Memorandum
U.S. Department of Transportation
Federal Highway Administration

The attached guidance outlines the process for the Federal Highway Administration's (FHWA) review and approval of the annual overall disadvantaged business enterprise (DBE) goal submissions made by state transportation agencies (STA) to implement their DBE program. The DBE goal submission includes the STA's goal setting methodology and its race- and gender-neutral (hereafter race-neutral) and race- and gender-conscious (hereafter race-conscious) projections for meeting the annual goal. If a STA has not submitted its FY 2006 DBE goal (which was due on August 1st), it should be instructed to do so as soon as possible and notified that its failure to comply by a specified date may result in a finding of noncompliance. Except for the STAs that are in the Ninth Circuit (identified below), no further extensions of the time to submit the FY 2006 DBE goal should be granted.  

As in the past, DBE goal submissions that meet specified criteria require Headquarters concurrence before the division administrator gives final approval. The Office of Civil Rights (HCR) in consultation with the Office of Chief Counsel will conduct the review by Headquarters. We have added a new class of submissions that require Headquarters review. All submissions made by states impacted by the Ninth Circuit Court of Appeals decision in Western States Paving Co. v. State of Washington Dept. of Transportation, 407 F. 3d 983 (9th Cir. 2005), must be forwarded to HCR for concurrence. The STAs included in this category are Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

In Western States Paving the Court found the Washington State DBE program, as implemented, was not narrowly tailored to accomplish the remedial objectives established by Congress – and consequently not constitutional as applied in that state – because the State failed to produce sufficient evidence of discrimination or its effects in its transportation contracting industry to justify the use of race-conscious measures as an element of its program. The Court also suggested that a narrowly tailored program must structure its use of race-conscious measures to provide remedial relief to those groups that have actually suffered discrimination. 

US DOT intends to issue specific guidance on the steps that recipients in the Ninth Circuit must take in response to the Western States Paving decision. We will disseminate that guidance as soon as the Office of the General Counsel issues it. In the meantime, division offices that serve STAs in the Ninth Circuit should take the following steps:

• If the STA goal submission indicates that race-conscious means will be used to meet the goal, the submission must describe the evidence of discrimination or its effects that supports the STA's continued use of DBE contract goals. If warranted by the evidence, the STA may need to request a waiver of the regulatory prohibition on the use of group specific goals. See 49 C.F.R. §§ 26.45(h) and 26.51(e). If this information is not in the submission, the STA should be advised to revise its submission to include a description of its evidence and to indicate whether a waiver is needed to implement goals of limited application.

• If the STA determines that it needs time to assess whether it has sufficient evidence of discrimination or its effects, the STA must revise its submission to request approval to implement a wholly race-neutral program while it undertakes this assessment. This may involve commissioning a disparity or availability study sufficient to meet the standard set by the Ninth Circuit Court of Appeals. The STA should be advised that the costs of conducting a disparity or availability study is reimbursable as an eligible program cost, subject to the applicable cost-sharing formula.

• A STA that moves to a wholly race-neutral program as a result of the Western States Paving decision must commit to conduct the required analysis and establish a schedule with milestones for completion to obtain approval of its DBE goal submission.

Also attached for your use are (1) a sample letter of acknowledgment, (2) a sample approval letter, and (3) a sample decision document. We ask that you use the samples provided because they have been carefully crafted to document FHWA action. It is important to note that the sample approval letter requires that you clearly identify the approved annual overall DBE goal and the race-conscious and race-neutral breakdown. All approval letters should contain this information.

The attached guidance also provides instruction to the division offices on the process for approving significant changes to a STA's US DOT approved DBE program. While STAs are not required to obtain FHWA approval of regular updates of their DBE programs, significant changes to a STA's program require prior approval before implementation. To ensure that HCR is apprised of the current status of each STA's approved DBE program, we ask that each division office take the following actions upon receipt of this memorandum:

1. Notify HCR of the most recent FHWA approved change to the STA's DBE program.

2. If your STA's DBE program does not include the policy, processes, and procedures that address the changes required by the July 16, 2003 rule and US DOT's Qs&As, you must immediately begin working closely with the STA to ensure that its program is up to date and complies with existing regulations.

3. This updating process should be finalized by January 31, 2006.

Any questions you may have about the guidance may be directed to Calvin Gibson, HCR, at (202) 366-2024 and/or Jo Anne Robinson, HCC, at (202) 366-1346.

Attachment 1
Attachment 2
Attachment 3
Attachment 4
Attachment 5