The inequitable equity of Oakland paving

City Council decisions stalled Oakland’s paving program for 1.5 years, hurt underserved communities, and cost taxpayers $6M

For photos of current Oakland road conditions, see here

From 2017 to 2022, Oakland’s Department of Transportation (OakDOT) made exceptional progress in fixing the City’s decrepit roads. The City re-paved 160 miles of its 830-mile road network and 18 miles of bikeways, while quintupling the pace of roadwork. But in mid 2022, progress ground to a near standstill, and road conditions deteriorated significantly in 2023. 

OakDOT blamed the delays on contracting issues, lack of staff, and equipment failures. But the deeper cause was the City Council’s rejection of all paving contract bids in January 2022—because they fell 2.7% short of the small-business participation requirement. This decision led to protracted negotiations and a 1.5 year delay in the work.

Those negotiations weren’t really motivated by concerns for small businesses. As Council transcripts make clear, the actual motivation was racial equity—specifically to increase the subcontract value awarded to Black-owned firms to address historical disparities. 

Contrary to the Council’s intent, the final outcome was anything but equitable—both for contractors and residents. Up to $2.2M of subcontracts were revoked from a small Hispanic-owned firm and directed to a small Black-owned firm; an action that is potentially illegal. And the price for the work increased $6M (paid by taxpayers). Moreover, the 1.5 year contracting delay deprived 433,000 residents of sorely needed road improvements, life-saving safety upgrades, and quality of life improvements—particularly for Black residents who suffer traffic injuries at twice the rate of other Oaklanders.

In the end, the council intervention pushed the boundaries of ethical & legal conduct, benefited only the owners of three contracting firms, and effected broader harms to the people of Oakland. And it did nothing to address the root causes of contracting disparities for Black-owned and White women-owned businesses. 

Addressing racial disparities requires proactive solutions that build skills, resources, and wealth in the impacted groups. But closed-door redistribution of City contracts by race (or by any other non performance-related preference) is not the solution. It only drags us toward the worst of human nature, and degrades the future for everyone. 

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Oakland’s paving progress was derailed

Oakland’s Department of Transportation, was launched in 2017 with $350M of funding from 2016 Measure KK. In the next five years, OakDOT achieved national recognition for its innovative and equity-based approach,¹ and won more than $150M in additional grant funding. Most importantly, OakDOT made rapid progress in fixing the City’s crumbling, unsafe, 830-mile road network. It re-paved 160 miles of roadways, improved 1000 curb ramps, made 2000 crosswalk improvements, and built or upgraded 18 miles of bikeways.

It was a glimmer of hope for the City’s recovery in an otherwise gloomy pandemic environment. 

Spurred on by that progress, Oaklanders approved Measure U in 2022 which funded most of a 5-year $375M extension of the paving plan.² Over ten years (2017-2027), the City aimed to repave 560 miles of Oakland's roads and to make streetscape and safety improvements. The projected total cost of the program was over $875M, to be funded by Oakland bonds, state gas taxes, city general funds, and grants.

To achieve that ambitious goal, OakDOT had to dramatically accelerate the pace of road resurfacing. By the end of Fiscal Year (FY) 2021,³ the Department was paving 46 miles/year—a 5-fold improvement over the historical average of 9 miles/year prior to 2016. And it was on track to raise the pace again to 55 miles/year by the end of FY 2022. 

But in mid 2022, everything ground to a near standstill. 

Only 22 miles of roads were paved in FY 2022-2023, less than 50% of the planned 55 miles. By the end of 2023, paving operations were all but shuttered. Road conditions deteriorated significantly, losing 25% of the gain made in the previous three years.⁴ The City’s paving plan has been delayed 1.5 years, with completion now anticipated in 2029 at best.

The cost of these roads is not just chattering teeth, busted tires, and grumpy residents. It has resulted in tragic injuries and deaths. One person was paralyzed after hitting a pothole on Skyline, and another person suffered spine injuries. Each incident cost the City $6.5M in legal damages ($13M total), and the city has paid $35M in road-related lawsuits over the past 10 years. The paving delays could mean more shattered lives.

Why did the paving stop?

In the 2023 report on the 5-year paving plan, the City blames the delays on contracting issues, lack of staff, and equipment failures. The report also points to a deeper cause: the City Council decision on January 18, 2022⁵ to reject paving contracts recommended by City staff. 

In that Council meeting, OakDOT Director Ryan Russo requested approval of bids for $60M of paving contracts.⁶ These contracts would have allowed the City to stay on schedule to complete its 3-Year Paving Plan in June, and begin the recently approved 5-Year Plan on-time in July. 

But the Council denied the request. It directed OakDOT to negotiate new bids and return to Council for approval. 

When the revised bids were finally approved ten months later in November 2022,⁷ the total cost had risen to $66M—a price increase of $6M for the same work. Moreover, staffing bottlenecks in the City procurement office delayed contract execution until October of 2023. In total, an 18+ month delay in paving work.

Why did the Council reject the bids?

Ostensibly, these changes were made in service of the City’s Small Local Business Entity (SLBE) requirements for contracting. According to the City Compliance department, the winning bid failed to meet the SLBE requirements, achieving only 22.3% SLBE participation when a minimum of 25% was required by City ordinance. 

Though similar paving contracts had been awarded in previous years without this issue, the City had since then updated the SLBE qualification criteria. These changes caused the new bids to fall short. In the January 2022 Council meeting, Director Russo requested a waiver of the requirements due to the newness of the change in City code, the near miss on the new requirement, and the negative consequences of paving delays on the residents of Oakland. 

Unsatisfied with the arguments, Council Member (CM) Carroll Fife pulled Russo’s request from the Consent Calendar,⁸ and registered her dissent. Echoing the protests of Black contractors, she suggested that the request was an example of persistent and deliberate exclusion of Black contractors from City Contracts. She insisted that the bids be rejected and that the competitive bidding process restarted despite the delays that would entail. 

Others on the Council and the City staff pointed out that the SLBE shortfall was only 2.7% ($360K short on each $13.7M contract), a gap that could be corrected through negotiations to meet the small business requirement, rather than a restart of the bidding process. Negotiations would, in principle, be executed much faster than rebidding, and reduce delays.⁹ After much deliberation, the Council agreed to instruct OakDOT to negotiate the existing bids, instead of restarting the bidding process.

Unfortunately, the negotiation process was not quick. The revised contracts were not approved by the Council until November 2022, ten months after the original request for approval, thereby missing the entire 2022 paving season. 

The protracted negotiation seems odd given that the gap was only $360K in the original bids; $200K of that gap could have been addressed simply by replacing the Dublin-based trucking subcontractor (Double D) with one of the SLBE subcontractors already on the bid. The remaining $140K gap could then have been closed with light revisions. But somehow that $140K gap ballooned into an additional $1.4M of fees per revised contract (a 10% increase). 

So what gives?  Why were there protracted negotiations and outsized increases in total contract value? Why are claims of racial discrimination being raised in a debate about small business participation?

It actually was not about small business, it was about race

On the surface, the bids were rejected because they failed to meet the 25% SLBE threshold.¹⁰ But the January Council discussion reveals that their decision was not SLBE concerns per se. CM Fife believed there was persistent discrimination against Black people in the awarding of contracts, and sought to direct contracts toward Black-owned firms. In the meeting, she explains:

I know we can't say, because of prop 209, black businesses need to be centered in these contracts that are multimillion dollar contracts. It's important that black minority contractors, and I'm just going to say it, also need to have access to these types of resources when they come across the table.

CM Dan Kalb extends this concern to Black employees of contractors:

So as I've said many times before, my concern and desire is to have contracts go to firms that have a large number or a significant number of African American employees or BIPOC employees who are doing the actual work.

But why is the SLBE program seen by Council members as the cause of, or a remedy for, the claimed racial discrimination and disparities?

The answer lies in history. The SLBE program is Oakland’s replacement for an affirmative action program (in effect prior to 1996) to address disparities in contracting through race-conscious mechanisms. The program was called a “Minority Business Entity” (MBE) program. But in 1996 California voters passed Proposition 206 which updated California Constitution Section 31 to prohibit the use of race in State operations:

The State shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.

This made the MBE program illegal. Therefore, the City replaced it with the SLBE program which aimed to address issues commonly faced by small business owners that also contribute to racial disparities (such as insurance requirements, capital access, relationship networks, etc.). But the new program was race-neutral; it could not use race for decisions or preferential treatment in program operations.

Thus, the SLBE program and MBE program are intimately entangled—the SLBE program being the City’s race-neutral means to address racial, ethnic and gender disparities in City contracting.

Twenty years later, a disparity study commissioned by the City in 2017 and finalized in 2019 showed that statistically significant disparities still persisted in the awarding of contracts to firms owned by Black people and White women. Despite 16.51% availability of Black-owned construction firms, they received only 1.13% of City prime contracts from June 2011 to July 2016.¹¹  And White women-owned firms received 1.71% of those prime contracts, despite 4.88% availability.

Efforts to remedy the continued disparities were made via changes to the SLBE program in February of 2021. This included a more stringent definition of what is considered small and local businesses in Oakland (the change that caused the contracts to seemingly miss the SLBE threshold), as well as incentives to encourage mentor-protégé teams, incentives for very small businesses, and a contract rotation program for awards under $50,000.  

Director Russo, who was aware of these changes and their motivations to remedy racial disparities, held specific meetings with the Oakland African American Chamber of Commerce in 2021 to ensure awareness of the contract availability. Russo also recommended in the 5 year plan to create a Joint Venture (JV) program which would pair small business owners with larger ones, and to reserve one contract per cycle for bidding only by JVs.

Pushing the needle on race-based contracting

But CM Fife was not satisfied with the race-neutral ordinance changes, nor the outreach and partnering efforts of the OakDOT. As noted above, she felt the contracts needed to be specifically “centered” on Black firms as a remedy for disparities.

Indeed, this was the outcome delivered in the revised bids submitted in June 2022 and approved by the Council in November 2022. In the winning bid, 100% of the trucking subcontract was given to Monroe Trucking,¹² a Black-owned SLBE firm that received only part of trucking work in original bid. The other trucking subcontractors, S&S Trucking (a Hispanic-owned SLBE firm) and Double D Trucking (not an SLBE), were removed from the bid entirely. Also, two new line items were added to the bids: one for “Adjustment of Utilities”, which was awarded to a new subcontractor, Focon, Inc. (Black-owned), and one for “Bid Summary Specialty Amt” which was awarded to the original prime contractor, Gallagher & Burk (White-owned). Additional changes include a small price increase of 3-5% among the other subcontractors to account for inflation.

The figure below tabulates all line-items in the original (rejected) and negotiated (approved) bids, and the changes. Four contracts were awarded under Projects 1006103 and 1006104, all of which are required to meet the schedule presented in the table. One contract was awarded for 1006105.

The net financial impact across all 5 contracts was to remove up to $2.2M of trucking subcontracts from a Hispanic-owned SLBE firm (S&S) and $850K from a non-local firm (Double D), and award the entire trucking subcontract to a Black-owned firm (Monroe Trucking).¹³ Monroe Trucking originally was included for $1.6M across five subcontracts; that rose to $4.9M in the revised bids. In addition, the bids added $4.7M of new fees split across White and Black firms (Gallagher and Focon), and increased prices for all subcontract work across all subcontractors. 

The net impact on small businesses was marginal, increasing the percentage from 28.4% to 32.8% in the new contracts,¹⁴ while the impact on racial participation was dramatic—raising Black firm participation from 2.8% to as much as 10.7%, and reducing Hispanic participation from 18.7% to as low as 13.9%. Participation by White women-owned firms (Bond Blacktop) fell from 2.1% to 2.0%.

This outcome pleased CM Fife, who notes in November 2022 upon approval of the revised bids:

It was stalled, not because of the council, but it was stalled because of the negotiations to ensure that we were not engaging in processes to keep black contractors from getting access to what seemed to be an improperly bid process. So I'm very, very encouraged that all of the individuals that were part of this process came together. But it honestly was because I pulled the item from consent and I pulled the item to push for greater transparency and participation from people who don't typically get the work.

Racial preference is not the right solution 

Neither the City nor CM Fife have produced evidence to substantiate CM Fife’s claims of impropriety in Oakland’s SLBE program. But regardless of the veracity of the claims, the remedy for racial disparities is not to deliberately exclude one firm from the contract and give it to another on the basis of race. By Section 31 of the California Constitution, this appears to be illegal. It would also appear to be a violation of US Code Title 42, Section 1981, Title VII of the 1964 Civil Rights Act, and the 14th Amendment of the US Constitution. 

One might argue that the Council’s action to apportion subcontracts solely to Black contractors is not an act of discrimination; rather, it is correction for an explicit act of previous discrimination. But the City has not shown their action was a remedy for racial discrimination by any party, and we have no reason or information to suggest it was. Despite Fife’s prima facie claims that Black contractors were excluded from the process or the contracts, evidence suggests otherwise. OakDOT had communicated the contract opportunities to all iSupplier contractors and also directly to Black contractors. In addition, two firms (Monroe and S&S) had shared in the original trucking bid at $350K and $500K respectively, suggesting neither Black nor Hispanic firms were excluded from the process. 

Nonetheless, without further information from the City we cannot rule out the possibility of discrimination. We attempted to obtain such information, but received no response to our requests for interviews from parties involved in the contracting, nor from our California Public Records Act requests of the City.¹⁵

But even if discrimination was the cause for redistribution of subcontracts, it is not fair, nor equitable, nor legal to specifically exclude the original subcontractor (S&S Trucking) on the basis of race, as it appears the City did.

Such actions may put the City at risk for a lawsuit, which of course would be another diversion of taxpayer resources from the multitude of service and infrastructure needs in the City. And if this action was justified in some way on the grounds of discrimination, that would be material information to include in the rationale for bid revisions submitted to the City Council in November 2022. No such justification was provided.

Consequences far beyond the immediate contracts

Regardless of their legal implications, the actions of the City and members of the Council pushed the boundaries of ethical conduct, and effected broader harms to the people of Oakland.  

It is clear from the 2017 disparity report that Black contractors face unique barriers to accessing city contracts. But the Council’s ad hoc intervention, which altered a particular set of contracts in closed-door negotiations, is rife with opportunity for corruption.¹⁶

The negotiating parties might favor one firm over another without fair competition under public scrutiny. For example, there may have been other Black contractors that wished to bid on the subcontracts directed to Monroe Trucking and Focon, Inc. A transparent and public process for bidding was not executed. 

And such favoring need not even be direct. When a City Council member rejects contracts because he or she expects to see a certain firm favored in those contracts, there is an implied threat that bids will be rejected unless those expectations are met. Such expectations could be used to motivate preference to particular firms favored by Council members or City decision-makers. It is for this reason that strict rules limiting contract negotiations have been established in the City’s formal procurement process, including sealed bids and non-interference by Council members with City operations.

Moreover, this ad hoc approach does nothing to fix the root causes leading to disparities among Black and White women contractors. Only policy changes, such as those made to the SLBE program in 2021, can address those issues sustainably. And if those policies fail to deliver the intended benefits, then they need to be adjusted through concerted and transparent law-making decisions, not ad hoc and transient interventions.

The acts of the Council also deprived 433,000 Oakland residents of infrastructure, safety, and quality of life improvements that they paid for and deserve. OakDOT schedules safety upgrades when it repaves a road; so no paving means no safety improvements. And these are sorely needed; 33 residents died last year walking or biking in Oakland. That’s higher than the average murder rate in the United States. Street design can help reduce the speeding, illegal u-turns and reckless driving that cause those fatalities.

Even more frustratingly, the 235,000 residents East Oakland, Fruitvale, and West Oakland stood to benefit the most from these delayed improvements. These are predominantly Black, Hispanic and Asian residents who suffer disproportionate rates of crime, economic hardship, and urban blight. Black residents are 2-3 times more likely than other races to be killed or severely injured in traffic crashes and as pedestrians. CM Fife herself, in the summer of 2021, lauded the progress and equitability of the paving program; she specifically highlighted its overdue benefits to historically underinvested communities in West and East Oakland. Those benefits are now greatly deferred.

And let us not forget the $6M of additional costs paid in the revised contracts—monies that could have gone to further paving improvements, or to direct investments into neighborhoods, schools, parks and services needed by the communities of Oakland.

Most sadly, these negative impacts and missed opportunities were suffered by thousands of Oaklanders—just to benefit the owners of three construction firms.

1. Two years after Measure KK was passed, the paving activity was formalized into a 3-Year plan approved by the City Council in 2019, and then a 5 year extension of that plan approved in 2021. The 3-Year plan won national awards for its data-driven approach to addressing both road conditions and the City’s 9-point equity priorities.

2. The 5-year plan includes $300M for road construction and $75M for City staff to research, plan, design, bid, and manage the projects.

3. Oakland’s Fiscal Years begin on July 1st and end on June 30. Thus Fiscal Year 2021 means the year running from July 1, 2020 to June 30, 2021.

4. The City’s average Pavement Condition Index (PCI) deteriorated from 58 at the end of 2021 to 57 at the end of 2022. Over the previous three years (2019-2021) the PCI had increased from 54 to 58.

5. See item 2.18 of the Minutes and KTOP recording of January 18, 2022 Council meeting.

6. Five contracts were proposed, four for $13.7M and one for $5.2M.

7. See Consent Calendar discussion in KTOP recording of November 1, 2022 Council meeting.

8. The City Council Consent Calendar includes agenda items forwarded from subcommittees with unanimous support from that committee. All such items are consolidated in the full City Council meeting for a single vote of approval. All Council Members may pull any item from the Consent Calendar to hold a debate and independent vote on that item.

9. The original contract bidding process started in April of 2021 with the aim of contract completion in the spring of 2022. Overall the competitive bidding and contracting process requires 12-15 months to complete under normal operations.

10. Even the pretext of missing the 25% SLBE requirement is questionable. Analysis of the revised and approved bids revealed that the calculation used for the compliance analysis in the original bids was done incorrectly. The revised bids used corrected calculations. Had those been applied to the original bids, they would have cleared the threshold with 27.5% SLBE participation on the four $13.7M bids and 43.8% SLBE participation on the $5M bid. Were it not for the mistake, the original contract wouldn’t have been brought to council for approval, and the paving program would not have been delayed.

11. These findings apply to contracts worth $50K-$780K. Contracts below $50K were examined separately. Contracts above $780K were excluded from the disparity analysis because there are so few construction firms in Oakland that are capable of handling large projects. Thus the disparity conclusions of the findings only apply to a subset of the subcontracts within the bids that had smaller value.

12. We note that Monroe Trucking has no website or Yelp listing. The only evidence of their operations is US DoT registration (#2728748) suggesting they have 1 driver and 2 trucks in the firm. We could not verify this is up-to-date, but it does raise the question of whether Monroe presently has the capacity to support the full Trucking contract that was previously shared by 3 subcontractors.

13. Because the City did not comply with our public records request, we were unable to view the final contracts awarded by the City in the summer and fall of 2023. It is possible that the final contractors and contract amounts deviated from that approved in the November 2022 City Council resolution which left some discretion to the City to modify the contracts.

14. Note that the original contracts were in compliance with the 25% SLBE requirement according to the corrected calculations used on the revised bids. Thus the total SLBE participation across all 5 contracts was 28.4%, not 22.16% as originally understood by the City and Council.

15. Attempts were made to reach individuals in OakDOT (Fred Kelley, Sarah Fine, Mastewal Cherinet), former OakDOT director Ryan Russo, the Department Workforce & Employment Standards (Vivian Inman and Shelley Darensburg), Ghallagher & Burk, and Council Member Carroll Fife. None responded. All public records requests were also disregarded—a violation. of the California Public Records Act.

16. See remarks by Director Russo at the January 2022 City Council meeting regarding the standard limitations on City contract negotiations.