FRANKFORT — A state program for minority- and female-owned road contractors has done little to help businesses build independence from the program since it was begun in 1983.

        Only two Kentucky companies have gotten enough business to go out on their own, and both re-entered the program after business dropped off.

        The Disadvantaged Business Enterprise program, under which $37 million in state roadwork was awarded in the fiscal year ending June 30, is intended to make participating firms successful enough to “graduate” from it.

        In 1999, two longtime firms in the program — Matsuda Inc. of Bullitt County and H&G Construction of Lyon County — graduated when their gross receipts exceeded the program's limit, then a $16.6 million average per year over the most recent three years. The limit has since increased to $17.4 million.

        The following year, revenues for both firms dipped, and they applied to get back in. The Kentucky Transportation Cabinet recertified them. There is no restriction on how long a company can participate.

        Currently, there are 67 companies certified as disadvantaged for highway work, including the two firms that re-entered the program.

        The fact that no Kentucky road contractor has permanently graduated illustrates a problem, said Maurice Sweeney, who headed the program from 1992 to 1996.

        “There should be some time limit for this program and similar programs, and within that time limit you sink or swim,” he said. “The program should help open a door and let people see your capabilities, but not be a program for life.”

        Jose Sepulveda, head of the Federal Highway Administration's office in Kentucky, agreed and pointed to U.S. Department of Transportation regulations. One objective is to “assist the development of firms that can compete successfully in the marketplace” outside the program.

        “The whole idea of the program is to help disadvantaged businesses become viable,” Mr. Sepulveda said. “I don't think it was ever intended to become a lifetime thing.”

        The FBI is investigating Kentucky's program following two recent reports that found mismanagement and possible fraud. One report was from the Federal Highway Administration, and the other was by a private attorney asked to examine the program by Transportation Secretary James Codell III.

        The program began as a way to give a larger share of federally funded contracts to minorities and women in a business dominated by white men.

        Under the program, a percentage of money paid under federally funded road contracts awarded by the Transportation Cabinet must go to companies certified as disadvantaged.

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