The provision in the 1998 federal Transportation Equity Act establishing the use of disadvantaged business enterprise goals was constitutional, but Washington state’s application of the goals program violated the constitution, the U.S. Court of Appeals for the Ninth Circuit ruled.

After having two low bids in two months for federally funded paving jobs in Washington state rejected in favor of minority-owned firms, Western States Paving Co. sued the Washington State Dept. of Transportation, claiming that TEA-21’s minority preference program violated its rights to equal protection under the constitution. A federal district court in Washington ruled that the preference program was constitutional both on its face and as applied by WSDOT, and it dismissed the claim.

On appeal, the federal appeals court noted that racial classifications must be narrowly tailored to further a compelling governmental interest. In the present case, the federal government does have a compelling purpose in authorizing DBE goals to ensure that government funds aren’t used to perpetuate public or private discrimination. In the present case, Congress had sufficient evidence of discrimination in the transportation contracting industry. And TEA-21 attempts to ensure that it is "narrowly tailored" by barring quotas and authorizing states to use racial preferences only when non-race-conscious methods fail. So the TEA-21 program was constitutional.

However, Washington state must show that its own application of the TEA-21 program is narrowly tailored to further Congress’s objectives, the court said. In this case, the state’s studies showed that DBEs constituted 11.4% of the transportation contracting capacity in the state but received about 9% of state contracts where affirmative action goals were not used. This small statistical disparity was not enough evidence of historic discrimination to warrant WSDOT’s 14% DBE goal on federally funded projects, the court held. Western States Paving Co. Inc. v. WSDOT, No. 03-35783 (USCA 9th Cir. 2005).