Seventh Circuit Court Re-affirms NERA Study as Valid Tool in Illinois DOT's Disadvantaged Business Enterprise Program Case

05 February 2007

CHICAGO -- A "custom census" and expert trial testimony conducted by NERA Vice President Dr. Jon Wainwright is a valid and legally defensible tool for determining the number of Disadvantaged Business Enterprises (DBEs) in a particular area and evaluating the effects of discrimination, according to an 8 January 2007 ruling by the US Seventh Circuit Court of Appeals. The court affirmed the trial court's judgment that the Illinois Department of Transportation's DBE plan was constitutional in Northern Contracting, Inc. v. Illinois Department of Transportation. The unanimous panel relied heavily upon Dr. Wainwright's testimony and NERA's research.

In 2000, highway contractor Northern Contracting, Inc. (NCI) filed suit against the Illinois Department of Transportation (IDOT) over its DBE program, which promotes a level playing field for socially and economically disadvantaged businesses in federally assisted transportation projects. The lawsuit challenged the constitutionality of the federal DBE program regulations as well as IDOT's application of those regulations. IDOT commissioned Dr. Wainwright to develop evidence relevant to the DBE program, including a custom census of DBE availability, and to present expert trial testimony in court.

Dr. Wainwright developed a custom census to provide an accurate calculation of the current relative availability of DBEs, employing an innovative six-step analysis that identified the appropriate geographic market for IDOT's contracting activity. NERA's analysis also included estimations of the degree to which minority and women firms' formation rates and earnings from those firms were depressed by discrimination, resulting in an estimate of DBE availability in a non-discriminatory market.

In 2005, the District Court for the Northern District of Illinois ruled in favor of IDOT, extensively relying upon Dr. Wainwright's testimony and NERA's research. NCI appealed, in part arguing that IDOT miscalculated the number of DBEs by relying on NERA's custom census instead of a simple count of the number of certified DBEs.

The Court of Appeals rejected the argument, noting, "The NERA custom census reflects an attempt by IDOT to arrive at more accurate numbers that would be possible through use of just the list." The Court re-affirmed the earlier decision that IDOT's Fiscal Year 2005 DBE program -- based largely on the NERA report prepared by Dr. Wainwright -- "was narrowly tailored to the compelling interest identified by the federal government -- remedying the effects of racial and gender discrimination in the highway construction market."

"We are very pleased that another federal court has found our work to meet strict constitutional scrutiny and federal regulations," said Dr. Wainwright. "With highly qualified experts and proper economic and statistical methods, it is possible to have a legally defensible affirmative action program. NERA is proud to be the industry leader on these issues."

NERA is a leading provider of studies related to historically disadvantaged business enterprise. These studies evaluate goals established by federal, state, and local governments, and help public agencies to develop effective and lawful affirmative action programs for procuring goods and services from businesses owned by minorities and women. Learn more about our services and experience in the Employment and Labor section of our website.

NERA Economic Consulting (www.nera.com), founded in 1961 as National Economic Research Associates, is a unit of Mercer Specialty Consulting, an MMC company.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world's leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 25 offices across North America, Europe, and Asia Pacific.