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parity S
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Table of Contents
BBC RESEARCH & CONSULTING i
ES. Executive Summary A. Analyses in the Disparity Study ........................................................................................... ES–2 B. Availability Analysis Results ................................................................................................. ES–3 C. Utilization Analysis Results .................................................................................................. ES–4 D. Disparity Analysis Results .................................................................................................... ES–6 E. Overall DBE Goal .................................................................................................................. ES–9 F. Program Implementation .................................................................................................. ES–11
1. Introduction
A. Background ........................................................................................................................... 1–2 B. Study Scope ........................................................................................................................... 1–3 C. Study Team Members ........................................................................................................... 1–7
2. Legal Framework
A. Program Elements ................................................................................................................. 2–1 B. Legal Standards ..................................................................................................................... 2–3
3. Marketplace Conditions
A. Human Capital ....................................................................................................................... 3–2 B. Financial Capital .................................................................................................................... 3–6 C. Business Ownership .............................................................................................................. 3–9 D. Business Success ................................................................................................................. 3–11 E. Summary .............................................................................................................................. 3–13
4. Collection and Analysis of Contract Data
A. Overview of Contracting Policies .......................................................................................... 4–1 B. Collection and Analysis of Contract Data .............................................................................. 4–3 C. Collection of Vendor Data ..................................................................................................... 4–5 D. Relevant Geographic Market Area ........................................................................................ 4–6 E. Relevant Types of Work ......................................................................................................... 4–6 F. Collection of Bid and Proposal Data ...................................................................................... 4–7 G. Agency Review Process ......................................................................................................... 4–7
Table of Contents
BBC RESEARCH & CONSULTING ii
5. Availability Analysis A. Purpose of the Availability Analysis ...................................................................................... 5–1 B. Potentially Available Businesses ........................................................................................... 5–1 C. Businesses in the Availability Database ................................................................................. 5–3 D. Availability Calculations ........................................................................................................ 5–4 E. Availability Results ................................................................................................................. 5–6 F. Base Figure for Overall DBE Goal ........................................................................................... 5–9 G. Implications for DBE Contract Goals ................................................................................... 5–10
6. Utilization Analysis
A. Overview of Utilization Analysis ............................................................................................ 6–1 B. Utilization Analysis Results .................................................................................................... 6–1
7. Disparity Analysis
A. Overview of Disparity Analysis .............................................................................................. 7–1 B. Disparity Analysis Results ...................................................................................................... 7–5 C. Statistical Significance of Disparity Analysis Results ............................................................. 7–9 D. Case Study Analysis ............................................................................................................. 7–12
8. Overall DBE Goal
A. Establishing a Base Figure ..................................................................................................... 8–1 B. Considering a Step‐2 Adjustment .......................................................................................... 8–2
9. Program Measures
A. Is there evidence of discrimination within the local transportation contracting marketplace for any racial/ethnic or gender groups? .......................................................... 9–2 B. What has been the agency’s past experience in meeting its overall DBE goal? ................... 9–2 C. What has DBE participation been when the agency did not use race‐or
gender‐conscious measures? ................................................................................................ 9–3 D. What is the extent and effectiveness of race‐ and gender‐neutral measures
that the agency could have in place for the next fiscal year? ............................................... 9–3 10. Program Implementation
A. Elements of the Federal DBE Program ................................................................................ 10–1 B. Additional Considerations ................................................................................................. 10–10
Table of Contents
BBC RESEARCH & CONSULTING iii
Appendices A. Definition of Terms B. Legal Framework and Analysis C. Quantitative Analyses of Marketplace Conditions D. Qualitative Analyses about Marketplace Conditions E. Availability Analysis Approach F. Disparity Tables
CHAPTER ES.
Executive Summary
BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER ES, PAGE 1
CHAPTER ES. Executive Summary
TheIllinoisDepartmentofTransportation(IDOT)retainedBBCResearch&Consulting(BBC)toconductadisparitystudytohelpinformtheagency’simplementationoftheFederalDisadvantagedBusinessEnterprise(DBE)Program.AsaFederalHighwayAdministration(FHWA)fundrecipient,IDOTimplementstheFederalDBEProgramtoaddresspotentialdiscriminationagainstDBEsintheawardandadministrationofFHWA‐fundedcontracts.Todoso,IDOTusesvariousmeasurestoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitsFHWA‐fundedcontractsincludingbothrace‐andgender‐neutralmeasuresandrace‐andgender‐consciousmeasures.Race‐andgender‐neutralmeasuresaremeasuresthataredesignedtoencouragetheparticipationofallbusinessesinIDOTcontracting,regardlessoftherace/ethnicityandgenderoftheowners.Incontrast,race‐andgender‐consciousmeasuresaredesignedtospecificallyencouragetheparticipationofminority‐andwoman‐ownedbusinessesinIDOTcontracting.Aspartofthedisparitystudy,BBCassessedwhethertherewereanydisparitiesbetween: Thepercentageofcontractingdollars(includingsubcontractdollars)thatminority‐and
woman‐ownedbusinessesreceivedontransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawardedbetweenOctober1,2012andSeptember30,2016(i.e.,utilization);and
Thepercentageoftransportation‐relatedconstructionandprofessionalservicescontractingdollarsthatminority‐andwoman‐ownedbusinessesmightbeexpectedtoreceivebasedontheiravailabilitytoperformspecifictypesandsizesofIDOTprimecontractsandsubcontracts(i.e.,availability).
Thedisparitystudyalsoexaminedotherquantitativeandqualitativeinformationrelatedto: ThelegalframeworksurroundingIDOT’simplementationoftheFederalDBEProgram; Localmarketplaceconditionsforminority‐andwoman‐ownedbusinesses;and ContractingpracticesandbusinessassistanceprogramsthatIDOTcurrentlyhasinplace.IDOTcouldusestudyinformationtohelprefineitsimplementationoftheFederalDBEProgram,including: SettinganoverallDBEgoalfortheparticipationofminority‐andwoman‐ownedbusinesses
initstransportation‐relatedcontracts; Determiningwhichprogrammeasurestousetoencouragetheparticipationofminority‐
andwoman‐ownedbusinesses;and Determiningwhichgroupswouldbeeligibletoparticipateinrace‐andgender‐conscious
measuresthattheagencydecidestouseaspartofimplementingtheFederalDBEProgram.
BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER ES, PAGE 2
BBCsummarizeskeyinformationfromthedisparitystudyinfiveparts:A. Analysesinthedisparitystudy;B. Availabilityanalysisresults;C. Utilizationanalysisresults;D. Disparityanalysisresults;E. OverallDBEGoal;andF. Programimplementation.
A. Analyses in the Disparity Study Alongwithmeasuringdisparitiesbetweentheparticipationandavailabilityofminority‐andwoman‐ownedbusinessesinIDOTcontracts,BBCalsoexaminedotherquantitativeandqualitativeinformationrelatedtoIDOT’simplementationoftheFederalDBEProgram: Thestudyteamconductedananalysisoffederalregulations,caselaw,andother
informationtoguidethemethodologyforthedisparitystudy.Theanalysisincludedareviewoffederal,state,andlocalrequirementsrelatedtotheFederalDBEProgramandotherminority‐andwoman‐ownedbusinessprograms(seeChapter2andAppendixB).
BBCconductedquantitativeanalysesofthesuccessofminorities;women;andminority‐andwoman‐ownedbusinessesthroughoutIllinois.Inaddition,BBCcollectedqualitativeinformationaboutpotentialbarriersthatminority‐andwoman‐ownedbusinessesfaceinthelocalmarketplacethroughin‐depthinterviews,telephonesurveys,publicmeetings,andwrittentestimony(seeChapter3,AppendixC,andAppendixD).
BBCanalyzedthepercentageofIDOT’stransportation‐relatedcontractingdollarsthatminority‐andwoman‐ownedbusinessesareavailabletoperform.Thatanalysiswasbasedontelephonesurveysthatthestudyteamcompletedwithbusinessesthatworkinindustriesrelatedtothespecifictypesoftransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawards(seeChapter5andAppendixE).
BBCanalyzedthedollarsthatminority‐andwoman‐ownedbusinessesreceivedonthetransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawardedduringthestudyperiod(seeChapter6).
BBCexaminedwhethertherewereanydisparitiesbetweentheparticipationandavailabilityofminority‐andwoman‐ownedbusinessesonthetransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawardedduringthestudyperiod(seeChapter7).
BBCreviewedIDOT’scurrentoverallDBEgoalandprovidedguidancerelatedtosettingitsnextoverallDBEgoal(seeChapter8).
BBCreviewedIDOT’scurrentcontractingpracticesandmeasurestoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitscontractingandprovidedguidancerelatedtoadditionalprogramoptionsandpotentialrefinementstothosepracticesandmeasures(seeChapter9).
BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER ES, PAGE 3
BBCreviewedrequirementsoftheFederalDBEProgramaswellasIDOT’scompliancewiththoserequirementsandprovidedguidancerelatedtopotentialrefinementstotheagency’simplementationoftheprogram(seeChapter10).
B. Availability Analysis Results BBCusedacustomcensusavailabilityanalysistoanalyzetheavailabilityofminority‐andwoman‐ownedbusinessesthatareready,willing,andabletoperformonIDOT’stransportation‐relatedconstructionandprofessionalservicesprimecontractsandsubcontracts.BBC’sapproachreliedoninformationfromsurveysthatthestudyteamconductedwithpotentiallyavailablebusinesseslocatedthroughoutIllinoisthatperformworkwithinrelevantworkspecializations,orsubindustries.ThatapproachallowedBBCtodeveloparepresentative,unbiased,andstatistically‐validdatabaseofpotentiallyavailablebusinessesandestimatetheavailabilityofminority‐andwoman‐ownedbusinessesinanaccurate,statistically‐validmanner.Overall results.FigureES‐1presentsoveralldollar‐weightedavailabilityestimatesbyracial/ethnicandgendergroupforthetransportation‐relatedconstructionandprofessionalservicesprimecontractsandsubcontractsthatIDOTawardedduringthestudyperiod.Overall,theavailabilityofminority‐andwoman‐ownedbusinessesforthosecontractsis19.9percent.Inotherwords,onewouldexpectminority‐andwoman‐ownedbusinessestoreceive19.9percentofthetransportation‐relatedcontractingdollarsthatIDOTawardsbasedontheiravailabilityforthatwork.Non‐Hispanicwhitewoman‐ownedbusinesses(13.6%)andHispanicAmerican‐ownedbusinesses(2.9%)exhibitedthehighestavailabilityamongtherelevantbusinessgroups.Figure ES‐1. Availability estimates by racial/ethnic and gender group
Note: Numbers rounded to nearest tenth of 1 percent and thus may not sum exactly to totals. For more detail and results by group, see Figure F‐2 in Appendix F. Source: BBC Research & Consulting availability analysis.
Results by contract goal status.IDOTusedDBEcontractgoalstoawardmostofitscontractsduringthestudyperiodtoencouragetheparticipationofminority‐andwoman‐ownedbusinesses.IDOT’suseofDBEcontractgoalsisarace‐andgender‐consciousmeasure.ItisusefultoexamineavailabilityanalysisresultsseparatelyforcontractsthatIDOTawardswiththeuseofDBEcontractgoals(goalcontracts)andcontractsthatIDOTawardswithouttheuseofthosegoals(no‐goalcontracts).FigureES‐2presentsavailabilityestimatesseparatelyforgoalandno‐goalcontracts.AsshowninFigureES‐2,theavailabilityofminority‐andwoman‐ownedbusinessesconsideredtogetherislowerforgoalcontracts(19.1%)thanforno‐goalcontracts(29.4%).
Business group
Asian Pacific American‐owned 0.5 %Black American‐owned 1.5Hispanic American‐owned 2.9Native American‐owned 0.0Subcontinent Asian American‐owned 1.4Non‐Hispanic white woman‐owned 13.6 %Total Minority‐ and Woman‐owned 19.9 %
Availability %
BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER ES, PAGE 4
Figure ES‐2. Availability estimates by contract goal status
Note: Numbers rounded to nearest tenth of 1 percent and thus may not sum exactly to totals. For more detail, see Figures F‐18 and F‐19 in Appendix F. Source: BBC Research & Consulting availability analysis.
Results by contract role. Manyminority‐andwoman‐ownedbusinessesaresmallbusinessesandthusoftenworkassubcontractors.Becauseofthattendency,itisusefultoexamineavailabilityestimatesseparatelyforprimecontractsandsubcontracts.FigureES‐3presentsthoseresults.AsshowninFigureES‐3,theavailabilityofminority‐andwoman‐ownedbusinessesconsideredtogetherislowerforIDOTprimecontracts(15.2%)thanforIDOTsubcontracts(34.4%). Figure ES‐3. Availability estimates by contract role
Note: Numbers rounded to nearest tenth of 1 percent and thus may not sum exactly to totals. For more detail, see Figures F‐7 and F‐8 in Appendix F. Source: BBC Research & Consulting availability analysis.
C. Utilization Analysis Results BBCmeasuredtheparticipationofminority‐andwoman‐ownedbusinessesinIDOT’stransportation‐relatedcontractingintermsofutilization—thepercentageofprimecontractandsubcontractdollarsthatminority‐andwoman‐ownedbusinessesreceivedonIDOTprimecontractsandsubcontractsduringthestudyperiod.Overall results.FigureES‐4presentsthepercentageofcontractingdollarsthatminority‐andwoman‐ownedbusinessesconsideredtogetherreceivedontransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawardedduringthestudyperiod(includingbothprimecontractsandsubcontracts).AsshowninFigureES‐4,overall,minority‐andwoman‐ownedbusinessesreceived15.5percentoftherelevantcontractingdollarsthatIDOTawardedduringthestudyperiod.Themajorityofthosecontractingdollars—13.1percent—wenttocertifiedDBEs.Non‐Hispanicwhitewoman‐ownedbusinesses(6.9%)andHispanicAmerican‐ownedbusinesses(5.2%)exhibitedhigherlevelsofparticipationonIDOTcontractsthantheotherrelevantgroups.
Business group
Asian Pacific American‐owned 0.5 % 0.2 %Black American‐owned 1.5 1.8Hispanic American‐owned 2.5 7.7Native American‐owned 0.0 0.1Subcontinent Asian American‐owned 1.4 1.5Non‐Hispanic white woman‐owned 13.2 % 18.1 %Total Minority‐ and Woman‐owned 19.1 % 29.4 %
Goal statusGoal
contractsNo‐goal contracts
Business group
Asian Pacific American‐owned 0.2 % 1.4 %Black American‐owned 1.5 1.5Hispanic American‐owned 1.5 7.6Native American‐owned 0.0 0.0Subcontinent Asian American‐owned 1.2 1.9Non‐Hispanic white woman‐owned 10.9 % 22.1 %Total Minority‐ and Woman‐owned 15.2 % 34.4 %
Contract rolePrime contract Subcontract
BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER ES, PAGE 5
Figure ES‐4. Overall utilization results
Note: Numbers rounded to nearest tenth of 1 percent. Numbers may not add to totals. For more detail, see Figure F‐2 in Appendix F. Source: BBC Research & Consulting utilization analysis.
Results by contract goal status.IDOTusedDBEcontractgoalstoawardmanycontractsduringthestudyperiodtoencouragetheparticipationofminority‐andwoman‐ownedbusinesses.Itisinstructivetocomparetheparticipationofminority‐andwoman‐ownedbusinessesbetweengoalcontractsno‐goalcontracts.Doingsoprovidesusefulinformationaboutoutcomesforminority‐andwoman‐ownedbusinessesoncontractsthatIDOTawardedinarace‐andgender‐neutralenvironmentandtheefficacyofDBEcontractgoalsinencouragingtheparticipationofminority‐andwoman‐ownedbusinessesinIDOT’stransportation‐relatedcontracts.FigureES‐5presentsutilizationresultsseparatelyforIDOTgoalcontractsandno‐goalcontracts.AsshowninFigureES‐5,minority‐andwoman‐ownedbusinessesconsideredtogethershowedhigherparticipationingoalcontracts(15.9%)thaninno‐goalcontracts(11.5%).ThoseresultsindicatetheeffectivenessofDBEcontractgoalsinencouragingtheparticipationofminority‐andwoman‐ownedbusinessesinIDOT’stransportation‐relatedcontracts.Figure ES‐5. Utilization results by contract goal status
Note: Numbers rounded to nearest tenth of 1 percent. Numbers may not add to totals. For more detail, see Figures F‐18 and F‐19 in Appendix F. Source: BBC Research & Consulting utilization analysis.
Results by contract role. Manyminority‐andwoman‐ownedbusinessesaresmallbusinessesandthusoftenworkassubcontractors,soitmightbereasonabletoexpecthigherparticipationofminority‐andwoman‐ownedbusinessinsubcontractsthaninprimecontracts.FigureES‐6presentsutilizationresultsforminority‐andwoman‐ownedbusinessesseparatelyforprime
Minority‐ and Woman‐ownedAsian Pacific American‐owned 0.5 %Black American‐owned 1.7Hispanic American‐owned 5.2Native American‐owned 0.2Subcontinent Asian American‐owned 1.0Non‐Hispanic white woman‐owned 6.9Total Minority‐ and Woman‐owned 15.5 %
DBEsAsian Pacific American‐owned 0.5 %Black American‐owned 1.7Hispanic American‐owned 5.2Native American‐owned 0.1Subcontinent Asian American‐owned 0.7Non‐Hispanic white woman‐owned 4.9Total DBE 13.1 %
Utilization %
Business group
Asian Pacific American‐owned 0.5 0.2 %Black American‐owned 1.7 1.8Hispanic American‐owned 5.4 7.7Native American‐owned 0.2 0.1Subcontinent Asian American‐owned 1.0 1.5Non‐Hispanic white woman‐owned 7.0 6.7Total Minority‐ and Woman‐owned 15.9 11.5 %
Goal contracts
No‐goal contracts
Goal status
BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER ES, PAGE 6
contractsandsubcontracts.AsshowninFigureES‐6,theparticipationofminority‐andwoman‐ownedbusinessesconsideredtogetherwasinfactmuchhigherinIDOTsubcontracts(47.9%)thanprimecontracts(5.2%).Figure ES‐6. Utilization results by contract role
Note: Numbers rounded to nearest tenth of 1 percent. Numbers may not add to totals. For more detail, see Figures F‐7 and F‐8 in Appendix F. Source: BBC Research & Consulting utilization analysis.
D. Disparity Analysis Results Althoughinformationabouttheparticipationofminority‐andwoman‐ownedbusinessesinIDOTcontractsisusefulonitsown,itisevenmoreusefulwhenitiscomparedwiththelevelofparticipationthatmightbeexpectedbasedontheavailabilityofminority‐andwoman‐ownedbusinessesforIDOTwork.BBCcomparedtheparticipationofminority‐andwoman‐ownedbusinessesinIDOTprimecontractsandsubcontractswiththepercentageofcontractdollarsthatthosebusinessesmightbeexpectedtoreceivebasedontheiravailabilityforthatwork.BBCcalculateddisparityindicesforeachrelevantbusinessgroupandforvariouscontractsetsbydividingpercentparticipationbypercentavailabilityandmultiplyingthatquotientby100.Adisparityindexof100indicatesanexactmatchbetweenparticipationandavailabilityforaparticulargroupforaparticularsetofcontracts(referredtoasparity).Adisparityindexoflessthan100indicatesadisparitybetweenparticipationandavailability.Adisparityindexoflessthan80indicatesasubstantialdisparitybetweenparticipationandavailability.Overall results.FigureES‐7presentsdisparityindicesforallrelevantprimecontractsandsubcontractsthatIDOTawardedduringthestudyperiod.Thelinedrawnatadisparityindexlevelof100indicatesparity,andthelinedrawnatadisparityindexlevelof80indicatesasubstantialdisparity.AsshowninFigureES‐7,overall,theparticipationofminority‐andwoman‐ownedbusinessesincontractsthatIDOTawardedduringthestudyperiodwassubstantiallylowerthanwhatonemightexpectbasedontheavailabilityofthosebusinessesforthatwork.Thedisparityindexof78indicatesthatminority‐andwoman‐ownedbusinessesconsideredtogetherreceivedapproximately$0.78foreverydollarthattheymightbeexpectedtoreceivebasedontheiravailabilityfortransportation‐relatedcontractsthatIDOTawardedduringthestudyperiod.DisparityanalysisresultsbyindividualgroupindicatedthatSubcontinentAsianAmerican‐ownedbusinesses(disparityindexof70)andnon‐Hispanicwhitewoman‐ownedbusinesses(disparityindexof51)exhibitedsubstantialdisparities.
Business group
Asian Pacific American‐owned 0.3 1.2 %Black American‐owned 0.6 5.0Hispanic American‐owned 0.9 18.7Native American‐owned 0.0 0.6Subcontinent Asian American‐owned 0.8 1.4Non‐Hispanic white woman‐owned 2.5 20.8Total Minority‐ and Woman‐owned 5.2 47.9 %
Contract rolePrime contracts Subcontracts
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BBC RESEARCH & CONSULTING—FINAL REPORT CHAPTER ES, PAGE 10
Figure ES‐10. Availability components of the base figure
Note: Numbers rounded to nearest tenth of 1 percent and thus may not sum exactly to totals.
Source: BBC Research & Consulting availability analysis.
Considering a step‐2 adjustment. TheFederalDBEProgramrequiresIDOTtoconsiderapotentialstep‐2adjustmenttoitsbasefigureaspartofdeterminingitsoverallDBEgoalandoutlinesseveralfactorsthattheagencymustconsiderwhenassessingwhethertomakeanyadjustment: CurrentcapacityofDBEstoperformwork,asmeasuredbythevolumeofworkDBEshave
performedinrecentyears; Informationrelatedtoemployment,self‐employment,education,training,andunions; AnydisparitiesintheabilityofDBEstogetfinancing,bonding,andinsurance;and Otherrelevantdata.4BBCcompletedananalysisofeachoftheabovestep‐2factors.MuchoftheinformationthatBBCexaminedwasnoteasilyquantifiablebutisstillrelevanttoIDOTasitdetermineswhethertomakeastep‐2adjustment.Takentogether,thequantitativeandqualitativeevidencethatthestudyteamcollectedaspartofthedisparitystudymaysupportastep‐2adjustmenttothebasefigureasIDOTconsiderssettingitsoverallDBEgoal.Basedoninformationfromthedisparitystudy,therearereasonswhyIDOTmightconsideranupwardadjustmenttoitsbasefigure: IDOTmightadjustitsbasefigureupwardtoaccountforbarriersthatminoritiesand
womenfaceinhumancapitalandowningbusinessesinthelocalcontractingindustry.Suchanadjustmentwouldcorrespondtoa“determinationofthelevelofDBEparticipationyouwouldexpectabsenttheeffectsofdiscrimination.”5
IDOTmightalsoadjustitsbasefigureupwardinlightofevidenceofbarriersthataffectminorities;women;andminority‐andwoman‐ownedbusinessesinobtainingfinancing,
449CFRSection26.45.549CFRSection26.45(b).
a. Business group
Asian Pacific American‐owned 0.4 % 1.7 % 0.4 %Black American‐owned 0.6 8.9 0.9Hispanic American‐owned 2.6 1.8 2.6Native American‐owned 0.0 0.0 0.0Subcontinent Asian American‐owned 0.9 4.5 1.0Non‐Hispanic white woman‐owned 12.9 10.6 12.7Total potential DBEs 17.3 % 24.8 % 17.6 %Industry weight 97 % 3 %
Base figure componentb. Construction d. Totalc. Professional Services
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bonding,andinsuranceandevidencethatminority‐andwoman‐ownedbusinessesarelesssuccessfulthancomparablebusinessesownedbynon‐Hispanicwhitemen.
TherearealsoreasonswhyIDOTmightconsideradownwardadjustmenttoitsbasefigure.IDOT’sutilizationreportsforFFYs2012through2016indicatedmedianannualDBEparticipationof14.6percentforthoseyears,whichislowerthanitsbasefigure.USDOT’s“TipsforGoal‐Setting”suggeststhatanagencycanmakeastep‐2adjustmentbyaveragingthebasefigurewithpastmedianDBEparticipation.BBC’sanalysisofDBEparticipationinIDOT’sFHWA‐fundedcontractsalsoindicatesDBEparticipation(12.6%)thatislowerthanthebasefigure.IfIDOTweretoadjustitsbasefigurebasedonpastDBEparticipation,itmightconsidertakingtheaverageofthe17.6basefigureandthe14.6percent(or12.6percent)pastDBEparticipation.USDOTregulationsclearlystatethatIDOTisrequiredtoreviewabroadrangeofinformationwhenconsideringwhetheritisnecessarytomakeastep‐2adjustment—eitherupwardordownward—toitsbasefigure.However,IDOTisnotrequiredtomakeanadjustmentaslongasitcanexplainwhatfactorsitconsideredandcanexplainitsdecisionaspartofitsgoal‐settingprocess.
F. Program Implementation Chapters9and10reviewadditionalinformationrelevanttoIDOT’simplementationoftheFederalDBEProgramincludingprogrammeasuresthattheagencycouldconsiderusingtoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitscontracting.IDOTshouldreviewthatinformationaswellasotherrelevantinformationasitmakesdecisionsconcerningthefutureimplementationoftheFederalDBEProgram.Tothatend,BBCpresentsthefollowingareasofpotentialrefinementforIDOT’sconsideration: IDOTshouldconsidercontinuingitseffortstonetworkwithminority‐andwoman‐owned
businesses,buttheagencymightalsoconsiderbroadeningitseffortstoincludemorepartnershipswithlocaltradeorganizationsandotherpublicagencies.IDOTmightalsoconsidercreatingaconsortiumoflocalorganizationsandpublicagenciesthatwouldjointlyhostquarterlyoutreachandnetworkingeventsandtrainingsessionsforbusinessesseekingpublicsectorcontracts.
Tofurtherencouragetheparticipationofsmallbusinesses—includingmanyminority‐andwoman‐ownedbusinesses—IDOTshouldconsidermakingeffortstounbundlerelativelylargecontractsintoseveralsmallercontracts.Doingsowouldresultinthatworkbeingmoreaccessibletosmallbusinesses,whichinturnmightincreaseopportunitiesforminority‐andwoman‐ownedbusinessesandresultingreaterminority‐andwoman‐ownedbusinessparticipation.
IDOTshouldconsiderexploringwaystoincreaseprimecontractingandsubcontractingopportunitiesforsmallbusinesses,includingmanyminority‐andwoman‐ownedbusinesses.Withregardtoprimecontractopportunities,IDOTmightconsidersettingasidesmallprimecontractsforsmallbusinessbiddingtoencouragetheparticipationofminority‐andwoman‐ownedbusinessesasprimecontractors.Withregardtosubcontractopportunities,IDOTcouldconsiderimplementingaprogramthatrequiresprimecontractorstoincludecertainlevelsofsubcontractingaspartoftheirbidsandproposals.
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Disparityanalysisresultsindicatedthatmostracial/ethnicandgendergroupsdidnotshowdisparitiesoncontractsthatIDOTawardedwiththeuseofDBEcontractgoalsduringthestudyperiod.Incontrast,mostracial/ethnicandgendergroupsshowedsubstantialdisparitiesoncontractsthatIDOTawardedwithouttheuseofDBEcontractgoals.IDOTshouldconsidercontinuingitsuseofDBEcontractgoalsinthefuture.Theagencywillneedtoensurethattheuseofthosegoalsisnarrowlytailoredandconsistentwithotherrelevantlegalstandards(fordetails,seeChapter2andAppendixB).
IDOTshouldconsiderimplementingprocessestohelpensurethatitcollectscomprehensiveinformationonalltheprimecontractsandsubcontractsthatitawardsandthatthosedataaremaintainedandorganizedinanintuitivemanner,includingdataonpass‐throughcontractingthattheCityofChicagoawards.DoingsowillallowIDOTtomonitortheparticipationofminority‐andwoman‐ownedbusinessesasaccuratelyaspossible.
Aspartofthedisparitystudy,thestudyteamalsoexaminedinformationconcerningconditionsinthelocalmarketplaceforminorities;women;andminority‐andwoman‐ownedbusinessesincludingresultsfordifferentracial/ethnicandgendergroups.IDOTshouldreviewthefulldisparitystudyreport,aswellasotherinformationitmayhave,indeterminingwhetheritneedstocontinueusingrace‐orgender‐consciousmeasuresaspartofitsimplementationoftheFederalDBEProgram,andifso,indeterminingwhatactionsitmighttakebasedonstudyresults.
CHAPTER 1.
Introduction
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CHAPTER 1. Introduction
TheIllinoisDepartmentofTransportation(IDOT)isresponsiblefortheplanning,construction,operation,andmaintenanceofthetransportationsystemthroughoutIllinoisincludinghighwaysandbridges;airports;publictransit;railfreight;andrailpassengersystems.AsaUnitedStatesDepartmentofTransportation(USDOT)fundrecipient,IDOTimplementstheFederalDisadvantagedBusinessEnterprise(DBE)Program.TheFederalDBEProgramisdesignedtoaddresspotentialdiscriminationagainstDBEsintheawardandadministrationofUSDOT‐fundedcontracts.IDOTretainedBBCResearch&Consulting(BBC)toconductadisparitystudytohelpevaluatetheeffectivenessofitsimplementationoftheFederalDBEPrograminencouragingtheparticipationofminority‐andwoman‐ownedbusinessesinitsfederally‐fundedcontracts.Aspartofthedisparitystudy,BBCexaminedwhetherthereareanydisparitiesbetween: Thepercentageofcontractdollars(includingsubcontractdollars)thatIDOTspentwith
minority‐andwoman‐ownedbusinessesduringthestudyperiod(i.e.,utilization);and Thepercentageofcontractdollarsthatminority‐andwoman‐ownedbusinessesmightbe
expectedtoreceivebasedontheiravailabilitytoperformspecifictypesandsizesoftheIDOT’sprimecontractsandsubcontracts(i.e.,availability).
BBCalsoassessedotherquantitativeandqualitativeinformationrelatedto: ThelegalframeworksurroundingIDOT’simplementationoftheFederalDBEProgram; Localmarketplaceconditionsforminority‐andwoman‐ownedbusinesses;and ContractingpracticesandbusinessassistanceprogramsthatIDOTcurrentlyhasinplace.ThereareseveralreasonswhythedisparitystudywillbeusefultoIDOTasitmakesdecisionsaboutitsimplementationoftheFederalDBEProgram: ThetypesofresearchthatBBCconductedaspartofthedisparitystudyprovideinformation
thatwillbeusefultoIDOTasitmakesdecisionsaboutdifferentaspectsofitsimplementationoftheFederalDBEProgram(e.g.,settinganoverallDBEgoal);
Thedisparitystudyprovidesinsightsintohowtoimprovecontractingopportunitiesforsmallbusinessesaswellasminority‐andwoman‐ownedbusinesses;
Anindependent,objectivereviewoftheparticipationofminority‐andwoman‐ownedbusinessesinIDOT’scontractingwillbevaluabletoagencyleadershipandtoexternalgroupsthatmaybemonitoringIDOT’scontractingpractices;and
StateandlocalagenciesthathavesuccessfullydefendedimplementationsoftheFederalDBEProgramincourthavetypicallyreliedoninformationfromdisparitystudies.
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BBCintroducesthe2017IDOTDisparityStudyinthreeparts:A. Background;B. Studyscope;andC. Studyteammembers.
A. Background TheFederalDBEProgramisaprogramdesignedtoincreasetheparticipationofminority‐andwoman‐ownedbusinessesinUSDOT‐fundedcontracts.AsarecipientofUSDOTfunds,IDOTmustimplementtheFederalDBEProgramandcomplywithcorrespondingfederalregulations.Setting an overall goal for DBE participation.AspartoftheFederalDBEProgram,everythreeyears,anagencyisrequiredtosetanoverallgoalforDBEparticipationinitsUSDOT‐fundedcontracts.1Althoughanagencyisrequiredtosetthegoaleverythreeyears,theoverallDBEgoalisanannualgoalinthattheagencymustmonitorDBEparticipationinitsUSDOT‐fundedcontractseveryyear.IfDBEparticipationforaparticularyearislessthantheoverallDBEgoal,thentheagencymustanalyzethereasonsforthedifferenceandestablishspecificmeasuresthatenabletheagencytomeetthegoalinthenextyear.TheFederalDBEProgramdescribesthestepsanagencymustfollowinestablishingitsoverallDBEgoal.Tobeginthegoal‐settingprocess,anagencymustdevelopabasefigurebasedondemonstrableevidenceoftheavailabilityofDBEstoparticipateintheagency’sUSDOT‐fundedcontracts.Then,theagencymustconsiderconditionsinthelocalmarketplaceforminority‐andwoman‐ownedbusinessesandmakeanupward,downward,ornoadjustmenttoitsbasefigureasitdeterminesitsoverallDBEgoal(referredtoasa“step‐2”adjustment).Projecting the portion of the overall DBE goal to be met through race‐ and gender‐neutral means. Accordingto49CodeofFederalRegulations(CFR)Part26,anagencymustmeetthemaximumfeasibleportionofitsoverallDBEgoalthroughtheuseofrace‐andgender‐neutralprogrammeasures.2Race‐andgender‐neutralmeasuresaremeasuresthataredesignedtoencouragetheparticipationofallbusinesses—orallsmallbusinesses—inanagency’scontracting(forexamplesofrace‐andgender‐neutralmeasures,see49CFRSection26.51(b)).Participationinsuchmeasuresisnotlimitedtominority‐andwoman‐ownedbusinessesortocertifiedDBEs.Ifanagencycannotmeetitsgoalsolelythroughtheuseofrace‐andgender‐neutralmeasures,thenitmustconsideralsousingrace‐andgender‐consciousprogrammeasures.Race‐andgender‐consciousmeasuresaredesignedtospecificallyencouragetheparticipationofminority‐andwoman‐ownedbusinessesinanagency’scontracting(e.g.,usingDBEgoalsonindividualcontracts).TheFederalDBEProgramrequiresanagencytoprojecttheportionofitsoverallDBEgoalthatitwillmeetthroughrace‐andgender‐neutralmeasuresandtheportion
1http://www.gpo.gov/fdsys/pkg/FR‐2011‐01‐28/html/2011‐1531.htm249CFRSection26.51.
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thatitwillmeetthroughanyrace‐orgender‐consciousmeasures.USDOThasoutlinedanumberoffactorsforanagencytoconsiderwhenmakingsuchdeterminations.3Determining whether all groups will be eligible for race‐ and gender‐conscious measures.Ifanagencydeterminesthatrace‐orgender‐consciousmeasures—suchasDBEcontractgoals—areappropriateforitsimplementationoftheFederalDBEProgram,thenitmustalsodeterminewhichracial/ethnicorgendergroupsareeligibleforparticipationinthosemeasures.Eligibilityforsuchmeasuresislimitedtoonlythoseracial/ethnicorgendergroupsforwhichcompellingevidenceofdiscriminationexistsinthelocalmarketplace.USDOTprovidesawaiverprovisionifanagencydeterminesthatitsimplementationoftheFederalDBEProgramshouldonlyincludecertainracial/ethnicorgendergroupsintherace‐orgender‐consciousmeasuresthatituses.
B. Study Scope InformationfromthedisparitystudywillhelpIDOTcontinuetoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitsfederally‐fundedcontracts.Inaddition,informationfromthestudywillhelpIDOTcontinuetoimplementtheFederalDBEPrograminalegally‐defensiblemanner.Definitions of minority‐ and woman‐owned businesses.Tointerpretthecoreanalysespresentedinthedisparitystudy,itisusefultounderstandhowthestudyteamtreatsminority‐andwoman‐ownedbusinessesandbusinessesthatarecertifiedasDBEswithIDOT.Itisalsoimportanttounderstandhowthestudyteamtreatsbusinessesownedbyminoritywomeninitsanalyses.Minority‐ and woman‐owned businesses.Thestudyteamfocuseditsanalysesontheminority‐andwoman‐ownedbusinessgroupsthattheFederalDBEProgrampresumestobedisadvantaged:AsianPacificAmerican‐,BlackAmerican‐,HispanicAmerican‐,NativeAmerican,SubcontinentAsianAmerican‐,andnon‐Hispanicwhitewoman‐ownedbusinesses.Thestudyteamanalyzedthepossibilitythatrace‐orgender‐baseddiscriminationaffectedtheparticipationofminority‐andwoman‐ownedbusinessesinIDOTworkbasedspecificallyontherace/ethnicityandgenderofbusinessownership.Therefore,thestudyteamcountedbusinessesasminority‐orwoman‐ownedregardlessofwhethertheywere,orcouldbe,certifiedasDBEsthroughIDOT.Analyzingtheparticipationandavailabilityofminority‐andwoman‐ownedbusinessesregardlessofDBEcertificationallowedthestudyteamtoassesswhethertherearedisparitiesaffectingallminority‐andwoman‐ownedbusinessesandnotjustcertifiedbusinesses.DBEs.DBEsareminority‐andwoman‐ownedbusinessesthatarespecificallycertifiedassuchthroughIDOT.AdeterminationofDBEeligibilityincludesassessingbusinesses’grossrevenuesandbusinessowners’personalnetworth(maximumof$1.32millionexcludingequityinahomeandinthebusiness).Someminority‐andwoman‐ownedbusinessesdonotqualifyasDBEs
3http://www.dotcr.ost.dot.gov/Documents/Dbe/49CFRPART26.doc
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becauseofgrossrevenueornetworthrequirements.4BusinessesseekingDBEcertificationinIllinoisarerequiredtosubmitanapplicationtoIDOT.Theapplicationisavailableonlineandrequiresbusinessestosubmitvariousinformationincludingbusinessname;contactinformation;taxinformation;workspecializations;andrace/ethnicityandgenderoftheirowners.IDOTreviewseachapplicationforapproval.Thereviewprocessmayinvolveon‐sitemeetingsandadditionaldocumentationtoconfirmbusinessinformation.BecausetheFederalDBEProgramrequiresagenciestotracktheparticipationofcertifiedDBEs,BBCreportsutilizationresultsforallminority‐andwoman‐ownedbusinessesandseparatelyforthoseminority‐andwoman‐ownedbusinessesthatarecertifiedasDBEs.However,BBCdoesnotreportavailabilityordisparityanalysisresultsseparatelyforcertifiedDBEs.Potential DBEs.PotentialDBEsareminority‐andwoman‐ownedbusinessesthatareDBE‐certifiedorappearthattheycouldbeDBE‐certifiedbasedonrevenuerequirementsdescribedin49CFRPart26(regardlessofactualcertification).ThestudyteamdidnotcountbusinessesthathavebeendecertifiedorhavegraduatedfromtheDBEProgramaspotentialDBEs.BBCexaminedtheavailabilityofpotentialDBEsaspartofhelpingIDOTcalculatethebasefigureofitsoverallDBEgoal.Figure1‐1providesfurtherexplanationofpotentialDBEs. Minority woman‐owned businesses.BBCconsideredfouroptionswhenconsideringhowtoclassifybusinessesownedbyminoritywomen: Classifyingthosebusinessesasbothminority‐ownedandwoman‐owned; Creatinguniquegroupsofminoritywoman‐ownedbusinesses; Classifyingminoritywoman‐ownedbusinesseswithallotherwoman‐ownedbusinesses;and Classifyingminoritywoman‐ownedbusinesseswiththeircorrespondingminoritygroups.
4Businessesownedbynon‐HispanicwhitemencanbecertifiedasDBEsifthosebusinessesmeettherequirementsin49CFRPart26.
Figure 1‐1. Definition of potential DBEs
To help IDOT calculate its overall DBE goal, BBC did not include the following types of minority‐ and woman‐owned businesses in its definition of potential DBEs:
Minority‐ and woman‐owned businesses that have graduated from the DBE Program and have not been recertified;
Minority‐ and woman‐owned businesses that are not currently DBE‐certified but that have applied for DBE certification with IDOT and have been denied; and
Minority‐ and woman‐owned businesses that are not currently DBE‐certified that appear to have average annual revenues over the most recent three years so high as to deem them ineligible for DBE certification.
At the time of this study, the overall revenue limit for DBE certification was $22,410,000 based on a three‐year average of gross receipts. There were lower revenue limits for specific subindustries according to United States Small Business Administration (SBA) small business size standards. Only a few minority‐ and woman‐owned businesses appeared to have exceeded those revenue limits based on information that they provided as part of availability surveys.
Business owners must also meet USDOT personal net worth limits for their businesses to qualify for DBE certification. The personal net worth of business owners was not available as part of this study and thus was not considered when determining potential DBE status.
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BBCchosenottocodebusinessesasbothwoman‐ownedandminority‐ownedtoavoiddouble‐countingcertainbusinesseswhenreportingdisparitystudyresults.Creatinggroupsofminoritywoman‐ownedbusinessesthatweredistinctfrombusinessesownedbyminoritymen(e.g.,BlackAmericanwoman‐ownedbusinessesversusbusinessesownedbyBlackAmericanmen)wasalsounworkablebecausesomeminoritygroupsexhibitedsuchlowparticipationthatfurtherdisaggregationbygenderwouldhavemadeitevenmoredifficulttointerprettheresults.Afterrejectingthefirsttwooptions,BBCthenconsideredwhethertogroupminoritywoman‐ownedbusinesseswithallotherwoman‐ownedbusinessesorwiththeircorrespondingminoritygroups.BBCchosethelatter(e.g.,groupingBlackAmericanwoman‐ownedbusinesseswithallotherBlackAmerican‐ownedbusinesses).Thus,woman‐ownedbusinessesinthisreportreferstonon‐Hispanicwhitewoman‐ownedbusinesses.Majority‐owned businesses.Majority‐ownedbusinessesarebusinessesthatarenotownedbyminoritiesorwomen(i.e.,businessesownedbynon‐Hispanicwhitemen).Incoredisparitystudyanalyses,thestudyteamcodedeachbusinessasminority‐,woman‐,ormajority‐owned.Analyses in the disparity study.Thedisparitystudyexaminedwhetherthereareanydisparitiesbetweentheparticipationandavailabilityofminority‐andwoman‐ownedbusinessesonIDOTcontracts.Thestudyfocusedontransportation‐relatedconstructionandprofessionalservicescontractsthatIDOTawardedbetweenOctober1,2012andSeptember30,2016(i.e.,thestudyperiod).Duringthestudyperiod,IDOTappliedDBEcontractgoalstomanyofthefederally‐fundedcontractsthatitawarded.Inadditiontothecoreutilization,availability,anddisparityanalyses,thedisparitystudyalsoincludes: AreviewoflegalissuessurroundingimplementationoftheFederalDBEProgram; Ananalysisoflocalmarketplaceconditionsforminority‐andwoman‐ownedbusinesses; AnassessmentofIDOT’scontractingpracticesandbusinessassistanceprograms;and OtherinformationforIDOTtoconsiderasitrefinesitsimplementationoftheFederalDBE
Program.Thatinformationisorganizedinthedisparitystudyreportinthefollowingmanner:Legal framework and analysis.Thestudyteamconductedadetailedanalysisofrelevantfederalregulations,caselaw,statelaw,andotherinformationtoguidethemethodologyforthedisparitystudy.TheanalysisincludedareviewoffederalandstaterequirementsconcerningIDOT’simplementationoftheFederalDBEProgram.ThelegalframeworkandanalysisforthestudyissummarizedinChapter2andpresentedindetailinAppendixB.Marketplace conditions.BBCconductedquantitativeanalysesofthesuccessofminoritiesandwomenandminority‐andwoman‐ownedbusinessesinthelocalcontractingindustries.BBCcomparedbusinessoutcomesforminorities,women,andminority‐andwoman‐ownedbusinessestooutcomesfornon‐Hispanicwhitemenandmajority‐ownedbusinesses.Inaddition,thestudyteamcollectedqualitativeinformationaboutpotentialbarriersthatsmallbusinesses
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andminority‐andwoman‐ownedbusinessesfaceinIllinoisthroughin‐depthinterviews.InformationaboutmarketplaceconditionsispresentedinChapter3,AppendixC,andAppendixD.
Data collection and analysis.BBCexamineddatafrommultiplesourcestocompletetheutilizationandavailabilityanalyses.Inaddition,thestudyteamconductedtelephonesurveyswiththousandsofbusinessesthroughoutIllinois.Thescopeofthestudyteam’sdatacollectionandanalysisasitpertainstotheutilizationandavailabilityanalysesispresentedinChapter4. Availability analysis.BBCanalyzedthepercentageofminority‐andwoman‐ownedbusinessesthatareready,willing,andabletoperformonIDOTprimecontractsandsubcontracts.ThatanalysiswasbasedonIDOTdataandtelephonesurveysthatthestudyteamconductedwiththousandsofIllinoisbusinessesthatworkinindustriesrelatedtothetypesofcontractingdollarsthatIDOTawards.BBCanalyzedavailabilityseparatelyforbusinessesownedbyspecificminoritygroupsandnon‐Hispanicwhitewomenandfordifferenttypesofcontracts.ResultsfromtheavailabilityanalysisarepresentedinChapter5andAppendixE. Utilization analysis.BBCanalyzedcontractdollarsthatIDOTspentwithminority‐andwoman‐ownedbusinessesontransportation‐relatedcontractsthattheagencyawardedbetweenOctober1,2012andSeptember30,2016.Thosedataincludedinformationaboutassociatedsubcontracts.5IDOTappliedDBEcontractgoalstomanyofthosecontracts.BBCanalyzedutilizationseparatelyforbusinessesownedbyspecificminoritygroupsandnon‐Hispanicwomenandfordifferenttypesofcontracts.ResultsfromtheutilizationanalysisarepresentedinChapter6.Disparity analysis.BBCexaminedwhethertherewereanydisparitiesbetweentheutilizationofminority‐andwoman‐ownedbusinessesoncontractsthatIDOTawardedduringthestudyperiodandtheavailabilityofthosebusinessesforthatwork.BBCanalyzeddisparityanalysisresultsseparatelyforbusinessesownedbyspecificminoritygroupsandnon‐Hispanicwhitewomenandfordifferenttypesofcontracts.Thestudyteamalsoassessedwhetheranyobserveddisparitieswerestatisticallysignificant.BBCfurtherexploredresultsforsubsetsofIDOTcontractsandexaminedbidandproposalinformationforrelevantIDOTcontracts.ResultsfromthedisparityanalysisandfurtherexplorationsofdisparitiesarepresentedinChapter7andAppendixF.Overall DBE goal.Basedoninformationfromtheavailabilityanalysisandotherresearch,BBCprovidedIDOTwithinformationthatwillhelptheagencysetitsoverallDBEgoalincludingthebasefigureandconsiderationofastep‐2adjustment.InformationaboutIDOT’soverallDBEgoalispresentedinChapter8.Race‐ and gender‐neutral measures. BBCreviewedinformationregardingevidenceofdiscriminationintheIllinoiscontractingmarketplace;analyzedIDOT’sexperiencewithmeetingitsoverallDBEgoalinthepast;andprovidedinformationaboutIDOT’spastperformancein 5Primecontractors—notIDOT—actuallyawardsubcontractstosubcontractors.However,forsimplicity,throughoutthereport,BBCreferstoIDOTasawardingsubcontracts.
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encouragingtheparticipationofminority‐andwoman‐ownedbusinessesusingrace‐andgender‐neutralmeasures.InformationfromthoseanalysesispresentedinChapter9.Federal DBE Program.BBCreviewedIDOT’simplementationoftheFederalDBEProgram.BBCprovidedguidancerelatedtoadditionalprogramoptions.Thestudyteam’sreviewandguidanceispresentedinChapter10.
C. Study Team Members TheBBCstudyteamwasmadeupofsevenfirmsthat,collectively,possessdecadesofexperiencerelatedtoconductingdisparitystudiesinconnectionwiththeFederalDBEProgram.BBC (prime consultant).BBCisaDenver‐baseddisparitystudyandeconomicresearchfirm.BBChadoverallresponsibilityforthestudyandperformedallofthequantitativeanalyses.B2B Consulting. B2BConsultingisaBlackAmericanwoman‐ownedconsultingandtrainingfirmlocatedinNorthRiverside,Illinois.B2BConsultingconductedin‐person,in‐depthanecdotalinterviewswithbusinessownersandtradeassociationrepresentativesandhelpedfacilitatecommunityengagementeffortsthroughoutthelocalmarketplace. Customer Research International (CRI).CRIisaSubcontinentAsianAmerican‐ownedsurveyfieldworkfirmbasedinSanMarcos,Texas.CRIconductedtelephonesurveyswiththousandsofIllinoisbusinessestogatherinformationfortheutilizationandavailabilityanalyses.Holland & Knight. Holland&Knightisalawfirmwithofficesthroughoutthecountry.Holland&Knightconductedthelegalanalysisforthestudy.Keen Independent Research (Keen Independent).KeenIndependentisanArizona‐basedresearchfirm.KeenIndependenthelpedmanagethein‐depthinterviewprocessaspartofthestudyteam’squalitativeanalysesofmarketplaceconditions.SC‐B Consulting. SC‐BConsultingisanon‐Hispanicwhitewoman‐ownedmanagementandbusinessconsultingfirmlocatedinUrbana‐Champaign,Illinois.SC‐BConsultingconductedin‐person,in‐depthanecdotalinterviewswithbusinessownersandtradeassociationrepresentativesthroughoutthelocalmarketplace.Zann & Associates.Zann&AssociatesisaBlackAmericanwoman‐ownedmanagementconsultingfirmbasedinChicago,Illinois.Zann&AssociatesreviewedthepracticesandproceduresthatIDOTusestoawardcontractsandthemeasureitusestoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinitscontracting.
CHAPTER 2.
Legal Framework
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CHAPTER 2. Legal Analysis
AsarecipientofUnitedStatesDepartmentofTransportation(USDOT)funds,theIllinoisDepartmentofTransportation(IDOT)implementstheFederalDisadvantagedBusinessEnterprise(DBE)Program.TheFederalDBEProgramisgovernedby49CodeofFederalRegulations(CFR)Part26andrelatedfederalregulations.BBCResearch&Consulting(BBC)presentstheLegalAnalysisforthe2017IDOTDisparityStudyintwoparts:A. Programelements;andB. Legalstandards.
A. Program Elements TheFederalDBEProgramisdesignedtoencouragetheparticipationofminority‐andwoman‐ownedbusinessesinanagency’scontracting,andmorespecifically,initsUSDOT‐fundedcontracts.1AspartoftheFederalDBEProgram,everythreeyears,anagencyisrequiredtosetanoverallgoalforDBEparticipationinitsUSDOT‐fundedcontracts.2Althoughanagencyisrequiredtosetthegoaleverythreeyears,theoverallDBEgoalisanannualgoalinthattheagencymustmonitorDBEparticipationinitsUSDOT‐fundedcontractseveryyear.IfDBEparticipationforaparticularyearislessthantheoverallDBEgoalforthatyear,thentheagencymustanalyzethereasonsforthedifferenceandestablishspecificmeasuresthatwilladdressthedifferenceandenabletheagencytomeetthegoalinthenextyear.Definition of DBE.Accordingto49CFRPart26,aDBEisabusinessthatisownedandcontrolledbyoneormoreindividualswhoaresociallyandeconomicallydisadvantagedaccordingtotheguidelinesintheFederalDBEProgram.ThefollowinggroupsarepresumedtobesociallyandeconomicallydisadvantagedaccordingtotheFederalDBEProgram: AsianPacificAmericans; BlackAmericans; HispanicAmericans; NativeAmericans; SubcontinentAsianAmericans;and Womenofanyraceorethnicity.Adeterminationofeconomicdisadvantageincludesassessingbusinesses’grossrevenuesandbusinessowners’personalnetworth(maximumof$1.32millionexcludingequityinahomeandinthebusiness).Someminority‐andwoman‐ownedbusinessesdonotqualifyasDBEsbecause 1BBCconsidersacontractasUSDOT‐fundedifitincludesatleastonedollarofUSDOTfunding.2http://www.gpo.gov/fdsys/pkg/FR‐2011‐01‐28/html/2011‐1531.htm
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ofgrossrevenueornetworthrequirements.Businessesownedbynon‐HispanicwhitemencanbecertifiedasDBEsifthosebusinessesmeettherequirementsin49CFRPart26.Certification requirements.BusinessesseekingDBEcertificationinIllinoisarerequiredtosubmitanapplicationtoIDOT.Theapplicationisavailableonlineandrequiresbusinessestosubmitvariousinformationincludingbusinessname;contactinformation;taxinformation;workspecializations;andrace/ethnicityandgenderoftheowners.IDOTreviewseachapplicationforapproval.Thereviewprocessmayinvolveon‐sitemeetingsandadditionaldocumentationtoconfirmrequiredbusinessinformation.Measures to encourage DBE participation. Regulationsthatgovernanagency’simplementationoftheFederalDBEProgramrequirethattheagencymeetsthemaximumfeasibleportionofitsoverallDBEgoalthroughtheuseofrace‐andgender‐neutralmeasures.3Race‐andgender‐neutralmeasuresaredesignedtoencouragetheparticipationofallbusinesses—or,allsmallbusinesses—inanagency’scontracting.Participationinsuchmeasuresisnotlimitedtominority‐andwoman‐ownedbusinessesortocertifiedDBEs.IfanagencycannotmeetitsoverallDBEgoalsolelythroughrace‐andgender‐neutralmeans,thenitisrequiredtoconsiderusingrace‐andgender‐consciousmeasuresaspartofitsimplementationoftheFederalDBEProgram.Race‐andgender‐consciousmeasuresaredesignedtospecificallyencouragetheparticipationofminority‐andwoman‐ownedbusinessesinanagency’scontracting(e.g.,usingDBEgoalsonindividualUSDOT‐fundedcontracts).Giventhatcontext,thereareseveralapproachesthatagenciescouldusetoimplementtheFederalDBEProgram.1. Using a combination of race‐ and gender‐neutral and race‐ and gender‐conscious measures with all DBEs considered eligible.Manyagenciesuseacombinationofrace‐andgender‐neutralandrace‐andgender‐consciousmeasureswhenimplementingtheFederalDBEProgramwithallcertifiedDBEsbeingconsideredeligibletoparticipateintherace‐andgender‐consciousmeasures.Thoseagenciesusevariousmeasuresthataredesignedtoencouragetheparticipationofsmallandemergingbusinessesintheircontracting.Inaddition,theyalsouseDBEcontractgoalsonindividualcontracts,andtheparticipationofallcertifiedDBEs—regardlessofrace/ethnicityorgender—counttowardmeetingthosegoals.IDOTimplementstheFederalDBEPrograminthismanner.Theagencyusesacombinationofrace‐andgender‐neutralandrace‐andgender‐consciousmeasuresandconsidersallcertifiedDBEsaseligibletoparticipateinrace‐andgender‐consciousmeasures.2. Applying a combination of race‐ and gender‐neutral and race‐ and gender‐conscious measures with only certain DBEs considered eligible. SomeagencieslimitDBEparticipationinrace‐andgender‐consciousmeasurestocertainracial/ethnicorgendergroupsbasedonevidenceofthosegroupsfacingdiscriminationwithintheagencies’respectiverelevantgeographicmarketareas(underutilizedDBEs,orUDBEs).Forexample,theCaliforniaDepartmentofTransportation(Caltrans)setsDBEcontractgoalsforwhichonlyUDBEs—whichdonotincludeallDBEgroups—areconsideredeligible.CaltranscountstheparticipationofallDBEstowardmeetingitsoverallDBEgoal,butonlyUDBEparticipationcountstowardprimecontractorsmeetingDBEcontract 349CFRSection26.51.
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goalsonindividualcontracts.CaltransdeterminedwhichDBEgroupswereUDBEsbyexaminingresultsofadisparitystudyforindividualracial/ethnicandgendergroups.TheColoradoDepartmentofTransportationandtheOregonDepartmentofTransportation,amongotheragencies,haveimplementedtheFederalDBEPrograminsimilarways.3. Applying a combination of race‐ and gender‐neutral and more aggressive race‐ and gender‐conscious measures in extreme circumstances.TheFederalDBEProgramprovidesthatanagencymaynotusemoreaggressiverace‐andgender‐consciousprogrammeasures—suchassettingasidecontractsexclusivelyforDBEbidding—exceptinlimitedandextremecircumstances.Anagencymayonlyusesetasideswhennoothermethodcouldbereasonablyexpectedtoredressegregiousinstancesofdiscrimination.4SpecificquotasforDBEparticipationarestrictlyprohibitedundertheFederalDBEProgram.4. Operating an entirely race‐ and gender‐neutral program.SomeagencieshaveimplementedtheFederalDBEProgramwithouttheuseofDBEcontractgoalsorotherrace‐andgender‐consciousmeasures.Instead,thoseagenciesonlyuserace‐andgender‐neutralmeasuresaspartoftheirimplementationsoftheFederalDBEProgram.Forexample,theFloridaDepartmentofTransportationandthePortofSeattleimplementtheFederalDBEProgramusingonlyrace‐andgender‐neutralprogrammeasures.
B. Legal Standards IDOT’suseofDBEcontractgoalsisconsideredarace‐andgender‐consciousmeasure.PrimecontractorscanmeetDBEcontractgoalsbyeithermakingsubcontractingcommitmentswithcertifiedDBEsubcontractorsatthetimeofbidorbyshowingthattheymadeallreasonablegoodfaitheffortstomeetthegoalsbutcouldnotdoso.TheUnitedStatesSupremeCourthasestablishedthatgovernmentprogramsthatincluderace‐andgender‐consciousmeasuresmustmeetthestrictscrutinystandardofconstitutionalreview.5ThetwokeyU.S.SupremeCourtcasesthatestablishedthestrictscrutinystandardforsuchmeasuresare: The1989decisioninCityofRichmondv.J.A.CrosonCompany,whichestablishedthestrict
scrutinystandardofreviewforrace‐consciousprogramsadoptedbystateandlocalgovernments;6and
The1995decisioninAdarandConstructors,Inc.v.Peña,whichestablishedthestrictscrutinystandardofreviewforfederalrace‐consciousprograms.7
Anagencymustmeetboththecompellinggovernmentalinterestandthenarrowtailoringcomponentsofthestrictscrutinystandard.Aprogramthatfailstomeeteithercomponentisunconstitutional.
449CFRSection26.43.5CertainFederalCourtsofAppealsapplytheintermediatescrutinystandardtogender‐consciousprograms.AppendixBdescribestheintermediatescrutinystandardindetail.6CityofRichmondv.J.A.CrosonCompany,488U.S.469(1989).7AdarandConstructors,Inc.v.Peña,515U.S.200(1995).
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Compelling governmental interest.Anagencymustdemonstrateacompellinggovernmentalinterestinremedyingpastidentifieddiscriminationinordertouserace‐orgender‐consciousmeasures.Anagencythatusesrace‐orgender‐consciousmeasuresaspartofaminority‐orwoman‐ownedbusinessprogramhastheinitialburdenofshowingevidenceofdiscrimination—includingstatisticalandanecdotalevidence—thatsupportstheuseofsuchmeasures.Agenciescannotrelyonnationalstatisticsofdiscriminationinanindustrytodrawconclusionsabouttheprevailingmarketconditionsintheirownregions.Rather,theymustassessdiscriminationwithintheirownrelevantmarketareas.8Itisnotnecessaryforagovernmentagencyitselftohavediscriminatedagainstminority‐orwoman‐ownedbusinessesforittoact.InCityofRichmondv.J.A.CrosonCompany,theSupremeCourtfound,“if[thegovernmentalentity]couldshowthatithadessentiallybecomea‘passiveparticipant’inasystemofracialexclusionpracticedbyelementsofthelocalconstructionindustry…[i]tcouldtakeaffirmativestepstodismantlesuchasystem.”Manyagencieshaveusedinformationfromdisparitystudies—specifically,evidenceofdisparitiesbetweentheparticipationandavailabilityofminority‐andwoman‐ownedbusinesses—aspartofdeterminingwhethertheircontractingpracticesareaffectedbyrace‐orgender‐baseddiscrimination.InCityofRichmondv.J.A.CrosonCompany,theU.S.SupremeCourtheldthat,“[w]herethereisasignificantstatisticaldisparitybetweenthenumberofqualifiedminoritycontractorswillingandabletoperformaparticularserviceandthenumberofsuchcontractorsactuallyengagedbythelocalityorthelocality’sprimecontractors,aninferenceofdiscriminatoryexclusioncouldarise.”LowercourtdecisionssinceCityofRichmondv.J.A.CrosonCompanyhaveheldthatacompellinggovernmentalinterestmustbeestablishedforeachracial/ethnicandgendergrouptowhichrace‐andgender‐consciousmeasuresapply.Narrow tailoring.Inadditiontodemonstratingacompellinggovernmentalinterest,anagencymustalsodemonstratethatitsuseofrace‐andgender‐consciousmeasuresisnarrowlytailored.Thereareanumberoffactorsthatcourtsconsiderwhendeterminingwhethertheuseofsuchmeasuresisnarrowlytailoredincluding: Thenecessityofsuchmeasuresandtheefficacyofalternative,race‐andgender‐neutral
measures; Thedegreetowhichtheuseofsuchmeasuresislimitedtothosegroupsthatactuallysuffer
discriminationinthelocalmarketplace; Thedegreetowhichtheuseofsuchmeasuresisflexibleandlimitedinduration,including
theavailabilityofwaiversandsunsetprovisions; Therelationshipofanynumericalgoalstotherelevantbusinessmarketplace;and Theimpactofsuchmeasuresontherightsofthirdparties.9
8Seee.g.,ConcreteWorks,Inc.v.CityandCountyofDenver(“ConcreteWorksI”),36F.3d1513,1520(10thCir.1994).9See,e.g.,AGC,SDCv.Caltrans,713F.3dat1198‐1199;Rothe,545F.3dat1036;WesternStatesPaving,407F3dat993‐995;SherbrookeTurf,345F.3dat971;AdarandVII,228F.3dat1181;Eng’gContractorsAss’n,122F.3dat927(internalquotationsandcitationsomitted).
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Meeting the strict scrutiny standard.Manyprogramshavefailedtomeetthestrictscrutinystandard,becausetheyhavefailedtomeetthecompellinggovernmentalinterestrequirement,thenarrowtailoringrequirement,orboth.However,manyotherprogramshavemetthestrictscrutinystandardandcourtshavedeemedthemtobeconstitutional.AppendixBprovidesdetaileddiscussionsoftherelatedcaselaw.
CHAPTER 3.
Marketplace Conditions
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CHAPTER 3. Marketplace Conditions
Historically,therehavebeenmyriadlegal,economic,andsocialobstaclesthathaveimpededminoritiesandwomenfromacquiringthehumanandfinancialcapitalnecessarytostartandoperatesuccessfulbusinesses.Barrierssuchasslavery,racialoppression,segregation,race‐baseddisplacement,andlabormarketdiscriminationproducedsubstantialdisparitiesforminoritiesandwomen,theeffectsofwhicharestillapparenttoday.Thosebarrierslimitedopportunitiesforminoritiesintermsofbotheducationandworkplaceexperience.1,2,3,4Similarly,manywomenwererestrictedtoeitherbeinghomemakersortakinggender‐specificjobswithlowpayandlittlechanceforadvancement.5Inthe19thandearly20thcenturies,minoritiesinIllinoisfacedbarriersthatweresimilartothosethatminoritiesfacednationwide.DiscriminatorytreatmentwascommonforminoritiesinIllinois.BlackAmericanswereforcedtoliveinracially‐segregatedneighborhoodsandsendtheirchildrentosegregatedschools.Intheearlytomid‐20thcentury,BlackAmericanswereforcedtouseseparatefacilitiesatarearestaurantsandculturalinstitutions.Disparatetreatmentalsoextendedintothelabormarket.BlackAmericanswereconcentratedinlowwageworkinmanufacturingindustrieswithfewopportunitiesforadvancement.6,7Inthemiddleofthe20thcentury,manylegalandworkplacereformsopenedupnewopportunitiesforminoritiesandwomennationwide.Brownv.BoardofEducation,TheEqualPayAct,TheCivilRightsAct,andTheWomen’sEducationalEquityActoutlawedmanyformsofrace‐andgender‐baseddiscrimination.Workplacesadoptedformalizedpersonnelpoliciesandimplementedprogramstodiversifytheirstaffs.8Thosereformsincreaseddiversityinworkplacesandreducededucationalandemploymentdisparitiesforminoritiesandwomen.9,10,11,12However,despitethoseimprovements,minoritiesandwomencontinuetofacebarriers—suchasincarceration,residentialsegregation,andfamilyresponsibilities—thathavemadeitmoredifficulttoacquirethehumanandfinancialcapitalnecessarytostartandoperatebusinessessuccessfully.13,14,15FederalCourtsandtheUnitedStatesCongresshaveconsideredbarriersthatminorities;women;andminority‐andwoman‐ownedbusinessesfaceinalocalmarketplaceasevidencefortheexistenceofrace‐orgender‐baseddiscriminationinthatmarketplace.16,17,18TheUnitedStatesSupremeCourtandotherfederalcourtshaveheldthatanalysesofconditionsinalocalmarketplaceforminorities;women;andminority‐andwoman‐ownedbusinessesareinstructiveindeterminingwhetheragencies’implementationsofminority‐andwoman‐ownedbusinessprogramsareappropriateandjustified.Thoseanalyseshelpagenciesdeterminewhethertheyarepassivelyparticipatinginanyrace‐orgender‐baseddiscriminationthatmakesitmoredifficultforminority‐andwoman‐ownedbusinessestosuccessfullycompetefortheircontracts.Passiveparticipationindiscriminationmeansthatagenciesunintentionallyperpetuaterace‐orgender‐baseddiscriminationsimplybyoperatingwithindiscriminatorymarketplaces.Manycourtshaveheldthatpassiveparticipationinanyrace‐orgender‐baseddiscrimination
BBC RESEARCH & CONSULTING – FINAL REPORT CHAPTER 3, PAGE 2
establishesacompellinggovernmentalinterestforagenciestotakeremedialactiontoaddresssuchdiscrimination.19,20,21Thestudyteamconductedquantitativeandqualitativeanalysestoassesswhetherminorities;women;andminority‐andwoman‐ownedbusinessesfaceanybarriersintheIllinoisconstructionandprofessionalservicesindustries.Thestudyteamalsoexaminedthepotentialeffectsthatanysuchbarriershaveontheformationandsuccessofminority‐andwoman‐ownedbusinessesandontheirparticipationinandavailabilityforcontractsthattheIllinoisDepartmentofTransportationawards.Thestudyteamexaminedlocalmarketplaceconditionsprimarilyinfourareas: Humancapital,toassesswhetherminoritiesandwomenfaceanybarriersrelatedto
education,employment,andgainingmanagerialexperienceinrelevantindustries; Financialcapital,toassesswhetherminoritiesandwomenfaceanybarriersrelatedto
wages,homeownership,personalwealth,andaccesstofinancing; Businessownershiptoassesswhetherminoritiesandwomenownbusinessesatrates
thatarecomparabletothatofnon‐Hispanicwhitemen;and Successofbusinessestoassesswhetherminority‐andwoman‐ownedbusinesseshave
outcomesthataresimilartothoseofbusinessesownedbynon‐Hispanicwhitemen.TheinformationinChapter3comesfromexistingresearchintheareaofrace‐andgender‐baseddiscriminationaswellasfromprimaryresearchthatthestudyteamconductedofcurrentmarketplaceconditions.AdditionalquantitativeandqualitativeanalysesofmarketplaceconditionsarepresentedinAppendixCandAppendixD,respectively.
A. Human Capital Humancapitalisthecollectionofpersonalknowledge,behavior,experience,andcharacteristicsthatmakeupanindividual’sabilitytoperformandsucceedinparticularlabormarkets.Factorssuchaseducation,businessexperience,andmanagerialexperiencehavebeenshowntoberelatedtobusinesssuccess.22,23,24,25Anyrace‐orgender‐basedbarriersinthoseareasmaymakeitmoredifficultforminoritiesandwomentoworkinrelevantindustriesandpreventsomeofthemfromstartingandoperatingbusinessessuccessfully.Education.Barriersassociatedwitheducationalattainmentmayprecludeentryoradvancementincertainindustries,becausemanyoccupationsrequireatleastahighschooldiploma.Someoccupations—suchasoccupationsinprofessionalservices—requireatleastafour‐yearcollegedegree.Inaddition,educationalattainmentisastrongpredictorofbothincomeandpersonalwealth,whicharebothshowntoberelatedtobusinessformationandsuccess.26,27Nationally,minoritieslagbehindnon‐Hispanicwhitesintermsofbotheducationalattainmentandthequalityofeducationthattheyreceive.28,29Minoritiesarefarmorelikelythannon‐Hispanicwhitestoattendschoolsthatdonotprovideaccesstocoreclassesinscienceandmath.30Inaddition,BlackAmericanstudentsaremorethanthreetimesmorelikelythannon‐Hispanicwhitestobeexpelledorsuspendedfromhighschool.31Forthoseandotherreasons,minoritiesarefarlesslikelythannon‐Hispanicwhitestoattendcollege;enrollathighly‐ormoderatelyselectivefour‐yearinstitutions;orearncollegedegrees.32
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BBC RESEARCH & CONSULTING – FINAL REPORT CHAPTER 3, PAGE 6
Figure 3‐4. Percentage of workers who worked as a manager in each study‐related industry, Illinois, 2011‐2015
Note: *, ** Denotes that the difference in proportions between the minority group and non‐Hispanic whites (or between women and men) is statistically significant at the 90% and 95% confidence level, respectively. "Other race minority" omitted due to small sample size. † Denotes that statistical significance was not assessed due to small sample sizes. Source: BBC Research & Consulting from 2011‐2015 ACS 5% Public Use Microdata sample. The raw data extract was obtained through the IPUMS program of the MN Population Center: http://usa.ipums.org/usa/.
Intergenerational business experience.Havingafamilymemberwhoownsabusinessandisworkinginthatbusinessisanimportantpredictorofbusinessownershipandbusinesssuccess.Suchexperienceshelpentrepreneursgainaccesstoimportantopportunitynetworks;obtainknowledgeofbestpracticesandbusinessetiquette;andreceivehands‐onexperienceinhelpingtorunbusinesses.However,atleastnationally,minoritieshavesubstantiallyfewerfamilymemberswhoownbusinessesandbothminoritiesandwomenhavefeweropportunitiestobeinvolvedwiththosebusinesses.50,51Thatlackofexperiencemakesitmoredifficultforminoritiesandwomentosubsequentlystarttheirownbusinessesandoperatethemsuccessfully.
B. Financial Capital Inadditiontohumancapital,financialcapitalhasbeenshowntobeanimportantindicatorofbusinessformationandsuccess.52,53,54Individualscanacquirefinancialcapitalthroughmanysourcesincludingemploymentwages,personalwealth,homeownership,andfinancing.Ifrace‐orgender‐baseddiscriminationexistsinthosecapitalmarkets,minoritiesandwomenmayhavedifficultyacquiringthecapitalnecessarytostart,operate,orexpandbusinesses.Wages and income.Wageandincomegapsbetweenminoritiesandnon‐Hispanicwhitesandbetweenwomenandmenarewell‐documentedthroughoutthecountry,evenwhenresearchershavestatisticallycontrolledforvariousfactorsunrelatedtoraceandgender.55,56,57Forexample,nationalincomedataindicatethat,onaverage,BlackAmericansandHispanicAmericanshavehouseholdincomesthatarelessthantwo‐thirdsthoseofnon‐Hispanicwhites.58,59Womenhavealsofacedconsistentwageandincomegapsrelativetomen.Nationally,themedianhourlywageofwomenisstillonly84percentthemedianhourlywageofmen.60Suchdisparitiesmakeitdifficultforminoritiesandwomentouseemploymentwagesasasourceofbusinesscapital.BBCobservedwagegapsinIllinoisconsistentwiththegapsthatresearchershaveobservednationally.Figure3‐5presentsmeanannualwagesforIllinoisworkersbyrace/ethnicityandgender.AsshowninFigure3‐5,BlackAmericans,HispanicAmericans,NativeAmericans,andotherraceminoritiesinIllinoisearnsubstantiallylessthannon‐Hispanicwhites.Inaddition,womenworkersearnsubstantiallylessthanmen.BBCalsoconductedregressionanalysesto
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