The Suburban Bus Division of the Regional Transportation Authority (Pace) Overall Disadvantaged Business Enterprise Goal (DBE)

Transcription

1 The Suburban Bus Division of the Regional Transportation Authority (Pace) Overall Disadvantaged Business Enterprise Goal (DBE) Setting Methodology Report Federal Fiscal Years (FFY) Federal Transit Administration

2 OVERALL DISADVANTAGED BUSINESS ENTERPRISE GOAL SETTING METHODOLOGY REPORT I. INTRODUCTION Federal Fiscal Years The Suburban Bus Division of the Regional Transportation Authority (Pace) submits its Disadvantaged Business Enterprise (DBE) Overall Goal Setting Methodology Report to the United States Department of Transportation s (USDOT) Federal Transit Administration (FTA) for review and approval. The Report has been prepared in compliance with the DBE regulations, 49 CFR 26.45, as amended, the USDOT General Counsel s Tips for Goal-Setting (USDOT Tips), 1 and the appellate court s decision in Northern Contracting v. Illinois Department of Transportation. 2 The regulations require that the overall goal be prepared using a two-step process. Pace must first determine a base figure for the relative availability of certified and non-certified minority and woman-owned business enterprises in the relevant market area (step 1), Next, Pace must examine all relevant evidence to determine what adjustment to the base figure, if any, is needed in order to arrive at an overall goal (step 2). The final adjusted figure is Pace s overall goal, and represents the proportion of federal transportation funding it expects to allocate to DBEs during the subsequent three federal fiscal years (FFY). Once the adjusted overall goal is determined, Pace must estimate what portion of the goal will be met by race-neutral measures, and if necessary, what portion of the goal will be met by race- conscious contract goals. 3 Based on the requirements set forth in 49 CFR 26.45, the case law and USDOT Tips, Pace is submitting an overall, annual DBE goal for FFY of 11.46%. II. OVERALL GOAL-SETTING METHODOLOGY To meet the requirements of 26.45, Pace commissioned a Disparity Study ( Study ) from Colette Holt & Associates ( CHA ), a nationally recognized law and economics-consulting firm. The Study is attached as Exhibit A to this Report. The methodology for this Study embodies the constitutional principles of City of Richmond v. Croson and Adarand v. Peña, the case law in the Seventh Circuit Court of Appeals, the DBE program s regulatory requirements in Part 26, and the USDOT Tips for Goal Setting. This approach has been specifically upheld by courts. It is also 1 United States Department of Transportation, Tips for Goal Setting in the Disadvantaged Business Enterprise (DBE) Program, F.3d 715 (2007) CFR 26.51(f)(1), and 26.51(d). 1

3 the approach recommended by the National Academy of Sciences that is now the standard for designing legally defensible disparity studies for transportation agencies. 4 The Study provides a statistical analysis of baseline DBE availability, and examines econometric evidence of disparities between DBEs and non-dbes in factors impacting entrepreneurial success on Pace s contracts and subcontracts. It further provides qualitative evidence of barriers impacting DBEs ability to obtain Pace prime contracts and associated subcontracts, as well as the results of consultations with stakeholders and individual firms about the availability of DBEs in Pace s market area. A. STEP ONE BASE FIGURE CALCULATION 1. Determination of Pace s Geographic and Industry Markets The first element in estimating DBE availability was to determine empirically the relevant geographic and industry market areas for Pace s federally-assisted contracts. The Study therefore examined a sample of approximately $433 million of agency spending to determine empirically the market areas for fiscal years 2008 through This represented 90% of all dollars in the data. The Study applied a 90/90/90 rule, whereby we analyzed North American Industry Classification System ( NAICS ) codes that cover over 90 percent of the total contract dollars; over 90 percent of the prime contract dollars; and over 90 percent of the subcontract dollars. We took this approach so that we could be assured that we provide an in depth picture of Pace s activities. Table A presents the distribution of the number of contracts and the amount of contract dollars across all industry sectors. The Study determined that Pace s industry market is made up of 17 NAICS industry codes. Table A: Industry Percentage Distribution of All Contracts by Dollars Paid, All Sectors NAICS NAICS Code Description PCT Total Contract Dollars Cumulative PCT Total Contract Dollars Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals) 21.84% 21.84% Office Administrative Services 17.68% 39.52% 4 Guidelines for Conducting a Disparity and Availability Study for the Federal DBE Program, Transportation Research Board of the National Academy of Sciences, NCHRP Report, Issue No. 644,

4 Heavy Duty Truck Manufacturing 7.33% 46.85% Industrial Machinery and Equipment Merchant Wholesalers 7.20% 54.05% Bus and Other Motor Vehicle Transit Systems 5.52% 59.57% School and Employee Bus Transportation 5.21% 64.78% Motorcycle, ATV, and All Other Motor Vehicle Dealers 3.91% 68.69% Other Communications Equipment Manufacturing 2.98% 71.67% Charter Bus Industry 2.70% 74.37% Custom Computer Programming Services 2.19% 76.56% Petrochemical Manufacturing 2.16% 78.72% Tire Manufacturing (except Retreading) 2.15% 80.87% Insurance Agencies and Brokerages 1.76% 82.63% Offices of Lawyers 1.71% 84.35% Advertising Agencies 1.38% 85.72% Electrical Contractors and Other Wiring Installation Contractors 1.34% 87.06% Motor Vehicle Supplies and New Parts Merchant Wholesalers 1.07% 88.14% Motor Vehicle Body Manufacturing 1.03% 89.17% Passenger Car Leasing 0.94% 90.11% TOTAL % The Study next determined the locations of firms in these NAICS codes to establish the industries in which the agency purchases. It applied the rule of thumb of identifying the firm locations that account for at least 75 percent of contract and subcontract dollar payments in the 3

5 contract data file. Location was determined by ZIP code as listed in the file and aggregated into counties as the geographic unit. Spending in Illinois accounted for 79.61% of all contract dollars paid in the product market. Of that total, the counties of Cook, DuPage, Kane, and Will accounted for percent. Therefore, the State of Illinois constituted the geographic market area from which the Study drew availability data. Table B presents data on how the contract dollars were spent across the State s counties. Table B: Distribution of Contracts in Pace s Product Market, by State State PCT of Total Contract Dollars Paid State PCT of Total Contract Dollars Paid IL % PA 0.189% IN 8.019% TX 0.043% CA 7.997% AL 0.037% Canada 1.699% WI 0.014% GA 1.242% FL 0.013% IA 0.686% NJ 0.003% NY 0.447% TOTAL % 2. Determination of Pace s Utilization of DBEs in Its Market Areas The Study next determined the dollar value of Pace s utilization of DBEs in its market area constrained by geography and industry sector, as measured by payments to prime firms and associated subcontractors and disaggregated by race and gender. Table C presents the distribution of contract dollars by industry sectors by race and gender for federally-funded contracts. Table C: Distribution of Contract Dollars by Race and Gender Federal Funds NAICS Black Hispanic Asian Native American White Women Non- DBE 4

6 % 0.0% 0.0% 0.0% 0.0% 100.0% % 28.6% 0.0% 0.0% 4.5% 66.9% % 0.0% 0.0% 0.0% 64.8% 35.2% % 0.0% 0.0% 0.0% 0.0% 100.0% % 0.0% 0.0% 0.0% 0.0% 100.0% % 0.0% 0.0% 0.0% 0.0% 100.0% % 0.0% 0.0% 0.0% 0.0% 100.0% % 0.0% 0.0% 0.0% 0.0% 100.0% % 0.0% 0.0% 0.0% 0.0% 100.0% % 0.0% 0.0% 0.0% 4.3% 95.7% % 0.0% 0.0% 0.0% 100.0% 0.0% % 0.0% 0.0% 0.0% 0.0% 100.0% TOTAL 0.0% 0.6% 0.0% 0.0% 0.5% 98.8% 3. Determination of DBE Availability in Pace s Market Areas Using the recommended true custom census approach to estimating availability, the Study determined the aggregated availability of DBEs, weighted by Pace s spending in its geographic and industry markets, to be 9.82 percent. Table D presents the weighted availability data for various racial and gender categories for federally-funded contracts. Table D: Aggregated Weighted Availability Federal Funds, NAICS Black Hispanic Asian Native American White Women DBE Non- DBE Total TOTAL 1.64% 0.96% 0.96% 0.04% 6.21% 9.82% 90.18% 100.0% 5

7 B. Step Two Adjustment Once the step 1 base figure estimate of DBE availability has been calculated, Pace must examine all of the evidence available in its jurisdiction to determine if an adjustment is necessary to the base figure to reflect the level of DBE participation expected absent the effects of discrimination. Included among the types of evidence that must be considered are the current capacity of DBEs to perform work on Pace s federally-assisted contracts, as measured by the volume of work DBEs have performed in recent years, and evidence from disparity studies conducted anywhere within Pace s jurisdiction, to the extent not already accounted for in the base figure. If available, Pace must also consider available evidence from related fields that affect the opportunities for DBEs to form, grow and compete, including statistical disparities in the ability of DBEs to obtain the financing, bonding and insurance required to participate in the Program, and data on employment, self-employment, education, training and union apprenticeship programs, to the extent relevant to the opportunities for DBEs to perform in the Program. The regulations caution that any adjustment to the base figure to account for the continuing effects of past discrimination or the effects of an ongoing DBE program must be based on demonstrable evidence that is logically and directly related to the effect for which the adjustment is sought (d)(3) 1. Past DBE utilization Pace considered the current capacity of DBEs to perform work in Illinois, as measured by the amount of work performed by certified DBEs on federal-aid projects over the past five years. The median for Pace s participation for FFY 2010 through FFY 2015 is 13.1%. Table E: DBE Awards for FFYs FFY DBE Participation % % % % % 6

8 2. Additional Step 2 Evidence While the Study s evidence of economy-wide disparities 5 might be used to make a step two adjustment, in our view, this does not provide evidence that is sufficiently directly related to an adjustment to reflect the level of participation that would be expected but for discrimination. Further, the law in the Seventh Circuit Court of Appeals is that affirmative action goals should reflect the plausible lower bound estimate of availability. Pace therefore determined that past participation was the only appropriate adjustment factor. It then averaged the median past participation with the step 1 base figure estimate for an overall, annual goal of 11.46%. Baseline DBE Availability: 9.82% Median Past DBE Participation: 13.1% Average: 11.46% IV. Projection of Race-Neutral versus Race-Conscious Goal Attainment The regulations require that Pace must meet the maximum feasible portion of its overall goal by using race-neutral measures to facilitate DBE participation. Ongoing and new initiatives seek to reduce discriminatory barriers, increase capacity and level the playing field for the participation of DBEs and other small contractors. To achieve the maximum feasible portion of the goal through remedies other than contract goals, Pace implements the following race-neutral measures: Vendor communication and outreach. Certification outreach and resources. Contract unbundling. Enforcement of prompt payment requirements. Small Business Enterprise setaside program Pace will continue enhancing and executing these race-neutral initiatives. 5 The Study examined disparities in business receipts and in business formation and earnings. Minority and women-owned firm are significantly less profitable than similar nonminority or women-owned firms, and minorities and women earn substantially and significantly less from their labor than do their similarly situated nonminority male counterparts in Pace s market area. Barriers to equal access to business and human capital were also identified. 7

9 To estimate the portions of the goal to be met through race-neutral and race-conscious measures, Pace evaluated past race-neutral DBE participation as defined in 26.51(a). Pace s median achievement on federal-aid contracts through race-neutral means for FFY was 0.15%. Table F: Race-neutral DBE Participation for FFYs FFY Race-Neutral DBE Participation % % % % % Therefore Pace projects that it will meet 0.15% of its overall goal of 11.46% on FTAassisted projects through race-neutral measures and 11.31% of its overall goal through race-conscious contract goals. Pace will monitor DBE participation throughout the year to adjust its use of contract goals to ensure that their use does not exceed the overall goal. V. Public Participation A. Consultation As part of the Study, the consultant conducted 6 focus groups of business owners and a stakeholder session, totaling 54 individual attendees. The groups invited to participate in the sessions are listed in Appendix A to the Study. During these sessions, the consultant solicited information about the availability of DBEs and non-dbes, the effects of discrimination on opportunities for DBEs, and Pace s efforts to establish a level playing field for the participation of DBE. The results are provided in Chapters III and VI of the Study. B. Published Notice Pace published the proposed new overall, annual DBE goal informing the public of the proposed goal and its rationale on its website and in the Chicago Sun-Times and made the methodology available for inspection during normal business hours at Pace s headquarters for 30 days following the date of the notice. The advertising information is attached. 8

10 NOTICE: Pace, Suburban Bus Division of the Regional Transportation Authority, is hereby informing the public of the proposed overall DBE goal of 11.46% (Race- Conscious Goal = 11.31% and Race-Neutral Goal = 0.15%) in accordance with 49 CFR Part (g)(1)(ii). The goal and its rationale may be viewed at Pace Headquarters (see address below) during normal business hours of 8:00 a.m. to 4:30 p.m. Monday through Friday. Comments can be left via at Christina.Perez@pacebus. com or at Pace Headquarters through August 19, Pace Suburban Bus 550 W. Algonquin Road Arlington Heights, IL Ph# (847) /21-8/19/