Illinois Department of Transportation's DBE Program Upheld Based on NERA's Expert Testimony

The Situation

In July 2000, Illinois highway contractor Northern Contracting Inc. (NCI) filed suit against the Illinois Department of Transportation (IDOT) over its Disadvantaged Business Enterprise (DBE) program, which promotes the participation of socially and economically disadvantaged businesses in federally-assisted transportation contracting projects. The lawsuit challenged the constitutionality of IDOT's application of the DBE Program regulations.

NERA's Role

IDOT commissioned NERA Senior Vice President Dr. Jon Wainwright to conduct a study to meet the constitutional and regulatory requirements of the DBE Program and to testify at trial. To determine the baseline level of DBE availability, Dr. Wainwright developed a custom census to provide an accurate calculation of the relative availability of DBEs. He employed a six-step analysis that identified the appropriate geographic market for IDOT's contracting activity; identified the relevant product markets in which IDOT and its prime contractors contract; identified all available contractors and subcontractors in the relevant industries within the State of Illinois using a comprehensive micro-business establishment list; sought to rectify biases that commonly occur in DBE lists; and determined the ownership of firms not listed in available directories by polling a random sample of such businesses. NERA's analysis next 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. Dr. Wainwright then presented his findings in federal court.

The Initial Result
On 8 September 2005, the US District Court for the Northern District of Illinois ruled in favor of IDOT. Dr. Wainwright's testimony and NERA's research were cited extensively by Judge Rebecca R. Pallmeyer in her decision.

The Appeal
In April 2006, NCI appealed the decision in the United States Court of Appeals for the Seventh Circuit. In its appeal, NCI argued that IDOT 1) improperly calculated the relative availability of DBEs in Illinois, 2) failed to properly adjust its base figure based on local market conditions, and 3) failed to meet the maximum feasible portion of its overall goal through race-neutral means.

The Final Result
The Court of Appeals upheld Dr. Wainwright's initial analysis. On 8 January 2007, the Court ruled that NCI had failed to prove all three of its arguments, a failure that "reflects NCI's broader inability to demonstrate that IDOT's DBE program is in violation of the Constitution."