Follow the Money

• DOI: 10.1177/0275074007311309
• Published date: 01 December 2008
• Date: 01 December 2008
• Author: George R. La Noue
• Subject Matter: Articles

480

Follow the Money

Who Benefits From the Federal

Aviation Administration’s DBE Program?

George R. La Noue

University of Maryland, Baltimore County

The Disadvantaged Business Enterprise (DBE) component of federal transportation programs

creates important competitive advantages for firms considered to be socially and economically

disadvantaged. Every recipient of federal transportation funds must set annual and contract

goals targeting the DBE share of contract dollars. All firms owned by women and minorities

are presumed to be socially disadvantaged and can become certified DBEs. DBE programs

have been subject to legal and political controversy since they were enacted in 1982. This arti-

cle is based on data of 5,385 contracts’ worth $1.94 billion awarded by 423 recipients of the

Federal Aviation Administrations fund in FY 2004. Findings show that race-conscious rather

than race-neutral goals are predominantly used, that DBEs are greatly overutilized as subcon-

tractors given the goals airports have set, and that the principal DBE group beneficiary of the

awards is White women. Policy recommendations are offered.

Keywords: Federal Aviation Administration; Disadvantaged Business Enterprise (DBE)

program; minority goal-setting procedures; civil rights

Harold Lasswell’s (1936) classic definition of politics, “Who gets what, when, and how,”

has been reduced in modern parlance to the admonition “follow the money.” But finding

out who actually benefits from a program, a vital preliminary step to evaluating it, is often

very difficult. Take, for example, the Federal Aviation Administration’s (FAA) Disadvantaged

Business Enterprise (DBE) program. The FAA DBE program is one of the three DBE pro-

grams operated by the U.S. Department of Transportation (USDOT). The FAA contracting

program subsidizes the building of airport terminals, storage facilities, runways, and so on,

just as the Federal Highway Administration program subsidizes the construction of highways,

bridges, and so on and the Federal Transit Administration subsidizes the creation and fur-

bishing of rapid transit facilities.

Although there are some differences in these USDOT DBE programs, each follows the

same pattern of providing grants to state and local recipients for all or part of their local con-

struction projects. Each currently requires recipients (airports, highway departments, and

transit districts) of federal transportation funds to calculate the availability of DBEs in their

local marketplace. Recipients, then, set an overall annual aspirational goal indicating the per-

centage of contract dollars DBEs should receive. During the year, specific DBE goals are

then attached to particular contracts to attain the annual goal. Because the current extension

of the federal transportation program called SAFETEA-LU authorizes $244 billion to be

The American Review

of Public Administration

Volume 38 Number 4

December 2008 480-500

© 2008 Sage Publications

10.1177/0275074007311309

http://arp.sagepub.com

hosted at

http://online.sagepub.com

Initial Submission: April 27, 2007

Accepted: August 16, 2007

La Noue / FAA DBE Program 481

spent between FY 2005 and FY 2010, a huge amount of money is at stake. If, hypothetically,

the DBE goals were raised or lowered by 5% as a share of total expenditures, that would

amount to $12.2 billion.

From its inception in 1982, DBE programs have been legally and politically controversial.

The root of the legal issue is that DBE programs are based on the statutory presumption that

businesses owned 51% or more by racial and ethnic minorities or by women are “socially

and economically disadvantaged” and thus should be the beneficiaries of contracting goals.

Businesses owned by White males have no such presumption. Consequently, except for a very

few owners who have physical disabilities, almost no firms owned by White males are certi-

fied as DBEs, regardless of the travails of specific owners.

There has been frequent litigation about whether the racial and gender presumptions inher-

ent in DBE programs meet the constitutional equal protection standards. This question was

considered in Fullilove v. Klutznick (1980), when the Supreme Court upheld race-based set-

asides in the Public Works Employment Act of 1977, and later in Adarand v. Pena (1995),

when the Court applied the much tougher strict scrutiny test to race–based contracting pro-

grams at any government level. In the period between the two decisions, the Court began to

reflect increasing skepticism toward race-based decision making (City of Richmond v. Croson,

1989; Shaw v. Reno (1993). Five circuit courts of appeals have addressed federal contracting

issues as well (Adarand Constructors v. Slater, 2000; Gross Seeds v. Nebraska Department of

Roads, 2003; Milwaukee County Pavers Association v. Fiedler, 1991; Northern Contracting,

Inc. v. Illinois Department of Transportation, 2007; Sherbrooke Turf, Inc. v. Minnesota Depart-

ment of Transportation, 2003; Tennessee Asphalt Co. v. Farris, 1991; Western States Paving

Co., Inc. v. Washington State Department of Transportation, 2005).

Although each court has found that Congress has a compelling interest to create the DBE

programs, in the recent Western States (2005) litigation, the U.S. Department of Justice con-

ceded that to set lawfully race-conscious contract goals, a recipient has to make a finding that

it was remedying local discrimination. The Ninth Circuit agreed and found Washington State’s

federally financed highway DBE program unconstitutional because there had been no local

study identifying such discrimination. Furthermore, that court suggested some tough new stan-

dards for conducting disparity studies comparing the availability and utilization of DBEs and

non-DBEs in Washington State. The court required a measure of the relative capacity of DBEs

and non-DBEs to undertake construction work and a separate finding of discrimination for

each of the principal racial and ethnic groups (p. 1000). After Western States, USDOT (2006)

concluded, “The [disparity] study should rigorously determine the effects of factors other than

discrimination that may account for statistical disparities between DBE availability and par-

ticipation. This is likely to require multivariate/regression analysis” (Question 4).

As a consequence, every USDOT recipient in the Ninth Circuit region (Alaska, Arizona,

California, Hawaii, Idaho, Montana, Nevada, Oregon), except Washington, which has already

completed a disparity study, has to meet its DBE goals entirely through race-neutral means,

rather than race-conscious means, until new disparity studies can be completed. These stud-

ies will cost millions of dollars, mostly paid for with federal funds. Moreover, there is no

guarantee that when such studies are completed they will be acceptable when judicially

reviewed. Most such studies in the past have not survived the strict scrutiny standard courts

must apply when racial classifications are involved (e.g., Associated General Contractors

v. Drabik, 2000; Contractors Association of Eastern Pennsylvania v. City of Philadelphia, 1993;