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High-Speed Rail Projects: A Fast Track To Nowhere For Minority-Owned Businesses?

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The Obama Administration is pouring billions of dollars into high-speed rail projects across the country, touting them as a way to stimulate local economies in recessionary times. Just this week, President Obama submitted a budget plan to Congress, seeking approval of an additional $8 billion for such ventures. Yet as these projects get underway, this massive infusion of federal money appears to be bypassing the very businesses that help bolster our local economies -- small and minority-owned businesses.

Data is making it increasingly apparent that minority-owned businesses -- among those hardest hit in the current economic climate -- are being largely shut out of bullet train contracting opportunities. California is a prime example of how little minority communities are benefiting from these projects. High-speed rail in the Golden State is designed to link San Francisco to Los Angeles and San Diego, with multiple stops throughout the Central Valley. The project is estimated to cost approximately $43 billion, making it the single largest public works venture in the nation.

Yet a civil rights complaint filed recently by the Lawyers' Committee for Civil Rights of the San Francisco Bay Area details how minority-owned businesses are being largely excluded from contracting opportunities on this massive project. Through a restrictive procurement system and a laissez-faire attitude, the state agency established to oversee the project appears to be funneling nearly all contracting dollars to large non-minority -- and in some cases foreign-owned -- corporations.

For example, on 10 multimillion dollar design contracts already awarded, barely a dozen of the 134 prime and subconsultants are minority-owned firms. This includes those with exceedingly small contracts in comparison with overall contracting dollars, such as a minority-owned business with a $100,000 subconsulting contract on a $75 million prime contract. Statistics on participation by small businesses -- which many minority-owned businesses are -- paint an equally grim picture. Over the past six fiscal years, less than four percent of contracting dollars for California's bullet train have gone to small businesses.

California is not alone in seeing this trend. In Florida, the Obama Administration had committed over $2 billion to a bullet train line that would link Tampa to Orlando, with a possible extension to Miami at a later date. A statewide coalition of minority-owned businesses in Florida recently called upon the bullet train project there to take proactive steps to open up procurement opportunities, fearing that otherwise all of the contracting would remain only within an insular "old boys" network of firms. With the recent rejection of this high-speed rail project by Florida Governor Rick Scott, California stands to gain significantly from the redistribution of those funds, highlighting the need to ensure that equitable contracting ensues.

There is certainly no shortage of minority-owned businesses that are ready, willing, and able to do the necessary work if given the opportunity. A recent study by the California Department of Transportation found that hundreds of minority-owned civil engineers, structural engineers, land surveyors, and other professionals that are ready and able to participate in large-scale public works projects such as the high-speed rail.

When minority-owned businesses are allowed to compete on an equal footing in a fair and open system, they win contract awards. And when that happens, the ripple effect is astounding. Growing businesses hire workers, often from minority communities. They spend money locally and contribute to community re-vitalization. But when procurement systems are closed and insular, as bullet train projects are shaping up to be, none of these benefits are realized.

Fortunately, it is not too late for the Obama Administration to reverse this trend. Though billions of dollars have already been spent on these high-speed rail projects, many more billions are still at stake. The federal government holds the purse strings. It can -- and should -- insist that contracting opportunities funded by federal taxpayer dollars be open to all on an equal basis.

The civil rights complaint filed by minority-owned businesses in California demands that federal agencies suspend all funding to that state's high-speed rail project until its contracting practices are made fair and non-discriminatory. We support that effort, and call upon the Obama Administration to go even further. The Administration should re-examine federally-funded high-speed rail projects across the country, insist that minority-owned businesses be afforded equal opportunity to work on these ventures, and withhold funding until closed procurement systems are opened up.

Without immediate federal intervention, this multi-billion opportunity to jumpstart the economy will be squandered, and high-speed rail will end up as a fast-track to nowhere for minority businesses and the communities they help.

Diana LaCome is President of National Concilio of America, a non-profit organization promoting Hispanic business interests nationally. Harry Alford is the President and CEO of the National Black Chamber of Commerce, a non-profit organization dedicated to economically empowering and sustaining African American communities through entrepreneurship and capitalistic activity.

The civil rights complaint filed by the Lawyers' Committee for Civil Rights of the San Francisco Bay Area regarding California's High-Speed Rail Project can be found here.