SACRAMENTO - Just when California is poised to ramp up road construction, Caltrans may roll back a civil rights program that has steered tens of thousands of federally funded contracts to woman- and minority-owned small businesses across the state.

State Department of Transportation officials say they prefer to continue administering the Disadvantaged Business Enterprise program -- which pushes contractors to give a percentage of their contracts to women and minority subcontractors -- but a federal court decision could kill the decades-old quota system.

A ruling by the 9th U.S. Circuit Court of Appeals in May would force Caltrans to prove to the U.S. Department of Transportation that discrimination exists among the big contractors that share a $4 billion pot of federal transportation construction funding.

And that may be difficult.

Caltrans officials recently hosted 12 public forums for small business owners and other interested parties around California, and only 70 people testified that they had encountered discrimination. Two people spoke in opposition of the program, which has been around for 27 years.

The agency has since scheduled a new round of meetings, including one March 1 in San Jose.

Though coincidental, the timing of the court decision could be especially painful because Gov. Arnold Schwarzenegger and legislators want the state to embark on an ambitious highway construction plan.

Now, the owners and employees of many small firms may be shut out and some predict they may be forced to shut down.

"If they discontinue the Disadvantaged Business Enterprise," said Tu Nguyen, whose San Jose company works on irrigation projects at freeway interchanges, "it's going to hurt a lot."

Just how much? The small firm he works for, T&L Landscaping, relies on the minority contracts for half its revenue.

The program works like this: Say California is awarded federal funding for a project, like for the $40.1 million going to repair the pavement and bridge at a Branham Lane overcrossing in San Jose. The state uses a formula and tells the main contractor that its bid should include a certain percentage of business with women or minority firms, in this case 11 percent of the project value. As a result, 10 "disadvantaged" businesses are working there on contracts worth $4.4 million.

Caltrans officials say the quota program has been highly successful in providing "a level playing field" for women and minorities since its roots in 1979.

Olivia Fonseca, the agency's deputy director for the office of civil rights, said Caltrans Director Will Kempton is "passionate about the program and wants it to remain as we have now."

But a court challenge against Washington state has prompted transportation officials in California -- and other states -- to re-evaluate the program.

The suit, filed by Western States Paving Co. of Vancouver, alleged that its white owner was turned down for subcontracting work by the city of Vancouver and Clark County because the prime contractor chose minority-owned firms instead. In one instance, the bid by Western States Paving was $100,000 less than a minority bid.

In the end, the appeals court ruled that Washington "has not proffered any evidence of discrimination within its own contracting market" and therefore "failed to meet its burden of demonstrating that its DBE program is narrowly tailored to further Congress's compelling remedial interest."

Because California's program deals with federal transportation money, it has been unaffected by Proposition 209, the 1996 voter initiative that bans the state from using racial preferences to award public contracts.

Argentine-born George Quinonez, of PCS Construction in Pleasant Hill, gets at least 75 percent of his business through the program, which has helped him purchase hundreds of thousands of dollars in equipment needed to pour a special concrete on freeways that dries in two hours.

His biggest fear: Being undercut by prime contractors if Caltrans won't be looking over their shoulders. Small and medium sizes contractors, he said, "are going to be at the mercy pretty much of what a big prime is willing to pay." him or her for his or her services."

Trucking company owner Pat McDonald of Santa Cruz, whose 20 trailers haul rocks, gravel and sand to and from highway construction sites, stands to lose more than 20 percent of her income if Caltrans pulls the plug.

"It is a viable program because it opens up the doors of opportunities for emerging businesses," McDonald said. "The issue is, simply without a program like this they won't look at those emerging businesses; they would have no reason to."

There are at least 5,000 firms listed on the Disadvantaged Business Enterprise database. And even more across the country -- from firms that work on and around freeways, to the owners of airport concession shops.

"I know the whole nation is watching to find out what's going to happen with this," said Todd Christner, director of operations for DBE Goodfaith Inc., a web-based firm that helps connect contractors with sub-contractors.

"I think a lot of companies will go out of business if this happens, without the legal requirement for large companies to hire smaller, minority owned companies," Christner said, convinced that contractors will either do the work themselves, or hire white-owned sub-contracting firms they've known for years.

"It will be millions and millions of dollars of funds diverted away from small businesses and women- and minority-owned firms in California," said Lloyd Chapman, president of the American Small Business League, a Petaluma-based organization. "It's a step in the wrong direction."