 F. Supp. At 1373.
35
Rowe, 615 F.3d at 249.
36
943 F. Supp. 1546 (S.D. Fla 1996).
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a body of evidence demonstrating causal barriers and discriminatory actions that result in
minority underrepresentation in public contracting. Evidence based on multiple accounts that
corroborates statistical analysis including regressions and ratios presents the strongest causal
basis for identifying barriers and discrimination within the context of a disparity study.
Evaluation and Recommendations
Figure 3-7 depicts several key elements typically detailed in the evaluation and
recommendation sections of disparity studies.
FIGURE 3-7
EVALUATION AND RECOMMENDATION FOCI
The extent to which a disparity study includes evaluation and recommendations varies based
on the purpose of the report. Studies conducted for litigation purposes often provide an
evaluation of a program limited to whether the program is necessary in light of observed
disparities, but exclude recommendations. In contrast, a disparity study conducted for federal
DBE program purposes (e.g., by a state DOT) typically includes a comparison of results to
existing or prior contracting goals, as well as recommendations for goals in the next period
of performance. Disparity studies for municipalities may focus extensively on program
evaluation and recommendations for how agencies can improve upon program performance
in procurement data collection, contracting process and procedures, resource allocation, and
policy actions related to race-neutral or race-based contracting programs.
CRITICAL AND OFTEN CONTENTIOUS ISSUES
This section explores issues that involve the interpretation of disparity study results and which
can lead to disagreement among consultants conducting disparity studies or testifying to
disparity issues in legal proceedings. The following discussion represents insights taken directly
from a review of the legal precedent and methodologies employed by various consultants in the
disparity studies reviewed for this report.
Existing Program Status
•Assessment of effectiveness of
program
•Issues with prime versus
subcontracts
•What race-neutral means are in
place?
•Where is program “failing?”
Recommendations
•Summarize ways to improve existing
programs serving MBEs and DBEs
•Several consistent themes
throughout
•Unbundling, lowering bonding,
mentorship and training
•Needs to be a push for new
innovative measures
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Dening Availability
Dening availability is an area of potential disagreement among consultants and experts in
performing a disparity study or providing expert opinions in a legal challenge. Specically,
there are different methods and interpretations of how to determine whether a particular rm
(regardless of whether it is an MBE or non-MBE) is “available” to bid on a contract and actually
perform the work required on a particular contract. The legal precedent refers to “ready,
willing and able” in measuring the availability of rms to use in measuring disparities. This
characterization entails an analysis that goes beyond assuming that every rm in a particular
relevant market should be included in the availability determination. In contrast, the term
“ready, willing and able” ideally necessitates a comprehensive analysis at both the rm and
contract level.
The review of existing disparity studies and legal precedent yielded numerous methods that
consultants and experts use to dene availability and compute the number of available rms
in relevant markets. Commonly cited methods include:
• Vendor lists;
• Bidder lists (i.e., a subset of vendors);
• Census data (either population or business count data); and
• Custom census.
The vendor list approach entails identifying available businesses from lists of vendors derived
from multiple sources including government procurement registration lists, qualied bidder lists,
government certication lists, business or trade association membership lists, and individual
consultant outreach (e.g., consultant-generated list of businesses). Bidder lists represent a
subset of vendor lists, limited to the rms that actually bid on particular projects for the agency
or agencies subject to the disparity analysis. Census-based approaches to availability include
using publicly-available population and rm counts, but these typically lack any rm-specic
characteristics. Lastly, a number of consultants use a “custom census” approach to develop
results that are representative of the jurisdiction and markets under review.
Legal challenges to race-based contracting programs provide insight into court-preferred
methodologies. In general, the use of bidder lists as the dening measure of available rms is
not favorable in the courts or among experts. The main argument is that bidder lists improperly
exclude ready, willing, and able rms that are not on the bidder list, but should be when
considering available rms. As one consultant states:
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“Some commentators… have advocated that the appropriate way to estimate
availability is through the use of bidder lists. In my view this is a singularly
inappropriate thing to do; using a bidder list assumes away the existence of
discrimination. It is perfectly possible that discrimination could have infected all
aspects of a rms work environment including being able to bid.”
37
In contrast, custom census approaches address many of the shortcomings of incomplete data
sets such as bidder lists or Census data. Several leading consultancies use this approach,
adhering to a general framework described by Wainwright and Holt:
The custom census approach employs a seven-step analysis that (1) creates a database
of representative [agency] projects, (2) identies the appropriate geographic market
for the [agency’s] contracting activity, (3) identies the appropriate product market for
the [agency’s] contracting activity, (4) counts all businesses in those relevant markets,
(5) identies listed minority-owned and women-owned businesses in the relevant
markets, (6) veries the ownership status of listed minority-owned and women-owned
businesses, and (7) veries the ownership status of all other rms. This method
results in an overall … availability number that is a dollar-weighted average of all the
underlying industry availability numbers, with larger weights applied to industries with
relatively more spending and lower weights applied to industries with relatively less
spending. The availability gure can also be subdivided by race, ethnicity, and gender
group, as well as by highway district, where appropriate.
38
The custom census approach requires considerable time and resources. In executing the last
steps, consultants typically conduct a comprehensive review of existing businesses, including
outreach to verify rm-specic characteristics.
Capacity
As discussed in Chapter 2, capacity is a rm-level measure of whether a particular contractor
has the ability to satisfy the requirements of a particular contract (e.g., does it have the capacity
to perform the contracted work such that it can be considered ready, willing and able to bid
on the project). Capacity is a key issue in considering availability and one that experts use in
advocating for eliminating afrmative action programs. Capacity-based arguments involve
the perception that smaller rms do not have the capacity to handle larger contracts, or
alternatively, are constrained by their ability to handle multiple procurement actions at the same
time. The implication is that when computing availability, it is erroneous to include a rm that
is ready, willing and able if there is the belief that rm does not have the capacity to be “able”
to execute the contract, even if it were “ready and willing.” Figure 3-8 demonstrates how the
37
Report on the City of Chicago’s MWBE Program, David G. Blanchower, June 10, 2009, p. 82.
38
Wainwright, Jon and Colette Holt. NCHRP Report 644: Guidelines for Conducting a Disparity and Availability Study for the
Federal DBE Program. Transportation Research Board, Washington, D.C. 2010, p. 30.
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disparity study computation changes based on the presumption of capacity constraints resulting
in a reduced number of “available” minority-owned rms.
FIGURE 3-8
CAPACITY SENSITIVITY EXAMPLE
In the hypothetical demonstration of Figure 3-8, reducing the number of “available” minority-
owned rms by exclusion due to capacity constraints changes the outcome, such that there
is no longer an observed disparity. More recent disparity studies include proposed solutions
to evaluate and address capacity issues and concerns. These include:
• Performing a contract by contract analysis to determine “bid capacity” of every rm
on each contract;
• Limiting the analysis based on contract thresholds (e.g., only examining contracts under
a certain dollar amount while also considering the largest bids offered by rms in each
racial, ethnic or gender group); and
• Limiting the analysis and evaluation of contracting activity to subcontracts, where the
perception is smaller dollar values lessen concerns about capacity.
Some consultants favor using rm size as a “threshold” for evaluating capacity. However, rm
size is often not the best measure. Prior cases have illustrated that size can be an outcome of
discrimination and that small rm capabilities can be highly elastic.
39
Examples are construction
rms that can scale up quickly in response to contract awards.
39
Concrete Works II, 36 F.3d at 1528-29 and Concrete Works IV, 321 F.3d at 980-982.
African American
Contract Awards = $100
All Other
Contract Awards = $300
African American Utilization
25% or 0.25
African American
Contractors = 3
All Other
Contractors = 5
African American Availability
37.5% or 0.375
Disparity Ratio
Substantial Disparity
African American
Contractors = 1
All Other
Contractors = 5
African American Availability
16.7% or 0.167
Disparity Ratio
No Disparity
Changing Availability to Exclude 2
A
frican American Contractors:
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The level of detail with which disparity studies address capacity varies and depends on
resources. Ideally, consultants could go rm by rm to address whether a particular rm has
the capacity to bid on each project. However, in most cases, this is not feasible. Instead,
many consultants use a bid capacity approach inherent in the custom census approach.
40
By
weighting contracting results by dollars, one can address capacity without any extra downward
bias from capacity adjustments (e.g., thresholds). As noted by Wainwright and Holt:
[A capacity adjustment] reduces the availability percentage by controlling for factors
that are likely to be directly affected by the presence of discrimination in the relevant
markets. Whether rms have worked or attempted to work on [agency] projects have
been awarded prime contracts or the size of those contracts should not be used to
limit the … availability measure. Not only is this a problem in its own right, but also it
may hide the existence of discrimination because a downward bias in availability can
lead to a conclusion of no signicant disparity when, in fact, a disparity exists.
41
The concept of “relative capacity” extends the discussion to encompass the argument that
some rms lack the capacity to work on multiple projects at the same time. As a result, the
belief is that any “availability” measure that fails to recognize this aspect is not sufcient. This
is an issue for analyses that use either vendor or bidder lists, particularly where companies have
not been contacted to identify rm-specic characteristics that might provide information on
relative capacity. One solution is the use of weighted availability data, for example, utilizing
dollar-weighted averages in computing availability. In this method, disparity study authors
calculate availability on a contract by contract basis, identifying rms that are available based
on contract type and size. So for a smaller dollar contract, there might be many more rms
(including MBEs) that are available than for larger contracts where smaller rms do not have
the capacity necessary to handle the requirement. Disparity consultants compute availability
percentages for each contract, then weight the result by the dollar value of the contract. Thus,
the higher contract value has a higher weight and greater inuence on the overall availability
percentage used in the disparity ratio computation.
42
Data Biases and Errors
In an ideal situation, data exist at a level sufcient to satisfy inquiry at a disaggregated level.
However, claims of insufcient data to analyze contracts by ethnic or racial group at a prime,
40
One example is Arizona Department of Transportation Disparity Study Report, Keen Independent Research, 7/2015, p. 5-11,
which states: Using a custom census approach typically results in lower availability estimates for MBEs and WBEs than a headcount
approach due in large part to Keen Independent’s consideration of “bid capacity” in measuring availability and because of dollar-
weighting availability results for each contract element (a large prime contract has a greater weight in calculating overall availability
than a small subcontract). The largest contracts that MBE/WBEs have bid on or performed in Arizona tend to be smaller than those
of other businesses, as discussed in [the report]. Therefore, MBE/WBEs are less likely to be identied as available for the largest
prime contracts and subcontracts.
41
Wainwright, Jon and Colette Holt. NCHRP Report 644: Guidelines for Conducting a Disparity and Availability Study for the
Federal DBE Program. Transportation Research Board, Washington, D.C. 2010, p. 32.
42
Many studies implement the dollar-weighted average approach. One example is 2015-16 State of Indiana Disparity Study, BBC
Research & Consulting, March 2016, p. 5-4.
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subcontract, or industry level permeate existing disparity studies. This arises as a function of
the data collection efforts employed at the agency or government level. At best, incomplete
recordkeeping can limit the usefulness of a study and at worst, can undermine claims of
discrimination based on insufcient evidence. Complicating matters is that analysis of data at
a highly disaggregated level can signicantly reduce the number of data points upon which the
disparity study draws conclusions. In this case, the question is whether just a few data points are
sufcient to establish discriminatory behavior from a statistical perspective or if aggregation is
necessary. Yet, aggregation can appear at odds with the legal desire to structure programs and
actions that are narrowly tailored.
In the rst case, inadequate data is largely a function of the procurement agencies’ inability
to implement standardized contract data collection systems, personnel shortages to capture
these data, or simply that the data are not collected or monitored. The greatest data gap
encountered in this review was data on subcontracting activity. This is a critical issue given
that many MBE or DBE programs focus on subcontracting goals as a means to remove
discriminatory behavior. Disparity studies typically overcome these limitations by excluding
certain analyses with questionable data or aggregating data across contract types (e.g., prime
plus subcontract), industry, or ethnic/racial groups (e.g., just reporting overall MBE results).
In reality, these data should be reported separately and only aggregated under reasonable
assurances that aggregation increases the reliability of the results.
Issues also exist with respect to data obtained from third-parties. For example, many
consultants begin an availability study by using third-party data such as those from Dun &
Bradstreet, which provide business listings and information including ownership, location, and
receipts. Tacit acceptance of the reliability of these data with respect to classications can be
problematic. For example, one consultant noted signicant error rates in M/WBE reporting,
sufcient to skew the results of an availability computation.
43
Yet another issue arises when analyses use small sample sizes or small contract sizes, such that
one observation can skew the results. An example drawn from one disparity study illustrated
how the disparity ratio for WBEs changed dramatically based on contracts awarded to a
single company. The company was apparently certied as a WBE at one time in California,
but was denied DBE certication in Arizona. During the study period, the company received
a signicant amount of contract awards. If one classied this rm as a WBE, it yields a WBE
disparity ratio in excess of 1.0. (i.e., no disparity exists). However, if the rm is removed from
the pool of WBEs due to questions about certication and ownership, the WBE disparity ratio
changes signicantly and drops below 1.0 (i.e., disparity exists).
43
Report on the City of Chicago’s MWBE Program, David G. Blanchower, June 10, 2009, p. 88.
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Statistical Signicance
Statistical evidence is critical to disparity studies and is necessary to meet the legal standards
of evidentiary review and support the implementation or need for a race-based contracting
program. Croson laid out the initial framework by stating that “where there is a statistically
signicant disparity between the number of qualied minority contractors willing and able to
perform a particular service and the number of such contractors actually engaged by the locality
or the locality’s prime contractors, an inference of discriminatory exclusion could arise.”
44
As
a result of this and subsequent legal challenges, a key question is what denes a statistically
signicant disparity?
As discussed previously, disparity consultants typically use an 80 percent threshold to identify
a substantial disparity. While implementing an 80 percent threshold is informative, it still
raises questions about whether the disparity is statistically signicant. In order to address this,
disparity study consultants implement a number of tests to determine whether a disparity is
statistically signicant. These include:
• Parametric analysis on individual contracts. In this method, disparity study consultants
conduct a statistical test to determine whether an observed disparity index of one group
is statistically different from that of another group or test value. For example, one can
conduct a t-test,
45
to determine whether the observed disparity index would fall outside
a certain range of values surrounding the test value (or mean of the other group).
46
• Non-parametric analysis on individual contracts. This method is typically used when
there are a lower number of contracts or high variability in dollar amounts observed in
the procurement data. Instead of using contract values, the disparity study consultant
will rank each contract on a whole number scale (e.g., rank order) and use these values in
the statistical tests, as opposed to actual contract values.
47
• Simulation analysis on expected contracting outcomes. Disparity study consultants also
use simulation analysis to rule out “chance” as a reason for observing disparity indices
different from 100 (or 1.0). While simulation can be performed at a contract level or an
aggregate level (i.e., grouping many contracts), the main goal is to recreate what one
would expect given inputs on actual bids and availability numbers for each business
type. If the simulation exercise is unable to replicate the observed disparity indices, then
one can realistically conclude that the observed disparity index did not occur due to
chance and is due to separate factors such as discrimination.
48
44
Croson, 488 US 469 (1989).
45
A t-test is a statistical hypothesis test based on a test statistic with a particular sampling distribution. It tests whether the means
of two groups are statistically different based on the distribution. For example, in the context of disparity studies, a t-test might
determine whether an observed disparity ratio is statistically signicant with respect to a hypothesized value (e.g., 1.0).
46
For more information on the statistical signicance in parametric testing, see Broward County Public Schools Disparity Study,
Mason Tillman Associates, 10/2015, at p. 9-1.
47
Ibid.
48
Additional information on simulation tests can be found in Arizona Department of Transportation Disparity Study Report,
Keen Independent Research, 7/2015, at p. 6-15.
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It is also important to note that a non-signicant disparity does not mean that discrimination
does not exist. Rather, there is insufcient information to reject the possibility that the disparity
is either due to chance or does not exist. For example, one reason for not nding statistical
signicance in observed disparities relates to an insufcient number of data points (i.e., bids
or contracts) necessary to perform the statistical test. A low frequency of data points does not
indicate that discrimination does not exist. Instead, disparity study consultants look to other
means of analyzing discrimination, including aggregating data, examining macroeconomic
factors of discrimination (i.e., discrimination in private markets), and importantly, anecdotal
evidence of discrimination.
Appropriate Time Period
The review of existing disparity studies identied a number of permutations when
analyzing time periods covered in analyzing contracting disparities for procurement agencies.
These included:
• A set number of procurement years, tied to the relevant scal year, e.g., analyzing all
procurement actions between FY2009 and FY2011.
• A dened date range, e.g., January 1, 2011 through June 30, 2013;
• Individual calendar or scal years;
• Periods that encompass a time when race-based programs were in effect and periods
where no race-based programs were in effect;
49
and
• Distinguishing between pre-recession and post-recession time periods.
In many cases, the study scope may have been determined by the agency, tailored to t
available resources. An analysis of results during periods where race-conscious programs exist
versus those periods without such programs can provide information on the effectiveness of
race-conscious programs. If awards to minority contractors decline precipitously after the
suspension of a program, a reasonable hypothesis is that the program was the primary driver in
overcoming discriminatory behavior and increasing parity in contracting.
IMPORTANCE OF ANECDOTAL INFORMATION
Qualitative data analysis provides an opportunity for disparity studies to supplement
quantitative data with respect to discrimination in public contracting. As noted in one
disparity study:
The statistical data can quantify the results of discriminatory practices, while anecdotal
testimony provides the human context through which the numbers can be understood.
50
49
This occurred frequently during the 2006 through time period when many state DOTs suspended existing race-conscious
programs in light of the Western States Paving decision.
50
Broward County Public Schools Disparity Study, Mason Tillman Associates, 10/2015, p. 8-1.
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There are several ways in which existing disparity studies collect anecdotal information,
including a combination of surveys, personal interviews, focus groups, public hearings, and
written testimony. Some studies favored a particular approach (e.g., oral history through
personal interviews), while others used combinations of methods across multiple forums. Most
disparity studies contained information on the nature and importance of anecdotal evidence.
In some cases, disparity studies leveraged anecdotal evidence from other disparity studies
conducted in nearby or overlapping geographic regions for similar time periods.
51
One
study noted:
Anecdotal research is a widely accepted research methodology that is based upon
observations, interviews, data collected during focus groups, survey responses and
other anecdotal data collection methods. The collection and analysis of anecdotal
data is used in conjunction with other research tools to provide context, and to help
explain ndings based on quantitative data analysis. Unlike conclusions derived from
other types of analysis in this report, the conclusions derived from anecdotal analysis
do not rely solely on quantitative data. Anecdotal analysis also utilizes quantitative
data to describe the context and examined social, political, and economic environment
in which all businesses and other relevant entities applicable to the survey operate.
52
Disparity study protocols evolve over time, and more recent disparity studies typically include
multiple methods for collecting qualitative data from a large set of respondents. As noted
previously, verication of actual accounts of discriminatory behavior from a wide cross-
section of key stakeholders is far superior to drawing upon a few select, unveried accounts.
This is necessary to separate perception from reality. For example, in certain cases, rms
and individuals that do not win a particular contract might feel the principal reason was
discrimination, even if discrimination played no role in failing to secure the contract. By
obtaining actual, veriable accounts from multiple participants, criticisms about sample size and
relying on only a handful of claims of discriminatory behavior are refuted and a bigger picture of
actual contracting experiences emerge. In some cases, the benet of the anecdotal evidence
is to recognize that discrimination might not be the root cause of disparities, or alternatively,
that race-neutral solutions might exist to alleviate perceptions of unfair treatment in public
contracting. One report noted:
It is essential to properly gather comprehensive anecdotal evidence that specically
addresses discrimination in a contracting market and discrimination that affects
business formation and growth to support a government race and gender preference
program. When gathering anecdotal evidence, researchers also must be able to
distinguish between evidence of discrimination and a general lack of access.
53
51
For example, in its disparity study for the Georgia DOT, BBC Research & Consulting also considered anecdotal evidence from
other disparity studies conducted for Clayton County and City of Augusta, see 2012 Georgia Department of Transportation Disparity
Study, BBC Research & Consulting, 6/2012, at J-3-J-5.
52
Disparity Study for Denver Public Schools, MGT of America, October 17, 2014, at p. 6-1
53
Connecticut State Disparity Study, the Connecticut Academy of Science and Engineering, Phase I, August 2013, p. 19.
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In order to evaluate the key difference between discrimination and general lack of access, most
disparity studies include viewpoints from both minority and majority rms. In this respect, the
disparity study alleviates concerns about focusing too narrowly on a single viewpoint, while at
the same time collecting additional anecdotal evidence to evaluate claims of discrimination.
Traditional methods of surveys, personal interviews, focus groups, and public hearings provide
a substantial amount of anecdotal evidence from a diverse population. The particular method
utilized is often a function of the disparity study consultant, agency resources, and regulations
in place requiring public input on the disparity study process. Nevertheless, the best types of
anecdotal evidence will remain those accounts that are drawn directly from actual contracting
participants who can share veriable experiences with disparity study consultants.
Chapter 4: Disparities and Marketplace Discrimination Exist
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December 2016 | Minority Business Development Agency
CHAPTER 4:
Disparities and Marketplace
Discrimination Exist
This section of the report summarizes the results of an investigation into contracting disparities
and quantitative evidence observed in 100 disparity studies, summaries, and reports, collectively
“the disparity studies” or “the set of disparity studies.” Appendix A of this report includes a
list of each disparity study reviewed as part of the research effort. Identication of potential
disparity studies entailed a thorough and comprehensive search of publicly-available studies
posted on agency, consultant, or other websites. A greater focus was on disparity studies
published in the last ten years to provide insight into the existing and recent public contracting
landscape for minority business enterprises (MBEs). While the search was comprehensive,
it does not purport to capture all publicly available disparity studies that might be available.
Instead, the set of disparity studies represents a sufcient base upon which to analyze the
methods, results and conclusions that disparity study consultants undertake to explore factors
that cause and remedies that address contracting disparities facing MBEs.
This chapter explores the disparity ratios contained in the set of disparity studies, as well
as the marketplace discrimination evidence derived from regression analysis and other
quantitative measures.
DESCRIPTION OF THE SET OF DISPARITY STUDIES
Disparity studies used in this report are drawn from a search of publicly available websites
for local and state contracting agencies, consultancies, or other websites. The process for
identifying disparity studies involved general internet searches on key terms and combinations
of key terms, including “disparity,” “disparity study,” “contracting disparities,” “anecdotal
evidence,” “contracting,” “barriers,” and “discrimination.” In addition, studies were also
identied through links in legal cases, articles and government notices. The results contained
in this report do not exclude any studies that were identied through the internet search
process. To that end, all studies in the set are publicly available, permitting other municipalities
or interested parties to replicate the analysis contained herein.
54
The studies span a range
of industries and geographic locations, and examine various program types depending on
the agency for which the study was conducted. While some cities are represented multiple
times in the set, the studies usually cover separate time periods or separate agencies within
a municipality, such that there is not double counting of contracting data and disparity ratios.
54
Appendix A lists each study and the associated hyperlink where the study is available. As of the publication of this report, two
study links were no longer active, but the study or summary was still included.
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Notable characteristics of the set of disparity studies include:
• The disparity studies covered state or local agencies in 31 different states, including
representation from every major Census region.
• 20 different lead organizations authored the disparity studies, dominated by several
large private, for-prot consultancies. However, most studies involved a team approach,
including the use of small or disadvantaged business enterprises as part of the research
team.
55
• Consistent with the research goal of examining contemporary data, most studies
encompassed more recent time periods. Of the 100 studies, 40 were published since
the beginning of 2011, and 81 were published since 2007.
56
As noted in the previous chapter, disparity studies include a myriad of combinations for
computing and reporting disparity ratios and results. Indeed, while there were consistent
reporting patterns among different studies by a primary consultant, there were often large
differences in reporting patterns across consultants.
57
The lack of standardization in how
consultants calculate and present disparity ratios underscores the importance of interpreting
disparity study results appropriately. Specically, the results of any disparity study are rooted
in the assumptions and data that consultants use for the particular contracting agency and
behavior under investigation. As a result, the 100 studies reviewed for this report include
studies conducted by different consultants for different government agencies, across many
different geographic areas, related to different time periods and using different methodologies.
As noted in Chapter 3, different methods exist for calculating utilization, availability and
capacity, including differences in underlying product and geographic market denitions. In
addition, numerous differences exist in reporting disparity ratios, including:
• Selection of time period for computations: Some studies computed disparity ratios for
each calendar or scal year under investigation (e.g., individual ratios for 2010, 2011, and
2012). Other studies only reported an aggregate disparity ratio for multiple years (e.g., a
single disparity ratio encompassing contracting data for 2010 through 2012).
• Different grouping of minorities: Some studies focused solely on minority business
enterprises (MBEs), others disaggregated data and disparity ratios by specic ethnic
and racial groups. However, even in these instances different consultants often treated
the “Asian American” group differently, where some consultants grouped all “Asian
Americans” together, while other consultants reported Pacic Asian Americans and
55
Primary lead organizations with greatest representation included BBC Research & Consulting, D.J. Miller & Associates, D.
Wilson Consulting, Grifn & Strong, Keen Independent Research, Mason Tillman Associates, MGT of America, and NERA (usually
with Collette Holt Associates as part of the team).
56
This is also reects that more recent studies were more likely to be publicly-available and linked on active websites. Older
studies are often archived or not publicly-accessible via the internet.
57
For example, consultancies like NERA and Mason Tillman Associates typically employed similar approaches in executing a
disparity study, although methodological approaches differ when comparing a typical NERA study with a Mason Tillman Associates
study. This does not mean that one study is necessarily “better” than the other, but reects the dynamic and differing points of view
that necessitate careful reading and interpretation of each study on its own merits.
Chapter 4: Disparities and Marketplace Discrimination Exist
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December 2016 | Minority Business Development Agency
Subcontinent Asian Americans separately. Some studies included data on Native
Americans, while others did not. For the purposes of this study, the disparity ratio
analysis does not include separate categories for Subcontinent Asians or Native
Americans.
58
• Different funding sources or geographic areas within the overall area of study: In certain
cases, consultants reported different iterations of disparity ratios based on the source of
funding and geographic area. For example, while a disparity study might include state-
wide contracting for a particular Department of Transportation, the consultant would
also report additional disparity ratios based on particular geographic regions within the
state and whether the source of contracting dollars were federal, state or local, even
though the primary report purpose might have been to compute a statewide disparity
ratio to use in goal setting.
The computational and reporting differences prohibit a true “apples to apples” comparison
of disparity ratios, given the unique characteristics applicable to each disparity study. Despite
methodological and computational variations across studies, there are wide-ranging similarities
in the disparity ratio results and ndings of each study. Foremost is the notable observation
of substantial contracting disparities prevalent for minority-owned businesses in each of these
studies, often for similar ethnic and racial groups across similar industries and over many years.
This includes the underutilization of MBEs in public contracting in multiple geographic areas
and industry sectors such as construction, professional services, other services and architecture
and engineering.
59
In order to illustrate these broad and extensive disparity observances, this study relied on a
canvassing effort that cataloged 2,385 disparity ratios drawn from the selected set of disparity
studies. It is important to recognize that these disparity ratios do not represent the entire set of
all disparity ratios included in each report. Rather, the cataloging process involved a top-down
approach to capture the disparity ratios consultants presented in executive summaries, ndings
and conclusions that addressed potential contracting disparities in a particular geographic
and product market for a particular racial or ethnic minority classication, or across all MBEs
or M/WBEs. In this respect, these are the primary disparity ratios that consultants are using
to inform readers of the nature and scope of potential underutilization of affected businesses.
Nevertheless, the set of 2,385 disparity ratios includes observations at different levels of
58
The reason for exclusion was due to infrequent observations and minor contracting amounts (i.e., number and dollars)
reported for these groups of businesses. It does not imply that discrimination either exists or does not exist for these groups of
business owners.
59
The most robust disparity studies separated architecture and engineering as a different product market from professional
services, such that there is no double counting inherent in computing disparity ratios for these two industrial sectors.
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Minority Business Development Agency | December 2016
aggregation, which lessens or prohibits direct comparison but still allows recognition that
disparities exist.
60
Furthermore, as noted above, some studies include numerous disparity ratio iterations that
are subsets of an overall disparity ratio summary. As a result, these data are not “new” ratios
given that the data are already subsumed in the overall disparity ratio calculation. This study
does not rely on the subsets of observations in presenting disparity ratios, as every effort was
made to avoid the inuence of double counting in disparity ratio reporting for each study.
61
Indeed, this is an area for future investigation, where a more comprehensive set of data of all
disparity ratios, including specic characteristics of each ratio, can be generated and distilled
for additional analysis.
For the purposes of this study, the analysis of disparity ratios provides the foundation for
analyzing anecdotal evidence designed to elucidate the core causes of MBE underutilization in
public contracting, including both discriminatory and non-discriminatory factors. An analysis
of potential discriminatory factors assumes a priori that disparities exist. The next few sections
of the report provide conrmation that disparities, as reported in the selected set of disparity
studies, are widespread and pervasive. Furthermore, while there may be conformation bias
62
inherent in the studies, they nevertheless provide the context for illustrating that MBEs are
substantially underutilized in the relevant geographic areas and industries, sufcient to use
these areas as the basis for exploring causal factors identied in Chapter 5.
OBSERVED DISPARITIES IN MINORITY CONTRACTING
A general trend in the review of disparity study results is that disparities in contracting are
extensive among minority business enterprises regardless of race, ethnicity, industry, or
geography. Figure 4-1 summarizes the overall ndings with respect to the split of contracting
disparity ratios among categories of minority-owned rms.
60
One area of concern is whether or not aggregation over multiple years inadvertently excludes observations where disparities
would not exist. For example, if a study concluded a disparity for African American prime construction contractors in a 2012-2014
aggregate time period, it is possible that an annual investigation might indicate that a disparity existed in 2012, but not in 2013 or
2014, yet the 2012 results drive the overall “aggregate” result. In many instances, consultants aggregate data over multiple years
not to obscure results, but to increase the robustness of the results by including more data to avoid any outliers.
61
The one area that includes “double counting” by denition is reporting an aggregate MBE or M/WBE gure, which includes
data on all ethnic and racial minority groups.
62
As discussed previously, the selected set of studies is not an independent representative sample of all public contracting in the
United States. In many cases, the particular state or local agency may have commissioned a study to decide whether to continue
or modify an existing race-conscious program which assumed a previous determination of disparity in contracting. Although the
studies reviewed were not subject to litigation, it nevertheless raises questions about whether the study was more likely to nd a
disparity as compared to a situation where a random agency and market is selected for investigation.
Chapter 4: Disparities and Marketplace Discrimination Exist
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December 2016 | Minority Business Development Agency
FIGURE 4-1
DISPARITY RATIO DISTRIBUTION FOR MINORITY-OWNED BUSINESSES
Figure 4-1 shows that 78.2 percent of contracting disparity ratio observations were less than
0.8 (or 80 on a scale of 100), indicating a “substantial” disparity. In addition, over 82 percent of
observations were below 1.0, indicating a disparity.
Analysis of the contracting disparities by industry, race, and ethnicity mirror the overall trend of
substantial disparities for minorities. Figure 4-2 presents data based on racial/ethnic group and
industry, aggregated across all disparity study time periods. The gure contains information
on African Americans, Asian Americans, Hispanic Americans and overall M/WBEs in the major
industries of construction, professional services (“Prof Svcs”), goods and supplies (“Goods”),
architectural and engineering (“A&E”) and other services (“Other Svcs”).
63
63
Most studies separated architecture and engineering construction-related services from the overall category of professional
services, using NAICS codes and specic information about rms and contractors to determine the appropriate product market.
78.2%
4.1%
17.7%
<0.8
>0.8 but <1.0
>1.0
n = 2,385
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Minority Business Development Agency | December 2016
FIGURE 4-2
DISPARITY RATIO OBSERVATIONS BY INDUSTRY
AND MINORITY CATEGORY
The red portion of Figure 4-2 includes all disparity ratios in excess of 0.8, including those that
exceed 1.0. In all cases, the number of ratios less than 0.8 exceeds the number greater than 0.8.
As a result, there were no observations where an ethnic or racial minority had a larger number
of disparity ratios in excess of 1.0 (i.e., overutilization) when examining the major industry
groupings of construction, professional services, goods, or architectural and engineering
services. Table 4-1 summarizes the same data in tabular form, but distinguishes between
observed disparities (less than 1.0) and substantial disparities (less than 0.8). The largest
absolute number of observed substantial disparity ratios was for African American owned
construction businesses, with 170 observations less than 0.8. The groups and industry with the
highest proportion of substantial disparities were Asian American professional services, African
American construction services, and Hispanic American architecture and engineering services.
0
50
100
150
200
250
Construction
Prof Svcs
Goods
A&E
Other Svcs
Construction
Prof Svcs
Goods
A&E
Other Svcs
Construction
Prof Svcs
Goods
A&E
Other Svcs
Construction
Prof Svcs
Goods
A&E
Other Svcs
African American Asian American Hispanic American To tal M/WBE
Observations
<0.8 >0.8
Chapter 4: Disparities and Marketplace Discrimination Exist
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December 2016 | Minority Business Development Agency
TABLE 4-1
DISPARITY RATIO OBSERVATIONS BY MINORITY CATEGORY
AND INDUSTRY
As discussed previously, numerous disparity studies include analysis into whether observed
disparity ratios are statistically signicant. For those disparity studies that explicitly indicated
whether a disparity ratio was statistically signicant or not, approximately 65 percent of all
disparity ratio observations were classied as statistically signicant by study authors. However,
this may be a conservative estimate since some disparity study consultants did not report
signicance at the individual disparity ratio level, but instead presented signicance at an
aggregate level through simulation. Lastly, 99 percent of statistically signicant disparities
identied by study authors were less than 0.8, lending strong support for discriminatory
behavior in contracting.
The median disparity ratio across all observations was only 0.19, which is considerably lower
than the 0.8 threshold for dening a substantial disparity.
64
When disaggregating the data
by race, ethnicity, and industry, the median values were lower than the overall median except
for the combined M/WBE group. Table 4-2 illustrates the inuence of WBEs on the overall
64
Approximately 31 percent of observed disparity ratios are zero, indicating that there is no utilization of a particular ethnic or
racial group for a particular product market in a particular geographic area. These represent disparity ratios where one would
expect minority representation, i.e., availability is not zero, despite utilization being zero. Nevertheless, even if one excludes
disparity ratios of zero as potential outliers, the median disparity ratio is still 0.43, which indicates substantial underutilization of
minority-owned businesses.
Group Industry Count< 1< 0.81 0.8
African American Construction 194 173 170 89.2% 87.6%
Professional Services 147 120 116 81.6% 78.9%
Goods and Supplies 127 90 86 70.9% 67.7%
Architecture & Engineering 102 88 85 86.3% 83.3%
Other Services 101 73 71 72.3% 70.3%
Asian American Construction 193 159 151 82.4% 78.2%
Professional Services 143 132 127 92.3% 88.8%
Goods and Supplies 119 89 86 74.8% 72.3%
Architecture & Engineering 102 87 80 85.3% 78.4%
Other Services 105 88 81 83.8% 77.1%
Hispanic American Construction 189 149 139 78.8% 73.5%
Professional Services 133 110 106 82.7% 79.7%
Goods and Supplies 119 98 93 82.4% 78.2%
Architecture & Engineering 88 76 74 86.4% 84.1%
Other Services 106 94 92 88.7% 86.8%
Total M/WBEConstruction 80 64 51 80.0% 63.8%
Professional Services 40 34 33 85.0% 82.5%
Goods and Supplies433529 81.4% 67.4%
Architecture & Engineering 44 35 32 79.5% 72.7%
Other Services 26 22 21 84.6% 80.8%
Disparity Ratio ObservationsPercent Less Than:
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Minority Business Development Agency | December 2016
disparity results. Specically, disparity ratios for WBEs are generally higher than those for MBEs,
although both are often below 1.0 and 0.8.
TABLE 4-2
MEDIAN DISPARITY RATIOS BY MINORITY CATEGORY AND INDUSTRY
The data drawn from the disparity study review indicate substantial disparities not only in the
aggregate, but also across subsets of different ethnicities, races, and industries. Furthermore,
the disparities exist across different time periods and geographic regions. Disparities are also
prevalent in periods and jurisdictions where race-based programs exist to purportedly support
MBEs or DBEs in contracting.
SUBCONTRACTING ANALYSIS
Many race-based programs focus on providing opportunities to MBEs via subcontracting goals.
Subcontracting remains an important avenue for MBE business development and growth and
warrants exploration with respect to contracting disparities. Yet, some disparity studies either
failed to include subcontracting as a stand-alone analysis or aggregated subcontracting with
prime contracting in the computation of disparity ratios. The previous chapter highlighted
some of the reasons for a lack of subcontracting analysis, although it is largely driven by the lack
of robust and accurate data at the subcontracting level. Nevertheless, most disparity studies
Group
Asian American
Total M/WBE
Industry
Construction
Professional Services
Goods and Supplies
Architecture & Engineering
Other Services
Other Services
Construction
Professional Services
Goods and Supplies
Architecture & Engineering
Other Services
Count
193
143
119
102
105
106
80
40
43
44
26
Median
0.072
0.000
0.110
0.036
0.039
African American Construction
Professional Services
Goods and Supplies
Architecture & Engineering
Other Services
194
147
127
102
101
0.160
0.205
0.293
0.041
0.444
Hispanic American Construction
Professional Services
Goods and Supplies
Architecture & Engineering
189
133
119
88
0.126
0.025
0.044
0.003
0.034
0.612
0.550
0.560
0.488
0.535
Chapter 4: Disparities and Marketplace Discrimination Exist
39
December 2016 | Minority Business Development Agency
acknowledge the importance of investigating subcontracting and the studies that can draw
upon the greatest resources often include subcontracting-specic analyses.
Studies with subcontract-level analyses typically involve the disparity study consultant
working in tandem with the contracting agency to identify subcontracting activity. While
the methodologies might differ based on data availability and a particular consultant,
subcontracting analyses typically follow a similar pattern as prime contracting analyses.
Specically, the disparity study will compute both utilization and availability for MBEs but limited
to subcontracting activity. With respect to utilization, many agencies do not have sufcient
resources to track subcontracting activity. As a result, disparity study consultants often work
with the agency to examine all prime contracts, or at least a representative sample of prime
contracts, in order to “reconstruct” subcontracts issued by the agency in the relevant product
markets.
Determining the availability of subcontractors is theoretically similar to determining availability
of MBEs to act as prime contractors. However, given the differences in how disparity study
consultants compute availability, there are also differences in computations of subcontractor
availability. For those studies that separated subcontracting and prime contracting for MBEs
and used a custom census, rms were typically asked if they performed as a subcontractor,
prime or both. Those that replied either subcontracting or both are included in the
subcontractor availability analysis. Other studies that rely on lists and the non-custom-
census methods described in Chapter 3 often rely on past experience as a subcontractor in
determining availability. For example, those MBEs that are active subcontractors on agency
contracts satisfy the “willing” component of the “ready, willing and able” requirements.
Despite differences in treatment of subcontracting activity, disparity studies that included
subcontracting as a stand-alone disparity analysis typically yielded results consistent with
those observed at the prime level. As an illustrative example, Table 4-3 presents a summary of
subcontracting disparity conclusions for a set of disparity studies conducted by Mason Tillman
Associates (MTA), which typically included a uniform approach to analyzing subcontracting data
and results.
65
Table 4-3 presents a summary of instances where MTA identied underutilization
as indicated by a disparity ratio less than 1.0.
65
While this research section highlights Mason Tillman Associates, many other disparity consultants and studies analyzed
subcontracting activity on a stand-alone basis. In these cases, studies also took steps to ensure that double counting of
subcontracting activity (e.g., as part of the prime analysis) was either acknowledge and/or addressed.
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TABLE 4-3
SUBCONTRACTING SUBSET ANALYSIS
The data indicate that in almost every case (78 out of 84), MBEs were underutilized on
subcontracts, indicating a disparity less than 1.0. In addition, MTA identied that 54 percent
of the underutilized observations were statistically signicant.
QUANTITATIVE DATA ON MARKETPLACE DISCRIMINATION
The existence of a numerical disparity drawn from public contracting data does not equate
to a conclusion of discrimination. To bridge this causal gap, disparity study consultants use
a combination of quantitative and qualitative analyses to explain why disparities arise in the
context of public contracting, including the extent to which discrimination drives disparities.
One area of investigation focuses on a statistical investigation of the possible existence of
discrimination in the private sector where contacting activity takes place.
In these cases, the presence of discrimination in the private sector provides additional
information on the root causes of potential contracting disparities, regardless of the extent of
public intervention. In addition, an analysis of private sector activity may also indicate bias in
the business availability calculations, where the presence of prior discrimination can suppress
Subcontracting An alysis using Mason Tillman Associates Disparity Studies
Agency/Jurisdiction
Year of
Report
Total
Disparity
Observations
Disparities
Indicating
Underutilization % of Total
(a)(b)
(c) (d)(e) = (d)/(c)
A
lameda County 2004 9889%
Broward County Schools2015 66100%
City of Arlington2010 33100%
City of Cincinnati 2015 6467%
City of Davenport2009 22100%
City of Houston2006 66100%
City of Jacksonville 2013 6350%
City of New York 2005 99100%
City of St. Louis2015 22100%
Commonwealth of Pennsylvania2007 66100%
Illinois DOT2011 22100%
Illinois Toll Highway Authority2011 66100%
San Francisco BART Authority (w/goals)2009 66100%
San Francisco BART Authority (w/o goals)2009 66100%
Washington Suburban Sanitary Commission 2010 99100%
Tota
l8
47
89
3%
Chapter 4: Disparities and Marketplace Discrimination Exist
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December 2016 | Minority Business Development Agency
the number of available MBEs in the marketplace. This will lead to an underrepresentation
of MBEs in the disparity ratio computation for the public agency contracting activity. The
remainder of this chapter discusses how disparity studies utilize economic data to analyze
marketplace discrimination, while the next chapter focuses on qualitative data indicating both
discriminatory and non-discriminatory reasons for observed disparities.
The legal precedent discussed in Chapter 2 provides the foundation for examining marketplace
data to determine whether public agencies passively participate in markets inuenced by
discrimination. Specically, both Adarand VII and Concrete Works IV discussed the importance
of analyzing evidence of marketplace discrimination against MBEs.
66
This is because market-
based evidence of discrimination can be used to support a compelling interest in remedying
past or present discrimination through the use of afrmative action legislation.
67
In other words,
the analyses seek to address the fundamental question of whether or not the market functions
properly for all businesses, regardless of the race of business ownership. If discrimination
prevents a well-functioning market, there is a demonstrated need for government intervention
in those affected sectors where the federal, state or local agency procures goods and services
to ensure that the government does not passively participate in established patterns of
discrimination.
Disparity studies typically include evidence of marketplace discrimination through statistical
analyses of private sector data, given that these contracting activities are generally not subject
to race-conscious or afrmative action programs. As noted in one disparity study:
Statistical examination of disparities in the private sector of the relevant geographic
market is important for several reasons. First, to the extent that discriminatory
practices by contractors, suppliers insurers, lenders, customers, and others limit the
ability of [MBEs] to compete, those practices will impact the larger private sector as
well as the public sector. Second, examining the utilization of [MBEs] in the private
sector provides an indicator of the extent to which [MBEs] are used in the absence of
race- and gender-conscious efforts, since few rms in the private sector make such
efforts. Third, the Supreme Court in Croson and other courts acknowledge that state
and local governments have a constitutional duty not to contribute to the perpetuation
of discrimination in the private sector of their relevant geographic and product
markets.
68
Regression analysis is one of the most commonly employed statistical methods used to analyze
private sector data in the context of disparity studies. As noted in Chapter 3 and Figure 3-6, the
66
Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000) and Concrete Works of Colorado, Inc. v.
City and County of Denver, 321 F. 3d 950 (10
th
Cir. 2003).
67
Ibid, at 1166-67 (Adarand VII) and at 976 (Concrete Works IV).
68
The State of Minority- and Women-owned Business Enterprise: Evidence from Missouri. NERA Economic Consulting.
June 28, 2012, p. 120.
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regression analysis of marketplace discrimination typically involves analysis of the
following areas:
• Business formation rates between minorities and non-minorities;
• Self-employment or business earnings between minority business owners and non-
minority business owners;
• Analysis of commercial loan denial rates for minority and non-minority business owners;
• Minority and non-minority employment representation among certain industries,
including management positions; and
• Home ownership rates and mortgage denial rates among demographic groups.
At the heart of regression analysis is the ability to estimate the effect of a set of independent
variables (e.g., characteristics such as age, race, education, etc.) on an outcome variable of
interest (e.g., business formation rates or earnings). As a simple example, consider an analysis
of business owner earnings for a set of companies or individuals in similar geographic and
product markets at a similar point in time. By controlling for similarities in other characteristics
such as education and labor force experience, one can determine whether any differences exist
in earnings due to other factors, such as race and ethnicity. These analyses demonstrate the
quantitative effects of discrimination on business formation rates and earnings and provide
evidence to support the need for race-conscious contracting programs, designed to remedy the
effects of past or ongoing discrimination.
Figure 4-3 provides an example of the regression modeling that National Economic Research
Associates (NERA) undertook as part of its disparity study for the State of Missouri. In this
example, NERA hypothesized that multiple factors inuence business owner earnings, among
them, race and ethnicity. It used American Community Survey data to evaluate the quantitative
effects of racial indicator variables on business owner earnings and found that, consistent
with an inference of discrimination, race negatively inuenced business owner earnings for
multiple racial groups while controlling for other factors. That is, all other factors being
equal, the regression analysis demonstrates that minority business owners earned less than
their comparable non-minority counterparts, consistent with a nding of discrimination. The
regression data and ndings were consistent across multiple product and geographic markets.
Chapter 4: Disparities and Marketplace Discrimination Exist
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December 2016 | Minority Business Development Agency
FIGURE 4-3
REGRESSION MODELING AND RESULTS EXAMPLE
The example demonstrates the utility of regression analyses, which when controlling for
differences in other characteristics, can provide a reasonable estimate of the impact that race
has on observed differences in business earnings. A disparity study can use regression to
show that discrimination exists in the private sector, which supports potential government
intervention through a race-conscious program for public contracting. For example, the NERA
analysis found that African American business owners earned 39 percent less, on average,
than similarly situated non-minority males (e.g., males that had similar ages, level of education
and other ownership characteristics), such that the difference or disparity is due to the race
of the business owner. The result was statistically signicant, such that a strong inference of
discrimination exists with respect to the relationship between race and business owner earnings.
NERA computed similar results when controlling for the product market (e.g., Construction)
or geographic market (e.g., the Missouri DOT market area in that particular study). As to the
impact of potential discriminatory behavior, NERA succinctly summarized the major issues
related to its regression analysis of business owner earnings:
Method: Regression analysis “testing” the numerical effect of business
owner race on earnings for similarly situated owners (i.e., controlling for
other owner characteristics
Question: Does the race of a business owner influence business owner
earnings when controlling for other characteristics (e.g., age, education, etc.)?
Data Source: Census Bureau’s American Community Survey
(ACS), 2006-2010 Five Ye ar Data Set
Results: Statistically significant business owner earnings
disparities exist for multiple racial groups, including African
Americans, Hispanics, Asians, Native Americans, and non
minority women.
-
Earnings Level Decrease Relative to Similarly Situated
Non-Minority Males:
•African Americans = 39.0 percent lower
•Hispanics = 22.5 percent lower
•Asians = 10.3 percent lower
•Native Americans = 38.7 percent lower
•Minority Women = 39.4 percent lowerNon-
Contracting Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing Disparity Studies
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Minority Business Development Agency | December 2016
As was the case for wage and salary earners, minority and female entrepreneurs earn
substantially and signicantly less from their efforts than similarly situated nonminority
male entrepreneurs. The situation, in general, differs little in the [relevant geographic]
market area than in the nation as a whole. These disparities are a symptom of
discrimination in commercial markets that directly and adversely affect DBEs. Other
things equal, if minorities and women are prevented by discrimination from earning
remuneration from their entrepreneurial efforts comparable to that of similarly situated
nonminority males, then capital reinvestment and growth rates may slow, business
failure rates may increase and, as demonstrated in the next section, business formation
rates may decrease. Combined, these phenomena result in lower DBE availability levels
than would be observed in a race- and gender-neutral market area. As this chapter
demonstrates, discrimination depresses business owner earnings for women and
minority entrepreneurs. Business owner earnings, however, are often directly related
to whether an owner has the capital to reinvest (rm size), how long a rm survives
(rm age), and how much money a rm takes in (individual rm revenues). These
observations illustrate why employment size, years in business and individual rm
revenues are especially inappropriate factors to consider in any sort of “capacity”
type analysis.
69
Disparity studies often include multiple analyses using a variety of different dependent
variables, such as wages, business formation, or access to credit (via loan denials or interest
rates). In each case, the regression model may differ in terms of explanatory variables, but
the purpose of the model is to determine whether marketplace discrimination exists in areas
where a public agency procures goods and services. Disparity studies that include regression
results demonstrating that minority business status is a statistically signicant factor leading to
observed disparities help build the case for discrimination in the marketplace. Thus, even if
an agency does not actively contribute to discriminatory behavior, it can implement programs
designed to remedy its passive role and achieve greater parity in contracting.
Disparity studies rely on multiple data sources to collect information on formation, earnings,
loan denials, and other business operations. These sources include the ACS, the U.S. Census
Bureau’s Survey of Business Owners and Self-Employed Persons (SBO), the Federal Reserve
Board’s Survey of Small Business Finances (SSBF), and mail or telephone surveys conducted for
a specic study. Although not uniform across all disparity studies, the majority of the studies in
the set that utilized quantitative data on marketplace discrimination found that minorities and
minority business enterprises:
• Earned signicantly lower wages than similarly situated non-minority male counterparts
in relevant markets;
• Had signicantly lower business earnings than similarly situated non-MBEs in
relevant markets;
69
Ibid, p. 136.
Chapter 4: Disparities and Marketplace Discrimination Exist
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December 2016 | Minority Business Development Agency
• Had lower rates of business formation than non-minority males;
• Were more likely to be denied commercial or personal loans than similarly situated non-
minority males or non-MBEs; and
• Had lower revenues and market shares than similarly situated non-MBEs.
Several disparity studies also considered issues such as employment within particular industries,
the proportion of employees in management positions, general population statistics, and other
business characteristics such as education, age of business, and fear of loan denials (i.e., without
actually applying and being denied), all of which affect the ability of minority-owned businesses
to compete for and win public contracts.
Chapter 5: Anecdotal Analysis and Summary
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December 2016 | Minority Business Development Agency
CHAPTER 5:
Anecdotal Analysis and Summary
One of the fundamental objectives of this research report is to identify and characterize factors
and barriers that lead to contracting disparities for MBEs, including identifying which factors
and barriers can arise due to discrimination. As discussed in the previous chapter, a review of
existing publicly-available disparity studies showed the widespread occurrence of substantial
contracting disparities, indicated by a disparity ratio less than 0.8 and often with statistical
signicance. Yet, a numerical disparity alone does not equal discrimination, which is a primary
reason why disparity studies include additional analysis aimed at investigating discrimination
and causation. This includes not only the regression analyses discussed in the previous chapter,
but also valuable systematically-collected anecdotal evidence that helps characterize instances
of discrimination and areas where contractors face barriers in public contracting independent
of racial or ethnic preferences. This chapter explores the relationship between anecdotal
evidence, observed disparities, and discrimination, as drawn from the set of disparity studies.
The chapter also includes selected anecdotes from disparity studies, which provide context and
illustrate the depth of the barriers identied by and the experiences of affected MBEs.
IMPORTANCE OF ANECDOTAL EVIDENCE IN SUPPORTING
RACE-BASED PROGRAMS
Anecdotal ndings provide insight into the “why” of disparities and lend support to the use of
both race-neutral and race-based remedial programs. Anecdotal evidence does not establish
the predicate for race-conscious programs, but instead, aids policymakers in evaluating
whether a contracting program is needed and if so, that it is narrowly tailored. Several patterns
of exclusionary behavior in public contracting have emerged over time, including instances
of outright discrimination on the part of non-MBE prime contractors and public agencies.
70
Anecdotal accounts of discrimination and exclusionary behavior serve to provide the context
that disparity studies seek regarding contracting disparities. As noted by one prominent
disparity study consultant:
Some courts and other observers have asserted that [anecdotal] ndings such as
[these] tell us nothing about discrimination against M/WBEs since, even though they
are current, even though they come directly from the businesses alleging disparate
70
For example, Association of General Contractors v. California Department of Transportation, 2013 WL 1607239 (9
th
Cir., 2013)
details instances of M/WBEs told that they were not qualied, although they were later found to be qualied when evaluated by
outside parties and harassment of M/WBEs by an entity’s personnel to discourage them from bidding on an entity’s contracts.
Contracting Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing Disparity Studies
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Minority Business Development Agency | December 2016
treatment, even though they are restricted to the relevant geographic and product
markets, even though they are disaggregated by procurement category, and even
though they are disaggregated by race and sex, they still do not compare rms of
similar size, qualications, or experience… Size, qualications, and experience are
precisely the factors that are adversely impacted by discrimination. [emphasis added]
71
Chapter 3 covered the general aspects of a strong anecdotal evidence gathering process,
including gathering information from not only qualied minority contractors, but also from
non-MBE contractors.
72
Exploring contracting barriers and the impact of discriminatory or
exclusionary behavior using qualitative data also includes identifying and cataloging specic,
veriable instances of discrimination within the relevant jurisdictions and market area,
73
discussing the harm that the improper conduct has inicted on the businesses in question, and
revealing that discriminatory exclusion and impaired contracting opportunities are systemic
rather than isolated or sporadic. Disparity studies that adhered to the aforementioned
requirements yielded anecdotal accounts and ndings that were more transparent and
complete than studies with less rigorous anecdotal approaches.
DISPARITY STUDY REVIEW FINDINGS ON COLLECTION METHODS
This research project included a review of 100 disparity studies and summaries, 86 of
which explicitly implemented a methodology to obtain qualitative data on contracting barriers
and exclusionary practices via anecdotal accounts. As noted in Chapter 3, there are different
methods to collect anecdotal evidence and the methods used to collect anecdotal data
varied by study and consultant. The most prevalent methods included personal interviews,
focus groups, public hearings, surveys, and submission of written testimony. Where possible,
consultants veried accounts and pooled the results of multiple anecdotal data collection
mechanisms to determine the prevalence of the barriers and/or discrimination detailed.
This ensures that the views of a single contractor are not deemed “representative” by the
consultants.
74
Figure 5-1 presents a tabulation of the percentage of studies that included each
anecdotal data collection mechanism.
71
NERA, The State of Minority- and Women-Owned Business Enterprise: Evidence from Cleveland, Prepared for the City of
Cleveland, December 24, 2012, p. 274.
72
In addition, many of the studies with more detailed anecdotal evidence sections included input from industry and trade groups,
as well as public procurement ofcials. While these may not reect a rst-hand account of discriminatory behavior, soliciting input
from these other groups can help support general patterns or accounts of discrimination.
73
As noted by one disparity consultant, “The probative value of anecdotal evidence of discrimination increases when it comes
from active businesses in the relevant geographic and procurement markets. The value of such evidence increases further when
it comes from rms that have actually worked or attempted to work for the public sector within those markets”, Race, Sex, and
Business Enterprise: Evidence from Augusta, Georgia. NERA Economic Consulting. September 4, 2009, p. 250.
74
There are conicting opinions regarding the importance of verifying anecdotal accounts in the case law and literature.
Chapter 5: Anecdotal Analysis and Summary
49
December 2016 | Minority Business Development Agency
FIGURE 5-1
DISTRIBUTION OF ANECDOTAL DATA COLLECTION MECHANISMS
There is no single preferred method for collecting anecdotal evidence. The legal precedent
and existing disparity studies often focus on the quality and breadth of information shared via
qualitative data collection, while also ensuring that a sufcient amount of evidence is collected.
Indeed, there are advantages and disadvantages to each method, as summarized in Table 5-1.
However, the most robust and reliable disparity studies incorporate multiple data collection
techniques to ensure collection of a wide range of anecdotal experiences from all types of
contracting participants. This alleviates concerns that the anecdotal evidence is merely a
summary of perceived instances of discrimination from disgruntled bidders who might have
lost out on a contract for any number of reasons apart from discrimination. With a large enough
set of reliable anecdotal accounts, disparity consultants can analyze prevalence and themes
to explore core barriers and issues faced by MBEs in contracting with a particular agency.
7%
64%
66%
76%
79%
0% 20%40% 60%80% 100%
Written Testimony
Survey
Public Hearing
Focus Groups
Interviews
n= 86
Contracting Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing Disparity Studies
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Minority Business Development Agency | December 2016
TABLE 5-1
SUMMARY OF ANECDOTAL EVIDENCE COLLECTION METHODS
As shown in Table 5-1, surveys and personal interviews provided a substantial amount of
anonymity to providers of anecdotal evidence, which allows individuals to provide honest and
detailed accounts, without fear of any perceived or potential repercussions.
75
Anonymity is
important, given that personal interviews and surveys allow participants to make comments that
will not be challenged by peers or panelists as in the case of focus groups or public hearings.
In contrast, focus groups and public hearings offer less anonymity, but can be a more cost-
effective way to obtain anecdotal accounts from a greater number of potential respondents in
a single setting. Focus groups permit consensus building and discussion of major issues, as
well as corroboration, which provides a clear picture of multiple perspectives on the issue being
discussed. One drawback is that groupthink or bias could arise through the course of a focus
group discussion.
Bias is a concern in collecting anecdotal accounts from interviews, focus groups, public hearings
and also surveys. This includes both interviewer bias and response bias.
76
Interviewer bias
arises when the disparity study consultant or interviewer phrases questions in a suggestive
or leading manner, which elicits responses that conrm the political purpose of a question.
Response bias occurs when a poorly constructed group of respondents is too homogeneous
and not indicative of all potential respondents. Most disparity consultants recognize the
potential for bias and are able to address these issues by using multiple techniques, including
75
A Procurement Disparity Study of the Commonwealth of Virginia. MGT of America. January 12, 2004.
76
Sullivan, John. Anecdotes as Evidence: Proving Public Contracting Discrimination in a Strict Scrutiny World. Engage,
Volume 16, Issue 2, pp. 16-22.
Advantages Disadvantages
AnonymitySmall Sample Size
First-hand Personal Account Resource Intensive
Allows Discussion
AnonymityResource Intensive
Large Sample Size No Additional Discussion
Provides Quantitative ResultsStatistical Rigor Issues
Accessible to Multiple ParticipantsLess Anonymity
Can Select Specific ParticipantsSubject to Bias (Groupthink)
Can Control Discussion Resource Intensive
Method
Personal Interviews
Surveys
Focus Groups
Public Hearings Accessible to Everyone Can Lack Control of Discussion
Can Solicit Numerous Viewpoints Lack of Anonymity
Relatively Resource Efficient
Chapter 5: Anecdotal Analysis and Summary
51
December 2016 | Minority Business Development Agency
a control group (i.e., disaffected individuals) and soliciting a representative set of veriable
accounts from a large enough sample of respondents.
Indeed, anecdotal evidence collection from the set of disparity studies was not limited to MBEs.
In fact, 85 percent of the studies analyzed with anecdotal sections included anecdotal data
collection from non-minority rms via surveys, personal interviews, focus groups, and public
hearings. This provided a complete picture of exclusionary behavior, including identifying
whether any common patterns were attributable directly to discrimination or were an issue for
businesses without regard to race or ethnicity. As an example, if both MBEs and non-MBEs
identied “receiving timely payment” as a critical barrier, there is less evidence that the matter
is racially motivated and more evidence to suggest that the agency’s practices hamper all rms
in the contracting process.
The overall credibility and validity of the set of disparity studies anecdotal evidence is supported
by the measures most of the disparity study consultants took in ensuring that anecdotal
accounts were drawn from reliable and veriable sources. With respect to surveys, many studies
relied on statistically signicant random samples of respondents drawn from lists of businesses
that either comprised the availability of rms in the relevant product and geographic markets
or were actual recipients of prime or subcontracts from the procurement agency. One disparity
study encompassed the typical operating procedure for a particular national consultancy to
ensure the credibility of anecdotal evidence drawn from surveys:
[W]e conducted a large scale survey of business establishments in the market area—
both M/WBE and non-M/WBE—and asked owners directly about their experiences,
if any, with contemporary business-related acts of discrimination. We nd that M/WBEs
in the City’s markets report suffering business-related discrimination in large numbers
and with statistically signicantly greater frequency than non-M/WBEs … The mail
survey sample was stratied by industry and drawn directly from the Master M/WBE
Directory and the Baseline Business Universe compiled for this study. Firms were
sampled randomly within strata. M/WBE rms were oversampled to facilitate statistical
comparisons with non-M/WBEs.
77
This effort is typical of disparity study consultants invested in not only ensuring a representative
sample of businesses for anecdotal inquiry, but also for developing reliable indicators that
individual anecdotal accounts are representative of what other similar rms are experiencing
when contracting or interacting with a particular agency. Similar verication procedures also
exist for personal interviews and focus groups. Consider the process typically undertaken by
another large, reputable disparity study consultant:
77
“The State of Minority- and Women- Owned Business Enterprise in Construction: Evidence from Houston”, NERA Economic
Consulting, 4/2012. P. 212-213.
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Minority Business Development Agency | December 2016
The initial stage of the interview process includes screening businesses for their
interest in being interviewed. The screener collected basic demographic data and
specic information to determine the relevant experiences of the business owners.
The screener captured information regarding the interviewee’s experience with
discrimination and interest in relating those experiences to a trained interviewer.
Anecdotal probes were used to solicit information from the interviewees who provided
construction, professional services, including architecture and engineering, or supplies
and services. The questions sought to determine if the business owner encountered or
had specic knowledge of instances where formal or informal contracting practices had
an adverse impact on small, minority, or women-owned businesses (S/M/WBEs) during
the January 1, 2009, through December 31, 2013, study period. A total of 60 interviews
were conducted with African American, Hispanic American, Asian American, Native
American, and Caucasian female, and non-minority male business owners that provide
construction, professional services, or supplies and services procured by the City.
78
In both examples illustrated by the two preceding quotations, the consultants employed a
combination of a survey and personal interviews to raise the level of verication and increase
credibility by focusing on multiple techniques of obtaining veriable anecdotal evidence.
CHARACTERIZING BARRIERS IDENTIFIED IN EXISTING DISPARITY STUDIES
The disparity studies’ qualitative analyses identify a number of contracting barriers that lead to
the observed disparity ratios for MBEs. These barriers arise in the context of market-wide issues
facing MBEs, as well as those created as a direct result of the specic procurement process for a
particular agency within a particular market. Many barriers are the direct result of discrimination,
although other barriers affect businesses regardless of race or ethnicity. The goal of this section
is to describe the primary barriers faced by MBEs to provide local governments and policy
makers with information regarding systemic issues, noting the discriminatory nature of each
barrier where appropriate. Figure 5-2 illustrates the different barriers identied in disparity
studies, with a focus on where barriers arise within the public contracting framework. Figure 5-2
is not exhaustive of all barriers that MBEs may face in a particular jurisdiction.
78
“City of Cincinnati Disparity Study”, Mason Tillman Associates, 7/2015. – p. 10-3.
Chapter 5: Anecdotal Analysis and Summary
53
December 2016 | Minority Business Development Agency
FIGURE 5-2
BARRIERS FACED BY MBES IN PUBLIC CONTRACTING
As shown in Figure 5-2, a number of barriers are external to the specic contracting processes
associated with a particular agency. These include barriers that arise due to discriminatory
behavior with respect to access to capital, exclusionary networks, and outright prejudicial
treatment of MBEs in a particular market. An important note is that just because a study
does not identify a particular barrier in a market, that no MBEs in that market face that barrier.
Government
Agency
Non-MBE
Prime
MBE
MBE as Prime
MBE as
Subcontractor
Prime Level
Discriminatory Barriers
•Timely bid notification
•Explicit discrimination
•Stereotypes
•MBE/DBE stigma
Subcontractor Level
Discriminatory Barriers
•Timely bid notification
•Bid shopping
•Held bid
• Lack of good faith effort
•Only using an MBE if required
•Explicit discrimination
•Stereotypes
•MBE/DBE stigma
•Higher/double standards
Prime Level
Non-Discriminatory Barriers
• Large project sizes
•Bonding/insurance
•Pre-qualification
•Timely payment
Pervasive Barriers Across
Contracting Levels***
•Access to capital
•Network access
•Marketplace discrimination
***Access to Capital and Network Access barriers can arise due to both discriminatory and non-
discriminatory reasons
Contracting Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing Disparity Studies
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Minority Business Development Agency | December 2016
Instead, the studies identify the most prevalent barriers and causes of underrepresentation.
The regression analyses described in the previous chapter support the existence of these
types of barriers and the anecdotal accounts drawn from the disparity studies provide
additional conrmation.
A separate set of barriers include those arising from a contracting agency’s bid procedures and
process. These include large project sizes, bid requirements related to bonding and insurance,
bid timing, and timely payment once a contract is in place. The disparity studies’ anecdotal
evidence sections indicate that these barriers were often applicable to a large number of non-
MBE businesses as well, such that race-neutral means were often recommended as a remedial
solution. However, the anecdotal evidence noted the relationship between these bid-specic
non-discriminatory barriers and market-based issues such as access to capital. In this respect,
issues such as obtaining bonding and insurance are not universally free from the inuence or
impact of discriminatory behavior. Nonetheless, they are barriers that negatively affect the
ability of MBEs to effectively compete in the public marketplace.
The most obvious barriers arising due to discrimination lie in actions by procurement agencies
and non-MBE prime contractors (when considering MBE subcontractors) to purposely
exclude or hinder MBE participation. These include outright prejudicial treatment, attitudes,
stereotypes, implementing higher and double standards for MBEs, or manipulating the
bid process. In these cases, the anecdotal accounts provide supporting evidence that
discrimination drives contracting disparities facing MBEs.
The last category of barriers includes network access barriers, which represent a gray area
concerning whether the barrier arises due to discrimination or as a result of general business
practices. As such, this barrier is complicated to address and will require work from multiple
parties. In certain cases, the exclusion of a particular racial or ethnic group from a network
arises due to discriminatory behavior, but it can be very difcult to prove. In other cases,
exclusionary behavior may arise because businesses and agencies tend to like who they have
worked with in the past, regardless of whether that business is an MBE or non-MBE.
Figure 5-3 shows the frequency with which disparity studies included specic barriers identied
by minority contractors. The most commonly cited barriers were networking barriers, restrictive
contracting requirements (e.g., bonding levels), and receiving timely payment.
Chapter 5: Anecdotal Analysis and Summary
55
December 2016 | Minority Business Development Agency
FIGURE 5-3
FREQUENCY OF BARRIERS IDENTIFIED BY M/WBES
The list of barriers in Figure 5-3 is not an exhaustive list and is limited to observations drawn
from a review of the set of disparity studies that included anecdotal evidence. In addition, the
disparity studies helped characterize where and how MBEs experienced these barriers and
related exclusionary practices during the procurement process.
The remainder of this chapter provides an overview of each major barrier, identifying evidence
of discriminatory behavior, as applicable. While some barriers were explicitly identied via the
surveys administered and the analysis thereof, others were eshed out in conversations as part
of interviews, focus groups, and public hearings.
NETWORKING BARRIERS
Nearly every disparity study reviewed identied contracting disparities arising due to MBEs’ lack
of access within social entrepreneurial networks colloquially referred to as “the good ole boy”
or “good old boys” network. Yet, the issue of exclusionary networks does not lend itself to a
simple, direct conclusion of active discrimination on the part of procurement agencies or non-
MBE prime contractors. One of the most critical challenges facing disparity study consultants
(and readers of these studies) is how to interpret discrimination as opposed to general lack of
access due to business conditions, where the latter point could have an impact on any business,
14%
34%
41%
42%
43%
49%
56%
60%
64%
66%
77%
78%
83%
86%
0% 10% 20% 30% 40% 50% 60%70% 80% 90% 100%
DBE Stigma
Double Standards
Held Bid
Capability Stereotypes
Bid Shopping
Higher Standards
Insurance Requirements
Large Project Sizes
Late Bid Notification
Discriminatory Attitude
Access to Capital
Receiving Timely Payment
Bonding Requirements
Networking Barriers
n = 86
Contracting Barriers and Factors Affecting Minority Business Enterprises: A Review of Existing Disparity Studies
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Minority Business Development Agency | December 2016
regardless of race or ethnicity. Regardless of the source, MBE’s general lack of network access
is a problem across agencies and geographies.
Disparity studies typically present anecdotal evidence that characterizes the network access
barrier as one where an MBE might not obtain a contract due to the following factors:
• Informal relationships among agencies and majority rms that yield preferential
treatment in bid reviews;
• “Friends help friends” where decisions of “who to work with” lie in preexisting
relationships that can be personal as well as professional;
• Lack of information on informal networks, such that MBEs are unable to cultivate these
relationships;
• Majority prime contractors dealing directly with agencies to determine upcoming
projects and bid conditions to the detriment of MBEs; and
• Prejudicial treatment by agencies or primes in not selecting an MBE to do the work.
The most obvious cases of exclusionary access due to discrimination arise in the outright
unjust or prejudicial treatment of rms based on racial or ethnic grounds. In this case, the
procurement ofcial or majority prime elects to exclude the MBE from the networks required
to succeed in contracting, based primarily on the fact of minority-ownership. Firms are acutely
aware of these challenges, as noted from the anecdotal evidence collected in the disparity
studies reviewed. For example, in a disparity study conducted for the municipality of Saint Paul,
Minnesota, a nonminority male participant noted that he “knows there’s an informal network in
Saint Paul that gives advantages to certain businesses but does not know how it operates.”
79
Others in the same study and in the remaining studies echoed his sentiment, noting that
“friends help friends,” which excludes rms that are not well-established in the local network.
These sentiments are echoed throughout the set of studies and are not a prima facie indication
of discrimination, but raise the level of attention necessary to understand how each network
might work. As noted in another study:
I think that sometimes the majority of times, more work is won between the hours of
ve and eight than eight and ve.
80
This statement is indicative of the difculty of segregating causal factors of exclusionary
networks between race-based reasons (i.e., discrimination) versus race-neutral factors
(i.e., impacts all business owners). The issue becomes one of how companies build trust,
relationships, and social capital on a professional and personal level. If prejudice and bigotry
inhibit the ability to cultivate these relationships, then the anecdotal evidence supports
remedial efforts through the use of race-based contracting programs.
79
A Disparity Study for the City of Saint Paul and the Saint Paul Housing and Redevelopment Authority. MGT of America.
August 4, 2008, p. 7-28.
80
Race, Sex, and Business Enterprise: Evidence from Augusta Georgia. NERA Economic Consulting. September 4, 2009, p. 259.
Chapter 5: Anecdotal Analysis and Summary
57
December 2016 | Minority Business Development Agency
Many interviewees who act as subcontractors reported that they often secure work with
prime contractors through their past relationships with those rms.
81
If minorities cannot
break into networks to establish initial relationships, the problem of network exclusion and
resulting contracting disparities continues. Prime contractors reported that they tend to utilize
subcontractors that they know and trust. In addition to issues with potential subcontracting,
MBEs face challenges in terms of network access among agency employees. One contractor
noted that he operates at a disadvantage because of the actions of agency ofcials:
The majority rms get the opportunity to go into state agencies, sit down, and they talk
about ideas and theories. They also can come up with solutions. By the time the bid’s
put out there, they’ve already got something they’ve developed with management that
will match so they’re going to be the successful winner.
82
The lack of information on informal networks also acts as a barrier to MBEs, leading to observed
contracting disparities. Almost every disparity study that covered network access provided
anecdotal accounts summarizing issues with MBEs gaining access to information on these
networks, and notably, how to access the “inside information” exchanged as part of the
network. Per one study:
The added disadvantage of being African American or Hispanic, or one of those, is
that you are not necessarily plugged into a network of information. Information is
power and you don’t have access to some of the information. Whereas, a friend of
yours working in public works could call you up, if you were his fraternity brother or a
member of his club, or whatever, and say, ‘Hey, look out for business coming down the
pike.’ That’s what we fundamentally don’t have access to… that inside information.
We don’t have the networks that many other people in the majority culture have. And
that is the fundamental difference.
83
PROCESS-BASED BARRIERS
A number of barriers that lead to observed disparities reside with agency and prime contractor
management of the bids and bid process when MBEs seek to work as either a prime or
subcontractor. These include bonding & insurance, large project sizes, and bid-specic issues
(bid shopping, held bid, late bid notication).
81
Availability and Disparity Study: California Department of Transportation. BBC Research & Consulting. June 29, 2007.
82
A Historically Underutilized Business (HUB) Disparity Study of State Contracting. MGT of America. March 30, 2010, p. 7-14.
83
Nevada Department of Transportation Disparity Study Final Report, Keen Independent Research, December 6, 2013, p. J-87.
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Minority Business Development Agency | December 2016
Bonding & Insurance Requirements
Most public contracting projects involving construction or large investments up-front require a
contractor to be bonded, which protects the agency if the contractor fails to perform the job,
fails to pay for necessary licenses and permits, fails to pay subcontractors, or fails to monitor a
job site or contract resulting in employee theft, damage or destruction. As a result, a bidder
on a contract requiring bonding needs to show proof that it has obtained the requisite level
of bonding from a surety corporation. Similarly, many public contracts include requirements
for contractors to carry certain types of insurance, typically liability insurance (general and
professional) and workers compensation insurance. The liability insurance protects the public
agency from contractor-caused damage (not covered by the bond), professional liability pertains
to errors made and losses incurred in professional matters (e.g., nance or property valuation),
and workers compensation insurance covers payment for lost wages and medical services for
contractor employees.
Most MBEs indicated difculty in obtaining bonding, which is a barrier to obtaining contracts
and leads to contracting disparities. One reason is that minority-owned rms are typically
smaller in terms of revenue and employees than non-minority rms,
84
which leads surety
companies to avoid providing a high enough bond to meet a particular contract requirement.
Another reason is that public contracting agencies set the bonding requirements at a level
that is too high for most MBEs to meet, given the aforementioned size and scale. In this
respect, when public agencies set the bonding requirement at a level above what might be the
minimum necessary, it excludes a large number of MBEs that might be ready, willing, and able
(i.e., available) to bid but cannot due to the bonding requirement.
The anecdotal summaries in disparity studies noted that bonding issues were not limited to
MBEs. Many interviewees indicated that bonding requirements adversely affected all small
businesses and their opportunities to bid on public contracts, and those barriers related
to bonding are linked to capital access.
85
However, third party macroeconomic data on
discrimination in credit markets, often included in disparity study analyses as part of the
regression analyses sections, clearly indicate a relationship between bonding issues and
discrimination. Anecdotal evidence supports the quantitative results. One trade association
head stated:
Lending institutions have discriminated against the small companies and the American
Americans and what have you. They go in and give them their balance sheet and they
84
Survey of Business Owners. United States Census Bureau. 2012. SBO data conrm that average receipts and number of paid
employees for minority-owned businesses are lower than those of rms owned by white males. For more information, please see
http://www.census.gov/programs-surveys/sbo.html
85
For example, see 2015 State of Indiana Disparity Study. BBC Research & Consulting. March 2016. In another study, an MBE
stated: “It’s a combination of all factors. Being small with limited resources and being a minority because if it didn’t matter, why
would they ask you your ethnicity on the form?” 2014 San Diego Association of Governments Disparity Study. BBC Research &
Consulting. May 2, 2014.
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don’t show a steady ow of cash and they don’t have an asset base. So they don’t get
the bonding.”
86
Consistent disparities and statistically signicant ndings related to loan denials and credit
access for MBEs versus non-MBEs complement these anecdotal insights.
Arguments also exist with respect to insurance requirements prohibiting MBEs from obtaining
contracts, increasing contracting disparities. Many interviewees said that they could obtain
insurance, but that the cost of obtaining it, especially for small businesses, was a barrier to
sustaining their businesses or bidding certain projects. This perspective is not unique to MBEs,
but consistent with discriminatory lending practices, the inability to obtain insurance can include
the impact of discrimination.
Large Project Sizes
An issue that is closely related to bonding and insurance involves large project sizes. Most
disparity studies identied project size as an impediment to contracting for smaller businesses.
The disparity studies indicated that owners of large rms did not necessarily feel that there was
a problem with the current project sizes, but that small rms (including both MBEs and non-
MBEs) almost always discussed project size as a barrier to contracting. One entrepreneur noted
that “project specications are designed in such a way that only large companies can provide
supplies.”
87
As a result, the issue impacts small versus large, as opposed to strictly MBE versus
non-MBE. Nevertheless, larger, bundled contracts typically preclude smaller rms from
acting as a prime, as the smaller rms might not meet contract requirements such as
bonding and insurance. As discussed in the previous section, discrimination in capital
markets can further contribute to the inability of MBEs to get bonding and insurance. This
results in MBE underrepresentation on bidding for large contracts and perpetuates existing
contracting disparities.
Bid Specic Issues (Late Bid Notication, Held Bid, Bid Shopping)
The anecdotal insights provided additional evidence that bid specic issues cause large
contracting disparities. These include exclusionary or discriminatory practices that not only
arise out of prejudicial treatment, but also are a response to race-based program requirements.
This section focuses on the issues of late bid notication, bid shopping, and held bids.
Anecdotal accounts of late bid notication arose largely in the context of MBEs indicating
that prime contractors requested bids from MBEs at the last minute, purportedly to satisfy
good faith efforts in meeting race-based contracting program requirements. In these cases,
86
2014 San Diego Association of Governments Disparity Study. BBC Research & Consulting. May 2, 2014, p. 4-14.
87
A Disparity Study for the City of Saint Paul and the Saint Paul Housing and Redevelopment Authority. MGT of America.
August 4, 2008, p. 7-24.
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late bid notication and inadequate lead time were due to a combination of discrimination
and exclusionary networks. If a prime contractor sends out a late bid notication to an MBE,
they fully expect not to receive a bid from that MBE, allowing them to use a non-MBE. Yet,
the prime contractor can rationalize that it satised good faith efforts to include MBEs by
telling procurement agencies that it sent out bid invitations to MBEs. While this scenario was
presented throughout the set, one study summarized the situation as:
Unscrupulous tactics by prime contractors seeking to avoid [Emerging Business
Enterprise or EBE] program requirements were reported by many interviewees.
Inadequate lead time to respond to prime contractors’ bid requests was reported
as a tactic prime contractors utilized to prevent EBE subcontractors from submitting
timely bids. Some interviewees complained that prime contractors listed them on bid
documents for their EBE certication status with no intent of working with them.
88
With respect to the relationship between late bid notication and exclusionary network issues,
minority business owners expressed concern that they were the last to know about upcoming
opportunities and did not nd out about opportunities with sufcient time to prepare a
thorough bid. This puts minority-owned rms at a distinct disadvantage, partially stemming
from the depressed network access detailed at the start of this segment. Studies reviewed
cited instances where social networks affected the availability of information and lead time,
indicating a relationship between bid notication and also the barriers due to network access.
Business owners who were currently working for an agency or who had personal relationships
with agency staff often found out about opportunities ahead of time, increasing their ability to
prepare and submit a bid. As discussed above, many minority business owners are not part of
these networks and suffer as a result.
In other instances, anecdotal evidence indicated that late bid notication was not to the result
of active discriminatory behavior, but a product of poor planning or bid process execution
by agencies. Some agencies send out notices at the last minute, preventing all prospective
bidders from having a chance to submit a competitive bid or proposal. These situations can
arise due to miscommunication between agencies and primes, instead of discriminatory
behavior. As a result, veriable anecdotal accounts that detail late bid notication issues that
affect all small businesses, particularly subcontractors, will provide deeper insight into whether
race-neutral remedies are necessary at the outset to address agency issues.
Anecdotal experiences with bid shopping and held bids often exhibited a strong discriminatory
pattern throughout the set of disparity studies. A held bid occurs when a prime contractor
solicits information from a subcontractor and includes them on a prime bid. When the prime
contractor wins the bid, however, they do not engage the original subcontractor and instead
work with another rm. Minority business owners identied this barrier often in the anecdotal
88
City of Milwaukee, Study to Determine the Effectiveness of the City’s Emerging Business Enterprise Program, Mason Tillman
Associates, August 2007, p. 7-29.
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December 2016 | Minority Business Development Agency
summaries, noting that they were included to reach minority goals, but never contracted or
received any work as a result. The contracting agency never followed up to ensure that the
bid was fullled as submitted in terms of subcontractors. In addition, no repercussions were
noted for the prime that switched subcontractors despite meeting goals with a minority
contractor. Local governments and contracting agencies must improve monitoring of
subcontracting activity.
Held bids and not using MBEs after submitting a bid is a pervasive and damaging issue. For
example, in a survey for a disparity study for the City of Columbia, 40 percent of subcontractors
reported being dropped from a City project after the award of the contract to the prime
contractor. Of all M/WBEs surveyed, 34 percent mentioned this issue as a signicant
impediment to their business success.
89
It is an issue rooted in discrimination. As an
illustrative example of the phenomenon observed throughout the set, in one study, an
interviewee was explicit about the discrimination inherent in held bids and not receiving work
after being on the bid:
I had an incident where I was sent a good faith – I mean, a request for good faith effort.
I sent them my request. And then that particular contractor, GC, received the job, but
when I called him, he said, “I just sent you that for a request for bid because I have to
because of the good faith effort, but I will never use a minority rm for the service
that I do.”
90
Bid shopping is another activity that was frequently reported in the bid process, but can be
difcult to prove as resulting from discrimination. Figure 5-4 presents a hypothetical example of
this practice, where a prime contractor might share a bid with other potential bidders to see if
they can get a lower price. Bid shopping arising out of discrimination (i.e., the desire to not use
an MBE because of race or ethnicity) was frequently cited in the anecdotal accounts from the
disparity studies.
89
A Historically Underutilized Business (HUB) Disparity Study for the City of Columbia. MGT of America. August 15, 2006, p. 6-10.
90
Race, Sex, and Business Enterprise: Evidence from the City of Austin. NERA Economic Consulting. May 15, 2008,
p. 243.
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FIGURE 5-4
EXAMPLE OF BID SHOPPING
In Figure 5-4, the prime requests a bid from an MBE. The MBE provides a bid of $5,000. Yet,
the prime does not want to work with the MBE and instead, shares the MBE bid information
with his non-MBE friends. The prime provides the bid information to see if he or she can get
a non-MBE to bid under the MBE bid. In this hypothetical, one of the non-MBEs, armed with
the MBE bid information, is able to undercut the MBE bid and successfully win the project.
This insider track of information and “behind closed doors” bid shopping harms minority
entrepreneurs and is an unfair and unethical practice.
When asked about bid shopping, one disparity study included an anecdotal account from a
Hispanic American female owner of an MBE- and WBE-certied specialty contracting rm,
who responded that the practice was continual. She explained that she has twice had a
prime contractor swap around the subcontractors after hearing that competitors had seen her
offers. She noted that this practice is discouraging because of the time involved to prepare
bid responses.
91
Despite the reported prevalence of bid shopping, it is difcult for affected
contractors to prove that it occurs due to discriminatory behavior related to race and ethnicity.
One Hispanic American owner of a construction rm noted that some prime contractors engage
in bid shopping to avoid meeting M/WBE requirements.
92
This sentiment was echoed
91
2015 State of Indiana Disparity Study. BBC Research & Consulting. March 2016, p. E-113.
92
Alameda County Availability Study. Mason Tillman Associates. October 2004, p. 9-25.
MBEs
Initial Bid = $5000
Stage 1
Prime Solicits Bids from
Potential Subcontractors
Stage 2
Prime Solicits Secondary
Bid from non-MBE to
Undercut MBE Bid
No Second Bid
Opportunity
Can you
do it for
less than
$5000?
MBEs
Prime
Contractor
Prime
Contractor
Non-MBEs
Initial Bid = $5200
Secondary Bid = $4900
Non-MBEs
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December 2016 | Minority Business Development Agency
throughout the set when examining the survey, focus groups, and other data collection results.
The difculty in proving such actions presents a challenge in nding remedies for bid shopping.
This difculty reinforces the need to draw from veried experiences that help provide context to
instances where bid issues arise as a means to avoid working with a particular business due to
race or ethnicity.
DISCRIMINATORY ATTITUDES AND PERCEPTIONS
Almost every disparity study contained anecdotal accounts detailing explicit instances of
discrimination in public contracting. These insights took the form of outright prejudice and
incorporation of capability stereotypes and the use of double or higher standards in assessing
MBEs for contracting opportunities. In other instances, outright discriminatory behavior was
tied to previously discussed barriers, such as shopping bids or excluding access explicitly
due to the desire not to work with a rm whose ownership was a particular race or ethnicity.
As a result, many of the barriers discussed in this section interact with or contribute to other
barriers and were mentioned throughout the anecdotal analyses and data in the disparity study
set analyzed. One issue that requires attention in assessing anecdotal accounts is whether
the contracting outcome arises from a perception of discrimination, as opposed to actual
discriminatory behavior. A single selected anecdote might reect the opinion or perception of
a business owner, when in fact the loss of a bid or contract might be due to factors unrelated
to discrimination. However, the selected anecdotes included in this section are drawn from
disparity studies that implement the processes described previously to increase the veriability
and reliability of the anecdotal evidence, collected not only from interviews but also surveys,
focus groups and/or public hearings. As a result, the anecdotes reect a broader range
of experiences from business owners and other stakeholders that interact with the
contracting agencies.
Discriminatory Attitude and Racism
Instances of outright discrimination permeated the anecdotal summaries of the disparity
studies reviewed in this research. The disparity studies captured countless accounts of
disparate treatment and overt racism experienced by MBEs and DBEs. Across geographies
and industries, the anecdotes provided by minority entrepreneurs corroborated one another
and centered around the issue of lack of respect and discrimination based on race or gender.
In some instances, the discriminatory behavior is overt but in others, minority entrepreneurs
picked up on more nuanced acts of discrimination. One example is embodied by the following
anecdotal account:
“I have been called ‘beaniard,’ ‘wetback,’ and a ‘spic,’ I had two guys sit to the right
of me, where one was making arguments to let the other one use a very expensive
piece of equipment on a high-rise building for free. But, that same guy was charging
us a very large amount of money per hour to have access to the same equipment. And
when they made the agreement, the one guy told the other guy, ‘That’s very white of
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you. I appreciate it.’ And the other guy told him, ‘Don’t mention it.’ This was a project
that had an [Emerging Business Enterprise] requirement.”
93
Derogatory insults and preferential treatment for non-MBE rms due to outright discrimination
extended to all ethnic, racial, and gender groups. In one disparity study, interviewees reported
instances of racial slurs, sexist comments and sexual harassment, race-related grafti on work
sites, and other incidents affecting women and minorities throughout the data collection
mechanisms employed.
94
The disparity studies also included a number of different instances
where racism occurred based on prejudice, yet MBEs did not report them due to fears of
retaliation. This presents a signicant policy challenge in terms of rectifying the issue. As
expressed in one study:
A representative of a Hispanic American owned construction rm inquired from a
winning prime why his rm was not selected to subcontract on a job. The prime’s
representative asked the rm’s representative what the owner’s surname was. When
the surname was given, the prime responded, ‘that’s the reason.’ No action was taken
by the potential subcontractor due to concern over retaliation.
95
Although not every instance of racism or discrimination was overt, business owners said that
they could “feel it.”
96
In other cases, there was little doubt about intent. As an example of the
experiences reported in the set, one participant was told by City staff that he was “a black boy
with an attitude.”
97
Capability Stereotypes
In numerous disparity studies, survey responses, focus groups, and interviews reported that
some agency staff and prime contractors consider minority-owned rms to be less qualied
than majority-owned rms. This issue was pervasive throughout the set analyzed and is typied
by several accounts. In one study, an African American male owner of an architectural rm for
twenty years explained why he does not want to be labeled as a minority architect:
“I don’t [like] to be called a minority architect. The word ‘minority’ implies inferiority
in the minds of many of the people who are making the decisions. Not that it is [true],
but that is what they think. So I want to be known as an architect. I don’t want to be
listed as a minority architect [because that is not a] benet for me. As a matter of fact,
93
City of Milwaukee Study to Determine the Effectiveness of the City’s Emerging Business Enterprise Program. Mason Tillman
Associates. August 2007, p. 7-4.
94
Availability and Disparity Study: California Department of Transportation. BBC Research & Consulting. August 31, 2012, p. 3-4.
95
Availability Analysis and Disparity Analysis for the Arizona Department of Transportation. MGT of America. March 16, 2009,
p. 8-46.
96
Disparity Study for Denver Public Schools. MGT of America. October 17, 2014.
97
Mecklenburg County Disparity Study Final Report, MGT of America, January 22, 2004, p. 6-37.
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December 2016 | Minority Business Development Agency
it’s a strike against me to say I’m a minority architect. The playing eld, in terms of
how the selection process is made, is not level. In spite of what is heard, it’s not a level
playing eld.”
98
In a disparity study of the Commonwealth of Virginia, 65 percent of M/WBE respondents
agreed with the statement that “M/WBEs are viewed as less competent than nonminority
rms.” When examining the control group of nonminority male owned rms, only 17 percent
agreed with the same statement. This characterizes a persistent informational and experiential
asymmetry on the part of the affected population, MBEs, and the non-affected population when
it comes to stereotypes and their damaging effects on business performance. In each case, the
offender is a priori judging a particular rm not on capability or performance, but stereotyping
performance based on perceptions about race or ethnicity.
Double or Higher Standards
Double or higher standards pertain to the additional requirements imposed on minority-
owned rms in public contracting that are not imposed on non-MBEs. The studies reviewed
contained anecdotal data to support the presence of double or higher standards for MBEs. The
data collection was supported by multiple anecdotal accounts detailing MBEs encountering
increased scrutiny regarding their work product as well as increased administrative requirements
or “hoops to jump through” once hired. As noted by one anecdotal account:
There is a hidden expectation amongst any African American or minority company that we
better do the job and do it better than anybody else if you want to maintain that contract or do
businesses again in the future.
99
All contractors should be subjected to the same standards and expectations while working as
a prime contractor or as a subcontractor on public projects. However, the anecdotal analyses
indicated that many minority business owners believed that their work was systematically held
to a higher standard than their Caucasian male counterparts.
100
The higher standards barrier
is a systemic issue for minority entrepreneurs. Often, higher standards cause undue economic
hardships for minority entrepreneurs.
101
One business owner who previously worked for a
Caucasian-male-owned rm stated that he sees striking differences in his treatment since
starting his own business.
102
A minority male owner of a construction company reported that
certain City managers hold his work to a higher standard than his colleagues, noting:
98
City of New York Disparity Study, Mason Tillman Associates, January 2005, p. 9-7.
99
City of Cincinnati Disparity Study. Mason Tillman Associates. July 2015, p. 10-6.
100
For an example, please see San Francisco Bay Area Rapid Transit District Availability and Utilization Study. Mason Tillman
Associates. April 2009.
101
For an example, please see City of Milwaukee Study to Determine the Effectiveness of the City’s Emerging Business Enterprise
Program. Mason Tillman Associates. August 2007.
102
Disparity Study for Denver Public Schools. MGT of America. October 17, 2014.
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Some City managers will require me as a minority-owned business to do work that was
not requested of others doing similar work. I did demolition work for the City. The
side was supposed to be seeded and the ground should be very smooth which is how I
complete by jobs. I have seen other jobs where the work was not nearly as professional
as mine but they did not have to redo it.
103
Disparity studies also noted that some minority and female business owners report double
standards for performance of work that had a negative impact on contracting experiences.
Many attributed the double standards directly to race and gender discrimination. Some owners
and managers of MBEs and DBEs report that double standards for work adversely affected their
companies and decreased competitiveness:
When asked if she had experienced any double-standards for minority- or women-
owned rms, the Asian Pacic female owner of a SBA- and DBE-certied environmental
company said, “Yes, of course. You can feel it. More [so] being a minority than being
a woman.”
104
The existence of double and higher standards impacts the observed disparity ratios. First, the
presence of these standards inuences agency and prime selection of minority contractors, such
that if the bids do not meet the inated expectations, the MBE will not be selected. Second,
the perception of these standards acts as a deterrent to MBEs that might otherwise bid on
public contracts. In other words, if an MBE already assumes that the deck is stacked against
them, what incentive is there to actually bid on these contracts? Theoretically, this inuences
the availability of rms, if one determines that a particular MBE is not “ready and willing,” given
it has no intention of bidding on a contract.
DBE Stigma
Although not as pervasive as the overt discrimination discussed above, disparity studies
contained anecdotes and systematically-collected anecdotal data detailing stigma associated
with certication as a disadvantaged business enterprise (DBE). Firms reported that the mere
mention of DBE certication or that the business is owned by a minority was a turnoff when
attempting to do subcontracting work for prime contractors on public contracts. Minority-
owned rms reported that primes did not want to hear about MBE or DBE status
105
and minority-
owned businesses took note and began excluding that information from their business cards and
when searching for new business because it is “a slap against us.”
106
As stated in one report:
103
City of Cincinnati Disparity Study. Mason Tillman Associates. July 2015, p. 10-6.
104
Nevada Department of Transportation Disparity Study Final Report, Keen Independent Research, December 6, 2013, p. J-82.
105
The State of Minority- and Women-owned Business Enterprise: Evidence from Cleveland. NERA Economic Consulting.
December 24, 2012.
106
The State of Minority- and Women-owned Business Enterprise: Evidence from Missouri. NERA Economic Consulting.
June 28, 2012, p. 245.
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December 2016 | Minority Business Development Agency
The African American diversity marketing manager of an MBE/SBE/DBE-certied
environmental consulting company stated that the disadvantages of certication
are that “the rest of the rms that are not certied view your company differently, in
a more negative light due to the lack of education around what a DBE certication
entails. The view in the marketplace is that companies with that certication have poor
qualications and are not qualied.”
107
BARRIERS AFFECTING FIRM FINANCIAL PERFORMANCE AND
ABILITY TO COMPETE
As noted in Chapter 3, most studies include a section dedicated to analysis of publicly-available
data with respect to evidence of discrimination related to access to capital. Indeed, most
disparity studies provided data and results showing that MBEs faced discriminatory lending
practices with respect to gaining and obtaining credit. In this review of disparity studies, distinct
anecdotal accounts with respect to access to capital and receipt of timely payment directly
support the statistical evidence pertaining to discrimination, barriers to public contracting, and
contracting disparities.
Access to Capital
Substantial research demonstrates discriminatory practices in lending, depressed access to
capital and credit, and lower net worth among minority business owners.
108
Financial institutions
restrict the amount of debt capital available to MBEs, engage in redlining of minority areas,
and discriminate in mortgage application approvals. Suppliers offer difcult credit terms
and higher prices to MBEs, and unions restrict the number of training and job slots available
to minority and women workers,
109
further compounding the problem. Anecdotal data and
individual illustrative accounts drawn from the disparity studies highlighted the perception of
discrimination, but predominantly focused on size issues that affect access to capital for all small
businesses, independent of race or ethnicity. As stated in one report:
An African American male-owned DBE/MBE/SBE-certied masonry subcontractor,
stated that he has had difculties obtaining nancing. This is a part of the reason
why he is a disadvantaged business. He has had personal issues in the past that has
affected his ability to receive nancing on projects. It does not make sense to him when
he is trying to make payroll and payments to rent equipment and has an outstanding
history of making those payments as it relates to his business, but when it comes to
obtaining nancing for his work related projects, he has difculty obtaining nancing
107
California Department of Transportation, Availability and Disparity Study, BBC Research and Consulting, August 31, 2012,
p. J-6.
108
For a discussion of general access to capital issues, please see Analysis of Essex County Procurement and Contracting:
Final Report prepared by the University of Minnesota Disparity Study Research Team, 2005.
109
MWBE Local Business Disparity Study for the City of Evanston. D.J. Miller & Associates. April 1996.
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because of issues in his personal life. He stated that with respect to obtaining bonding,
on a $1 million bond, 2.5 percent is required. He said that if he had that kind of cash
available, he would not qualify for disadvantaged status. He feels that this is another
way that small businesses are disqualied for projects.
110
As another example of access to capital issues, interviewees in a 2007 California Department
of Transportation study reported that nancing was difcult for smaller companies with fewer
assets and new companies with less history, although not necessarily due to race.
111
Small
business owners indicated that access to nancing was a barrier in general and more specically
at startup and the initial growth phases. In a study of Cleveland, Ohio, a sizeable number of
entrepreneurs used personal resources to nance their businesses, including second mortgages
and credit cards.
112
Receiving Timely Payment
In almost every disparity study analyzed, receiving timely payment was raised as a barrier to
successful contracting. Time and time again, study authors noted that “the worst problem
overall for MBEs was receiving timely payment for work performed.”
113
This issue was noted
repeatedly at both the prime and subcontractor levels and is pervasive, hitting at access to
capital as well as issues related to MBEs remaining as going concerns given potential liquidity
issues that arise out of lack of timely payment. As an example, California Department of
Transportation (Caltrans) contractors who were interviewed went so far as to say that they would
prefer not to work for Caltrans because the agency is so slow to make payments.
114
Late payments by prime contractors and government agencies are problematic for small
business owners who are struggling to maintain solvency, pay creditors, and meet payroll.
Some interviewees, including MBEs, WBEs, and majority-owned rms, reported that lack of
timely payment on contracts and subcontracts led to an increased need for loans, business
capital, and nancing.
115
For example, two-thirds of the written complaints that the Georgia
Department of Transportation received within a particular study period included assertions by
DBE subcontractors that the prime contractor had improperly delayed or withheld payment to
the subcontractor.
116
110
Metro Disparity Study Final Report, Los Angeles County Metropolitan Transportation Authority, BBC Research and Consulting,
January 22, 2010, p. B-178.
111
Availability and Disparity Study: California Department of Transportation. BBC Research & Consulting. June 29, 2007.
112
The State of Minority- and Women-owned Business Enterprise: Evidence from Cleveland. NERA Economic Consulting.
December 24, 2012.
113
Race, Sex, and Business Enterprise: Evidence from Augusta, Georgia. NERA Economic Consulting. September 4, 2009, p. 252.
114
Availability and Disparity Study: California Department of Transportation. BBC Research & Consulting. June 29, 2007.
115
The State of Minority- and Women-owned Business Enterprise: Evidence from Cleveland. NERA Economic Consulting.
December 24, 2012.
116
2012 Georgia Department of Transportation Disparity Study. BBC Research & Consulting. June 15, 2012.
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December 2016 | Minority Business Development Agency
CHAPTER 6:
Research Findings
The objective of this report is to provide insight into how the qualitative data and evidence
included in disparity studies identies contracting barriers and discriminatory behavior which
lead to the observed contracting disparities for MBEs. The report analyzes the impetus for
disparity studies, including the components and methodologies of sound disparity studies. As
part of the analysis, the report summarizes existing disparity ratios contained in a select set of
disparity studies. Lastly, the report includes an analysis of additional quantitative and qualitative
evidence that facilitates an investigation into what causes disparities such that the ndings can
advance the dialogue into nding effective policy solutions to remediate contracting disparities
for MBEs.
A review of 100 disparity studies, reports, and summaries indicated signicant contracting
disparities for minority business enterprises (MBEs), pervasive across different ethnic and racial
groups, industries, and geographies. The disparity results were substantial, with over 78 percent
of disparity ratio observations falling below a 0.8 or 80 percent threshold used to classify a
“substantial” disparity. In many cases, these disparity ratios were statistically signicant at high
levels, such that disparity study consultants could reject chance as a prime driver of contracting
disparities. However, the presence of signicant disparities observed from numerical disparity
ratios does not imply discrimination. Instead, disparity studies rely on a wealth of additional
information to characterize inferences of discrimination and the need for race-based contracting
programs implied by substantial and signicant disparities.
Anecdotal data collection and analysis is an essential disparity study component in terms of
understanding what discriminatory behaviors are most pervasive. The anecdotal evidence
captured in each disparity study reviewed as part of the research design provided the
foundation for evaluating contracting barriers, how these barriers arise, and in what context they
arise (e.g., discriminatory or non-discriminatory). Key barriers identied in the qualitative data
analysis include:
• Barriers arising largely from discriminatory behavior: Agency and prime contractors
employing capability stereotypes, double or higher standards, and manipulating
bid processes based on prejudicial factors unrelated to business performance; also
systemic discrimination against MBEs related to key market-based issues including
access to capital.
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• Barriers arising largely from non-discriminatory behavior: Actions that inuence all
businesses regardless of race or ethnicity, including large project sizes, bid qualications,
and timely payment.
• Barriers related to network access: Exclusion of MBEs from formal or informal networks
that would facilitate greater access to public contracting opportunities, although these
represent a gray area between discriminatory and non-discriminatory behavior.
With respect to the last bullet, there is a ne line between claims of discrimination and a general
lack of access. MBEs often cited network exclusion as a barrier, but often the reasons why were
split between claims of discrimination versus understanding that most businesses prefer to work
with rms they know and trust, regardless of race or ethnicity.
The review of existing disparity studies yielded several common themes and insights beyond
the characterization of contracting barriers and evidence of discrimination. These included:
• The “needle has not moved” with respect to overcoming disparities. Every study
identied contracting disparities and many supported these ndings with additional
quantitative and anecdotal evidence that emphasized the need for both race-neutral
and race-conscious remedial efforts. Yet over time, disparities were prevalent even
within the same jurisdiction.
117
• Disparity studies often reported the same race-neutral remedies (e.g., unbundling large
contracts, improving payment processes, improving data collection) and race-conscious
remedies (e.g., improved goal setting and monitoring) to address contracting disparities,
yet the studies fail to detail the extent to which agencies have actually implemented and
measured the success or failure of these recommendations.
• Race-conscious programs typically helped MBEs when enacted; however the legal
history has illustrated that these programs need to comply with the strict scrutiny
standard and be narrowly tailored.
In addition to common observations, the disparity studies and anecdotal evidence highlighted
common problems and issues with contracting disparities experienced by MBEs. These include:
• Enforcement and accountability of race-conscious programs by contracting agencies.
There is a perception among some MBEs that prime contractors do not engage in good
117
For example, the Washington Suburban Sanitary Commission commissioned disparity studies in 1999, 2005, 2010 and 2015.
Although the 2015 study has yet to be published, the rst three studies indicated that substantial disparities continued to exist
for many racial and ethnic groups. While the 2005 study noted improvement over the 1999 study, the disparity consultants, which
were different for each of the rst three studies, often recommended similar approaches to addressing disparities. Likewise,
disparity studies conducted in 2007 and 2012 for the California Department of Transportation (Caltrans) both contained substantial
statistically signicant disparities for specic racial and ethnic groups. As a result, Caltrans still failed to meet DBE goals. What
remains unclear and a major policy issue is to what extent Caltrans implemented recommendations provided in the 2007 disparity
study that might provide insight into why continued disparity observations existed in 2012.
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faith efforts to comply with race-conscious programs and agencies do not monitor or
enforce these efforts.
118
• Resource constraints are a major issue facing contracting agencies. Many suggestions
for program improvements, both race-neutral and race-conscious, require a substantial
monetary investment (both human capital and infrastructure) at the public agency level.
Based on the political and economic environment, some of these recommendations are
prohibitive given lack of resources.
• There is often insufcient analysis and evidence of subcontracting activity at the agency
level. Given that subcontracting is an important and critical component of increasing
MBE participation in public contracting, greater oversight and accountability of
subcontracting behavior coupled with better and more reliable data collection should
be a priority.
These three bullet points also raise an important question for future research. Do disparity
studies and conclusions provide insight into how governments are doing with respect to
rectifying disparities? A logical next step in the research process is to investigate what is (and is
not) being done to help address the causal factors of contracting disparities, including the role
or inuence of discrimination against MBEs.
THERE IS A NEED FOR INNOVATIVE POLICIES
The disparity study review indicated that both discriminatory and non-discriminatory actions
lead to contracting disparities for MBEs. Additional research is needed to understand what
steps public agencies have taken to address these disparities. Specically, whether agencies
have been effective at implementing the common policy prescriptions that most disparity
studies include and to what extent these policies have either succeeded or failed. Beyond this,
there are a number of areas to explore and research with respect to lessening barriers faced by
MBEs in public contracting. Suggestions include, but are not limited to:
• Developing a uniform approach to determining the capacity of rms. A holistic
denition could consider key individuals, equipment, nancing, technology, and the
availability to compete, among other factors. This can alleviate disagreements of which
rms are available in a particular geographic and product market.
• An analysis of how often disputes are brought against municipalities/agencies could
be a useful tool to help agencies and policymakers evaluate the current state of public
contracting for minorities. Key issues include what is the cost of these actions and who
pays? What level of resources is being dedicated to defend the program that could be
used to improve the program?
118
Numerous disparity studies included anecdotal accounts which touted the belief that without a race-conscious program in
place, prime contractors would never use an MBE.
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• Research into the real ramications for a rm that engages in discriminatory behavior
and is caught. How do different municipalities and agencies deal with this scenario? A
large-scale survey and interview effort could offer clarity and assist in developing policies
that will deter rms from engaging in discriminatory behavior by dis-incentivizing it.
• To reduce informational asymmetries resulting from established and often exclusive
networks, governments can create a centralized bidding notication hub for all city/
related agencies where bid posting is mandatory. This will ensure equal access to
information as well as timely and equal notication.
• The Federal Government should be a model for state and local governments in
addressing and understanding the public contracting process. To what extent can new
technology or innovative tools be used to educate and inform government contracting
ofcers with respect to barriers faced by MBEs? Would these tools be transferable
to local contracting agencies? Can tools be developed at a federal level to help
standardize and assist all agencies in the collection and management of procurement
data at the prime and subcontractor level? Organizations like the MBDA can push
for ways to standardize data collection procedures and elements. This will be a long
process but one that will ultimately result in greater information and better-informed
policies to affect change.
• Little work exists to understand the economic impact of discrimination in public
contracting for MBEs. A study that demonstrates the value of these rms to the
agencies and communities in which they work is necessary to drive home the business
case for afrmative-action programs that remedy existing contracting disparities.
• Agencies such as the MBDA could host and sponsor working groups of leading disparity
study professionals to discuss and contrast the merits and difculties of current disparity
study methodologies, particularly with respect to the issue of dening both “availability”
and “ready, willing, and able” rms.
• Agencies can generate disparity study fact sheets and distribute them to buyers and
ofce staff. This allows staff to see exactly what issues the disparity study identied with
respect to discrimination and should advance the discussion towards nding solutions.
An ongoing education process could focus on understanding specic problems and
using teamwork to solve them. It could also encourage buy-in across the organization
by starting with a thorough understanding of the problem.
• Certifying organizations could offer different levels of certications and certify, for
example, that a rm can do a specic type of work at a specic dollar amount. This
would reduce the risk to municipalities and states, and would remove the rationale for
disparities that capacity is the main issue.
• Contractors who did not win a bid require objective and accurate feedback to improve
in subsequent bidding opportunities. Although not cited as a major barrier, multiple
minority business owners reported that they lack feedback on failed proposals.
Because most proposals contain evaluation criteria in the performance work statement,
government agencies should provide the information on rm and proposal ratings to
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December 2016 | Minority Business Development Agency
contractors who did not win in an effort to correct their mistakes in their next proposal to
increase their chances of winning.
• States and municipalities should evaluate the feasibility and implementation of
completely anonymous incident reporting systems. Staff members involved in issues
should be apprised of the situation and if found that they contributed to the problem,
should face monitored corrective action or other sanctions.
• A study that examines the economic impact of discrimination in public contracting
could help quantify lost revenue and the impact on communities. This study could
help organizations like the MBDA and the Department of Justice (DOJ) to create a
centralized data system going forward where state and municipality data ows in,
collecting anecdotal information, incident reports, payment speed, etc. The data
would be publicly available and would permit the MBDA and the DOJ to proactively
develop and run well-informed initiatives to alleviate discriminatory behavior that causes
disparities in public contracting.
Appendix A: List of Disparity Studies (Chronological)
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December 2016 | Minority Business Development Agency
APPENDIX A
List of Disparity Studies (Chronological)
• “2015-16 State of Indiana Disparity Study”, BBC Research & Consulting, 3/2016. (Indiana)
https://www.in.gov/idoa/mwbe/les/Final_Disparity_Study_Report_IDOA.pdf
• “Disadvantaged Business Enterprise Availability, Utilization, and Disparity Study for the San Francisco Municipal
Transportation Agency (SFMTA)”, Rosales Business Partners LLC, 11/2015. (San Francisco, California)
https://www.sfmta.com/sites/default/les/agendaitems/2016/4-19-16%20Item%2014%20Disparity%20Study%20-
%20report.pdf
• “Minority- and Women-owned Business Enterprise (M/WBE) Program Disparity Study”, MGT of America,
10/2015. (San Antonio, Texas)
http://www.saws.org/business_center/SMWB/study/docs/SAWS_MWBE_Disparity_Study_20150104.pdf
• “Minority- and Women-owned Business Enterprise (M/WBE) Program Disparity Study”, MGT of America,
10/2015. (San Antonio, Texas)
http://www.saws.org/business_center/SMWB/study/docs/SAWS_MWBE_Disparity_Study_20150104.pdf
• “Minority- and Women-owned Business Enterprise (M/WBE) Program Disparity Study”, MGT of America,
10/2015. (San Antonio, Texas)
http://www.saws.org/business_center/SMWB/study/docs/SAWS_MWBE_Disparity_Study_20150104.pdf
• “Broward County Public Schools Disparity Study”, Mason Tillman Associates, 10/2015. (Broward County, Florida)
http://www.broward.k12..us/supply/sdop/docs/disparity/SBBC%20Disparity%20Study%20Final%20Report%20
10-4-15%20(Posted%2003.2016).pdf
• “City of Atlanta 2015 Disparity Study Report”, Keen Independent Research, 10/2015. (Atlanta, Georgia)
http://citycouncil.atlantaga.gov/15-O-1556-Full-Keen-Independent-2015-City-of-Atlanta-Disparity-Study.pdf
• “City of Atlanta 2015 Disparity Study Report”, Keen Independent Research, 10/2015. (Atlanta, Georgia)
http://citycouncil.atlantaga.gov/15-O-1556-Full-Keen-Independent-2015-City-of-Atlanta-Disparity-Study.pdf
• “City of Philadelphia Fiscal Year 2014 Annual Disparity Study”, Econsult Corporation, 8/2015.
(Philadelphia, Pennsylvania)
http://www.phila.gov/commerce/Documents/Fiscal%20Year%202014%20Annual%20Disparity%20Study.pdf
• “City of Cincinnati Disparity Study”, Mason Tillman Associates, 7/2015. (Cincinnati, Ohio)
https://www.cincinnati-oh.gov/manager/assets/File/City%20of%20Cincinnati%20Disparity%20Study%20Final%20
Report%209-27-2015.pdf
• “Arizona Department of Transportation Disparity Study Report”, Keen Independent Research, 7/2015. (Arizona)
https://www.azdot.gov/docs/default-source/beco-library/2015-adot-disparity-study-report-may-2015.pdf?sfvrsn=4
• “City of St. Louis Disparity Study”, Mason Tillman Associates, 4/2015. (St. Louis, Missouri)
https://www.stlouis-mo.gov/government/departments/sldc/upload/City-of-St-Louis-Disparity-Study-Final-5-11-15.pdf
• “Durham County/City of Durham, North Carolina Multi-Jurisdictional Disparity Study”, Grifn & Strong, P.C.,
1/2015. (Durham, North Carolina) https://durhamnc.gov/DocumentCenter/View/2648
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• “Disparity Study for Denver Public Schools”, MGT of America, 10/2014. (Denver, Colorado)
http://businessdiversity.dpsk12.org/wp-content/uploads/2014/10/DPS-Disparity-Study-Draft-Report-10.17.2014.pdf
• “State of Missouri Ofce of Administration Disparity Study”, Colette Holt & Associates, 10/2014. (Missouri)
https://oa.mo.gov/sites/default/les/2014MOOADisparityStudyFinal.pdf
• “North Carolina Department of Transportation Disparity Study, 2014”, Colette Holt & Associates, 7/2014. (North
Carolina) https://www.ncdot.gov/download/about/regulations/ncdotdisparitystudy2014.pdf
• “City of Philadelphia Fiscal Year 2013 Annual Disparity Study”, Econsult Corporation, 6/2014.
(Philadelphia, Pennsylvania)
http://www.phila.gov/commerce/Documents/City%20of%20Philadelphia-FY13%20Annual%20Disparity%20Study.pdf
• “Connecticut Disparity Study: Phase 2”, The Connecticut Academy of Science and Engineering, 5/2014.
(Connecticut) http://www.ctcase.org/summaries/disparity_phase2_sum.pdf
• “2014 San Diego Association of Governments Disparity Study”, BBC Research & Consulting, 5/2014. (San Diego,
California) http://www.bbcresearch.com/images/SANDAG_Final_Disparity_Study_Report_web.pdf
• “City of Mobile Disparity Study 2010-2012”, Speeches ETC., 2/2014. (Mobile, Alabama)
https://www.cityofmobile.org/announcement_les/dsnal_report.pdf
• “Nevada Department of Transportation Disparity Study Final Report”, Keen Independent Research, 12/2013.
(Nevada) https://nevadadot.com/uploadedFiles/NDOT/About_NDOT/NDOT_Divisions/Administration/
Contract_Compliance/Disparity%20Study%20Final%20Report%20Dec%202013.pdf
• “Connecticut Disparity Study: Phase 1”, The Connecticut Academy of Science and Engineering, 8/2013.
(Connecticut) http://www.ctcase.org/reports/disparity/disparity.pdf
• “Jacksonville Multi-Jurisdictional Disparity Study Volume 1”, Mason Tillman Associates, 8/2013.
(Jacksonville, Florida) http://www.coj.net/departments/jedc/docs/equal-business-opportunity/contract-
compliance/nal-city-of-jacksonville-disparity-study-report-.aspx
• “Disadvantaged Business Enterprise Disparity Study: Volume 1”, NERA Economic Consulting, 7/2013. (Maryland)
http://www.mdot.maryland.gov/Ofce%20of%20Minority%20Business%20Enterprise/Resources_Information/
DBEDisparityStudy%202013%20Vol1.pdf
• “Disadvantaged Business Enterprise Disparity Study: Volume 1”, NERA Economic Consulting, 7/2013. (Maryland)
http://www.mdot.maryland.gov/Ofce%20of%20Minority%20Business%20Enterprise/Resources_Information/
DBEDisparityStudy%202013%20Vol1.pdf
• “Disadvantaged Business Enterprise Disparity Study: Volume 1”, NERA Economic Consulting, 7/2013. (Maryland)
http://www.mdot.maryland.gov/Ofce%20of%20Minority%20Business%20Enterprise/Resources_Information/
DBEDisparityStudy%202013%20Vol1.pdf
• “City and County of Denver: Minority/Women Owned/Disadvantaged Business Enterprise Disparity Study”,
MGT of America, 7/2013. (Denver, Colorado)
https://www.denvergov.org/Portals/690/documents/DSBO/Disparity%20Study%202013.pdf
• “2012 Disadvantaged Business Enterprise (DBE) Program Disparity Study Update”, Mason Tillman Associates,
3/2013. (Los Angeles County, California)
http://media.metro.net/about_us/disparity_study/images/Final_Disparity_Study_Report.pdf
• “Disparity Study Metropolitan St. Louis Sewer District”, Mason Tillman Associates, 12/2012. (St. Louis, Missouri)
http://www.stlmsd.com/sites/default/les/misc/disparity-study.pdf
• “The State of Minority- and Women- Owned Business Enterprise: Evidence from Mississippi”, NERA Economic
Consulting, 12/2012. (Mississippi)
http://jmaa.com/wp-content/uploads/2013/01/NERA_JMAA_Disparity_Study_FinalRev.pdf
Appendix A: List of Disparity Studies (Chronological)
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December 2016 | Minority Business Development Agency
• “The State of Minority- and Women- Owned Business Enterprise: Evidence from Cleveland”, NERA Economic
Consulting, 12/2012. (Cleveland, Ohio)
https://www.ceacisp.org/sites/default/les/images/disparity_study_cleveland_2006-2010_pub_dec_2012.pdf
• “Memphis Light, Gas, and Water Division Comprehensive Disparity Study and Policy Formulation”, MGT of
America, 12/2012. (Memphis, Tennessee)
http://www.mlgw.com/images/content/les/pdf/FinalDisparityStudyReport_01_18_2013.pdf
• “Comprehensive Disparity Study for the City of Pensacola”, MGT of America, 9/2012. (Pensacola, Florida)
http://www.ci.pensacola..us/DocumentCenter/Home/View/131
• “Availability and Disparity Study: California Department of Transportation”, BBC Research & Consulting, 8/2012.
(California) http://www.dot.ca.gov/hq/bep/docs/2012_Caltrans_Availability_and_Disparity_Study_Final.pdf
• “The State of Minority- and Women- Owned Business Enterprise: Evidence from Missouri”, NERA Economic
Consulting, 6/2012. (Missouri) http://www.modot.org/ecr/documents/NERAMODOTDisparityStudyFinal3.pdf
• “2012 Georgia Department of Transportation Disparity Study”, BBC Research & Consulting, 6/2012.
(Georgia) http://www.dot.ga.gov/PartnerSmart/Business/Documents/2012%20Disparity%20Study/
Final/2012DisparityStudy-FinalReport.pdf
• “The State of Minority- and Women- Owned Business Enterprise in Construction: Evidence from Houston”,
NERA Economic Consulting, 4/2012. (Houston, Texas)
http://www.houstontx.gov/obo/disparitystudynalreport.pdf
• “City of Philadelphia Fiscal Year 2010 Annual Disparity Study”, Econsult Corporation, 10/2011. (Philadelphia,
Pennsylvania) http://www.phila.gov/commerce/Documents/2010%20Disparity%20Study.pdf
• “The City of Charlotte Update Disparity Study”, MGT of America, 9/2011. (Charlotte, North Carolina)
http://charlottenc.gov/mfs/cbi/Documents/2011DisparityStudy.pdf#search=disparity%20study
• “Illinois Department of Transportation/Illinois Tollway Disadvantaged Business Enterprises Disparity Study:
Volume 2”, Mason Tillman Associates, 9/2011. (Illinois)
http://www.diversity.dot.illinois.gov/pdf/DBEDisparityStudy.pdf
• “Illinois Department of Transportation/Illinois Tollway Disadvantaged Business Enterprises Disparity Study:
Volume 1”, Mason Tillman Associates, 8/2011. (Illinois)
https://www.illinoistollway.com/documents/10157/15890/Final+Disparity+Study+Report
• “The State of Minority- and Women- Owned Business Enterprise: Evidence from Maryland”, NERA Economic
Consulting, 2/2011. (Maryland) http://www.mdot.maryland.gov/Ofce%20of%20Minority%20Business%20
Enterprise/Resources_Information/NERA_MD_Disparity_Study_Final_20110218.pdf
• “Portsmouth Public Schools Procurement Disparity Study Final Report”, MGT of America, 1/2011.
(Portsmouth, Virginia) http://pps.k12.va.us/UserFiles/Servers/Server_794494/File/MWBE%20Program/
PPS%20Procurement%20Disparity%20Study.pdf
• “Washington Suburban Sanitary Commission 2010 Disparity Study”, Mason Tillman Associates, 1/2011.
(Maryland/Washington, DC) https://www.wsscwater.com/les/live/sites/wssc/les/SLMBE/WSSC%202010%20
Disparity%20Study%20Final%20Report.pdf
• “Disparity Study for the City of Milwaukee”, D. Wilson Consulting Group, 12/2010. (Milwaukee, Wisconsin)
http://city.milwaukee.gov/ImageLibrary/Groups/doaEBEP/Events/Disparity_Study_-_Full_Report.pdf
• “The State of Minority- and Women- Owned Business Enterprise: Evidence from Broward County”, NERA
Economic Consulting, 11/2010. (Broward County, Florida)
http://www.broward.org/zArchive/econdev/Documents/NERABrowardDisparityStudyFinal112210.pdf
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• “A Study to Determine DBE Availability and Analyze Disparity in the Transportation Contracting Industry in
Oklahoma”, BBC Research & Consulting, 11/2010. (Oklahoma)
https://www.ok.gov/odot/documents/02_dbe_dis_title-page.pdf
• “The State of Minority- and Women-Owned Business Enterprise: Evidence from Hawai’i”, NERA Economic
Consulting, 10/2010. (Hawaii)
http://www.oahumpo.org/wp-content/uploads/2013/01/ReportNERA_HDOT_nal.pdf
• “The State of Minority- and Women- Owned Business Enterprise: Evidence from Minneapolis”, NERA Economic
Consulting, 10/2010. (Minneapolis, Minnesota)
http://www.ci.minneapolis.mn.us/www/groups/public/@civilrights/documents/webcontent/wcms1p-084807.pdf
• “Joint Availability and Disparity Study: City of Arlington”, Mason Tillman Associates, 6/2010. (Arlington, Texas)
http://www.arlington-tx.gov/nance/wp-content/uploads/sites/24/2014/06/NCTOG-Joint-Availability-and-
Disparity-Study-for-the-City-of-Arlington.pdf
• “Airport Concessions Disparity Study”, Exstare Federal Services Group, 5/2010. (Phoenix, Arizona)
https://skyharbor.com/docs/default-source/pdfs/airport-concessions-disparity-study-nal-report.pdf?sfvrsn=2
• “The State of Minority- and Woman- Owned Business Enterprise: Evidence from New York”, NERA Economic
Consulting, 4/2010. (New York) http://esd.ny.gov/mwbe/Data/NERA_NYS_Disparity_Study_Final_NEW.pdf
• “A Historically Underutilized Business (HUB) Disparity Study of State Contracting 2009”, MGT of America, 3/2010.
(Texas) http://trcc.state.tx.us/procurement/prog/hub/disparity/Texas_DS_2009_ExeSum.pdf
• “City of Memphis, Tennessee Comprehensive Disparity Study”, Grifn & Strong, P.C., 3/2010. (Memphis,
Tennessee) http://www.memphistn.gov/portals/0/pdf_forms/diversity_study.pdf
• “A Disparity Study for the Commonwealth of Virginia”, MGT of America, 1/2010. (Virginia) http://static.
mgnetwork.com/rtd/pdfs/20100328_race_disp04.pdf
• “OCTA Disparity Study Final Report”, BBC Research & Consulting, 1/2010. (Orange County, California)
https://cammnet.octa.net/les/OCTA%20Disparity%20Study%20Final%20Report.pdf
• “Metro Disparity Study Final Report: Los Angeles County Metropolitan Transportation Authority”, BBC Research
& Consulting, 1/2010. (Los Angeles County, California)
http://media.metro.net/about_us/deod/images/disparity_study/Metro-Disparity-Study-Final-Report-01-22-10.pdf
• “Colorado Department of Transportation Statewide Transportation Disparity Study”, D. Wilson Consulting
Group, 11/2009. (Colorado)
https://www.codot.gov/library/studies/2009-disparity-study-and-appendices/CDOT_2009_Disparity_Study.pdf
• “State of Minnesota Joint Availability and Disparity Study: Department of Transportation”, MGT of America,
10/2009. (Minnesota) http://www.mmd.admin.state.mn.us/disparity/Revised2009MnDOTDisparityStudy.pdf
• “State of Minnesota Joint Availability and Disparity Study: Department of Administration”, MGT of America,
10/2009. (Minnesota) http://www.mmd.admin.state.mn.us/disparity/Revised2009AdminDisparityStudy.pdf
• “State of Minnesota Joint Availability and Disparity Study: Metropolitan Airports Commission”, MGT of America,
10/2009. (Minnesota) https://www.metroairports.org/documents/MAC-2009-Disparity-Study.aspx
• “State of Minnesota Joint Availability and Disparity Study: Metropolitan Mosquito Control District”,
MGT of America, 10/2009. (Minnesota)
http://www.mmd.admin.state.mn.us/disparity/Revised2009MMCDDisparityStudy.pdf
• “State of Minnesota Joint Availability and Disparity Study: Metropolitan Council”, MGT of America, 10/2009.
(Minnesota) http://www.mmd.admin.state.mn.us/disparity/Revised2009METCDisparityStudy.pdf
• “State of Minnesota Joint Availability and Disparity Study”, MGT of America, 10/2009. (Minnesota)
http://www.mmd.admin.state.mn.us/disparity/Revised2009MnDOTDisparityStudy.pdf
Appendix A: List of Disparity Studies (Chronological)
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December 2016 | Minority Business Development Agency
• “Race, Sex, and Business Enterprise: Evidence from Augusta, Georgia”, NERA Economic Consulting, 9/2009.
(Augusta, Georgia) http://www.augustaga.gov/DocumentCenter/Home/View/2072
• “Measuring Business Opportunity: A Disparity Study of NCDOT’s State and Federal Programs”, Euquant, 8/2009.
(North Carolina) https://connect.ncdot.gov/business/SmallBusiness/Documents/Business%20Opportunity%20
Compliance%20-%20Full%20Version.pdf
• “Disparity/Availability Study for the Montana Department of Transportation”, D. Wilson Consulting Group,
8/2009. (Montana)
http://www.mdt.mt.gov/other/webdata/external/research/docs/research_proj/disparity/nal_report.pdf
• “City of Davenport Disparity Regarding Minority and Women Participation in Contracting”, Mason Tillman
Associates, 6/2009. (Davenport, Iowa)
http://www.davenportnaacp.org/downloads/Davenport_Disparity_Study_2009.pdf
• “Report on the City of Chicago’s MWBE Program”, David G. Blanchower, 6/2009. (Chicago, Illinois)
http://www.dartmouth.edu/~blnchr/papers/chicago%20sunset%20nal%20report%20june%2010th%202009-0.pdf
• “San Francisco Bay Area Rapid Transit District Availability and Utilization Study”, Mason Tillman Associates,
4/2009. (San Francisco, California)
https://www.bart.gov/sites/default/les/docs/Final_Availability_and_Utilization_Study_4-6-09.pdf
• “Availability Analysis and Disparity Analysis for the Arizona Department of Transportation”, MGT of America,
3/2009. (Arizona) https://repository.asu.edu/items/28164
• “A Comprehensive Disparity Study of the City of Tucson MWBE Program”, D. Wilson Consulting Group, 9/2008.
(Tucson, Arizona) https://www.tucsonaz.gov/les/oeop/DisparityStudy08.pdf
• “A Disparity Study for the City of Saint Paul and the Saint Paul Housing and Redevelopment Authority”, MGT of
America, 8/2008. (Saint Paul, Minnesota) https://www.stpaul.gov/DocumentCenter/Government/
Human%20Rights%20&%20Equal%20Economic%20Opportunity/Publications%20&%20Resources/
Disparity%20Study/2008%20Disparity%20Study_201506161151224076.pdf
• “A Second-Generation Disparity Study for the City of Dayton, Ohio”, MGT of America, 8/2008. (Dayton, Ohio)
http://www.mvfairhousing.com/ai2015/2008-08-08_Disparity_Study_Dayton.PDF
• “Race, Sex, and Business Enterprise: Evidence from the City of Austin”, NERA Economic Consulting, 5/2008.
(Austin, Texas)
https://www.austintexas.gov/sites/default/les/les/Small_Minority_Business/Report-neracoa_may2008.pdf
• “Measuring Minority- and Woman-Owned Construction and Professional Service Firm Availability and
Utilization”, CRA International - Mark Berkman, Matthew Johnson, Robert Fairlie, 12/2007. (Santa Clara Valley,
California) http://www.vta.org/sfc/servlet.shepherd/version/download/068A0000001FbwY
• “A Study to Determine DBE Availability and Analyze Disparity in the Transportation Contracting Industry in
Idaho”, BBC Research & Consulting, 12/2007. (Idaho) https://itd.idaho.gov/civil/pdf/Disparity/Study.pdf
• “Quantitative Analysis of the Availability of Minority- and Women-Owned Businesses and their Utilization by the
Corpus Christi Regional Transportation Authority”, Jim Lee, 11/2007. (Corpus Christi, Texas)
https://www.ccrta.org/wp-content/uploads/2016/06/ccrta-disparity-study-2007.pdf
• “City of Birmingham Disparity Study Report”, Pendleton, Friedberg, Wilson & Hennessey, P.C., 9/2007.
• “For Development and Revision of Small, Minority & Women Business Enterprise Program”, Grifn & Strong,
P.C., 9/2007. (Nashville, Tennessee)
https://www.ynashville.com/business-diversity-development/Documents/MNAADisparityStudy.pdf
• “Disparity Study in Building Construction and Building Design”, Mason Tillman Associates, 8/2007.
(Pennsylvania) http://www.dgs.pa.gov/Businesses/Minority,%20Women%20and%20Veteran%20Businesses/
Documents/Disparity%20Study.pdf
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• “City of Milwaukee Study to Determine the Effectiveness of the City’s Emerging Business Enterprise Program”,
Mason Tillman Associates, 8/2007. (Milwaukee, Wisconsin)
http://www.city.milwaukee.gov/ImageLibrary/Groups/doaBusinessOp/EBEP_STUDY.pdf
• “Availability and Disparity Study: California Department of Transportation”, BBC Research & Consulting, 6/2007.
(California) http://www.dot.ca.gov/hq/bep/study/Avail_Disparity_Study_Final_Rpt.pdf
• “Fairness in Purchasing and Contracting Disparity Study”, Mason Tillman Associates, 5/2007. (Oakland,
California) http://cces.oaklandnet.com/ContComp/Pdf/CityofOaklandVolumeIMasterReportMay20075-11-07.pdf
• “City of Philadelphia Fiscal Year 2006 Annual Disparity Study”, Econsult Corporation, 5/2007.
(Philadelphia, Pennsylvania)
http://mbec.phila.gov/HOME/forms/FY%202006%20Disparity%20Study%20-%20FINAL%202007-06-01.pdf
• “The City of Houston Disparity Study”, Mason Tillman Associates, 12/2006. (Houston, Texas)
https://www.houstontx.gov/obo/reports/cohdisparitystudy2006.pdf
• “The Prince George’s County Government Disparity Study Final Report”, D.J. Miller & Associates, 11/2006.
(Prince George’s County, Maryland) http://www.pfccoalition.org/Study/Disparity+Study+Final+Report.pdf
• “A Business Underutilization Causation Analysis Study for the City of Columbia”, MGT of America, 8/2006.
(Columbia, South Carolina) https://www.columbiasc.net/depts/obo/docs/extprod012139.pdf
• “Race, Sex, and Business Enterprise: Evidence from the State of Illinois and the Chicago Metropolitan Area”,
NERA Economic Consulting, 6/2006. (Illinois)
https://www.illinoistollway.com/documents/10157/dcef5ab6-c681-4156-a364-e8413aa4f0f1
• “Race, Sex, and Business Enterprise: Evidence from Denver, Colorado”, NERA Economic Consulting, 5/2006.
(Denver, Colorado) https://www.denvergov.org/Portals/690/documents/060505FinalDenverReport.pdf
• “Multi-Jurisdictional Disparity Consultant Services”, Mason Tillman Associates, 4/2006. (Tampa, Florida)
http://www.tampagov.net/sites/default/les/minority-business-development/les/disparity_study_nal_
report_050206_vol_1.pdf http://www.tampagov.net/sites/default/les/minority-business-development/les/
disparity_study_report_nal_report_vol_2_050406.pdf
• “Race, Sex, and Business Enterprise: Evidence from the State of Maryland”, NERA Economic Consulting, 3/2006.
(Maryland) http://www.mdot.maryland.gov/Ofce%20of%20Minority%20Business%20Enterprise/Resources_
Information/FinalReportNERAMaryland.pdf
• “Analysis of Essex County Procurement and Contracting”, University of Minnesota Disparity Study Research
Team, 10/2005. (Essex County, New Jersey) http://essexcountynj.org/report.pdf
• “Race, Sex, and the Business Enterprise: Evidence from the State of Washington”, NERA Economic Consulting,
10/2005. (Washington) https://assets.documentcloud.org/documents/367581/nera-wsdot-study-2005.pdf
• “State of New Jersey Construction Services Disparity Study 2000-2002”, Mason Tillman Associates, 10/2005.
(New Jersey) https://dspace.njstatelib.org/xmlui/bitstream/handle/10929/22390/e192005.pdf?sequence=1
• “State of New Jersey Disparity Study of Procurement in Processional Services, Other Services, and Goods and
Commodities”, Mason Tillman Associates, 6/2005. (New Jersey) http://www.cdapc.com/assets/Documents/
IG_REPORTS_AND_DISPARITY_REPORT/NJ_STATE_DISPARITY_FINAL_REPORT_6-13-2005.pdf
• “WSSC 2005 Disparity Study - Summary and Recommendations”, BBC Research & Consulting, 6/2005.
(Washington) http://dlslibrary.state.md.us/publications/ICA/WSSC/DisparityStudy_2005.pdf
• “City of New York Disparity Study”, Mason Tillman Associates, 1/2005. (New York, New York)
http://masontillman.com/sites/masontillman.com/les/attachments/1312%20City%20of%20New%20York%20
Final%20REPORT%201-24-05.pdf
• “Alameda County Availability Study”, Mason Tillman Associates, 10/2004. (Alameda County, California)
https://www.acgov.org/government/documents/availabilitystudy.pdf
Appendix A: List of Disparity Studies (Chronological)
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• “A Procurement Disparity Study of the Commonwealth of Virginia”, MGT of America, 1/2004. (Virginia)
http://static.mgnetwork.com/rtd/pdfs/20100328_race_disp04.pdf
• “Mecklenburg County Disparity Study”, MGT of America, 1/2004. (Mecklenburg County, North Carolina)
http://charmeck.org/mecklenburg/county/edo/MWSBE/Documents/FR2168County.pdf
• “State of Ohio Predicate Study”, D.J. Miller & Associates, 7/2001. (Ohio) https://www.dot.state.oh.us/groups/
DisparityStudies/Documents/Study%20Resources/2001%20Predicate%20Study%20Final%20Report.pdf
• “Colorado Department of Transportation Disparity Study Update”, MGT of America, 4/2001. (Colorado)
http://hermes.cde.state.co.us/drupal/islandora/object/co%3A5196
• “MWBE Local Business Disparity Study for the City of Evanston”, D.J. Miller & Associates, 4/1996.
(Evanston, Illinois)
http://www.cityofevanston.org/assets/DJ%20Miller%20%20Associates%20Disparity%20Study%20April%201996.pdf
• “State of Texas Disparity Study”, National Economic Research Associates, 12/1994. (Texas)
Appendix B: Glossary
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APPENDIX B
Glossary
anecdotal evidence. Qualitative data derived through personal interviews, focus groups, public
hearings, surveys, written testimony and other means, that details accounts of discrimination, disparate
treatment, or barriers faced by individuals with respect to business operations.
availability. A measure of the number of rms in a particular geographic and product market that are
ready, willing, and able to perform work for procurement agencies. Availability is typically expressed on
an expected contract-dollar basis and can be reported at different levels of aggregation depending on
race, ethnicity and gender combinations.
bid capacity. Analysis of the sizes of contracts and subcontracts that a particular business has bid on or
been awarded in the past.
bid shopping. The practice of a prime contractor providing bid information from a minority-owned
subcontractor to a non-minority subcontractor with the intent of receiving a new bid from the non-
minority subcontractor to undercut the bid received from the minority-owned subcontractor.
bonding. A type of surety bond that guarantees reimbursement to the agency/authority for any nancial
losses caused by fraudulent or dishonest acts by ofcers or employees of the contractor or subcontractor.
This includes theft, embezzlement, and forgery. Bonding is required for most public contracting projects
involving construction or large up-front investments.
bundled contracts. Multiple, smaller contracts or goods/services that are combined into one
larger contract.
capacity. A rm-level measure of whether a particular DBE contractor has the ability to full the
requirements of a particular contract (e.g., does it have the capacity to perform the contracted work such
that it can be considered ready, willing, and able to bid on the project).
compelling interest. Pertains to the rst prong of the strict scrutiny standard, where the constitutionality
of race-conscious contracting programs is evaluated to assess whether the benets of exclusion of others
offers signicant benets to the government.
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disadvantaged business enterprise (DBE). For-prot small business concerns where socially and
economically disadvantaged individuals own at least a 51% interest and also control management
and daily business operations. African Americans, Hispanics, Native Americans, Asian-Pacic and
Subcontinent Asian Americans, and women are presumed to be socially and economically disadvantaged.
Other individuals can also qualify as socially and economically disadvantaged on a case-by-case basis.
disaggregation. The process of splitting a larger group into smaller constituent parts. For example,
statistics presented for minority business enterprises include data pertaining to African Americans,
Hispanic Americans, Asian Americans, etc. Disaggregation is typically used in the context of analyzing
disparity ratios at a ner level of detail based on particular ethnic or racial groups, as well as within major
industry groupings.
discrimination. The unjust or prejudicial treatment of different categories of people or things, especially
on the grounds of race, age, or sex.
disparity index or disparity ratio. The utilization of minority-owned rms divided by the availability of
minority-owned rms in a particular geographic and product market. A disparity index or ratio is often
expressed as a decimal, or alternatively multiplied by 100. When expressed as a decimal, an index of 1.0
indicates parity. When multiplied by 100, an index of 100 equals parity. Values less than 0.8 or 80 typically
indicate a substantial disparity.
Dun & Bradstreet (D&B). A business services company that provides commercial data on businesses
including credit history and ownership status.
federal disadvantaged business enterprise (DBE) program. A program designed to remedy ongoing
discrimination and the continuing effects of past discrimination in federally-assisted highway, transit,
airport, and highway safety nancial assistance transportation contracting markets nationwide. The
primary remedial goal and objective of the DBE program is to level the playing eld by providing
small businesses owned and controlled by socially and economically disadvantaged individuals a fair
opportunity to compete for federally funded transportation contracts. Established by the USDOT after
enactment of the Transportation Equity Act for the 21
st
Century (TEA-21) as amended in 1998. 49 CFR
Part 26 includes the regulations covering the Federal DBE Program.
metropolitan statistical area (MSA) Geographic regions and entities used in the collection and
tabulation of Federal statistics. MSAs are dened by the Ofce of Management and Budget (OMB) and
are used by multiple agencies to delineate geographic areas.
minority business enterprise (MBE). Minority group members are United States citizens who are Asian,
Black, Hispanic and Native American. Ownership by minority individuals indicates that the business is at
least 51% owned by such individuals or, in the case of a publicly-owned business, at least 51% of the stock
is owned by one or more such individuals i.e. the management and daily operations are controlled by
those minority group members.
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M/WBE. An aggregate measure of all minority- and women-owned business establishments for a
particular disparity study.
narrowly tailored. Relates to the second prong of the strict scrutiny standard, where a narrowly tailored
program is one that remedies discrimination for affected groups while considering race-neutral means
and the rights of third parties.
North American Industrial Classication System (NAICS). A standardized method of identifying the
sector or industry in which a company operates using a numerical system ranging from two to six digits.
p-value. A measure of statistical signicance, where the p-value provides a numerical probability that an
outcome or result is due purely to chance. The lower than p-value, the less likely that the outcome is due
to chance, as opposed to other causal factors.
prime. A business that contracts directly with the government agency.
race-based or race-conscious program: A government initiated program that specically includes racial
or ethnic preferences in alleviating discriminatory behavior against affected racial or ethnic minority
business enterprises in public contracting.
race-neutral measures. Contracting programs or initiatives that apply to all businesses regardless
of race. Examples include assisting all small businesses in overcoming barriers to bonding and
insurance, simplifying bidding procedures, providing technical assistance or establishing start-up
assistance programs.
regression analysis. A statistical method that examines the relationship between variables using
mathematical models to determine the best t of data points. Regression involves estimating the
relationship between a dependent variable and one or more independent variables which can inuence
the dependent variable result.
relevant geographic market. The geographic market in which disparity ratios are computed for MBEs in
an particular industry. Typically, geographic markets are determined through an analysis evaluating where
a substantial number of contract dollars are awarded from a procurement agency or agencies.
relevant product market. The industry in which disparity ratios are computed for MBEs in a particular
geographic area. Typically, industries are determined through an analysis evaluating where a substantial
number of contract dollars are awarded from a procurement agency or agencies to rms operating within
particular industries. Most disparity studies include analyses involving “Construction,” “Professional
Services,” “Goods and Supplies,” and “Architecture & Engineering Services.”
set-aside. A contracting preference program where certain contracts are earmarked for restricted
competition. These contracts are only available to a subset of businesses, for example, minority-
owned rms.
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statistically signicant. A result is statistically signicant if it is determined that the observed result is
not attributable to chance. The level of signicance depends on p-values, where a greater the level of
signicance equates with a lower probability that the result is due to chance alone.
strict scrutiny. A form of judicial review that courts use to determine the constitutionality of certain laws.
The two prongs of the strict scrutiny standard include establishing a compelling governmental interest
and narrowly tailoring a race-conscious remedial program.
subcontractor. A contractor that provides contract work to prime contractors, not directly to the
government agency.
utilization. A measure of what percentage of contracts or dollars are awarded to minority-owned
businesses. Calculated by dividing the total contracts or dollars awarded to minority-owned rms by the
total contracts or dollars awarded to all rms.
woman-owned business enterprise (WBE). A business with at least 51 percent ownership and control
by women. Some studies restrict the WBE denition to include only non-minority women, while others
include minority-owned women in the denition.
