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.
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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
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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
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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.
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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...)
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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.
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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.
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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
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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.
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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.
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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
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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
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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.
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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.”
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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.
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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
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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.
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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
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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
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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.
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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
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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.
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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).
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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,
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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
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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
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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.”).
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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...)
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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).
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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
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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
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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.
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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
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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
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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
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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
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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
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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-
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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
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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
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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?”
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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,
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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.
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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,
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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.
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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.
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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
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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
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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
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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.
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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
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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-
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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.
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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
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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
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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
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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
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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
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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
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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.
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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
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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.
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“[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
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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.”).
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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
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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,
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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
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unconstitutional is reversed. The case is remanded with instruction to enter
judgment for Denver.
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Concrete Works of Colorado, Inc. v. City & County of Denver
Court: Court of Appeals for the Tenth Circuit
Date filed: 2003-02-10
Citations: 321 F.3d 950
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