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Federal Concrete, Inc. v. Executive Office for Administration and Finance

Superior Court of Massachusetts, Suffolk

February 27, 2018



          Douglas H. Wilkins, Justice of the Superior Court

         The plaintiff Federal Concrete, Inc. ("Plaintiff" or "Federal Concrete") brought this action for injunctive and declaratory relief against Executive Office for Administration and Finance (A & F), Michael J. Heffernan, in his Official Capacity as Secretary of Administration and Finance and William McAvoy, in his Official Capacity as Executive Director of the Supplier Diversity Office of the Operational Services Division of the Executive Office for Administration and Finance ("SDO") (collectively, "defendants"). Federal Concrete has filed "Motion of Plaintiff, Federal Concrete, Inc., for Summary Judgment" (P # 29) ("Motion"), which the defendants initially did not oppose. The Court heard argument on the Motion on October 20, 2017 and December 20, 2017. On October 17, 2017, the defendants filed Defendants’ Motion to Dismiss ("Motion to Dismiss"), which the Plaintiff has opposed. After hearing, the Motion is ALLOWED. The Motion to Dismiss is DENIED.


         The facts established by the Parties’ Rule 9A(b)(5) statement, along with inferences drawn in favor of the plaintiffs as opposing parties, are as follows.

         The Legislature established the SDO (then known as the State Office of Minority Business Assistance) in 1978. In 1980, it established an affirmative marketing set-aside program for state building projects to be administered by the Division of Capital Planning and Operations (now the Division of Capital Asset Management and Maintenance ("DCAMM"). It required DCAMM to reserve a portion of state building contracts for firms owned by "minority" persons, defined as a person "with permanent residence in the United States who is American Indian, Black, Cape Verdean, or Western Hemisphere Hispanic." In 1984, it expanded the definition of "minority" to include "Eskimo, Aleut [and] Asian" persons. The statute, now codified at G.L.c. 7C, § 6(c), retains the same definition of "minority" today: "American Indian, Black, Cape Verdean, Western Hemisphere Hispanic, Aleut, Eskimo, or Asian."

         As of 1994, SDO’s regulations defined the term minority for purposes of SDO’s services as: "American Indian, Asian, Black" (defined to include African Americans and the "original peoples" of Cape Verde), "Eskimo, Aleut," and "Hispanic," defined as "all persons having their origins in any of the Spanish-speaking peoples of Mexico, Puerto Rico, Cuba, Central or South America, or the Caribbean Islands." On December 13, 1996, SDO added "Portuguese" persons as a category of "minority," but "Portuguese persons shall only be included in the definition of minority if specifically set forth in programs funded by state transportation bond statutes which include such persons as eligible participants."

         In the current construction affirmative marketing program. SDA and DCAMM together establish "participation goals" for certified minority-owned businesses (MBEs) and women-owned businesses (WBEs) on "capital facility projects and state assisted building projects." G.L.c. 7, § 61(I). The most recent goals, effective January 1, 2012, require combined MBE/WBE participation of 10.4% on each such project. SDO must maintain a directory of the firms it has certified as MBEs and WBEs. Both general contractors and DCAMM rely on SDO’s database to determine what firms are eligible to participate on construction projects as MBEs.

         Prior to November 1, 2007, SDO’s practice was to certify businesses owned by persons of Portuguese origin as Portuguese Business Enterprises, or "PBEs," not as "MBEs." That designation implemented 425 Code Mass.Regs. 2.02, which limited PBE participation to projects funded by state transportation bond statutes, and to ensure that they would not be allowed to work as MBEs on non-transportation projects.

         On or about November 1, 2007, SDO’s then-executive director, Eydie Silva, arbitrarily decided to certify businesses owned by persons of Portuguese origin as "MBEs." The effect of this change was to allow such firms to participate not only in transportation-related projects, but in any state construction project subject to the MBE/WBE participation goal. SDO did not engage in any process or investigation to determine whether persons of Portuguese origin were socially or economically disadvantaged so as to justify this MBE preference, nor did SDO amend its regulation. At no time did SDO possess any evidence that persons of Portuguese origin have ever suffered discrimination in the construction industry in Massachusetts. It should be noted that these facts were submitted long before the current disparity study.

         As a result of being certified as MBEs, construction firms owned by persons of Portuguese origin came to be awarded tens of millions of dollars in non-transportation construction contracts. For example, in fiscal year 2015, the total value of awards made to businesses certified as MBEs on DCAMM-monitored construction projects was $25, 759, 706. Portuguese-owned businesses were awarded contracts worth $15, 646, 293, or 61 percent of the total. Between fiscal years 2013 and 2015, twenty-five construction firms owned by persons of Portuguese origin received $32, 041, 038 in payments as MBEs on state construction contracts overseen by DCAMM. That $32 million represented 46 percent of all payments to MBEs on DCAMM-monitored projects during those years.

         In 2009, Reginald Nunnally became SDO’s Executive Director. Upon learning that entities owned by persons of Portuguese origin were being certified as MBEs for all purposes, he investigated and determined that SDO had no evidence that Portuguese people suffer from discrimination in Massachusetts. He also discovered that the most recent disparity study on which SDO based its determination of what groups to include in the set-aside program did not mention Portuguese individuals. In late 2012, he sent letters to all Portuguese-owned businesses certified as MBEs to inform them that they would be classified as PBEs and not MBEs. He received numerous calls from Portuguese-owned businesses protesting the change, as well as calls from state legislators representing districts in Southeast Massachusetts, which he referred to the Governor’s office. He received a call from Assistant Secretary of Access and Opportunity in Governor Patrick’s Office, asking why the change had been made. He also heard from an official at DCAMM that the change "would be problematic" for DCAMM because "there were a number of Portuguese businesses that were part of the MBE program that were participating" on state construction projects, and DCAMM "would have ... difficulty meeting their goals if we all of a sudden without a process took them out of the program." Ultimately, at the behest of Governor Patrick’s office, Mr. Nunnally rescinded his decision to revoke the MBE certifications of Portuguese-owned businesses. In January 2013, he informed those firms that after "many telephone conversations and meetings," they would be allowed to retain MBE certification.

         In 2014, DCAMM published a Request for Proposals to conduct a disparity study. The RFP did not propose a study of discrimination against persons of Portuguese origin. DCAMM did not immediately engage any entity to do the study. In January 2016, DCAMM initiated that disparity study. The contract with DCAMM’s provider, NERA Economic Consulting, provides that "[t]he study will include persons of Portuguese descent amongst the minority/ethnic groups as part of its data gathering and study analysis."

         In March or April 2015, after the change in administrations, Nunnally had a meeting with Governor Baker’s Assistant Secretary for Access and Opportunity, Jabes Rojas. Mr. Rojas asked Nunnally about the controversy surrounding MBE certification of Portuguese-owned businesses. Nunnally informed Rojas that "there was no scientific evidence that [Portuguese persons] were disadvantaged," and that both "SDO and the MBE community" believed that including them "wasn’t fair, and ... was against the regulations." Nunnally told Rojas that "I believe that they were white firms that did not have-were not discriminated against, they had access to capital and they were firms that were fairly well-capitalized and, you know, were bidding and winning projects all on their own and didn’t really need the MBE status," which gave them "much more of an edge."

         In 2013, Janet Butler founded Federal Concrete, Inc., which provides cast-in-place concrete services in Massachusetts, Rhode Island and Connecticut. SDO has certified Federal Concrete as a woman-owned business enterprise ("WBE"). In the fall of 2015, Federal submitted a bid as a WBE on a concrete subcontract for a school project for the town of Abington. The general contractor, Brait Builders, rejected Federal’s bid and instead satisfied 99.1% of its combined MBE/WBE participation goal by subcontracting with two businesses owned by persons of Portuguese origin; Marmelo Brothers Masonry, Inc. ("Marmelo") and Colony Drywall, Inc. ("Colony"). Federal filed a bid protest with the Attorney General’s Office, arguing that the inclusion of Portuguese-owned firms to satisfy the MBE/WBE set-aside participation goals for the project violated state law. Brait argued that it reasonably relied on SDO’s website, which listed both Marmelo and Colony as MBEs. ...

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