News Column

Hispanic Contractors Removed From Caltrans' Affirmative Action Program

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Has California reached a point where Hispanic contractors are no longer suffering from the ill effects of discrimination?

Officials with the California Department of Transportation say the answer -- for now -- is yes.

But the state's Hispanic Contractors Association says the answer is an emphatic "no way."

This month, the state department -- generally referred to as Caltrans -- released a new list of the ethnic and gender groups that qualify for federally funded affirmative-action programs. Hispanics are no longer on it. Four other groups still are: blacks, Asian-Pacific Americans, American Indians and women.

The new list is sure to be a boon for contracting companies owned by people in those four groups, but is expected to do little for the firms owned by Hispanics, who nationwide have been hit disproportionately hard by the deepening recession.

The new list also comes just before money from President Barack Obama's $787 billion economic stimulus program is expected to begin flowing into California's beleaguered construction industry. It also coincides with an apparent slowdown for disadvantaged minority- and women-owned California contractors, who appear to be getting shorter shrift than usual on Caltrans contracts.

In Caltrans jargon, the term for the affirmative-action policy in question is the "race- and gender-conscious" program. Caltrans strives to ensure that at least 6.75 percent of all highway projects partly funded by federal dollars go to the disadvantaged women- or minority-owned companies in this group.

Caltrans's race- and gender-conscious program had been put on ice for four years -- not just for Hispanics, but for all minority- and women-owned contractors -- while the agency conducted a study to determine which groups still feel the sting of discrimination. On April 2, the program was officially re-instated, but with Hispanics removed.

The controversial new list is taking heat from all sides. It already has raised the ire of not only the Hispanic Contractors Association, but also a prominent conservative legal foundation that opposes affirmative action, and which is considering filing a lawsuit.

Caltrans based the new list on a two-year-old disparity study concluding that Hispanic-owned construction companies are generally numerous and successful enough to be removed from the race-conscious group.

Julian Camacho, president of the Hispanic Contractors Association of California, says the results of the Caltrans disparity study have it all wrong.

By law, he said, ethnic groups are considered at a disparity when there is evidence of discrimination or its lasting effects.

"I grew up in California; I remember when you would see signs that said 'No Mexicans or dogs allowed,' " he said. "It took a long time for our people to wrestle ourselves out of the backbreaking labor of the fields. It took a long time to move from campesinos to owners of businesses. As a consequence we don't have, as a class of people -- Mexicans, mostly -- a lot of accumulated wealth. The fact that we don't is an effect of discrimination."

Camacho, who also serves on the Caltrans Small Business Council -- an advisory council to the Caltrans staff -- said the Hispanic Contractors Association has asked Caltrans to amend the study. He said he hopes Hispanics will be back on the race-conscious list by July, in time for more Hispanic contractors to reap the benefits of the stimulus money.

Camacho, who served as a cabinet member under California Gov. Jerry Brown in the 1970s, said a failure to make the list in time could cost Hispanic contractors across California an estimated $270 million in stimulus dollars alone.

"I know that discrimination is alive and well in California," he said. "The effects will continue to live with us for several generations."

Organizations of other ethnic groups are no doubt hopeful that the new list will give their businesses a boost.

A spokeswoman with the American Indian Chamber of Commerce of California declined to comment on the situation involving Hispanics, but said she agrees with the study's conclusion as it relates to American Indians.

"We definitely know we are not receiving the value of what we could be getting," said spokeswoman Tracy Stanhoff, adding that she can't comment on the Hispanic group because the organization tries to steer clear of commenting on the situations of other ethnic groups. "It needs to be done. If the world was fair, then we would all be at the same level, but it isn't that way."

Ironically, the new race-conscious configuration has also rankled a faction that the Hispanic Contractors Association considers an opponent. The Sacramento-based Pacific Legal Foundation, an organization with Libertarian leanings, considers nearly all race- and gender-based contracting policies unconstitutional.

Pacific Legal Foundation attorney Ralph Kasarda told HispanicBusiness.com that the organization is considering filing a lawsuit against the state of California for re-instating the race-conscious program.

"To this date, Caltrans has not identified any actionable instance of intentional discrimination," he said in an email Monday.

Furthermore, Kasarda argued, Caltrans' own race-conscious policy is discriminatory, victimizing not only white males but, now, Hispanic males as well.

"If Caltrans believes that discrimination against Hispanic males in contracting is a remedy to discrimination in the highway construction industry, it must have reason to believe that Hispanic males are intentionally discriminating against other racial groups and women. What else could justify such an extreme measure?"

The disparity study was the direct result of a landmark 2003 lawsuit, in which a group of Caucasian-owned contractors sued the state of Washington over a paving contract, claiming reverse discrimination. In 2005, the U.S. Court of Appeals for the Ninth Circuit ruled partly in favor of the contractors, and consequently all the western states were told they must conduct disparity studies to determine which ethnic and gender groups -- if any -- qualified for race-based contracting preferences. The 2005 ruling prompted Caltrans to put a temporary moratorium on its race-conscious program.

Other states conducted their own disparity studies. In Nevada, the study found that Hispanics are still at a disparity in the Las Vegas area, but that blacks and women are not. However, the Nevada Department of Transportation, at the urging of the study, ended up dropping the race-conscious program altogether, because the disparities in question were statistically marginal, Nevada DOT spokesman Roc Stacey said.

In California, there is an added layer. In 1996, voters approved Prop 209, a broad amendment to the state constitution that eliminated affirmative action.

However, some state programs in California that receive federal dollars -- such as certain Caltrans highway projects -- are still required to meet affirmative-action goals.

In 2008, Caltrans discovered that -- most likely due to the 2005 moratorium on race-conscious contracting -- minority- and women-owned businesses were getting skipped over for contracts. In the three years since the 2005 moratorium, the percentage of eligible contracts going to such businesses had plummeted from an average of about 9 percent every year to 2 percent, said Caltrans spokesman Matt Rocca. (The overall goal is 13.5 percent.)

In response to complaints from the Hispanic Contractors Association about the de-listing, Caltrans officials concede that some of the raw data from the comprehensive study might be dated, and say they may run some re-calculations.

"Their issues are legitimate and we understand that," said Robert Padilla, chief of Caltrans' office of business and economic opportunity, which oversees the Disadvantaged Business Enterprise program. "We are looking to update this data. If it tells us something different, than we will make the appropriate changes."

Such changes, if necessary, could be made as early as July of 2010, he said.

But for businesses such as Golden Bay Fencing of the San Francisco Bay Area, that could be too late.

"We are kind of sitting here, holding our breath, and we are starting to turn blue," said owner Floyd Chavez.

Co-founded by Chavez and his brother in 1990, Golden Bay Fencing thrived when it benefited from being on the race-conscious list. The company landed huge contracts, such as one at the San Francisco International Airport for designing and constructing a six-foot high, 280-foot-long hydraulic gate that, with the push of a button, retracts into the ground to clear the way for taxiing 747s. It built a similar gate for Pixar Animation Studios in Emeryville.

But in the past two years, Chavez's company has shriveled from 60 employees to 12, and is now on the verge of shutdown. Although much of Chavez's misery is attributable to the bad economy, Chavez said the decline really began in 2007, after the end of the race-conscious program.

"All of a sudden, we were getting excluded," he told HispanicBusiness.com. "It's still the good ol' boys network; it's designed for big business."

The disparity study officially got under way in mid 2006, and was finished a year later.

Caltrans farmed out the study to a consulting company based in Colorado called BBC Research and Consulting. In the 500-page study, BBC used extensive mathematical modeling to determine roughly how many Caltrans contracts each of the minority- and women-owned companies would get in the ideal world -- that is, a world in which discrimination or its effects don't put certain companies at an unfair disadvantage.

If the group in question achieved 80 percent or more of that ideal number, they were deemed "at parity." The Hispanic group barely made parity, scoring 81 percent. The other group that achieved parity, Subcontinent Asian Americans -- including people from India, Pakistan and Bangladesh -- exceeded 100 percent, scoring a whopping 125.

The other four were far below the threshold, with Native Americans at 65 percent; women, 48 percent, Asian-Pacific Americans (whose descendents come from places such as Japan, China and Korea), 31 percent; and blacks, 15 percent.

Paul Guerrero, an attorney who also sits on the Caltrans Small Business Council, said he was disappointed about how the study was conducted by a company from out of state.

"We felt there are plenty of knowledgeable companies in California that could do a disparity study," he said. Guerrero added that other California agencies -- such as the Valley Transportation Agency in Silicon Valley -- have conducted disparity studies, and -- unlike BBC -- concluded that Hispanics still suffer from the effects of discrimination.

BBC Research has not returned a call asking for a comment.

After the completion of the disparity study in June of 2007, Caltrans needed approval from the Federal Highway Administration in order to re-initiate its race-conscious program. The FHWA approval process took more than a year. The go-ahead finally arrived in March of 2009, and the race-conscious program was re-launched on April 2.

The new iteration omits not only Hispanics, but also Subcontinent Asian Americans.

However, the two groups aren't being removed entirely from Caltrans' programs for disadvantaged businesses. In lieu of making the "race conscious" list, they were placed on its watered-down equivalent: the "race neutral" program.

Groups in the race-neutral category are eligible for things such as free technical assistance and one-on-one counseling from Caltrans. But when it comes to landing contracts, being in the race-neutral category hasn't borne much fruit of late.

"It's based wholly on good faith," Camacho said.

In its overarching goals, Caltrans has long sought to ensure that 13.5 percent of all federally awarded contracts go to disadvantaged businesses. Half of the contracts -- 6.75 percent -- are supposed to be awarded to groups in the race-conscious category. Historically, the agency has been good about meeting that target. The balance is supposed to come from the race-neutral side, but that goal is seldom met, critics say.

"'Race neutral' is a real nice liberal title for a program that means nothing," Camacho said.

Camacho, 73, served under California Gov. Jerry Brown as the state's chief deputy director of general services in the late 1970s, and has long been an advocate for Hispanic small businesses.

He helped create the Hispanic Contractors Association of California about 10 years ago, but it languished and he finally took full control as the non-profit organization's volunteer president about three years ago. Since then, it has grown to about 150 members, he said.

Camacho said the Hispanic Contractors Association -- which does not currently have a Web site -- won't back down from the fight. But he also said the group isn't eager to file a lawsuit.

"We're not interested in suing anybody -- that's not what we do," he said. "That is the position of last resort.

"We are looking for bidding opportunities," he added. "We are looking for work."

Floyd Chavez of Golden Bay Fencing

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