Implementation of the Disadvantaged Business Enterprise Program in Federally Funded Transit Projects in New York City

Washington, DC. The subcommittee met, pursuant to notice, at 10:10 a.m., in room 2247, Rayburn House Office Building, Hon. Cardiss Collins (chairwoman of the subcommittee) presiding.

Present: Representatives Cardiss Collins, Major R. Owens, and Alfred A. (Al) McCandless.

Also present: Myron G. Zeitz, counsel; Brian Lockwood, minority professional staff, Committee on Government Operations; and Jean Smith-Hoffman, legislative counsel to Mr. Owens.

OPENING STATEMENT OF CHAIRWOMAN COLLINS

Mrs. COLLINS. Good morning. This hearing of the Government Activities and Transportation Subcommittee will come to order. In 1982, Congress enacted the Surface Transportation Act which required that 10 percent of all Federal funds for State and local transportation improvement projects be earmarked for disadvantaged small business contractors. If properly implemented, that requirement would result in over $7 billion over a 4-year period in contracts for minority and disadvantaged companies.

Today's hearing, our fifth on the program since the enactment, will focus on the apparent failure of the Department of Transportation to enforce the law. When bona fide disadvantaged businesses are being denied contracts, and are the victims of "good old boy" networks and false and inflated figures, it is time for the Department of Transportation to get tough with those who deny the will of Congress and the hopes and aspirations of our minority business community.

Those and other allegations have led this subcommittee to review the implementation of the Disadvantaged Small Business Program by the New York City Transit Authority pursuant to its receipt of Federal transportation funds.

For purposes of this inquiry, the subcommittee will receive te mony from the U.S. and New York State Departments of Trans

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tation, the New York Governor's Office, and the New York City Transit Authority. Additionally and more importantly, we will hear from representatives of disadvantaged small businesses concerning their reported difficulties in getting their rightful share of business from the transit authority and its prime contractors.

I wish to publicly acknowledge the lead role that has been undertaken by Representative Major Owens and his staff in the conduct of this investigation. In his characteristically quiet but determined fashion, the gentleman from Brooklyn has worked diligently_on behalf of small business, minority entrepreneurs not only in New York State but throughout this country.

At this point, I yield to Representative Major Owens.
Mr. MAJOR OWENS. Thank you, Madam Chairlady.

I want to first express my appreciation for your calling this hearing.

The set-aside provision of the Surface Transportation and Assistance Act is now the law of the land. Congress has the right to expect every Government agency at every level-Federal, State, and local-to obey the law and to work dutifully to implement the law. Congress expects each recipient agency to obey the law and to honestly and effectively administer the law. Congress also expects public officials, especially mayors and Governors, to place the full weight of their offices behind the legal implementation of the law. We regret the fact that the traditional majority white contractors are hostile toward the set-aside provisions of the law. However, we have no sympathy for those who refuse to accept the wisdom of Congress. The Supreme Court has affirmed that Congress not only acted wisely, it also acted in accordance with the Constitution. Setaside programs have been endorsed as one legitimate remedy and relief in correcting historic bias and discrimination. Whether they like it or not, if the traditional majority general contractors want to feed at the public trough, they must obey the law. It would promote the interests of all concerned if the majority general contractors would cease their tenacious resistance and cooperate with the implementation of the law.

The continuing bitter resistance of the private contractors is not the primary focus of today's hearing, however. Today's hearing is focused on the intentional or unconscious collusion of public officials and recipient agency officials with these hostile private contractors. This is our major concern today.

With regard to the set-aside provision of the Surface Transportation Act, the time is long overdue for the Government to take steps to salvage its own credibility. The law must be enforced. The law must be properly administered and implemented.

Unfortunately, there is detailed evidence which shows that the Federal Department of Transportation too often shows too little concern for the enforcement of the law. With respect to New York State and New York City, there is also clear evidence that public officials have not only failed to seize the opportunities to promote minority economic development which this law offers, they have also refused to take steps to ensure the most basic compliance with the law.

This hearing will also explore a considerable amount of available evidence showing that one of the Nation's largest recipient agen

cies, the New York City Transit Authority, has both failed to comply with the law and possibly acted in intentional or unintentional collusion with hostile majority contractors.

The New York City Transit Authority is a massive institution expending enormous amounts of State and local as well as Federal funds. The transit authority also impacts on the lives of all New York City residents in numerous other ways. This gigantic institution has the capacity to function as a major force for improvement of the general welfare of New Yorkers and as a major force for minority and women's economic development. Since the majority of the riders whose existence justifies the existence of the transit authority are minorities, the transit authority should assume an extraordinary responsibility for their natural constituency. Their concern should go far beyond the mere obedience of the Federal law. The failure of the transit authority to accept this more lofty but reasonable mission is regrettable. But the failure of the transit authority management to put forth a good faith effort to obey and enforce the law is shameful, and if there has been intentional collusion with contractors seeking to evade the law, then we are dealing with corruption and one more scandal in a city where corruption is already at the root of a great deal of oppression.

With respect to the transit authority, we have received numerous complaints from legitimate minority and women's businesses. These complaints center around the certification process, the letting of contracts, and the need for assistance throughout the life of the contract as required by Federal regulations—49 CFR, part 23, to be more specific.

The range of complaints that we have received makes it appear that the transit authority may be just as hostile to the program as the prime contractors. When complaints have been raised to the Federal level, I have been told also that the recipient agency's explanations have been accepted by the Federal department at face value and that the Federal agency does no independent investigation to verify compliance.

It is my hope that this hearing will bring forth information which will shed some light on the many allegations we have received. It is my hope that we will find that support for minority and women's businesses is stronger than some have concluded and that whatever problems exist in the program will be met with speedy and effective corrective action.

Mrs. COLLINS. Thank you very much.

We are going to swear in all of the witnesses today. Would you raise your right hands, please?

[Witnesses sworn.]

Mrs. COLLINS. Thank you.

For those of you who are unaware of the procedure of the subcommittee, we work on what we call the 5-minute rule. Each person who has testimony to offer will be given 5 minutes to summarize their testimony, with the knowledge that the entire testimony, if it's in written form, will be made a part of the record. Members of the subcommittee are given time to ask their questions on a 5-minute basis, and we will go back and forth as is necessary.

Our first panel is Mr. Michael Nairne, deputy secretary to the Governor of the State of New York, in Albany, NY; and Mr.

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