STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
B. COXWELL CONTRACTING, INC., )
)
Intervenor, )
)
vs. ) CASE NO. 88-2959RP
) STATE OF FLORIDA, DEPARTMENT OF ) TRANSPORTATION, )
)
Respondent, )
)
and )
) FLORIDA TRANSPORTATION BUILDERS ) ASSOCIATION, )
)
Intervenor. )
)
FINAL ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a final hearing in this case on July 29 and August 3, 1988, in Tallahassee, Florida. The parties waived the requirement that a Final Order be entered within thirty (30) days following the close of the hearing and completed filing their post-hearing submissions on September 14, 1988.
APPEARANCES
For Petitioner: Randall L. Schecter, Esquire
B. Coxwell 433 North Magnolia Street Contracting, Inc. Tallahassee, Florida 32308
For Petitioner/ Mary M. Piccard and Intervenor: Albert Craig Penson, Esquire Florida Cumming, Lawrence & DeSigner, Transportation Post Office Box 589
Builders Tallahassee, Florida 32302 Association:
For Respondent: Judy Rice, Esquire
Department of Transportation Haydon Burns Building
605 Suwannee Street
Tallahassee, Florida 32301 ISSUE PRESENTED
The issue presented for decision herein is whether or not Respondent's proposed amendment to Rule 14-78, Florida Administrative Code, is invalid.
INTRODUCTION AND BACKGROUND
By publication of the text of the proposed rule on June 3, 1988, in Volume 14, No. 22, Florida Administrative Weekly, the Department of Transportation (herein Respondent or Department) proposes to amend the definition of "Native American" to "members of the American Indian tribes recognized by the U.S. Bureau of Indian Affairs" (BIA). The group is presumed to be socially and economically disadvantaged and members of the group may be eligible for certification as a disadvantaged business enterprise (DBE), by the Department. Certification as a DBE affords a competitive and economic advantage through preferential treatment of obtaining Department work--either as a prime or subcontractor. DBEs may bid on contracts set-aside for DBEs and may be used to meet DBE subcontract goals on Department contracts." The Federal Highway Administration Office reviewed and approved the proposed rule. The current provisions of Rule 14-78.002, Florida Administrative Code provide in pertinent part:
14-78.002 Definitions. Throughout this rule chapter, the, following words and phrases shall have the respective meanings set forth below unless a different meaning is plainly required by the context:
"Socially and economically disadvantaged individuals" means those individuals who are citizens of the United States or lawfully admitted permanent residents and who are women, Black Americans, Hispanic Americans Native Americans, Asian-Pacific Americans or Asian-Indian Americans, and any other minorities or individuals certified as disadvantaged by the Small Business Administration pursuant to Section 6(a) of the Small Business Act (15 U.S.C. 637) and implementing regulations. Individuals in the following groups are presumed to be socially and economically disadvantaged; provided, however, this presumption is rebuttable:
"Black Americans" which includes persons having origins in any of the black racial groups of Africa;
"Hispanic Americans" which
includes persons of Mexican, Puerto Rican, Cuban, Central or "South American or other Spanish or Portuguese origin, regardless of race;
"Asian-Pacific Americans" which includes persons whose origins are from Japan, China,
Taiwan, Korea, Vietnam, Laos, . . . "Native Americans" which
includes persons who are American Indians, Eskimos, Aleuts, or Native Hawaiians;
"Asian-Indian Americans" which includes persons whose origins are from India, Pakistan, and Bangla Desh;
`Women.'
The amendment proposes to modify the definition of Native Americans as follows:
(d) `Native Americans, which includes persons who are members of the American Indian tribes recognized by the U. S. Bureau of Indian Affairs, Eskimos, Aleuts, or Native Hawaiians.
This challenge involves only section 14-78.002,(1)(d), of the proposed rule.
The challenge was brought by J. B. Coxwell Contracting, Inc. (Coxwell), a currently certified DBE, whose certification is on the basis of his membership, as an Indian, in the Machis Lower Creek Tribe of Alabama.
The Department contested a Motion to Intervene filed by the Florida Transportation Builders Association (FTBA), on the ground that FTBA, an association of road construction contractors, had not demonstrated standing as contemplated by Section 339.0805, Florida Statutes. FTBA has amply demonstrated that certain of its members would be "affected persons," as noted herein, by enforcement of the proposed challenged rule. Here, FTBA's attempt to intervene is controlled by the more liberal term "affected persons" used in section 120.54 rather than the more restrictive term, "substantially affected" used in section
120.56. It is determined that FTBA has standing as a number of its members stand to lose their DBE certification if the proposed rule is held to be valid. See, Florida Department of Offender Rehabilitation v. Jerry, 353 So.2d 1230 (Fla. 1st DCA), cert. denied, 359 So.2d 1215 (Fla. 1978). Florida Homes Builders Association vs. Department of Labor, 412 So.2d 352 (Fla. 1982)
The Department's stated reasons for the proposed change is the need for a standard to define American Indians and a concern about the genuineness of the ethnic identity as Indians of those who apply for Indian DBE certification.
In support thereof, the Department maintains that its on-site certification investigators have experienced trouble in ascertaining whether applicants who apply for DBE certification under the status of Indians are in fact bona fide Indians.
On July 26, 1988, an Order was entered allowing intervention by FTBA.
Coxwell and FTBA challenged the proposed rule amendment as violating due process and equal protection provisions of the Florida and United States constitutions, as being based on an insufficient economic impact statement and that the amendment constitutes an unlawful delegation of authority.
FINDINGS OF FACT
Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received and upon consideration of the proposed final orders, the following relevant facts are found:
Petitioner, J. B. Coxwell Construction, Inc., is an Asphalt Construction Company which is certified as a DBE by the Florida Department of Transportation. The basis of Coxwell's DBE certification is the claimed American Indian heritage of John B. Coxwell.
An example of the dilemma faced by the Department in administering the DBE certification program, which illustrates the need for substantive criteria defining "Indian" as proposed in the amendment, is the DBE certification issued to Coxwell. Coxwell is certified based on his membership in the Machis Lower Creek Tribe of Alabama. The Department does not dispute that Mr. Coxwell is a member of the Machis Tribe. However, the only document by Coxwell which substantiates or evidences his Indian origin and heritage consists of a family pedigree chart obtained from the chief of the recently formed Machis Tribe. Coxwell has no other document evidencing that he has ever held himself out to be an Indian. As to the pedigree chart, he did not provide any input or information but relied on the chief's filling out the family tree. The space on the pedigree document which directs that he "Give the name of record or book where this information was obtained" is blank and gives no source. The pedigree document is the total documentary basis of Coxwell's membership in the Machis Tribe and the tribal membership card is the basis for the recognition of Coxwell as an Indian by the State of Alabama. Prior to applying for membership as a Machis, Coxwell has never held himself out to be an Indian. Growing up in Alabama, he represented that he was white and his birth certificate registered his parents and him as being white. He never suffered discrimination and knew of no Indian tribes by name when he was growing up and he was never known in the community as an Indian.
Coxwell's firm is pre-qualified as a prime contractor under Section 337.14, Florida Statutes, based on his construction experience, personnel, equipment, and financial capability. The firm has grossed over $10,000,000 in the past three years and competes on the Department's prime contracts. Coxwell attributes his company's success to his approximate 30 years in the business, hard work and learned experience, most of which was acquired prior to being certified as a DBE
Coxwell grew up in Southeast Alabama during a time when racial discrimination ran rampant against Indians. As a result, Coxwell hid the fact that he was of Indian heritage to avoid being discriminated against.
Joe Hill, of Cherokee and Creek Indian heritage, currently operates three certified DBE Indian companies, to wit, J. E. Hill Contractor (concrete construction), Hill Milling (asphalt removing-milling), and Hill Marketing, a paint striping company. The Cherokee and Creek Indian tribes are not recognized by BIA.
Approximately 75% of Hill's business is DBE related work and a substantial amount of that work would be eliminated if he is decertified as a DBE pursuant to the proposed rule. Hill, like Coxwell, is currently certified by the Department as a prime contractor and does about $10,000,00 in work annually with the Department. Hill will lose what he considers to be a DBE monopoly on the type of services his companies perform on Department contracts.
Hill was in the road construction business long before the DBE program was formulated, as his father formed the business in the early 1930's and he has accumulated substantial expertise. Hill will be able to continue contracting on Department prime and subcontracts if he is decertified as a DBE.
Glen Powell, a certified DBE, is a member of the North Bay Clan Indian tribe. Powell obtained his DBE certification in 1982 based on his status as an American Indian. The North Bay Clan Indian Tribe is not recognized by BIA. Powell's experience is that Indians are treated singularly different than any other minority in the U.S. In addition to his DBE business, Powell owns a real estate company, is 50% owner in Seminole Properties, and owns a 38 unit apartment complex. He also is president and 100% owner of First American Contracting. Powell will lose a substantial portion of his business and will lay off employees if he is decertified as a DBE. In fact however, due to the inherent nature of competition, Mr. Powell has recently laid-off one third of his work force.
Gulf Asphalt Corporation (Gulf) does prime contracting work for DOT in Florida and is a member of the FTBA. Carol Atkinson, a resident of Panama City, has been employed by Gulf for 20 years. She is in charge of bid preparations and other financial work for Gulf. She is responsible for soliciting bids from DBE subcontractors in order to meet the stated DBE goals on DOT jobs. Atkinson is concerned that Gulf currently relies on six Indian DBE firms which would be affected by the proposed rule change. In fact, the Department's DBE directory indicates there are a multitude of DBE firms in the panhandle area upon which prime contractors such as Gulf can draw upon for satisfying the DBE goals.
William Brown Williams, the chairman of the Northwest Florida Creek Council, is an advocate for non-federally recognized Indian people. As an advocate, Williams has encountered problems in administering benefits for Indians and in determining who are bona fide Indians eligible, for benefits. Williams was involved in an unsuccessful petition in 1977 to the BIA for recognition of the Creek Tribe of Indians. Membership in federally recognized tribes, as in non-federally recognized tribes, is a tribal determination. Williams is aware of the problems in administering programs which target Indians as beneficiaries. As an example, in the Federal Title IV Program, any person who declares himself an Indian can secure Title IV money for his school system. Upon Williams learning of the proposed rule in early July 1988, he visited with Juanita Moore, the Bureau Chief of the Office of Minority Programs with FDOT, and provided input in formulating the proposed rule.
Teresa Stewart, Director of the Department's Division of Administration, participates in the policy directives of the Bureau of Minority Programs, as well as six other Bureaus. In the transition from her previous job to Director, Stewart was briefed in January 1987 by her predecessor regarding the bureau's problems in determining ethnic identity of Indians. The bureau has not experienced such problems in identifying other minorities' ethnic origins. In response to the Indian certification program, Stewart consulted Joe Queton, Executive Director of the Governor's Council on Indian Affairs, and reviewed the federal recognition process administered by the BIA.
Queton is aware of the potential for abuse by use of the current rules' undefined term "American Indian". Queton advises other state agencies regarding their MBE programs and has advised the Department's bureau over a period of several years. Under the current rule, there is no single document that can universally demonstrate Indian heritage. Absent a clear definition of American Indian, those who actually experienced economic discrimination due to
their identity as Indians are competing for the DBE program benefits with persons who grew up identified as White, but now claim DBE certification benefits by tracing undefined Indian heritage. The Governor's Council on Indian Affairs recommends policy relating to Indians in Florida. Queton has expressed a desire that, to the extent that Florida recognizes Indian tribes, the State recognize tribes which are (1) indigenous to Florida and (2) recognized by the BIA. Queton is a member of the federally recognized Kiowa tribe of Oklahoma.
The council's purpose is to work with and provide assistance to Indians.
Without established criteria, the potential for abuse is great for non-Indians to participate in the DBE program. Queton opines that DBE recognition should be based on careful anthropological, genealogical and historical review to appropriately identify such tribes. Currently, Florida does not recognize any tribes officially. The Department's concern in accepting other states' recognition of Indian Tribes is the wide variety of practices of other states, many of which have no substantive criteria.
J. Anthony Paredes, Chairman of the Department of Anthropology, Florida State University, is an anthropologist who has extensively authored, published, and, researched Indian matters. Currently serving as president of the Southern Anthropological Society, he is on the editorial board of the American Indian Culture and Research Journal. He has published papers regarding Indian matters in such journals as Current Anthropology, American Anthropologist, Human Organization, The Journal of the Society for Applied Anthropology, numerous chapters in books and has edited a book on contemporary Chipohoi Indians. Paredes has performed extensive field and archival research on the Alabama cultures of the Poarch Creeks and Machis Indian communities. He actively participated in the research which was used in the successful petition for federal recognition made in 1980 to the U.S. BIA by the Alabama Poarch Band of Creeks.
In his research of the Poarch Creeks, Paredes took hundreds of hours of oral testimony, made extensive searches of county records, marriage records, World War I selective service records, land records, and other federal records of all kind. He also compiled extensive genealogical interview results. Subsequent to his extensive research in Alabama and his previous ethno- historical work of the Creek nation on behalf of the Poarch Creeks, the EIA hired Dr. Paredes to research the ethno-history and ethnology of the Machis Lower Alabama Creek Indians, and to provide BIA a background report without reaching conclusions. He was commissioned to find all the evidence available that indicated identification of the Machis as an Indian group, and of their existence as a community from their first known historical existence to the present day, and find, if there existed, any form of Machis tribal government or political authority. Dr. Paredes found no evidence of identity of the Machis as Indians from the early 1800's to the present. As to the Machis, there was an identifiable family group of relatives settled in Alabama, who were not linked in any way to the Indians of southeastern Alabama. The first recorded reference to the Machis was found in a 1982 newspaper article. Based on Dr. Paredes' field and archival research, he found nothing to identify any of the named ancestors of the current Machis as Indians. Dr. Paredes found no evidence of descent by the Machis from historic Indian groups.
The BIA has established substantive criteria for recognition of Indian tribes. Their recognition provides substantive rational criteria for administering the Department's proposed DBE rule as to Indian applicants. Determination of an individual's membership in BIA-recognized tribes, is made by the tribe. The BIA tribal recognition application process, may take 3 or 4 years in research and investigation. After initial petition, the BIA branch of
Acknowledgment may seek additional information or verification in reviewing petitions. BIA utilizes a scientific and thorough review to assure validity of the final determination of claimants to Indian tribe states and Indian ethnicity. The BIA does not close membership rolls of a federally recognized tribe since that matter is controlled by the tribe. In addition to Dr. Paredes' investigation of the Machis as an Indian tribe, the BIA also sent anthropologists to Alabama who conducted their own investigation of the Machis. BIA treats each application seriously and reviews each at face value. The federal recognition process is not an adversary process. Costs of petitioning for BIA recognition are defrayed by the Administration for Native Americans.
The BIA review team has a genealogist that specializes exclusively in genealogy. Denial of federal recognition of a tribe may not mean that the applicants are not Indians but where the denial is based on the applicant's failure to meet criterion number one, decendents from Indians, the applicants, as in the case of the Machis, are not Indians.
Dan Harbolt is an investigator with the Department's Inspector General's Office. Harbolt and a colleague, Nick Collins, went to Alabama and interviewed the budget director and administrator of the Alabama Indian Affairs Commission, Jane L. Weeks, to ascertain information concerning Alabama's recognition process of Indians. The Alabama Indian Affairs Commission was not involved in reviewing certification of establishing criteria for Indian recognition and has no established criteria for such recognition. Harbolt's meeting with Weeks occurred in response to rumors that certification as a member of an Indian tribe could be purchased in Alabama. Upon learning that, Harbolt and Collins traveled to Alabama on July 21-22, 1988. Prior to that trip, Collins had contacted a Billy Joe Faulkner, who represented himself as chief of the United Cherokee Tribe of Alabama. Collins requested Indian tribal membership explaining that he was a Tallahassee contractor that wanted to become certified as a DBE. Faulkner indicated that Collins should bring him $500 and that he had never certified anyone for less than that amount. Faulkner did not inquire as to Collins' blood line or heredity during that conversation.
At Faulkner's residence in Alabama, Collins completed a phony family tree chart and Faulkner accepted Collins' self-affirmation that he (Collins) had Indian blood on his mother's side. Faulkner gave Collins eleven signed tribal membership certificates to fill out, and raised-seal membership documents from the tribe. All the documents were left blank as to the name of the member and were given to Collins to complete the member's name at a later time. Faulkner signed the documents as principal chief. The investigation results were reported to Stewart, upon Harbolt and Collins return to Tallahassee the following week.
Juanita Moore, Bureau Chief of the Office of Minority Programs, drafted the proposed rule. In preparing the draft of the proposed rule, Moore consulted with Leigh Ann Reynolds, an employee in the Department's contract compliance office. In preparing the draft, Moore examined the list of potentially affected DBEs and considered the cost to those potentially affected entities. Moore determined that there would be an economic impact on approximately nine million dollars of the department's work involving some approximately 15 affected DBEs. Moore determined, based on a cost analysis and other financial data, that there are, in total, approximately 100 Indian DBEs who are doing business with the Department. Of that amount, there would be approximately 15 who would be directly affected by promulgation of the proposed rule. However, there would be a "washout" of DBEs, that is, another DBE, unaffected by the proposed rule, would step in to be awarded that work to the
extent that those affected DBEs were unable to otherwise demonstrate that they are entitled to the DBE certification.
The Department is concerned about the genuineness of the applicants who represented themselves to be of Indian descent. Put another way, the Department has found it difficult, if not impossible, to trace the heritage of applicants who claim DBE certification based on their Indian heritage under the Department's existing certification criteria. Petitioner Coxwell presented a family pedigree chart which could note be verified as accurate.
Moore has had extensive experience with the Department as an internal auditor, Program Management Review and Evaluation, Deputy Bureau Chief for Contract Administration and her present position of Bureau Chief. She has analyzed bids with respect to the Department's contracting requirements and familiar with contract contents and the administration of the process of qualifying prime and subcontractors. Moore is a member of the DBE Certification Committee. Moore considered the economic impact that would be brought to Petitioner Coxwell and others similarly situated to the extent that they lost their DBE certification pursuant to the proposed rule. She reviewed Petitioner Coxwell's application for qualification as a prime contractor which contains an itemization of all contract names and customers for fiscal year ending September 30, 1987. Of the 57 contracts listed, 9 are listed as Department contracts or subcontracts. Based upon Moore's examination of the impact on free and open competition, and on potentially affected DBE's, Moore concluded that only 15 potentially affected Indian DBE's would no longer be eligible for certification. The remaining DBE's would be benefited by the change.
The removal of any current DBE specialty contractor would have no substantial impact on the Department's ability to set DBE contract goals or on open competition to meet DBE goals as there are a minimum of 25 eligible specialty contractors who are DBEs and could perform that type of work
In preparation of the draft of the economic impact statement (EIS), Moore reviewed the handwritten draft and concurred in the revision of the EIS to reflect the determination that the proposed rule would have an impact on certain currently certified Indian DBEs. Moore's liaison with the Department's legal section in preparing the rule and the EIS, Leigh Ann Reynolds, jointly reviewed the proposed rule and EIS. The summary of the EIS did not reflect correctly Moore's determination that the proposed rule would ,affect certification of some current DBEs. An error in printing the summary was discovered subsequent to its being published. This in no way negated the determination that the rule impacted some Indian DBEs, which was accurately stated in the actual EIS, the latter having being submitted simultaneously to the Joint Administrative Procedures Committee (JAPC) by Jim Myers, a consultant in the Department's legal section. Three weeks prior to the public hearing held on the proposed rule, Myers sent the proposed rule with its underscored proposed changes, seeking comments, to all currently certified Indian DBEs. The Department considered the comments received at the public hearing held on the proposed rule.
Additionally, the Department intends to consider eligible, under Indian status, those persons who can demonstrate eligibility for membership in federally recognized tribes, in addition to actual members.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings. Section 120.54(4), Florida Statutes.
The parties were duly noticed pursuant to the notice provisions of Chapter 120, Florida Statutes.
The authority of the Florida Department of Transportation is derived from Chapters 339 and 337, Florida Statutes.
25. Pursuant to sections 339.0805, 337.125, 337.135 and 337.137, Florida Statutes, the Department administers a certification program which certify's applicants as Disadvantaged Business Enterprises (DBEs). DBEs are accorded competitive advantages and preferential treatment as they are eligible to participate in the Department's sheltered program of set-aside contracts and DBE subcontract goals. The program also serves to implement the State Minority Business Program as described in section 287.0945, Florida Statutes.
DBEs are small business concerns that are owned and controlled by socially and economically disadvantaged individuals. Section 339.0805, Florida Statutes, incorporates, by reference, the definition of (1) small business concerns and (2) socially and economically disadvantaged individuals as defined by the Surface Transportation and Uniform Relocation Assistance Act of 1987, and provides:
339.0805 State Transportation Trust Fund; specified percentage to, be expended with small businesses owned by socially and economically disadvantaged persons; construction management development program; bond guarantee program.- -
(1)(a) Except to the extent that the head of the department determines otherwise, not less than
10 percent of the amounts expended from the State Transportation Trust Fund shall be expended with small business concerns owned and controlled by socially and economically individuals as
defined by the Surface Transportation and Uniform Relocation Assistance
Act of 1987.
(b) In fulfilling this mandate, the department shall utilize every means available to it, including, but not limited to, goals and set- asides for competitive bidding and contracting only by, between, and among those firms which are certified by the department as socially and disadvantaged business enterprises and which
are pre-qualified as may be appropriate. It is the policy
of the state to meaningfully assist socially and economically disadvantaged business enterprises through a program that will provide
for the development of skills through business management training, as well as financial assistance in the form of bond guarantees, to primarily remedy the effects of past economic disparity....
The head of the department is authorized to expend up to 6 percent of the funds specified in subsection (1) which are designated to be expended on small business firms owned and operated by socially and economically disadvantaged individuals to conduct, by contract or otherwise, a construction management development program....
(b) On-the-job instruction will consist of, but is not limited to, setting up the job site; cash flow methods; project scheduling; quantity takeoffs; estimating; reading plans and specifications; department procedures on billing and payments; and bid preparation methods.
The head of the department is authorized to expend funds
on a bond guarantee program ....
(5) The department shall promulgate rules for implementing the directives contained in this section. (emphasis added)
The Surface Transportation and Uniform Relocation Assistance Act of 1987 (23 U.S.C. 101 et seq.) (STURRA), Public Law 100-17 at 101 Stat. 145 and
146 defines a "small business concern" by reference to Section 3 of the Small Business Act (15 U.S.C. 632). STURRA defines "socially and economically disadvantaged individuals" by reference to section 8(d) of the Small Business Act (15 U.S.C. 637[d]). Section 106 (c) of STURRA provides:
Disadvantaged Business Enterprises.- -
GENERAL RULE. --Except to the extent that the Secretary determines otherwise, not less than
10 percent of the amounts authorized to be appropriated under titles I and III of this Act or obligated under titles I, II, and III (other than section 203) of the Surface Transportation Assistance Act of 1982 after the date of the enactment of this Act shall be expended with small business concerns owned and controlled by
socially and economically disadvantaged individuals.
DEFINITIONS.--For purposes of this subsection---
SMALL BUSINESS CONCERN.--
The term "small business concern" has the meaning such term has under section 3 of the Small Business Act (15 U.S.C. 632); except that such term shall not include any concern or group of concerns controlled by the same socially and economically disadvantaged individual or individuals which has average annual gross receipts over the preceding 3 fiscal years in excess of $14,000,000 as adjusted by the Secretary for inflation.
SOCIALLY AND ECONOMICALLY DISADVANTAGED INDIVIDUALS. --The term "socially and economically disadvantaged individuals" has the meaning such term has under section 8(d) of the Small Business Act (15
U.S.C. 637(d) and relevant subcontracting regulations promulgated pursuant thereto; except that women shall be presumed to be socially and economically disadvantaged individuals for purposes of this subsection.
STURRA authorizes funds for construction of highways in Title I- Federal Aid Highway Act of 1987 (Sections 101-174). Section 106 funds provisions of title 23, United States Code.
The multiple chain of incorporation by reference of the definition of socially and economically disadvantaged" ends with a reference to "Native Americans" and no definition, in section 8 (d) of the Small Business Act (15
U.S.C. 637[d]), which provides:
Performance of contracts by
small business concerns; inclusion of required contract clause; subcontracting plans; contract eligibility; incentives; breach of contract; review; report to Congress.
It is the policy of the
United States that small business concerns, and small business concerns owned and controlled by socially and economically disadvantaged individuals, shall have the maximum practicable opportunity to participate in the performance of contracts let by any
Federal agency, including contacts and subcontracts for subsystems, assemblies, components, and related services for major systems ... the policy of the United States that its prime contractors establish procedures to ensure the timely payment of amounts due pursuant to the terms of their subcontracts with small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals.
The clause stated in paragraph
shall be included in all contracts let by any Federal agency except any contract which....
The clause required by paragraph (2) shall be as follows:
It is the policy of the United States that small business concerns and disadvantaged
individuals shall have the maximum practicable opportunity to participate in the performance of contracts let by any Federal Agency, including contracts and subcontracts for subsystems, assemblies, components and related services for major systems ...
The contractor hereby
agrees to carry out this policy in the awarding of subcontracts to the fullest extent consistent with the efficient performance of this contract...
(C) As used in this contract,
the term "small business concern" shall mean a small business as defined pursuant to section 3 of the Small Business Act [15 U.S.C.A. 632] and relevant regulations promulgated pursuant thereto. The term "small business concern owned and controlled by socially and economically disadvantaged individuals" shall mean a small business concern--
which is at least 51 per centum owned by one or more socially and economically disadvantaged individuals; or, in the case of any publicly owned
business, at least 51 per centum of the stock of which is owned by one or more socially and economically
disadvantaged individuals; and
whose management and daily business operations are controlled by one or more of such individuals.
The contractor shall presume that socially and economically disadvantaged individuals include Black Americans, Native Americans, Asian Pacific Americans, and other minorities, or any other individual found to be disadvantaged by the administration pursuant to section 8(a) of the Small Business Act [15 U.S.C.A., 637(a)]. (emphasis added).
The United States Department of Transportation has promulgated 49 CFR Part 23, which provides guidelines for state "recipients" who receive federal highway funds and implement minority business enterprise programs on federally funded projects. Relevant provisions of 49 C.F.R. Part 23 are:
Subpart D - Implementation of Section 105(f) of the Surface Transportation Assistance Act of 1982.
Section 23.61 Purpose.
The purpose of this subpart is to implement section 105(f) of the Surface Transportation
Assistance Act of 1982 (Pub. L. 97-
424) so that, except to the extent that the Secretary determines otherwise, not less than ten percent of the funds authorized by the Act for the programs listed in section 23.63 of this subpart is expended with small business concerns owned and controlled by socially and economically disadvantaged individuals.
Section 23.62 Definitions.
The following definitions amply to this subpart. Where these definitions are inconsistent with
the definitions of Section 23.5 of this part, these definitions control for all other purposes under this part.
"Act" means the Surface Transportation Assistance Act of 1982 (Pub.L. 97-424)
"Disadvantaged business" means a small business concern: (a) Which is at least 51 percent owned by one or more socially and economically disadvantaged individuals, or, in the case of any publicly owned business, at least 51 percent of the stock of which is owned by one or more socially and economically disadvantaged individuals; and (b) whose management and daily business
operations are controlled by one or more of the socially and economically disadvantaged individuals who own it.
"Small business concern" means a small business as defined pursuant to section 3 of the Small Business Act and relevant
promulgated pursuant thereto. "Socially and Economically disadvantaged individuals" means those individuals who are citizens of the United States (or lawfully admitted permanent residents) and who are Black Americans, Hispanic Americans, Native Americans, Asian- Pacific Americans, or Asian-Indian Americans and any other minorities or individuals found to be disadvantaged by the Small Business Administration pursuant to section 8(a) of the Small Business Act.
Recipients shall make a rebuttable presumption that individuals in the following groups are socially and economically disadvantaged.
Recipients also may determine, on a case-by-case basis, that individuals who are not a member of one of the following groups are socially and economically disadvantaged.
"Black Americans". which includes persons having origins in any of the Black racial groups of Africa;
"Hispanic Americans" which includes persons of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish culture or origin, regardless of race; "Native Americans", which
includes persons who are American Indians, Aleuts, or Native Hawaiians;
"Asian-Pacific Americans" which includes persons whose origins are from Japan, China, Taiwan, Korea, Vietnam, Laos,
Cambodia, the Philippines, Samoa, Guam, the U.S. Trust Territories of the Pacific, and the Northern Marianas; and
"Asian-Indian Americans", which includes persons whose
origins are from India, Pakistan and Bangladesh. (emphasis added)
Under the federal D.O.T. regulation, five groups are rebuttably presumed to be socially and economically disadvantaged. Of the five groups, "Native Americans" is described as persons ". . . who are American Indians (emphasis added). The proposed Department rule implements this definition. The Department has noted, similar to a federal study, that there were numerous problems with bona fide DBEs including deficiencies in working capital, an inability to meet bonding requirements, disability caused by an inadequate "track record," lack of awareness of bidding (opportunities, unfamiliarity with the bidding process, preselection before formal advertising processes and exercise of discretion by government's officers who disfavor minority businesses. The Department's program has a goal of benefiting only minority group members that are identified and regarded by the public at large as minorities and then only such minorities that are recognized as such by the particular minority community. Concern with identity with a minority group is based on the consideration that if an applicant hasn't been recognized as a member of a minority group, they will not have suffered social and economic disadvantage.
The proposed rule does not enlarge, modify, or contravene the federal and state law and regulations which it implements. The Department's effort, by promulgating the proposed rule, to assure that the DBE certification program only benefit Indians identified by the community at large as Indians and by the Indian community is within its responsibilities, powers and functions.
The petition of Coxwell challenges "late changes" to the EIS regarding the Department's conclusion that the proposed rule would impact on DBEs whose Indian tribes would no longer be eligible for certification. The original and only EIS stated "some impact upon Disadvantaged Business Enterprises may be evident, as those Indian tribes no longer recognized as DBEs will not be eligible for certification." This conclusion was not a "late change," but was determined during the drafting of the rule and was inadvertently left out of the published summary notice. It was included in the EIS presented contemporaneously to the JAPC.
A copy of the proposed rule, with the proposed definition change underlined and described in the "purpose and effect" section, was sent to each potentially affected Indian DBE prior to the public hearing, thereby affording actual notice of the proposed change to all substantially affected parties. The inadvertent omission of the actual conclusion from the published summary notice is not a deficiency so grave as to impair the fairness of the proceeding.
Coxwell's petition also contended that the EIS did not consider the "significant costs" to affected DBE contractors and subcontractors. Prior to publication of the proposed rule, the Department made a cost benefit analysis of such efforts in consideration of costs to affected DBEs. As part of this analysis, a review was made of the number and named of DBEs who would no longer be eligible for the program. Prior to the public hearing, the Minority Office Bureau Chief made calculations, based on the actual usage of the potentially affected DBEs during the past year on Department contracts, and reviewed the calculations with the Director of Administration. During the formulation of the rule, these same administrators made an analysis and determination that the cost on competition and the open market was not significant. Those determinations were reasonable and substantiated.
Although Petitioners challenge the convulsion made by the Department, and the lack of written calculations, the Department demonstrated that it made a
consideration of the economic factors and their impact, and that the EIS had not impaired the fairness of the rule making proceedings. The rulemaking proceedings provided a forum for full consideration of additionally asserted concerns. An economic impact statement need not be a "model of financial forecasting" where any deficiencies do not impair the fairness of the rule making proceedings. Humana, Inc. v. Department of Health, (Fla. 1st DCA 1985). "A rule will not be declared invalid merely because the economic impact statement may not be as complete as possible; . . . ." Health Care and Retirement v. Department of Health, 463 So.2d 1175 at 1178 (Fla. 1st DCA 1984). To declare a rule invalid solely on the basis that the EIS appears to be facially deficient, or is less than thorough, . . . would add a transparent technicality to the rule-making process and would exalt form over substance." Plantation Resident's Association, Inc. v School Board of Broward County, 424 So.2d 879 (Fla. 1st DCA 1982). See Florida-Texas Freight, Inc. v. Hawkins, 379 So.2d 944 (Fla. 1980)..
The rule provides economic factors to be considered by the Department in goal setting and set-aside determinations. It also provides a mechanism by which contractors who cannot obtain DBE participation may be excused by a demonstration that the contractor made "good faith efforts" to obtain DBE participation. These are set forth in Rule 14-78.003(1) and (2) as follows:
14-78.003 General Responsibilities.
In furtherance of the purpose of this rule chapter, the Department shall establish overall DBE goals for its entire DBE program. In setting the overall goals the Department shall consider the following factors:
the number and types of contracts to be awarded by the Department;
the number, capacity, and capabilities of certified DBEs likely to be available to compete for contracts let by the Department; and
To implement its DBE goal program the Department may:
(a) set aside contracts for competition only by, between, or among certified DBEs.
The total dollar amount of all projects set aside in any one fiscal year shall not exceed ten percent of the funds allocated for contracting for that fiscal year.
A contract shall not be set abide unless at least three potential eligible bidders can be identified.
In selecting contracts suitable for a set aside, the Department shall
following factors:
the number, capacity, and capabilities of potential eligible bidders;
the type of work required by the contract to be let; and
the estimated total dollar amount of the contract to be let.
* * *
In setting contract goals, the Department shall consider the following
factors:
the type of work required by the contract to be let;
the subcontracting opportunities in the contract to be let;
the estimated total dollar amount of the contract to be let; and
the number, capacity and capabilities of certified DBEs.
3. For all contracts for which DBE contract goals have been established, each bidder shall meet or exceed or demonstrate that it could not meet, despite its good
faith efforts, the contract goals set by the Department. The DBE participation information shall be submitted with the contractor's bid proposal. Award of the contract shall be conditioned upon submission of the DBE participation information with the bid proposal and upon satisfaction of the contract goals or, if the goals are not met, upon demonstrating that good faith efforts were made to meet the goals. Failure to satisfy these requirements shall result in a contractor's bid being deemed nonresponive and the bid being rejected.
In evaluating a contractor's good
faith efforts, the Department will consider:
1. Whether the contractor, at least seven days prior to the letting, provided written notice by certified mail, return receipt requested, or hand delivery, with receipt, to all certified DBEs which perform the type of work in the geographical area of the project, which the contractor intends to subcontact, advising the DBEs 1) of the specific work the contractor intends to subcontract; 2) that their interest in the contract is being solicited; and 3) how to obtain information about and review and inspect the contract plans and specifications.
ii. Whether the contractor provided interested DBEs assistance in reviewing the contract plans and specifications.
Whether the DBE goal was met by other bidders.
Whether the contractor submits all quotations received from DBEs, and for those quotations not accepted, an explanation of why the DBE will not be used during the course of the contract. Receipt of a lower quotation from a non-DBE will not in itself excuse a contractor's failure to meet contract goals.
Whether the contractor assisted interested DBEs in obtaining any required bonding, lines of credit, or insurance.
Whether the contractor elected to subcontract types of work that match the capabilities of solicited DBEs.
Whether the contractor's efforts
were merely pro forma and given all relevant circumstances, could not reasonably b expected to produce sufficient DBE participation to meet the goals.
Whether the contractor has on other contracts within the past six months utilized DBEs.
This list is not intended to be exclusive or exhaustive and the Department will look not only at the different kinds of efforts that the contractor has made but also the quality, quantity and intensity of these efforts.
Coxwell's petition attacks the constitutionality validity of the rule. See, Key Haven vs. Bd. of Trustees of Internal Imp., 427 So.2d 153 (Fla. 1982). It asserts that the proposed definition is an invalid delegation of legislative authority in that it would have a "discriminatory and prejudicial affect on all DBEs controlled by American Indians whose tribes are not formally recognized by the U.S. Bureau of Indian Affairs" alleging equal protection violations, citing the Fourteenth Amendment to the U.S. Constitution and to Article I, Section 2 of the Florida Constitution. The Florida Supreme Court, in analyzing an equal protection challenge, noted that Article I, Section 2 of the Florida Constitution functions similarly to the Fourteenth Amendment to the U.S. Constitution and has relied on federal court decisions in its analyses. Glusenkamp v. State, 391 So.2d 192 (Fla. 1980). The Supreme Court has found an "equal protection component" applicable to the federal government through the "due process clause" of the Fifth Amendment. Equal protection analysis in the Fifth Amendment area is the same as that under the Fourteenth Amendment.
Buckley v. Valeo, 424 US 1, 93, 46 L.Ed.2d 659 (1976), footnoted in Deleware
Tribal Business Comm. vs. Weeks, 430 U.S. 73 448, 65 L.Ed.2d 902, 100 S.Ct. 2758 (1980), the Supreme Court analyzed a Fifth Amendment equal protection challenge to a statute which implemented a Minority Business Enterprise program (MBE) under the Public Works Employment Act. The Public Works Act (PWA) was, in the main, identical in its provisions to the underlying legislation and programs implemented by the Department's proposed rule. The PWA required MBE participation by state and local governments on federally funded local public work projects. MBEs were to be 51% owned by U.S. citizens who are "Negroes, Spanish-Speaking, Orientals, Indians, Eskimos and Aleuts". In determining whether the statute was in violation of equal protection, the Supreme Court looked at 1) whether the objectives of the legislation were within Congress' power, and 2) whether the means were appropriate. In satisfying itself as to the first criteria, the Court determined that Congress had evidence of ". . . the existence and maintenance of barriers to competitive access which had their roots in racial and ethnic discrimination . . . ." Id at 65 L.Ed.2d 924. In reviewing the "means" used to enact racial and ethnic classifications without unconstitutionally violating the equal protection component, the Court scrutinized whether the racial criteria was ". . . narrowly tailored to the achievement of that goal" (remedying the effects of discrimination) (emphasis added). Id. at 65 L.Ed.2d 925. As to the challenge that the PWA was "under- inclusive" (the effect alleged by the Coxwell petition), the Court found it permissible for the MBE program to be limited to certain Minorities, even though
other minorities may have also suffered the effects of discrimination. Id. at 65 L.Ed.2d 929.
In the instant challenge, the Department has demonstrated valid concerns that the objective of the proposed rule, to benefit bona fide Indians, requires a narrow tailoring of the rule. Narrowly tailoring legislation which benefits certain minority groups and not others enhances the constitutionality of the measure.
Even examining the proposed amendment under a rigid scrutiny standard applied to racial classification challenges, the Department has demonstrated a compelling interest in limiting the affirmative action benefits to those persons are in fact identifiable as Indians. The Department also demonstrated the need for effective standards to be included in the rule in order to effectively implement the DBE program for, Indian's. Palmore v. Sidot, 466 U.S. 422, 80 L.Ed.2d 421 (1984), held unconstitutional a Florida statute based on the Court's consideration that private racial biases and prejudices were being impermissibly implemented in the challenged statute. No such racial prejudice has been alleged or shown in the proposed rule.
Indians are not similarly situated as to other races or classes. It is well settled that federal regulation of Indian tribes has been determined not to be based upon impermissible racial classifications. "[C]lassifications expressly singling out Indian tribes as subjects of legislation are expressly provided for in the Constitution . . . United States vs. Antelope, 430 U.S. 641,
5 L.Ed.2d 701 at 706 (1977) (Crimes committed by enrolled Indians on Indian reservation subject to federal jurisdiction).
Where the Federal government sought to distribute nine million dollars to two federally recognized tribes, it was not a violation of equal protection to preclude non-enrolled descendants in the distribution. Delaware Tribal Business Comm. v. Weeks, 430 U.S. 73, 51 L.Ed.2d 173, (1977). The Supreme Court concluded that awarding benefits only to those Indians federally recognized was rationally supported by the concerns to avoid delay, administrative difficulty, and potentially unmeritious claims. In Simmons v. Eagle Seelatsee, 244 F. Supp. 808 (United States District Court, E.D. Washington, S.D. 1965) the court noted the government's right ". . . to classify Indians according to their percentages of Indian blood," and listed, regulations applying only to Indians.
The other test applied by the Florida Supreme Court for determining whether a statutory classification denies equal protection, under Article I, section 2 of the Florida Constitution, and the Fourteenth Amendment to the U.S. Constitution, is "whether the classification made by the Legislature . . . is unreasonable." Gammon v. Cobb, 335 So.2d 261 (Fla. 1976). ". . . [I]n order for a statutory, classification not to deny equal protection, it must rest on some difference that bears a just and reasonable relation to the statute in respect to which the classification is proposed;" Id. at 264. The equal protection clause is violated only when the classification made is arbitrary and unreasonable. Daniels v. O'Connor, 243 So.2d 144 (Fla. 1971). In determining whether a statute may limit eligibility for benefits to only certain classifications of persons, the Florida Supreme Court applied the same test as the Fullilove court, i.e., that ". . . the Constitution does not require the legislature ,to address the entirety of any problem at one time . . . ." State v. Champe, 373 So.2d 874 (Fla. 1978)
25 CFR, Part 83, establishes procedures by which any unrecognized Indian groups in the U.S. may currently seek acknowledgment of the group's
existence as an Indian tribe. The scope of the regulation covers American Indian groups indigenous to the continental United States ". . . which are ethnically and culturally identifiable . . ." (Sec. 83.3). The tribes so recognized are published in the federal register. Incorporation of federal acknowledgment provides valid criteria by which the Department may define American Indians.
ORDER
It is ORDERED that Petitioner's challenge to Respondent's proposed amendment to Rule 14-78.002(1)(d), Florida Administrative Code, is denied.
DONE and ORDERED this 13th day of January, 1989, in Tallahassee, Florida.
JAMES E. BRADWELL
Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32301
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 13th day of January, 1989.
COPIES FURNISHED:
Randal L. Schecter, Esquire Callahan, Schecter & Barth
433 North Magnolia Drive Tallahassee, Florida 32308
Judith G. Rice, Esquire Brice Hargrove, Esquire Thomas Cassidy, III, Esquire Haydon Burns Building, MS-58 Tallahassee, Florida 32399
Albert C. Penson, Esquire Mary Piccard, Esquire 1004 DeSoto Drive
Tallahassee, Florida 32302
Kaye H. Henderson, Secretary Department of Transportation Haydon Burns Building
605 Suwannee Street
Tallahassee, Florida 32399-0450
Thomas H. Bateman, III General Counsel
Department of Transportation Haydon Burns Building
605 Suwannee Street
Tallahassee, Florida 32399-0450
Liz Cloud, Chief
Bureau of Administrative Code 1802 The Capitol
Tallahassee, Florida 32399-025O
Carroll Webb, Executive Director Administrative Procedures Committee
120 Holland Building Tallahassee, Florida 32399-1300
NOTICE OF RIGHT TO JUDICIAL REVIEW
A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68. FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.
| Issue Date | Proceedings |
|---|---|
| Jan. 13, 1989 | Final Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jan. 13, 1989 | DOAH Final Order | Respondent's proposed rule amendment is invalid. |
ACS-ASSOCIATED CONTRACTUAL SERVICES, INC. vs DEPARTMENT OF TRANSPORTATION, 88-002959RP (1988)
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THE CONE CORPORATION vs DEPARTMENT OF TRANSPORTATION, 88-002959RP (1988)
EBY CONSTRUCTION COMPANY, INC. vs DEPARTMENT OF TRANSPORTATION, 88-002959RP (1988)
DICKERSON FLORIDA, INC. vs. DEPARTMENT OF TRANSPORTATION, 88-002959RP (1988)
