When the Piedmont Triad Airport Authority lets a construction contract that uses federal Department of Transportation money, must it apply North Carolina's 10% minority business goal under § 143-128.2 and the related HUB reporting rules, or can it elect the federal DBE program under 49 C.F.R. Part 26?

Plain-English summary

The Piedmont Triad Airport Authority's general counsel, William Cooke, sent the AG a five-part request about how the 2001 amendments to Chapter 143, Article 8 (the public-contracting law) interact with federal DBE rules for airport construction projects that the U.S. Department of Transportation helps fund. The AG, through Senior Deputy AG Reginald Watkins and a team of Special and Assistant AGs, walked through each question:

Question 1. Does N.C.G.S. § 143-128.2 apply to USDOT-assisted contracts? The opinion's answer depends on the Authority's election under N.C.G.S. § 63-54(c). If it lets a federally assisted contract under federal law, the state statute does not apply. If it chooses state law and state funds are involved, the state statute applies. The opinion also says it applies to a project financed wholly with state funds.

Question 2. Is the Authority required to submit the semi-annual HUB report under § 143-128.3(a) for USDOT-assisted contracts? No, but only when the Authority has elected federal law. The HUB report is required only of public entities "subject to G.S. 143-128.2." When the Authority elects federal law under § 63-54(c), it is not subject to § 143-128.2 and therefore not subject to the HUB reporting rule.

Question 3. Must the Authority submit the report under § 143-131(b) upon completion of a USDOT-assisted contract? The opinion says the report is mandatory if the Authority lets the contract under state law. If it elects federal law, the state report is optional. The AG says the federal reporting requirements do not conflict with a voluntary state report.

Question 4. Does § 143-128(f1) require dispute-resolution language in every construction contract, and must the Authority require the parties to use the process? No to both. The statute makes the dispute resolution process "available" by operation of law, and the contracts need not include it as long as they don't prohibit it. The Authority may include notice language but is not required to. The statute uses "may," not "shall," so the Authority chooses whether to require mediation as a precondition to litigation.

Question 5. Does the 10% MBE goal apply to a "building project" only when it involves buildings, or to any construction contract over $300,000 (like a fence)? The AG declined to answer. "Building project" is not defined anywhere in Chapter 143, and existing case law (Martin and APAC-Carolina) gives mixed signals (public buildings and school buildings clearly count; an airport runway grading was treated like a building project in APAC-Carolina). The AG declared the term ambiguous and provided no opinion.

Currency note

This opinion was issued in 2002. Check the current versions of Chapter 143, Article 8, N.C.G.S. § 63-54(c), and 49 C.F.R. Part 26 before applying its analysis to a current contract.

Background and statutory framework

State MBE goal versus federal DBE program. § 143-128.2 sets a 10% minority business participation goal for state-funded "building projects" of $300,000 or more. 49 C.F.R. Part 26 is the federal DBE program for DOT-assisted contracts. Both programs aim to broaden participation for non-traditional contractors, but they use slightly different definitions and slightly different mechanisms (overall goals, contract goals, good-faith efforts).

The airport election statute. N.C.G.S. § 63-54(c) is older than the 2001 MBE amendments and grants airport authorities the right to let federally-funded contracts under federal law when "federal moneys" contribute. This is the lever that lets airport authorities avoid conflicting state law. The AG read § 63-54(c) as overriding § 143-128.2 if the Authority elects federal law.

Scope of the election. The AG describes an election to let contracts involving federal money under federal law. The opinion does not separately address whether different funding portions of one contract could be governed by different programs.

The reporting triggers. The semi-annual HUB report (§ 143-128.3(a)) applies to entities subject to § 143-128.2. The § 143-131(b) report applies to contracts awarded pursuant to that section. The AG read both requirements in light of the Authority's election of state or federal law.

Dispute resolution. § 143-128(f1) creates a dispute resolution process available to all parties to the public entity's construction projects. The statute uses "may," giving the public entity discretion to require mediation as a precondition to litigation. The process is available by implication; the contract just cannot prohibit it.

Common questions

Q: When can this airport authority choose federal law for its contracts?

A: The AG says N.C.G.S. § 63-54(c) permits the Authority to let an airport contract under federal law when federal money contributes to it. The opinion does not describe the Authority's usual practice or recommend one choice.

Q: Does the opinion say how the election applies to different funding portions of one contract?

A: No. The AG says the Authority may let contracts involving federal funds under federal law and that § 143-128.2 then would not apply. It does not analyze separate funding portions within a contract.

Q: Is the AG's refusal to answer Question 5 binding on anyone?

A: The AG gave no opinion on the meaning of "building project" because the phrase was ambiguous. The opinion discusses Martin and APAC-Carolina but says neither precisely defines the phrase.

Q: Why was the dispute-resolution language treated as permissive?

A: The AG read "may" in § 143-128(f1) as giving the public entity a choice whether to require mediation before litigation. The opinion says the process remains available even if the contract omits it, provided the contract does not prohibit its use.

Citations

Statutes and regulations:

• N.C.G.S. § 143-128(f1) (dispute-resolution process; "may" language)
• N.C.G.S. § 143-128.2(a) (10% MBE goal for state-funded building projects)
• N.C.G.S. § 143-128.2(g)(1) (definition of minority business)
• N.C.G.S. § 143-128.3(a) (semi-annual HUB report)
• N.C.G.S. § 143-131(b) (post-completion minority participation report)
• N.C.G.S. § 63-1(a)(14) (airport authority within "municipality" definition)
• N.C.G.S. § 63-54(c) (election of federal law for federally-funded airport contracts)
• 49 C.F.R. Part 26 (federal DBE program); 49 C.F.R. §§ 26.5, 26.11, 26.45, 26.51, 26.53

Cases:

• Porsh Builders, Inc. v. Winston-Salem, 302 N.C. 550, 276 S.E.2d 443 (1981) ("may" as permissive)
• Martin v. N.C. Housing Corp., 277 N.C. 29, 175 S.E.2d 665 (1970) ("building project" implied to extend beyond buildings)
• APAC-Carolina, Inc. v. Greensboro-High Point Airport Auth., 110 N.C. App. 664, 431 S.E.2d 508 (1993) (runway grading treated as building project)

Source

• Landing page: https://ncdoj.gov/opinions/piedmont-triad-airport-authority/

Original opinion text

Re: Advisory Opinion: 2001 Amendments to Article 8 of Chapter 143

Dear Mr. Cooke:

By letter dated April 15, 2002, you asked for our opinion regarding the effect of the 2001 amendments to Article 8 of Chapter 143 of the North Carolina General Statutes on the responsibilities of the Piedmont Triad Airport Authority when letting contracts (Senate Bill 914, Session Laws 2001-496).

As noted in your subsequent correspondence of June 12, 2002, Question Nos. 1, 2, and 3 specifically relate to assistance provided by United States Department of Transportation ("US DOT") in contracts let by the Airport Authority. Question Nos. 4 and 5 apply to both US DOT and non-US DOT assisted contracts. We will address each question as presented to this office.

Question No. 1: Where [US] DOT-assisted contracts are involved, do the provisions of N.C. Gen. Stat. §143-128.2 apply to the Authority and its contract bidders (in cases where the statute applies to bidders), in particular, the provisions of N.C. Gen. Stat. § 143-128.2 (a), (b), (c), (e), and (f)?

Conclusion: Yes.

In answering this question, it should be noted the answer depends upon whether the entity makes an election to apply state or federal law in its letting of the contract. If a project is financed wholly with state funds, clearly the provisions of N.C. Gen. Stat. §143-128.2 would apply.

N.C. Gen. Stat. §143-128.2 (2001) sets out procedures for establishing and meeting minority business participation goals in public contracts let by public entities. N.C. Gen. Stat. §143-128.2(a) states:

A local government unit or other public or private entity that receives State appropriations for a building project . . . shall have a verifiable ten percent (10%) goal for participation by minority businesses in the total value of the work . . . . (emphasis added)

This section is paralleled at the federal level by 49 C.F.R. Part 26 (hereinafter sometimes referred to as "Part 26"), which applies to the Authority and its contracts when the contracts let by the Authority are financially assisted by the U.S. Department of Transportation. Part 26 is comprehensive in scope. It deals with all aspects of Disadvantaged Business Enterprise ("DBE") participation in contracts with federal assistance. In particular, § 26.45 sets out how recipients of federal money set overall goals for DBE participation. Section 26.51 describes the means to be used by recipients to meet overall goals and § 26.53 addresses the good faith efforts to be followed to meet contract goals when they are applicable.

N.C. Gen. Stat. §143-128.2 has the same general purpose as Part 26 at the federal level — to facilitate non-traditional participation in construction projects for those contractors who may not otherwise have the same opportunity to participate. The federal program speaks in terms of "Disadvantaged Business Enterprises" ("DBEs"), which are more specifically defined in 49 C.F.R. § 26.5. This class includes, but is not necessarily limited to, those occupying traditional minority roles, such as women and persons of color.

In contrast to the federal program, the State program speaks in terms of "minority business" participation, with "minority business" being more specifically defined in N.C. Gen. Stat. §143-128.2(g)(1). The federal definition of "DBE" and the state definition of "minority business" are nearly identical. As noted above, those definitions under 49 C.F.R. Part 26 and N.C. Gen. Stat. §143-128.2 are similar, but they are not the same.

N.C. Gen. Stat. § 63-54 (c) grants an entity discretionary authority to let contracts under state or federal law when federal moneys are involved. Where a project is financed wholly with federal funds, or by a combination of state and federal funds, the legislature, through its enactment of N.C. Gen. Stat. § 63-54 (c), allows "contracts for the acquisition, construction, enlargement, improvement, maintenance, equipment or operation of airports" to be let under federal laws, conflicting state laws notwithstanding, when a portion of the funds used are "federal moneys."

The provisions of N.C. Gen. Stat. § 63-54 apply to "municipalities." N.C. Gen. Stat. § 63-1(a)(14) includes in its definition of "municipality" any "authority . . . which may be authorized by law to acquire, establish, construct, maintain, improve, and operate airports and other air navigation facilities." Therefore, the Piedmont Triad Airport Authority is covered under N.C. Gen. Stat. § 63-54 (c).

If the entity, as permitted by N.C. Gen. Stat. § 63-54 (c), decides not to let contracts under federal law, then the requirements of N.C. Gen. Stat. § 143-128.2 would apply, provided any state funds are involved in the project. Assuming that the majority of funding for a project is derived from federal sources, the contribution of any state funds would trigger the requirements of N.C. Gen. Stat. § 143-128.2. This means at that point, the entity must elect whether to let the contracts under state or federal law. Obviously, where the entity chooses to let contracts under federal law relying upon N.C. Gen. Stat. § 63-54 (c), then state law would not apply.

While there may be substantial issues concerning preemption of federal regulations over state statutes, these need not be discussed, as N.C. Gen. Stat. §143-128.2 will be inapplicable to the Authority for contracts let using, at least in part, federal money, provided the Authority chooses to let the contracts under federal law. In choosing to have federal law apply under N.C. Gen. Stat. § 63-54 (c), any state laws to the contrary (here, N.C. Gen. Stat. §143-128.2) would not apply.

Question No. 2: Is the Authority required to submit to the Secretary of Administration, Office of Historically Underutilized Business, the semi-annual report described in N.C. Gen. Stat. §143-128.3(a) with respect to [US] DOT-assisted contracts?

Conclusion: No.

N.C. Gen. Stat. §143-128.3 (a) (2001) states "All public entities subject to G.S. 143-128.2 shall report" certain data with respect to "each building project" to the Department of Administration, Office of Historically Underutilized Business (emphasis added). This statute specifically applies to entities subject to N.C. Gen. Stat. § 143-128.2. In the limited circumstance where public entities exercise their discretionary authority under N.C. Gen. Stat. § 63-54(c) to let federally funded contracts under federal law, they are not subject to the reporting requirements prescribed by N.C. Gen. Stat. § 143-128.3(a); otherwise, they are subject to the reporting requirements of that statute.

Question No. 3: Is the Authority required to submit to the Department of Administration, Office of Historically Underutilized Business, the report described in N.C. Gen. Stat. §143-131(b) upon completion of each [US] DOT-assisted contract?

Conclusion: Yes.

Again, if the entity chooses to let contracts pursuant to state law, then this statute would apply, meaning that compliance with its reporting requirements is mandatory. N.C. Gen. Stat. §143-131(b) makes specific reference to contracts "awarded pursuant to this section." (Emphasis added). If the entity, consistent with authority granted by N.C. Gen. Stat. §63-54(c), chooses to let contracts under federal law, the mandatory reporting requirements of N.C. Gen. Stat. §143-131(b) would not apply.

Even if the entity chooses to let projects under federal law, it retains discretionary authority to voluntarily report information referred to in this statute, but it is not required to do so. The previous discussion shows that federal law sets goals in terms of "DBEs." State law sets goals in terms of "minority business" participation. Under federal law, the class known as DBEs would include, but is not necessarily limited to, minorities.

In addition, federal law sets forth minimum guidelines that entities receiving federal funds must enact. Such entities may do more in terms of fostering non-traditional participation so long as these extra efforts do not conflict with federal law.

In other words, the Authority, in instances where it has chosen to let contracts under federal law, may comply with the reporting requirements of N.C. Gen. Stat. §143-131(b) in addition to any reporting requirements found in 49 C.F.R. § 26.11. The reporting requirements in N.C. Gen. Stat. §143-131(b) are not in conflict with any federal law governing reporting requirements since no analogous federal reporting requirements exist.

N.C. Gen. Stat. §143-131(b) does not reference the goal setting provisions as set out in N.C. Gen. Stat. §143-128.2 (2001). "Minority participation" and "minority business participation" referred to in N.C. Gen. Stat. §143-131(b) may be solicited and recruited in the manner described in 49 C.F.R. Part 26. These efforts to solicit and recruit minorities and minority businesses under the federal law may be reported as required in N.C. Gen. Stat. §143-131(b) to the Department of Administration, Office for Historically Underutilized Business.

Question No. 4: Do the provisions of N.C. Gen. Stat. §143-128(f1) require that a dispute resolution procedure be incorporated in the contracts of all parties involved in the Authority's construction projects, subject to the possible $15,000 limitation, and, if so, must the Authority require the parties to use said dispute resolution procedure?

Conclusion: No. No.

For the purposes of clarification, it should be noted in the requestor's original inquiry, the statute referenced in question 4 inadvertently referred to subsection (g) as opposed to subsection (f1). As noted in the introductory paragraph, question No. 4 was asked in reference to both US DOT and non-US DOT assisted contracts.

N.C. Gen. Stat. 143-128 (f1) (2001) does not mandate inclusion of the dispute resolution process in all contracts for the Authority's construction projects. Subsection (f1) reads "This dispute resolution process will be available to all the parties involved in the public entity's construction project. . ."

The dispute resolution process will still be available to all parties even in the absence of inclusion of this process in a contract. That is, the dispute resolution process "will be available" by implication of law, as long as the contract does not prohibit its use between the parties. Subsection (f1) should be read to disallow any contract provisions making dispute resolution unavailable to any of the parties to the various contracts for the Authority's construction projects. The Authority may include language in its contracts to put all contracting parties on notice of the availability of the dispute resolution process.

Secondly, N.C. Gen. Stat. §143-128 (f1) (2001) states that "The public entity may require in its contracts that a party participate in mediation concerning a dispute as a precondition to initiating litigation concerning the dispute" (emphasis added). The use of "may" instead of "shall" regarding whether the Authority must require the parties to use the dispute resolution process indicates a permissive, non-mandatory stance by the legislature. See, e.g., Porsh Builders, Inc. v. Winston-Salem, 302 N.C. 550, 555, 276 S.E.2d 443, 446 (1981). Since the legislature chose to use the word "may" instead of "shall", the language of subsection (f1) allocates to the public entity the right to choose whether to contractually require parties to use the dispute resolution process. See, e.g., Id.

Question No. 5: Do the goal setting provisions of N.C. Gen. Stat. §143-128.2 which must be set for "building projects" apply only to buildings projects for the "erection, construction, alteration or repair of any buildings costing $300,000 or more" or do they apply to any type of building contract costing $300,000 or more (such as, i.e., the building of a fence)?

Conclusion: The statutes addressing this issue are ambiguous. Therefore, this office provides no opinion on this question.

Question No. 5 includes both US DOT and non-US DOT assisted contracts. The essence of this question is whether "building projects" is limited to buildings or whether it is intended to be broadly construed as encompassing all sorts of construction projects. The phrase "building projects" is ambiguous. It is not defined in the section in which it is used. Nor is it defined in any other section of the statutes (according to the General Index of the N.C. General Statutes).

A review of two cases from the North Carolina Supreme Court and Court of Appeals sheds some light upon the meaning of the phrase "building project" without specifically defining it. In the case of public construction, a "building project" has been found to include "public buildings, school buildings, highways, etc." thus implying that the definition extends beyond the scope of a building. Martin v. N.C. Housing Corp., 277 N.C. 29, 49, 175 S.E.2d 665, 676 (1970). In a case involving an airport authority, the court implies, but does not define, a "building project" as including grading work on an airport runway. APAC-Carolina, Inc. v. Greensboro-High Point Airport Auth., 110 N.C. App. 664, 431 S.E.2d 508 (1993). Despite these cases, however, no one case in North Carolina specifically defines the meaning of "building project." Therefore, we too are unable to define the phrase with any precision.

We trust that this Advisory Opinion will be of assistance to you in advising your client.

Sincerely,

Reginald L. Watkins
Senior Deputy Attorney General

Robert O. Crawford, III
Special Deputy Attorney General

Joseph E. Herrin
Assistant Attorney General

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