HELENA — Montana has paid $485,000 to settle claims that a program meant to boost the number of highway contracts going to disadvantaged businesses illegally discriminated against a construction company for having rich, white male owners.
Billings-based Mountain West Holding Co. sued the state in 2013 after transportation officials set a goal to hire disadvantaged businesses on a little more than a quarter of all state highway projects between 2012 and 2014.
Company lawyers said that caused Mountain West to lose out on some contract bids, and was a violation of the federal Civil Rights Act's prohibition on racial discrimination in programs receiving federal financial assistance.
The state's attorneys said the disadvantaged business enterprise program was "race-neutral," and that some businesses in the program are owned by white men. They also noted that Mountain West's already dominant market share in state highway projects actually increased from 2012-2014.
The $485,000 settlement was reached just days before the case had been set to go to trial on Feb. 26.
"We thought that we had some potential liability and that's why we ended up settling," said Dave Ohler, chief counsel for the Montana Department of Transportation.
A person who answered the phone at Mountain West on Wednesday said the company did not have an immediate comment.
All states must have a disadvantaged business enterprise program in order to receive federal highway funding. The program covers small businesses owned by "socially or economically disadvantaged" individuals, including minorities, females and people worth less than $1.3 million.
Of the 105 companies in the Montana program from 2012-2014, eight were owned by white men, according to state attorneys. Mountain West did not qualify.
The state had found that less than 3 percent of all contract money was going to those small companies, far short of its goal of 5.8 percent at the time.
So transportation department officials looked to boost that number by setting a preference for disadvantaged businesses for 62 of the 237 total highway projects over those two years.
Mountain West, which specializes as a subcontractor in concrete barriers, guardrails, sign installations and traffic control, said in its lawsuit that it lost out on bids because the state would award contracts to those companies that used a certain number of disadvantaged businesses as subcontractors.
The company cited four highway projects it lost to other companies owned by Native Americans or Native American women.
The company questioned the validity of a study the state used to institute its race and gender goals, and said Montana had no evidence of past discrimination in awarding highway construction contracts.
Attorneys for the state responded that Mountain West had an overall share of 74 percent of all concrete work, 71 percent of all guardrail work, 54 percent of all signage work and 44 percent of all traffic control work in the state in 2013.
Its revenue in all those areas increased between 2012 and 2014, casting doubt on Mountain West's claim that it suffered damages due to the disadvantaged business enterprise program, state attorneys said in court filings.
A federal judge initially dismissed Mountain West's lawsuit, but the 9th U.S. Circuit Court of Appeals revived it and said the company could pursue its allegation of discrimination.
The state has since increased its goal to award disadvantaged businesses 6.14 percent of all contracts. Ohler said that is an "inspirational goal" and there are currently no requirements for contractors to hire a certain number of disadvantaged subcontractors.