A Sacramento judge's validation of a program that reserves millions of dollars of California's road-building contracts for women- and minority-owned firms is on its way to a federal appellate court.

U.S. District Judge John A. Mendez ruled in March that the California Department of Transportation is within constitutional bounds in awarding 6.75 percent of construction and engineering contracts involving federal funds to companies owned by African Americans, Native Americans, Asian Pacific Americans or women.

Caltrans also strives to funnel a similar amount of work to companies owned by the same minority groups, but without utilizing race and gender as a criteria.

The overall policy has a direct effect on about $2.75 billion worth of projects, according to a legal challenge by the Associated General Contractors of America.

In 2009, the agency began including race and gender as factors in advertised contracts for all projects at least partially funded with federal money.

Mendez rebutted the association's argument that the "disadvantaged business enterprises," or DBE, program is unconstitutional on its face and supported by flawed evidence that is too general or irrelevant. The contractors argue the program discriminates against white and Latino males and "subcontinent Asian American males," such as those from India or Pakistan.

The judge didn't see it that way. "Because Caltrans' DBE program is based on substantial statistical and anecdotal evidence of discrimination in the California contracting industry, and because the court finds that it is narrowly tailored (to remedy specifically identified bias), the court upholds the program as constitutional," Mendez declared at a March 23 hearing.

On Friday, attorneys from the Pacific Legal Foundation, a limited-government watchdog group, notified Mendez there will be an appeal to the 9th U.S. Circuit Court of Appeals in San Francisco.

"We believe we have a good legal argument to put before the 9th Circuit," the contractors' lead attorney, Sharon Browne, said in an interview. "The government should not be discriminating based on race and gender. That's a fundamental principle of American jurisprudence. Caltrans should be making decisions based on the lowest responsible bid."

Olivia Fonseca, deputy director of Caltrans' Office of Business and Economic Opportunity and administrator of the DBE program, said she is confident the department will be on solid footing at the appellate level.

"In 2005," she said, "the 9th Circuit ruled that there must be evidence a disparity exists and which minorities are subject to discrimination. We suspended the existing program and commissioned an exhaustive study through research, surveys and public hearings. The assessments were based on race, ethnicity and gender. It was found that Hispanic and Subcontinent Asians were at parity, while African Americans, Asian Pacific Americans, Native Americans and women were underutilized."

Also in 2005, Congress enacted a statute requiring that "not less than 10 percent of the amounts made available for any program … shall be expended with small business concerns owned and controlled by socially and economically disadvantaged individuals."

Court papers filed by Caltrans say the agency "had to design a DBE program meeting regulatory requirements or risk losing its federal funding, which accounts for one-third of California's budget for transportation projects."

No set-asides are allowed for projects entirely funded by the state because of a ban on minority preferences approved by California voters in 1996.

Court papers filed by the contractors counter that between 2006 and 2008, when Caltrans' DBE program was race and gender neutral, no federal funds were withheld.

But Mendez found that, if he halted Caltrans' program with an injunction sought by the contractors, the agency would face the prospect of dealing with federal authorities unhappy about noncompliance with their regulations.

COURTS

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