No. 00-730
In the Supreme Court of the United States
ADARAND CONSTRUCTORS, INC., PETITIONER
v.
RODNEY E. SLATER,
SECRETARY OF TRANSPORTATION, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
BRIEF FOR THE RESPONDENTS IN OPPOSITION
SETH P. WAXMAN
Solicitor General
Counsel of Record
BILL LANN LEE
Assistant Attorney General
BARBARA D. UNDERWOOD
Deputy Solicitor General
MARK L. GROSS
TERESA KWONG
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
ROSALIND A. KNAPP
Acting General Counsel
PAUL M. GEIER
Assistant General Counsel
for Litigation
PETER J. PLOCKI
Senior Trial Attorney
EDWARD V. A. KUSSY
Acting Chief Counsel
Federal Highway
Administration
Department of
Transportation
Washington, D.C. 20590
QUESTIONS PRESENTED
1. Whether the court of appeals misapplied the strict scrutiny standard
in determining if Congress had a compelling interest to enact legislation
designed to remedy the effects of racial discrimination.
2. Whether the United States Department of Transportation's current Disadvantaged
Business Enterprise program is narrowly tailored to serve the compelling
governmental interest of remedying the effects of racial discrimination
that impede the ability of socially and economically disadvantaged individuals
to participate in opportunities created by government contracting.
In the Supreme Court of the United States
No. 00-730
ADARAND CONSTRUCTORS, INC., PETITIONER
v.
RODNEY E. SLATER,
SECRETARY OF TRANSPORTATION, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
BRIEF FOR THE RESPONDENTS IN OPPOSITION
OPINIONS BELOW
The opinion of the court of appeals (Pet. App. 1-98) is reported at 228
F.3d 1147. The opinion of the district court (Pet. App. 128-201) is reported
at 965 F. Supp. 1556.
JURISDICTION
The judgment of the court of appeals was entered on September 25, 2000.
The petition for a writ of certiorari was filed on November 3, 2000. The
jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).
STATEMENT
This case involves a set of federal statutes and regulations that constitute
the Disadvantaged Business Enterprise (DBE) program of the U.S. Department
of Transportation (DOT). That program provides opportunities for socially
and economically disadvantaged business enterprises to participate in federally-aided
highway and transit programs. The DOT's current DBE program differs substantially
from the program that was in effect when this Court first reviewed this
case in Adarand Constructors, Inc. v. Peña, 515 U.S. 200 (1995).
Many of the changes to the program were made in response to the Court's
Adarand decision. See 64 Fed. Reg. 5096, 5101-5103, 5129 (1999); 49 C.F.R.
Pt. 26.
1. This case arose out of the now-discontinued Subcontractor Compensation
Clauses or SCCs formerly used by the Federal Highway Administration (FHWA),
an agency of the DOT, in contracts for highway construction on federal lands.
As originally conceived and employed, SCCs provided financial incentives
for prime contractors to subcontract with DBEs. See Adarand, 515 U.S. at
209. They thus enabled the DOT to satisfy certain objectives under the Small
Business Act (SBA), 15 U.S.C. 631 et seq., and the Surface Transportation
and Uniform Relocation Assistance Act of 1987 (STURAA), Pub. L. No. 100-17,
101 Stat. 132. See Adarand, 515 U.S. at 209. The SCCs were designed to help
achieve a federal government-wide goal, established by the SBA, that small
disadvantaged businesses participate in at least "5 percent of the
total value of all prime contract and subcontract awards." 15 U.S.C.
644(g)(1) (1994 & Supp. IV 1998). And they were to help the DOT meet
the goal, set by the STURAA, for DBE participation in highway construction
on federal lands. Under Section 106(c)(1) of the STURAA, "not less
than 10 percent" of the funds authorized by the STURAA are to "be
expended with small business concerns owned and controlled by" socially
and economically disadvantaged individuals, unless the Secretary of Transportation
in his or her discretion determines otherwise. 101 Stat. 145. The five and
ten percent participation levels are aspirational goals; they are not mandatory
participation requirements.
Under Section 8 of the SBA, an individual is "[s]ocially disadvantaged"
if he or she has been "subjected to racial or ethnic prejudice or cultural
bias because of" his or her "identity as a member of a group without
regard to * * * individual qualities." 15 U.S.C. 637(a)(5). An individual
is considered "[e]conomically disadvantaged" if his or her "ability
to compete in the free enterprise system has been impaired due to diminished
capital and credit opportunities as compared to others in the same business
area who are not socially disadvantaged." 15 U.S.C. 637(a)(6)(A). See
also 49 C.F.R. Pt. 26, App. E (definitions of social and economic disadvantage).
Section 8 of the SBA provides a presumption used in making initial social
and economic disadvantage determinations. In particular, Section 8 provides
that "Black Americans, Hispanic Americans, Native Americans, Asian
Pacific Americans and other minorities," as well as other groups designated
from time to time by the Small Business Administration, are presumed to
be socially and economically disadvantaged. 15 U.S.C. 637(d)(3)(C)(ii).
Section 106(c)(2)(B) of the STURAA adopted that presumption for the DOT's
DBE program and extends it, in the context of highway and transit contracting,
to include women as well. See 101 Stat. 146. After that provision of the
STURAA expired in 1991, Congress re-enacted it as Section 1003(b) of the
Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), Pub. L.
No. 102-240, 105 Stat. 1919-1921. In 1998, Congress re-enacted the provision
as Section 1101(b) of the Transportation Equity Act for the 21st Century
(TEA-21), Pub. L. No. 105-178, 112 Stat. 113-115. See pp. 5-6, infra.
Notwithstanding the presumption, the DOT currently requires all individuals
claiming to be disadvantaged to certify, in a notarized document, that they
in fact are socially and economically disadvantaged within the meaning of
the statute and agency regulations. 49 C.F.R. 26.67(a)(1); 64 Fed. Reg.
5136. In addition, such individuals must provide financial data to ensure
that their net worth does not exceed regulatory limits. 49 C.F.R. 26.67(a)(2),
(b); 64 Fed. Reg. 5098, 5117, 5136-5137. Finally, both the presumption and
certification may be rebutted, 49 C.F.R. 26.67(b); 64 Fed. Reg. 5136, and
third parties may challenge an applicant's eligibility by showing that the
applicant is not actually socially or economically disadvantaged, 49 C.F.R.
26.87; 64 Fed. Reg. 5142.
2. On August 10, 1990, petitioner filed a complaint alleging that the SCC
program then in effect violated 42 U.S.C. 2000d et seq. (Title VI), and
the Fifth and Fourteenth Amendments. Among other things, petitioner contended
that it was denied a subcontract on a federal highway project funded by
the STURAA because of the SCC program. Adarand, 515 U.S. at 205. Petitioner
sought only prospective relief.
The district court initially upheld the program under intermediate scrutiny,
Adarand Constructors, Inc. v. Skinner, 790 F. Supp. 240, 244-245 (D. Colo.
1992), and the court of appeals affirmed, Adarand Constructors, Inc. v.
Peña, 16 F.3d 1537, 1539 (10th Cir. 1994). This Court, however, granted
certiorari and vacated the court of appeals' judgment. 515 U.S. at 200,
237. In so doing, the Court rejected the contention that race-based classifications
imposed by a federal government agency may be upheld against an equal protection
challenge under intermediate scrutiny. Instead, the Court held, such classifications
are always subject to strict scrutiny. Id. at 227. The Court did not address
the constitutionality of the SCC program itself. Instead, it remanded the
case to the lower courts to determine "whether any of the ways in which
the Government uses subcontractor compensation clauses can survive strict
scrutiny." Id. at 238.
Following the remand, petitioner filed a First Amended Complaint, seeking,
inter alia, a declaration that "§ 105(f) of [the Surface Transportation
Assistance Act of 1982], § 106(c) of the STURAA, § 1101(b) of
ISTEA, § 8(d) of the SBA (15 U.S.C. § 637(d)) and 15 U.S.C. §
644(g), the regulations promulgated thereunder, and the contract provisions
promulgated pursuant to those statutes and regulations are unconstitutional
as applied to highway construction in the State of Colorado." Pet.
App. 141. The district court granted petitioner's motion for summary judgment.
Id. at 200-201. Although the court found that the government had established
a compelling governmental interest for the SCC program, the court held that
the SCC program did not satisfy strict scrutiny because it was not narrowly
tailored to accomplish the asserted interest. Id. at 180, 200.
While the case was pending on appeal before the Tenth Circuit, Congress
in 1998 reconsidered the DBE program and re-authorized it in the Transportation
Equity Act for the 21st Century (TEA-21), Pub. L. No. 105-178, Tit. I, §
1101(b)(1), 112 Stat. 113. Before passing TEA-21, Con-gress extensively
debated whether to renew the DBE pro-gram. During those debates, Congress
considered, and soundly rejected by bipartisan votes, two amendments that
would have eliminated the DBE program. 144 Cong. Rec. S1496 (Mar. 6, 1998),
H2011 (Apr. 1, 1998). Congress found that goal-based programs like those
in the DBE program were the only effective means to combat the continuing
effects of discrimination. Studies of DBE participation in several States
showed that, where the States terminated their DBE programs, DBE participation
in the state-funded portion of the highway program fell to nearly zero.
See 144 Cong. Rec. S1404, S1409-1410, S1420 (Mar. 5, 1998); id. at S1482
(Mar. 6, 1998). Congress, moreover, found evidence showing that discrimination
continued adversely to affect the ability of certain groups to participate
in highway con-struction. For example, there was evidence of overt dis-crimination
in the awarding of subcontracts; pay disparities that cannot be explained
by other factors; discrimination in the provision of business loans and
bonding; and the adverse consequences of an "old-boy" network
that effectively ex-cluded minorities and women. 144 Cong. Rec. S1409, S1413,
S1422, S1429-S1430. See 64 Fed. Reg. at 5100-5102 (sum-marizing).
Congress also considered and debated at length the DBE program as it had
been implemented by the DOT under the earlier Acts. During those debates,
Congress was made aware of the fact that the DOT was revising its regulatory
program to address outstanding judicial, legislative, and practical concerns,
and to more narrowly focus the program's application to small firms owned
by individuals who are truly socially and economically disadvantaged. 144
Cong. Rec. S1409, S1423-1425, S1430-1431 (Mar. 5, 1998); id. at S1485- 1486
(Mar. 6, 1998); id. at S5413-5414 (May 22, 1998). See, e.g., H.R. Rep. No.
550, 105th Cong., 2d Sess. 409-410 (1998) ("The Department of Transportation
is reviewing the DBE program in light of recent court rulings and has proposed
new regulations to ensure that the program withstands constitutional muster.").
Consistent with Congress's expectation, the DOT developed enhanced regulatory
safeguards to ensure that only firms owned and controlled by individuals
who are in fact socially and economically disadvantaged-i.e., who have been
excluded or handicapped in their participation in the industry by discrimination-participate
in the DBE program. For example, the DOT now requires that owners of firms
applying for DBE certification, including those who are by statute presumed
to be disadvantaged, submit a signed and notarized statement that they are
socially and economically disadvantaged. 49 C.F.R. 26.67(a)(1). The statement
must also disclose the owner's personal net worth, with appropriate documentation.
49 C.F.R. 26.67(a)(2)(i). If the individual's personal net worth, as defined
by regulation, exceeds $750,000, the presumption of economic disadvantage
is conclusively rebutted and the individual is not eligible for the DBE
program. 49 C.F.R. 26.67(b)(1). The regulations further provide that any
person may challenge whether a specific DBE owner is in fact socially and
economically disadvantaged. 49 C.F.R. 26.87. If a recipient of DOT financial
assistance has a reasonable basis to believe that an individual owner who
is a member of one of the designated groups is not socially and/or economically
disadvantaged, it may at any time commence a proceeding to determine whether
the presumption should be regarded as rebutted with respect to that individual.
49 C.F.R. 26.67(b)(2). Indi-viduals who are in fact socially and economically
disadvan-taged, but who are not subject to the presumption, also may participate
in the program. 49 C.F.R. 26.67(d).
Regarding DOT-assisted contracts issued through state and local programs,
the DOT's new regulations include several provisions that specifically address
narrow tailoring. See 64 Fed. Reg. 5102-5103. For example, recipients of
DOT financial assistance may apply to the DOT for waivers that will release
them from almost any DOT regulation if they believe that they can achieve
equal opportunity for DBEs under local circumstances through other approaches.
49 C.F.R. 26.15. Recipients can also be exempted from any provision of the
regulations if special circumstances make compliance impractical. 49 C.F.R.
26.15(a).
The DOT's new regulations also ask recipients to set their own overall annual
goals for DBE participation based on local market conditions, 49 C.F.R.
26.45, and expressly state that the statutory ten percent DBE goal is merely
a national aspirational goal. Grant recipients thus are not required to
set overall annual or contract goals at the ten percent level or to take
any special administrative steps if their goals are above or below ten percent.
49 C.F.R. 26.41(c). The particular goal that each recipient selects, moreover,
is not imposed by the government; nor may the recipient tie its goal to
the ten percent national figure Congress urged the DOT to achieve. Instead,
each recipient must select its own method for goal setting based on a two-step
process that reflects the recipient's market conditions. 49 C.F.R. 26.45.
No penalty is imposed upon a recipient for simply failing to meet its overall
goals. 49 C.F.R. 26.47.
The regulations specifically prohibit the use of quotas or set-asides. 49
C.F.R. 26.43; 64 Fed. Reg. at 5107-5108. Indeed, the DOT requires recipients
to meet the maximum feasible portion of their goals through race- and gender-neutral
means. 49 C.F.R. 26.51(a). Such means include arranging solicitations in
ways that facilitate participation by all small businesses, including DBEs;
providing assistance in overcoming limitations such as the inability to
obtain bonding or financing; providing technical assistance and services
to small businesses; and engaging in outreach efforts. 49 C.F.R. 26.51(b).
Contracting agencies are instructed to use potentially race- and gender-conscious
measures, such as contract goals, only if they cannot meet their overall
goals through race- and gender-neutral means. 49 C.F.R. 26.51(d). Even when
an in-place contract goal is not met, a prime contractor that demonstrates
that it has made good-faith efforts to achieve the goal must be awarded
the contract. 49 C.F.R. 26.53. The DOT's new regulations require recipients
to reduce their use of DBE-conscious measures during the year if it is determined
that they can achieve a greater proportion of their overall goal through
race- and gender-neutral measures than previously had been projected. 49
C.F.R. 26.51(f)(1).
3. In January of 1999, the court of appeals held that this case had become
moot because Colorado had certified petitioner as a DBE, Pet. App. 117,
but this Court reversed, Adarand Constructors v. Peña, 528 U.S. 216
(2000) (per curiam); Pet. App. 111-112. Following the remand, the DOT in
March of 2000 further amended its small business contracting program. This
time the DOT eliminated the use of SCCs, the financial incentives the Court
had considered in its first Adarand decision and that had been the subject
of petitioner's complaint. See Pet. App. 97 ("Adarand does not dispute"
that "the SCC, which spawned this litigation in 1989, is no longer
in use."); Pet. 4.1
Following the submission of supplemental briefs addressing the new statute
and the DOT's new regulations, on September 25, 2000, the court of appeals
held that the DOT's current DBE program satisfies constitutional standards.
Pet. App. 1-98. Following this Court's guidance in its first Adarand decision,
515 U.S. at 227, 238, the court of appeals examined Section 1101(b) of TEA-21
and the new DOT implementing regulations under strict scrutiny, Pet. App.
8, 24, asking whether the program is narrowly tailored to serve a compelling
government interest, id. at 24, 54-57.
With respect to the government's interest, the court of appeals agreed with
the district court that the government had a compelling interest in "eradicating
the economic roots of racial discrimination in highway transportation programs
funded by federal monies," Pet. App. 54, and in "remedying the
effects of racial discrimination and opening up federal contracting opportunities
to members of previously excluded minority groups," id. at 25. The
court of appeals reviewed at length the evidence that had been presented
to Congress since the early 1970s and found that Congress had "a strong
basis in evidence" to support its conclusion "that racial discrimination
and its continuing effects have distorted the market for public contracts."
Id. at 24-49. That evidence had been produced through numerous congressional
investigations and hearings, and included outside statistical and anecdotal
sources, including the voluminous evidence published in the Federal Register
as The Compelling Interest, 61 Fed. Reg. 26,050-26,063 (1996). See Pet.
App. 36-38. The evidence showed not only that prime contractors refused
"to employ minority subcontractors due to 'old boy' networks"
and that subcontractors' unions had excluded minorities, but also that minorities
were subject to intentional discrimination in bid selection and in the provision
of capital and services needed to compete for and participate on construction
projects. Pet. App. 33-39. That evidence, according to the court, supported
Congress's finding that racial discrimination has impeded the formation
of minority businesses. Id. at 33-34. The court of appeals also found that
barriers to competition by minority enterprises persisted. Id. at 39-44.
Among other things, the court of appeals noted congressional investigations
that showed racial discrimination by financial institutions and bonding
companies; local disparity studies; and evidence that minority participation
in state construction markets dropped sharply or disappeared entirely once
a State eliminated its DBE program. Ibid. Accordingly, the court found that
the government had "more than satisfie[d]" its burden of providing
a strong basis in evidence supporting the "compelling interest for
a race-conscious remedy." Id. at 54.
With respect to the requirement of "narrow tailoring," the court
of appeals found that certain provisions of the prior DBE certification
process-e.g., the presumption that members of certain minority groups and
women were economically disadvantaged without inquiry into individual circumstances-were
not narrowly tailored. Pet. App. 72-74. It also held that the automatic
use of financial incentives to encourage the award of subcontracts to DBEs,
as originally contemplated by the SCC program, failed to pass constitutional
muster. Id. at 79. But the court concluded that the new DOT regulations
and amendments had cured the constitutional deficiencies in the earlier
DBE program. Ibid. At the outset, the court of appeals noted that petitioner
did not challenge the district court's finding that Congress had unsuccessfully
tried to cure the effects of discrimination in the contracting market through
race-neutral means. Id. at 57-58. Then, citing the requirement that recipients
use race-neutral means to meet their overall goals before resorting to race-conscious
methods, 49 C.F.R. 26.51(a), and the available race-neutral measures enumerated
in 49 C.F.R. 26.51(b), the court found that the new regulations were narrowly
tailored. Pet. App. 59-60.
The court of appeals also determined that the program was narrowly tailored
through durational limits. First, the court noted (Pet. App. 62), the presumption
of social and economic disadvantage contained in Section 8(d) of the SBA
would cease to apply with respect to any individual contractor certified
by the Small Business Administration three years after the contractor's
initial certification. "If a business wishes to remain certified for
longer than three years, it must 'submit a new application and receive a
new certification.'" Pet. App. 62. Second, the DOT DBE program itself
has a limited duration. It expires at the end of six years, together with
TEA-21. Id. at 62-63. And Congress's extensive debate regarding whether
to renew the DBE program before passing TEA-21, the court further held,
underscored the fact that Congress had specifically and recently found that
there was still a remedial need for the DBE program. Ibid.
The court of appeals also evaluated the DBE program in accordance with four
other narrow tailoring considerations discussed in United States v. Paradise,
480 U.S. 149, 171 (1987): the program's flexibility, the degree to which
aspirational goals "correspond to an actual finding as to the number
of existing minority-owned businesses," the burden on third parties,
and whether the DBE program is over- or under-inclusive. Pet. App. 63-79.
As to the first factor, the court found that the flexibility requirement
was satisfied because of 49 C.F.R. 26.15's express waiver provision, which
allows recipients to seek waivers and exemptions from DBE requirements "despite
the already non-mandatory nature of DBE programs." Pet. App. 63-64.
Turning to the second factor, the court of appeals emphasized that the five
and ten percent national goals were merely aspirational, unlike the mandatory
percentage requirement at issue in City of Richmond v. J.A. Croson Co.,
488 U.S. 469, 508 (1989). Pet. App. 66. Moreover, the court noted that recipients
set their own overall goals according to local market conditions, taking
into account "the availability of ready, willing and able DBEs relative
to all businesses ready, willing and able to participate on [the recipient's]
DOT-assisted contracts." Id. at 67-68. And it observed that there is
no penalty if a recipient acts in good faith but fails to meet its goal.
Id. at 68-69. Those features, the court of appeals stated, ensure that the
recipient's goals for DBE participation will realistically (but not inflexibly)
reflect the number of available and capable DBEs in the particular market.
The court of appeals further concluded that neither the SCC nor DBE programs
imposed a burden on third parties that was of a magnitude that might render
the programs constitutionally infirm. Pet. App. 69-71. As for the DBE program,
the court found that changes in the SBA and the new DBE regulations under
TEA-21 sufficiently cabined the burden on non-minority businesses by making
the program narrowly tailored. For instance, the regulations (see 49 C.F.R.
26.61(d); 13 C.F.R. 124.105(c)(1)) now require non-minority applicants for
DBE certification to prove social disadvantage by a preponderance of the
evidence, rather than by clear and convincing evidence. Pet. App. 70. The
new regulations, furthermore, "require recipients to ensure that DBEs
are not 'so overconcentrated in a certain type of work as to unduly burden
the opportunity of non-DBE firms to participate.'" Pet. App. 70 (citing
49 C.F.R. 26.33(a)).
Lastly, the court of appeals rejected petitioner's argument that Congress
must inquire into discrimination against each particular minority group
or women in a State's construction industry in order to ensure that the
DBE program is not over- or under-inclusive. Pet. App. 71-79. Citing the
new regulations' requirement that DBE applicants submit notarized statements
of their owners' social and economic disadvantage along with documentation
in support of the economic disadvantage claim, 49 C.F.R. 26.67(a), the court
found that such an individualized showing was enough to satisfy narrow tailoring.
Pet. App. 74-75. The court further held that to mandate an individualized
inquiry into the DBEs in discrete markets like the Colorado construction
industry would be "at odds with [Tenth Circuit] holdings regarding
compelling interest and Congress's power to enact nationwide legislation."
Id. at 75-77 & n.25. Indeed, the court of appeals observed, to require
the "degree of precise fit" that petitioner proposed "would
again render strict scrutiny 'fatal in fact.'" Id. at 77. Such automatic
"fatality is inconsistent with [Adarand] * * * in its declaration that
strict scrutiny was not fatal in fact." Ibid.
ARGUMENT
The court of appeals in this case correctly and carefully applied the test
of strict scrutiny to evaluate the constitutionality of the Department of
Transportation's (DOT) Disadvantaged Business Enterprises (DBE) program.
Its decision does not conflict with any decision of this Court or any other
court of appeals. The decision, in fact, is the first court of appeals decision
to address the validity of that program following this Court's decision
in Adarand Constructors, Inc. v. Peña, 515 U.S. 200 (1995), and the
substantial revisions that the DOT made to the program in response to Adarand.
This case, moreover, focused primarily on a specific aspect of the DOT's
small business program-the use of Subcontractor Compensation Clauses or
SCCs-that had been discontinued before the court of appeals issued its decision,
and petitioner sought only prospective relief. Consequently, the case has
become somewhat divorced from the concrete context of an actual application
that traditionally assists this Court in deciding cases. Moreover, other
federal courts are now reviewing the current DOT DBE program. Those cases
will permit a number of circuits to address the constitutionality of the
program in a context with a more meaningful forward-looking effect, and
consequently provide this Court with the opportunity to conduct further
review as appropriate. Accordingly, review of the issue raised by petitioner
is not, at this time, warranted.
1. Although "[s]trict scrutiny remains * * * strict," Bush v.
Vera, 517 U.S. 952, 978 (1996) (plurality opinion), this Court has rejected
"the notion that strict scrutiny is 'strict in theory, but fatal in
fact.'" Adarand, 515 U.S. at 237. Petitioner does not dispute that
the decision below, by its terms, applies strict constitutional scrutiny
to the DOT's DBE program. Instead, petitioner argues that the court of appeals'
application of strict scrutiny may have been somewhat more "lenient"
than it should have been. Pet. 5. Petitioner, however, identifies nothing
in the court of appeals' opinion that states, much less holds, that there
are two standards of strict scrutiny, or that a lesser standard of strict
scrutiny should be or was applied here. Instead, petitioner points to a
series of alleged (and mostly case-specific) errors that, in petitioner's
view, amount to a misapplication of the strict scrutiny test. See Pet. 16
("Although the panel correctly recited that test, * * * the panel badly
misapplied each of the elements."). For example, petitioner argues
that the court of appeals overlooked race-neutral remedies, Pet. 10-13;
misanalyzed the durational limits on the DBE program, Pet. 13-14; and accepted
as "strong evidence" proof that, in petitioner's view, was not
strong at all, Pet. 15-25. The allegation that a court of appeals has misapplied
settled law to the particular facts of a case is not the sort of matter
that ordinarily warrants this Court's review.
Indeed, for that reason, the question on which petitioner seeks review is
not well presented by this case. If the court of appeals had concluded that
Congress's findings are entitled to greater deference (within the confines
of strict scrutiny) than similar findings by a state or local government,
there would be some justification for that conclusion. The judiciary is
bound to give the decisions of Congress-the co-equal branch of government
to which Section 5 of the Fourteenth Amendment textually accords specific
remedial authority-"great weight." See Fullilove v. Klutznick,
448 U.S. 448, 472 (1980) (plurality opinion); Rostker v. Goldberg, 453 U.S.
57, 64 (1981) ("The customary deference accorded the judgments of Congress
is certainly appropriate when * * * Congress specifically considered the
question of the Act's constitutionality."). As Justice O'Connor's opinion
in City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989), explains, "other
governmental entities might have to show more than Congress before undertaking
race-conscious measures: 'The degree of specificity required in the findings
of discrimination and the breadth of discretion in the choice of remedies
may vary with the nature and authority of the governmental body.'"
488 U.S. at 489 (quoting Fullilove, 448 U.S. at 515-516 n.14 (Powell, J.,
concurring)). See also id. at 521-523 (Scalia, J., concurring). Although
Adarand makes it clear that the use of any race-conscious measure (whether
by the federal government or a State) is subject to strict scrutiny, the
opinion reserves judgment on "the extent to which courts should defer
to Congress' exercise of [its] authority" within the confines of strict
scrutiny. 515 U.S. at 230-231. See also id. at 268-269 (Souter, J., dissenting).
Because the decision below declines to resolve that issue, Pet. App. 25-26,
instead finding that the DBE program as currently consti-tuted survives
an undifferentiated standard of strict scru-tiny, this case does not present
the Court with reason to resolve the issue either.
In any event, following this Court's decision in Adarand, Congress comprehensively
re-examined and then re-authorized the DBE program in the Transportation
Equity Act for the 21st Century (TEA-21), Pub. L. No. 105-178, Tit. I, §
1101(b)(1), 112 Stat. 113, and did so on the understanding that the DOT
was in the process of revising its imple-mentation to address outstanding
judicial, legislative, and practical concerns, and to more narrowly focus
the program's application to small firms owned by individuals who are truly
socially and economically disadvantaged. 144 Cong. Rec. S1409, S1423-1425,
S1430-1431 (Mar. 5, 1998); id. at S1485-1486 (Mar. 6, 1998); id. at S5413-5414
(May 22, 1998); H.R. Rep. No. 550, 105th Cong., 2d Sess. 410 (1998) (TEA-21
Conference Report). As a result of those recent revisions, the current DBE
program and regulations significantly differ from those in place when this
Court decided Adarand, and the decision below represents the first and to
date only appellate decision addressing their constitutionality in light
of Adarand. Given the significant nature of the revisions the DOT made to
its regulations following Adarand, we believe it would be appropriate to
permit other courts to address the constitutionality of the program, as
currently constituted, in light of Adarand before this Court undertakes
such review for itself.
That course would be particularly appropriate here because this lawsuit,
although not moot, in large part seeks prospective relief with respect to
a device, the SCC, that is no longer used. In contrast, there are a number
of pending lawsuits against the DOT concerning the federal DBE program,
and against state and local public authorities, challenging other features
of the current program.2 Other lower courts are also considering the constitutionality
of race-based classifications in other federal government contracting programs.3
Those pending cases will permit a number of circuits, in the near future,
to address the issue in a more meaningful and concrete context. Once that
has occurred, this Court can determine whether further review of the issue
is appropriate and, if it conducts that review, it will have the benefit
of the considered judgment of multiple lower federal courts. As Justice
Stevens stated respecting the denial of petitions for a writ of certiorari
in McCray v. New York, 461 U.S. 961, 963 (1983), "it is a sound exercise
of discretion for the Court to allow [lower courts] to serve as laboratories
in which the issue receives further study before it is addressed by this
Court."
Another factor counseling against review at this time is the fact that the
program is subject to review by the Comptroller General this year. TEA-21
itself provides that "the Comptroller General of the United States
shall conduct [in 2001] a review of, and publish and report to Congress
findings and conclusions on, the impact throughout the United States of
administering the" DBE provisions. TEA-21 § 1101(b)(6), 112 Stat.
114. The Court ought not undertake the important task of constitutional
review of the program before that legislatively mandated review takes place.
2. Petitioner's remaining contentions are unsupported by the law or the
record, and in any event are largely case-specific. As a result, none warrants
this Court's review.
a. Petitioner spends much of its brief attacking the finding that the government
has a compelling interest to support the DOT's DBE program. The court of
appeals, petitioner asserts, erred in finding that interest supported by
"society-wide disparities" rather than "particularized findings
of racial discrimination" suffered by individual qualified minority
companies, Pet. 16, 19-21, and by finding that the DBE program was narrowly
tailored even though there allegedly was no showing that Congress inquired
into whether each person seeking to take advantage of a race-based preference
had suffered from the effects of discrimination at the hands of the government,
Pet. 7-10. The court of appeals' failure to require such particularized
findings, petitioner contends, is inconsistent with the requirements of
strict scrutiny set forth by this Court's decision in Croson, supra, and
its first Adarand decision. Pet. 7-15.
As an initial matter, those claims appear to rest on the erroneous factual
assumption that individual applicants may obtain the DBE designation without
any individualized showing that they have suffered discrimination. The DOT's
new regulations refute that assumption. Under those regulations, the owners
of firms seeking DBE designation must certify that they are in fact socially
and economically disadvantaged. 49 C.F.R. 26.67(a). Owners thus, in effect,
must certify in a notarized document that they have been "subjected
to racial or ethnic prejudice or cultural bias because of their identity
as a member of a group without regard to their individual qualities"
so as to establish social disadvantage, 15 U.S.C. 637(a)(5), and that their
"ability to compete in the free enterprise system has been impaired
due to diminished capital and credit opportunities as compared to others
in the same business area who are not socially disadvantaged," so as
to establish economic disadvantage, 15 U.S.C. 637(a)(6)(A). The DOT "may
refer to the Department of Justice, for prosecution under 18 U.S.C. 1001
or other applicable provisions of law, any person who makes a false or fraudulent
statement in connection with participation of a DBE in any DOT-assisted
program." 49 C.F.R. 26.107(e). Applicants for DBE certification, moreover,
must submit documentation of their owner's personal wealth; if the owner's
net worth exceeds $750,000, any presumption of disadvantage is considered
irrefutably rebutted. See 49 C.F.R. 26.67(a)(2). Even a facially valid certification,
moreover, is rebuttable, 49 C.F.R. 26.26(b); and third parties may challenge
eligibility by showing that the owner is not actually socially or economically
disadvantaged, 49 C.F.R. 26.87.
As a result, the DOT's current DBE program does look to whether those seeking
to participate have individually suffered the effects of the discrimination
that the program seeks to redress. And the DOT's preliminary experience
with the requirement suggests that it has a significant effect; imposition
of the certification requirement, it appears, substantially alters both
the number and identity of DBE applicants. The certification requirement
for social and economic disadvantage, moreover, guards against over-inclusiveness,
ferreting out those who are not truly disadvantaged. And it renders petitioner's
claim that it has been harmed by the use of racial categories or presumptions
largely illusory. As the district court explained in Interstate Traffic
Control v. Beverage, 101 F. Supp. 2d 445, 453 (S.D. W. Va. 2000), the only
way another party may now be injured by the rebuttable race- or gender-related
presumption set forth in the statute is if an applicant commits fraud by
falsely certifying and the fraud goes unchallenged. Petitioner nowhere alleges
that such fraud exists, much less that it is sufficiently common as to have
a likely effect on petitioner in the future.4
Petitioner also argues that Congress cannot exercise its national jurisdiction
to establish a national program; instead, petitioner seems to argue, Congress
can have a compelling interest only if it makes localized, market-by-market
findings of discrimination and disadvantage for each covered local jurisdiction
throughout the country. The court of appeals properly rejected that contention.
Pet. App. 27. In Croson, this Court rejected the City of Richmond's attempt
to justify a "rigid [30%] racial quota" in the awarding of City
contracts, where the City presented no evidence of discrimination in the
Richmond construction industry. 488 U.S. at 499-500, 504. Croson, however,
does not speak to the geographic scope of Congress's powers; it speaks to
the fact that local authorities must justify their use of race-conscious
remedies based on local conditions. Moreover, Croson specifically contrasts
the powers of Congress with those of the States. Id. at 504; id. at 490
(opinion of O'Connor, J.) ("That Congress may identify and redress
the effects of society-wide discrimination does not mean that * * * the
States and their political subdivisions are free to decide that such remedies
are appropriate.").5 In any event, even though the DBE program is national
in nature, the portion of it that is subject to strict scrutiny-the use
of race-conscious means -is not of uniform nationwide application. To the
contrary, that portion of the program is distinctly and heavily tailored
to local conditions. Pet. App. 27 n.10 (noting that issue is best addressed
under narrow tailoring). The new DOT regulations provide a system of waivers
and exceptions based on local concerns, and bar the use of any race-conscious
remedy where the effects of discrimination and program goals can be achieved
through neutral means. See pp. 11-12, supra; p. 25, infra.
Finally, petitioner seems to contend that the federal government has no
interest in eliminating the effects of discrimination unless the federal
government itself has engaged in illegal discrimination. See Pet. 21. That
assertion is incorrect as a matter of law. Pet. App. 26. "It is beyond
dispute that any public entity, state or federal, has a compelling interest
in assuring that public dollars, drawn from the tax contributions of all
citizens, do not serve to finance the evil of private prejudice." Croson,
488 U.S. at 492 (opinion of O'Connor, J.).6 Congress acted within its authority
in creating the DBE program to achieve that end here.
b. Petitioner also argues that in this case the government did not produce
sufficiently convincing proof of discrimination in the highway construction
industry. In particular, petitioner asserts (Pet. 11-14) that the court
of appeals erroneously treated common barriers, faced by all new entrants
to the industry, as barriers to minority participation that might justify
a race-conscious remedy. That argument, however, mischaracterizes the evidence
on which the court of appeals and Congress relied. The evidence showed that
certain groups suffered discrimination-both overt and covert-in access to
capital and needed services, such as the provision of performance and payment
bonds, not because they were new entrants but because of race and gender.
For example, the court found that the "government's evidence is particularly
striking in the area of race-based denial of access to capital." Pet.
App. 35. The court noted studies showing disparate treatment of black-owned
businesses even when "all other factors are equal"-including one
study showing that certain minorities were 1.5 times to 3 times as likely
to be turned down for "loans as whites"-and concluded that the
"findings strongly support an initial showing of discrimination in
lending." Pet. App. 37-38. Petitioner also ignores the evidence, specifically
cited by the court of appeals, that prime contractors "often resist
working with" minority enterprises by "shopping" low bids
from minority-owned firms to avoid contracting with them, id. at 41, and
others showing that minority-owned firms are two to three times as likely
to be denied performance and payment bonds (a necessity in government contracting)
as white-owned firms "with the same experience level," id. at
42-43. See also id. at 44 (evidence of discriminatory pricing by suppliers).
Moreover, to the extent petitioner believes that a particular DBE applicant
has not suffered disability beyond that suffered by any other new entrant
into the industry, petitioner is free to challenge the applicant's DBE status;
petitioner, however, has chosen not to do so.7 Finally, petitioner's argument
is belied by numerous studies, considered by Congress before it passed TEA-21,
showing that minority participation in various States became virtually nonexistent
once the state DBE program was eliminated, and demonstrating that minorities
face barriers not shared by all new businesses. Pet. App. 49; see also 144
Cong. Rec. S1401, S1409-1410, S1420 (Mar. 5, 1998); id. at S1482 (Mar. 6,
1998). Congress thus did not, as petitioner contends (Pet. 11-12), reject
race-neutral alternatives in favor of the DBE program without considering
such alternatives. Instead, it found that those alternatives had proved
ineffectual.8
Alternatively, petitioner attempts to attribute ill intentions to Congress,
declaring (Pet. 23-24) that "it is clear from the legislative history
of the most recent highway funding statute to incorporate the racial classifications"
that Congress was not providing a remedy for individualized harm, but rather
was trying to achieve "racial proportionality in the highway construction
industry." See also Pet. 19-21. But the legislative history shows precisely
the opposite to be true. Congress sought to remedy the effects of discrimination;
it was aware of and relied on the proposed DOT regulations when it considered
passing TEA-21; and it wanted to ensure that the DBE program was constitutional,
and not over-inclusive, before renewing the DBE program. 144 Cong. Rec.
S1409, S1423-1425, S1430-1431 (Mar. 5, 1998); id. at S1485-1486 (Mar. 6,
1998); id. at S5413-5414 (May 22, 1998). See also TEA-21 Conference Report,
supra, at 409-410. The new regulations, for example, contain such safeguards
as requiring recipients of DOT financial aid to devise overall goals for
DBE participation that reflect local conditions. 49 C.F.R. 26.45(c). And
those seeking DBE designation, moreover, must certify that their owners
are socially and economically disadvantaged. 49 C.F.R. 26.67(a).
3. Petitioner also claims that the DOT's DBE program is not narrowly tailored.
Pet. 8-14. Petitioner's contentions on narrow tailoring, however, largely
mirror its arguments regarding the compelling interest. For example, petitioner
argues (Pet. 8) that the program is not narrowly tailored because no individual
proof of economic and social disadvantage is required of DBE program participants.
As explained above (pp. 18-19, supra), that is incorrect-all participants
must certify, in a notarized document, that they are in fact socially and
economically disadvantaged, i.e., that they have been subject to discrimination
and have been deprived of the opportunity to participate in the relevant
market as a result; and third parties like petitioner may challenge that
certification and put any applicant to its burden of proof. Nor is it true
(Pet. 10-11) that the barriers to participation the DBE program seeks to
overcome are common to all new entrants. The record demonstrates that women
and minorities face a unique barrier in this context-discrimination. See
pp. 21-22, supra. See also 61 Fed. Reg. 26,050-26,063 (1996). That is the
barrier the DBE program seeks to overcome.
Petitioner, moreover, mostly ignores the numerous ways in which the program
is finely tailored. See United States v. Paradise, 480 U.S. 149, 187 (1987)
(articulating additional factors relevant to narrow tailoring). Most important,
the DOT's certification and qualification rules ensure that benefits flow
only to those who are truly disadvantaged. All owners of firms applying
for certification as a DBE, including minorities and women presumed to be
disadvantaged, must submit a signed, notarized statement certifying not
only that they are socially and economically disadvantaged, but also verifying
their personal net worth, with appropriate supporting documentation. 49
C.F.R. 26.67. If the individual owner's personal net worth exceeds $750,000,
the presumption of economic disadvantage is conclusively rebutted and the
individual and firm are not eligible to participate in the DBE program.
49 C.F.R. 26.67. Moreover, when a firm's receipts exceed small business
standards, it can no longer participate in the program, regardless of its
owner's personal net worth. 49 C.F.R. 26.65. Any DBE certification may be
challenged, and the DBE program is open to all: Non-minorities may apply
for DBE certification, 49 C.F.R. 26.65, and need demonstrate social and
economic disadvantage only by a preponderance of the evidence (not by clear
and convincing proof, as formerly required). See 49 C.F.R. 26.67.
Moreover, under the new regulations, recipients may request a waiver from
the DBE program (as Colorado has) if they choose to operate their program
differently from the way recommended in DOT regulations, see Preamble to
49 C.F.R. 26.15, or receive exemptions if, because of unique circumstances
not considered by the DOT, compliance with specific provisions is impractical,
49 C.F.R. 26.15. Recipients subject to the DOT's regulations, moreover,
must meet the maximum feasible portion of their annual DBE goals through
race-neutral methods, 49 C.F.R. 26.51(a), and may use race-conscious methods
only if necessary, 49 C.F.R. 26.51(d). The DBE goals for each recipient,
moreover, are established by the recipient itself, under flexible criteria
adjusted for local market conditions. 49 C.F.R. 26.45. Recipients are neither
required nor encouraged to emulate the nationwide aspirational ten percent
goal or employ special measures if their goals are below that level. 49
C.F.R. 26.41(c). And, in setting their goals, recipients must create a baseline
figure for the relative availability of ready, willing and able DBEs in
each recipient's local market, 49 C.F.R. 26.45(c), and adjust the base figure
to ensure that the overall annual goal truly reflects the level of DBE participation
that recipients would expect absent the effects of discrimination, 49 C.F.R.
26.45(d). The procedure thus does not bestow any undue benefits on DBEs,
but rather seeks to place them on as nearly level a playing field as reasonably
possible.9 Finally, the DBE program, having been authorized under a funding
statute, is subject to continuous study and periodic re-authorization, adjustment,
and review. See pp. 11, 17, supra. The program thus will not, and cannot,
operate in perpetuity.10
Seeking to avoid the effect of those important requirements, many of which
were imposed by the 1999 regulations, petitioner asserts (at 25-29) that
the court of appeals should not have relied on them. Petitioner does not
dispute that, because it seeks solely prospective relief, only the current
law and regulations are relevant to its challenge. See Diffenderfer v. Central
Baptist Church, 404 U.S. 412, 414 (1972) (per curiam) (where plaintiff seeks
prospective relief, Court "must review the judgment * * * in light
of [the] law as it now stands"); cf. Rufo, 502 U.S. at 384. Instead,
petitioner argues (Pet. 26-27) that the new regulations do not apply here
because they are directed at state and local contracts, rather than federal
procurement contracts like the federal contract containing the Subcontractor
Compensation Clause (SCC) that petitioner originally challenged.
Petitioner, however, did not raise that argument below, and the court of
appeals did not address it. This Court ordinarily does not pass on arguments
that were neither pressed nor passed upon in the court of appeals. See,
e.g., Yee v. City of Escondido, 503 U.S. 519, 533 (1992); DeShaney v. Winnebago
County Dep't of Social Servs., 489 U.S. 189, 195 & n.2 (1989); Capital
Cities Cable, Inc. v. Crisp, 467 U.S. 691, 697 (1984).11 And the argument
is without merit. If this case could be characterized only as a challenge
to the use of SCCs in federal procurement contracts, it would be moot, because
SCCs have been abolished. Moreover, even in the context of that now-defunct
program, the criteria for DBE certification were found in the DBE regulations,
as petitioner has conceded before. Pet. App. 159. Additionally, when the
DOT was implementing the SCC program, it ordinarily contracted with prime
contractors, who in turn subcontracted with DBEs. Adarand, 515 U.S. at 205.
As a result, the DOT did not (and does not) itself certify the DBEs, including
the DBE, Gonzales Construction Company, that was awarded a subcontract over
petitioner a decade ago. Instead, state entities receiving federal funding,
such as the Colorado Department of Transportation, certified the DBEs in
accordance with DOT DBE regulations. Adarand, 515 U.S. at 209. As a result,
the extensive federal aid program regulations, which define the gamut of
requirements relating to DBE certification ranging from obligations of the
applicant for DBE certification to duties of the recipient state authority,
provide the relevant legal framework for constitutional review.12 Even if
that were fairly debatable, however, any doubt concerning which law or regulation
(or which version of the law or regulation) should be scrutinized in this
case weighs strongly in favor of denying review, so the Court may take up
the constitutional issue in a case that more clearly and cleanly presents
it.
Petitioner also argues (Pet. 28-29) that the 1999 regulations are void because
they eliminate or alter Section 8(d)'s "mandatory" presumption
of disadvantage by requiring applicants for DBE certification to aver that
they meet the relevant criteria and submit documentation regarding economic
disadvantage. It is questionable, as an initial matter, whether petitioner
has standing to challenge the validity of those requirements, since they
cause petitioner no cognizable injury. The court of appeals, moreover, did
not address that argument, and there is no reason for this Court to consider
it in the first instance. Besides, the argument is without merit. Under
the regulations, the presumption continues to operate, since actual proof
of disadvantage would be required in its absence. Moreover, Congress clearly
intended the presumption to be rebuttable, see S. Rep. No. 4, 100th Cong.,
1st Sess. 28 (1987), and the DOT has always treated it as such. The Intermodal
Surface Transportation Efficiency Act of 1991 (ISTEA) and TEA-21, in any
event, expressly give the Secretary of Transportation regulatory discretion
in implementation. For instance, the aspirational goal for DBE participation
in TEA-21 is qualified by the phrase "[e]xcept to the extent that the
Secretary determines otherwise." Pub. L. No. 105-178, § 1101(b)(1),
112 Stat. 113. See also ISTEA, Pub. L. No. 102-240, Tit. I, § 1003(b),
105 Stat. 1919-1920 (same).13
Finally, petitioner contends (Pet. 27-28) that the statutory presumption
for social disadvantage is over-inclusive, and the new regulations alter
only the presumption for economic disadvantage. But the regulations require
all applicants for DBE certification to provide not only a notarized statement
of their net worth, but also a notarized statement that they are both socially
and economically disadvantaged. 49 C.F.R. 26.67.14 That certification requirement
for showing both social and economic disadvantage guards against over-inclusiveness.
Indeed, as explained above (p. 19, supra), the requirement ensures that,
absent undetected fraud, only those who are truly economically and socially
disadvantaged participate in the program, notwithstanding the statute's
presumptions. And no allegation of such fraud has been made here.15
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
BILL LANN LEE
Assistant Attorney General
BARBARA D. UNDERWOOD
Deputy Solicitor General
MARK L. GROSS
TERESA KWONG
Attorneys
ROSALIND A. KNAPP
Acting General Counsel
PAUL M. GEIER
Assistant General Counsel
for Litigation
PETER J. PLOCKI
Senior Trial Attorney
EDWARD V. A. KUSSY
Acting Chief Counsel
Federal Highway
Administration
Department of
Transportation
JANUARY 2001
1 Indeed, we are advised that there are, at most, one or two outstanding
potential (i.e., not yet submitted) claims for payment under contracts with
the Central Federal Lands Highway Division, entered into before March of
2000, that contained SCCs. Any such claims for payment, however, would relate
to work that has already been completed on contracts that were entered into
long ago. Accordingly, such payments (if any) would cause petitioner no
injury, and could not form the basis of a claim for prospective relief.
2 See Klaver Constr. Co. v. Kansas Dep't of Trans., No. 99- 2510-KHV (D.
Kan.); Sherbrooke Turf, Inc. v. Minnesota Dep't of Transp., No. 00-CV-1026
(D. Minn.); Gross Seed Co. v. Nebraska Dep't of Roads, No. 00-3073 (D. Neb.);
Western States Paving Co. v. Washington Dep't of Transp., No. 00-5204 (W.D.
Wash.); Northern Contracting, Inc. v. Illinois, No. 00-4515 (N.D. Ill.);
Falconite, Inc. v. Oklahoma, No. 00-CV-1494 (W.D. Okla.); Houston Contractors
Ass'n v. Metropolitan Transit Auth., No. H-93-3651 (S.D. Tex.); Kossman
Contracting Co. v. Metropolitan Transit Auth., No. H-96-3036 (S.D. Tex.).
3 See, e.g., C.S. McCrosson v. Cook, No. 95-1345 (D.N.M.), appeal pending,
No. 00-2515 (10th Cir.); DynaLantic v. Department of Defense, No. 95-CV-2301
(D.D.C.).
4 Perhaps recognizing that the new regulations are largely fatal to its
position, petitioner argues that the new regulations are not applicable
to the current challenge, and are in any event inconsistent with the statute
and therefore invalid. See Pet. 26-29. As explained below (pp. 26-29, infra),
it is far from clear that those arguments are properly before the Court,
and they are without merit. In any event, Congress has the authority to
make group specific determinations of discrimination, and we disagree with
petitioner's submission that Congress may act to correct the effects of
discrimination only after making specific findings for each victim participating
in a remedial program. See pp. 14-15, supra.
5 Nothing in the Court's subsequent decision in Adarand, 515 U.S. at 200,
eliminates that fundamental distinction between the remedial authority of
Congress and that of state and local governments. That decision merely clarified
the standard of review that courts should apply to federal racial classifications;
it did not limit the geographic scope of Congress's authority.
6 A substantial portion of federal transportation dollars is distributed
to subcontractors, which are not selected by the government on the basis
of lowest bids, but are chosen instead at the discretion of private prime
contractors. See p. 22, infra.
7 Petitioner's claim that the court of appeals improperly shifted the burden
of proof (Pet. 24-25) is without merit. The court of appeals expressly put
the government to its "burden of presenting a 'strong basis in evidence'
sufficient to support its articulated * * * compelling interest." Pet.
App. 49. It simply found that the government had done so, and noted that
petitioner had "utterly failed" to introduce evidence of its own
to rebut the government's proof. Id. at 50-54.
8 Perhaps recognizing its failure to rebut the evidence relied on by Congress
and the court of appeals, petitioner also argues that such evidence is irrelevant
because it was not before Congress in 1978 when the presumption of disadvantage
in the SBA was first enacted. See Pet. 21-22. But when Congress reconsidered
and then re-authorized the DOT's DBE program in 1998-specifically rejecting
amendments that would have eliminated the program-Congress did have that
extensive evidence before it. See pp. 5-6, 15-16, supra. See also TEA-21
Conference Report, supra, at 409 ("Subsection 102(b) continues the
Disadvantaged Business Enterprise provisions."). Consequently, for
present purposes, the relevant record is the one Congress addressed when
it reconsidered the program in 1998 in light of this Court's Adarand decision;
not the record that existed pre-Adarand in 1978. Cf. Rufo v. Inmates of
Suffolk County Jail, 502 U.S. 367, 384 (1992) (courts must review significant
changes to the law or facts when considering injunctive relief).
9 Recipients also must ensure that non-DBEs are not unfairly excluded from
competing for subcontracts through an over-concentration of DBEs in one
particular line of business. 49 C.F.R. 26.33. In addition, basing an annual
goal and contract goals on the availability of DBEs ensures that, to the
extent it is necessary to employ race-conscious criteria, those are not
employed to reduce participation by non-DBE's below current availability
to perform government contracts.
10 Petitioner argues (Pet. 13-14) that, because the program is predicated
on barriers to entry that are common to all new entrants, it will operate
indefinitely. That argument, however, rests on the mistaken premise that
the program is predicated on barriers to entry, not actual discrimination
that has prevented and continues to prevent participation by certain groups.
In any event, given the sensitive nature of the program and the ongoing
nature of review, it is highly doubtful (and certainly premature to predict)
that the program's duration is indefinite. Indeed, petitioner ignores the
fact that the DBE program was extensively debated before Congress passed
TEA-21, expires in 2004, and, as provided in the statute, will be reviewed
by the Comptroller General of the United States in 2001. 112 Stat. 114.
11 In fact, in the district court, petitioner had argued (and the district
court accepted) that its lawsuit necessarily implicated the regulations
because the regulations define the requirements for DBE certification in
the federal aid DBE program. Pet. App. 159. Petitioner similarly relied
on the pre-1999 version of the regulations in its last petition for a writ
of certiorari, and claimed that Colorado's DBE program was inconsistent
with the regulations. Pet. at 18-25 & n.24, Adarand Constructors, Inc.
v. Slater, 528 U.S. 216 (2000) (No. 99-295).
12 Nor can petitioner avoid the effect of those regulations by arguing that
it is bringing a facial challenge to the statutes themselves. If the statutes
can be implemented in a constitutional manner through the regulations, the
facial challenge must fail. See United States v. Salerno, 481 U.S. 739,
745 (1987) (court cannot strike down a statute as facially invalid unless
there is "no set of circumstances * * * under which the Act would be
valid"). In addition, it is not clear that a challenge to the statute
alone would constitute a genuine case or controversy. Petitioner cannot
claim injury from the statute alone, since the statute is not self-executing.
Any injury petitioner may claim must arise from the application of the statute
by the DOT through its regulations.
13 Nothing in this Court's decision in Adarand Constructors, Inc. v. Slater,
528 U.S. 216 (2000), is to the contrary. In that decision, the Court simply
concluded that Colorado's DBE certification procedure, which did not provide
a presumption of social disadvantage for women and certain minorities, was
incompatible with the 1999 DBE regulations, which do allow for such a presumption.
Id. at 222-223. That decision, therefore, has no bearing on whether the
presumption of social and economic disadvan-tage in Section 8(d) may be
implemented by the 1999 regulations. Cf. No. 00-295 Pet. at 29. Colorado
has changed its DBE program to include the presumption of social and economic
disadvantage in conformity with the DOT's DBE regulations.
14 In addition, petitioner's argument is rebutted by the fact that Section
8(d)'s presumption of disadvantage is a single presumption that applies
when the criteria for both social and economic disadvantage are met. See
15 U.S.C. 637(d)(1) (1994 & Supp. IV 1998); 49 C.F.R. 26.67. Because
the presumption may be invoked only if the applicant for DBE certification
is both socially and economically disadvantaged, the refined criteria for
determining economic advantage-the requirement that applicants for DBE certification
submit documentation of their personal wealth and the rebuttal of the presumption
of disadvantage if the applicant's net worth exceeds $750,000, 49 C.F.R.
26.67(b)(1)-render the entire statutory economic and social disadvantage
presumption more narrowly tailored. Thus, if a DBE applicant does not meet
the economic disadvantage requirements, that applicant is not entitled to
a presumption of disadvantage even if he or she may be deemed socially disadvantaged.
Under these circumstances, petitioner's demand for more exacting criteria
(Pet. 14-15) for showing social disadvantage would be redundant. The certification
requirements imposed in the new regulations establish that application of
the presumption of social and economic advantage is, contrary to petitioner's
assertion, far from "mandatory" and "conclusive." Cf.
Pet. 9-10.
15 The extensive record of discrimination, and the above-described features
of the DOT's DBE program, distinguish that program from those addressed
in the cases cited by petitioner (at 7) as conflicting with the decision
below. For example, in Monterey Mechanical Co. v. Wilson, 125 F.3d 702 (9th
Cir. 1997), the court of appeals did not resolve "how much proof, or
what kind of legislative findings" would be required because "the
state made absolutely no attempt to justify" the ethnic and gender
categories it employed; nowhere did it show that tax money was, in effect,
subsidizing discrimination. 125 F.3d at 713. Moreover, the program there,
unlike the one here, was not narrowly tailored through a certification requirement
or any other means. 125 F.3d at 714. Contractors Associations of Eastern
Pennsylvania v. City of Philadelphia, 91 F.3d 586, 607 (3d Cir. 1996), cert.
denied, 519 U.S. 1113 (1997), is similarly distinguishable. There, the City
Council did not show that the 15 percent set-aside for African-American
contractors was designed to "approximate market share for black contractors
that would have existed, had the purported discrimination not existed,"
and the percentage selected was disproportionate to the number of minority
"construction firms qualified to perform City-financed contracts."
91 F.3d at 607. The participation goals set by recipients here, in contrast,
are flexible, based on the availability of qualified DBE firms, and calculated
to offset the effects of discrimination. See p. 25, supra. Finally, in Associated
General Contractors v. Drabick, 214 F.3d 730 (6th Cir. 2000), petition for
cert. pending, No. 00-976, the State's evidence of discrimination was less
compelling, id. at 736; there was no consideration of non-racial criteria,
id. at 738; and there was no effort at narrow tailoring through a certification
mechanism or otherwise, id. at 737.