Within hours of taking office, President Trump executed two executive orders aimed at rescinding former President Biden’s Diversity, Equity, and Inclusion (DEI)-focused orders. Trump’s orders reached beyond actions by the Biden administration and sought to rescind the equal employment opportunity executive order from 1965. Despite these sweeping steps, Trump’s executive orders cannot eliminate the U.S. Department of Transportation’s (DOT) Disadvantaged Business Enterprise (DBE) program because it originated via Congress.

The DBE program was enacted by Congress in 1983 and has been reauthorized and amended since — always by Congress. It was most recently reauthorized by that legislative body under the Infrastructure Investment and Jobs Act (also known as the Bipartisan Infrastructure Law) in 2021. The DBE program’s primary goal is to remedy ongoing discrimination and its effects in DOT-funded projects.

Some people may associate the DBE program with DEI, which is understandable, given that nearly every business certified as a DBE must be at least 51 percent owned by a woman or a member of a minority group. However, DOT has recently moved away from using race or gender as the basis for DBE certification. Firms owned by nonminority males can become certified if they can show, on a case-by-case basis, they are socially and economically disadvantaged. Likewise, a minority-owned or woman-owned business is not presumed to be socioeconomically disadvantaged merely on that basis. The owners must show they have actually experienced discrimination. Thus, it could be argued the DBE program does not operate under DEI initiatives targeted by Trump’s executive orders.

Even if one were to argue the DBE program falls under the purview of DEI, Trump’s orders cannot eliminate the program because presidents lack the authority to override congressional laws through executive orders. Thus, so long as the Infrastructure Investment and Jobs Act is law, the DBE program is as well. Congress could elect not to reauthorize the law, but that would still require an act of Congress, not a presidential executive order. In fact, Trump’s executive orders expressly state they “shall be implemented consistent with applicable law and subject to the availability of appropriations.” Thus, because the DBE program originated in a law enacted by Congress, the executive order cannot erase it.

While it is not addressed by Trump’s executive order, the DBE program is threatened by an ongoing lawsuit, Mid-America Milling Company, LLC, et al. v. United States Department of Transportation, in which the plaintiffs have challenged DOT’s use of rebuttable presumption to determine “socially disadvantaged” applicants. DOT regulations provide that African Americans, Hispanics, Native Americans, Asian-Pacific and Subcontinent Asian Americans, and women are presumed to be socioeconomically disadvantaged (known as the “rebuttable presumption”). On Sept. 23, 2024, however, a U.S. district court in the Mid-America case ruled the rebuttable presumption of social disadvantage in the DBE program is unconstitutional, and issued an injunction that bars the use of the rebuttable presumption on DBE projects — but only ones the plaintiffs in that case would bid on. Thus, the court limited its ruling to the two contractor plaintiffs (located in the Midwest), and did not order a nationwide injunction. This ruling was the impetus for DOT to move away from race and gender solely as the basis for certification as a DBE. Although the Mid-America decision is ostensibly limited, its effects are spreading across the nation.

It is also worthwhile to note that the DBE program is only the federal law for certification of disadvantaged businesses. Most if not all states have their own certification program (enacted by their legislatures), which applies outside of the federal DBE program certification. Oregon has four separate state certifications; Washington has six that vary from women to minority to small business certifications. At this point, these states have not taken steps to prevent their agencies from continuing to pursue some goal of participation in their state-funded projects.

The bottom line is: The DBE program and the state equivalent M/WBE programs are not apt to disappear anytime soon. Arguably, the DBE program does not fall under the DEI umbrella, because most certification agencies have already removed the rebuttable presumption of socioeconomic discrimination based solely on race or gender, and instead require applicants to provide specific instances of discrimination.

Realistically, however, the policies the Trump administration relies on to remove DEI initiatives from the federal government may still have an impact on the long-term application of the DBE program. For example, we may reasonably expect that DBE goals could be significantly reduced or removed altogether from future federally funded projects. On the other hand, one could also envision Oregon and Washington moving to strengthen their respective state M/WBE goals and efforts over the next four years — to which federal agencies could respond by withholding federal funding for state-specific programs. Only time — and further government action — will tell.

Paige Spratt is a shareholder in the Vancouver, Washington, office of Schwabe, Williamson & Wyatt. Contact her at 360-905-1433 or pspratt@schwabe.com.

This column is intended to provide readers with general information and not legal advice. Consult professional counsel for help regarding specific situations.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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On Jan. 25, President Biden signed Executive Order 14005 (the “Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers”), which modified the Buy American Act (BAA) to require the use of more American-made components on government projects.

2021 amendments to the BAA

Under the 2021 version of the BAA, contractors must certify “that each end product … is a domestic end product …” The definition of “domestic end product” varies based on whether it’s “wholly or predominately made of iron or steel or a combination of both.” A “domestic end product” that is not wholly or predominately made of iron or steel, must be provided so that “the cost of its components mined, produced or manufactured in the United States exceeds 55 percent of the cost of all its components.” This 55 percent “cost” is an increase from 50 percent under the prior version of the act.

A “domestic end product” that is “wholly or predominately made of iron or steel” must be provided so that the cost “of foreign iron and steel constitutes less than 5 percent of the cost of all the components used in the end product.” Thus, to comply with the BAA, a predominately steel end product must be 95 percent mined, melted, and manufactured in the United States. This is a significant increase from the 50 percent requirement required under the prior version of the act.

To be deemed a “wholly or predominately” steel or iron (or combination thereof) end product, “the cost of the iron and steel content exceeds 50 percent of the total cost of all its components” – including “the cost of iron and steel is the cost of the iron or steel mill products (such as bar, billet, slab, wire, plate, or sheet)” but excluding commercially available off-the shelf fasteners.

Notably, the term “component” means “an article, material or supply incorporated directly into an end product.” This is different from a “fastener” (for which there are some exceptions), which is defined as “a hardware device that mechanically joins or affixes two or more objects together; examples of fasteners are nuts, bolts, pins, rivets, nails, clips, and screws.” Contractors should also be aware that there are exceptions for “commercially available off-the-shelf” products, which are essentially (and oversimplified) those products sold in the commercial marketplace.

Proposed changes to the BAA

On July 30, the Federal Acquisition Regulatory Council (FAR Council) proposed additional BAA amendments that would further increase the domestic component requirement, increase price preferences for “critical” components, and implement reporting requirements.

If adopted without revisions, the amendments would keep the “cost of component” threshold but immediately increase the 55 percent requirement to 60 percent. Then, over several years, that requirement would increase to 65 percent (in 2024) and eventually 75 percent (in 2029). The FAR Council proposes some exceptions to implementation of this rule, but contractors should gear their operations toward complying with these requirements on federal projects.

The amendments increase the price preference for “critical” components and products. For end products designated as “critical,” contractors will be given price preferences where those end products are domestic. The government is still developing this critical components list. Still, contractors should stay informed of which products and components receive this preferential treatment in making decisions regarding future operations and strategies if trying to perform more public work.

The amendments further require the contractor, within 15 days of award, to disclose “the amount of domestic content in each critical item, and the amount of domestic content in each domestic end product containing a critical component …” This change will increase the administrative burden on government contractors and require them to provide the “domestic content” within a limited time period.

While these changes have not yet been implemented, government contractors should plan accordingly when looking and planning for future government projects.

Buy American vs. Buy America

Don’t confuse the Buy American Act with the Buy America Act. The Buy American Act applies to federal government procurements, including construction of federal projects such as dams, federal buildings or jetties. In contrast, the Buy America Act applies to federally funded transportation projects that are often procured at state or local government levels. Under the Buy America Act, all steel and/or iron components must be mined, melted and manufactured in the United States.

Contractors with questions regarding the Buy American Act (or even the Buy America Act) should consult with an attorney experienced in government contracting issues.

Paige Spratt is a real estate and construction attorney with Schwabe, Williamson & Wyatt. Contact her at 360-905-1433 or pspratt@schwabe.com.

Note: This article is intended to provide readers with general information and not legal advice. For specific situations, consult with competent counsel.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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As most people are undoubtedly aware, the construction industry has seen material prices escalate astronomically over the past few months. Some specialty lumber prices have soared upwards of 6,000 percent. The cost of a sheet of plywood is double what it was even six months ago.

Generally, contractors assume the risk of material prices when they sign a lump sum or GMP contract unless there is a material escalation clause included in the contract terms. Thus, many contractors are likely wondering what their options are to try and get paid for some of these price increases, especially if they are mid-project and do not have a material escalation clause in their contract. Consider the following guidance on mitigating damages arising from these significant price increases:

Engage in open dialogue with the owner early

Contractors that are facing significant material price escalation on projects, regardless of whether there is a material escalation provision, should immediately notify the owner to communicate the cost increase issues. There is no substitute for a good candid conversation about all project issues, especially when they are about significant price increases. Generally, owners have been receptive to discussing the material escalation issues facing the industry as a whole and generally understand it is not the fault of their contractors. Open and candid dialogue with a project owner can allow you to resolve and mitigate issues before they significantly impact your project. Demonstrating to the owner that you are doing everything reasonably possible to procure the materials may also serve to redirect the owner’s attention to the distributors and suppliers that are closer to the source of the problem.

Evaluate mitigation opportunities

Oftentimes there are opportunities for the contractor to mitigate damages relating to material escalation (e.g., proposing different materials, purchasing in bulk, etc.). On a recent large project in Portland, the owner and contractor were able to negotiate use of additional storage/laydown areas so all materials could be purchased by the contractor in advance and stored for later use. In fact, the owner agreed to pay for the additional area that was needed to store the materials. In other instances, it may be cost-effective to secure additional off-site storage and buy materials in bulk. These options to mitigate damages should be brought forward and discussed with the owner to see if a reasonable solution can be reached to mitigate damages to the contractor and the project – there are also implications on payment and insurance that need to be considered if you are storing materials. And a reasonable damage mitigation offer that is rejected by the owner will be a helpful data point in the unfortunate event a claim arises in the future.

Address material escalation issues before contracting

If you are negotiating a private project or bidding on a public works project, ask to include a material escalation provision in the contract terms (either through private negotiations or asking the agency to modify the IFB during the public solicitation process). Most contracts do not have a standard material escalation clause, so contractors need to specifically negotiate these. Owners may benefit from these clauses because contractors would be less likely to include large contingencies to account for the risk of material escalations. These material escalation contract terms can be limited to a certain type of material (e.g., the Oregon Department of Transportation specifications contain a specific provision for steel price increases) or all materials, and limited to certain durations of the contract. An example material escalation clause is:

Owner acknowledges that some of the materials that are to be incorporated into the Project have volatile prices (e.g., the prices of wood, steel, aluminum, etc.) that are changing day-to day or even hour-to-hour. Accordingly, Contractor cannot guarantee material prices for any amount of time during the course of this Contract. If material prices deviate more than ___ percent from the time of execution of this Contract to material procurement, Contractor shall be entitled to a Change Order to compensate Contractor for any material price escalation after this Contract is executed.

If a contractor is faced with an existing contract that does not contain a material escalation clause and a difficult owner that is unwilling to work with the contractor to mitigate the damages, and assuming there are no other contract provisions that would entitle the contractor to additional compensation, then the contractor may be able to argue that the significant cost increase caused the contract to become commercially impracticable or impossible, or that there was a unilateral or mutual mistake at that time of contracting.

Depending on the timing of the project and date of the contract, it is also possible that a clause targeted to COVID-19 may provide relief to the contractor. Likewise, the underlying cause of the material shortage or price increase may arguably trigger a contract’s force majeure provision. These claims, however, can be very difficult to prove and any contractor contemplating such arguments should consult with its attorney.

Material escalation is impacting the entire construction industry and all projects at various levels. Contractors should be proactively addressing material cost increases before they become significant problems and cause an otherwise great project to turn into a distressed project.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the authors and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. None of the authors nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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In July 2020, Oregon OSHA re-proposed two new permanent rules that have been overshadowed by the recent infectious disease temporary rules. These proposed permanent rules, however, should not be overlooked because they may impact your business.

The first rule, the “re-proposed” Increase of Certain Minimum and Maximum Penalties for Alleged Violations, proposes to increase the minimum and maximum amounts for OSHA violations. This rule was proposed to align with similar standards that the federal OSHA had implemented in November 2015, requiring increases of minimum and maximum penalties for violations up to 78 percent. Federal OSHA, however, had not made adjustments since 1990. In reaction to these new federal regulations, Oregon OSHA made initial adjustments to its penalties in 2017; they became effective in 2018.

As drafted, the rule (which incorporates changes to OAR 437-001-0145) will increase minimums for serious violations depending on the probability of risk of physical harm or death. Most concerning is that the new rule gives the OSHA administrator the authority “at his or her discretion, to assess a penalty of between $100 and $13,538 for any serious violation, between $200 and $135,382 for any repeated violation, and between $9,472 and $135,382 for any willful violation after considering the facts.” Depending on the type of violation and whether Oregon OSHA determines it to be willful could result in over a 10,000 percent increase from the current discretionary penalty. There are several other changes, clarifications and “technical adjustments,” which can be viewed on Oregon OSHA’s website.

The second rule, the “re-proposed” Amendments in General Administrative Rules to Clarify Employer’s Responsibilities, proposes to add two definitions to OAR Chapter 437, the rules for the Oregon Safe Employment Act, and further change the law to provide “how Oregon OSHA assesses an employer’s knowledge of a violation, and when an employer is and is not responsible for a violation …”

The proposed rule, modifying OAR 437-001-0015, would include a new definition for “reasonable diligence,” which is broadly defined as “a standard of care where the employer identifies and anticipates hazards and violations that could occur in the workplace and then takes measures through the use of devices, safeguards, rules, procedures, or other methods that eliminate or safely control such hazards or prevent such violations.” Opponents criticize the definition as an impossible standard. Employers could never show compliance regardless of how diligently they act. Many even argue that the standard will make employers strictly liable and shift the burden of proof from the agency to the employer for any violation.

The rule further defines “unpreventable employee misconduct” as:

“where an employee intentionally violates or does not use the devices, safeguards, rules, procedures or other methods provided, developed and implemented by the employer to safely accomplish the work; and does so in a manner that the employer could not have prevented. To establish unpreventable employee misconduct, the employer must demonstrate all of the following elements:

“(a) The employer had devices, safeguards, rules, procedures, or other methods in place to eliminate or safely control the hazard or prevent the violation.

“(b) The employer had effectively communicated to employees the methods established under (a).

“(c) The employer had provided employees with the necessary training, equipment and materials to use and comply with the methods established under (a).

“(d) The employer had developed and implemented measures that identified any violation of the methods established under (a).

“(e) The employer had taken effective correction action when a violation was identified under (d).”

Unpreventable employee misconduct is one of the few claims employers can use to defend against an alleged safety violation. Critics argue that the additions, however, essentially render the defense unusable. Essentially, the employer must show that it identified all instances of employee misconduct (violations) and took “effective” corrective action when the violation was known. In most instances, however, the employer has safeguards and training in place and is unaware of employee violations – if the employer were aware of the violation, it would have presumably corrected it and, thus, there would be no violation.

There are additional changes related to this rule that should be viewed on Oregon OSHA’s website. The public comment period to both rule changes closed on Oct. 30, 2020. The permanent rules have not yet been adopted, but should become effective in the near future. Be sure to consult counsel to determine how these rule changes specifically affect your business.

Paige Spratt is a real estate and construction attorney with Schwabe, Williamson & Wyatt. Contact her at 360-905-1433 or pspratt@schwabe.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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On Dec. 13, a Thurston County jury awarded $57.2 million in liquidated damages to the Washington State Department of Transportation (WSDOT) to be paid by Seattle Tunnel Partners (STP), while denying STP’s $480 million counterclaim for delay damages.

The claim arose when the massive boring machine – “Big Bertha” – shut down unexpectedly during the State Route 99 tunnel project in Seattle. The machine hit a steel pipe after boring only 1,000 feet of the 1.2-mile-long tunnel under the waterfront.

STP (a joint venture between New York City-based Dragados USA and Los Angeles-based Tutor Perini Corp.) claimed that the steel pipe was an unforeseen site condition that damaged Big Bertha, resulting in a delay of nearly three years. WSDOT claimed that the delay was mostly caused by Big Bertha’s poor design.

Ultimately, the jury agreed with WSDOT and awarded it damages for the project schedule delay exceeding 730 days. STP had been granted some additional contract time during the work delay, but 730 days remained unexcused.

STP has been embroiled in this battle with WSDOT since 2015, when the agency initially filed the lawsuit for breach of contract relating to the tunneling stoppage that occurred in 2013. The primary issue was whether STP’s delay in completing the project was an excusable one caused by a differing site condition – the steel pipe. After the parties spent four years litigating, a jury determined that STP’s delay was not excusable and that it was liable for liquidated damages associated with the delay.

While STP will likely appeal the jury’s verdict, it is fighting an uphill battle. Even good appeals have only a 30 percent chance of overturning the decision at the trial court. Verdicts like these should serve as a reminder to contractors, subcontractors and designers that litigation can be unpredictable and costly. The verdict should also remind us to pay close attention to some of the key contract provisions relating to unforeseen site conditions and delays.

The unforeseen site conditions clause

Contractors should always ensure that they have an unforeseen site conditions clause (including physical subsurface conditions) included in their contracts. Unless there is a contract provision allocating otherwise, the general contractor bears the risk of costs and impact related to an unforeseen subsurface condition – many contractors do not realize this risk. While many public contracts contain an unforeseen site conditions clause, most private contracts do not.

There are many large private projects happening in the Pacific Northwest that likely do not contain an unforeseen site conditions clause. Thus, if a general contractor is working under a contract without an unforeseen site conditions clause and, for example, uncovers a large underground oil tank that was not disclosed on the drawings or as part of the geotechnical report, the general contractor could be on the hook to pay not only for the costs to remove the tank, but also for the impacts associated with the delay. As you can imagine, the environmental impact alone in this example would be substantial. In STP’s case, there was an issue as to whether Big Bertha’s breakdown and the ultimate project delay were actually caused by an unforeseen site condition. If STP had proved that the sole cause of delay was the steel pipe as an unforeseen site condition, WSDOT would have likely been on the hook for the cost and impact of the delay because of the unforeseen site conditions clause.

The consequential and liquidated damages clause

Most contracts, public and private, contain a waiver of “consequential” damages, while specifying “liquidated” damages for delay. Consequential damages are those indirect damages to one party caused by the other party’s breach of contract. For example, if a contractor is late delivering a casino, the contractor could be on the hook to pay for the lost profits that the casino owner could have made had the casino opened on time. In this example, the contractor would likely want the owner to waive consequential damages.

Liquidated damages are to compensate one party (usually the project owner) for the actual damages that it incurs as a result of the delay. Providing for liquidated damages (in lieu of unknown, indirect damages) is a good option for both owners and contractors on many projects.

Liquidated damages clauses should clearly define when the damages will begin to apply. The parties should always agree upon the project schedule (showing the project’s critical path) and clearly state the assumptions supporting the durations and contract time.

The amount of liquidated damages should also be reasonable. Liquidated damages are not a penalty but are intended to compensate a party for its actual damages associated with the delay, including financing costs, overhead, etc. The rate should be specifically negotiated and agreed to. The clause should also provide that it is the exclusive remedy for delay.

Notably, without a liquidated damages provision, STP could have been on the hook for a lot more than $57.2 million. Consider all of the potential indirect costs – lost profits from tolling, WSDOT’s administrative costs for 730 days, etc. WSDOT’s consequential damages could have easily eclipsed the liquidated damages that it was ultimately awarded. A liquidated damages clause provides a known risk to the contractor.

Be sure to consult your attorney if you’re planning to propose any changes to the provisions of your contract so that he or she can evaluate the overall impact to the contract. Additionally, it is never a bad idea to have an attorney review your contracts every couple of years to ensure that they are up to date with the ever-changing law and evaluate any exposure that your company might be facing.

Paige Spratt is a real estate and construction attorney for Schwabe, Williamson & Wyatt. Contact her at 360-905-1433 or pspratt@schwabe.com.

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Less than two months ago, in Nova Contracting Inc. v. City of Olympia, the Washington (state) Supreme Court reaffirmed its long-held requirement that construction contractors must strictly comply with written notice requirements in construction contracts; otherwise, they waive their claim for additional compensation – even if the owner had actual knowledge of the change.

This is nothing new for those who have been working in the Washington construction industry. For the past 15 years (since Mike M. Johnson Inc. v. County of Spokane in 2003), Washington courts have required strict compliance with notice requirements. The Nova court, however, took it a step further by extending the strict compliance standard to apply to expectancy and consequential damages, and not just the cost to perform the additional work. This creates numerous issues, including mountains of paperwork and the requirement that contractors give notice before they even realize there is a claim.

In Nova, the general contractor (Nova) was awarded a contract by the city of Olympia to replace a deteriorating culvert along a creek. The contract incorporated the Washington State Department of Transportation standard specifications (in fact, many Washington public agencies incorporate the WSDOT standard specifications). Under the contract, Nova had 45 days from the notice to proceed to complete the work. Before it had even been authorized to proceed, however, Nova provided submittals to the city for approval – Nova was not authorized to mobilize on site without its submittals being approved.

On Aug. 11, 2013, the city issued a notice to proceed letter to Nova (which started the 45-day countdown to project completion). The following week, the city denied Nova’s submittals. Nova amended and reissued its submittals to the city, which were again denied. On Sept. 4, the city issued a notice of default letter to Nova demanding that Nova cure its performance of the work, including provision of sufficient submittals. Upon receipt of the notice of default, Nova reissued its third batch of submittals and mobilized on-site. Shortly thereafter, the city issued a stop work notice.

On Sept. 9, 2013, Nova filed its formal written notice of protest under the WSDOT standard specifications. On Sept. 18, Nova informed the city that it could not complete the project within the 45-day deadline. Thus, on Sept. 24, the city terminated Nova’s contract for default. Nova filed a written protest against the city’s notice of default and filed a claim for damages on Sept. 30.

WSDOT’s specification section 1-04.5 (the pertinent provision) provides that if the contractor “disagree(s) with anything required in a change order, another written order, or an oral order from the (city) engineer, including any direction, instruction, or determination by the engineer, the contractor shall … immediately give a signed written notice of protest to the project engineer.” If the contractor fails to give notice, it “waives any additional entitlement and accepts from the engineer any written or oral order (including directions, instructions, interpretations, and determinations).”

The court held that, because Nova failed to give immediate written notice after the city rejected its submittals, Nova waived its claim for any damages. Thus, even though Nova probably did not realize that it was being damaged after the first round of submittals was rejected, it should have nevertheless “immediately” notified the city in writing of the protest.

This holding creates an even bigger mountain of paperwork for contractors and owners alike. Contractors working in Washington need to be even more diligent in making sure they strictly comply with the notice requirements and give immediate notice “in writing” for not just claims but also minor disagreements, such as rejections of submittals. Essentially, contractors need to double down on their efforts to make sure that they can get paid for changed work.

Unlike their counterparts in Washington, Oregon courts have refused to strictly enforce construction contract notice provisions. Instead, Oregon courts will hold that actual notice is adequate when the written notice of protest is “a mere formality.” Yet, I have seen instances where owners and developers in Oregon try to strictly enforce notice requirements by rejecting change orders because the contractor did not submit a “formal” notice. Recently, I saw a contracting manager for an Oregon public agency reject a proposed change order because it was submitted one hour and three minutes late. It could be just a matter of time before Oregon looks at adopting a similar standard as Washington.

Bottom line: all contractors, regardless of which state they work in, should thoroughly review and understand the notice provisions of their contracts. Private contracts should try to negotiate more workable notice provisions. If questions arise regarding the logistics of the notice provision (sometimes, it is impossible to comply with a very harsh notice requirement), contractors should consult with their attorneys.

Paige Spratt is a real estate and construction attorney for Schwabe, Williamson & Wyatt. She has a bachelor’s degree in construction management, and professional experience as a construction manager. Contact her at 360-905-1433 or pspratt@schwabe.com.

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In June I wrote a column for the 91��Ƶ about the decision by the Washington State Department of Transportation to exclude non-minority woman-owned businesses to meet Disadvantaged Business Enterprise (DBE) goals on federally funded contracts.

As reported, on June 1, WSDOT implemented a waiver from the United States Department of Transportation (USDOT) that excluded from consideration non-minority woman-owned businesses from meeting DBE contract goals on WSDOT projects. WSDOT requested the waiver in 2014 because a study performed by BBC Research and Consulting (BBC) concluded that non-minority woman-owned businesses did not face disparities in performing work on WSDOT projects.

Yet, less than four months later, in a Sept. 13 letter, WSDOT asked USDOT to rescind the waiver because a new study showed that non-minority woman-owned businesses were actually facing disparities on WSDOT contracts. The initial DBE study analyzed “data from federal fiscal years 2009 through 2011 and demonstrated that non-minority women-owned DBEs did not face substantial disparity. Based on the results of this study, and in order to maintain a legally defensible and narrowly tailored DBE program, WSDOT requested a waiver to remove non-minority woman-owned DBEs from the race and gender-conscious component of the DBE Program.”

In April 2016, WSDOT hired Colette Holt & Associates (CHA) to conduct an updated “DBE Program Disparity Study.” This study analyzed contracts between federal fiscal years 2012 through 2015. CHA concluded that “the survey results strongly suggest that minorities and women continue to suffer discriminatory barriers to full and fair access to contracts and associated subcontracts.” In addition, the study published the following findings from their anecdotal survey, in which 78 minority- and women-owned firms participated:

• 64.10 percent answered yes to the question “Do you experience barriers to contracting opportunities based on race and/or gender?”
• 64.10 percent answered yes to the question “Do you have access to informal and formal networking information and have the same access to the same information as other non-DBE firms in your industry?”
• 56.41 percent answered yes to the question “Is your competency questioned based on your race and/or gender?”
• 11.6 percent reported they have unequal access to insurance; 16.67 percent reported they have unequal access to surety bonding services; and 29.49 percent reported they have unequal access to financing and business capital.
• 65.38 percent reported they are solicited for WSDOT or government projects with DBE goals.
• 56.41 percent reported they are solicited for private projects and projects without DBE goals.
• 48.72 percent stated that WSDOT and/or prime contracts pay them promptly.
• 48.72 percent reported they experience job-related sexual or racial harassment or stereotyping.
• 24.36 percent stated they experience discrimination from suppliers or subcontractors because of their race and/or gender.

40.26 percent had accessed some type of supportive services or other program to assist DBEs and small firms: 7.79 percent had participated in financing or loan programs; 9.09 percent had accessed bonding support programs; 12.99 percent had participated in a mentor-protégé program or relationship; 18.18 percent had received support services such as assistance with marketing, estimating, information technology, etc.; and 20.78 percent had joint ventured with another firm.

BBC’s study (which had been heavily criticized by many organizations as being fundamentally flawed) analyzed contracts between federal fiscal years 2009 and 2011, but reached a wholly different conclusion – non-minority woman-owned businesses should be excluded from satisfying DBE goals on WSDOT projects. The waiver was valid until 2020 and allowed WSDOT to extend it at its request or “until it is no longer necessary.” The waiver apparently became no longer necessary within just a few months after it was implemented.

Although the CHA study comes just five years after BBC performed its study, WSDOT claims that the waiver to preclude non-minority woman-owned businesses from meeting DBE goals “is no longer reflective of current marketplace conditions in Washington State.” WSDOT has asked USDOT to expedite the handling of the rescission so that non-minority woman-owned businesses can be used to meet DBE goals on WSDOT contracts.

Since the waiver has not been rescinded by USDOT, the waiver is still in effect for WSDOT projects that receive federal funding. Contractors should carefully review the language in the contracts that they are bidding to ensure that they are complying with the DBE requirements.

Paige Spratt is a construction lawyer for Schwabe, Williamson & Wyatt. She has a bachelor’s degree in construction management, and professional experience as a construction manager. Contact her at 360-905-1433 or pspratt@schwabe.com.

The post OP-ED: Washington state agency retracts waiver within four months appeared first on Daily Journal of Commerce.

As of June 1, the Washington State Department of Transportation (WSDOT) is excluding non-minority woman-owned businesses to meet Disadvantage Business Enterprise (DBE) goals on federally funded contracts.

In 2014, WSDOT submitted its initial waiver request to the United States Department of Transportation (USDOT) proposing that WSDOT be allowed to “set federal-aid highway program DBE contract goals that would exclude from consideration toward meeting the goal DBEs owned by non-minority women for whom no disparities between availability and utilization were found.”

As a part of its waiver request, WSDOT submitted a 2012 DBE Program Disparity Study conducted by BBC Research & Consulting that analyzed data from 2009 through 2011. The study, which has drawn criticism for being fundamentally flawed, concluded that non-minority woman-owned businesses do not face disparities in performing work on WSDOT projects. The waiver is valid until 2020 and may be extended at WSDOT’s request or “until it is no longer necessary.”

For state highway departments such as the Oregon Department of Transportation (ODOT) and WSDOT to receive federal funding, they are required by federal law to implement DBE programs. One of the objectives of a state DBE program is to ensure there is a level playing field for businesses owned by socially and economically disadvantaged individuals to participate in federally-funded projects.

All DBE programs must nevertheless be “narrowly tailored to further Congress’ compelling remedial interest,” according to Western States Paving v. WDOT. In western states, the Ninth Circuit Court of Appeals stated that a DBE program is narrowly tailored when the state can show a presence of “discrimination in the state’s transportation contracting industry” and the DBE goal “is limited to those minority groups that have actually suffered discrimination.”

Thus, every three years, states must submit their DBE goals, which can only include those groups for whom “significant disparities” exist based on evidence obtained from disparity and/or availability studies conducted in each state. WSDOT’s 2009-2011 disparity study prompted its request for waiver to exclude non-minority woman-owned businesses from meeting DBE goals.

Considering Oregon’s proximity to Washington, this change to WSDOT’s DBE goal participation will likely affect many Oregon-based contractors (including those Oregon non-minority woman-owned businesses that are currently certified as Washington DBEs). As of June 1, 2017, all contractors bidding on WSDOT projects will not be able to use non-minority women-owned businesses to meet DBE goals on federally funded WSDOT projects. Thus, Oregon-based contractors bidding on WSDOT work will not be able to use non-minority woman-owned businesses to meet DBE goals through at least 2020.

This change, however, does not affect DBE goals on public contracts for other Washington state agencies, including Sound Transit and the Port of Seattle. The change also does not affect existing WSDOT contracts.

WSDOT is implementing the waiver by classifying all DBEs that are not non-minority woman-owned businesses as “underutilized” disadvantaged business enterprises (UDBEs), and the waiver requires only UDBE utilization on all WSDOT federally funded projects. The “U” is a special designation specifically used by WSDOT – all UDBEs must still be certified as DBEs with the Washington State Office of Minority and Women’s Business Enterprises.

WSDOT’s federally funded contracts will now include provisions requiring compliance with the waiver, including “UDBE commitments” and “UDBE condition of award goals.” The UDBE condition of award includes a “utilization certification form” and a “written confirmation form” that must be submitted with its bid. Firms certified only as DBEs without the “U” designation will not count toward the commitment amounts and condition of award goals. Failure to comply could result in a bid being rejected as non-responsive.

While Oregon and Washington are arguably very similar in many aspects, it is unlikely that ODOT will seek a similar waiver for non-minority woman-owned businesses anytime soon. Notably, ODOT’s 2016 disparity study, conducted by Keen Independent Research, found that there was “quantitative evidence of disparities for white women-owned firms in ODOT contracts and in the Oregon transportation contracting industry.”

Paige Spratt is a construction lawyer for Schwabe, Williamson & Wyatt. She has a bachelor’s degree in construction management, and professional experience as a construction manager. Contact her at 360-905-1433 or pspratt@schwabe.com.

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Ask any contractor in the Portland-metro area: “What is the number one problem plaguing the construction industry?” Answer: People. There are not enough people available to perform the work – this includes all work, from running a crew to installing utility pipes. And most people in the industry agree that it will only get worse as baby boomers continue to retire. Studies predict that by 2020, the construction market will exceed the growth that we saw in 2007. The construction industry needs people and it needs them now.

Construction provides some of the highest-paying jobs in the area. Did you know that the national average salary of a plumber is $54,620? So why is it so hard to find people to fill these high-paying jobs? One answer: Skills. Prospective employees lack the necessary skills to fill these jobs. And they lack not only technical skills, like how to use a screwdriver, saw or tape measure, but also those “soft skills” inherent in every job, such as showing up to work on time, following directions and communicating effectively.

Thus, we know that there is a skilled labor shortage, and we also know that it is only going to get worse. But what can be done to bridge this apparent workforce gap? Training. Employers and educational institutions need to provide training to current and prospective workers to enable them to become skilled in the trades.

Some educational institutions are taking that leap. For example, starting this fall, Clark College in Vancouver, Washington, implemented an 11-week “pre-apprentice” program that allows adults age 18 and older to explore the trades. The program provides certifications in first aid, flagging and OSHA (Occupational Safety and Health Administration) 10-hour training. The program is intended to introduce students to three potential career pathways: 1, entering the job market; 2, pursuing an apprentice program; or 3, enrolling in one of Clark College’s Career Technical Education (CTE) programs, such as welding.

The program focuses on not only technical skills, but also “career readiness.” Its instructor, Justin Allen, says that he builds his lesson plans by listening to the needs of industry leaders and planning around “big soft skills.” For example, in the second week of classes, the students learned about the masonry industry and its specific expectations – not just what masons do. Students are given opportunities to meet with masonry companies and union members to learn about the culture of that industry.

The program is also targeting women and minorities, who are significantly underrepresented in the construction trades. Allen says that industry leaders have expressed a “special need in increasing the number of women and minorities” in skilled trades. And while the program is in its pilot stage, more than half of Allen’s students are women looking to pursue careers in construction.

While Clark College is helping develop and train a sustainable construction workforce, what else can the industry do to bridge the workforce gap? Invest in our community – not just with dollars, but time and resources. In fact, in 2015, five Clark County community partners teamed up to do just that by introducing YouthBuild, a program developed to train Clark County at-risk youths between the ages of 17 and 24 to obtain job (and life) skills in the construction industry. Through the program, students learn about the trades in the classroom, by performing community service projects and by constructing homes for Evergreen Habitat for Humanity. In the process, students also earn their high school diplomas or GEDs. YouthBuild students can then take the skills they learned during the program and pursue careers in the construction industry. Currently, students are helping construct two Habitat for Humanity homes for local families; the projects are scheduled to finish in December.

There are many opportunities to help build a skilled and diverse construction workforce. As leaders in the construction industry, we need to make the investment into our community by blazing our own trails to solve these workforce woes.

We need to work together to talk to parents, teachers and kids about the benefits of learning a trade skill. As employers, we should be investing in our employees by providing on-the-job-training so we can promote and grow from within. We need to hire interns so that teens and young adults can learn the values of employment. As parents, we should communicate with our children about career opportunities in addition to college – the trades offer high-paying, respectable careers (and young adults are not left with tens of thousands of dollars in student loan debt). In sum, we need to get people excited about pursuing – and their kids pursuing – careers in construction.

Paige Spratt is a construction lawyer for Schwabe, Williamson & Wyatt. She serves on the Workforce Southwest Washington board of directors. She has a bachelor’s degree in construction management, and professional experience as a construction manager. Contact her at 360-905-1433 or pspratt@schwabe.com.

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