Concrete Works of Colorado, Inc. v. City & County of Denver

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
FEB 10 2003

UNITED STATES COURT OF APPEALS PATRICK FISHER
Clerk
TENTH CIRCUIT

CONCRETE WORKS OF
COLORADO, INC., a Colorado
corporation,

Plaintiff - Appellee,

v.

CITY AND COUNTY OF DENVER, a
municipal corporation, No. 00-1145

Defendant - Appellant.

CITY OF CHICAGO; CITY OF LAS
VEGAS; CITY OF MINNEAPOLIS;
CITY OF SAN FRANCISCO;
INTERNATIONAL MUNICIPAL
LAWYERS ASSOCIATION;
LAWYERS’ COMMITTEE FOR
CIVIL RIGHTS UNDER LAW;
CITY OF PHOENIX; UNITED
STATES; MINORITY BUSINESS
ENTERPRISE LEGAL DEFENSE
AND EDUCATION FUND, INC.;
NATIONAL ASSOCIATION OF
MINORITY CONTRACTORS; LATIN
AMERICAN MANAGEMENT
ASSOCIATION; NATIONAL ASIAN
 PACIFIC AMERICAN LEGAL
CONSORTIUM; PACIFIC LEGAL
FOUNDATION,

Amici Curiae.

Appeal from the United States District Court
for the District of Colorado
(D.C. No. 92-M-21 )

J. Scott Detamore, (William Perry Pendley, with him on the brief), Mountain
States Legal Foundation, Denver, Colorado, for Plaintiff-Appellee.

Eileen Penner, Mayer, Brown & Platt, Washington, D.C., (Thomas B. Colby,
Mayer, Brown & Platt, Washington, D.C.; J. Wallace Wortham, Jr., City Attorney,
Norman R. Bangeman, Laurie J. Heydman, Dean Speirs, Victoria Ortega,
Assistant City Attorneys, City and County of Denver, Denver, Colorado, with her
on the briefs), for Defendant-Appellant.

David A. Strauss, Chicago, Illinois, filed an amici curiae brief on behalf of Cities
of Chicago, Las Vegas, Minneapolis, and San Francisco, and International
Municipal Lawyers Association; Mara S. Georges, Corporation Counsel of the
City of Chicago, Lawrence Rosenthal, Deputy Corporation Counsel, Chicago,
Illinois, on behalf of the City of Chicago; Bradford R. Jerbic, Las Vegas City
Attorney, Las Vegas, Nevada, on behalf of the City of Las Vegas; Jay M. Heffern,
Minneapolis City Attorney, Peter W. Ginder, Assistant City Attorney,
Minneapolis, Minnesota, on behalf of the City of Minneapolis; Louise H. Renne,
City Attorney, Randy Riddle and Teresa Stricker, Deputy City Attorneys, San
Francisco, California, on behalf of the City of San Francisco; Henry W.
Underhill, Jr., General Counsel & Executive Director, Lani L. Williams,
Associate Counsel, International Municipal Lawyers Association, Washington,
DC, on behalf of International Municipal Lawyers Association.

Paul C. Saunders, Cravath, Swaine & Moore, New York, NY, and Thomas J.
Henderson, Lawyers’ Committee for Civil Rights Under Law, Washington, DC,
filed an amicus curiae brief on behalf of Lawyers’ Committee for Civil Rights
Under Law.

-2-
Brad Holm, Alan K. Hyde, Holm, Wright, Hyde & Hays, PLC, Phoenix, Arizona,
filed an amicus curiae brief on behalf of the City of Phoenix.

Mark L. Gross, Lisa J. Stark, Attorneys, Department of Justice, Washington, DC,
filed an amicus curiae brief on behalf of the United States.

Stephen D. Bell, Fatina N. Purdie, Dorsey & Whitney, LLP, Denver, Colorado,
and Franklin M. Lee, Minority Business Enterprise Legal Defense and Education
Fund, Inc., Washington, DC, filed an amici curiae brief on behalf of the Minority
Business Enterprise Legal Defense and Education Fund, Inc., the National
Association of Minority Contractors, the Latin American Management
Association, and the National Asian Pacific American Legal Consortium.

John H. Findley, Pacific Legal Foundation, Sacramento, California, filed an
amicus curiae brief on behalf of Pacific Legal Foundation.

Before KELLY, McKAY, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

I. INTRODUCTION

Plaintiff, Concrete Works of Colorado, Inc. (“CWC”) initiated this action

in 1992, challenging the constitutionality of an affirmative action ordinance

enacted by the City and County of Denver (hereinafter the “City” or “Denver”).

The ordinance established participation goals for racial minorities and women on

certain City construction and professional design projects. Denver has amended

-3-
the ordinance twice since this lawsuit was initiated but it remains essentially

unchanged for purposes of this case.

In 1993, the district court granted summary judgment in favor of Denver.

See Concrete Works of Colorado, Inc. v. City & County of Denver , 823 F. Supp.

821, 845 (D. Colo. 1993) (“ Concrete Works I ”). After CWC appealed, this court

reversed the grant of summary judgment and remanded the case for trial. See

Concrete Works of Colorado, Inc. v. City & County of Denver , 36 F.3d 1513,

1530-31 (10th Cir. 1994) (“ Concrete Works II ”). On remand, a bench trial was

held and the district court entered judgment in favor of CWC on its claims for

injunctive and declaratory relief. See Concrete Works of Colorado, Inc. v. City &

County of Denver , 86 F. Supp. 2d 1042, 1079 (D. Colo. 2000) (“Concrete Works

III ”). The district court enjoined Denver from enforcing the ordinance. See id .

CWC’s entitlement to damages was reserved and the district court directed entry

of judgment under Rule 54(b) of the Federal Rules of Civil Procedure. See id. at

1044, 1079. Denver then brought this appeal.

Section II. of this opinion summarizes the challenged Denver ordinances

and this litigation to date. Section III. generally presents the applicable law and

the parties’ positions thereon. In Section IV., we examine the evidence upon

which Denver relies to support the ordinances. At trial, Denver presented

historical evidence, statistical evidence, and anecdotal evidence which are

-4-
discussed respectively in subsections IV.A., IV.B., and IV.C. In Section V., we

discuss the legal framework used by the district court to evaluate Denver’s

evidence. Section VI. contains a discussion of CWC’s rebuttal evidence,

including its challenges to Denver’s use of marketplace data and to the reliability

of Denver’s disparity studies. In Section VII., we address the question of narrow

tailoring.

-5-
 Exercising jurisdiction pursuant to 28 U.S.C. §§ 1291, 1292(a)(1), 1
we

1
The district court enjoined Denver from enforcing the three affirmative
action ordinances the City has enacted since 1990. See § II.A. infra (discussing,
seriatim , the 1990 Ordinance, the 1996 Ordinance, and the 1998 Ordinance).
CWC’s claims for prospective injunctive relief relating to the 1990 and 1996
Ordinances, however, became moot as each was amended and ultimately replaced
by the 1998 Ordinance. See PeTA, People for the Ethical Treatment of Animals
v. Rasmussen , 298 F.3d 1198, 1202 (10th Cir. 2002) (holding that claims for
prospective relief “require a continuing injury”). Because the 1990 Ordinance
and the 1996 Ordinance are no longer in effect, the portion of the district court’s
order enjoining Denver from enforcing them is meaningless and is hereby
vacated . Our jurisdiction to review the grant of prospective injunctive relief
from the application of the 1998 Ordinance arises pursuant to 28 U.S.C. §
1292(a)(1).
In addition to prospective injunctive relief, CWC also sought retrospective
relief in the form of monetary damages. CWC’s claims for damages relate to the
1990 Ordinance and thus implicate the constitutionality of that ordinance.
Consequently, CWC’s challenge to the 1990 Ordinance is not moot. See
Richmond v. J.A. Croson Co. , 488 U.S. 469, 478 n.1 (1989); F.E.R. v. Valdez , 58
F.3d 1530, 1532-33 (10th Cir. 1995). Because the district court entered a Rule
54(b) certification, our jurisdiction to review the grant of declaratory relief
relating to the 1990 Ordinance arises under 28 U.S.C. § 1291. See Fed. R. Civ.
P. 54(b). CWC, however, has made no claim for damages arising from the
application of the 1996 Ordinance and that ordinance has been superseded by the
1998 Ordinance. The viability of CWC’s claims under the 1996 Ordinance is
controlled by National Advertising Co. v. City & County of Denver, 912 F.2d
405, 412 (10th Cir. 1990). In National Advertising , the challenged ordinance
was amended before the district court ruled on the defendant’s motion for
summary judgment. See id. at 408. Accordingly, the constitutionality of the
newest version of the challenged ordinance was one of the issues decided by the
district court. See id . at 408-411. In its appeal, the plaintiff challenged the
district court’s ruling that its claims under the old version of the ordinance were
moot. See id . at 411. We affirmed the district court’s ruling, concluding that
“[a] declaratory judgment on the validity of [the] repealed ordinance is a
textbook example of advising what the law would be upon a hypothetical state of
facts” and dismissed the claims for declaratory relief from the old statute as
moot. Id. at 412 (quotations omitted). Because the constitutionality of the 1998
(continued...)

-6-
reverse and remand .

II. BACKGROUND

Comprehensive statements of the relevant facts and prior proceedings in

this case are fully set out in our previous opinion and in the two district court

orders. See Concrete Works II , 36 F.3d at 1515-1517; Concrete Works III , 86 F.

Supp. 2d at 1043-46; Concrete Works I , 823 F. Supp. at 824-826. In particular,

the most recent order of the district court contains a thorough description of the

1
(...continued)
Ordinance was decided by the district court and is resolved in this appeal, this
case is controlled by National Advertising and not City of Mesquite v. Aladdin’s
Castle, Inc. , 455 U.S. 283, 288-89 (1982) (concluding that claims arising under a
statute that was amended while the case was pending in the Court of Appeals
were not moot). Accordingly, we conclude that CWC’s challenge to the
constitutionality of the 1996 Ordinance is moot and we vacate that portion of the
district court’s order declaring the 1996 Ordinance unconstitutional.
This court has previously concluded that CWC has standing to challenge
the 1990 Ordinance. See Concrete Works II , 36 F.3d 1513, 1518-19 (10th Cir.
1994). The City argues that CWC lacks standing to challenge the 1998
Ordinance because all prime contractors must now meet identical requirements.
We are satisfied that CWC has standing because the record establishes that it has
bid on subcontracting work for the City in the past and is “able and ready to bid”
on subcontracting work subject to the 1998 Ordinance. Northeastern Fla.
Chapter of the Associated Gen. Contractors of Am. v. Jacksonville , 508 U.S. 656,
668-69 (1993) (relying, in part, on unchallenged allegations contained in
plaintiff’s complaint to conclude that the plaintiff had standing). Under the terms
of the 1998 Ordinance, a prime contractor who cannot meet the percentage goals
set out in the ordinance must provide the City with a statement of its good faith
efforts. To satisfy its obligation, the prime contractor, inter alia, must verify that
if it rejected an MBE or WBE it was because the M/WBE was not the lowest
bidder or was not qualified. The 1998 Ordinance contains no analogous provision
requiring a prime contractor to justify the failure to award a subcontract to a non-
M/WBE subcontractor who submits the lowest bid.

-7-
numerous studies commissioned by the City and the operation of the ordinances.

See Concrete Works III , 86 F. Supp. 2d at 1053-61, 1050-53. Consequently we

have summarized only the most relevant facts.

The appellate record in this case is prodigious. The trial transcript,

including opening and closing statements, exceeds three thousand pages and the

entire appellate appendix exceeds ten thousand pages. Consequently, the parties’

ability to cogently frame the issues and provide record support for their

respective positions was particularly critical. Though we are under no obligation

to do so, this court made every reasonable effort to locate pertinent portions of

the record when a citation to such was omitted by the parties.

A. The Ordinances

In 1990, the City promulgated an affirmative action program codified as

Ordinance No. 513 (the “1990 Ordinance”). The 1990 Ordinance established the

Mayor’s Office of Contract Compliance (“MOCC”) and delegated to that office

“authority to promulgate such rules and regulations and/or informal guidelines as

may be necessary to effectuate the purposes” of the 1990 Ordinance. Subject to

exemptions adopted by the Manager of Public Works, the 1990 Ordinance

applied to all contracts for which bidding was required before the City could

make an award.

-8-
 The 1990 Ordinance contained annual goals for the utilization of minority

business enterprises (“MBEs”) and women business enterprises (“WBEs”). Of

the total dollars spent annually for construction contracts with the City, the goal

was 16% to MBEs and 12% to WBEs. The annual goals for professional design

and construction services were 10% of annual expenditures to MBEs and 10% to

WBEs. MBEs were defined in the 1990 Ordinance as businesses: (1) at least

51% owned by one or more eligible minorities and (2) with daily business

operations controlled by one or more eligible minorities. Minorities were defined

as persons of “Black, Hispanic, Asian-American, or American Indian descent.”

WBEs were defined as businesses: (1) at least 51% owned by one or more women

and (2) with daily business operations controlled by one or more women. To

participate in the program, both MBEs and WBEs were required to obtain

certification from the City. Notwithstanding the requirement to meet annual

goals, the MOCC could set individualized M/WBE participation goals for

specific City construction and professional design projects. On some projects,

goals were set at zero.

Prime contractors and subcontractors who bid on City contracts were

required to commit to the goals and requirements set forth in the 1990 Ordinance.

Bidders could comply with the 1990 Ordinance by meeting the project

participation goals or by demonstrating sufficient good faith efforts to meet those

-9-
goals. Bidders could meet the good-faith requirements by demonstrating that

they sought to subcontract with M/WBEs but were unsuccessful or that they

rejected a certified MBE or WBE because it did not submit the lowest bid or was

not qualified. If the bidder failed to meet either the good-faith or project-

participation requirements, the bid was considered “not responsive.”

In 1996, the City replaced the 1990 Ordinance with Ordinance No. 304

(the “1996 Ordinance”). The district court stated that the 1996 Ordinance

differed from the 1990 Ordinance as follows:

The 1996 Ordinance . . . amended the 1990 Ordinance by expanding
the definition of “covered contracts” to include limited categories of
privately financed projects on City-owned land; added updated
information and findings to the statement of factual support for
continuing the program; refined the requirements for W/MBE
certification and graduation; mandated the use of MBEs and WBEs
on change orders and expanded sanctions for improper behavior by
MBEs, WBEs or majority owned contractors in failing to perform
the affirmative action commitments made on City projects. It
changed the definition of American-Indian descent by eliminating
the provision for 25% blood quantum alternative to tribal
membership.

Concrete Works III, 86 F. Supp. 2d at 1049. The 1996 Ordinance was amended

in 1998 by Ordinance No. 948 (the “1998 Ordinance”). Annual participation

goals for both MBEs and WBEs were reduced to 10% of total dollars spent on

construction projects and 10% of total dollars spent on professional design

contracts. An substantive change prohibited an MBE or a WBE, acting as a

bidder, from counting self-performed work toward project goals.

-10-
B. The Lawsuit

In January 1992, CWC filed a complaint in federal district court alleging

that the 1990 Ordinance violated the Equal Protection Clause of the Fourteenth

Amendment. CWC is a Colorado construction firm owned and operated by a

non-minority male. CWC alleged that it lost three contracts with the City

because it failed to comply with the M/WBE participation goals or meet the

good-faith requirements set out in the 1990 Ordinance. CWC sought both

damages and injunctive relief. After a motion for summary judgment filed by the

City was granted by the district court, CWC appealed. This court reversed,

concluding that genuine issues of material fact existed, making the grant of

summary judgment inappropriate. See Concrete Works II , 36 F.3d at 1530-31.

The case was remanded for trial. 2
Id. at 1531.

The district court conducted a bench trial in February and June 1999 on the

constitutionality of the three ordinances. The court ruled in favor of CWC and

concluded that the ordinances violated the Fourteenth Amendment. See Concrete

Works III , 86 F. Supp. 2d at 1079. The court enjoined the City from enforcing

the 1990 Ordinance, the 1996 Ordinance, and the 1998 Ordinance. See id. The

court reserved ruling on CWC’s claim for damages. See id . The City then

brought this appeal.

2
CWC filed an amended complaint on April 9, 1997, adding allegations
related to the 1996 Ordinance.

-11-
III. Standard of Review and Burdens of Proof

A. Race-Based Remedial Measures

CWC argues that the ordinances violate the Equal Protection Clause of the

Fourteenth Amendment which provides that “[n]o State shall . . . deny to any

person within its jurisdiction the equal protection of the laws.” U.S. Const.

amend. XIV, § 1. Because the use of racial preferences is a “highly suspect

tool,” the race-based measures contained in the ordinances are subject to strict

judicial scrutiny. City of Richmond v. J.A. Croson Co. , 488 U.S. 469, 493 (1989)

(plurality opinion) (“[T]he purpose of strict scrutiny is to ‘smoke out’ illegitimate

uses of race . . . [and] ensure[] that the means chosen ‘fit’ [the] compelling goal

so closely that there is little or no possibility that the motive for the classification

was illegitimate racial prejudice or stereotype.”). To withstand CWC’s

challenge, the race-based measures in the ordinances must serve a compelling

governmental interest and must be narrowly tailored to further that interest. See

Adarand Constructors, Inc. v. Pena , 515 U.S. 200, 227 (1995) (“ Adarand III ”);

Wygant v. Jackson Bd. of Educ. , 476 U.S. 267, 274 (1986) (plurality opinion).

Denver asserts that it has a compelling interest in remedying racial

discrimination within its jurisdiction. A clear majority of the Supreme Court has

expressly held that “[a] State’s interest in remedying the effects of past or present

racial discrimination may in the proper case justify a government’s use of racial

-12-
distinctions.” Shaw v. Hunt, 517 U.S. 899, 909 (1996). A plurality of the Court

has also stated that a governmental entity “can use its spending powers to remedy

private discrimination, if it identifies that discrimination with the particularity

required by the Fourteenth Amendment.” Croson , 488 U.S. at 492 (plurality

opinion). Because “an effort to alleviate the effects of societal discrimination is

not a compelling interest,” Denver can demonstrate that its interest is compelling

only if it satisfies two conditions. Shaw , 517 U.S. at 909-10 (emphasis added).

First, it must identify the past or present discrimination “with some specificity.”

Id. at 909 (quotation omitted). Second, it must also demonstrate that a “strong

basis in evidence” supports its conclusion that remedial action is necessary. Id.

at 910 (quotation omitted).

Denver can meet its burden without conclusively proving the existence of

past or present racial discrimination. See Concrete Works II , 36 F.3d at 1522

(“[T]he Fourteenth Amendment does not require a court to make an ultimate

judicial finding of discrimination before a municipality may take affirmative

steps to eradicate discrimination.”). Denver may rely on “empirical evidence that

demonstrates ‘a significant statistical disparity between the number of qualified

minority contractors . . . and the number of such contractors actually engaged by

the locality or the locality’s prime contractors.’” Id. (quoting Croson , 488 U.S.

at 509 (plurality opinion)). Furthermore, Denver may rely on statistical evidence

-13-
gathered from the six-county Denver Metropolitan Statistical Area (MSA). See

id. at 1520. Denver may supplement the statistical evidence with anecdotal

evidence of public and private discrimination. See id. at 1520-21; see also id. at

1520 (“Personal accounts of actual discrimination or the effects of discriminatory

practices may, however, vividly complement empirical evidence.”).

“Neither Croson nor its progeny clearly state whether private

discrimination that is in no way funded with public tax dollars can, by itself,

provide the requisite strong basis in evidence necessary to justify a municipality’s

affirmative action program.” Id. at 1529. Denver, however, clearly may take

measures to remedy its own discrimination or even to prevent itself from acting

as a “passive participant in a system of racial exclusion practiced by elements of

the local construction industry.” Croson , 488 U.S. at 492 (plurality opinion)

(quotation omitted). Thus, Denver may establish its compelling interest by

presenting evidence of its own direct participation in racial discrimination or its

passive participation in private discrimination. See Concrete Works II , 36 F.3d at

1519 & n.7.

The question of whether Denver has demonstrated a strong basis in

evidence is a question of law. See id . at 1522. As such, we review that question

and any attendant legal questions de novo . Underlying factual findings are

reviewed for clear error. See id.

-14-
 Once Denver meets its burden, CWC must introduce “credible,

particularized evidence to rebut [Denver’s] initial showing of the existence of a

compelling interest.” Adarand Constructors, Inc. v. Slater , 228 F.3d 1147, 1175

(10th Cir. 2000) (“ Adarand VII ”). “[R]ebuttal evidence may consist of a neutral

explanation for the statistical disparities.” Coral Constr. Co. v. King County ,

941 F.2d 910, 921 (9th Cir. 1991) (cited with approval in Concrete Works II , 36

F.3d at 1531). CWC can also rebut Denver’s statistical evidence “by (1) showing

that the statistics are flawed; (2) demonstrating that the disparities shown by the

statistics are not significant or actionable; or (3) presenting contrasting statistical

data.” Id.; see also Eng’g Contractors Ass’n of S. Fla., Inc. v. Metro. Dade

County , 122 F.3d 895, 916 (11th Cir. 1997) (same); Contractors Ass’n of E. Pa.,

Inc. v. City of Phila. , 6 F.3d 990, 1007 (3d Cir. 1993) (same). This court has

repeatedly emphasized that the burden of proof at all times remains with CWC to

demonstrate the unconstitutionality of the ordinances. 3
See Adarand VII , 228

F.3d at 1176 (“We reiterate that the ultimate burden of proof remains with the

challenging party to demonstrate the unconstitutionality of an affirmative-action

program.” (quotation omitted)); Concrete Works II , 36 F.3d at 1522-23; see also

Wygant , 476 U.S. at 277-78 (plurality opinion) (“The ultimate burden remains

We are not persuaded by CWC’s unsupported assertion that this is “an
3

impossible and unconstitutional burden.”

-15-
with the [plaintiff] to demonstrate the unconstitutionality of an affirmative-action

program.”).

B. Gender-Based Remedial Measures

This court applies intermediate scrutiny to the gender-based measures

contained in the ordinances. See Concrete Works II , 36 F.3d at 1519. To

withstand CWC’s challenge, Denver must establish an “exceedingly persuasive

justification” for those measures. United States v. Virginia , 518 U.S. 515, 524

(1996) (quotation omitted). Denver can meet its burden by demonstrating that

the gender-based preferences “serve[] important governmental objectives” and

are “substantially related to achievement of those objectives.” Id. (quotation

omitted). Neither this court nor the Supreme Court has developed a framework

for analyzing equal protection challenges to gender-based remedial measures.

See Eng’g Contractors Ass’n , 122 F.3d at 909 (“The Supreme Court has not

addressed the question explicitly, and there is a similar dearth of guidance in the

reported decisions of other federal appellate courts.”). Further, the parties have

not provided this court with any comprehensive arguments on this issue. CWC

implicitly advocates that the gender-based classifications must also survive strict

judicial scrutiny. Denver argues that the statistical and anecdotal evidence it

presented is sufficient to survive strict scrutiny so, a fortiori , the gender-based

measures necessarily survive intermediate scrutiny.

-16-
 To meet its burden of demonstrating an important governmental interest,

Denver must show that the gender-based measures in the ordinances were based

on “reasoned analysis rather than through the mechanical application of

traditional, often inaccurate, assumptions.” Miss. Univ. for Women v. Hogan ,

458 U.S. 718, 726 (1982). Thus, the evidentiary basis necessary to demonstrate

Denver’s important governmental interest may be something less than the “strong

basis in evidence” required to justify race-based remedial measures. See Eng’g

Contractors Ass’n , 122 F.3d at 909; Contractors Ass’n of E. Pa. , 6 F.3d at 1010

(“Logically, a city must be able to rely on less evidence in enacting a gender

preference than a racial preference because applying Croson ’s evidentiary

standard to a gender preference would eviscerate the difference between strict

and intermediate scrutiny.”).

Denver argues that it can satisfy its burden of production without

introducing evidence showing its active or passive participation in gender

discrimination. This approach has been embraced by both the Ninth and

Eleventh Circuit Courts of Appeal. See Ensley Branch, NAACP v. Seibels , 31

F.3d 1548, 1580 (11th Cir. 1994) (“Under the intermediate scrutiny test, a local

government must demonstrate some past discrimination against women, but not

necessarily discrimination by the government itself. One of the distinguishing

features of intermediate scrutiny is that, unlike strict scrutiny, the government

-17-
interest prong of the inquiry can be satisfied by a showing of societal

discrimination in the relevant economic sector.”); Coral Constr. Co. , 941 F.2d at

932 (“Unlike the strict standard of review applied to race-conscious programs,

intermediate scrutiny does not require any showing of governmental involvement,

active or passive, in the discrimination it seeks to remedy.”). We need not

resolve this issue, however, because Denver has introduced evidence that links

the City to gender discrimination in the local construction industry. See §§ IV.C.

& VI.A.1., infra .

IV. Denver’s Evidence Supporting its Compelling Interest and its
Important Governmental Interest

A. Historical Evidence

At trial, Denver introduced evidence detailing its construction contracting

practices before the 1990 Ordinance. In 1973, the City Council enacted an

ordinance creating an Affirmative Action Office (“AAO”) within its Department

of Public Works (“DPW”). 4
According to testimony from the City’s first

Affirmative Action Officer, Wesley Martin, the AAO sought to ensure that

minority contractors were hired to participate in City construction projects.

Martin further testified that minority contractors were available but the City’s

rules, guidelines, and biases operated to effectively bar them from participating

The DPW is the City agency responsible for most City construction
4

contracting.

-18-
in City contracting. In 1977, the City Council passed a resolution establishing a

voluntary program aimed at increasing minority participation in City contracting.

Martin testified that the resolution had very little impact on how City projects

were bid, mainly because the program had no enforcement mechanism.

In 1977, the Department of Housing and Urban Development (“HUD”)

commenced an investigation into a grievance filed by the Minority Association of

Contractors. The grievance alleged that minority contractors were not being

utilized on Denver-based, federally funded projects in violation of applicable

federal statutes. HUD provided the City with a preliminary investigative report

dated September 30, 1977 in which HUD concluded,

The [C]ity failed to take those reasonable actions to overcome the
effects of conditions which resulted in limited participation in the
benefits of the [Community Development Block Grant] Program, and
failed to make reasonable efforts to meet the special needs of the
minority contractors which in effect resulted in minority contractors
not taking full advantage of the [Community Development Block
Grant] Program.

Martin testified that this HUD report was significant because it was the first time

the City “was actually told that they were in apparent non-compliance with

affirmative action requirements.”

Martin also testified that the HUD report led Congresswoman Patricia

Schroeder to request an investigation by the General Accounting Office

(“GAO”). The GAO evaluated, inter alia , the DPW’s compliance with federal

-19-
affirmative action requirements for minority construction contractors. In a report

released on September 25, 1978 (the “GAO Report”), the GAO concluded that

certain DPW contracting practices “appeared to have a significant negative effect

on minority and other categorical groups of contractors covered by [federal]

affirmative action requirements.” These practices included requiring contractor

prequalification, advertising for most bids only on a limited basis, and providing

inadequate time to submit a bid proposal. See Concrete Works II , 36 F.3d at

1524 n.11. Appended to the GAO Report was a chart detailing the DPW’s

utilization of minority contractors on federally funded City projects. That chart

indicates that a total of $55,477,000 was awarded for such contracts between July

1, 1975 and December 31, 1977. Of that total, $2,476,000, or 4.46% was

awarded to minority firms.

In 1979, the United States Department of Transportation (“DOT”)

threatened to withdraw federal financial assistance for contracting projects at

Denver’s Stapleton International Airport unless the City took measures to

facilitate minority participation on Stapleton projects. In a letter to the City’s

mayor, the DOT asserted that the DPW’s prequalification requirement, while

neutral on its face, was unjustified and operated to bar minority contractors from

obtaining DPW contracts. The letter directed the City to eliminate or modify the

prequalification requirement and to develop and authorize an affirmative action

-20-
plan and procedure. In 1980, the City Council adopted an affirmative action

program which applied to all contracts funded by the DOT. The plan contained

percentage participation goals for both MBEs and WBEs.

A report on the utilization by the DPW of minority and women contracting

firms prepared by the AAO and dated April 2, 1983, indicates that 9.4% of all

DPW contract dollars were awarded to MBEs in 1977, 5.6% in 1978, 4.3% in

1979, 17.2% in 1980, 14.7% in 1981, and 24.1% in 1982. With respect to WBEs,

1.1% of all DPW contract dollars were awarded to WBEs in 1980, 5
0.34% in

1981, and 1.9% in 1982. Martin testified that the information on MBE and WBE

project participation was provided by the contractors and that the AAO had no

procedure by which it could monitor actual participation. He characterized the

utilization numbers as “overstated.” Although the AAO report estimated the total

number of MBEs and WBEs in the Denver MSA, it did not estimate their

availability as a percentage of all construction firms.

In 1983, the City began to consider expanding its affirmative action

program to include all DPW construction projects, not just those receiving

federal funding. The City held a public hearing at which the City Council heard

testimony from minority contractors and other individuals regarding utilization of

MBEs and WBEs on local construction projects. The testimony included specific

5
Statistics were not collected for WBEs until 1980.

-21-
examples of discrimination encountered in the Denver construction industry.

Many minority contractors testified that they worked on projects that had federal

requirements for minority participation but were almost completely excluded

from City projects without federal affirmative action requirements. Additionally,

the Director of Governmental Affairs for the Associated General Contractors of

Colorado stipulated at the hearing that there was discrimination in the industry

against minorities and women. The City Council subsequently enacted Ordinance

246, Series of 1983, which set goals for MBE and WBE participation in all City

construction projects managed by the DPW. The annual goal for MBE

participation was 20% of dollars spent. For WBE participation, the goal was 5%

of dollars spent.

In 1984, the year after Ordinance 246 was passed, the AAO reported that

MBE participation on all DPW construction contracts was 28%; WBE

participation was 6%. In 1985, MBE participation was 21% and WBE

participation was 7%. In 1986, the AAO reported MBE participation on all DPW

projects at 20% and WBE participation at 7%. In 1987, MBE participation was

26% and WBE participation was 9%.

Ordinance 246 was set to expire in 1988. In that year, the DPW surveyed

local contractors by soliciting written responses to questionnaires. The City

Council also conducted public hearings on the utilization of MBEs and WBEs on

-22-
DPW projects. The stated objective of the hearings was “[t]o determine the

current MBE and WBE utilization levels on [DPW] projects and to assess their

overall capabilities; also, to investigate the extent and impact of any past

discriminatory practices or barriers to MBE and WBE participation on [DPW]

projects; and to identify any special problems affecting MBEs and WBEs in

specific areas of the construction industry.” Based on the responses to the

questionnaires and the extensive testimony presented at the hearings, the City

Council determined that Ordinance 246 should be extended with modification.

It, therefore, enacted Ordinance No. 424, Series of 1988, which, inter alia , set

higher annual participation goals for MBEs and WBEs.

B. Statistical Evidence—The Disparity Studies

In 1989, Denver hired, inter alia , Browne, Bortz & Coddington, Inc. and

and Harding & Ogborn (collectively “BBC”) to assess the propriety of the DPW

goals program in light of the Supreme Court’s decision in Croson . BBC issued a

final report on June 2, 1990 (the “1990 Study”). It determined that data showing

MBE and WBE participation on most DPW construction projects was “tainted”

by federal and City affirmative action programs that had been in place for more

than a decade. Consequently, the 1990 Study analyzed the availability and

utilization of MBE and WBE construction and design firms on City bond projects

from the 1970’s and 1980’s. These projects were not subject to the goals

-23-
program. Denver argues that this data provides a true measure of MBE and WBE

utilization on public contracts.

The conclusions reached by BBC were expressed, in part, in the form of

disparity indices. A “disparity index is calculated by dividing the percentage of

MBE and WBE participation in City contracts by the percentage of MBEs and

WBEs in the relevant population of local construction firms. A disparity index of

1 demonstrates full MBE and WBE participation, whereas the closer the index is

to zero, the greater the MBE and WBE underutilization.” Concrete Works II , 36

F.3d at 1524 n.10. Data from eight City bond projects undertaken between 1972

and 1976 showed disparity indices of less than 0.63 for MBEs and less than 0.29

for WBEs. On a bond project for a renovation of the Museum of Natural History,

the disparity indices were 0.48 for MBEs and 0.40 for WBEs. Finally, for 1985

housing bond projects, the disparity indices were 0.43 for MBEs and 0.09 for

WBEs.

The 1990 Study also examined MBE and WBE utilization in the overall

Denver MSA construction market, both public and private. Because DPW

construction contracts represented only 2% of all construction in the Denver

MSA, BBC believed that the data would not be skewed by the DPW goals

program and would reflect the utilization of MBEs and WBEs in the market in

which Denver obtained its construction and professional design services.

-24-
Disparity indices for 1977, calculated by using Census Bureau data, were 0.44 for

MBEs and 0.46 for WBEs. For 1982, the disparity indices were 0.46 for MBEs

and 0.30 for WBEs. Additional disparity indices for 1989 were calculated using

data obtained from telephone surveys conducted by a private telemarketing firm

retained by BBC. The disparity indices calculated from this data were 0.43 for

MBEs and 0.42 for WBEs.

Finally, BBC interviewed representatives of MBEs, WBEs, majority-owned

construction firms, and government officials. They also reviewed testimony

given at hearings held in 1988 by the DPW and the Denver City Council. Based

on this information, the 1990 Study concluded that, despite Denver’s efforts to

increase MBE and WBE participation in DPW projects, some Denver employees

and private contractors engaged in conduct designed to circumvent the goals

program. In an effort to ensure that projects were awarded to certain contractors,

Denver employees avoided the goals program by using change orders to existing

contracts rather than putting new work out to bid. Employees also characterized

some major construction projects as “remodeling” because remodeling projects

fell under the auspices of the Department of General Services (“DGS”) which had

no goals program. Other responses indicated that prime contractors continued to

call WBEs they knew were no longer in business and counted those calls as

good-faith efforts to meet the goals program. Others bid shopped in an effort to

-25-
prevent MBEs and WBEs from submitting the lowest bid, or characterized

subcontractors as suppliers and then contended the goals program did not apply

because not enough work was subcontracted. After reviewing the statistical and

anecdotal evidence contained in the 1990 Study, the City Council enacted the

1990 Ordinance.

In 1991, BBC prepared an additional study analyzing the utilization of

MBEs and WBEs in the goods, services, and remodeling industries (the “DGS

Study”). BBC analyzed, inter alia , data for construction and remodeling

contracts issued by the DGS. During the relevant period, these contracts were

not subject to a goals program but were most likely subject to bonding and

prevailing wage requirements. The disparity indices calculated for 1989 DGS

remodeling projects were 0.14 for MBEs and 0.47 for WBEs. For 1990

remodeling projects, the disparity indices were 0.19 for MBEs and 1.36 for

WBEs.

After this court decided Concrete Works II , Denver commissioned another

study by BBC (the “1995 Study”). Using 1987 Census Bureau data, the 1995

Study again examined utilization of MBEs and WBEs in the construction and

professional design industries within the Denver MSA. The census data included

information on employment and revenues for proprietorships, partnerships, and

Subchapter S corporations with 10 or fewer stockholders. Information on C

-26-
corporations was unavailable. Accordingly to the 1995 Study, firms were

classified as minority or women-owned “if the sole owner or at least half of the

partners or shareholders were minorities or women.” The 1995 Study

acknowledged that the Census Bureau data on Hispanic, Asian, and Native

American firms were generated from sampling and underrepresented total

marketplace utilization and total availability of those firms. The 1995 Study,

however, also noted that “Census information indicates that the same

relationships between utilization and availability presented in [the] report would

also be found if the entire population of Hispanic, Asian and Native American-

owned firms were represented.”

The 1995 Study also concluded that MBEs and WBEs were more likely to

be one-person or family-run businesses. The study concluded that Hispanic-

owned firms were less likely to have paid employees than White-owned firms but

that Asian/Native American-owned firms were more likely to have paid

employees than White or other minority-owed firms. To determine whether these

factors explained overall market disparities, the 1995 Study used the census data

to calculate disparity indices for all firms in the Denver MSA construction

-27-
industry 6 and separately calculated disparity indices for firms with paid

employees and firms with no paid employees.

Black Hispanic Asian/Native All Women
American MBEs
All Firms 0.50 0.53 0.21 0.50 1.61
Firms with Paid N/A 0.67 0.16 0.62 1.42
Employees
Firms with No Paid N/A 0.36 0.42 0.36 0.83
Employees

The Census Bureau information was also used to examine average revenues

per employee for Denver MSA construction firms with paid employees.

Hispanic, Asian, Native American, and women-owned firms with paid employees

all reported lower revenues per employee than majority-owned firms. A

comparison of revenues per employee for Black-owned firms was not included in

the 1995 Study because of the small number of Black-owned constructions firms

with paid employees.

The 1995 Study also used 1990 census data to calculate rates of self-

employment within the Denver MSA construction industry. The data indicated

that 5.8% of Blacks and 6.2% of Hispanics working in the construction industry

6
The 1995 Study also used census data to examine marketplace utilization
of minority and women-owned firms in all industries in the Denver MSA. We
agree with the district court that the relevance of these statistics is unclear. See
Concrete Works III , 86 F. Supp. 2d 1042, 1056 (D. Colo. 2000).

-28-
were self-employed compared with 14.8% of Whites working in the construction

industry. For women, 4.8% were self-employed compared to 12.6% of men.

Data from the professional design industry demonstrated that 3.3% of women in

that industry were self-employed compared to 13.0% of men. The study

concluded that the disparities in the rates of self-employment for Blacks,

Hispanics, and women persisted even after controlling for education and length

of work experience. The 1995 Study controlled for these variables but reported

that Blacks and Hispanics working in the Denver MSA construction industry

were less than half as likely to own their own businesses as were Whites of

comparable education and experience. White women in the construction industry

owned businesses at 38% of the rate expected given their education and

experience. Additionally, women working in the Denver professional design

industry owned businesses at 30% of the expected rate. BBC was unable to

perform an analysis of business-ownership rates for Blacks, Hispanics, Asians,

and Native Americans working in the professional design industry because the

necessary data was unavailable.

In late 1994 and early 1995, BBC also conducted a telephone survey of

2920 construction firms doing business in the Denver MSA. The survey

collected information on firm revenue; length of time in business; ethnic, racial,

and gender status of business ownership; work history with the City;

-29-
qualifications; interest in future work with the City; and other characteristics.

Information was obtained for all construction and professional design firms,

including C corporations. Based on information obtained from the survey, BBC

calculated percentage utilization and percentage availability of MBEs and WBEs.

Percentage utilization was calculated from revenue information provided by the

responding firms. Percentage availability was calculated based on the number of

MBEs and WBEs that responded to the survey question regarding revenues.

Using these utilization and availability percentages, the 1995 Study showed

disparity indices of 0.64 for MBEs and 0.70 for WBEs in the construction

industry. In the professional design industry, disparity indices were 0.67 for

MBEs and 0.69 for WBEs. The 1995 Study concluded that the disparity indices

obtained from the telephone survey data were more accurate than those obtained

from the 1987 census data because the data obtained from the telephone survey

was more recent, had a narrower focus, and included data on C corporations. 7

Additionally, it was possible to calculate disparity indices for professional design

firms from the survey data.

The 1995 Study also contained a summary of a disparity study conducted in

1993 for the Denver Housing Authority (the “DHA Study”) and a 1992 disparity

7
The district court incorrectly stated that the survey data did not include
information on C corporations. See Concrete Works III , 86 F. Supp. 2d at 1056.
Instead, it was the Census Bureau data that did not include C corporations.

-30-
study conducted for the Regional Transportation District (the “RTD Study”).

Because the RTD had an affirmative action program in place, the RTD Study

examined the utilization of minority- and women-owned firms by the private

sector in the Denver area marketplace. The RTD Study, inter alia , examined

both prime contracting and subcontracting in the Denver MSA construction

industry. The disparity indices shown in the RTD Study are summarized below. 8

African-American Hispanic Asian Women
Prime Contracting 0.01 0.07 0.03 0.22
Subcontracting 0.01 0.12 0.05 0.53
Total 0.01 0.09 0.04 0.32

The DHA Study examined the utilization of M/WBEs by the Denver

Housing Authority for the years 1986, 1987, 1988, and 1992. Both census data

and information from the DHA’s vendor file were used to measure availability.

The DHA Study found disparities between the utilization and availability of

M/WBEs in some areas in some years, including years that DHA had an

affirmative action program in place.

After it was presented with the 1995 Study, the City enacted the 1996

Ordinance. The 1996 Ordinance made several changes to the 1990 Ordinance.

See Concrete Works III , 86 F. Supp. 2d at 1049; supra § II.A.

The RTD Study expressed the disparity indices in percentages. For
8

purposes of consistency, we have converted the percentages to decimal form.

-31-
 In 1997, the City retained National Economic Research Associates, Inc.

(“NERA”) to conduct a study to estimate the availability of MBEs and WBEs and

to examine, inter alia , whether race and gender discrimination limited the

participation of MBEs and WBEs in construction projects of the type typically

undertaken by the City (the “NERA Study”). The NERA Study used a more

sophisticated method to calculate availability than the earlier studies conducted

by BBC. The study first identified the construction specialities and geographic

areas in which the City spent the bulk of its construction funds. The MOCC

provided NERA with information for the years 1991-1996 relating to the City’s

construction contacts. That information included the name of the project, the

name and address of each contractor and subcontractor, the task performed, the

contract type, the amount paid to each contractor, and the total value of each

project. NERA excluded projects funded by the federal government and projects

relating to the construction of Denver International Airport because they were not

representative of the typical City construction project. Public library projects

funded by the 1990 Library Bond Program were prorated because their large size

was atypical. NERA used the firms’ postal zip codes to determine their location.

Each construction contract or task performed was then assigned a four-

digit Standard Industrial Classification (“SIC”) code. SIC codes catagorize

businesses by specialization and are used by the Census Bureau to report

-32-
economic statistics. NERA then used this data to summarize the City’s

construction expenditures by project type and geographic area. The study

showed that more than 84% of the City’s construction dollars were paid to firms

located in Adams, Arapahoe, Boulder, Denver, Douglas, and Jefferson counties.

Further, forty SIC codes accounted for 95% of all City construction expenditures.

NERA used the geographic and specialization information to calculate

M/WBE availability. Availability was defined as “the ratio of M/WBE firms to

the total number of firms in the four-digit SIC codes and geographic market area

relevant to the City’s contracts.” The total number of firms was obtained from

Dun & Bradstreet’s Marketplace database. The number of M/WBE firms was

obtained from a directory complied by BBC from twenty-nine different sources.

NERA then successfully located 1002 of the 1283 M/WBEs in the directory. The

information it obtained from these firms was used to adjust for the possibility of

overcounting M/WBEs. NERA also sampled firms in the Dun & Bradstreet

Marketplace database to make an undercount adjustment. The final result was a

weighted average of availability for each racial group and for women.

Availability was calculated for both prime contracts and subcontractors in each

group.

The NERA Study then compared M/WBE availability and utilization in the

Colorado construction industry. The statewide market was used because

-33-
necessary information was unavailable for the Denver MSA. NERA believed the

statewide data was relevant because the Denver MSA accounted for nearly 60%

of the total value of construction work done in Colorado. Additionally, data

collected in 1987 by the Census Bureau was used because more current data was

unavailable. The NERA Study calculated disparity indices 9
for the statewide

construction market in Colorado as follows: 0.41 for African-American firms,

0.40 for Hispanic firms, 0.14 for Asian and other minorities, and 0.74 for

women-owned firms. NERA considered a disparity to be substantially significant

if it was less than 0.80 because the Equal Employment Opportunity Commission

considers a selection rate for any group that is 80% or less of the selection rate

for the group with the highest rate to be evidence of adverse impact. Cf. 29

C.F.R. § 1607.4(D).

The NERA Study also contained an analysis of whether African

Americans, Hispanics, or Asian Americans working in the construction industry

are less likely to be self-employed than similarly situated Whites. Using data

from the Public Use Microdata Samples (“PUMS”) of the 1990 Census of

Population and Housing, NERA obtained a sample of 3075 individuals working

in the construction industry, of whom 1874 resided in the Denver MSA. NERA

was able to obtain the following information for each individual: race; whether

9
See note 8, supra .

-34-
the individual was self-employed or worked for someone else; sex; marital status;

age; education; access to capital including dividend and interest income, spouse’s

income, and home ownership; number of children living at home; and “personal

handicaps.” NERA considered these factors possible determinants of self-

employment. Using this information, NERA conducted two probit regressions:

one for Colorado and one for the Denver MSA. The study concluded that in both

Colorado and the Denver MSA, African Americans, Hispanics, and Native

Americans working in the construction industry have lower self-employment

rates than Whites. Asian Americans had higher self-employment rates than

Whites. NERA concluded that the high rate of self-employment for Asian

Americans was consistent with studies showing that immigrants are more likely

to be self-employed than individuals born in the United States. Close to 60% of

the Asian Americans in the PUMS data used by NERA were immigrants.

Using the availability figures calculated earlier in the study, the NERA

Study then compared the actual availability of M/WBEs in the Denver MSA with

the potential availability of M/WBEs if they formed businesses at the same rate

as Whites with the same characteristics.

-35-
 Actual Availability Potential Availability
Prime Contracting:
African American 2.12% 8.89%
Asian 0.48% 0.48%
Hispanic 6.32% 14.68%
Native American 0.20% 0.60%
MBE 9.51% 24.65%
WBE 10.45% not calculated
Subcontracting:
African American 1.93% 8.09%
Asian 0.89% 0.89%
Hispanic 6.35% 14.75%
Native American 0.46% 1.38%
MBE 10.11% 25.11%
WBE 9.97% not calculated

Finally, the NERA Study examined whether self-employed minorities and

women in the construction industry have lower earnings than white males with

similar characteristics. Using linear regression analysis, NERA was able to

compare business owners with similar years of education, of similar age, doing

business in the same geographic area, and having other similar demographic

characteristics. Even after controlling for several factors, the results showed that

self-employed African Americans, Hispanics, Native Americans, and women had

-36-
lower earnings than white males. In the Denver MSA, the earnings of self-

employed women in the construction industry were 59% of the earnings of

similarly-situated white men. The earnings disparity for African Americans was

51%, for Hispanics it was 75%, and for Native Americans it was 26%. No

disparity was shown for Asian Americans.

NERA also conducted a mail survey of both M/WBEs and non-M/WBEs to

obtain anecdotal evidence on their experiences in the construction industry.

Approximately 17% of the M/WBEs who received the questionnaire responded.

Of the M/WBEs who responded, 35% indicated that they had experienced at least

one incident of disparate treatment within the last five years while engaged in

business activities. These business activities included, inter alia : (1) applying

for a commercial loan, (2) applying for a bond, (3) obtaining quotes from

suppliers, (4) bidding or working on private and public sector prime contracts,

(5) bidding or working on private and public sector subcontracts, (6) receiving

payments for subcontracting work, (7) being required to do inappropriate or extra

work on a project, and (8) having to meet unnecessarily strict quality or

performance standards. The survey also posed the following question: “How

often do prime contractors who use your firm as a subcontractor on public sector

projects with [M/WBE] goals or requirements . . . also use your firm on public

sector or private sector projects without [M/WBE] goals or requirements?” Fifty-

-37-
eight percent of minorities and 41% of white women who responded to this

question indicated they were “seldom or never” used on non-goals projects.

M/WBEs were also asked whether the following aspects of procurement

made it more difficult or impossible to obtain construction contracts: (1) bonding

requirements, (2) insurance requirements, (3) large project size, (4) cost of

completing proposals, (5) obtaining working capital, (6) length of notification for

bid deadlines, (7) prequalification requirements, and (8) previous dealings with

an agency. This question was also asked of non-M/WBEs in a separate survey.

With one exception, 10
M/WBEs considered each aspect of procurement more

problematic than non-M/WBEs. To determine whether a firm’s size or

experience explained the different responses, NERA conducted a regression

analysis that controlled for age of the firm, number of employees, and level of

revenues. The results again showed that with the same, single exception,

M/WBEs had more difficulties than non-M/WBEs with the same characteristics.

Additionally, the results of a follow-up telephone survey of M/WBE and non-

M/WBE firms not responding to the mail survey led NERA to conclude that it is

likely the disparities are greater than indicated. The telephone survey indicated

that non-M/WBE firms were more likely to have responded to the mail survey

The only aspect of procurement that did not cause greater difficulties for
10

M/WBEs than for non-M/WBEs was previous dealings with an agency.

-38-
than M/WBEs if they had actually experienced the difficulties delineated in the

survey question.

After the NERA Study was completed, the City enacted the 1998

Ordinance. The 1998 Ordinance reduced the annual goals to 10% for both MBEs

and WBEs and eliminated a provision which previously allowed M/WBEs to

count their own work toward project goals. See Concrete Works III , 86 F. Supp.

2d at 1050.

C. Anecdotal Evidence

The district court’s memorandum and order contains a comprehensive

synopsis of the anecdotal evidence presented by Denver at trial. See id. at 1071-

74. That evidence was extensive and included the testimony of the senior vice-

president of a large, majority-owned construction firm who stated that when he

worked in Denver, he received credible complaints from minority and women-

owned construction firms that they were subject to different work rules than

majority-owned firms. He also testified that he frequently observed graffiti

containing racial or gender epithets written on job sites in the Denver

metropolitan area. Further, he stated that he believed, based on his personal

experiences, that many majority-owned firms refused to hire minority or women-

owned subcontractors because they believed those firms were not competent.

-39-
 Several M/WBE witnesses testified that they experienced difficulty

prequalifying for private sector projects and projects with the City and other

governmental entities in Colorado. See id . at 1071-72. One individual testified

that her company was required to prequalify for a private sector project while no

similar requirement was imposed on majority-owned firms. Several others

testified that they attempted to prequalify for projects but their applications were

denied even though they met the prequalification requirements.

Other M/WBEs testified that their bids were rejected even when they were

the lowest bidder; that they believed they were paid more slowly than majority-

owned firms on both City projects and private sector projects; that they were

charged more for supplies and materials; that they were required to do additional

work not part of the subcontracting arrangement; and that they found it difficult

to join unions and trade associations. See id . at 1072-73. There was extensive

testimony detailing the difficulties M/WBEs experienced in obtaining lines of

credit. One WBE testified that she was given a false explanation of why her loan

was declined; another testified that the lending institution required the co-

signature of her husband even though her husband, who also owned a

construction firm, was not required to obtain her co-signature; a third testified

that the bank required her father to be involved in the lending negotiations.

-40-
 The most poignant anecdotal testimony involved recitations of racially- and

gender-motived harassment experienced by M/WBEs at work sites. Women were

called “bitches” and Blacks were called “nigger” or “dumb nigger.” One

seventy-three year old truck driver was called a “dumb, f-ing Mexican.” Even

more disturbing was the testimony that minority and female employees working

on construction projects were physically assaulted and fondled, spat upon with

chewing tobacco, and pelted with two-inch bolts thrown by males from a height

of eighty feet.

V. The Legal Framework Applied by the District Court

The district court began its examination of the City’s evidence with the

disparity studies conducted by BBC and NERA. The court criticized the studies

because they did not answer the following six questions posed by the court for

the first time in its memorandum and order:

(1) Is there pervasive race, ethnic and gender discrimination
throughout all aspects of the construction and professional design
industry in the six county Denver MSA? (2) Does such
discrimination equally affect all of the racial and ethnic groups
designated for preference by Denver and all women? (3) Does such
discrimination result from policies and practices intentionally used
by business firms for the purpose of disadvantaging those firms
because of race, ethnicity and gender? (4) Would Denver’s use of
those discriminating firms without requiring them to give work to
certified MBEs and WBEs in the required percentages on each
project make Denver guilty of prohibited discrimination? (5) Is the
compelled use of certified MBEs and WBEs in the prescribed
percentages on particular projects likely to change the discriminatory
policies and programs that taint the industry? (6) Is the burden of

-41-
 compliance with Denver’s preferential program a reasonable one
fairly placed on those who are justly accountable for the proven
discrimination?

Concrete Works III , 86 F. Supp. 2d at 1066-67.

Believing that its six questions set the proper legal framework for

analyzing the City’s evidence, the district court criticized Denver’s disparity

studies and refused to give weight to much of Denver’s evidence because it did

“almost nothing to answer” those questions and because the methodology used in

the studies “was not designed to answer the relevant questions.” Id. at 1067,

1071. The court’s questions, however, misstate controlling precedent and

Denver’s burden at trial.

Read in context with the other five questions and the record, it is clear

from the first question that the district court believed Denver was required to

prove the existence of discrimination. Instead of asking whether Denver had

demonstrated strong evidence from which an inference of past or present

discrimination could be drawn, the question asks whether Denver’s evidence

shows that there is pervasive discrimination. See id. at 1066. The second and

third questions then refer to “ such discrimination” and the sixth question asks

whether the burden of compliance is placed on those firms accountable for the

“proven discrimination.” Id. (emphasis added). It appears the district court may

have been persuaded by CWC’s erroneous and unsupported statement in its

-42-
written closing argument that Denver had the “burden of establishing by a

preponderance that not only were there inferences of discrimination, but in fact

that the inferences were correct.” 11
Denver, however, bore no such burden.

In Concrete Works II , this court clearly stated that “the Fourteenth

Amendment does not require a court to make an ultimate finding of

discrimination before a municipality may take affirmative steps to eradicate

discrimination.” 36 F.3d at 1522. Denver’s initial burden was to demonstrate

that strong evidence of discrimination supported its conclusion that remedial

measures were necessary. Strong evidence is that “approaching a prima facie

case of a constitutional or statutory violation,” not irrefutable or definitive proof

of discrimination. Croson , 488 U.S. at 500. The burden of proof at all times

remained with CWC to prove by a preponderance of the evidence that Denver’s

“evidence did not support an inference of prior discrimination and thus a

remedial purpose.” Adarand VII , 228 F.3d at 1176 (quotation omitted).

Consistent with its second question, the district court concluded that “the

aggregation of [all racial and ethnic groups] as equally victimized by

11
Although CWC’s closing argument contains no support for this statement,
it embodies the position taken by its expert, George LaNoue, a professor of
political science at the University of Maryland. LaNoue summarized his
criticisms of Denver’s disparity studies by stating, “[T]he ultimate test is of
course whether a set of data that lacks the relevant variables can ever be used to
prove discrimination, and the proof of discrimination is what I think is required
here.”

-43-
discrimination and equally entitled to the preferential remedies is particularly

problematic for Fourteenth Amendment equality analysis.” Concrete Works III ,

86 F. Supp. 2d at 1069 (emphasis added). In Croson , a majority of the Court

noted that Richmond’s affirmative action program included racial groups “that, as

a practical matter, may never have suffered from discrimination in the

construction industry in Richmond.” 488 U.S. at 506. Consequently, the Court

questioned whether Richmond could justify the program as an attempt to remedy

past discrimination. See id. Denver, however, did introduce evidence of

discrimination against each group included in the ordinances. Thus, Denver’s

evidence does not suffer from the problem discussed by the Court in Croson .

The district court, however, apparently believed Denver could not satisfy its

burden of introducing strong evidence unless it was able to show that each group

suffered equally from discrimination. Croson imposes no such requirement.

-44-
 The district court’s third question also misstates the applicable law. 12

Underlying that question is the district court’s conclusion that Denver must

demonstrate that the private firms directly engaged in any discrimination in

which Denver passively participates do so intentionally, with the purpose of

disadvantaging minorities and women. The district court provided no support for

its conclusion and this court could find none. The Croson majority concluded

that a “city would have a compelling interest in preventing its tax dollars from

assisting [local trade] organizations in maintaining a racially segregated

construction market.” 488 U.S. at 503. Thus, Denver’s only burden was to

introduce evidence which raised the inference of discriminatory exclusion in the

local construction industry and linked its spending to that discrimination.

The Supreme Court has clearly stated that the inference of discriminatory

exclusion can arise from statistical disparities. See id . Accordingly, we conclude

that Denver can meet its burden through the introduction of statistical and

12
Like the district court’s first question, the third question appears to be
derived from the erroneous statement in CWC’s written closing argument that
Denver must prove “the existence of a pattern of deliberate exclusion of women
and minority contacts in Denver” and that “this pattern of exclusion must be
unique to Denver, caused by Denver and its contractors, and not be the result of
general societal discrimination.” Although the closing argument contains no
support for this statement, in its appellate brief, CWC relies on the following
statement taken from a footnote in a memorandum opinion issued by the Northern
District of Illinois: “Prejudiced attitudes are sometimes the personal attitudes of
the supervisor rather than being reflective of the employer’s policy.” Builder’s
Ass’n of Greater Chicago v. County of Cook , 123 F. Supp. 2d 1087, 1114 n.13
(N.D. Ill. 2000).

-45-
anecdotal evidence alone. To the extent the district court required Denver to

introduce additional evidence to show discriminatory motive or intent on the part

of private construction firms, the court erred. Denver was under no burden to

identify any specific practice or policy that resulted in discrimination. Neither

was Denver required to demonstrate that the purpose of any such practice or

policy was to disadvantage women or minorities. To impose such a burden on a

municipality would be tantamount to requiring direct proof of discrimination and

would eviscerate any reliance the municipality could place on statistical studies

and anecdotal evidence. Accord Associated Gen. Contractors of Cal., Inc. v.

Coalition for Econ. Equal. , 950 F.2d 1401, 1416 n.11 (9th Cir. 1991).

Guided by the erroneous third question, the court concluded that Denver’s

disparity studies were flawed because they “do not generate a fair inference that

there are discriminatory barriers to participation in the construction industry that

are different from societal discrimination .” Concrete Works III , 86 F. Supp. 2d

at 1071 (emphasis added). The district court provided no authority for its

conclusion that the City must demonstrate that any identified discrimination in

the construction industry is not a reflection of societal discrimination. Denver, in

fact, is not required to show that the discriminatory practices in the construction

industry were unique to that industry or differed from societal discrimination.

Under the district court’s approach, a municipality is without the power to

-46-
remedy even proven discrimination in the construction industry as long as that

discrimination merely reflects general societal discrimination. Denver offers the

persuasive hypothesis that the district court’s position arose from a

misinterpretation of Croson ’s admonition against reliance on general societal

discrimination to support affirmative action programs. See Croson , 488 U.S. at

497 (plurality opinion). We are not suggesting that societal discrimination

without more would suffice. Indeed, the converse is true. The Croson plurality’s

statements, however, have no application when, as in this case, the municipality

presents specific evidence of discrimination in the local construction industry. If

such evidence is presented, it is immaterial for constitutional purposes whether

the industry discrimination springs from widespread discriminatory attitudes

shared by society or is the product of policies, practices, and attitudes unique to

the industry. Denver’s statistical and anecdotal evidence is relevant because it

identifies discrimination in the local construction industry, not simply

discrimination in society. The genesis of the identified discrimination is

irrelevant and the district court erred when it discounted Denver’s evidence on

that basis.

The district court’s erroneous view of the law affected its analysis of

Denver’s evidence. After considering the anecdotal evidence, the court found

that the evidence supported the conclusion “that women and minority groups are

-47-
disadvantaged in trying to compete in the construction industry because of the

prevalence of negative views about them.” Id. at 1074; see also id. (“In

summary, the anecdotal evidence shows that race, ethnicity and gender affect the

construction industry and those who work in it.”). Notwithstanding that finding,

the court deemed the anecdotal evidence unpersuasive because it did not show

that the negative views prevalent in the construction industry were different than

“any societal views.” Id.; see also id. at 1073 (“It cannot be determined whether

these [incidents involving harassment at work sites] are manifestations of societal

prejudices or fairly attributable to employers as a business policy.”). The district

court’s erroneous belief that Denver was required to show the existence of

specific discriminatory policies and that those policies were more than a

reflection of societal discrimination resulted in the court improperly discounting

much of Denver’s statistical and anecdotal evidence.

The district court’s fourth question appears to be the basis upon which the

court rejected the evidence Denver presented on marketplace discrimination. See

§ VI.A.1., infra . The question expresses the erroneous legal conclusion that a

municipality may only remedy its own discrimination. This conclusion is

contrary to both our holding in Concrete Works II and the plurality opinion in

Croson . It appears to be a reflection of the erroneous statement made by CWC in

its closing argument. See supra n.12. This court recognized in this very case

-48-
that “a municipality has a compelling interest in taking affirmative steps to

remedy both public and private discrimination specifically identified in its area.”

Concrete Works II , 36 F.3d at 1529 (emphasis added). In Concrete Works II , we

remanded this case for trial and stated, “The record before us does not explain

the Denver government’s role in contributing to the underutilization of MBEs

and WBEs in the private construction market in the Denver MSA, and this may

well be a fruitful issue to explore at trial.” Id. at 1529-30. We also stated that

“we do not read Croson as requiring the municipality to identify an exact linkage

between its award of public contracts and private discrimination.” Id. at 1529.

Our comments indicate that Denver can meet it burden of demonstrating its

compelling interest with evidence of private discrimination in the local

construction industry coupled with evidence that it has become a passive

participant in that discrimination. See id. Thus, contrary to the wording of

question four, Denver was clearly not required to demonstrate that it is “guilty of

prohibited discrimination” to meet its initial burden.

Likewise, the district court’s fifth question manifests the erroneous

conclusion that Denver was required to demonstrate the ordinances will change

discriminatory practices and policies in the local construction industry. Denver’s

program can survive the equal protection challenge brought by CWC if Denver

can show that the ordinances are narrowly tailored to remedy Denver’s

-49-
participation in the identified discrimination; there is no requirement that the

ordinances must also eliminate the discrimination. In fact, any such requirement

would be illogical. If firms persisted in their discrimination, they could

effectively defeat all affirmative action legislation.

Finally, contrary to the district court’s sixth question, the ordinances do not

have to be tailored to place the burden of compliance only on those firms

accountable for the discrimination. A plurality of the Supreme Court has stated

that “[a]s part of this Nation’s dedication to eradicating racial discrimination,

innocent persons may be called upon to bear some of the burden of the remedy. .

. . [S]uch a sharing of the burden by innocent parties is not impermissible.”

Wygant , 476 at 280-81 (quotations omitted). The proper focus is on whether the

burden on third parties is “too intrusive” or “unacceptable.” See id. at 283;

United States v. Paradise , 480 U.S. 149, 182 (1987) (plurality opinion).

The sixth question also appears to be implicated in the district court’s

statement rejecting Denver’s disparity studies: “While statistical studies may

suggest that some showings of disparity may create an inference of

discrimination, they say nothing about who is responsible for such

discrimination.” Concrete Works III , 86 F. Supp. 2d at 1070. The district court

then intimated that it would be illogical to assume that “male Caucasian

contractors will only do business with other male Caucasians even where that is

-50-
contrary to their economic interests.” Id. Such an assumption, while perhaps

economically illogical, nonetheless is consistent with the district court’s own

observation that, “[d]iscriminating behavior . . . is irrational and not subject to

the often used legal standard of conduct—a reasonable person under the same or

similar circumstances.” Id. at 1064. Additionally, this court has previously

concluded that Denver’s statistical studies which compare utilization of M/WBEs

to availability, support the inference that “local prime contractors” are engaged in

racial and gender discrimination. Concrete Works II , 36 F.3d at 1529. Thus,

Denver’s disparity studies should not have been discounted because they fail to

specifically identify those individuals or firms responsible for the discrimination.

The six questions posed by the district court as its aggregate litmus test

contain misstatements or misapplications of the legal principles that govern equal

protection cases like the one before the court. Not only did the district court

analyze the ordinances and Denver’s evidence supporting them through an

incorrect legal framework, it also discounted Denver’s studies as biased because

they failed to address the six questions. See Concrete Works III , 86 F. Supp. 2d

at 1071. According to the court, this bias was evident when the articulated

purposes of the studies were contrasted with the court’s questions. See id.

Because the court’s six questions incorrectly state Denver’s burden, however, the

studies cannot be criticized as biased on that basis. We conclude the district

-51-
court’s framework imposed a greater burden on Denver than that required by

applicable law. Accordingly, the court failed to give sufficient weight to

Denver’s evidence. See Concrete Works III , 86 F. Supp. 2d at 1071 (criticizing

Denver’s disparity studies because “the methodology was not designed to answer

the relevant questions”); id. at 1074 (discounting Denver’s anecdotal evidence

because it “does not answer the six questions considered in the court’s evaluation

of the statistical evidence.”)

VI. CWC’s Arguments and Rebuttal Evidence

A. The Disparity Studies

1. Use of Marketplace Data

The district court, inter alia , concluded that the 1990 Study, the 1995

Study, the NERA Study, and the other disparity studies upon which Denver relied

were significantly flawed because they measured discrimination in the overall

Denver MSA construction industry, not discrimination by the City itself. See id.

at 1070 (“The question, [Denver says], is what happens in the market without

[the ordinances]. That may be consistent with scientific methodology but it does

not square with the applicable law.”). The court may have believed that

marketplace data is irrelevant because such data would not answer question four:

“Would Denver’s use of those discriminating firms without requiring them to

give work to certified MBEs and WBEs in the required percentages on each

-52-
project make Denver guilty of prohibited discrimination?” Id. at 1066. The

district court’s conclusion, however, is directly contrary to our holding in

Adarand VII that evidence of both public and private discrimination in the

construction industry is relevant. See 228 F.3d at 1166-67.

Consistent with the district court’s conclusion, CWC continues to argue, as

it did in Concrete Works II , that marketplace data is irrelevant because the

ordinances can be justified only by evidence of discrimination by the City itself

or by prime contractors while working on City projects. See supra n.12. CWC’s

argument is based on language used in Croson but taken out of context by CWC

and by memorandum orders issued by two federal district courts. See Croson ,

488 U.S. at 502; Associated Util. Contractors of Md., Inc. v. Mayor & City

Council , 83 F. Supp. 2d 613, 619 (D. Md. 2000); Webster v. Fulton County , 51 F.

Supp. 2d 1354, 1368-69 (N.D. Ga. 1999), summarily aff’d , 218 F.3d 1267 (11th

Cir. 2000). In Croson , the Court criticized Richmond’s data, in part, because it

did not show “what percentage of total city construction dollars minority firms

now receive as subcontractors on prime contracts let by the city.” Croson , 488

U.S. at 502. Relying on this language, CWC argues that the City cannot meet its

burden of demonstrating strong evidence of discrimination unless it demonstrates

that it directly participates in discrimination or indirectly participates by utilizing

contractors who discriminate on City projects. It further argues that evidence of

-53-
marketplace discrimination is irrelevant to this determination and can never assist

the City in meeting its burden.

CWC’s argument is not supported by the language it cites from Croson

when that language is read in context. In the Croson majority opinion, the Court

noted, by example, some of the flaws in the evidence presented by the city of

Richmond. In addition to criticizing the city because it did not present data

showing the percentage of city dollars received by minority subcontractors on

city construction projects, the Court also faulted Richmond’s evidence that MBE

membership in local contractors’ associations was extremely low. See id. at 503.

The Court’s criticism, however, was not that the evidence of low participation in

such associations was irrelevant . Instead, the Court criticized the information

because it did not consider nondiscriminatory explanations for the low level of

membership. See id. Importantly, the Court specifically concluded that if

Richmond had linked the evidence showing low MBE participation in trade

associations to the number of local MBEs eligible for membership, any resulting

statistical disparity, if large enough, could support an inference of discriminatory

exclusion. See id. If such an inference could be drawn, “the city would have a

compelling interest in preventing its tax dollars from assisting these organization

in maintaining a racially segregated construction market.” Id. Thus, contrary to

CWC’s mischaracterization of the Court’s statements in Croson , the Court

-54-
actually concluded that evidence of marketplace discrimination could be used by

a municipality to meet its burden of producing strong evidence but that

Richmond failed to meet its burden because, inter alia , it failed to offer any such

evidence.

The conclusion reached by the majority in Croson that marketplace data is

relevant in equal protection challenges to affirmative action programs is

consistent with the approach later taken by the Court in Shaw v. Hunt . In Shaw,

a majority of the Court relied on the majority opinion in Croson for the broad

proposition that a governmental entity’s “interest in remedying the effects of past

or present racial discrimination may in the proper case justify a government’s use

of racial distinctions.” 517 U.S. at 909. The Shaw Court did not adopt any

requirement that only discrimination by the governmental entity, either directly or

by utilizing firms engaged in discrimination on projects funded by the entity, was

remediable. The Court, however, did set out two conditions which must be met

for the governmental entity to show a compelling interest. “First, the

discrimination must be identified discrimination.” Id. at 910 (quotation omitted).

The City can satisfy this condition by identifying the discrimination, “‘ public or

private , with some specificity.’” Id. (quoting Croson , 488 U.S. at 504) (emphasis

added). The governmental entity must also have a “strong basis in evidence to

conclude that remedial action was necessary.” Id. (quotation omitted). Thus,

-55-
Shaw specifically stated that evidence of either public or private discrimination

could be used to satisfy the municipality’s burden of producing strong evidence.

CWC’s argument that the marketplace data is irrelevant is also inconsistent

with binding precedent in this circuit. In Adarand VII , we specifically concluded

that evidence of marketplace discrimination can be used to support a compelling

interest in remedying past or present discrimination through the use of

affirmative action legislation. See 228 F.3d at 1166-67 (“[W]e may consider

public and private discrimination not only in the specific area of government

procurement contracts but also in the construction industry generally; thus any

findings Congress has made as to the entire construction industry are relevant .”

(emphasis added)). Further, in this very case we rejected the argument CWC

reasserts here that marketplace data is irrelevant and remanded the case to the

district court to determine whether Denver could link its public spending to “the

Denver MSA evidence of industry-wide discrimination.” Concrete Works II , 36

F.3d at 1529. We clearly stated that evidence explaining “the Denver

government’s role in contributing to the underutilization of MBEs and WBEs in

the private construction market in the Denver MSA ” was relevant to Denver’s

burden of producing strong evidence. Id. at 1530 (emphasis added).

Consistent with our mandate in Concrete Works II , the City attempted to

show at trial that it “indirectly contributed to private discrimination by awarding

-56-
public contracts to firms that in turn discriminated against MBE and/or WBE

subcontractors in other private portions of their business.” Id. The City can

demonstrate that it is a “‘passive participant’ in a system of racial exclusion

practiced by elements of the local construction industry” by compiling evidence

of marketplace discrimination and then linking its spending practices to the

private discrimination. Croson , 488 U.S. at 492 (O’Connor, J., joined by

Rehnquist, C.J. and White, J.). Therefore, evidence of marketplace

discrimination is not only relevant but, in this case, it is essential to the City’s

claim that it is an indirect participant in private discrimination. Consequently,

we again reject CWC’s argument and conclude that the district court’s

determination that the marketplace data was irrelevant was a legal error that

significantly affected the court’s analysis of Denver’s evidence.

At trial, the City presented testimony from M/WBEs doing business in the

Denver MSA to support its assertion that it is a “‘passive participant’ in a system

of racial exclusion practiced by elements of the local construction industry”

because it contracts with firms which discriminate against women and minorities.

Id. at 492 (O’Connor, J., joined by Rehnquist, C.J. and White, J.). At least eight

M/WBEs testified that general contractors who use them on City construction

projects refuse to use them on private projects. The witnesses specifically named

the contractors who engaged in this practice. An employee of the MOCC

-57-
identified eighteen of those contractors as firms that have performed City

contracts. Based on this testimony, the district court found that,

The City does not want to pay tax dollars to support firms that
discriminate against other firms because of their race, ethnicity and
gender. Yet, the anecdotal evidence shows that Denver has
repeatedly and knowingly done just that. During the taking of
testimony about the experiences of minority and woman-owned firms
in dealing with other contractors on projects not involving Denver,
the City’s lawyers carefully demonstrated that those same contractors
often do business with the City.

Concrete Works III , 86 F. Supp. 2d at 1075-76 (discussing narrow tailoring).

CWC does not challenge this finding. The anecdotal evidence supporting the

district court’s finding would not be sufficient on its own to support Denver’s

burden of demonstrating a strong basis in evidence for its conclusion that

remedial action was necessary. However, this evidence links Denver’s spending

to private discrimination. See Concrete Works II , 36 F.3d at 1529.

Consequently, we conclude that the anecdotal evidence and the district court’s

factual finding based on that evidence amply support Denver’s position that it

indirectly contributes to private discrimination in the Denver MSA construction

industry. See Croson , 488 U.S. at 492 (O’Connor, J., joined by Rehnquist, C.J.

and White J.) (“It is beyond dispute that any public entity, state or federal, has a

compelling interest in assuring that public dollars, drawn from the tax

contributions of all citizens, do not serve to finance the evil of private

prejudice.”).

-58-
 CWC’s argument that the lending discrimination studies and business

formation studies presented by Denver are irrelevant is also foreclosed by circuit

precedent. In Adarand VII , we concluded that evidence of discriminatory

barriers to the formation of businesses by minorities and women and fair

competition between M/WBEs and majority-owned construction firms shows a

“strong link” between a government’s “disbursements of public funds for

construction contracts and the channeling of those funds due to private

discrimination.” 228 F.3d at 1167-68. Evidence that private discrimination

results in barriers to business formation is relevant because it demonstrates that

M/WBEs are precluded at the outset from competing for public construction

contracts. See id. at 1168. Evidence of barriers to fair competition is also

relevant because it again demonstrates that existing M/WBEs are precluded from

competing for public contracts. See id. Thus, like the studies measuring

disparities in the utilization of M/WBEs in the Denver MSA construction

industry, studies showing that discriminatory barriers to business formation exist

in the Denver construction industry are relevant to the City’s showing that it

indirectly participates in industry discrimination. 13

13
CWC states, without elaboration, that Adarand VII is “inapposite”
because it involved a federal program and because a petition for a writ of
certiorari was filed with the Supreme Court. CWC’s unsupported attempt to
distinguish Adarand VII is wholly without merit. As an aside, we note that the
writ of certiorari granted in Adarand VII was dismissed as improvidently granted.
(continued...)

-59-
 The City presented evidence of lending discrimination to support its

position that M/WBEs in the Denver MSA construction industry face

discriminatory barriers to business formation. Denver introduced a disparity

study prepared in 1996 and sponsored by the Denver Community Reinvestment

Alliance, Colorado Capital Initiatives, and the City. The study’s stated purpose

was to “determine what barriers, if any, small businesses face when seeking

credit from financial institutions, and whether there is any difference in treatment

among small business owners seeking credit based on their ethnicity.” The study

ultimately concluded that “despite the fact that loan applicants of three different

racial/ethnic backgrounds in this sample were not appreciably different as

businesspeople, they were ultimately treated differently by the lenders on the

crucial issue of loan approval or denial.” In Adarand VII , this court concluded

that this very study, among other evidence, “strongly support[ed] an initial

showing of discrimination in lending.” 228 F.3d at 1170; see also id. at 1170

n.13 (“Lending discrimination alone of course does not justify action in the

construction market. However, the persistence of such discrimination . . .

supports the assertion that the formation, as well as utilization, of minority-

owned construction enterprises has been impeded.” (citation omitted)). The City

(...continued)
13

See Adarand Constructors, Inc., v. Mineta , 534 U.S. 103, 122 S. Ct. 511, 515
(2001).

-60-
also introduced anecdotal evidence of lending discrimination in the Denver

construction industry. See Concrete Works III , 86 F. Supp. 2d at 1072-73.

CWC did not present any evidence that undermines the reliability of the

lending discrimination evidence but simply repeats the argument, foreclosed by

circuit precedent, that it is irrelevant. The district court criticized the evidence

because it failed to determine whether the discrimination resulted from

discriminatory attitudes or from the neutral application of banking regulations.

See Concrete Works III , 86 F. Supp. 2d at 1072. We have already concluded,

however, that discriminatory motive can be inferred from the results shown in

disparity studies. Because the district court’s criticism is not directed at the

methodology used or conclusions drawn in the lending discrimination study, it

does not undermine the study’s reliability as an indicator that the City is

passively participating in marketplace discrimination. Indeed, in Adarand VII we

took “judicial notice of the obvious causal connection between access to capital

and ability to implement public works construction projects.” 228 F.3d at 1170.

The district court’s other criticisms are erroneous in light of this court’s holding

that the study “support[s] an initial showing of discrimination in lending.” Id.

Denver also introduced evidence of discriminatory barriers to competition

faced by M/WBEs in the form of business formation studies that were included in

the BBC and NERA Studies. The 1990 Study and the 1995 Study both showed

-61-
that all minority groups in the Denver MSA formed their own construction firms

at rates lower than the total population but that women formed construction firms

at higher rates. The 1997 NERA Study employed a more sophisticated analysis

to examine self-employment rates and controlled for gender, marital status,

education, availability of capital, and personal/family variables. As discussed,

supra , the NERA Study concluded that African Americans, Hispanics, and Native

Americans working in the construction industry have lower rates of self-

employment than similarly situated Whites. Asian Americans had higher rates.

The NERA Study did not calculate business-formation rates for women working

in the construction industry. The NERA Study also concluded that minority and

female business owners in the construction industry, with the exception of Asian-

American owners, have lower earnings than white male owners. This conclusion

was reached after controlling for education, age, marital status, and disabilities.

Although CWC asserts that the district court correctly concluded that the

business formation studies cannot be used to justify the ordinances, the court’s

conclusion conflicts with our holding in Adarand VII . See 228 F.3d at 1167-68.

“[T]he existence of evidence indicating that the number of [MBEs] would be

significantly (but unquantifiably) higher but for such barriers is nevertheless

relevant to the assessment of whether a disparity is sufficiently significant to give

rise to an inference of discriminatory exclusion.” Id. at 1174. Further, the

-62-
district court’s conclusion that no inference of discrimination can be drawn from

the studies because such a conclusion would require the “problematic assumption

of a direct relationship between the rate of formation of new businesses and the

number of persons working as employees in the industry” erroneously ignores the

fact that the NERA Study controlled for variables like education and level of

experience. Concrete Works III , 86 F. Supp. 2d at 1066.

In its written closing argument, CWC asserted that the business formation

study included in the 1995 Study is flawed because it did not control for

variables such as the type of educational degree received and types of work

experience. 14
Conceding that the NERA Study was “better,” CWC nevertheless

argues that it too is flawed because it did not control for, inter alia , “quality of

education” or “culture.” The district court faulted the 1995 Study because it did

14
The argument in CWC’s appellate brief on this issue consists of only the
following single sentence: “The Trial Court found that Denver had failed to
consider the proper and major variables.” This sentence ends with a footnote
which reads, “For a detailed explanation of the factors considered for variables
and the controls used and why they are not meaningful or reliable, see Plaintiff’s
Closing Statement.” This court is under no obligation to consider arguments not
fully set forth in a party’s appellate brief, including arguments incorporated by
reference to prior pleadings or other materials. See Gaines-Tabb v. ICI
Explosives, USA, Inc. , 160 F.3d 613, 623-24 (10th Cir. 1998). We strongly
disapprove of this practice not only because it hinders this court’s ability to
review the merits of the argument, but it unfairly allows the party to avoid the
page and word limitations imposed on appellate filings. In this case, the
deficiencies in CWC’s appellate brief are particularly problematic because the
closing statement, to which this court is directed, itself incorporates arguments
made in another separate document. This practice is improper under the rules of
appellate procedure.

-63-
not control for “marital status, veteran status, availability of other sources of

income and hours worked during the previous year.” Concrete Works III , 86 F.

Supp. 2d at 1057-58. The court also noted that the NERA Study failed to control

for “prior business experience, religion, cultural history and whether parents were

self-employed.” Id. at 1060.

Even assuming that it is possible to adequately measure variables like

quality of education and culture, neither the district court nor CWC provided any

explanation of how the failure to control for any of these variables undermines

the reliability of the business formation studies. While the report prepared by

CWC’s expert, George LaNoue, indicated that cultural differences or immigration

status may affect business-formation rates, LaNoue did not explain what he

meant by the term “cultural differences,” did not conduct a study that controlled

for these variables and, more importantly, did not testify that controlling for the

variables would eliminate the disparities. “[G]eneral criticism of disparity

studies, as opposed to particular evidence undermining the reliability of the

particular disparity studies . . . is of little persuasive value.” Adarand VII , 228

F.3d at 1173 n.14.

In sum, the district court erred when it refused to consider or give

sufficient weight to the lending discrimination study, the business formation

studies, and the studies measuring marketplace discrimination. That evidence

-64-
was legally relevant to the City’s burden of demonstrating a strong basis in

evidence to support its conclusion that remedial legislation was necessary. See

id. at 1167-68. CWC’s generalized denouncements of the studies fall far short of

the “credible, particularized evidence” necessary to rebut the City’s evidence. Id.

at 1175.

2. Variables

Beyond its conclusion that Denver’s disparity studies were largely or

wholly irrelevant because they measured marketplace discrimination and not

discrimination by the City itself or by contractors working on City projects, the

district court identified numerous perceived flaws in the studies. Acknowledging

that disparity studies may, when properly conducted, constitute persuasive

evidence in equal protection cases, the district court relied on language in

Croson ’s plurality opinion to set the standards those studies must meet.

According to the district court,

the probative force of statistical disparity studies depends upon
whether the data used provide meaningful measurements of the
number of minority firms “qualified” and “willing and able to
perform a particular service” as well as the number actually used in
public contracting, directly or indirectly.

Concrete Works III , 86 F. Supp. 2d at 1065 (quoting Croson , 488 U.S. at 501).

As we have already concluded, disparity studies that measure the use of M/WBEs

in the relevant marketplace, in addition to those that measure the direct or

-65-
indirect use of M/WBEs in public contracting, are also probative. The court,

however, also discredited the conclusions reached in Denver’s disparity studies

either because those studies failed to address the six questions developed by the

court or because they failed to control for certain variables.

a. Size and Experience

In Concrete Works II , this court reversed the grant of summary judgment,

in part, because it was unclear from the record whether the 1990 Study overstated

the availability of M/WBEs in the Denver construction market. We noted that “a

disparity index calculated on the basis of the absolute number of MBEs in the

local market may show greater underutilization than does data that takes into

consideration the size of MBEs and WBEs.” Concrete Works II , 36 F.3d at 1528.

At trial, both parties had the opportunity to present evidence on the effect firm

size and capacity had on the disparities shown in Denver’s studies.

CWC challenges Denver’s disparity studies as unreliable because the

disparities shown in the studies may be attributable to firm size and experience

rather than discrimination. CWC’s argument is based on a report submitted by its

expert, George LaNoue, which contains an extensive discussion of firm size and

experience. LaNoue first asserts that M/WBEs are generally smaller and less

experienced than majority firms. He then contends that smaller and less

experienced firms are less qualified and less able to undertake City construction

-66-
projects. He concludes that because Denver’s disparity studies do not control for

firm size and experience, the M/WBE availability figures used in those studies

are inflated. Thus, CWC argues the disparity indices calculated in the studies are

unreliable because they are not based on the availability of only those firms

qualified, willing, and able to work on City projects.

The district court noted that Denver’s disparity studies contain no analysis

of “the actual qualifications and capacities of the MBEs and WBEs in the Denver

M.S.A.,” but instead assume that, at any given time, all M/WBEs are available to

perform each contract. Concrete Works III , 86 F. Supp. 2d at 1065-66. The

court criticized Denver’s assumption as “implausible” and concluded that

“[a]ggregating all of the MBEs and WBEs in estimating availability without

regard for the size of the businesses . . . is a serious flaw in the methodology

and impairs the value of the results.” Id. at 1066, 1068.

Denver acknowledges that M/WBEs are generally smaller than majority-

owned firms in terms of revenues and number of employees and are slightly less

experienced. Additionally, in his written report, another CWC expert, John

Lunn, asserts that the only conclusion that can be drawn from Denver’s studies is

“that minority- and women-owned firms are smaller and less experienced than the

average of all construction firms in the Denver construction market.” Although

CWC did not conduct its own marketplace disparity study that controlled for firm

-67-
size and experience, its argument that the disparity studies are unreliable because

they fail to control for size and experience is deserving of consideration in light

of the uncontroverted evidence that M/WBEs are generally smaller and less

experienced than majority firms.

Denver counters, however, that a firm’s size has little effect on its

qualifications or its ability to provide construction services and that M/WBEs,

like all construction firms, can perform most services either by hiring additional

employees or by employing subcontractors. At trial, Denver introduced evidence

that the median number of employees of all construction firms in the Denver

MSA is three and presented testimony that even firms with few permanent

employees can perform large, public contracts by hiring additional employees or

subcontractors and renting equipment. Additionally, the district court found that

“most firms have few full-time permanent employees and must grow or shrink

their performance capacity according to the volume of business they are doing.”

Id. at 1064.

CWC responds that elasticity itself is relative to size and experience;

M/WBEs are less capable of expanding because they are smaller and less

experienced. The district court found that a firm’s ability to expand “depends

upon [its] access to increased resources, including workers with the needed skills,

equipment, material and operating capital.” Id. at 1064. The court did not find

-68-
that a firm’s size affected its ability to obtain these resources but concluded that

“the firm’s access to information, its reputation in the community and the skills

of its managers” all had an effect. Id. Thus there is no finding by the district

court that smaller, less experienced firms are less able to expand.

Even if we assume that M/WBEs are less able to expand because of their

smaller size and more limited experience, CWC does not respond to Denver’s

argument and the evidence it presented showing that experience and size are not

race- and gender-neutral variables and that M/WBE construction firms are

generally smaller and less experienced because of industry discrimination. The

lending discrimination and business formation studies both strongly support

Denver’s argument that M/WBEs are smaller and less experienced because of

marketplace and industry discrimination. In addition, Denver’s expert David

Evans testified that discrimination by banks or bonding companies would reduce

a firm’s revenue and the number of employees it could hire. Robin Hackett, the

owner of a WBE, testified that she has difficulty finding and retaining white male

employees because they are ridiculed by others in the industry for working at a

WBE. Hackett also testified that she is excluded from participating in a labor

pool of non-union employees shared by other local firms. Those firms sharing

this labor pool are able to “bid a bigger volume of work and not worry about

manning the projects.” Even Lunn, CWC’s expert, admitted during cross-

-69-
examination that the size and revenue differences between M/WBEs and

majority-owned firms could be due in part to the presence of discrimination.

Denver also argues that CWC’s argument lacks merit because the 1990

Study, the DGS Study, the 1995 Study, and the NERA Study all controlled for

size and the 1995 Study controlled for experience. It asserts that the 1990 Study

measured revenues per employee for construction M/WBEs and concluded that

the resulting disparities, “suggest[] that even among firms of the same

employment size, industry utilization of MBEs and WBEs was lower than that of

non-minority male owned firms.” Similarly, the 1995 Study controlled for size,

calculating, inter alia , disparity indices for firms with no paid employees which

presumably are the same size. CWC responds by simply making the bald

allegation that the 1995 Study’s control for size is a “pretense” and that the

control is “meaningless.” This glib response is wholly inadequate to rebut

Denver’s argument and the conclusions drawn in the disparity studies.

Based on the uncontroverted evidence presented at trial, we conclude that

the district court did not give sufficient weight to Denver’s disparity studies

because of its erroneous conclusion that the studies failed to adequately control

for size and experience. Denver is permitted to make assumptions about capacity

and qualification of M/WBEs to perform construction services if it can support

those assumptions. The assumptions made in this case are consistent with the

-70-
evidence presented at trial and support the City’s position that a firm’s size does

not affect its qualifications, willingness, or ability to perform construction

services and that the smaller size and lesser experience of M/WBEs are,

themselves, the result of industry discrimination. Further, CWC did not conduct

its own disparity study using marketplace data and thus did not demonstrate that

the disparities shown in Denver’s studies will decrease or disappear if the studies

controlled for size and experience to CWC’s satisfaction. Consequently, CWC’s

rebuttal evidence is insufficient to meet its burden of discrediting Denver’s

disparity studies on the issue of size and experience.

b. Specialization

The district court also faulted Denver’s disparity studies because they do

not control for firm specialization. See Concrete Works III , 86 F. Supp. 2d at

1068 (“Aggregating all of the MBEs and WBEs in estimating availability without

regard for . . . the particular services or type of work in which they specialize is a

serious flaw in the methodology and impairs the value of the results.”). The

court’s criticism would be appropriate only if there was evidence that M/WBEs

are more likely to specialize in certain construction fields. CWC has failed to

marshal any such evidence. Its appellate brief contains only the conclusory

statement that M/WBEs “tend to be . . . congregated in certain construction

specialities.” This assertion is unsupported by any citation to the record and

-71-
CWC does not direct this court to any corroborative study or other evidence.

Further, there is no identified evidence showing that certain construction

specializations require skills less likely to be possessed by M/WBEs. In fact,

CWC’s statement appears to contradict the testimony of the City’s expert, Dr.

Evans, that the data he reviewed showed that MBEs were represented “widely

across the different [construction] specializations.” 15

In his expert report, Lunn criticizes Denver’s disparity studies because they

aggregate construction firms without regard to specialization or size. Although

Lunn’s report contains an example that illustrates his criticism, he conceded

during cross-examination that the example was purely hypothetical and was not

based on any data from the Denver MSA construction industry even though he

had access to that data. Lunn also testified that he had not done any investigation

into whether aggregation bias caused the disparities shown in Denver’s studies.

Not only does CWC offer no support for its position that M/WBEs are

clustered in certain construction specialities, but it has failed to demonstrate that

the disparities shown in Denver’s studies are eliminated when there is control for

firm specialization. In contrast, the NERA Study, which controlled for SIC-code

Dr. Evans’ testimony was given in response to the following question
15

posed during his cross-examination by CWC: “[A]re MWBEs generally in the
same construction specialities as non-MWBEs in the Denver area?”

-72-
subspecialty yet still showed disparities, provides support for Denver’s argument

that firm specialization does not explain the disparities.

c. Bidding

In his report, CWC’s expert, LaNoue, contends that the M/WBE

availability data used in Denver’s disparity studies is unreliable because it is not

a measure of only those firms actually bidding on City construction projects.

LaNoue asserts that, “All other measures than bidding are merely proxies for

availability. . . . [U]nless a firm makes a bid, it is not actually available for public

contracting.” LaNoue’s position appears to constitute an implicit conclusion that

only studies which equate M/WBE availability with actual bids on a contract-by-

contract basis can be used to support Denver’s burden. To calculate availability

at the level of certainty urged by CWC, Denver would be compelled to survey

each MBE, WBE, and majority firm each time bids are sought for a construction

project to determine which firms actually bid on the project, either as a prime

contractor or as a subcontractor. While this approach may provide an accurate

count of available firms, it says nothing about whether those firms are qualified.

If availability is calculated on an individual basis using LaNoue’s approach, it is

possible that unqualified firms would be included in the availability figure simply

because they bid on a particular project. Conversely, qualified firms would not

be included if, for any reason, they chose not to bid on the project. Thus,

-73-
LaNoue’s approach itself illustrates why disparity studies must make assumptions

about availability as long as the same assumptions can be made for all firms. 16

CWC does not identify any evidence showing that M/WBEs bid on City

projects at a different rate than non-M/WBE firms. Thus, it has not demonstrated

that differences in bidding practices may explain the disparities found in

Denver’s studies. Additionally, we do not read Croson to require disparity

studies that measure whether construction firms are able to perform a particular

contract . The studies must only determine whether the firms are capable of

“undertak[ing] prime or subcontracting work in public construction projects.”

Croson , 488 U.S. at 502.

3. Stock Data

John Lunn, CWC’s expert, criticized Denver’s studies because they used

“stock data” and not “flow data.” Studies utilizing stock data provide

information on an industry at a discrete point in time. Flow data show changes

that occur in the industry over time. Lunn testified that substantial changes in a

market situation and substantial changes in flows do not show up in studies

utilizing the stock concept. He then speculated that a study utilizing flow data

16
A municipality’s study can be challenged by demonstrating that it did not
control for a variable that has a negative effect on the qualifications, willingness,
or abilities of M/WBEs. The municipality would then be required to show that
the variable does not effect the M/WBEs’ availability or that the variable itself is
not race- or gender-neutral. This is precisely the situation presented in this case.

-74-
might show no disparities even though an analysis of stock data may indicate that

discrimination is present. Lunn, however, illustrated his point by using a

hypothetical involving law school admissions: he did not test his hypothesis on

actual flow data from the Denver construction market and he did not testify that

any substantial change had occurred in the Denver construction industry which

would make a study using flow data more reliable than the disparity studies

conducted by BBC and NERA.

Denver’s individual studies examined the Denver construction industry

from the 1970s through 1997. Each study showed disparities between M/WBEs

and non-M/WBEs. Thus, considered in the aggregate the disparity studies

themselves undermine CWC’s unsupported assertion that the use of flow data

would explain the disparities.

B. Utilization of M/WBEs on City Projects

CWC argues that Denver cannot demonstrate a compelling interest because

it overutilizes M/WBEs on City construction projects. This argument is an

extension of CWC’s argument that Denver can justify the ordinances only by

presenting evidence of discrimination by the City itself or by contractors while

working on City projects. Because we have concluded that Denver can satisfy its

burden by showing that it is an indirect participant in industry discrimination,

-75-
CWC’s argument relating to the utilization of M/WBEs on City projects goes

only to the weight of Denver’s evidence.

In Concrete Works II , this court concluded that CWC had raised a genuine

issue of material fact relating to Denver’s reliance on data from City-funded

construction projects not subject to the ordinances or the goals program which

predated the ordinances. We noted that one set of data “reveal[ed] extremely low

MBE and WBE utilization.” Concrete Works II , 36 F.3d at 1526 (referring to the

DGS Study). Similarly, data analyzing the utilization of M/WBEs on bond

projects for which goals were never set also showed underutilization of M/WBEs.

See id. at 1527 (referring to the 1990 Study). In contrast to this data, however,

the record also contained studies showing very strong M/WBE utilization on City

projects subject to the goals program. See id. at 1525. Consistent with this

court’s mandate in Concrete Works II , at trial Denver sought to demonstrate that

the utilization data from projects subject to the goals program was tainted by the

program and “reflect[ed] the intended remedial effect on MBE and WBE

utilization.” Id. at 1526.

In the pretrial order, the parties stipulated that the City’s utilization of

MBEs 17 exceeded their availability in 18.75 of the 20.75 years measured since

1978. CWC asserts that this indicates there is no underutilization of MBEs by

17
There was no analogous stipulation with respect to the utilization of
WBEs.

-76-
the City and, thus, data on the utilization of MBEs on City projects provides no

support for the race-based remedial measures. 18
Denver argues that the non-goals

data is the better indicator of past discrimination in public contracting than the

data on all City construction projects.

At trial, Denver presented evidence that the high utilization of MBEs on

City projects subject to the goals program was the result of the program and not

the absence of discrimination. Particularly persuasive was Denver’s evidence

that MBE utilization rates on City construction projects declined significantly

after the goals program was amended in 1989. One amendment eliminated the

minimum annual goals for MBE participation and replaced them with a system

whereby goals were set for each individual project. Another amendment required

MBEs seeking certification to demonstrate that they had suffered from past

discrimination. The drop in utilization rates can thus be linked to a relaxation of

the City’s affirmative-action efforts. CWC presented no evidence that otherwise

explains the decrease in utilization rates after the amendments became effective.

Denver also presented uncontroverted testimony that the goals and non-

goals projects were similar. One of Denver’s experts testified that the same pool

of construction firms worked on both the goals and non-goals projects.

18
CWC’s argument relating to the City’s alleged overutilization of MBEs is
limited to CWC’s challenge to Denver’s production of strong evidence. It does
not argue that the stipulation is relevant to the narrow tailoring analysis.

-77-
Additional evidence indicated that projects that should have been performed by

the DPW were diverted to the DGS to avoid the goals program. This

demonstrates that there was at least some overlap in the character of the goals

projects administered by DPW and the non-goals projects administered by the

DGS. Again, CWC presented no evidence that the character of the projects were

significantly different or that they involved different pools of prime contractors.

Finally, CWC’s argument that overutilization of MBEs on City projects rendered

MBEs unavailable to work on private projects has little persuasive value in light

of the extensive evidence on industry elasticity and Denver’s evidence that in

1989, DPW projects accounted for less than 4% of all MBE revenues. We

conclude that Denver presented ample evidence to support the conclusion that the

evidence showing M/WBE utilization on City projects not subject to the

ordinances or the goals programs is the better indicator of discrimination in City

contracting.

CWC also attacks the non-goals data presented by the City and the

conclusions drawn from that data. Because CWC takes the position that the City

can only remedy its own discrimination or the discrimination of contractors while

working on City projects, it asserts that the non-goals data is the only relevant

data presented by Denver. It further argues that the data provides insufficient

support for Denver’s burden. We have rejected CWC’s argument that the

-78-
marketplace data is irrelevant but agree that the non-goals data is also relevant to

Denver’s burden. We note, however, that Denver did not rely heavily on the non-

goals data at trial but focused primarily on the marketplace studies to support its

burden.

CWC attempts to rebut the non-goals evidence by noting flaws in some of

the disparity indices calculated on non-goals projects in the 1990 Study. CWC

first criticizes the portion of the 1990 Study which examined the eight local bond

projects undertaken between 1972 and 1976. CWC asserts that the disparity

indices calculated for these bond projects are meaningless because they were

calculated using 1977 availability figures. This valid criticism undermines the

persuasive value of these disparity indices. CWC also challenges the conclusions

drawn in the portion of the 1990 Study that analyzed five private housing

projects constructed in 1985 with revenue bonds but not subject to the goals

program. The flaws CWC notes in this study are legitimate and support its

position that the minority utilization figures are inaccurate and, thus, the subject

disparity indices in the 1990 Study may not be reliable.

CWC also asserts that Denver cannot rely on “the Peat Marwick study” to

support the ordinances because that study found no evidence of discrimination in

bonding by the City. Unfortunately, we cannot evaluate the merits of CWC’s

argument because it has provided no record citation directing us to this study and

-79-
we were unable to locate it in the appellate record. We also note that while it

was discussed in Concrete Works I , it is not referred to in Concrete Works III .

After a time-consuming search of the trial transcript, unguided by any record

citation, we were able to locate and review only one piece of relevant evidence:

the testimony of a witness, Wesley Martin. On cross-examination the following

exchange occurred between Martin and CWC’s counsel,

Q: —you would agree that they did find there that there was no
evidence of bonding discrimination in the bonding industry?

A: I believe they termed it a little bit differently than that, if I recall
from reading that. They said that there was no immediate evidence
of discrimination evident there, but I don’t think they came to a
conclusion that it did not exist.

This testimony provides no support for CWC’s one-sentence argument that the

Peat Marwick study found “no evidence of discrimination, either by Denver or by

the bonding industry.” Because we cannot review the study itself, we cannot

determined whether it rebuts Denver’s other evidence and we conclude that

CWC’s argument is waived.

The City also relied on the DGS Study, the GAO Report, and the DOT’s

threat to withdraw federal funding as evidence of City discrimination on non-

goals projects. CWC does not rebut or even discuss the DGS Study which

showed disparity indices of 0.14 for MBEs and 0.47 for WBEs on 1989 DGS

remodeling projects. On 1990 DGS remodeling projects the disparity indices

-80-
were 0.19 for MBEs and 1.36 for WBEs. With respect to the GAO Report, CWC

asserts that the only finding reached in that report was that the DPW’s

prequalification requirement had a disparate impact on minorities. CWC then

summarily argues that this finding does not support the conclusion that the City

was discriminating because the DPW’s prequalification requirements were “race

neutral.” The GAO Report, however, concluded that the prequalification system

was applied in “an inconsistent and subjective manner” and that it “appeared to

have a greater adverse effect on small and minority contractors.” The Report also

concluded that the DPW’s advertising procedures for bid proposals and its lack

of a procedure to assure that contractors had adequate time to prepare bid

proposals had a greater negative effect on smaller and/or less experienced

contractors and minority contractors. Denver has already conceded that MBEs

are generally smaller and less experienced than majority-owned firms and has

introduced evidence indicating that both characteristics are the result of industry

discrimination. See § VI.A.2.a, supra .

CWC also asserts that Denver’s reliance on the GAO Report is misplaced

because the Report contained an incorrect minority availability figure of 11%. In

the 1990 Study, BBC used census data to estimate MBE availability in 1977 19
at

19
The GAO Report contained a table showing the utilization of minority
contractors on federally funded contracts awarded by the DPW between July 1,
1975 and December 31, 1977.

-81-
2%. The GAO Report, however, did not calculate disparity indices or attempt to

determine whether minority contractors were being underutilized. As CWC itself

concedes, the report concluded only that Denver’s contracting practices and

policies adversely affected small contractors and minority contractors more than

majority contractors. CWC’s criticism does nothing to rebut this finding. As the

report itself indicates, the GAO did not rely on the 11% availability figure to

reach its conclusions:

Since Denver had not established specific goals for minority
contractor participation in federally assisted construction contracts,
no measure was available to determine whether the current 5-percent
level of participation was reasonable. However, Denver identified
about 11 percent of the construction contracting firms in the Denver
metropolitan area as being owned by minorities.

Although the GAO Report is not particularly compelling because it contains very

little analysis, the conclusions drawn in the Report do provide some support for

Denver’s position that it engaged in discriminatory conduct. CWC’s arguments

are insufficient to rebut those conclusions.

CWC’s attempt to discredit Denver’s reliance on the DOT’s threats to

withdraw federal funding is also unpersuasive. Like the GAO Report, the DOT

found that Denver’s prequalification requirements operated as a barrier to

minority firms. In 1979, the DOT threatened to initiate administrative

proceedings to terminate federal funding for Stapleton International Airport

unless Denver modified its prequalification procedures and developed an

-82-
affirmative action plan applicable to Stapleton. We again reject CWC’s argument

that the DOT’s findings do not show discriminatory conduct by Denver because

the prequalification requirements were race-neutral. CWC also asserts that the

DOT’s findings are flawed because the DOT erroneously determined that

minority contractor utilization was 6% in 1978 and 5% in 1979. CWC again

points to the 1990 Study prepared by BBC which calculated MBE availability in

1977 at 2% and argues that, based on the DOT’s utilization figures, MBEs were

actually overutilized on DOT-funded projects. CWC does not provide any record

citation to support its assertion that the DOT determined minority utilization to

be 6% in 1978 and 5% in 1979. We have reviewed all the materials in the

appellate record relating to the City’s dispute with the DOT and could not locate

the source of CWC’s information or confirm its accuracy. Thus, we are unable to

consider CWC’s argument. In addition, we question whether an accurate

disparity index can be calculated by using availability figures from one study and

utilization figures from a second study. There is simply no way to determine

whether similar data-collection methods were used in the two studies.

In sum, Denver has demonstrated that the utilization of M/WBEs on City

projects has been affected by the affirmative action programs that have been in

place in one form or another since 1977. Thus, the non-goals data is the better

indicator of discrimination in public contracting. CWC’s criticisms of the non-

-83-
goals disparity indices reported in the 1990 Study persuasively rebuts that data.

CWC, however, is unable to persuasively rebut the other non-goals evidence,

including the DGS Study, the GAO Report, and the DOT’s threatened

administrative action. We conclude that, on balance, the non-goals data provides

some support for Denver’s position that its belief that racial and gender

discrimination existed in public contracting before the enactment of the

ordinances was supported by strong evidence.

C. Revenue Comparisons

The 1995 Study contained tables showing that revenues per employee were

lower for Hispanic, Asian, Native American, and women-owned construction

firms in the Denver MSA than for majority-owned firms. CWC argues that this

data on revenues is flawed. In his expert report, CWC expert, LaNoue, asserted

that prime contractors report gross revenues differently than subcontractors: a

subcontractor counts only those revenues earned by its own employees while a

prime contractor also includes amounts it receives but pays out to subcontractors.

At trial, LaNoue testified that “all the evidence suggests” that “white, male-

owned firms are more likely to be prime contractors.” Thus, CWC argues that

the revenue comparisons contained in the 1995 Study overstate the revenues of

majority-owned firms.

-84-
 CWC’s argument rises or falls on the correctness of the statement in

LaNoue’s expert report that “MWBEs, as newer, smaller firms, tend more often

to be subcontractors than prime contractors.” LaNoue did not identify any study

or other evidence upon which he based his statements. In fact, availability data

reported in Table 2 of the NERA Study appear to contradict LaNoue’s statement.

That data shows that both MBEs and WBEs are almost equally likely to be prime

contractors as they are to be subcontractors. “When an expert opinion is not

supported by sufficient facts to validate it in the eyes of the law, or when

indisputable record facts contradict or otherwise render the opinion unreasonable,

it cannot support a jury’s verdict.” Brooke Group Ltd. v. Brown & Williamson

Tobacco Corp. , 509 U.S. 209, 242 (1993).

LaNoue’s statements, at best, provide tenuous support for CWC’s

argument. However, Denver does not challenge the district court’s finding,

apparently based on LaNoue’s unsupported testimony, “that small minority firms

most often work as subcontractors.” Concrete Works III , 86 F. Supp. 2d at 1070.

Thus, we must credit CWC’s argument but conclude it is only marginally

persuasive and further note that Denver’s reliance on the revenue-per-employee

data was minimal.

To support its related argument that majority-owned firms have greater

revenues per employee because they are larger and more experienced, CWC

-85-
offered the testimony of Craig Long. Long, who has worked in the Denver

construction industry for twenty-eight years, testified that larger and/or more

experienced firms are more competitive and more profitable per employee

because they, inter alia : (1) have more access to cash so they can take advantage

of early-payment discounts; (2) can obtain lower prices from suppliers if they

have established long-term relationships with them; and (3) can obtain credit at

lower rates. We have already concluded, however, that M/WBEs are less able to

benefit from the advantages Long describes because of discrimination.

CWC also argues that the revenue comparisons are flawed because they do

not identify the source of the revenues. CWC takes the position that Denver

cannot use evidence of revenue differences to show that it is a passive participant

in marketplace discrimination unless it can demonstrate that all revenues were

derived from work done in the Denver MSA. It appears uncontested that

Denver’s studies did not exclude revenues that Denver-based firms earned on

projects outside the Denver MSA. See Concrete Works III , 86 F. Supp. 2d at

1059 (noting that the data used in the NERA Study “do not limit revenues to

what was earned by work done in Colorado”). LaNoue testified that ascertaining

the source of firm revenues is important because it identifies the entities or

individuals responsible for the discrimination. Given our conclusion, supra , that

Denver’s other evidence supports the conclusion that it is a passive participant in

-86-
marketplace discrimination, CWC’s criticisms regarding the source of revenues

are irrelevant.

D. Anecdotal Evidence

Faced with the prodigious anecdotal evidence presented by Denver at trial,

CWC argues that many of the examples of discrimination are not “severe” or

“extreme.” The anecdotal evidence, however, included several incidents

involving profoundly disturbing behavior on the part of lenders, majority-owned

firms, and individual employees. The anecdotal testimony revealed behavior that

was not merely sophomoric or insensitive, but which resulted in real economic or

physical harm. While CWC also argues that all new or small contractors have

difficulty obtaining credit and that treatment the witnesses characterized as

discriminatory is experienced by all contractors, Denver’s witnesses specifically

testified that they believed the incidents they experienced were motivated by race

or gender discrimination. They supported those beliefs with testimony that

majority-owned firms were not subject to the same requirements imposed on

them.

There is no merit to CWC’s argument that the witnesses’ accounts must be

verified to provide support for Denver’s burden. Anecdotal evidence is nothing

more than a witness’ narrative of an incident told from the witness’ perspective

and including the witness’ perceptions. In this case, the anecdotal evidence was

-87-
not subject to rigorous cross-examination. See id. at 1071 (“This court limited

the number of witnesses to be called for this purpose to avoid duplication under

F.R.E. 403, received lay opinions under F.R.E. 701, expansively accepted hearsay

and applied a liberal standard of relevance. Cross examination of these witnesses

was restricted to avoid unduly prolonging the trial.”). Denver was not required

to present corroborating evidence and CWC was free to present its own witnesses

to either refute the incidents described by Denver’s witnesses or to relate their

own perceptions on discrimination in the Denver construction industry.

After considering Denver’s anecdotal evidence, the district court found

that the evidence “shows that race, ethnicity and gender affect the construction

industry and those who work in it” and that the egregious mistreatment of

minority and women employees “had direct financial consequences” on

construction firms. Id. at 1074, 1073. The court, however, failed to credit any of

Denver’s anecdotal evidence because it did not answer the six questions posed by

the court. See id. at 1074 (“[T]aken as a whole, the anecdotal evidence does not

answer the six questions considered in the court’s evaluation of the statistical

evidence.”). As we conclude supra , however, the district court’s six questions

represent a misstatement of the governing law and imposed an erroneously high

burden on Denver. Based on the district court’s findings regarding Denver’s

anecdotal evidence and our review of the record, we conclude that the anecdotal

-88-
evidence provides persuasive, unrebutted support for Denver’s initial burden. Cf.

Int’l Bhd. of Teamsters v. United States , 431 U.S. 324, 339 (1977) (concluding

that anecdotal evidence presented in a pattern or practice discrimination case was

persuasive because it “brought the cold [statistics] convincingly to life”).

E. Summary

The record contains extensive evidence supporting Denver’s position that

it had a strong basis in evidence for concluding that the 1990 Ordinance and the

1998 Ordinance were necessary to remediate discrimination against both MBEs

and WBEs. The information available to Denver and upon which the ordinances

were predicated, indicated that discrimination was persistent in the local

construction industry and that Denver was, at least, an indirect participant in that

discrimination.

Before enacting the 1990 Ordinance, Denver was informed by the GAO

that the DPW was likely not complying with federal affirmative-action

requirements. A year after the GAO Report, the DOT threatened to withdraw

federal funding for Stapleton International Airport because the DOT took the

position that minority contractors were not being utilized at appropriate levels.

The City then held public hearings at which extensive testimony was given

detailing discrimination against MBEs and WBEs on local construction projects.

In 1988, the city solicited written responses to questionnaires and conducted

-89-
additional hearings on the issue of discrimination in the local construction

industry.

The City then retained BBC to evaluate the utilization of M/WBEs on local

construction projects. BBC ultimately produced the 1990 Study which showed

large disparities in the utilization of MBEs and WBEs on construction projects

undertaken in the Denver MSA. Further, the 1990 Study indicated that there

were disparities in the utilization of M/WBEs on City projects. The anecdotal

evidence collected by BBC and summarized in the 1990 Study strongly suggested

that there was ongoing discrimination against MBEs and WBEs in the Denver

construction industry.

Before enacting the 1998 Ordinance, Denver had the opportunity to

evaluate the considerable amount of information contained in the 1995 Study.

That study used both census data and information obtained from a telephone

survey to examine the utilization of MBEs and WBEs in the Denver construction

and professional design industries. The census data showed disparities in the

utilization of MBEs and the survey data showed disparities in the utilization of

MBEs and WBEs. The 1995 Study also showed that Blacks and Hispanics

working in the Denver construction industry had lower rates of self-employment

than Whites and that women had lower rates of self-employment than men. The

-90-
disparities in self-employment rates persisted even though the 1995 Study

controlled for education and length of work experience.

The 1995 Study also contained a summary of the RTD Study and the DHA

Study. The RTD Study showed disparities in the utilization of M/WBE prime

contractors and subcontractors in the Denver MSA construction industry. The

DHA Study found some disparities in the utilization of M/WBEs on DHA

projects. In addition, the separate DGS Study showed disparities in the

utilization of MBEs and WBEs on DGS construction and remodeling projects.

The City then retained NERA to examine whether discrimination limited

M/WBE participation in contracting. The NERA Study showed disparities in the

utilization of M/WBEs in the Colorado construction industry. It also concluded

that African Americans, Hispanics, and Native Americans working in the Denver

MSA construction industry have lower self-employment rates than Whites. The

NERA Study then used the information on self-employment rates to calculate the

potential availability of MBEs if they formed construction businesses at the same

rate as Whites. It then compared potential availability to the actual availability of

MBEs in the Denver MSA. In the case of African American, Hispanic, and

Native American prime contractors and subcontractors, potential availability

exceeded actual availability.

-91-
 The NERA Study also examined the earnings of self-employed minorities

and women in the construction industry. The study showed disparities in the

earnings of self-employed women, African Americans, Hispanics, and Native

Americans. Finally, the results of a mail survey conducted by NERA showed that

M/WBEs engaged in business activities experience disparate treatment at a higher

rate than non-M/WBEs.

To meet its initial burden, Denver was not required to unequivocally

establish the existence of discrimination nor was it required to “negate all

evidence of non-discrimination.” Concrete Works II , 36 F.3d at 1530. After

properly considering all relevant evidence presented by Denver at trial and the

district court’s undisputed factual findings, we conclude that Denver met its

initial burden of producing strong evidence of racial discrimination in the Denver

construction industry. Denver has also shown that the gender-based measures

were based on reasoned analysis. Moreover, although CWC does not raise the

issue, we conclude that Denver had a strong basis in evidence to conclude that

action was necessary to remediate discrimination against M/WBEs before it

adopted both the 1990 Ordinance and the 1998 Ordinance. See Shaw , 517 U.S. at

910 (“[T]he institution that makes the racial distinction must have had a strong

basis in evidence to conclude that remedial action was necessary, before it

-92-
embarks on an affirmative-action program.” (quotation omitted) (emphasis in

original)).

To rebut Denver’s evidence, CWC was required to “establish that Denver’s

evidence did not constitute strong evidence of such discrimination.” Concrete

Works II , 36 F.3d at 1523. CWC cannot meet its burden of proof through

conjecture and unsupported criticisms of Denver’s evidence. Rather, it must

present “credible, particularized evidence.” Adarand VII , 228 F.3d at 1175.

CWC has not met its burden. Its legal arguments urging us to disregard Denver’s

non-goals data, marketplace data, lending discrimination study, and business

formation study lack merit. Further, its criticisms of the methodologies used in

those studies, albeit legitimate in some very limited circumstances, merely nip at

the edges of Denver’s evidence and are insufficient to undermine the reliability

of the studies. CWC hypothesized that the disparities shown in the studies on

which Denver relies could be explained by any number of factors other than

racial discrimination. However, it did not conduct its own marketplace disparity

study controlling for the disputed variables and has presented no other evidence

from which this court could conclude that such variables explain the disparities.

Although CWC advanced a seemingly meritorious argument that the size and

experience of M/WBEs may explain the disparities, Denver’s additional evidence

persuasively dispelled that argument.

-93-
 “[W]hether a strong basis in evidence of past or present discrimination

exists, thereby establishing a compelling interest for the municipality to enact a

race-conscious ordinance, is a question of law.” Concrete Works II , 36 F.3d at

1522. We conclude that Denver has demonstrated that a strong basis in evidence

supported its conclusion that remedial action was necessary to remedy racial

discrimination in the Denver construction industry. Further, Denver has shown

that the gender-based measures in the 1990 and 1998 Ordinances were based on

reasoned analysis. Consequently, we conclude that Denver has shown that it has

a compelling interest in remedying racial discrimination in the Denver

construction industry and that it has an important governmental interest in

remedying gender discrimination. CWC has failed to rebut Denver’s showing.

VII. NARROW TAILORING

Having concluded that Denver has demonstrated a compelling interest in

the race-based measures and an important governmental interest in the gender-

based measures, this court must now examine whether the ordinances are

narrowly tailored to serve the compelling interest and are substantially related to

the achievement of the important governmental interest.

Shortly after CWC filed this lawsuit in 1992, Denver moved for summary

judgment. The United States District Court for the District of Colorado granted

Denver’s motion. Judge Sherman G. Finesilver prepared an order which was

-94-
published in the Federal Supplement. See Concrete Works I , 823 F. Supp. at 821.

The court concluded that Denver had established a compelling interest in its

affirmative-action plan. See id. at 841. The court also concluded that Denver’s

program was narrowly tailored. 20
See id. at 844-45. CWC appealed the grant of

summary judgment and that appeal culminated in our decision in Concrete Works

II. This court reversed the grant of summary judgment on the compelling-interest

issue and concluded that CWC had waived any challenge to the narrow tailoring

conclusion reached by the district court.

Because Concrete works does not challenge the district court’s
conclusion with respect to the second prong of Croson ’s strict
scrutiny standard—i.e. that the Ordinance is narrowly tailored to
remedy past and present discrimination—we need not address this
issue. The summary allegation in amici’s brief that the ordinance is
not narrowly tailored does not suffice to preserve this issue on
appeal.

Concrete Works II , 36 F.3d at 1531 n.24.

“[A] legal decision made at one stage of litigation, unchallenged in a

subsequent appeal when the opportunity to do so existed, becomes the law of the

case for future stages of the same litigation, and the parties are deemed to have

waived the right to challenge that decision at a later time.” Capps v. Sullivan , 13

Although the district court acknowledged that the gender-based remedial
20

measures in Denver’s plan should be subject to intermediate scrutiny, it analyzed
those measures under the strict-scrutiny standards. See Concrete Works I , 823 F.
Supp. 821, 829 (1993) (“[A]n ordinance surpasses or fails constitutional
standards in light of the most stringent applicable level of scrutiny.”).

-95-
F.3d 350, 353 (10th Cir. 1993) (quotation omitted); see also Demarest v. Price ,

130 F.3d 922, 942 n.9 (10th Cir. 1997); Martinez v. Roscoe , 100 F.3d 121, 123

(10th Cir. 1996). Other circuit courts of appeal have recognized that this rule is

“necessary to the orderly conduct of litigation” and ensures that a party which

fails to challenge a ruling in a first appeal does not “stand better as regards the

law of the case than one who had argued and lost.” Lafferty v. Northwest

Airlines, Inc. , 740 F.2d 1071, 1089 (D.C. Cir. 1984); Fogel v. Chestnutt , 668

F.2d 100, 109 (2d Cir. 1981).

Denver argues that the district court erred when it addressed the narrow

tailoring issue on remand. The law of the case doctrine, however, is “only a rule

of practice in the courts and not a limit on their power.” United States v.

Monsisvais , 946 F.2d 114, 116 (10th Cir. 1991). Although the law of the case

doctrine does not implicate a court’s jurisdiction, a district court’s authority to

deviate from law of the case is circumscribed by three “exceptionally narrow”

exceptions:

(1) when the evidence in a subsequent trial is substantially different;
(2) when controlling authority has subsequently made a contrary
decision of the law applicable to such issues; or (3) when the
decision was clearly erroneous and would work a manifest injustice.

Huffman v. Saul Holdings Ltd. P’ship , 262 F.3d 1128, 1133 (10th Cir. 2001)

(quotation omitted). The district court did not rely on any of these exceptions

when it revisited the narrow tailoring issues in Concrete Works III and CWC does

-96-
not argue that any exception applies. In fact, CWC’s only response to Denver’s

law-of-the-case argument is contained in a short footnote in its appellate brief.

CWC then proceeds to advance what appear to be many of the same merits

arguments the district court rejected when it granted summary judgment for

Denver on the narrow tailoring issue in 1993. See Concrete Works I , 823 F.

Supp. at 841-45.

In its footnote, CWC does assert that the two prongs of strict scrutiny are

inseparable. We presume that CWC is arguing that the compelling interest

analysis cannot be conducted without also conducting the narrow tailoring

analysis. CWC’s argument is clearly foreclosed by our treatment of this case in

Concrete Works II ; we reversed the grant of summary judgment on the

compelling-interest prong without addressing the narrow-tailoring prong,

concluding that it had been waived. See 36 F.3d at 1531 & n.24.

CWC also argues that the 1998 Ordinance was not before the district court

when it first ruled on the narrow tailoring issues. CWC suggests that the law of

the case doctrine did not bar the district court from addressing the question of

whether that ordinance is narrowly tailored. This argument would appear to

implicate the second exception to the law of the case doctrine, i.e. , the evidence

presented at trial was substantially different than the evidence before the district

court when it ruled on the narrow tailoring issue the first time. CWC’s argument,

-97-
however, must fail because CWC does not identify any significant or material

differences between the 1990 Ordinance and the 1998 Ordinance. Further, the

portion of its brief dedicated to the narrow tailoring issue contains no argument

that the amendments made to the original ordinance since Judge Finesilver ruled

on the issue disadvantage them to a greater degree or otherwise affect the narrow

tailoring issue. Any such argument would be inconsistent with the district

court’s unchallenged conclusion that Denver’s program has “been in effect since

1990 without substantial change.” Concrete Works III , 86 F. Supp. 2d at 1079.

We conclude that the district court lacked authority to address the narrow

tailoring issue on remand because none of the exceptions to the law of the case

doctrine are applicable. The district court’s earlier determination that Denver’s

affirmative-action measures are narrowly tailored is law of the case and binding

on the parties.

VIII. Conclusion

The City has demonstrated a compelling interest in remediating racial

discrimination in the Denver construction industry and an important

governmental interest in remediating gender discrimination in that industry.

Further the City’s affirmative-action program is narrowly tailored. Consequently,

the judgment of the district court enjoining Denver from enforcing the 1998

Ordinance and declaring the 1990 Ordinance and the 1998 Ordinance

-98-
unconstitutional is reversed. The case is remanded with instruction to enter

judgment for Denver.

-99-