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Similar disparities exist in education along racial and ethnic
lines.
The so-called "glass ceiling" remains an obstacle to
advancement for women and minorities.
There remain substantial
pay disparities based on race, gender, and ethnicity even when
levels of experience and education are taken into account.
Without doubt, patterns of stereotyping persist, reducing
opportunity for many Americans to achieve their potential.
The.
various civil rights enforcement agencies of the federal
government, and their ,state counterparts, still confront incident
I
upon grievous incident of unfairness on the basis of status in
violation of law.!!
Until these conditions are alleviated, the
federal authority cannot responsibly declare victory in achieving
r
the national goal of a genuinely inclusive society.
As the President has often stated, affirmative action
within certain constraints -- can be a useful tool to help
achieve the national goal. of equal opportunity.
At th'e same
time, it is important to address real and perceived abuses in the
use of affirmative action programs.
The President and other
senior'officials have repeatedly eschewed numerical straitjackets
and other inflexible methods which discourage regard for valid
l'In 1994 alone, the EEOC found violations on employment
discrimination laws·in
cases. The Department of
Education found unequal educational opportunities in
separate occasions. The civil Rights Division ·of the Department
of Justice has
ma~ters under in~estigation or in
litigation currently. The Office of 'Federal Contract Compliance
Programs in the Department of Labor currently has
matters involving,potential violations of anti-discrimination
laws and regulations.
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3
qualifications and discredit affirmative action as a pragmatic
response to the historic problem of exclusion of minorities and
women.
Some of these abuses -- and the mythology which has grown
up around them -- may have.spawned the so-called "Civil Rights
Initiative" in California and other legislative measures to limit
affirmative action or eliminate it altogether.
,Balancing these concerns, the ctinton Administration should
clarify its policy on affirmative action in emploxment and
education..
This clarification should both govern enforcement of
. ,existing laws and executive orders bearing on discrimination on
the basis of race, national origin and gender, and provide a
framework for defending
~gainst
attacks on our policy.
Clarification of our policy should include an appeal to the
best in all Americans. Affirmative action at its core is a tool
to move America toward inclusion and responsibility, and away
from our legacy of discrimination. This nation has come too far
to move backwards now. But we have not come far enough that we
can ignore the continuing realities of discrimination, and the
continuing need for remedies.
I.
What We'Mean
At the outset,'affirmative action needs definition.
As used
in this text! affirmative action means any plan or program which,
based in any part on race, ethnic origin or.gender, creates or
�- 4
enhances an opportunity to perform.
In plain terms, and in
accordance with Supreme 'Court p~e6edent, this Administration has
supported affirmative action plans; which do not compromise valid
qualifications, and which are flexible, realistic, reviewable and
fair.
Generally, this means we have supported affirmative action
plans where (1) race, national origin or gender
several factors considered,
(2)
ii
~ne
among
fundamental and va;ti'd job or
educational qualifications are not compromised,
(3). numbers used,
if any, are gen~ine. ~6als rather tha~ numerical straightjackets
or "quotas," (4) timetables for achieving the goals are
reasonable and there is review of the continuing value of the
plan at appropriate intervals, and (5) no v~sted ri~ht (as
distinct from a sense of entitlement) is at issue or is unduly
burdened.
As demonstrated below, this kind of affirmative action
is well within the parameters set by the Supreme Court.
II.
Legal Parameters: Court-Ordered Affirmative Action
1.
Courts have broad remedial power to order
race~
conscious remedies to eradicate the continuing effects of past
discrimination.
Three Supreme Court decisions provide the framework for an
analysis of such affirmative action orders.
In Local 28 of Sheet Metal Workers v. EEOC, 478 U.S. 421
(1986), the Court held that race-conscious relief may be.ordered
as a remedy under Title VII for past discrimination "where an
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employer or a labor union has engaged in
p~rsistent
or egregious
discrimination, or where necessary to dissipate the lingering
effects of pervasive discrimination."
Id. at 445.
The Court
noted, however, that such relief would not be appropriate in all
cases.
The Court stated that such relief should not be invoked
simply to create a racially balanced workforce, and should be
tailored to fit the nature of the violation it seeks to correct.
Notably, the Court rejected the argument that Title VII
authorizes a court to award so-called "preferential" relief only
to the actual victims of unlawful discrimination.
On the
contrary, the Court approved a remedy that provided for a
numerical hiring goal -- 29% nonwhite union membership, based ,on
the percentage of nonwhites in the relevant labor pool.al
On the same day that Local 28 was decided, the Court
addressed whether Title VII precluded, the entry of a consent
decree (adopted to settle the litigation) ,that provided race
conscious relief through promotional goals ,to non-victims of the
discrimination.
(1986).
Local No. 93 v. City of Cleveland, 478 U.S. 501
The Court held that Title VII did not preclude entry of
such a consent decree.
The Court stated .that a consent decree is
YAlthough the Court in Local 28 principally addressed whether the
remedial order exceeded the scope of Title VII, it also noted
that the defendant challenged the remedy under the equal
protection component of the Fifth Amendment's Due Process Clause.
478 U.S. at 479-481. The Court expressly declined to address the
proper test to be applied in analyzing the constitutionality of
race-conscious remedial measures, since it found that the remedy
passed "even the most rigorous test" (strict scrutiny).
at
480.
�"
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6 '
more like a voluntary agreement than a court order, and' any
limits that there might be under Title VII on a court's remedial
power are not implicated by a consent decree.
Thus, the
standards for voluntary affirmative action plans (discussed
below) control plans adopted in a consent decree.
Finally, in united states v. Paradise, 480 u.s. 149 (1987),
the Court addressed 'the constitutionality of a remedial order
requiring one-black-for-one-white promotions for state troopers
in the Alabama Department of Public Safety.
The Court upheld the
order, largely in view of the protracted history of the case and
the unavailability of any other effective' remedy.
Al though not
deciding whether strict scrutiny applied to the remedy, the Court
found that the relief ordered survived that analysis because it
was narrowly tailored to served a compelling governmental
purpose.
The Court found that, the race-conscious relief was
justified 'by a compelling interest in remedying the persistent
discrimination in hiring and promotions.
The Court also found it
was narrowly tailored because no other effective remedy was
available, it was flexible in application (it could be waived) ,
it was temporary, it did, not impose an undue burden on innocent
third parties, and it required that only qualified black troopers
be promoted.
Although the Court in Paradise' did not address whether
strict scrutiny
applie~
to race-conscious relief challenged under
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the Equal Protection Clause, in City of Richmond v. J.A. Croson
Co., 488 U.S. 469 (1989) (discussed more fully below), the Court
held that all racial classifications by state actors (at least,
if not only, in the context of government contracting) are
subject to strict scrutiny, even those that are remedial.
Thus,
as a practical matter, most of the cases addressing raceconscious relief analyze the lawfulness of-the relief under the
constitutional test because either the remedial plan involves a
state actor (most of the consent decree cases) or the defendant
asserts that the court's plan violates the Constitution (a claim
in Local
28).J./
Accordingly, there is now little dispute over the power of
courts to order affirmative action plans, or the right of parties
to settle th~ir case with a consent decree incorporating .bch a
plan (at least so long as there remain continuing effects of past
discrimination).
Thus, most of the cases involving affirmative
action remedies now address whether the remedial plan is
"narrowly tailored. II!'
~
In each o~ the above-three cases the Reagan administration
filed briefs opposing affirmative action, arguing that nonvictims
of discrimination could not benefit from affirmative action and
that attaining a numerical balance of races could not be
justified under previous Supreme Court decisions. The Supreme
Court rejected these v i e w s . ,
!'Of course, in the true remedial case, the court will have
necessarily found unlawful _discrimination before addressing a
remedial plan. In the consent decree cases, questions do arise
on what showing is necessary to establish past discrimination and
the need for remedial action. As noted above, evidence that
(continued ... )
�- 8
2.
The Clinton Administration
h~s
supported
affirmat~ve
action as a remedy to systemic employment discrimination.
In Aiken v. City of Memphis, 37 F.3d 1155 (6th Cir. 1994)
(en banc} , the united states filed a brief as
~micus
curiae
arguing that the City's race-conscious promotional goals do not
violate the E~ual Protection Clause:since t~e city had a
compelling interest.in remedying the effects of past
discrimination and the goals were sufficiently narrowly tailored.
We asserted that courts consider the following factors in
determining whether race-conscious affirmative action is narrowly
tailored:
the necessity of the relief and the efficacy of
(1)
alternative remedies;
(2) the flexibility and duration of the
remedy, including a waiver provision;
(3) the impact on third
parties; and (4) the relationship between the numerical goals and
the relevant labor market.
with respect to these
factors~
the
critical features are that the goals are contingent on the
availability of
qual~fied
minority candidates, that they are
temporary (and thus will be terminated when the long-term goals
of the decree have been met), that they do not operate as an
absolute bar to the advancement of white candidates, and that
they are tied to the relevant labor market.
in some cases
~(
~he
We also argued that
relevant benchmark may be the civilian labor
... continued)
establishes a prima facie case of discrimination is generally
sufficient to support an affirmative action plan in a consent
. decree.
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force, while in others
(~,
where no special expertise or
training is involved) it may be the general population.
Aiken the en banc
co~rt
(In
expressly rejected the argument that the
promotional goals were properly based upon civilian labor force
figures. )
III. Legal Parameters: Voluntary Affirmative Action Plans
A.
,Employment
1.
The Supreme Court has decided three cases involving
voiuntary affirmative action plans.
First, in united
Steelworkers ,of America v. Weber, 443'U.S. 193
(1~79),
the Court
addressed a challenge to a voluntary affirmative action plan
adopted by
a
private employer, Kaiser Aluminum & Chemical Corp.,
and a union, ,united Steelworkers of America, which was ,included
within a master collective bargaining
agreem~nt.
The plan was
designed to eliminat. conspicuous racial imbalances in Kaiser's
almost exclusively white craftwork forces by reserving for black
employe~s
50% of the openings in plant training programs, until
the percentage of black craftworkers was commensurate with the
labor force.
At the time of the agreement, only 1. 83% of the
skilled craftworkers'were black.
The Supreme
Cou~t
,held that under Title VII, Kaiser and the
union could lawfully adopt voluntary race-conscious measures that
were specifically "designed to break down old patterns of racial
segregation and hierarchy" that had been historically 'implicit in
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the membership practices of the union, in order to "open
employment opportunities for Negroes in occupations which have
been traditionally closed to them."
Weber, 443 U.S. at 208.
The
Court stated that Congress, under Title VII, did not intend to
"limit traditional business freedom to such a degree as to
prohibit all voluntary, race-conscious affirmative action,"
recognizing that "[s]uch a prohibition would diminish traditional
management prerogatives whi,le at the, same time impeding
.
'
attainment of the ultimate statutory goals." ·Id. at 207.
Second, in Wygant v. Jackson Bd. of Educ., 476 U.S. 267
(1986), the Court addressed whether a school board could
constitutionally give
prefe~ential
treatment to minorities in
layoffs .pursuant to a collective bargaining agreement.
A
majority of the Court voted that it could not, but there was no
majority opinion.
At a minimum, the decision stands for the
proposition that layoffs by a public entity are to be treated
differentiy under the constitutionfl from hiring and promotion
decisions because, in part, the effect of the policy is felt by
particular individuals (the nonminorities who are laid off) and
not. dispersed among nonminorities as a whole.
A majority of the
'court: also seemed to agree that remedying "societal"
discrimination cannot be deemed sufficiently compelling to pass
muster under strict scrutiny.
A majority of the Court did
reaffirm, however, that an affirmative action plan need not be
lIThe Court has not addressed layoffs· under any federal statute .
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limited ,to remedying specific instances of identified
discrimination to be sUfficiently narrowly tailored.
Finally, in Johnson v. Transportation Agency, 480 U.S. 616
(1987), the Supreme Court evaluated, under Title VII, an
affirmative action plan adopted voluntarily by a state
"transportation agency (Agency), that contained provisions
distinctly ,different from the plan that the Court had evaluated
, '
in Weber.
The Agency had found that women were represented "far
less than their. proportion of the Cpunty labor force in both the
Agency as a whole and in five of seven job categor,ies."
480 U.S. at 621.
Johnson,
The Agency's Plan was created, in part, to
remedy the underrepresentation of women in job classifications
where "women had not traditionally been employed
* * *
and
* * *
had not been strongly motivated to seek training or employment in
them 'because of the limited opportunities that have existed in
the past for them to work in such classifications.
'11
Ibid.' The
Agency authorized officers making promotions to positions in
which women are underrepresented to consider, as one factor, the
sex of a qualified applicant.
The long-term goal of the plan was
to achieve a workforce whose composition reflects the proportion
of women in the area 'labor force.
The plan was challenged by a
white male who was passed'over for promotion as a road dispatcher
in favor of an equally qualified white female., There had never
been a female road dispatcher employed at the
Agency~
�- 12
The
Supre~e
Court held that the Agenoy's consideration of
sex in promotion decisions was permissible under Title VII, since
the plan "directed that numerous factors be taken into account in
making hiring decisions, including specifically the
qualifications of female applicants for particular jobs
Johnson, 480 U.S. at 637.
* * *
The Court determined that it was not
unreasonable for the employer to take into consideration the
female applicant's sex in making its'decision "since it was
undertaken to further an affirmative action plan designed to
eliminate Agency work force imbalances in traditionally
segregated job categories. ri
2.
Ibid.
The Supreme Court, and lower courts, have essentially
found that there are at least two permissible bases for voluntary
affirmative action under Title VII:
1} to remedy a clear and
convincing history of past discrimination (Weber), and 2} to cure
a manifest imbalance in the employer's workforce (Johnson).
Court has allowed that there may be other permissible
The
bases.~
~
The Reagan administration maintained (in Wygant and Johnson)
that a history of societal or community discrimination, or a
desire to achieve some numerical proportion or balance of races
or gender, cannot justify an affirmative action plan. The Court
did not accept these limitations.'
In contrast, in Taxman v. Board of Educ. of the Township'of
Piscataway, Nos. 94-5090, 94-5112 (3d. Cir.) (appeal pending),
the Clinton Administration, reversing the position of the Bush
administration, argues that the Supreme Court did not intend to
foreclose other permissible bases for employers to adopt
affirmative action plans, and 'that the Supreme Court employs a
deliberate, case-by-case approach in evaluating voluntarily
adopted plans. The united states also argued that even absent
(continued ••. )
�~
13
Once there is a permissible basis for a voluntary plan,
3.
a court will next consider whether the method utilized
"unnecessarily trammel[s]" the interests of nonminorities (or
males).
Weber, 443 U.S. at 195; Johnson, 480 U.S. at 637-638.
In Weber, the Court found that the plan was permissible for three
reasons:
firit, it "[did] not require the discharge of white
workers and their replacement with.new black hires"; seciond, "the
plan [does not] create an
absolut~
bar to the advancement.of
white employees"; and third, "the plan is a temporary measure[,]
* * * not intended to maintain racial balance, but simply to
eliminate a mariifest racial imbalance."
W~ber,
443 U.S. at 208.
In Johnson, the Court found that a plan that took gender into
account as one of a number of factors in making a promotion
decision was permissible under the general framework of Weber.
Johnson, 481 U.S. at 637-640.
The Court noted that the agency's
affirmative· action plan "resembles the 'Harvard Plan' approvingly
noted by Justice Powell in
* * * Bakke * * *, which considered
race along with other criteria in determining admission to the
college."
Id. at 638.
The Court determined that under the
agency's plan, "[n]o persons are automatically excluded from
consideration" because "all [women and
m~n]
are able to have
their qualifications weighed against those of other applicants."
Ibid.
The Cour.t further .stated that the male employee "had no
continued)
evidence of pas~ discrimination or a manifest imbalance in the
overall workforce, a school board may utilize affirmative action
measures to ensure faculty diversity within the various
educational ·components of a school district.
§/ ( •••
�- 14
absolute entitlement ,to" the position that he sought, because
denial of
~
promotion "unsettled no legitimate, firmly rooted
expectation * * *.11
Ibid.
Finally, the Court found ,that plan
did not unnecessarily trammel the interests of males because it
was designed to lIattain a balanced work force, not maintain one."
The Court also stated that it was "unsurprising that the Plan
contains no explicit end date, for the agency's flexible, case
by-case approach was not expected to yield success in a brief
period of time."
,Ibid.
"Express assurance that a program is
only temporary may be necessary if ,the program actually sets
aside positions according to specific numbers."
Id. at 639-640.
B.
1.
area.
Education
There has been surprisingly little case law in this
The leading case is still Regents of the Univ. of Cal. v.
Bakke, 438'U.S. 265 (1978), in which the Supreme Court struck
down a state medical school's separate admissions program and
reservatibn of' a fixed number of ~lots for designated minorities.
The Court declined, however, to hold that a university could
never consider race asa factor in admissions.
The medical
school had not claimed that its program was justified as a remedy
for its own
previou~
discrimination (as opp6sed to general
societal discrimination).
Moreover, Justice Powell in his
separate opinion found that "the attainment of a diverse student
body * * * clearly is a constitutionally permissible goal for an
institution of higher education."
'Id. at 311-312.
Although the
�- 15
medical school's reservation of admissions slots for ethnic
minorities was not, according to Justice Powell, a necessary or
appropriate means of achieving this goal, a more flexible program
that treated each applicant as an individual might be
constitutionally permissible.
2."
Id. at 315-319.
Two recent lower court decisions have again focused
attention on the question of what forms of affirmative action are
permissible in the education context.
38 F.3d 147 (4th Cir. 1994)
In Podberesky v. Kirwan,
(Podberesky'II), the Fourth Circuit
struck down the Banneker Scholarship program at "the. University of
MarylanQ at College Park (UMCP), which awarded a limited number
of merit-based scholarships restricted to black students. Y
The
appeals court held that the district court had erred in granting
Y
The Clinton Administration filed amicus briefs in"the district
court and court of appeals in Podberesky II. We argued that
where a state .has previously operated a dual system, there is a
presumption that continuing racial problems are a result of prior
discrimination, and the court thus erred in requiring the
university to dispr9ve ~lternative theories of causation.
In particular, ~e disagreed with the district court's
suggestion that a hostile racial climate on campus and negative
reputation among blacks can never serve as eVidence ~upporting a
need for remedtal action because these problems may also be .
caused by societal discrimination or by blacks' awareness of
historical facts.
We further argued that the district court should have given
some weight to the long and continuing history of efforts by the
Department of Education's Office for civil Rights to require the
state of Maryland to desegregate its formerly de jure segregated
system of higher education. The state had for the first time
submitted an acceptable desegregation plan in 1985 (of which the
Banneker program represented one aspect), and is still being
monitored by OCR.
.
�- 16
summary judgment to ·.the university on its claim that.. the Banneker
program was necessary to remedy c.ontinuihg . effects of i tspast
discrimination, and that, in any event, the program was.not
n~rrowly
tailored to serve a
. rehearing is pending.
remedi~lpurpose.
,A petition 'for
See a·lso Podberesky y. Kirwan, 956 F. 2d .52
(4thCir. 1992) (Podberesky I)
(remanding for specific findings
on present effects Of past discrimination by.UMCP.).
~.
In Hopwood
Texas, 861 F. Supp. 551
(W.D~ Te~.
1994), the
district court struck down a law school admissions" program that
.
.
applied lower admissions standards to African American and
Mexican American . applicants and had a 'separate committee to
"
consider those applicants.' The court found that ,the program
served" a legitimate remedial purpose in that there was strong
evidence of continuing effects in .the law school'of past
discrimination in both the University of Texas and the state
,educational system as a whole, id. at 571-573, but that the
.
.
program was not narrowly tailored. because it failed to compare
applicants on an individual basis as required by Justice Powell's
opinion in Bakke.
·Id. at, 578-579.
The court refused" however,
to order prospective injunctive relief, since the
sub~eq~ently
law
•..
school had
established.a new admissions procedure that appeared
to eliminate the defects found by the court.
The court found
that the plaintiffs (white applicants who were not admitted) had.
not establ ished that they would have been admitted. in the a:bsence
of the program,. and thus declined to award compen'satory damages
�- 17
or order that they be admitted' to the law school.
583.
Id. at 582
The plaintiffs have appealed the denial of relief (the
state did not cross-appeal).
The court also found that the law school had a compelling
interest in achieving a diverse student body that would support
the use of an appropriate affirmative action program.
Supp. at 571.
861 F.
We are not aware of any 60urt of appeals decision
since Bakke addressing this' issue, and the courts in Podberesky
did not consider whether the Banneker pr9gram was justified on
that basis.
3.
In sum, voluntary affirmative action programs by state
schools may generally be
subj~ct
to strict scrutiny and therefore
must be narrowly tailored to serve a compelling state interest.~
See City of Richmond v. J.A. Croson Co., 488 U.S. 469, 494 (1989)
(plurality); ide at 519 (Kennedy, J., concurring).
The need to
remedy past discrimination undoubtedly constitutes a compelling
interest.~
Although an institution must have a "strong basis in
evidence" for concluding that remedial action is necessary, ide
at 500, it may adopt a voluntary program even in the absence of a
court finding of discrimination.
Se~Wygant
v. Jackson Bd. of
~
Race~conscious remedial measuies enact~~ by congre~s are'
subject to intermedi,ate scrutiny. Metro Broadcasting. Inc. v.
FCC, 497 U ~ S • 547, ,563 - 5 6 5 ( 1990) •
2'Achieving a diverse student body, according to Bakke, is also a
valid educational goal.
'
�- 18 -
Educ., 476
U~S.
267, 289 (1986)
(O'Connor r J., concurring)
(violation arises, not with making of findings, but when wrong is
committed).
Indeed,'the united states' view, adopted by the
Supreme Court in united states v.
Fordice~
112 S. ct. 2727, 2736
37' (1992), is that a,state ha~ an affirmative obligation to
,eliminate all vestiges of a previously segregated higher
education system, and that obligation is not
adoption of race-neutral policies.
satisfie~
by mere
The recently entered consent
decree in our. higher education s.uit against Louisiana " for
,exampl~,
,contains provisions requiring the state to establish
race-targeted scholarships.
Further, once a university. has demonstrated a basis in
evidence that continuing ,effects of discrimination exist, it mU9,t
also show that a particular affirmative action
narrowly tailored to remedy those effect's.
progra~
is
In the employment
context, courts have focused on a number of factors in making
that determihation, including whether the preference unduly
, affects the rights of innocent third parties and y!hether the same
objectives ,c6uld be achieved by a r~ce-neut~al altern~tive.
\
See
'
Wygant, 476 U.S. at 280-284 (plurality); Croson, 488 U.S. at 507.
other factors include "the
,
flexi~ility
'
and duration of the
,
relief" and "t,he relationship of the numerical goals to the
relevant labor market."
171 (1987)
(plurality).
united states v. Paradise, 480 U.S. 149,
�- 19
IV.
Affirmative Action Abuses
Much of the criticism of affirmative action is directed
toward such abuses.
Such abuses appear to derive from either
ill-conceived or ill-implemented plans.
Even the benign or
remedial use of race implicates the "core purpose of the
Fourteenth Amendment," which is to. "do away with all
"
governmentally imposed distinctions based on race."
Sidoti, 466 U.S. 429, 432 (1984).
Palmore v.
For this reason, matters of
duration, scope and flexibility are central to the permissibility
of a particular affirmative action plan.
While there is no
indication that this Administration has "abused" affirmative
action (or
suppo~ted
any such abuse), support 'for affirmative
action seems often to mean,in some minds, tolerance of, if not
support for, its abuse.
This is mistaken and should be
addressed.
V.
The Case for Affirmative Action
Despite the possibility of abuse, there are many reasons to
continu~ ~o support legitimat~ affirmative action programs in
employment and education.
African Americans and Hispanics
continue to lag far behind whites in employment, income and
educational 'level.
an
averag~
In
199~,
for example, African Americans had
unemployment rate of 12.9% and Hispanics 10.6%, while
the average unemployment rate for whites was only 6.0%.
See
�- 20
statistical Abstract of the united states 1994 at 396.
Although
these figures show modest improvement from 1985, when·the rates
were 15.1% for African Americans, 10.5% for Hispanics, and 6.2%
for whites (ibid.), the disparities are still striking.
Similarly., in 1992, the median income for African Americans and
Hispanics was $i8,660 and $22,848 respectively, while for whites
it was $32,368.
Id. at 464.
Unequal access to education plays an important role in
creating these disparities.
In a constantly changing economy
requiring increasing levels of technical expertise, a college
degree (or even a more advanced degree) has become more and more
important in obtaining a job.
graduates were unemployed.
In 1993, only 2.9% of college
Id. at 418.~1
While 27.8% of the
white labor force had a college degree, only 16.5% of the African
American labor force and 11.7% of the Hispanic labor force had
completed college.
Id. at 397.
Overall, 22.6% of whites had a
college degree, while only 12.2% of African Americans and 9.0% of
Hispanics did.
Id. at 157.
The picture is even worse for
education beyond a bachelor's degree, necessary for many betterpaid jobs:
7.7% of whites, but only 3.4% of African Americans
and 2.6% of Hispanics had advanced degrees.
~I
Ibid.
African American and Hispanic college graduates were more
likely to be unemplqyed than their white counterparts, however,
with unemployment rates of 3.8% and 3.9% compared to 2.8% for
whites.
Ibid.
�.- 21
Among high school graduates, fewer 'African Americans and
Hispanics than whites go on to college.
In 1992, 67.0% of white
high school graduates under 25 were enrolled in or had completed
at least one year of college.
The comparable figures for African
American and Hispanic high school graduates were 53.3% and 55.0%
respectively.
Id. at 177.
High school dropout rates for 1992
were 4.1% for whites, 4.9% for African Americans, and 7.9% for
Hispanics.
This represents a significant improvement from 1973,
.when the rates were 5.7% for whites, 10.1% for African Americans,
and '10.0% for Hispanics.
Id. at 172.
The continuing disparity
in African American and white employment levels, despite the
decreasing disparity in high school dropout rates, may suggest
that a high school degree by itself is insufficient to' improve
employment prospects meaningfully.'
African Americans and Hispanics who are· employed tend to
hold lower-paid jobs that require l~ss education.
Even with
college degrees, they earned significantly less thari white
college graduates.
Id. at 158.
African Americans, who
constituted 10.2% of employed persons in 1993, occupied 6.6% of
managerial and professional jobs; Hispanics, who constituted 7.8%
of employed persons, occupied 4.0% of those jobs.
Id. at 407.
The consequences of these disparities are stark.
In 1992,
50.7% of African American children under 6 and 44.0% of Hispanic
children lived under poverty level, while only 14.4% of white
�- 22
children did so.
The overall poverty rates were 33.3% for
African Americans, 29.3% for Hispanics, and 11.6% for whites.
Id. at 476.
Moreover, poverty and unemployment tend to
perpetuate themselves through the generatibns, as minority
parents' poverty
an~
lack of education makes it more difficult
for their children to attain the education and. skills they need
to
~ompete.
{lnless something is done to reverse these trends, we
run a serious risk of creating a permanently
margin~lized
underclass.
These conditions have deep roots .. We should start with a
rec6gnition of the importance of education as a means of
preparirg children and adults to participate fully in the
economic life of our country, and the importance of work to keep
them invested.
In addition, for more than a decade, labor
economists and others have stressed that the complexion of our
workforce is
changing.
By the beginning of the next century,
members of minority groups and women will make-up more than half
of our work force.
Moreover, the nature of jobs that will
p~rmit
workers to earn a wage above the poverty line will change even
more dramatically.
Education credentials will mean the
difference between gainful and sUbsistence level or no employment
for many individuals.
For.the nation, our abiliFy to increase
substantially the number of well-prepared high school, college
and university graduates will determine our ability to
participate productively in a global economy.
�-
23 -.
It is not difficult to understatid why discrimination on the
basis of race, national origin and gender undermines this
national goai.
It is also not difficult to understand that a
long history of systemic discrimination has placed the nation at
a significant disadvantage with respect to a large and growing
segment of its human resources.
This disadvantage is equivalent
to a Very large and deep "hole" out of which we do not have the
capacity easily to dig ourselves.
Together with a legacy of
discrimination and unequal access, we have also inherited a
legacy of racial and gender stereotyping and superstitions that
also make it difficult to move from a simple non-discrimination
principle to a "color-blind" system of opportunity and access.
We must -- as a nation -- understand better why this is
~o.
Racial segregation by law and practice in this country was
critically dependent upon myth and superstition.
The deliberate
creation of dehumanizing stereotypes about African Americans and
other non-white citizens helped to balance the tension between
ideals of liberty and equality and the accommodation of slavery
and later oppressive segregation.
The ability to credit the
stereotypes of non-white persons as both incapable and:unworthy,
hostile and aggressive, slow and lacking ambition was used to
justify the treatment of African Americans in law and fact.
These myths and stereotypes did not disappear with the
pronouncements of the Brown v. Board of· Education
-decision in
�- 24
1954; they did not disappear in 1964 when the Congress enacted
the civil Rights Act.
The myths and stereotypes 'are enforced in
the minds of many citizens everyday on every television set and
most movie theater screens in the united states.
They are given
life by talk show hosts and their 'audiences, ultra-conservative
politicians and the "code words" that subtlely but surely call
attention to the disproportionate number of minority men and
women in our nation's jails and on its welfare rolls.
Those who
fail to fit the stereotypes are simply deemed "exceptions."
The
stereotypes, the myths, the superstitions mask views that at
their core are discriminatory, though the proof necessary to
build a convincing legal case may be illusive.
Employers, teachers and others are often unable to separate
an indiv£dualis potential, abiliti~s and qualifications from the
st~reotypes associated with minority group membership.
The
resulting decision is believed to be an objective evaluation not
the product of discrimination.
Thus, a simple non-discrimination
principle and the provision of remedies to only those who
successfully ~prove'l illegal discrimination are not alone likely
to produc~ signific~nt improve~~nt in the access to educational
opportunity and a well-educated, highly qualified and
credentialed workforce by the twenty-first century.
The federal
government cannot afford to ignore opportunities to undertake and
support affirmative efforts to achieve greater inclusion and
�- 25
overcome the debilitating effects of stereotyping that wastes
valuable human resources.
Affirmative. action, when properly used; can help remedy this
situation.
First, it may make job and educational opportunities
available to minority individuals who are capable of doing the
work but who otherwise might not have access to opportunities
available to nonminority applicants with greater advantages of
background.
The entry-level job or degree obtained as a result
will open doors to other opportunities and the chance to
.
\
.
participate fully in mainstream American life:
Second, the very
existence of affirmative action programs may attract minorities
to apply for jobs and educational programs for which they might
otherwise be too disc6uraged to consider themselves eligible.
Third, the advancement of individual beneficiaries of affirmative
action provides role models of minority achievement fOr many
others.
Affirmative action also provides other, less tangible but
perhaps equally important, benefits to society as a whole.
Only
if workplaces and schools are truly integrated will members of
all races have the opportunity to get to know and respect each
. other without regard to race.
Moreover, society will benefit if
all of its members are given a meaningful opportunity to develop
their talents.·
�- 26 '
For all these reasons, we, should support affirmative action
on behalf of minorities in circumstances where it will have a
beneficial effect and where other remedies for
underrepresentation are not as effective. W
Affirmative action
,
may be less helpful in remedying problems caused by family
breakdown and inferior inner-city primary and secondary schools.
We may wish to consider.other types of programs and/or government
intervention to address these more intractable problems.
Affirmative action on behalf of women also serves 'important
if somewhat different needs.
Women had a lower unemployment rate
in 1993 than men (6.5% versus 7.1%), ide at 396, and also filled
a relatively high percentage of managerial and professional jobs.
Id. at 407.
However, women are drastically underrepresented in
most stereotypically male occupations such as the' construction
trades, police and firefighters, scientists, and engineers.
Although women have increased their numbers at the entry. level of
certain professions such as business, law and medicine, they have
not been promoted in proportion to their entering numbers.
Ibid.
At every 'level of educational a'ttainment,women earn less than
men.
Id. at 158.
Moreover, women are much less likely to be
participants in the labor force (57.9% versus 75.2% of men in
1993).
Id. at 395.
This may to some extent reflect their belief
that they would not be able to earn sufficient income to offset
W The case for affirmative action on behalf of Asian Americans
may be most compelling in the context of promotions, where the
"glass ceiling" is often a serious obstacle.
See - - . at 157.
Id.
'.
�- 27
childcare and other costs associated' with working'.
As women have
increasingly become. single heads of households, their need to
secure well paid employment has also iDcreased.
We should thus
support affirmative action programs that help increase women's
representation in trades and, professions in which they' are
currently underrepresented.
It is doubtful that we would have the degree of diversity
that we have achieved in many components of American society
without affirmative action.
compelled
thi~
Although Brown v. Bd. of Educ.
nation's citizenry to face one another, and come
to grips with our own differences, it was not until, the
"watershed decade" of the 1960s'that the growth of the black
middle class, as
a
proportion of white collar workers, doubled
from .13 to 26% (in terms of number of teachers, self-employed
businessmen
~nd
clergy); much of
thi~
growth occurred outside
what were then considered "traditional black occupations" such as
in government employment.
Common Destiny, at p. 169.
By 1980,
in part due to efforts by employers to improve minority
representation, we have also seen black
represen~a~ion
in the
private sector grow to 18% (up from 6% in 1940), and an increase
as managers in the public sector reach 12% (up from 1% in 1940).
Ibid.
Thus, no matter how one feels about affirmative action, it
is clear that it has played an integral part in accomplishing a
national, objective of integrating previously excluded groups into
the economic mainstream.
without· affirmative action measures,
�- 28
the society would have never been able to accomplish the gains·
that it has.
Of course, the question now becomes whether we still need
affirmative action-type measures, or whether the society
generally is ready to continue the quest for diversity without
any settled policy for doing
so~
There are certainly businesses,
schools and other entities that would continue to foster
diversity within their institutions even without a· settled policy
(or requirement) for doing that.·
Some critics· argue that such
organizations should make employment, admissions, hiring,
promotion, etc., decisions based on strict, objective criteria
that are
~pplied
equally to all applicants, ciandidates, etc.
In
reality, we know that that is not how the world operates.
Preferen~es
based on nepotism, on "legacy," on region or state,
on a school's
prestige~
etc., are all deemed acceptable in
various contexts and are widely and traditionally
exercis~d;
Subjective criteria playa part most hiring and admissions
decisions because most such decisions are policy-driven.
Because
subjectivity cannot be eliminated in the selection scheme, such
sUbjectivity can operate to exciude .competent individuals who
might not be akin to the individual making the seiection.
That
is why affirmative action is still useful; because it helps
ensure equal opportunities to perform to persqns from· backgrounds
not well represented in our mainstream social institutions Jsuch
as business and higher education).
�-
29
Some call for a ciblorblind society, and for
th~
eliminatiion
of affirmative action as an essential precondition for achieving
that ideal.
These critics believe that the problems of
discrimination exist mainly in isolation and can be addressed by
individual lawsuits where and as appropriate.
be
reme~bered
However, it must
that individual lawsuits face many
obstac~es:
counsel often can not be obtained.; the ~xpenses of experts who
are often necessary can not be recouped under existing federal
law; "loser pays" rules, if they become law, will operate as a
further disincentive.
These and other factors combine to make it
impractical for minorities and women to address their claims in
individual lawsuits, leaving it to a wide swath of
to swallow their rage.
·~he
citizenry
Moreover, we then send to the business
and educational communities the message that we would rather have
the issues of inclusiveness relegated to the province of the
courts than to have private and public
~nstitutions
express that
interest proactively by· seeking and retaining qualified
minorities and women to contribute productively to mainstream
American life.
It must also be noted that the valid initiatives
under consideration address themselves almost exclusively to
voluntary affirmative action by governments, while
~ost
of
th~
action in this area is undertaken voluntarily by private
businesses and schools.
In short, the attacks on affirmative
action are wildly unfocussed and mainly uninformed, and we should
meet them directly, honestly, and with a clear goal of
inclusiveness firmly in mind.
�-
30
#
#
#
#
�..
~.
,
AFFIRMA.TIVE ACTION
"Affirmative action has been good jar America. That does not mean it has
always been perfect. It does not mean it should go on forever. It should be
retired when its job is done, and I am resolved that that day will come.
But.... the job is not done .... "
President· Bill Clinton
July 19, 1995
We must not become the first generation of Americans since the end of Reconstruction to
narrow ·the reach of equal opportunity. We must continue ~e struggle toward equal
opportunity for all and special treatment for none. America carnlot afford to waste a single
person as we confront new challenges. Affirmative Action has closed many gaps in
economic opportunity, but we still have a long' way to go.
The unemployment rate for African-Americans remains about twice that of whites. Women
still make only 72 % as much as men. Worrienand minorities hold less than 5 % of the senior
management positions in the nation's.largest companies. The federal government received
more than 90,000 complaints of employment discrimination based on race, etlinicity and
gender in 1994. Hate crimes and violence are still ugly realities in the lives of many
Americans.
. " ><",
President Clinton believes there is still a need for affirmative action that is done right -- we
need to mend it, not end it. There still exists a compelling need for race-conscious
affirmative action measures iri federal procurement that target assistance to small businesses
owned by socialiy and economically disadvantaged individuals. As we approach the 21st
century, President .Clinton believes we must restore the American Dream to all Americans,
. find common ground amid our great diversity, and strengthen the American commitment to,
equal opportunity for all.
.
A RECORD OF ACCOMPLISHMENT:
•
Done Right, Affirmative Action Works: In 1995, President Clinton ordered a review
of the federal government's affirmative action programs. That review concluded that
affirnlative action is still an effective tool to expand economic and educational
opportunity:
The military's. approach, .ensuring it has a wide pool of qualified candidates for
every promotion, has given us the world's most diverse and best qualified
military leadership.
Education Department programs targeted at minorities do a lot of good with a
minimal investment :-- about 40 cents of every $1,000 in student aid.
The affirmative action program administered by the Department of Labor, that
was enhanced by President Nixon, has prevented discrimination and fostered
equal employment for all Americans including women, minorities, the disabled
and veterans -- without quotas or mandated outcomes.
Affirmative action has helped build up firms owned by minorities and women,
who were historically excluded, and has helped a new generation of
entrepreneurs to flourish, fostering self-reliance and economic growth.
NOll\1l\tl3S3tld
AdO~O.l.OHd
�,
•
",
Pre'sidedtial'Directive to Ens'ure Affirmative' ACtion:' On July 19, 199?, President'
Clinton directed all federal age'ncies to comply.with the Supreme Court's 'decision jn
" Adarandand to apply four standards to rriake sure tJiat all· affirmative action programs
'are fair:
No quotas. '
,No reverse discrimination.,
No preferences for unqualified individuals.,'
r' .
No continuation of programs that have met their goals.
,
Any program that does not meet any of these principles must be eliminated or
, changed.
.
.
,
'"
"
.'
:
~
,
"
.'
, The.Administration has ,already suspended programs that did not meet the Supreme
Court's gitidelfnes in Adaiand and has proposed procurement reforms' that:
'
,
Safeguard against fraud and abuse to ensure that. the benefits of affirmative
action go only to individuals and businesses that are deserving;"
Require the use of race-neutral means such as outreach and .technical assistance
to increase minority opportunity and participation'in federal procurement;
Ensure' that race will not be relied upon as 'the sole factor in procurement
decisions -- only qualified businesses will receive federal procurement awards;
.:
ProVIde a set of marketdri~en benchmarks for eachindustry-- not quotas --to'
ensure that race-conscious procurement is notused unnecessarily;
, 'Continue ,the use of,several Tace.:.conscious contracting mechanisms' to promote
minqrity procurement, including the Small Business Administration's Sea)
program; .
,
.' "
,
Avoid any undue burden on nonbeneficiaries of the' program.
•
Eniploymerit Guidance: The Clinton Administration issued detailed guidance on th~
proper rise of race in federal employment under Adarand.
I,
•
,.' Litigation: The Clinton Administration ,is continuing to defend the use of affirmati~e
'action contracting under the 8(a) program: in several court cases brought since
.Adarand. President Clinton also instructed' the Justice Department to file a brief in
support of the state of Texas' petition to the Supreme Cburt in. the Hopwood case'to
uphold the University; of Texas Law School's interest ,in promoting r~cial ~iversityof
its stUdent body. ' The Admini'stration strongly opposes federal' and state initiatives such
as the Dole-Canady bill and the California Civil Rights Initiative that, would tUm back
" the clock on the federal government'shistdric; bipartisan cO:nuTtitment to equal,
opportUnity and eliminate affirinativeaction in California for minorities and women.
•
Helping Distressed Communities: President Clinton has issued an Executive Order
'launching the Empowerment Contracting program that provides a supplement, not a '
repl~cetiterit, to existing federal procureme~t programs. Under the Empowerment
Contracting Order, the program ,will offer incentives for' government, contracting
awards to' businesses in distressed communities that' hire asignificarit,' number of
, resIdents' and that generate significant economic activity in low-income areas.
�THE CHALLENGES AHEAD: .
President Clinton will continue to work to ensure equal opportunity for all Americans and to
prevent this issue from dividing us. There are those who would use this issue to divide us.
They must not succeed. AmerIca will survive and prosper as a society only if we are
confident and united. Today in America, many racial and· ethnic groups live and work
together in harmony .!- an achievement unmatched in human history. President Clinton
believes we have a responsibility to .renew and strengthen the ideals that foster that unity.
May 1996
PHOTOCOPY
PRESERVATION
�. . . .1.
I
~
DEPARTMENT OF JUSTICE
PROPOSED REFORMS TO AFFIRMATIVE ACTION IN FEDERAL PROCUREMENT
AGENCY:
Department of Justice
ACTION:
Public notice and invitation for reactions and views.
SUMMARY: '. The proposal set forth herein to reform affirmative
action in federal procurement has been. designed to ensure
compliance with the constitutional standards established by the
Supreme Court in Adatand Constructors. Inc. v. PeDa, 115 S. ct.
2097 (1995).
The proposed structure, which has been developed by.
the Justice Department, will form a model for amending the
affirmative action provisions of the Federal Acquisition
Regulation and the Defense Federal Acquisition Regulati9n
Supplement.
DATES:
Comment Date: Reactions and views on the proposed model
. must be submitted in writing to the address below by [INSERT 60
DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER].
ADDRESSES:
Interested parties should submit written comments to
Mark Gross, Office of the Assistant Attorney General for Civil
Rights, P.O. Box 65808, Washington, D.C. 20035-5808, telefax
(202)
307-2839.
FOR FURTHER INFORMATION CONTACT:
Mark Gross, Office of the
Assistant Attorney General for Civil Rights, P.O. Box 65808,_
Washington, D.C. :20035-5808, telefax (202) 307-2839.
\
�2
INTRODUCTION
In Adarand, the Supreme Court extended strict judicial
.
(
scrutiny to federal affirmative action programs that use racial
or ethnic criteria as a basis for decisionmaking.
In
procurement, this .means that any use of race in the decision to
award a contract is subject to strict scrutiny.
Under strict
scrutiny, any federal programs that make race a basis for
contract decisionmaking must be narrowly tailored to serve a'
compelling government interest.
Through its initial authorization of the use of section 8(a)
of the Small Business Act to expand opportunities for. minority
owned firms and through reenactments of this and other programs
designed to assist such businesses, Congress has repeatedly made
the judgment that race-conscious federal procurement programs are
needed to remedy the effects of discrimination that have raised
artificial barriers to the formation, development and utilization
of businesses owned by minorities and other socially
disadvantaged individuals.
In repeated legislative enactments,
Congress has, among other measures, established goals and granted
authority to promote the participation of Small Disadvantaged
I.
I
Businesses (SOBs) in procurement for the Department of Defense,
NASA and the Coast Guard.
It also enacted the Surface
Transportation Assistance Act of 1982, the Surface Transportation
and Uniform Relocation Assistance Act of 1987 and the Intermodal
Surface Transportation Efficiency Act of 1991, each of which
successivelY authorized a goal for participation by Disadvantaged
Business Enterprises.
Congress also included similar provisions
in the Airport and Airway Improvement Act of 1982 with respect to
�3
procurement regarding airport development and concessions.
Under
section 15(g) of the Small Business Act, 15 U.S.C. 644(g);
Congress has established goals for SOB participation in agency
procurement.
Finally, in 1994, Congress enacted the Federal
Acquisition streamlining,Act (FASA), which extended generally to
federal agencies authority to conduct various race-conscious
procurement activi ties.,
The purpose of this measure was t'o
facilitate the achievement of goals for SOB participation
established for agencies pursuant to Section 15(g) of the Small
Business Act.
Based upon these congressional actions, the legislative
history supporting them, and the evidence available to Congress,
this congressional judgment is credible and constitutionally
defensible.
Indeed, the survey of currently available evidence
conducted by the Justice Department since the Adarand decision,
including the review of numerous specific stUdies of
discrimination conducted by state and local governments
throughout the nation, leads to the conclusion that, in the
absence of affirmative remedial efforts, federal contracting
)
would unquestionably reflect the continuing impact of
discrimination that has persisted over an extended period.
For
purposes of these proposed reforms, therefore, the Justice
Department takes as a constitutionally justified
pre~ise
that
affirmative action in federal procurement is necessary, and that
�4
the federal government has a compelling interest to act on that
basis in the award of federal contracts. 1
Subject to certain statutory limitations (that are discussed
below), Congress has largely left to the executive agencies the
determination of how to achieve the remedial goals that it has
established.
T,he Court in Adarand made clear that, even when
there is a constitutionally sustainable compelling interest
supporting the use of race in decisionmaking, any such programs.
must be narrowly tailored to meet' that interest.
We have
focused, therefore, on ensuring that the means of serving the
congressionally mandated .interest in this area are narrowly
tailored to meet that objective.
seriously.
This task must be taken very
Adarand made clear that Congress has the authority to
use race-conscious decisionmaking to remedy the effects of past
and present discrimination but emphasized that such
decisionmaking must be done carefully.
This Administration is
committed to ensuring that discriminatory barriers to the
opportunity of minority-owned. firms are eliminated and the
maximum opportunities possible under the law are maintained.
Our
focus, therefore, has been on creating a structure for race- .
conscious procurement that will meet the congressionally
determined objective in a manner that will survive constitutional
scrutiny.
In givi'ng content to the narrow tailoring prong of strict
scrutiny, courts have identified six principal factors: (1)
1 Set forth as an appendix to this notice is a.preliminary
.survey of evidence establishing the compelling interest for
affirmative action in federal procurement.
,
�5
whether the government considered race neutral alternatives and
determined that they would prove insufficient before resorting to
race-conscious action; (2) the scope of the program and whether
it is flexible;
(3)
whether race is relied upon as the sole
factor in eligibility, or whether it is used as one factor in the
elig.ibility determination; (4) whether any numerical target is
reasonably related to the number of qualified minorities in the
applicable pool; (5) whether the duration of the program is
limited and whether it is subject to periodic review; and
extent of the burden imposed on nonbeneficiaries of
th~
(6)
the
program.
Not all of these factors are relevant in every circumstance and
courts generally consider a strong showing with respect to most
of the_~actors to be sufficient.
This proposal, however,
responds to all six factors.
The Department of Defense (000), which conducts a
substantial majority of the federal government's procurement, was
the focus of initial post-Adarand compliance actions by the
federal government.
In particular, 000, acting pursuant to
authority granted by 10 U.S.C. S 2323,2 had developed through
regulation a practice known as the. "rule of two."
Pursuant to
2 section 2323 establishes a five percent goal for 000
contracting with small disadvantaged businesses ("SOBs") and
authorizes 000 to "enterint6 contracts using less than full and
open competitive procedures * * * and partial set asides for
[SOBs]." Section 2323 states that the cost of- using such
measures may not exceed fair market price by more than ten
percent. It authorizes the Secretary of Defense to adjust the
applicable percentage "for any industry category_ if available
information clearly indicates that nondisadvantaged small
business concerns in such industry category are generally being
denied a reasonable opportunity to compete for contracts because
of the use of that-percentage in the application of this
paragraph. "
.
�6
,
the rule of two, whenever a contract officer could identify two
or more SOBs that were qualified to bid on a project at a price
within ,10\ of fair market price, the officer w~s required to set
the contract aside for bidding exclusively by SOBs.
Under
section 2323, firms owned by individuals from designated racial
minority groups are presumed to be SOBs. 3
Others may enter the
program by establishing that they are socially and economically
disadvantaged.
After consultation with the Department of
Justice, 000 suspended use of the rule of, two in octobe,r 1995.
.
Congress in 1994 extended the affirmativ. action authority
,
granted 000 by section 2323 to all agencies of the federal,
government through enactment of the Federal Acquisition
streamlining Act (FASA), Pub. L. No. 103-355, sec. 7102, 108
,
'
Stat. 3243, 15 U.S.C. 4
644 'note.
Because of Adarand and the
effort to review federal affirmative action programs in light of
that decision, regulations'to implement the affirmative action
authority granted by FASA have been
delay~d.
See 60 Fed. Reg.
3 10 U~S.C. 2323 in~orporates by explicit reference the
language of section 8(d) of the Small Business Act, which states
that members of designated racial or ethnic groups are presumed
to be'socially and economically disadvantaged. Participants in
the,8(a) program are also presumed to be SOBs.
4 FASA states that in order to achieve goals for SOB
participation in procurement negotiated with the Small Business
Administration, an "agency may enter into contracts using -- (A)
,less than full and open competition by restricting the
competition for such awards to small business concerns owned and
controlled by socially and economically disadvantaged individuals
described in sUbsection (d) (3) (C) of section 8 of the Small
Business Act (15 U.S.C. 637); and (B) a price evaluation
preference not in excess of 10 percent when evaluating an offer
received from such a, small business concern as the result of an
unrestricted solicitation."
�..
7
448258, 48259 (sept. 18, 1995).
This proposal provides the basis
for those regulations'. ,,'
,The proposed'structure will necessarily affect a wide range
of 'measures that promote minor.ity participation in government
contracting through race-conscious means.
Taking 000 as an
example, approximately one-sixth of contracting with minority
.owned firms in 1994 resulted from use of the rule of two.
The
majority of dollars to minority firms was awarded by 000 through
other means: direct competitive awards, the Small Business
Administration'S (SBA) section 8(a) program, subcontracting
pursuant to section 8(d) of the Small Business Act, and a price
credit applied pursuant to section 2323.
With the exception of
direct competitive awards .(which do not take race into account),
activities pursuant to all of these 'methods will be affected,by
the proposed reforms. 5
,
'
: The8(a) program merits special mention at the outset.
This
program serves a. purpose tha,t 'is distinct from that served by
general SOB programs.
T~e
8 (a) program is designed to aS,sist the
development of businesses owned by socially and economically
disadvantaged individuals.
To this end, the program is targeted
toward concerns that are more disadvantaged 'economically than
other SOBs (e.g. the standard for economic disadvantage for entry
5 :This proposal address.es only affirmative action in the
federal government's,own direct procurement. It does not address
,. affirmative action in procurement and contracting that is
undertaken by states and localities pursuant to programs in which
", such entities receive' funds from federal agencies (~, the
Disadvantaged Business Enterprise prbgramthat the Departm~nt of
Transportation. administers pursuant to the Intermodal Surface,
Transportation Efficiency Act of 1~91~ Pub. L. No. 102-240,
section 1003(b), 105 Stat. 1919-1922, and the Airport and Airway
. Improvement Act of 1982,49' U.S.C. 47101, et~) ~,
'
�L •.
S
into Sea) is an owner's net worth of $250,000
$750,000 for SOB programs).
to
in the program are
Participant~
required to establish business
co~pared
developme~t
plans and are eligible
for technical, financial, and practical assistance,and may
compete in a sheltered market for a limited time before
graduating from the program.
Each of
thes~'aspecits
of the
program is designed to assist the business in developing
,~he
technical and practical expeiience necessary to become viable
without. assistance.
By contrast, the general ,SOB program is a
procurement program, designed to assist the government in finding
firms capable of providing needed services, while,atthe same
time, helping to
~ddressth~
traditional
exclu~ion
of minority
owned firms from contracting opportunities.
The pperation of the Sea) program will become subject to the'
overall limitatioris in the measures described below.
addition, the SBA is working to strengthen
fratid and to ensure that theS(a)
progra~
safegu~rds
In
against
serves its purpose of
assisting the development of businesses owned by individuals who
are socially and ec6nomi6ally disadvanta~ed.
Because the proposed reforms are broad and cover
~
number .of
different subjects related to affirmative action in federal
procurement, the.Justice'Oepartment is-seeking comments on each
of the aspects of the proposa1.Comments will be taken
~nto
account in the formulation of revised procurement regulations.
OVERVIEW OF STRUCTURE :
I
The SOB re~orm'o~tllned herein involves five major topics~
('1)
certification an~ eligibility;
(?)
benchmark limitations; (3)
mechanisms for i~creasing minority opportunity; (4) the~
�9
. 'i
interaction of benchmark limitations and mechanisms; and (5)
outreach and technical assistance.
The proposed structure
inciorporates these elements into a system that furthers the
President's. commitment to ensuring equal opportunity in
contracting, responds to the courts' narrow tailoring
requirements, and is
I.
~aithful
to statutory authority.
Eligibility and Certificatibn
At present, while a concern must have its eligibility
certified by the SBA to participate in the 8(a) program, there is
no similar-certification requirement for participation in SOB
programs.
Under current practice, firms simply check a box to
identify themselves as SOBts when
or 8 (d) subc.ontracts.
Refo~m
bi~ding
for federal contracts
of this certification process is
needed to assure that programs meet constitutional and statutory
objectives.
While the basic elements of eligibility under these
,
.
.
programs are statutorily determined, agencies have discretion to
impose significant additional controls and to establish'
mechanisms to assure that the statutory criteria are in fact met.
The SBA will continue as the sole agency with authority to
certify firms for the 8(a) program.
The· following discussion,
therefore, concerns only certification of SOB's that are not
participants in the 8(a) program.
Each bid that an SOB submits to an agency, or to a prime
contractor seeking to fulfill 8(d) subcontracting obligations,
will have to be accompanied by a. form-certifying that the concern
qualifies as a small disadvantaged business under eligibility
standards that will be published by the SBA.
The standards and
certification form will allow 8(a) participants to qualify
�10
automatically for SOB programs.
Others will be required to
r
establish their eligibility by submitting required statements and
documentation.
When a concern'has been certified by an agency as eligible
'for SOB programs, its name will be entered into a central on-line
register to be maintained by SBA.
That certification will be
valid for 'a period of up to three years during which time
registered firms will have only to complete a portion of the form
confirming the continued validity of that certification to
'participate in SOB programs'at any agency.
A full application
will have to be submitted to an agency every three years to
maintain eligibility.
A.
Social
~nd
Economic Oisadvantage
Members of designated minority groups seeking to participate
in SOB and Sed) programs will continue to fall within the
statutorily mandated presumption of social and economic
disadvantage. 6 This presumption is rebuttable as to both forms
of disadvantage.
The form will ask the applicant to identify the
group identification triggering a presumption of social and
economic disadvantage.'7
In addition, the form will enumerate
the objective criteria constituting economic disadvantage
6 Both FASA and 10 U.S.C. 2323 incorporate by explicit
reference the definition of social and economic disadvantage
contained in section Sed) of the Small Business Act. Pursuant to
section Sed), members of designated groups are presumed to be
both sqcially and economically disadvantaged; those presumptions
are rebuttable. By contrast, for the Sea) program, members of
identified groups are rebuttably presumed to be socially
disadvantaged, but must establish that they are economically
disadvantaged.
7 Members of minority groups do not have to participate in
the SOB program in-order to. bid on federal contracts.
.I
�11
according to SBA standards and advise the applicant that the
presumption of such.disadvantage is rebuttable and any challenge
to the individual's SOB status will be resolved on the basis of
these criteria.
Challenges would be processed through existing
SBA challenge mechanisms.
Individuals who do not fall within the statutory presumption
'will be. required to establish social and economic disadvantage by
answering a series of questions demonstrating such disadvantage.
Questions regarding social disadvantage will be included in the
standard certification form.
Pursuant to current practice,
individuals who do not fall within a presumption must prove their
social disadvantage by cle'ar and convincing evidence.
That
standard will be changed to permit proof by a preponderance of
the evidence.
The SBA currently has criteria for evaluating social
disadvantage~
SBA will conduct training 'seminars designed to
instruct personnel from other agencies on the procedures for
making eligibility determinations.
Individuals who do not fall
within the statutory presumption will also' be required to
demonstrate that they are economically disadvantaged according to
the criteria established by SBA.
Agencies will have discretion to decide which official
within the agency will have authority to. determine whether "non
presumed" individuals are socially and economically
disadvantaged. 8 . In most instances, the contracting officer
8 The form that such individuals are to complete will ask
whether they previously have applied for SOB certification and
been rejected or accepted .. A rejected firm will not be permitted
.< continued ... )
�12
should not have final authority to make the determination; the
procedure must, however, facilitate quick decisions so that the
procurement process will not be delayed and applicants will have
a fair,opportuni ty to compete.
An
agency may wish to assign this
responsibility to its Office of Small and ,Disadvantaged Business
Utilization.
The SBA will answer inquiries regarding eligibility
determinations and the procuring agency will retain the ability ,'.
to refer applications to the SBA for final eligibility
determinations through the protest procedures now in place.
In
the alternative; an agency may enter into an agreement with SBA
to have SBA make all determinations, including the initial
determination of eligibility.
B.
Ownership and Control
In addition to submitting the form described above, every
applicant will be required to submit with each bid a
certification that the business is owned and controlled by the
designated socially and economically disadvantaged individuals as
those terms are defined by the SBA's standards for ownership and
control at 13 C.F.R. 124.103 and 124.104. 9
Such a certification
must come from an SBA approved organization, a list of which will
be maintained by the SBA.
In order to be, approved by the SBA to
8( ••• continued)
to re-apply for certification for one year after .rejection,
unless it can show changed circumstances.
9 The standard certification form will accommodate one
eligibility criterion peculiar to the' DoD's SOB program under 10
U.S.C. 2323 -- that the majority of earnings must directly accrue
to the socially and economically disadvantaged 'individuals that
own and control the concern. The standard certification form
will acc:ommoda,te this criterion by including, a DoD-specific
section requiring the concern to attest that the majority of the
firm's earnings do flow in this manner.
t.
�13
certify ownership and control, (1) the entity must certify
ownership and control according to the standards established by
the SBA for the Sea) program (13 C.F.R.124.103' and 124.104); (2)
the entity's certifications must have been accepted by a state or
local government or a major private contractor; and (3) the
entity must not have been disqualified by any government
authority from making
c~rtifications
within the past five years.
Such entities may include private organizations, the SBA
(~
through the Sea) program), entities that provide certifications
for participation in the Oepartment of ,Transportation's
disadvantaged business enterprise (nOBEl!) program, or states or
localities, so long as the certification addresses the standards
for ownership and control promulgated by the SBA.
This procedure is intended to take advantage of the
extensive network of certifying entities already in existence.
At present, firms may have to obtain several different
certifications as they pursue a mix of private and public
contracts.
While it is clear that a control mechanism is needed
to protect against fraud, it makes little sense to create a new
federal bureaucracy to perform work that ·is already being done
and to erect another hurdle that an SOB must clear before
qualifying for
~
federal contract.
The limited resources of the
federal government and of SOBs make creation of such a
bureaucracy counterproductive.
To police the quality of certifications, SBA will conduct
periodic audits of certifying organizations.
Any entity may
submit information to the SBA in an effort to persuade the agency
to initiate such an audit.
�14
,
As a means of ensuring that the identified socially and
economically disadvantaged individuals retain ownership and
control of a firm', a certification of ownership and control will
be valid for a maximum of three years from the date it was
issued.
Certified firms will be required to recertify their
eligibility by submitting a full
a~plication,
including an
updated certification of ownership and control, every three
years.
C.
Challenges
Where an SOB is the apparent successful offeror ona
contract, the name of that firm and of the entity that certified
its ownership and control will be a matter of public record.
SBA
regulations currently allow any concern that submitted an offer
to protest the eligibility of an SPB that receives a contract
through an SOB
program~
The procuring agency or SBA may also
protest the eligibility of an SOB.
Individuals or organizations
that did not submit a bid for the contract in question may submit
information to the procuring agency in an effort to convince the
agency to initiate a protest. 10
Certification and Eligibility
The SBA's Division of Program
wi~l
process any
p~otest
that
contains specific factual allegations that the concern is not
el,igible for the program.
Grounds for an eligibility protest may inc.lude, but are not
limited to, evidence that:
10 The protests contemplated in the discussion-here relate
only to certification and elig.ibility, The discussion does not
relate to protests to other features of the proposed reforms that
might be raised through existing bid 'protest procedures or
through actions under the Administrative Procedure Act.
�15
•
the owners of the firm are not in fact socially or
economically disadvantaged;
the firm is not owned and controlled by the individuals
who meet the definition of social and economic
disadvantage; ,
the disadvantaged firm has acted, or is acting, as a
front company by failing to complete required'
percentages of the work contracted to the concern. 11
" Upon receiving a protest supported by specific factual
'information, the SBA will make an eligibility)determination by
examining documentation from the SOB including, for example,
personal and business financial statements, business records,
ownership certifications, and other information deemed necessary
to permit a determination as to the eligibility, of the firm.
Current regulations require the SBA to make a determination
concerning the eligibility of the firm within 15 days of the
filing of the challenge or notify the contracting officer of any
delay.
O.
Enforcement
Finalty, there must bea concerted effort to enforce the law
against individuals who present fraudulent information to the
government.
The existence ofa me,aningful threat of prosecution
for falsely claiming SOB status, or.for fraudulently using an SOB
11 The basis for such a challenge would be'48 C.F.R.
19.508, which requires completion of a minimum
percentage of contract activities by the firm awarded a contract
through a small business set aside or the 8(a) program. A clause
must be inserted in such cbntracts that limits the amount of work
that can be subcontracted. 48 C.F.R. 52.219-14. These
requirements will be expanded to include contracts awarded
through the reformed SOB program as well.
�16
as a front in order to obtain contracts, will do much to ensure
that the program benefits those for whom it is designed. ' To this
end, there will be an enhanced effort by SBA and the Department
of Justice to identify 'and pursue individuals fraudulently
misrepresenting 'information in order to obtain contracts through
, an SOB program.
Any individual may forward specific factual
information suggesting such a misrepres'entation to the procuring
I
agency contracting officer or the agency's inspector general.
Simi~arly,
the Inspector General of SBA will refer evidence of
misrepresentation that emerges through the challenge procedure or
otherwise to the Department of Justice.
In its enforcement, the
Dep'artment of Justice will ensure that it pursues to the extent
permitted by law all of the parties responsible for fraudulent or
sham transactions.
Penalties (or misrepresentations in,this area were increased
by the Business Opportunity Development and Reform Act of 1988
and include:
(1)
A fine of up to $500,000, imprisonment of up to 10
years, or both;
(2)
Suspension and debarment from Federal contracting
(48 C.F.R. pt. 9.4);
(3)
Ineligibility to participate in any program or
activity conducted under the authority of the Small Business
Act or the Small Business Investment Act of 1958 for a
period of up to tl')ree years; and
(4)
Administrative remedies prescribed by the Program,
Fraud civil Remedies Act of 1986 (31 U.S'-C. 3801-3812).
,
�17
"
Knowing and willful fraudulent statements 'or representations
may subject an i'ncilvidual to criminal 'penalties, including
imprisonment for up to five years, pursuant to 18 U.S.C.lOOl.
,,
'
In addition, knowing misrepresentations to obtain payment from
.
'
.
.
.
I
.
the.federal government may violate the False Claims Act,' 31
U.S.C. 3729, and subject the claimant to civil penalties and
treble damages.
II. BENCHMARK LIMITS
Although Congress has made the judgment that affirmative
race-conscious'measures
are~eeded
in
use of race must be narrowly tailored.
f~deral
contracting,
th~
The federal government
operates under a general statutory mandate to achieve the
"maximum practical 6pportti,nity" for SOB participation and that
overall mandate is transiated into ,specific agency-by-agency
Some specific program~ operate under statutorily
prescribed goals. 12 , To the extent that race-conscious measures
goals.
(going beyond', outreach and technical assistance) are utilized to
obtain these objectives, limitations must be established to
'comply with narrow tailoring requirements.
To this end, the proposal relies on development of a set of
specific guidelines to limit, where appropriate, the use of race
conscious
limits, or
entire
~easures
in specific'areas of federal pr06urement.
~~ertchmarks",
~overnment.
The
will be set for eacih industry for the
The Department of Commerce,' in 'consultation
12 See, ~, ,10U.S.C. ·2323 (5% goal for 000 contracti~g
with SOBs); Intermodal Surface Transportation Efficiency Act of
1991, Pub. L. No. 102-2~0, 105 Stat. 1914 (10% goal for highway
construction projects carried out directly by the D~partment of
Transportation).
'
�18
with the General Services Administration (GSA) and SBA, will
establish appropriate benchmark limitation,figurea for each
industry and report them to the Office of Federal Procurement
Policy (OFPP), which will pubiish and disseminate the final
benchmark figures.
Each industry benchmark limitation will
represent the level of minority contracting that one would
reasonably expect to find in a market absent discrimination or
its effects.
Benchmark limitations will provide the basis for
comparison with actual,'minority participation in procurement in
that industry (and, where appropriate, in a region).
, In establishing the ,benchmark limitations, the first step is
to define whether industries operate according to regional or
national .arkets.
In general, industries will 'be defined
according to two-digit Standard Industrial Classification (SIC)
codes.
Based on the evidence, it appears that most federal
contracting is conducted on a natio,nal basis.
the view, reflected in a variety
We also start from
o~'federal polici~s,
that
federal contracting should encourage the development of national
mar~ets
wherever feasible.,
Where data indicate, however, that an
industry operates regionally, the benchmark limitations will be
established by region.
After identifying the markets, the system will then
measure, using primarily
".
,
~
cen~usdata,
the capacity of firms
operating in each market that are owned by minorities.
In
estimating capacity, a number of factors will be examined., Most
significant, of 'course, will be the riumber of minority SDBs
,
�19
available and qualified to perform government contract~.13
general, it appears appropriate to
~ook
In
at the industry in
question and identify the smallest firm that has won a government
contract in that industry in the last three years.
Firms that
are significantly smaller would be presumed to be unqualified to
perform government contracts in that
in~ustry.
While keeping in
mind that capacity is not fixed, it will also be important to
look at measures such as the number of employees and amount of
revenues.
In addition to calculating the capacity of existing minority
firms, the proposed system will examine evidence, if any,
demonstrating that minority business formation and operation in a
specific industry has been suppressed by discrimination.
This
evidence may include direct eviden6e of discrimination in the
private and public sectors in such areas as obtaining credit,
surety guarantees and licenses.
It may also include evidence of
discrimination in pricing and contract awards.
In addition, the
evidence may include the results of regression analysis
techniques similar to those used in state studies of
discrimination in procurement.
That form of analysis holds
constant a variety of variables that might affect business
formation so that the effect of race can be isolated.
,The combination of
~xisting
minority capacity, and, where
applicable, the estimated effect of race in suppressing minority
13 For these purposes, the calculation of the number of
minority-owned firms will not include corporations owned by
federally-recognized Native American tribes and Alaskan Native
villages. Bidding credits for such corporations are nqt subject
to the Adarand strict scrutiny standard.
�20
business activity. in the industry will form the benchmark
limitation. ,Although there is 'no absolutely precise way to
calculate the impact of discrimination in various markets, the
benchmark limitations represent a reasonable effort to esta'blish
guidelines to limit the use of race-conscious measures and to
meet the requirement that such measures be narrowly tailored to
accomplish the compelling interest that Congress has identified
in this area.
Benchmark limitations will be adjusted every five years, as
new data regarding minority firms are made available by the
Census Bureau.
Generally, census regions will be used in
defining the scope of regional markets.
III. Mechanisms for Increasing Minority opportunity
Under the reformed structure, the federal government will
generally have authority, subject to the limitations discussed in
the next section, to use several race-conscious contracting
mechanisms:
SBA's Sea) program; a
biddi~g
credit for SOB prime
contractors'; and an evaluation credit for non-minority prime
contractors that use SOBs in subcontracting.
In addition, at all
times, agencies must engage in a variety of outreach and
technical assistance activities designed to enhance contracting
opportunities for SOBs (but that are not subject to strict
scrutiny). 'Those efforts will be expanded as described more
fully below.
The Sea) program will continue to provide for sole source
contracting and sheltered competition for Sea) firms.
However,
the program will be monitored; and where the benchmark,
limitations described more fully below warrant adjustments to the
�21
SOB program, correspond'ing adjustments will be made to the Sea)
program to ensure that its operation is
s~biect
to those
limitations:
A second available race-conscious measure will be a bidding
credit in prime contracting for SOBs.
Statutory authority for
the use of such a credit exists for 000 in 10
~he
remainder of the government in FASA.
U.S~C.
2323 and for
Each statute permits
use of such a credit so long as the final price does not exceed a
fair market price by more than 10%.
The use of the term
"pr~dit"
is "not
~earit
to restrict .
utilization by agencies of this mechanism to contracts where
price is the primary factor in selecting the successful bidder.
Where the successful bidder is selected based on other factors -
such as the ability to produce a contract that provides the "best
value" ,to the agency -- agencies may build the value of
increasing the participation of SOB contractors into the
evaluation of offers.
be
appropr~ate;
For some contracts, a numerical credit may
in others, some form of nonnumerica1 assignment
may make more sense to the agency.
restrict such options.
This proposal does not
However, regardless how it operates, any
bidding credit will be subject to the overall limitations on
race-conscious mechanisms described herein. '
, Pursuant to 10
U~S.C.
S 2323 and
FASA~
agencies will also be
permitted to use, as a third race-conscious mechanism, an
evaluation cr,edit with respect to the utilization by nonminority
prime contractors of SOBs as subcontractors.
Such goals would be
set by the agency for each prime contract based on the
availability of minority firms to perform the work.
The award of
�22
evaluation credits for prime contractors that use SOBs as·
subcontractors will supplement the
exis~ing
statutory SOB
subcontracting requirements in section Sed) of the Small Business
Act. 14 In order to certify their eligibility as SOBs,
subcontractors will submit the same certification form to the
prime contractor that is described in the certification section
of this proposal.
Such an evaluation credit can take a number of different
forms, depending on the circumstances of. a solicitation. 15 For
example, where it is practical for bidders to secure enforceable
commitments from SOB subcontractors priQr to the submission of
bids, agencies should establish an SOB subcontracting goal for
the contract, and award an evaluation credit to bidders who
demonstrate that they have entered into such commitments as a
means of
achiev~ng
the goal.
Where that is not practical,
agencies can award an evaluation credit to a bidder that
specifically identifies in a subcontracting plan those SOB
subcontractors that it intends to use to achieve the agency's, SOB
subcontract~ng goal~16
Agencies may also award an evaluation
14 For certain types of procurement, Section Sed) requires
agencies to negotiate an SOB subcontracting plan with the
successful bidder for the prime contract. The statute provides
that .each such plan shall include percentage goals for the
utilization of SOB subcontractors •.
15 As was the case with respect to the use of the term
"credit" in connection with bids from SOBs as prime contractors,
the use of that term here in connection with SOB subcontracting
is not intended to. restrict the utilization of this mechanism to
the evaluation of prime contract bids for which price is the
primary factor in selecting the successful bidder.
16 In either case, a successful prime contractor shou14
notify the contracting officer of any substitution of a non-SOB
(continued .•• )
�23
credit based on demonstrable evidence of a bidder's past
performance in using SOB subcontractors.
Agencies may. also grant
..
,
bonus awards to prime contractors to encourage the use of SOB
'subcontractors. 17
This proposal is not intended to limit
agencies in. developing or using additional mechanisms to increase
SOB subcontracting, but any such mechanism will be subject to the
limitations on race-conscious mechanisms described herein.
In applying these bidding and
eva~uation
credits, race will
simply be one factor that is considered in the decision to award
a contract
in contrast to programs in which race' is the sole
factor., .
IV.
Interaction. of BenChmark Limits and Mechanisms
In determining how benchmark limitations will be used to
measure the appropriateness of various forms of race-conscipus
contracting,. the objective has been to develop a system that can
operate with a sufficient degree of clarity, consistency and
simplicity over the range of federal agencies and contracting
activities.
Where the use of all available tools, including
di~ect competition and race-neutral outreaph and recruitment
,
efforts,' results in minority participation below the benchmark,
race-based mechanisms will remain available.
Their scope,
however,will vary and'be recalculated depending on the extent of
16( ••. continued)
subcontractor for anSDB firm with which the prime contractor had
entered into enforceablec:ommitments or that had been",·
specifically identified in the prime contractoi'. subcontracting
plan.'"
17 ,See e.g., Department-of Transportati~n Incentive
Subcontracting Program for Small and Small Disadvantaged Business
Concerns, 48 C.F.R: 52 219-10.
�24
the disparity between capacity and participation.
Where
participation exceeds· the benchmark, and can be expected t·o
continue to do so with reduced· race-conscious efforts,
adjustments will be made.
At the close of each fiscal year, the Department of Commerce
will review data collected by its GSA's Federal Procurement Data
Center for the three preceding fiscal years to determine the
percentage of contracting dollars that has been awarded to
minority-owned SOBs in each two-digit SIC code.
Commerce will
analyze minority SOB participation for all transactions that
exceed $25,000.
This review will include minority-owned SOBs
.
.
participating through direct contracting (including full and open
competition), the 8(a) program, and SOB prime and subcontracting
programs. 18
Data regarding minority participation will be
reviewed annually; but will include the past three fiscal years
of experience.
Examining experience over three year stretches
should produce a more accurate picture of minority participation,
given short-term fluctuations and the fact that·the process of
bidding and awarding a contract may $pan more than a single
fiscal year.
18 In order to measure accurately SOB subcontracting
part1cipation, it will be necessary to have information regarding
SOB subcontracting participation by two-digit SIC code. At the
same time, however, it is important to minimize the amount of new
record-keeping and reporting that these reforms may require.
Prime contractors such as commercial vendors that report SOB
participa;t:ion through company-wide annual subcontracting plans
will continue to be·able to use .this reporting method, with some
modification that serves to facilitate SIC code reporting. Under
one approach, prime contractors could require all subcontractors
to identify their primary SIC code and then track, as most primes
do now, the amount of dollars that flows to each subcontractor.
�\
25
Commerce will analyze the data and, after consultation with
SBA, report to oFPpregarding which mechanisms should be
available in each industry and the size of the credits that can
be applied.
OFPP will publish and disseminate the mechanisms
that can be used by the agencies in the upcoming year.
Pursuant to 15 U.S.C. 644{g), each agency now negotiates
goals for SOB participation with SBA for each year.
Commerce
would inform SBA and agencies of the appropriate benchmark limits
for the industries in whicp the
a~ency
contracts and of the
mechanisms available.
Where Commerce determines that participation by SOB's in
government contracting in an industry is below the relevant
I
,
benchmark limitation, it
m~y
report to OFPP that agencies should
be authorized to grant credit to SOB bidders and to prime
contractors for SOB subcontracting.
Commerce will set a
percentage cap of up to ten percent on the amount the credit 'can
allow the price of a contract to deviate from the fair'market
price.
That percentage will represent the maximum credit that
each agency may use in the evaluation of bids from SOBs and prime
contractors who commit to subcontracting with SOBs.
The size of
the credit will depend, in part, on the extent of the disparity
between the benchmark,limitations and minority SOB participation
in federal procurement an industry.
assessment of pricing
prac~ic.s
It also will depend on an
within particular industries to
indicate the effect of credits within "that industry.
Commerce's
determinations would be published and disseminated by OFPP.
Where the bidding
~nd
evaluation credits have been used in
an industry and' the percentage of dollars awarded to SOBs in that
�26
industry exceeds the benchmark limit, Commerce, in consultation
with SBA, must estimate the effect of curtailing the use of raceconscious contracting mechanisms and report to OFPP.
If Commerce
qetermines that the minority participation rate would fall
substantially below the benchmark limit in the absence of race
conscious me~sures,19 it need not require agencies to stop
using such measures,· but may, as described below, require
agencies to adjust their use.
Agencies will report the number of contracts that were
awarded using a bidding or evaluation credit as well as the
amount of those credits.
These figures will allow an estimate of
the "effect on SOB participation of adjusting or removing the
credit.
In the absence of that objective measure, Commerce will
have to estimate and report to ,OFPP how much minority contracting
resulted from the application of these race-conscious measures.
One indication may be the success of minorities in winning
contracts through direct competition in which race is not used in
the decision to award a contract.
It may also be useful to
examine comparable experience in private industries operating
without affirmative action programs.'
Even when agencies are not required to terminate bidding and
evaluation credits, they may be required to adjust their size in
order to ensure that the credits do not lead to the award of a
19 More than three "standard deviations" will generally be
viewed as "substantial" for these purposes. Under applicable
Supreme Court decisions, a disparity in the range of two or three
standard deviations is'strong evidence of a prima facie case of
discrimination in the employment context. A standard deviation
is a measure of the departure from the level of activity that one
would expect in the absence of discrimination.
�27
disproportionately large numbers of contracts to SOBs.
statutory
authority for this adjustment exists in both FASA and section
2323.
Because the size of credits will affect industries
differently, it is impossible to prescribe a set of specific
rules to govern adju~tments.
Responsibility will rest with
Commerce to analyze the impact of credits by industry category
and make adjustments where appropriate, which would then be
published and disseminated by OFPP.
In addition, in some circumstances, an agency may use less
than the authorized bidding or evaluation credit where necessary
to ensure that use of the credits by a specific agency does not
unfairly limit the opportunities of non-SOB contractors seeking
contracts from that agency.
While 'the size of the maximum
credits will be determined on an industry-wide basis and apply
across all agencies, it remains important to maintain flexibility
at the agency level to ensure against any undue concentrations of
SOB contracting and unnecessary use of race-conscious credits.
Thus, for example, where an agency has been particularly
successful in reaching out to SOB contractors, it may find its
use of the full credits unnecessary to achieve its goals, in
which event it could, subject to approval by Commerce, depart
downward from the authorized credits.
The exercise of this
discretion will be particularly important to avoid geographic
concentrations of SOB contracting that unduly limit opportunities
for non-SOBs. ,
When Commerce concludes that the use of race-conscious
measures is not justified in a particular industry (or region),
the use of the bidding credit and the evaluation credit will
�28
cease.
Suspending the use of race-conscious means will not
affect the continued use of race-neutral contracting measures •
. The limits imposed by the benchmarks also would not affect the
applicability of statutorily mandated goals, but would limit the
extent to which race-conscious means could be used to achieve
those goals.
For example, 000 would retain its five percent
overall statutory goal and would continue to exhort prime
contractors to achieve goals for subcontracting with SOB's.
Prime contractors, however, would no longer receive credit in
evaluation of their bids for signing up or identifying SOB
subcontractors.
Likewise, outreach and technical assistance
,efforts would continue and minority bidders on prime contracts
would continue to seek and win competitive awards; but there
would no longer be any bidding credit for minority firms.
It should be emphasized that the benchmarks are not a limit
on the level of minority contracting in any industry that may be
achieved without the use of race-conscious measures.
Conversely,
r
there is, of course, no
ass~rance
that minority participation in
particular industries will reach the benchmark limitations
through the available race conscious measures.
Minority
participation will depend on the availability of qualified
minority firms that successfully win contracts through open
competition, subcontracting, the 8(a) program or through the
application of price or evaluation credits.
The system described
herein is a good faith effort to remedy the effect of
discrimination, but it is not a guarantee of any particular
result.
�·29
The affirmative action structure described herein does not
utilize the statutory authorization under' FASA to allow federal'
agencies (or in the'case of DoD its direct authorization under 10
U.S.C. 2323) to set contracts aside for bidding exclusively by
SDBs.
If
feder~l
agencies use race-conscious measures in the
manner outlined above, together with concerted race-neutrai
efforts at outreach and technical assistance as described below,
we believe the use of this additional statutory authority should
be unnecessary.
.Following the initial two-year period of the
reformed system's operation (and at regular intervals
thereafter), however, Commerce, SBA and DoD will evaluate the
operation of the system and determine whether this statutory
power to authorize set-asides should be invoked.
In making that
determination, those agencies will take into account whether
persistent and sUbstantial underutilization of minority. firms in
particular
i~dustries
or in government contracting as a whole is
the result of the effects of past or present discriminatory
barriers that are not being overcome by this system.
Such periodic reviews should also consider whether, based on
experience, further limitation of the use of race-conscious
measures is appropriate beyond those outlined herein.
In that
regard, it should be noted that the reformed structure is
inherently and progressively self-limiting in the use of race
conscious measures.
As barriers to minority contracting are
removed and the use of race-neutral means of ensuring opportunity
succeeds, operation of the reformed structure will automatically
reduce, and eventually should eliminate, the use of race in
decisionm~king~
In addition, the statutory authority upon which
�30
the use of,bidding and evaluation credits is based expires at the
end of fiscal year 2000.
Congress will determine whether that
authority should be extended.
See 1'0 U.S.C. 2323;
FA~A,
S
7102.
Section Sea) Program
Contracts obta1ned by minority firms through the Sea)
program will count toward the calculation whether minority
participation has reached or exceeded the benchmark in any
industry. 20
The Administrator of SBA will be under an
obligation to monitor the' use of the Sea) program in relation to
the benchmark limits. Thus, where Commerce advises that the use·
of race-conscious measures must be curtailed in a specific
. industry on the basis of the benchmarks,
the~dministrator
would
take appropriate action to limit the use of the program through
one or more of the following techniques: (1) limiting entry into
the program in that industry; (2) accelerating graduation for
, ,
firms that do not need the full period of sheltered competition
to satisfy the goals of the program; and (3) limiting the number
of Sea) contracts awarded in particular industries or geographic
areas.
These same techniques' should be used by the Administrator in
carrying out existing authority to ensure that Sea) contracting
is not concentrated unduly in certain regions.
Even where a
market is defined as national in scope, and Sea) is being used
within applicable national benchmark limits, efforts' should be
20 As w~th calculation of the benchmark limitations, see n.
13, supra., corporations owned by federally-recognized Native
American tribes and Alaskan Native villages will not be included
in this calculation.
�31
made to guard against excessive use of 8(a) contracting in a
limited region. ,.
As noted earlier, the 8(a) program is distinct from the
general SOB program in that it is animated by its own distinct
purpose -- to assist socially and economically disadvantaged
individuals to overcome barriers that have suppressed business
formation and development.
Consistent with ,its unique nature,
the 8(a) program has features that already reflect some of the
factors that make up the narrow tailoring requirement.
Unlike
other SOB's, individuals seeking admission to the 8(a)
p~ogram
must establish economic disadvantage without the benefit of any
presu~ption.
The Small Business Act defines economically
disadvantaged individuals as "those socially disadvantaged
individuals whose ability to compete in the free enterprise
system
~as
been impaired due to diminished capital and credit
opportunities as compared to others in the same business,area who
are not socially disadvantaged. 1t
Furthermore, SBA employs
objective criteria to measure whether an individual is
economically disadvantaged.
lIn this sense, the statute and
regulations are targeted toward victims of discrimination; the,
SBA is proposing to clarify the regulations implementing the
program to emphasize this fact.
admitted to the
8(a),progra~
In addition, individuals are
for a limited period -- nine years
- and their performance is reviewed throughout.
An individual
may be required to l'eave the program prior to the nine year
graduation period if the review reveals that the, individual is no
longer economically disadvantaged or the firm meets other
graduation criteria determined by the SBA.
I
�32
SBA has under consideration additional program changes
designed to ensure that the 8(a) program focuses on its central
mission of assisting businesses to develop and concentrates,it
resources on its intended beneficiaries.
These changes would
further ensure that the 8(a) program is narrowly tailored to
serve the compelling interest for which it was enacted by
Congress.
v.
outreach and Technical Assistance
At present, agencies undertake a variety of activities
designed to make minority firms aware of contracting
opportunities and to help them take advantage of those
opportunities.
AS,a general proposition, ,these activities are
not subject to strict scrutiny.
The structure outlined above for
the use' of race-conscious measures assumes that agencies will
conti~ue such outreach and' technical assistance efforts at all
times, so that race-conscious measures will be used only to the
minimum extent necessary to achieve legitimate objectives.
Our
review indicates that, while there are a variety of good programs
of this nature operated by various federal agencies, there is a
lack of consistency and sustained energy and direction'to these
efforts.
SBA operates several assistance programs that are targeted
toward minority firms, but are also, available to qualifying
nonminority firms.' Notably, pursuant to section 7(j) of the
Small Business Act,' SBA provides financial assistance to public
;
and private organizations to provide technical and management
assistance to qualifying individuals.
also operates a program to
13 CFR 124.403, 404.
provideass~stance
to socially and
SBA
�33
economically disadvantaged businesses in preparing loan
applications and obtaining pre-qualification from SBA for loans.,
"See 13 CFR 120.
SBA also operates a surety bond program,pursuant
to which, it provides up to a 90% guarantee for bonds required of
small contractors.
The Department' of Commerce', through the Minor i ty Business
Development Administration, sponsors several programs to provide
information, training and research that are targeted toward
minority-owned businesses.
These programs include Minority
Business Development centers around the country to provide hands
on assistance to minority businesses.
000 has operated since 1990 the Mentor-Protege Pilot
Program, which provides incentive for 000 prime contractors to
furnish SOB's with technical assistance,.
See 10 U.S.C. 2301.
Mentor firms provide a variety of assistance, including progress
payments, advance subcontract payments, loans, providing
technical and management assistance and awards of subcontracts on
a noncompetitive basis to the ,protege.
firm for its expenses.
000 reimburses the mentor
The award of subcontracts under this
program is subject to strict scrutiny, but other portions of the
program are not.
The following are among the efforts that should be actively
pursued:
1. A race-rieutral version of the mentor-protege program
(t;:1:lat does not guarantee the award of subcontracts on a non
competitive basis) should be encouraged',at all agencies.
2. 000 has proposed
-~
and other agencies should follow
DoD's lead -- eliminating the impact of surety costs from bids.
�'34·
Because SOB's generally incur higher bond costs, this
race~
neutral change would assist SOB's and address one' of the most
frequently cited batriers to minority success in contracting.
In
this regard, agencies should alsp examine the use of irrevocable
letters of· credit in lieu of surety bonds.
~. Where agencies usemai/linglists.aminimum goal should
be set for inclusion of SOB's on agency mailing lists of bidders.
4.. The function of the Procurement Automated Source System
(PASS), currently
m~intained
by
~BA,
should be continued.
The
system· provides contracting officers with a continuously updated
.list of SOB firms, classified by interest and region.
5. A uniform system for publishing agency procurement
forecasts on SBA Online should be establisheq.
sho~ld
develop a systematic means for publishing
In addition, SBA
~pcoming
subcontracting opportunities.
6 •. Agencies should target outreach and technical assistance
efforts, including mentor-protege initiatives, .toward industries
in which 'SOB participation traditionally has been low.
Agencies
should continue to pursue strategi'es in which minority-owned
firms. are
~ncouragedto
become part of joint ventures or form
strategic alliances with non-minprity enterprises.
7.
The SBA should enhance its technical assistance
initiatives to enhance the ability of SOBs to use the tools of
electronic commerce.
. .
.
8 •. Pursuant. to Executive Order 12876, which directs
agencies to seek to enter into contracts with Historically Black
Colleges and Universities, agencies should attempt to increase
participation by such institutions in reseatchand development
�35
contracts as means of assisting the development of business
relationships. between the institutions and SOB's.
9.
Each'agency should review its 'contracting practices and
its solicitations to identify and eliminate any practices that
disproportionately affect opportunities for SOBs and do not 'serve
a valid and substantial procurement purpose.'
The foregoing is merely a partial list of possible measures.
What is required -- both as a matter of policy and constitutional
necessity -- is a systematic and continuing government-wide focus
on encouraging minority participation through outreach and
technical assistance.
It is proposed. in contracting, 'therefore,
that agencies should report annually to the President on'their
outreach and technical assistance practices •. These reports
'should present the actual practices and exper.iences 'of., federal
agencies and include recommend'ations as to approaches that can
and should be adopted more broadly •. The maximum use of such
race-neutral efforts will'reduce to a minimum the use, of raceconscious measures under the benchmark limits described above.
CONCLUSION
.
'
The structure outlined above has been crafted with regard
for each of the six factors that courts have identified as
relevant in determining whether race-ba.sed· decisionmaking is
, narrowly tailored to meet an identified compelling interest.
While courts have identified these six factors as relevant in
determining' whether a measure is narrowly tailored, they have not
required that race-conscious
enactmen~s
satisfy each element or
satisfy any particular element to any specific degree.
The
�36
structure proposed herein for SOB procurement, however, measures
up favorably with respect to each of the six factors.
~h~proposal require~
that agencies at all times use race
neutral alternatives to the maximum extent possible.
An annual
review mechanism is _established to ensure maximum use of such
race-neutral efforts.
Only where those efforts are
insuff~cient
to overcome the effects of past and present discrimination can
race-conscious efforts be invoked.
The
sy~tem
is
flexibl~
in that race will be relied on only
when annual analysis of actual experience in procurement
indicates that minority contracting falls below levels that would
be anticipated absent
discrimination~
Moreover, the extent of
any credit awarded will be adjusted annually to ensure that it is
closely matched to the need for a race-based remedial effort in a
particular industry.
Race will not be relied upon as the sole factor in SOB
procuremen~
decisions.
The use of credits (instead of set
asides) ensures that all firms have an opportunity to compete and
that in order to obtain federal contracts minority firms will
have to demonstrate that they are qualified to perform the
work.2~
Application of the benchmark limits ensures that any
reliance on_race is closely tied to the best available analysis
21 The SBA's Sea) program contains a variety of elements
that help to target the program on firms in need of special
assistance, including a requirement that applicants affirmatively
demonstrate economic disadvantage~ Furthermore, the program is ,
not limited to minority-owned firms. These features of the
program ensure 'that race is not the sole factor-in determining
entry into the program.
\
�37
of the relative capacitY'of minority firms to perform the work in
question -- or what their capacity would be in the absence of
discrimination.
The duration of the program is inherently limited.
As
minority firms are more successful in obtaining federal
contracts, reliance on race-based mechanisms will decrease
automatically.
When the effects of discrimination
.
.
,
h~ve
been
eliminated, as demonstrated by minority success in obtaining
procurement contracts, reliance on race will terminate
automatically.
The system as a whole will be reexamined by the
executive branch at the end of two years and at regular intervals
thereafter.
In addition, the principal enactments that this
proposal implements, FASA and the
Depar~ment
of Defense
Authorization Act, expire at the end of the fiscal year 2000.
Congress will have to examine the functioning of this system and
make a determination whether to extend the authority to continue
its operation.
Finally, the proposal avoids any undue burden on .
nonbeneficiaries of the program.
As a practical matter, the
overwhelming percentage of 'federal procurement money will'
continue to flow, as it does now, to nonminority businesses.
Furthermore, implementation of the benchmark limitations will
ensure that race-based decisionmaking cannot result in
concentrations of minority contracting in particular industries
or regions and will thereby limit the impaqton nonminorities.
The structure of affirmative action in contracting set forth
herein wilt not be simple to implement and will undoubtedly be
improved through further refinement.
Agencies will have to make
�38
judgments and observe limitations in the use of race-conscious
measures, and make concentrated race-neutral efforts that are not
required under current practice.
changed the .rules
gove~ning
model responds to
pr~nciples
federal.
affirm~tive
action.
This
developed by the Supreme Court and
lower courts in applying strict
decisionmaking.
The Supreme Court, however, has
sc~utiny
to race-based
The challenge for .the federal government is to
satisfy, within these newly-applicable constitutional
limitations, the compelling interest in remedying the effects of
discrimination that Congress has identified.
Michael C. Small
Oeputy Associate Attorney General
i
J
�APPENDIX
THE COMPELLING INTEREST FOR AFFIRMATlVE ACTION IN FEDERAL
PROCUREMENT: A PRELIMINARY SURVEY
Under the Supreme Court's ruling last year in Adaraod Constructors. Inc. v. Pena,
115 S. Ct. 2097 (1995), strict scrutiny applies to federal affirmative action programs that
provide for the use of racial or ethnic criteria as factors in procurement decisions in order to
benefit members of minority groups. Such programs satisfy strict scrutiny if they serve a
"compelling interest," and are "narrowly tailored" to the achievement of that interest. Strict
scrutiny is the most exacting standard of constitutional review. It is the same standard that
courts apply when reviewing laws that discriminate against minority groups.· The Supreme
Court in Adarand did not decide whether a compelling interest is served by the procurement
program at issue in the case (or by any other federal affirmative action program), and
remanded the case to the lower courts, which had not applied strict scrutiny. 1 Nevertheless,
a strong majority of the Court -- led by Justice O'Connor, who wrote the majority opinion --
I Adarand involved a constitutional cbaJJenge to a Department of Transportation (-DOr) program that
compensates prime contractors if they hire subcontractors certified as smaJl businesses controJJed by. -sociaJJy
and economically disadvantaged- individuals. The legislation OD which the DOT program is based, the Small
Business Act, establishes a aovemment-wide aoa! for participation of such concerns at -Dot less than 5 percent
of the total value of all prime contract and subcontract awards for each fiscal year.· IS U.S.C. § 644(g)(1).
The Act furtber provides that members of designated racial and ethnic minority aroups are presumed to be
socially and economically disadvantaged. h!.. § 637(a)(5)(6), § 637(d)(2),(3). In Adarand, the Supreme Court
stated that the presumption constitUtes race-conscious action, thereby triggering application of strict scrutiny.
115 S. Ct. at 2105.
�admonished that even under strict scrutiny, affinnative action by the federal government is
constitutional in appropriate circumstances. 2 Without spelling out in precise terms what
those circumstances are, the Court stated that the government has a compelling interest in
'remedying "[t]he unhappy persistence of both the practice and the lingering effects of racial
discrimination against minority groups in this country." 115 S.• Ct. at 2117.
i
At bottom, after Adamnd, the compelling interest
test~centers
on the nature and
,
weight of evidence of discrimination that the government needs.,to marshal in order to justify ..
race-conscious remedial action. It is clear that the mere factthat there has been generalized,
historical socjetal disCrimination in the country against minoriti~s is an insufficient predicate
for race-conscious remedial measures; the discrimination to be remedied must be identified
more concretely. The federal government would have a compelling interest in taking
i
re~edial action in its procurement activities, however, if it can IShOW with some degree of
.
.
I
specificity just how "the persistence of both the practice and the lingering effects of racial
discrimination" -- to use Justice O'Connor's phrase in Adamnd :-- has diminished contracting
,
opportunities for members of racial and ethnic minority groups)
. I
2 Adarand, liS S. Ct. at 2117. The Court emphasized that point in order to -dispel the notion that strict
scrutiny is 'strict in theory; but fatal in fact." hL. Seven of the nine justiceS of the Court embraced -the
principle that it is possible for affirmative action by the federal government
meet strict scrutiny. This group
included: (i) Justice O'Connor IUd two other justices in the majority, Chief ~ustice Rehoquist IUd Justice'
Kennedy; IUd (ii) the four disseotingjustices (Stevens, Souter, Ginsburg, IUd Breyer). Only Justices Scalia and
Thomas, both of wbom concurred in the result in the case, advocated a position that approacbes a near blanket
constitutional ban on affirmative action.
to
•
I
Adarand did DOt alter the principle that the ,overnment may take race-oooscious remedial action in the
absence of a formal judicial or administrative determination that there has been discrimination against individual
members of minorities groups (or minorities as a class). The test is whether the government has a -strong basis
in evidence- for the conclusion that sucb action is warranted. City of Richmond v. J.A.Croson Co., 488 U.S.
,
t
(continued...)
3
- 2
�In coordinating the review of federal affirmative action programs that the President
directed agencies to undertake in light of Adarand, the Justice Department has collected
evidence that bears on that inquiry. The evidence is still being evaluated, and further
information remains to be collected. As set forth below, that evidence indicates that racially
discriminatOry barriers hamper the ability of minoritY-Owned businesses to compete with
other fmns on an equal footing in our nation's contracting markets. In short, there is tc.x1ay
a compelling interest to take remedial action in federal procurement.'"
The purpose of this memorandum is to summarize the
evid~nce
that has been
assembled to date on the compelling interest question. Part I of the memorandum provides
i1I1
overview of the long legislative record that underpins the acts of Congress that authorize
affirmative action measures in procurement -- a record that is entitled to substantia,l deference
from the courts, given Congress' express constitutional power to identify and redress, on
a
nationwide basis, racial discrimination and its effects. The remaining sections of the
memorandum survey information from various sources: (1) congressional hearings and
3(... continued)
469, SOO (1989). Adarand also did not alter the principle that the beneficiaries of race-conscious remedial
measures need not be limited to those individuals who themselves demOnstrate that they have suffered some
identified discrimination. See Local 28. Sbeet Metal Workers' Int'l Ass'n v. EEOC, 478 U.S. 421,482 (1986);
WYKant v. Jackson Bd. of Educ.. 476 U.S. 267,277-78 (1986) (plurality opinion); i9.. at 287 (O'Connor, J.,
~~rring).
"
• The term -f~raI procuremeot- refers to goods and services that the federal government purchases .
directly for its own use. 'This is to"be distinguished from programs in whicb the federal govern.rJ1ent provides
funds to state and 10cal govem..tDents for use in their procurement activities. As part of those programs,
Congress has authorized recipients of federal fun~to take remedial action in procure!Jlent. Those programs are
not the focus of this memorandum. However. mucb of the evjd~ce discussed berein that supports the use of
remedial measures in the federal government's own procurement also supports the use of congressionally
authorized remedial measures in state and local procurement.
-
3
�reports that bear on the problems .that discrimin~tion poses for minority, opportunity in our
society, but that are not strictly related to specific. legislation authorizing affinnative action in
government procurement; (2) recent studies from around the cOuntry that document the
effects of racial discrimination on the procurement opportunities of minority-owned
.
'
I .
1
1
businesses at the state. and local level; and (3) works by social
~cientists,
economists, and
I·
,
other academic researchers on the manner in which the variousi fonns of discrimination act
i
I
together to restrict business opportunities for members of racial and ethnic minority groups. S
All told, tht; evidence that the Justice Department has collected to date is powerful
and persuasive. It shows that the discriminatory barriers facing minority-owned businesses
are not vague and amorphous manifestations of historical societal discrimination. Rather,
they are real and ,concrete, and reflect ongoing patterns and practices of exclusion, as well as
.
I
the tangible, lingering effects of prior discriminatory conduct. 6 :
I
$ It is well-established that the factual predicate for a particular affirmative action measure is not confined to
the four comers of the legislative record of the measure. See, u." Concrete Works v. City and County of
Denver,' 36 F ..3d 1513, 1520-22 (10th Cir. 1994), cert. denied, 115 S. Ct. PIS (1995); Contractors Ass'n v.
City of Philadelphia, 6 F.3d 990, 1004 (3d Cir. 1993); Coral Constr. Co. v:. King County, 941 F:2d 910,920
(9th Cir. 1991), cert .. denied, 502 U.S. 1033 (1992).
6 Congress has also adopted affirmative action measures in federal procurement, as well as in programs that
fund the procureme.ot activities of state aDd local governments; that are intended to' assist wome.o-owned
busineses. At preseot, such measures are subject to intermediate scrutiny, not the Adarand strict scrutiny
standard. Therefore, they have:: Dot been the focus of the post-Adarand revi~w that the Justice Department is
coordinating. However, some of the evidence collected by the Justice Department bears on the constitutional
j~fication for affirmative action programs for wome.o in government proc~reme.ot. See,.£.&.:., Interagency
Committee 00 Women's Business Enterprise, Expanding Business Opportunities for Women (1996); National
Foundation for Women Business Owners aDd Dunn & Bradstreet Information services, Women-Owoed
Businesses: A Report on the Progress and Achievement of Women-Owned :Entemrises - Breaking the
Boundaries (1995); Problems Facing Minority and Women-Owned Small BUsinesses in Procuring U.S.
Government Contracts: Hearing Before the Subcomm. on Commerce. ConSumer and Monetaa' Affairs of the
House Comm. on Government Operations. 103d Cong., 2d Sess. (1994). .
- 4
�It is important to emphasize that, even though the government has a compelling
interest in taking race-conscious remedial measures in its procurement, their use must be
limited. Under the requirements of the narrow tailoring prong of strict scrutiny, the
It
federal
g~vernment
It
may only employ such measures to the extent necessary to serve the
compelling interest in remedying the impact of discrimination on minority contracting
opportunity. The JUS?ce Department's proposed reforms to affirmative action in federal
procurement (to which this memorandum is attached) are intended to target race-conscious
remedial measures to markets in which the evidence indicates that discrimination continues to
impede the participation of minority firms in contracting. Thus, the proposal seeks to
ensur~
that affirmative action in federal procurement operates in a flexible, fair, limited, and careful
manner, and hence will satisfy the requirements of narrow tailoring. .
I. SURVEY OF THE LEGISLATIVE RECORD
In evaluating the evidentiary predicate for affIrmative action in federal procurement, it
is highly significant that the measures have been authorized by Congress, which has the
unique and express constitutional power to pass laws. to ensure the fulflllment of the
guarantees of racial equality in the Thirteenth and Fourteenth Amendments.' These explicit
,
.
'
constitutional commands vest Congress with' the authority to remedy discrimination' by
7 See~. 488 U.S. at 488 (plurality' opioion); Fullilove v. KJutznick, 448 U.S. 448. 483 (1980)
(plurality opioion); ilL. at SOO (powell. J .• CODCumng); see also Adarand. I1S S. Ct. at 2114; Metro
Broadcastine. Inc. v. FCC. 497 U.S. 547.563 (1990); ilL. at 6OS~ (O'Connor. J.• dissenting); ct. Seminole
Tribe of Florida v. Florida, 116 S. Ct. 1114. 1125 (1996) (reaffirming that broad grant of remedial power
under Section S of the Fourteenth Amendment enables Congress to override sta~ sovereign immunity),
- 5
�private actors, as well as state and local governments. 8 Congr~ss may also exercise its
constitutionally grounded spending and commerce powers to ensure that discrimination in our
I
nation is not inadvertently perpetuated through government p~~urement practices. 9 In
exercising its remedial authority, Congress need not target only deliberate acts of
discrimination. It may also strive to eliminate the effects of d~scrimination that continue to
,
impair opportunity for minorities, even in the absence of ongo~ng, intentional acts of
discrimination. 1o Furthermore, in combatting discrimination ~d its effects, Congress has
the latitude to develop national remedies for national problems. Congress need not make
findings of discrimination with the same degree of precision as do state or local governments.
. I
. .
Nor is it obligated to make findings of discrimination in every' industry or region that may be
affected by a remedial measure. II
Congress has repeatedly examined the problems that ra:cial discrimination poses for
minority-owned businesses. 'A complete discussion of the
en~re
record of Congress in this
"
• See Croson, 488 U.S. at 490 (plurality opinion); Fullilove, 448 U.S: at 476-78 (plurality opinion); id. at
500 (powell. J., concurring); Runyon v. McCrary, 427 U.S. 160, 179(19,76); see also Adarand, 115 S. Ct. at
2126 (Stevens, 1., dissenting);Metro Broadcasting, 497 U.S. at 60S (O'~nnor. J., dissenting).
9 See Croson, 488 U.S at 492 (plurality opinion) elt is beyond dispute that any public entity, state or
federal, has a compelling interest in assuring that public dollars, drawn from the tax contributions of all citizens,.
do DOt serve to finance the evil of private prejudice. "); see also Metro Broadcasting, 497 U.S. at 563..64; .
Fullilove, 448 U.S at 473-76 (plurality opinion).
10 See Adarand, 115 S. Ct. at 2117 (Congress may adopt affirmative ~tion to remedy "both the practice
and the lingering effects of discrimination"). Accord.uL at 213;, (Souter,J., dissenting) (government may act to
redress effects of discrimination "that would otherwise persist and skew tlle operation of public systems even in
the absence of current intent to practice any discrimination").
;
I.
II
Croson. 488U.S. at 490. 504; Fullilove, 448 U.S. at 502-03 (powell. J' t concurring). '
.
-
6
.
�area, is beyond the ,scope of this memorandum, 12 , The theme that emanates from this record
12 CoogressioDal bearings on the subject from 1980 to the present include the following: The Small,
Business Administration's 8(a) Minority Business Development Program: Hearing Before the Senate Comm . on
Small Business, l04thCong., 1st Sess. (1995); Discrimination in Surety Bondmg:' Hearing Before the
, Subcomm. on MinoritY Ente!prise. Finance and Urban Development of the House Comm. on Small Business,
103d, Cong" 1st Sess. (1993); Department of Defense: Federal Programs to Promote Min'ority Business
'Development: HeaOng Before the Subcomm. on Minority Ente!prise. FinanCe and Urban Development of the
House Comm. on Small Business, 103d Cong., 1st Sess. (1993); SBA's MinoritY Business Development
Program: Hearing Before the House Comm. on Small Business, 103d Cong., 1st
(1993); Problems
facing Minority and Women-Owned Small Businesses in Procuring U.S. Government Contracts: Hearing
Before the Subcomm. 0D Coromerce. Consumer and Monetaa Affairs of the House Comm. on Government
, Operations, 103d Cong., 1st Sess. (1993); Fiscal Economic and Social Crises Confropting American Cities:
Hearings Before the Senate Comm. on Banking. Housing and Urban Affairs, 102d Cong.; 2d Sess. (1992);
Small Disadvantaged Business Issues: Hearing Before the Investigations Subcomm. of the House Comm. On
Armed Services, 102d Cong., 1st Sess. (1991);,Federal Minority Business Programs: Hearing Before tbe
House Corom. on Small Business, 102d Cong.; 1st Sess. (1991); To Amend the Civil Rights Act of 1964: '
Permitting Minority Set-Asides: Hearing Before the Senate Comm . on Governmental Affairs, 101st Cong." 2d
Sess., (1990); City of Richmond v. I.A. Croson: Impact and Response: Hearing Before the Subcomm. on '
,Urban and Minority-Owned Business Development of the Senate Comm. of Small Business, IOIs,t Cong., 2d
Sess. (1990); Minority Business Set-Aside Programs: Hearing Before the House Corom. on the Judiciary, IOlst
Cong., lst Sess. (1990); Minority Construction Contracting: Hearing Before the Subcorom. on SBA. the
General Economy and Minority Ente!prise Development of the House Corom. on Small Business, IOIst Cong.,
1st Sess. (1989); Surety Bonds and Minority Contractors:, Hearing Before the Subcorom. on Commerce.
Consumer Protection and Competitiveness of the House Corom. on Energy and Commerce, l00th Cong., 2d
Sess. (1988); Twenty Years a(terthe Kerner Commission: The Need for a New Civil Rigbts Agenda: Hearing
Before the Subcorom. on Civil and Constitutional Rights of tbe House Comm. on tbe Judiciary, l00th Cong., 2d
Sess. ,(1988); Disadvantaged Business Set-Asides in Transportation Construction Projects: Hearings Before tbe
Subcorom. on Procurement. Innovation and Minority EnterPrise Development of the House Corom. on Small
Business, l00th Cong., 2d Sess. (1988); Barriers to Full MinorityParticip.tion in Federally funded Highway
Projects: Hearings Before a Subcomm. of the House Cogup. On Government Operations, l00th Cong., 2d '
Sess, (1988); The Small Business Competitiveness Demonstration Program Act of 1988: Hearings on S. 1559
Before the Senate Corom. on Small Business. l00th Cong., 2d Sess. (1988); Small Business Problems:
Hearings Before tbe House Corom. on Small Business, l00th Cong., 1st Sess. (1987); Minority Business
, ,Development. Act: Hearing Before tbe Subcorom. on Procurement. Innovation and Minority Ente!prise
Development of the House Corom. on Small Business, l00th Cong., lst Sess. (1987); A Bill to Refonn tbe'
Capital Ownership Development Program: Hearings on H.R. 1807 Before the Subcomm. on Procurement.
Innovation and, Minority Ente!prise Development oftbe House Comm.on Small Business, l00th Cong:, 1st
Sess. (1987); To Present and Examine the Result of a Survey of the Graduates of the Small Business'
Administration Section 8(.) Minority Business Development Program: Hearings Before the SenateCoinm. on
Small Business, l00th Cong., 1st Sess. (1987); Minority Ente!prise and Generai Small Business Problems:
Hearines Before the Subcornm. on SBA and SBlC Authority. Minority Ente!prise and General Small Business
Problems of the Senate Corom. on Small Business, 99th Cong., 2d Sess, (1986); The State of Hi§panic Small
Business in America: Hearings Before the Subcomm. on SBA and SBIC Authority, Minority Ente!prise and
General Small Business Problems of the House Comni. on Sma)) Business, 99th Cong., 1st Sess. (1985);
Federal Contracting ORportunities for Minority and Women-Owned Businesses: An Examination of the 8(d)
Subcontracting Program: Hearings Before the Senate Corom. on Small Business, ~8th Cong., 1st SesS. (1983);
Minority Business and Its Contribution to the United States Ecopomy: Hearing Before tbe Senate Com. on
Small Business, 97th Cong., 2d Sess. (1982); small Business and the Federal Procurement'System: Hearings
.
(continued ... )
sess.
7
�is unequivocal: Congress has adopted race-conscious remedial measures in procurement
1
directly in response to its findings that ·widesprea<;i discriminapon, especially in access to
fmancial credit,has been an impediment to the·ability of minonty-owned busi~ess to have an
.
,
,
,
I
,I
-".
1
equal chance at developing in our economy.·13 ,Furthermore, (2ongress has recognized that
1
1
expanding opportunities for rninQrity-owned businesses in government procurement helps to
bring irito mainstream public contracting networks firms that otherwise would be excluded as
,
,
,
a result of discriminatory barriers. In light of Congress'
1
ex~siveremedial charter, it is a
fundamental principle that courts must' accord a significant degree of deference to those
findings and the attendant judgment of the Congress'that
,
rem~ial, measures
,
in government
"I
I '
'procurement-are warranted. 14
i
The relevant congressional findings encompass a broad ,range of problems confronting
.
'
minority-ownedbusinesses.. They include "deficiencies in working capital,
,
~nabi1ity
to meet
)
bonding requirements, , . caused by ' . ,
disabilities
an inadequate 'track record,' lack of awareness
l
'
,
I'
of bidding opportun~ties, unfamiliarity with bidding procedure~, pre-selection before the
"
i
I'
,!
,
It{... conunued) ,
'
Before the Subcomm. on General Oversight ofthe House Comm. on SmaU Business, 97th Cong., 1st Sess.
(1981); Small aqd Minority Business in the pecade of the 1980's (part I): ! Hearings Before the House'Comm .
onSnial1 Business, 97th Coog., 1st Sess. (1981); Small Business and the Federal Procurement System: ,
Hearings Before the Subcogun. on General Oversiibt of the House Comm. on Small Business, 97th Cong., 1st
,Sess. (1981); To Amend the Small Business Act to Extend the Current SBA 8(a) Pilot Program: Hearings on
H.R. 5612 Before the Senate Select CoDUP. on Small Business,,96th Cong., 2d Sess. (1980).
13
Affirmative Action Review: ReJ?Ort to the President 55 (1995).
488 U.S. at 488-90 (plurality opinion);'Fullilove, 448
at 472-73 (Plu~lity opinion); id.
I., concurring); see also Metro Broadcasting, 497 U.S.!at 563;.tiL a! 605-07 (O'Connor, I.,
dissenting). This principle was not diStwbed by the Supreme Court's Rllin~ in Adarand; thus, it continues to
have force, even under strict scrutiny, See Adarand, 115 S. Ct. a! 2114; ~a! 212§ (Stevens, ]., dissenting);
id. at 2133 (Souter, ],' dissenting). .
i
, I.
See~,
U.S.
a! 508-10 (powell.
-
8
�.
,.
fonnal advertising process, and the exercise of discretion by government procurement
officers to disfavor minority businesses. "IS
For example, in a report that led to the legislatj.on that created what has become
known as the "S(a)" program at the Small Business Administrap,on,16 and that established
goals for participation in procurement at each federal agency by firms owned and controlled
by Socially and economically disadvantaged individuals (SDB's),17 a congressional
. committee found that the difficulties facing minority-owned businesses were "not the result of
random chance" Rather, the committee stated, "past discriminatory systems have resulted in
present economic inequities. illS In connection with the same legislation, another committee
concluded that a pattern of discrimination "continues to deprive racial and ethnic minorities
... of the opportunity to participate fully in the free enterprise system. ,,19 Eventually,
when it adopted the Sea) legi~lation,Congress found that minorities "have suffered the effects
of discriminatory practices or similar invidious circumstances over which they have no
control," and that "it is in the national interest to expeditiously ameliorate" the effects of this·
IS
Ful1ilove, 448 U.S. at 467 (plurality opinion).
If That program targets federal procurement opportunities for small firms owned and controlled by
individuals who are socially and economically disadvantaged. See 15 U.S.C. § 637(a). Members of certain
minority groups are presumed to be socially disadvantaged. 13 C.F.R. Pt. 124. .
.
t 644(g).
17
15 U.S.C.
II
H.R. Rep. No. 468, 94th Coog., 1st Sess. 2 (1975).
".
I'
S. Rep. No. 1070, 95th Cong., 2d Sess. 14 (1978). See also H.R. Rep. No. 949, 95th Cong., 2d Sess. 8
(1978).
19
- '9
�discrimination, through increased OPI~:>rtunities for minorities in~ government procurement. 20
I
.
• .
i
When revamping the 8(a) program in the late 1980s, Congress again found that
Wdiscrimination and the present effects of past discrimination- continued to hinder minority
. .
.
,
I
business development. Congress concluded that the program
~equired
bolstering so that it
i
would better -redress the effects of discrimination on entrepreneurial endeavors. -21
.
.
J. .
.
In the same vein are congressional findings that underpin legislation that sets agency-
specific goals for participation by disadvantaged businesses -- including minQrity-owned firms
i
.
21 Pub. L. No. 95-507, § 201, 92 Stat. 1757, 1760 (1978). See 124 Cong. Rec. 35,204 (1978) (statement
of Sen. Weicker) (commenting on the introduction of the conference report on the 8(a) legislation and observing
that the report recognizes the existence of a "pattern of social and economic discrimination that continues to
deprive racial and ethnic minorities of the opportunity to participate fully ~ the free enterprise system"). In the
same year it passed the 8(a) legislation, Congress considered an additional bill that sought to target federal
assistance to minority-owned firms. In introducing that measure, Senator I;>ole remarked that "minority
businessmen can compete equally when given equal opportunity. One of the most important steps this country
can take to insure equal opportunity for its hispanic, black and other minority citizens is to involve them in the
mainstream of our free enterprise system." 124 Cong. Rec. 7681 (1978). i .
I
21 H.R. Rep. No. 460, looth Cong., 1~ Sess. 16, 18 (1987). See 133: Cong. Rec. 37,814 (1987) (statement
of Sen. Bumpers) (discussing proposed revisions to 8(a) program and coouDenting that minorities "continue to
face discrimination in access to credit and markets"); liL. at 33,320 (statement' of Rep. Conte) (discussing
proposed revisions to 8(a) program and co~ting that effects of discrimination continued to be felt, and that
8(a) amendments were needed to "create a workable mechanism to finally redress past discriminatory
practices"). See generally S. Rep. No. 394, l00th Cong., 2d Sess. (l98~>:; The Small Business Competitiveness
Demonstration Program Act of 1988: Hearings on S. 1559 Before the Senate Comm. on Small Business, looth
Cong., 2d Sess. (1988); Small Business Problems: Hearings Before the House Comm. on Small Business,
l00th Cong., 1st Sess. (1987); Minority Business Development Act: Heanng Before the Subcomm. on
Procurement. Innovation and Minority Enterprise Development of the HouSe Comm, on Small Business, looth
Cong., 1st Sess:.(1987); A Bill to Reform the Capital Ownership Development Program: Hearings on H.R.
1807 Before the Subcomm. on Procurement. Innovation and Minority Enterprise Development of the House
Comm. on Small Business, looth Cong., 1st Sess. (1987); To Present and Examine the Result of a Survey of
the Graduates of the Small Business Administration Section 8(a) Minority Business Development Program:·
Hearings Before the Senate Small Business Comm., looth Cong., 1st Sess: (1987); Minority Enterprise and
General Small Business Problems: Hearings Before the Subcomm. on SBA and SBIC Authority. Minority
Enterprise and General Small Business Problems of the Senate Co mm . on Small Business, 99th Cong., 2d Sess.
(1986); The State of Hispanic Small Business in America: Hearings Before the Subcomm. on SBA and SBIC
Authority. Minority Enterprise and General Small Business Problems of the House Comm. on Small Business,
'
99th Cong., 1st Sess. (1985).
- 10
�- in procurement and grant programs administered by those agencies. For instance,· in
recommending the continued use of such goals as part of programs through which the
Department of Transportation provides funds to state and local governments for use in
. highway and transit projects, a congressional committee observed that it had considered
extensive testimony and evidence, and determined that this action was "necessary to remedy
the discrimination faced by Socially and economically disadvatltaged persons attempting to
compete in the highway industry and mass transit construction industry. "22
Congress has also established goals for SOB participation in procurement at the
Defense Department, and authorized that agency to use specific forms of remedial measures
to achieve the goals. 23 The Defense Department program too is predicated on findings that
22 S. Rep. No.4, looth Cong., lst SesS. 11 (1987). The DoT goals were initially established in the Surface
Transportation Assistance Act of 1982, Pub. L. No. 97-424, § 105(0,96 Stat. 2097 (1982). They were
continued in the Surface Transportation and Uniform Relocation Assistance Act of 1987 (-STURM -), Pub. L.
No. 100-17, § 106(c)(1), 101 Stat. 132, 145(1987). ·Congress held furtber bearings on the subject after
passage of STURAA. See Minority Construction Contracting: Hearing Before the Subco mm . on SBA. the
General Economy and Minority Entemrise Development of the House Comm. on Small Business, IOlst Cong.,
1st Sess. (1989); pisadvantased Business Set-Asides in Transportation Construction Projects: Hearings Before
the Subcomm . on Procurement. Innovation and Minority Entemrise Development of the House Corom. on Small
Business, l00th Cong., 2-d Sess. (1988); Barriers to Full Minority Participation in Federally Funded Highway
Construction Projects: Hearing Before a Subcorom. of the House Co mm . on Government Operations. looth
Cong.,2-d Sess. (1988). Congress subsequently reauthorized the goals in the Intermodal Surface Tiansportation
Efficiency Act of 1991, Pub. L.No. 102-240, § l003(b), 105 Stat. 1914. 1919 (1991). See 137 Cong. Rec.
S7571 (June 12, 1991) (statement of Sen. Simpson) (expressing support for continuation of disadvantaged
business ~rogram at Transportation Department).
Congress bas established comparable initiatives to encourage disadvantaged business participation in
Jrallt programs administered by the Environmental Protection Agency (EPA). For example, recipients of grants
awarded by EPA under the Clean Air Act are required to set disadvantaged business goals. ~ 42 U.S.C. §
7601.Dote; see also 42 U.S.C. 1 4370d (establishing an SDB goal for recipients of EPA funds used in support
of certain environme.otal-rela1ed projects); H.R. Rep. No. 226, 102 Cong .• 1st Sess. 48 (1991):
%3
10 U.S.C. 12323.
- 11
�opportunities for minority-owned businesses had been impairep.24 More fundamentally, in
establishing .the program, Congress recognized that fostering
~ntracting opportunities
.
.
for
minority-owned businesses at the Defense Department is crudal,because that agency alone
;
typically accounts for more than; two-thirds of the federal government's procurement
.activities. Therefore, affirmative action efforts at the
i
Defen~
Departl'!'ent enable minority-
owned businesses to demonstrate their capabilities to contracting officers at that important
i
procuring agency and to the vast number of nonminority frrms that provide goods and
services to the Pentagon. In tum, minority-owned businesses: can begin to break into the
i
contracting networks from which they typically have been excluded.25 '
Opportunities for minority-owned businesses to participate in
Def~nse
Department
procurement increased following the introduction of the affirmative action program there in
the late 1980s. However, the effects of discrimination were still felt in federal procurement
.
.
generally. Based on information it obtained through.a 1993 hearing, a congressional
committee reported the following year that this "lack of opportunity results primarily from
:w See H.R. Rep. No. 332, 99th Cong., lst Sess. 139-40 (1985) (if di~vantaged firms had been able to
-participate in the 'early' development of major Defense systems, ~ey would have bad an opportunity to gain
the expertise required to bid on such contracts-); see also H.R. Rep. No. 450, 99th Cong., lst Sess: 179
(1985); 131 Cong. Rec. i7,445-17,448 (1985); H.R. Rep. No. 1086, 98th Cong., 2d Sess.l00-01 (1984).
2' See 131 Cong. Rec. 17,447 (1985) (statement of-Rep. Conyers) (affirmative action needed to brW down
-buddy-buddy contracting- at the Defense Department, ·which bas the largest procurement program in the
Federal Government-); iQ..' (statement of-Rep. Schroeder) (an -old boy's c,ub" in Defense Department
contracting excludes many minorities from business opportunities); see also Department of Defense: Federal
Proerams to Promote Minority Business Development: Hearing Before the Subcomm. on Minority Enterprise,
finance and Urban Development of the House Comm. on Small Business, 10ld Cong., 1st Sess. 49 (1993) .
(statement of Rep. Roybal-Allard) (·Old attitudes and old habits die hard .•.. Defense contracting has,
traditionally. been a closed shop. Only. select few need apply. Since the passage of the minority contracting
opportunity law, some progress bas been made. -); H.R. Rep. No. 1086, 98th Cong., 2d Sess. 100-101 (1984)
(low level of participation by disadvantaged firms in Defense Department Contracting indicated a need to expand
procurement opportunities it that agency for such firms).
.
- 12
!
�discriminatory or economic conditions, - and that -improvingaceess to govern'ment contracts
and procurement offers a significant opportunity for business development in many industry
sectors. -26 In the Federal A~uisition Streamlining Act of 1994, Congress sawnt to make
,
,
available to'all agencies the remedial tools that pre~iously had been granted to the Defense
Department, in order to -improv[e] access to. contracting opportunities for . ~ . minorityowned small businesses.- 77
Through its recurring assessments of the implications of discrimination against
minority-businesses, Congress has concluded that, standing alone, legislation that simply
proscribes racial' discrimination is an inadeqiJate remedy. Congress also has attempted to
redress the problems facing minority businesses through race-neutral assistance to all smali
businesses. 28 Co~gress has determin~, however, that those remedies, by themselves, are
"ineffectual in eradicating the effects of past discrimination, ,,29 and that race-conscious
26
H.R. Rep. No. 870, t03d Cong., 2nd Sess. 5 (1994).
Z7
140 Cong. Re.c. H9242 (Sept. 20, 1994) (statement of Rep. Dellums).
.
'
.
'
:III Begi.nn.ing with the Small Business .Act of 1953, Congress bas authorized numerous programs to ~aid,
counsel, assist, and protect .•. the interests of small-business concenis- and -insure that a fair proportion of
the total purchases and contr&cts for supplies and services for the government be placed with small-business
enterprises. - Pub: L. No. 163, § 202. 67 Stat. 232 (l953). After recognizing in the 1960s the specific
problems facing minority owned businesses, ~gress attempted to address them through race-neutral measures.
For example. in 1971. Congress amended the Small Business Investment Act to create a surety bond guarantee
program to assist small businesses that have trouble obtaining traditional bonding. In 1972, Congress created a
new class of small business investment companies to provide debt aDd equity capital to sman businesses owned
by socially and economiCally disadvantaged individuals. And over the years, Congress bas continuously:
reviewed and strengthened programs to assist all small businesses through the Small BusinesS Act. See £.:.i..
Pub. L. No. 93-386, 88 Stat. 742 (l974); Pub. L. No. 94-305,90 Stat. 663 (l976); Pub. L. No. 95-89.91
Stat., 553 (1977).
" ,
'
19 Croson, 488 U.S. at 550 (Marshall. 1., dissenting). Acrord Fullilove, 448 U.S. at 467 (plurality
0pWOD); jg., at 511 (powell,l., concurring); see also City of Richmond v. 1.A. Croson: ,Impact and Response:
(continued...)
- 13
�.
'\
measures are a necessary supplement to race-neutral ones. 30 Finally, based on its
. understanding of what happens at the state and
l~
:
level when use of affirmative action is.
I
I
. severely curtailed or suspended outright, Congress has conclu'ded that minority participation
in government procurement tends to fall dramatically in the absence of at least some kind of
remedial measures, the result of which is to perpetuate the c1i~riminatoI)' barriers that have
kept minorities out of the mai~stream of public contracting."
The foregoing is just a sampling. from the legislative record of congressionally
•
.
I
I'
I
authorized affirmative action in .government procurement.
~e
remainder of th~
.memorandum surveys evidence from other sources regarding ,the impact of di~rimination on
the ability of minority-owned businesses to compete equally i~ contracting markets. This
.
,
I
I
evidence confJIIlls Congress' determination that race-con~ious remedial action is needed to .
.
I
correct that problem.
!9(... conunue:d)
Hearing Before the Subcomm. on Urban and Minority-Owned Business D'evelopment of the Senate Comm. on
Small Business. IOlst Cong., 2d Sess. 48 (1990) (statement of Ray Marshall); H.R. Rep. No. 468, 94th Cong .•
.
I
'.'
. '!
1st Sess. 32 (1975).
3D It bears empbasizi.Dg that nlCe-neutral programs for sinal) busin~ are important and necessary
components of an overall congressional strategy· 10 eMaDce opportunity f~r small businesses owned by
minorities. For example, Congress bas authorized contracting set asides for small businesses generally -
minority and noruninority alike - as well as a host of bonding, lending. apd technical assistance programs that
are opeD 10 all small businesses. See 15 U.S.C. t 631 ~.
:
31 The Meaning and Significance for Minority BusmesSes of the SupnSme Court Decision in the Cjty of
Richmond v. l.A. Croson Co.: Hearing Before the Legislation and National Security Subcomm. of the House
Comm. on Government Qperations. 101st Cong .• 2d Sess. 57.62-90 (1990); City of Richmond v. l.A. Croson:
Inmact and Response: Hearing Before the SubComm. on Urban and Minority-Owned Business Development of
the Senate Comin. on Small Business, 101stCong., 2d Sess. 39-44 (1990) (statement of Andrew Brimmer).
- 14
�n~ DISCRIMINATORY' BARRIERS TO MINORITY CONTRACTING OPPORTUNITIES
Developing a business that
can successfully compete for government contracts
dePends on many factors. To begin with, technical or professional experience, which is
typic3.lJy attained through employment and trade union opportunities, is an important
prerequisite to establishing any business. Second, obtaining financing is necessary to the
formation of most businesses. The inability to secure the twin building blocks of experience
and financing may prevent a business from ever getting off the ground. Some individuals
overcome these initial obstacles and are able to form businesses. However, they
subsequently may be shut out from important contracting and supplier networks, which can
hinder their ability to compete effectively for contract opportunities. And further barriers
may be encountered when a business tries to secure bonding and purchase supplies for
,
,
projects -- critical requirements for many major government contracts.
While almost all new or small businesses find it difficult to overcOme these barriers
and become successful, these problems are substantially greater for minority-owned
businesses. Empirical studies and reports issued by congressional' committees, executiv~
branch commissions, academic researchers, and state and local governments document the
widespread and systematic impact of discrimination on the ability of minorities to carry out
each of the steps that are required for participation in government contracting. This evidence
of discrimination can be grouped into two categories:
- 15
�'(i) evidence showing that discrimination works to preClude minorities from obtaining,
the experience and capital needed to form and develop a business, which encompasses
discrimination by trade unions and employers and discrimination by lenders;
(u) evidence showing that discriminatory barriers dep~ve existing minority firms of
full and fair contracting opportunities, which encompasses discrimination by' private
sector customers and prime contractors, discrimination by business networks, and
.
'
discrimination by suppliers and bonding providers.
The following provides an overview of both categories of evidence.
A. Effects of Discrimination on the Formation and Development of Minority Businesses
~
primary objective of 'affirmative action in procurement is to encourage and support
the formation and development of minorit~-owned firms as a:remedy to the "racism and
other barriers to the free enterprise system that have placed ~ heavier burden on the
development and maturity of minority businesses. "32 That these efforts are necessary is
evident from the recent findings by the U.S. Commission on Minority Business
Development, appointed by President Bush. The Commissio,. amassed a large amount of
evidence demonstrating the marginal position that minority-owiled businesses hold in our
society:
J2 Small and Minority Business in the Decade of the J980's (part 1): Hearings Before the House Comm. on
Small Business, 97th Cong., 1st Sess. 4 (1981). See also H.R. Rep. No. 870, 103d Cong., 2d Sess. S (1994).
- 16
�•
Minorities make up more than 20 percent of the population; yet, minorityowned businesses are only 9 percent of all U.S. businesses and receive less
than 4 percent of all business receipts. 33
•
Minority ,firms have, on average, gross receipts that are only 34 % of that of
nonminority firms. 34
•
The average payroll for minority firms with employees is less than half that of
nonminority firms with employees. 35 ,
President Bush's Commission undertook an extensive analysis of the barriers that face
minority-owned business formation and development. It concluded that "minorities are not
underrepresented in business because of choice or chance. Discrimination and benign neglect
is the reason why our economy has been denied access to this vital resource... 36 Further
evidence of the effect of discrimination on minority business development is revealed in
recent studies showing that minorities are significantly less likely than whites to form their
J3 United States Commission on Minority Business Development, Final Report 2~ (1992). These statistics
are based on 1987 census data, the most recent full data available regarding the status of minority~wned
businesses. Preliminary reports from 1992 census data reveal that the status of minority firms bas not
significantly improved. For instance, African Americans are 12 percent of the population but, in 1992, owned
only 3.69£, of all businesses (up from 3.19£, in 1987) and received just 1 percent ofall U.S. business receipts
(which is the same level as in 1987).
". 12.:. at 3.
15
12.:. at 4.
~
12.:. at 60.
,
-
17
�own business -- even after controlling for income level, wea1,th, education level, work
experience, age and marital statuS. 37 These findings strongly' indicate that minorities "face
barriers to business entry that nonminorities do not face. ,,38
SinCe the inception of federal affirmative action initiatives in procurement, policy
makers have rerognized that there are two principal barriers to the
formatio~
and
development of minority-owned businesses: limited technical: experience and limited fmancial
,
,
resources. President Nixon's Advisory Council on Minority Business Enterprise identified
these barriers in 1973 when it reported that "a characteristic :lack of financial and managerial
resources has impaired any willingness to undertake
enterpri~e
and its inherent risk. ,,39
Two decades later, a congressional committee found that mi~orities continue
to have "fewer
opportunities to develop business skills and attitudes, to obtain necessary resources, and to
gain experience, which is necessary for the success of small businesses in a competitive
environment. ,,40 Discrimination in two sectors of the
nation~
eronomy accounts, at least in,
I
part, for the diminished, opportunity: discrimination by trad~ unions and employers, which
I
37 See Division of Minority and Women's Business Development, Opportunity Denied: A Study of Racial
and Sexual DiScrimination Related to Government Contractina in New York State, Appendix D, 53-75 (1992)
(finding that minorities in New York were 20% less likely to enter self-employment than similarly situated
whites); Timothy Bates, Self-employment Entry Across Industry Groups, Journal of Business Venturing, Vol.
10, at 143-56 (1995) .
. ,. Timothy Bates, Self-employment Entry Across Industry Groups, Journal of Business Venturing, Vol. 10,
149 (1995).
'
" Samuel Doctors &. Anne Huff, Minority Entemrise and the President's Council 4-6 (1973) (quoted in
Tuchfaroer et aJ., Cjty of Cinciooati: Croson Study ISO (1992».
4)
H.R. Rep. No. 870, 103d Cong., 2d Sess. 5 (1994).
- 18
�has prevented minorities from garnering crucial technical skllls; and discrimination by
-
-
lenders, which has prevented minorities from garnering needed capital.
1. Discrimination by Trade Unions and Employers
President Nixon >'s Advisory Council on Minority Business Enterprise determined that
·the lack of opportunity to participate in managerial technical training has severely restricted
the supply of [minority] entrepreneurs, managers and technicians .• 41 A history of
discrimination by unions and employers helps to explain this unfortunate phenomenon.
Prior to the civil rights accomplishments of the 1960s, labor unions and employers
were virtually free to practice overt racial discrimination. Minorities were segregated into
menial, low wage positions, leaving no minority managers or white collar workers in most
sectors of our economy. Trade unions, which controlled training arid job placement in many
, skilled trades, commonly barred minorities from membership. As a result, ·whole industries
and categories of employment were, in effect, all-white, all-male .• 42 These practices left
minorities unable to gain the experience needed to operate all but the smallest businesses,
-I Samuel Doctors &. Anne Huff, Minority Enterprise and the President's Counci(4~ (1973) (quoted in
Tuchfarber ~, City of Cincinnati: Croson Study 150 (1992».
C2
Affirmative Action Review: Report to the President 7 (1995).
- 19
�primarily consisting of small ·mom and pop. stores with no 'employees, minimal revenue,
located in segregated neighborhoods, and serving an exclusi~ely minority clientele. 43
Discrimination by unions has been recognized as a major fa~tor in preventing
minorities from obtaining employment opportunities in the skilled· trades. Title VII of the
Civil Rights Act of 1964 (prohibiting employment discrimination) was. passed, in part, in
~
'response
.
.
to Congress's desire to halt ·the persistent problem~ of ra~ial and religious
discrimination or segregation ... by labor unions and professional, business, and trade
associations. d4 Even after Title
yn went on the books,
however, unions precluded
minorities from membership through a host of discriminatory policies, including the use of
"tests and admissions criteria which [have] no relation to on:the-job skills and which [have] a
differential impact" on minorities;45 discriminating in the application of admission
criteria;46 and imposing admission conditions, such as requiring that new members have a
43 See, ~, Joseph Pierce, Negro Business and Business Education (1947); Andrew Brimmer, ~
Economic Potential Of Black Capitalism, ,Public Policy Vol. 19, No.2, at 289-308 (1971); Kent Gilbreath, Red .
Capitalism: An Analysis of the Navajo Economy (1973) .
.. S. Rep. No. 872, 88th Cong., 1st Sess. 1 (1964). See,~, Brimmer & Marshal1, Public Policy and
Promotion of Minority Economic Development: City of Atlanta and Fulton County, Georgia, Pt. VII, 11-17
(1990) (in 1963, minorities were prohibited fromjoiriing Atlanta unions representing plumbers, electricians, .
steel workers and bricklayers); TEM Associates, MinoritylWomen Business Study: Revised Final Report,
Phase I. Volume I 3-13 ("In 1963, Dot one of the 1,000 persons in apprenticeship training in Dade Couoty was .
Black, and the Miami Sheet Metal Workers local, like most other trade unions, was all white. ").
~ United 'States v. Iron Workers Local 86, 443 F,ld 544,548 (9th Cir.) cert. denied, 404 U.S. 984 (1971) ..
See also Hameed v. International Ass'n of Bridge, Structural & Ornamental Iron Workers, 637 F.ld 506 (8th
Cir. 1980) (selection criteria, including aptitude test, and the requirement of a high scpool diploma as a
cooditioo of eligibility were discriminatory).
46 United States v. Iron Workers Local 86,443 F.ld 544, 548 (9th Cir.) (differential application and
admissions requirements between whites and blacks; spurious reasons gi~en for rejections of blacks), cert ..
denied, 404 U.S. 984 (1971); Sims v. Sheet Metal Workers Int'lAss'n, '489 F.ld 1023 (6th Cir. 1973) (union
waived requirements for white applicants). .
,
-20
�family relationship with
an existing member, that locked minorities out of membership
opportunities. 47 As a result, unions
rem~ned
virtually all-white for some time after the
enactment of Title VII:
•
In 1965, the President's Commission on Equal Opportunity found that out of .
3,969 persons selected for skilled trade union apprenticeships in 30 southern
cities, only 26 were black.48
•
In 1967, blacks made up less than 1 percent of the nation' s mechanical union
members (Le. sheet metal workers, boilermakers, plumbers, electricians,
ironworkers and elevator constructors}.49
•
. In 1969, only 1.6 percent of Philadelphia construction union members were
minorities. so
47 United Statesv. United Bhd. of Catpenters and Joiners of America. 457 F.2d 210. 215 (7th Cir.) cert:
deni&:l, 409 U.S. 851 (1972) (family relation requirement excluded minorities from Carpenters trade); United
States v. International Ass'n of Bridge. Structural and Ornamental Iron Workers. 438 F.2d 679,683 (7th Cir.)
(requiring family relationships between new and existing members "effectively precluded non-white
membership") cert. denied, 404 U.S. 830 (1971); Asbestos Workers, LOcal 53 v. Vogler, 407 F.2d 1047 (5th
Cir. 1969) (rule restricting membership to sons or close relatives of current members perpetuated the effect of
past exclusion of minorities) .
.. Jaynes Associates. Minority and Women's Participation in the New Haven Construction Industry: A
Report to the City of New Haven 24 (1989) (citing findings of President's Commission on Equal Opportunity),
., Steve Askin & Edmund Newton, Blood. Sweat and Steel. Black Enterprise, Vol. 14, at 42 (1984).
jO Department of Labor Memorandum from Arthur Fletcher to All Agency Heads (1969)' (cited in
Affirmative Action Review: Report to the President 11 (1995» (introducing the ·Philadelphia Plan" requiruig
the use ,of affirmative action goals and timetables in construction, Secretary Fletcher noted that "equal
employment opportunity in these trades in the Philadelphia area is still far from a reality. . .. We find.
therefore. that special measures are required to provide equal opportunity in these seven trades").
- 21
�,
Even when minorities were admitted to unions, discriminatory hiring practices and
seniority systems often were used to foreclose job opportunities to them. sl TheSe actions
.
.
I'
,
were the subject of numerous Civil rights suits, leading the Supreme Court to declare in 1979
·that "judicial fmdings of ~xclusion from crafts on racial grounds are so numerous as to
m~e
such exciusion a proper subject for judicial notice. "S2 Well'into the 1980s,courts,
committees of Congress, and administrative agencies contin\led to identify the "inability of
many minority workers to obtain jobs" through unions because of "slavish adherence to
.
,
traditional preferenCe practices [and] also from overt discri~ination. "s~ .
The discriminatory conduct that was the subject of the Supreme Court's decision in
Local 28, Sheet Metal Workers v. EEOC, S4 is illustrative of; the pattern of racial exclusion
I
by trade unions and its consequences for' minorities. The union local operated an
" See Pennsylvania v. Qperatina Ena'rs, Local 542. 469 F. Supp. 329, 339 (£.0. Pa. 1978) (unions held
liable for racial discrimination in employee referral procedures and practices); Waldinger &. Bailey, ~
Continuing Sirnificance of Race: Racial Contlict and Racial Discrimination in Constructiog. Politics and
Society. Vol. 19, No.3, at 299 (1991) (wDespite rules and formal p~ures, informal relationships still
dominate the union sector's employment processes .•); Edmund Ne~n, :Steel. The Union Fiefdom, Black
Enterprise, Vol. 14. at 46 (1984) (discrimination iD operation of hiring hans ·operated as impenetrable barriers"
to minority job seekers). See generally Barbara Lindeman Schlei &. Pau' Grossman. Employment
Discrimination Law 619-28 (1983).
,
n United Steelworkers of Am. v. Weber. 443 U.S. 193, 198 n. 1 (1979).
S3 Taylor v. United States Dept. of Labor. SS2 F. Supp. 728. 734 (£.D. Pa. 198Z). See Minority Business
Participation in Department of Trans;portation Projects: Hearing Before a Subcomm. of the House Comm. on
Government Operations, 99th Cong., 1st Sess. 201 (1985) (testimony oOames Haughton) (minority contractors
continue to ·suffer(] heavily because they have been victims to that discrimination as p~ticed by the unions");
Divisioo of Minority and Women's Business Development. Opportunity Denied!: A Study of Racial and Sexual
Discrimination Related to Government Contractin£ in New York State 41 (1992) eAt least seven reports were
issued by federal. state and city commissions and agencies between 196~ and 1982 documenting the pattern of
racial exclusion from New York's skiUed,trade unions by constitution and by·law provisions, member
, sponsorships rules, SUbjective interview ~ts and other techniques, as well as the complicity of construction
contractors and ·the acquiescence of government agencies in those practit:es .•).
.
So4
478 U.S. 421 (1986)
- 22
�apprenticeship training program designed to teach sheet meta1 skills. Apprentices enrolled in
the program received class-room training, as well as on-the-job work experience. As the
Supreme Court described it, successful completion of the program was the principal means of
attaining union membership. But by excluding minorities from the apprenticeship program
through ·pervasive and egregious discrimination, dS the local effectively excluded minorities,
from the union for decades. Such exclusion continued notwithstanding the passage of Title
vn and a series of administrative and judicial findings in the 60s and 70s that the local had
engaged in blatant discrimination in shutting minorities out of the program. Indeed, even
into the 80s, the local persisted in violating court orders to open up the program to
minorities. 56
More recently" a Yale University economist prepared a report documenting the
history
~f
discrimination by New Haven unions that "confirms the nationwide pattern of
discrimination. ,,57 Prior to the passage of the Civil Rights A,ct of 1964, New Haven's
unions prohibited minority membership,' and minority workers were almost completely
segregated into jobs that whites would not take because they required working under
conditions of extreme heat or discomfort. S8 After passage of the Civil Rights Act, '
minorities. were prevented from eritering unions by a rule requiring that at least three current
5.S
I!!:. at 476 .
.56
I!!:. at 433-34.
S'7 Jaynes Associates, Minority and Women's Partjcipation in the New Haven Construction IndustO': A
Report to the City of New Haven 25-26 (1989).
.
51
I!!:. at 26-27.
- 23
�members sponsor the application of any new member. 59 Although the policy was raceneutral on its face, "it was almost impossible to find three members who would nominate a
minority [and] stand up for him in a closed· meeting when other members would undoubtedly
.
,
attack the candidate and his sponsors. ,,60 This and other diScriminatory policies prevented
all but five African Americans from joining the 1,216 white members of the highest paid
.
I
skilled trade unions in 1967, and throughout the mid-70s, unions and apprenticeship
programs remained virtually all-white. 61 The report concluded that the history of "blocked
~ccess
to the skilled trades is the most important explanation of the low numbers of minority
and women construction contractor:s today. ,,62
59
M.. at 28.
III)
Id. at 2,8 ..
61 Id.at 33; New Haven Board of Aldermen. Minority and Women Business Participation in the New
Haven Construction Industry: Committee Report 7 (1990).
Q Jaynes .ASsOciates. Minority and Women's Particjpation in the N~w Haven Constru~tion Ind~try: A
Report to the City of New Haven 34 (1989). Comparable conclusions about the impact of trade union
discrimination have been reached in studies from other jurisdictions around the country. See. Y.:.. D.J. Miller
&. Associates. ~. The Disparity Study for Memphis Shelby County Intergovernmental Consortium 11-46
(Oct. 1994) ("In Memphis. trade unions have historically discriminated against African Americans. "); Report of
\
the Blue Ribbon Panel to the Honorable Richard M. Daley. Mayor of the City of Chicago 43 (March 1990)
("The Task Fo~ specifically DOtes the exclusion of minorities and women from the building trades. "); National
Ecooomic Research Associates. ~. Availability and UtilizatiuD of Minority and Women-Owned Business
Enterprises at the Massachusetts Water Resou~ Authority 72 (Nov. 1990) ("A number of MIWBE owners
complain that problems caused by unions are exacerbated by state bidding requirements that make it difficult or
impossible for DOn-union firms to bid. "); Coopers &. Lybrand. et al.. State of Maryland Minority Business
Utilization Study 9 (Feb. 1990) (discussing discriminatory union practices).
-
24
�There is no doubt that trade unions have put much of the discriminatory past behind
and they now provide an important sou'rce of opportunity for minorities.
them,
Some
barriers to full opportunity remain, however. 63
"
,
A parallel history of disCriminatory treatment'by employers has prevented minorities
,
,
from rising into the private sector, management positions that are m,ost likely to lead to selfemployment. In 1972, Congress found that only 3.5 percent of minorities held managerial
positions compared to 11.4 percent of white employees. 64 Congress attributed this
underrepresentation to continued discriminatory conduct by "employers, labor organiZations,
employment agenCies and joint labor-management committees. ,,65 Evidence derived from
caselaw and academic studies shows a variety
o~
discriminatory employment.practices,
, including promoting white employees over more qualified minority employees;66 relying on
,
,
Q
See BPA Economics. et al.. MBEfWBE Dimarity Study of the City of San Iose 1-34 (1990) (';Wben
trying to join unions. minorities may face testing and experience requirements that are waived in the case of
relatives of current union members. M); Waldinger & Bailey. ·The Continuing Significance of Race: Racial
Conflict and Racial Discrimination in Construction, Politics and Society~ Vol. 19,No. 3, at 296-97 (1991) (MIn
1987. blacks averaged less than 80 percent of parity for all skilled trades with even lower levels of
representation in the most higbly paid crafts like electricians and plumbers .•); The Meaning and Simificance for
Minority Businesses of the Supreme Court Decision in the City of Richmond v. I.A. Croson Co.: Hearing
Before the Legislatiop and National Security Subcomm. of the Comm. on Government Operations. IOlst Cong.•
2d Sess'. Ill-IS (1990).
'
.. H.R. Rep. No. 238, 92d Cong .• 2d Sess. 3 (1972).
6.'l
l5l at
7.
• See. bL. Winbushv. Iowa. 69 FEP ,Cases 1348 (8th Cir. 1995) (evidence was ·overwhelming that
employer bad engaged in disparate treatment with respect to promotion of black employees); (United States v.
N.L. Industries. Inc., 479F.2d 354 (8th Cir; 1973) (99 percent whiie management structure caused. in part. by
M
promoting lesser qualified white employees over mOre qualified minorities).
- 25
'
�word-of-mouth recruiting practices that exclude minorities from vacancy announcements;67
and creating promotion systems that lock minorities into inferior positions. 68
,
i
A study published earlier this year surveyed it broad :range of current labor market
evidence and concluded' that employment discrimination is "not a thing of the past. _69
Rather, race still matters when it comes to determining access to the best employment
I
opportunities. 70 Progress has been made,. of course. Yet, ·;more than three decades after
,
the passage of the Civil Rights Act, segregation by race and sex continues to be the rule
rather than the exception in the American workplace, and discrimination still reduces the pay
(j/ See, st:J..:., EEOC v. Detroit Edison Co., 515 F.2d 301, 313 (6th Cir. 1975), vacated and remanded on
other grounds, 431 U.S. 951 (1977) (finding discrimination in wthe practice of relying on referrals by a
predominantly white work force W) ; Long v. Sapp, 502 F.2d 34, 4.1 (5thCir. 1974) (word-of-mouth recruitment
serves to perpetuate all-white work force); Thomas v. Washington County Sch. Bd., 915 F.2d 922 (4th Cir.
1990). See also Univ. of Mass., Barriers to the Employment and Work-Place Advancement of Latinos: A
Reoort to the Glass Ceiling Commission 52 (Aug. 1994) (word-of-mouth recruiting methods that rely on social
networks are a significant wexclusionary barrier w to employment opportunities for minorities): Roosevelt
Thomas, et aI., The Impact of Recruitment. Selection. Promotion and COmpensation Policies and Practices on
the Glass Ceiling. submitted to U.S. Department of Labor Glass Ceiling Commission, 14 (April 1994) (noting
that -recruitment practices primarily consist[ing] of word-of-mouth and employee referral networking .••
promote the filling of vacancies almost exclusively from within. If the environment is already homogenous,
which many are, it maintains this same 'home-grown' environment Gertrude Ezorsky, Racism and Justice:
The Case for Affinnative Actiop 14-18 (1991); U.S. Commission on Ci7'il Rights, Affinnative Action in the
1980s: Dismantling the Process of Discrimination 8 (1981); Barbara Li,odeman Schlei &. Paul Grossman,
Employment Discrimination Law 571 (1983) .
W
);
.. See, st:J..:., Paxton v. Union National Bank, 688 F.2d 552,565-566 (8th Cir. 1982), cert. denied, 460 '
U.S. 1083 (1983); Sears v. Bennett, 645 F.2d 1365 (lOth Cir. 1981) (system requiring that porters, all of whom
were black, forfeit seniority when changing jobs designed to prevent promotion of black employees), cert.
denied, 456 U.S. 964 (1982); Terrell v. U.S. Pipe and Foundry Co., 644 F.2d 1112 (5th Cir. 1981) (seniority
system created for clearly discriminatory purposes), vacated on other grounds, 456 U.S. 955 (1982). See also
Ella Bell &. Stella Nkomo. Barriers to Workplace Advancement Experienced by African Americans 3 (1994)
(.AfriCID Americans ••• are functionally segregated into jobs less likely to be on the path to the top levels of
management.•).
69
Barbara Bergmann, In Defense of Affirmative Action 32-33 (1996).
'10
lit. at 33.
- 26
�and prospects of workers who are not white or male~ _71 The exclusionary conduct
frequently is not deliberate, and the people on top -- who' are mostly white and male -- often
believe that they are behaving fairly. But old habits die hard: reliance on outmoded
stereotypes and group reputations, and the persistence of -invisible biases- work to
perpetuate a system that creates disadvantages iri employment for minorities today.72
The results of recent -testing- studies
-~
in which equally matched minorities and
nonminorities seek the same job -- are but one source of evidence supporting this conclusion.
These studies show, for instance, that white males receive 50 percent more job offers than
minorities with the same characteristics applying for the :same jobs.73 As Justice, Ginsburg
described them, the testing studies make it abundantly clear that "U]ob applicants with
identical resumes, qualifications, and interview styles still experience different receptions.
depending on their· race. "74
Even when minorities are hired today, a "glass ceiling" tends to keep them in lowerlevel positions. This problem was recognized by Senator Dole who. in 1991. introduced the
Glass Ceiling Act on the basis of evidence "confirming ... the existence C?f invisible.
artificial barriers blocking women and minorities from advancing up the corporate ladder to
71
hL. at 62.
12
hL. at 63-82.
73 Cross~, Employer Hiring Practices: Differential Treatment of His,panic and Malo Job Seekers
(1990); Turner et at.. Qpoortunities Denied, Qpportunities Diminished: Discrimination in Hirine (1991),
1.
Adarand•.1l5 S. Ct. at 2135 (Ginsburg, J" dissenting).
- 27
�· management and executive level positions. ~7S That Act created the ,Federal Glass Ceiling
Commission, which subsequently completed a extensive study of the opportunities available
to minorities and women in priva~ sector employment, and concluded that ·at the highest
levels of business, thereis'indeed a barrier only rarely
pen~trated
by women orpersonsof
color .• 76 Evidence released by the Commission paints the following picture:
,
•
97 percent of the senior level managers in the nation' s largest companies are
white. T1
•
Black and Hispanic men are half as likely as white men to be managers'or
professionals. 78
•
In the private sector, most minority managers and professionals are tracked
into areas of the company -- personnel, CQmmunications, affirmative action,
public relations -- that are not likely to lead
~
advancement to the highest
levels of experience. 79
~! Federal Glass Ceiling Commission, Good for Business: Makine Full Use of the Nation's Human Capital
iii (1995) (citing 1991 statemeat by Senator Dole regarding 1991 Departmeat of Labor Report on the Glass
Ceiline Initiative),
715
bL. at iii.
77
'
bL. at 9.
111 IJ:!.:.
tA
19
.
at'IV-VI.
bL. at
J5-16.
- 28
�•
Because private sector opportunities are so limited, most minority professionals
and 'managers work in the public. sector. 80
In light of the evidence that it considered, the Commission concluded that, "in the private
sector, equally qualified and similarly situated citizens are beirig denied equal access to
advancement on the basis of gender, race, or ethnicity. ,,81
In sum, there are two central means to gaining the experience needed to operate a
business. One is to be taught by a parent, passing ona famHy-owned business. But the long
history of discrimination and exclusion by' unions and employers means there. are very few
minority parents with any such business to pass on. 82 The second avenue is to learn the
skills needed through private employment. But the effects of employment and trade union
discrimination have posed a constant barrier to that entryway into the business world. 83
10
19.:. at
13. .
II
hi.:. at
10-11.
ri See, u.,., The Meaning and Significance for Minority Business of tbe Supreme Court Decision in the
City of Richmond v. J.A. Croson: Hearing Before the Legislative and National Security Subcomm. of the
House Comm. on Government Operations, lOOth Cong., 2d Sess. III (1990) (statement of Manuel Rodriguez)
r[f]ew [minorities] today have families from whom they can iDherit" a business); H.R. Rep. No. 870, 103d
Cong., 2d Sess. IS D. 36 (1994) ("[T]be construction industry is ... family dominated. Many firms are in
their second or third eeoeration operating structures. -); New Haveo Board of Aldermen, Minority and Women
BUsiness Participation in the New Haven Construction Industry 10 (1990) ("The exclusion of minorities from
construction trades employment before the 19705 resulted in an absence of a parent or family member owning a
constrUction business. ").
.
13 National Ecooomic Research Associates, ~., The Utilization of Minority and Women-Owned
Businesses Enterprises qy Alameda County 176-77 (June 1992) A Dumber of witnesses ideotified historic
union discrimination as a major limitation to the formation and success of minority firms .•): Jaynes Associates.
Minority and Women's Particjpation in the New Haven Construction Industry: A Report to the City of New
Haven 34·(1989) (discrimination haS prevented minorities from "gainling] experience and skills· Decessary to
operate a business and therefore bas "kept the pool of potential minority ... contractors artificially small").
r
- 29
�2. Discrimination by Lenders
Without financing, a business cannot start or develop. There are two main methods
for a new business to raise capital. One is to solicit invest~ents from the public by selling
stock in the company (public credit); the other is to solicit :investments from banks or other
lenders (private credit). Congress has heard evidence that ,-since small businesses have very
limited or no access to public credit markets, it is critically important that these entities,
especially, minority-owned small businesses, have adequate ;access to bank credit on
, reasonable terms and conditions."&4 The rub is that small businesses owned by minorities
,
"
, find it much more difficult than small firms owned by nonrinorities to secure capital.
Indeed, this is often cited as the single largest factor suppressing the formation and
development of minority-owned businesses. 8SThe sad fact! is that, through countless
hearings,
Congr~ss
has learned that lending discrimination plays a major role in this
regard. 86
Availability of Credit to Minority and Women·Owned Small Businesses: Hearine Before the Subcomm.
on Financial Institutions Supervision. ReiYlation and Deposit Insurance of tbe House Comm. on Bankine. 103d
COng., 2d Sess. 6 (1994) (statement of Aodrew Hove). One reason that minorities starting small businesses are
especially reliant on, bank lending is because they traditionally lack perSonal wealth or access to other sources of
private credit, such as loans from family or friends. See generally Oliver &. Shapiro, Black WealtbfWhjte
Wealtb (1993).
IN
15 See The Wall Street Journal Reports:' Black Entrepreneurship R: 1 (1992) (Roper Organization poll of 472
minority business owners listed access to capital as the primary barrier;to their business development); United
States Commission on Minority Business Developinent, Final Re.p<?rt12 (1992) (-oDe of the most formidable
stumbling blOCks to the,formation and development of minority busin~ is the lack of access to capital. .).
.. See Availability of Credit to Minority and Women Owned Small :Businesses: Hearin& Before the
Subcomm. on Financial Institutions Supervision. ReiYlation and Deposit Insurance of the House Comm. on
Banking, 103d Cong., 2d Sess. 27 (1994) (statement of Wayne Slnith) (while perhaps more subtle than ,
discrimination in mortgage lending, discrimination in business lending exists); H.R. Rep. No. 870, 103d Cong.,
2d Sess. 7 (1994) (-There is a widespread relu~ta.oce on the part of the commercial banking ... and capital
.
"
'(continued...)
- 30
�Over and over again, studies show that minority applicants for business loans are
more likely to be rejected and, when accepted, receive smaller loan amounts than
nonminority applicants with identical collateral and borrowing credentials:
•
The typical white-owned business receives three times as many loan dollars as
the typical black-owned business with the same amol;lnt of equity capital!' In
construction,. white-owned fums receive
~
times as many loan dollars as
black-owned firms with identical equity,"
"(...continued)
I
markets 10 take the same risks with a [minority] entrepreneur that they would readily do with a white one. ");
Disadvantaged Business Set-Asides in Tranmortation Construction Projects: HeariU Before tbe Subcomm. on
Procurement. Innovation. and Minority Enterprise Development of the House Comm. on Small Business, lOOth
Cong., 2d Sess. 26 (1988) (statement of Joana Payne) ("[b]ecau.se of the ethnic and sex discrimination practiced
by lending institutions, it was very difficult for minorities and women 10 secure bank loans. ")j ~
Disadvantaeed Business Entemrise Program of the Federal-Aid Higbway Act: Hearing Before the Subcomm.
on Tran§pOrtation of tbe Senate Comm. on Environment and Public Works, 99th Cong. 1st Sess. 363 (1985)
(statement of James Laducer) (North Dakota banks ·refuse to lend monies to minority businesses from nearby
Indiancommunities")j see also Fiscal Economic and Social Crises Confronting American Cities: Hearings
Before the Senate Comm. on Banking, Housing. and Urban Affairs; 102d Cong., 2d Sess. (1992); Federal
Minority Business Programs: Hearing Before the House Comm. On Small Business, 102d Cong., 1st Sess .
.(1991); City of Ricbmond v. J.A. Croson: Impact and Response: Hearing Before the Subcomm. on Urban and
Minority-Owned Business Development of the Senate Comm . OD Small Business, IOlst Cong., 2d Sess. (1990);
Minority Construction Contracting: Hearing Before the Subcomm~ on SBA, the General Economy and Minority
Enterprise Development of tbe Ho~ Comm. on Sma)) Business, 101 Cong., 1st Sess.' (1989).
n Timothy Bates, Commercial Bank Financing of White and Black Owned Smali Business Start-ups,
Quarterly Review of Economics and Business, Vol. 31, No.1, at 79 (1991) ("The findings indicate that black
businesses are receiving smaller bank loans than whites - Dot because they are riskier, but. rather. because they
.
are black-owned b~inesses .•).
a Grown & Bates. Commercial Bank Lending Practices and tbe Development of Black-Owned Construction
Companies. Journal of Urban Affairs. Vol. 14. No. I, at· 34 (1992).
- 31
�•
Minorities are approximately 20 percent less likely to receive venture capital
fmancing than white fmn owners with the same borrowing credentials. 89
•
All other factors being equal, a black business owner is approximately1S
percent less likely to receive a business lo~ than a white owner.90
•
The average loan to a black-owned construction finn is $49,000 less than the
average loan to an equally matched nonminority construction firm. 91
A comparable pattern of disparity appears in the most recent study on lending to
minority fmns, which was released earlier this year. That study surveyed 407 business
owners in the Denver area. It found that African Americans were 3 times more likely to be
rejected for business loans than whites. 92 The denial rate for Hispanic owners was 1.S
times as high as white owners. 93 Disparities in the denial rate remained significant even
after controlling for other factors that may affect the lending rate, such as the size and net
89 Bradford & Bales, Factors Affectine New Firms Success and their Use in Venture Capital Financing,
Journal of Small Business Finance, Vol. 2, No.1, at 23 (1992) (-The venture capital market .•• differentially
'
restricts mino'rity entrepreneurs from obtaining venture capital. -).
. ., Faith Ando, Capital Issues and the Minority-Owned Business, The Review of Black Political Economy,
Vol. 16, No.4, at 97 (1988).
91 Orown Ii. Bates, Commercial Bank Lending Practices and tbe Development of Black..Qwned Constructjon
Companies, Journal of Urban Affairs, Vol. 14, No.1. at 34 (1992).
f2 The Colorado Center for Community Development, University of Colorado at Denver, Survey of Small
Business Lepdjng' in Denver v. (1996). See Michael Selz.. Race-Linked Oap is Wide in Business-Loan
Rejections, Wall St. I., May 6, 1996, at B2.
93 The' Colorado Center for Community Development, University of Colorado at Denver; Survey of Small
Business Lending in Denver v. (1996).
- 32
�worth of the business. 94 The study concluded that ,-despite the fact that loan applicants of
three different racial/ethnic backgrounds in this sample (Black, Hispanic and Anglo) were not
appreciably different as businesspeople, they were ultimately treated differently by the .
lenders on the crucial issue of lOan approval or denial. _9.5
In sum, capital is a key to operating a business. Without financing, no business can
form. Once formect, restricted access to capital impedes investments necessary for business
development. Minority-owned frrms face troubles on both fronts. And in large part, those
troubles stem from lending discrimination. 96 As President Bush's Commission on Minority
Business Development explained, the result is a self-fulfilling prophecy:
Our nation's history has created a "cycle of negativity" that reinforces
prejudice through its very practice; restraints on capital availability lead to
failures,in tum, reinforce a prejudicial perception of minority firms as
inherently high-risks, thereby reducing access to even more capital and further
increasing the risk of failure. fJ7
,
,
There is also evidence that minorities.face discrimination in mortgage lending. See Munnell et a!.,
Mortgage tending In Boston: Intemreting the HMDA Data, 86 Am. Econ. Rev. 2S (1996) (finding that
minority appJicants were 60 percent more likely to be rejected for a mortgage loan than white males with •
identical characteristics, including age, income, wealth, and education). This serves to aggravate the problems
that minorities face in seeking business loans, because an important source of collateral for sucb loans to a new
firm is the bome of the owner of the firm. Thus, mortgage discrimination that impedes the ability of minorities
to obtain loans to purchase homes (or drives them to purchaSe less valuable homes than they oth~rwise would)
diminishes their ability to post collaleral for business loans.
.
•
96
9'1 United States cOmmission on Minority Business Development, Final Re.port 6 (1992). While the nation
bas made great strides in overcoming racial bias, the Commission's apt characterization of the debilitating
effects of lending discrjmination mirrors the description of the problem in a landmark monograph written over
one-half century ago:
, (continued...)
-
33
�B. Discrimination in Access to Con'tractin~ Maikets
Even when minorities are able to. form and develop' businesses, discrimination by
private sector customers, prime contractors, business netw9rks, suppliers, and' ,bonding
companies raises the costs for minority firms, which are then passed on to their customers.
This restricts the competitiveness of minority firms, thereby impeding their ability to gain
access to public contracting markets.
1. Discrimination by Prime Contractors and Private Sector Customers
In the private sector, minority business owners face discrimination that limits their
opportunities to work for prime contractors and private sartor customers. All too often,
co~tracting
remains a closed network, with prime contractors maintaining long-standing
-'
relationships with subcontractors with whom they prefer to work.98 Because minority
"(...continued)
,
The Negro Businessman encounters greater difficulties than whites in securing credit.
This is partially due to the marginal position of negro business. It is also partially due
to ,prejudicial opinions among whites concerning business 'ability and personal
reliability of Negroes. In either case a vicious circle is in operation keeping Negro
I
business dov.n.
. Gunnar MyrdaJ, An American Dilemma: The Negro and Modem Democracy' 308 (6th ed. 1944).
.
,
• See New Haven Board of Aldermen, Minority and Women Business Participation in the New ,Haven .
Constructiop Industry 10 (1990) (-The construction industry in New Haven remains to a large extent a closed
oetwork of established contractors and aubcontractors who have close long-term relationships and are highly
resistant to doing business with ·outsiders. ~.); Brimmer & Marshall, Public Policy and Promotiop of Minority
Economic pevelopment: City of Atlanta
Fulton County, Georgia; Pt. II, 61 (1990) (member of trade'
association testified that -contractors develop good working relationsJllps with certain subcontrac.tors and tend to
use them repeatedly, even in a few cases wben their prices are just a little bit higber than other
subcontractors").
'
and
-
34
�owned fl11Tls are new entrants to most markets, the existence and- proliferation of these
re1ationships locks them out of subcontracting opponunities. As a result, minority-owned
firms are seldom or never invited to bid for subcontracts on projects that do not contain
,
.
.
affl11Tlative action requirements. 99 In addition, when minority' firms are permitted to bid on
subcontracts, prime contractors often resist worklng with them. This son of exclusion is
often achieved by white firms refusing to accept lo~ minonty bids
minority bids with another subcontracto~ in order
or by sharing low
to allow that business to beat the bid (a
99 See National Economic Resea!ch Associates, The State of Texas Disparity Study: A Report to the Texas
LeKislature as Authorized by H.B. 2626, 73rd LeKislature 148 (1994) (-African American owner ... told by an
employee of a prime contraCtor that the contractor prefers.to work with [nollIniDority-owned firms] and works
with [minority-owned firms) only when required to do so. -); D.J. Miller & Associates, Dimarity Study for
Memphis/Shelby County Intergovernmental Consortium VIJ.10 (1994) (WMajority companies will not do
business with [minority-owned businesses] becauSe they lack confidence in [them) and are not willing to go
beyond those busin~with whom they have a 10 to IS year relationship.,W); Brown. Bou & Coddington,
Pimarity Study: City of Phoenix VIn-1O (July 1993) C-From the responses of a number of MBEIWBEs,
another form of marketplace discrimination that severely hampers tlleir access to the marketplace is denial of the
opportunity to bid. This may occur in a variety of ways, including, but not limited to, the use of non
competitive procurement and selection procedures. as well as intentional acts of rejection. -); National Economic
Research Associates, The Utilization of Minority and Woman-Owned Businesses by Contra Costa County:
Final Report ix', xiii (1992) (70 percent of minority~wned firms reported seldom or never being used for
contracts that do not contain affirmative action requirements); National Economic Research Associates, ~
Availability and Utilization of Minority-Owned Business Enterprises at the Massachusetts Water Resources
Authority 74 (1992) (55 percent of minority-ownedconstruction firms reported that prime contractors that use '
their firms on contracts with affirmative action requirements seldom or never used their firms on projects that
do DOl contain such requirements); A Study to Identify Discriminatory Practices in the Milwaukee Construction
Marketplace 125 (Feb. 1990) (WOnly 18 ~ of black contractors currently have private sector contracts with
primes with which they have worked OIl public sector contracts with MBE requirements. W): see also Coral
Constr. cO. v. Kine County, 941 F.ld 910,916 (9th'Cir. 1991),cert. denied, S02 U.S. 1033 (1992) (noting
reports that nollIniDority firms in the county refused to work with minority firms); Cone Com. v. Hillsborough
County, 908 F.2d 908.916 (11th Car.), cert. denied, 498 U.S. 983 (1990) (noting reports that when minority
contractors in the county "approached prime contractors, some prime contractors either were unavailable or
would refuse to speak to [the ~ority contractors]-).
- ,35
�I .
i'
practice known as -bid shopping-).Ioo These exclusionary practices have been the subject
of extensive testimony in congressional hearings. 101
An Atlanta study revealed evidence of the effect of discrimination by private sector
customers and prime contractors on minority contracting opportunities. The· study found that
.
.
. .
93 percent of the revenue received by rirlnority-owned frr~s came from the public sectOr and
only 7 percent from the private sector. In sharp contrast,' th~ study found that nonminority
firms receive only 20 percent of their revenue from the public sector and 80 percent from the
1m See Associated Gen. Contractors v. Coalition for Economic Equity, 950 F.2d 1401. 1416 (9th Cir.
1991). cert. denied. 503 U.S. 985 (1992) (notini reports that local minority firms were "denied contracts
despite beini the low bidder: and "refused work even after they were awarded the contracts as low bidder");
Cone Com. v. Hillsborough County, 908 F.2d 908. 916 (11th Cir.),cert:denied. 498 U.S. 983 (1990)
("(c]ontrary to their practices with non-minority subcontractors." local 'prime contractors would take minority
subcontractors' bids "around to various non-minority subcontractors Until they could M,d a non-minority to
underbid (the minority firm]"); BBC Research and Consultini. Regional Disparity Study: City of Las Vegas IX
12 (1992) (low biddini Hispanic contractor told that he was not giveD subcontract because the prime contractor
"did not know him" and that the prime "bad problems with minority Subs in the past"); BPA Economics.
MBEfWBE Disparity Study for the City of San Jose (Vol. 1)
(1990) (describing practices contributini to
low utilizatIon in construction contracts as including "bid shopping, ihsufficient distribution of notices of
contracts [and] insufficient lead time to prepare bids"); BBC Research and 'Consulting, The City of Tucson
.
Disparity Study IX-9-IX-ll (June 1994) (same).
m-I
101 See, ~, How State and l.qcal Governments Will Meet the Croson Standard: Hearing Before the '
Subcomm. on Civil and Constitutional Rights of the HouseComm. o'n the JUdiciary, lOOth Coni., 1st Sess. 54
(1989) (statement of Marc Bendick) e[t]he same prime contractor who will use a minority subcontractor 'on a
city contract and will be terribly satisfied with the ,firm's performance. will simply
use that minority
subcootractor 011& private contract where the prime contractor is not 'forced to use a minority firm."); ~
Meaning and Significance for Minority Businesses of the Supreme Court Decision. in the Cjty of Richmond v.
I.A. Croson Co.: Hearing Before the Legislation and National Security Subcomm. of the Crimm. on
Government OOOrations, 101st Coni.• 2d Sess;57 (1990) (statement of Gloria Molina); jg. at 100-101
(statement of E.R. Mitchell); i5L. at 113 (statement of Manuel RodrigUez); A Bill to Reform the Capital
Ownership Development Program: Hearlnas On H.R. 1807 Befure the Subcomm .. on Procurement, Innovation'
. and Minority Enterprise Development of the HQuse Comni. on Small Business. lOOth Cong., lst SesS. 593
(1987) (statement of Edward Irons); Small Djsadvantaaed Business ISsues: Hearings Before the Investigations
Subcomm. of the House Comm. on Anned Services, tOOth Cong., 1St Sess. 19-23 (1991) (statement of Parren"
Mitchell).
.:
not
-
36
�private' sector. 102 . In addition, the study reported that nearly half of the black-owned firms
worked primarily for
~inority
customers, and minority firms rarely worked in a joint venture
with a white-owned firm. 103
Customer prejudices are sometimes graphically expressed. African American
business owners have reported arriving at job cites to find signs saying WNo Niggers
Allowed, wl04 and -Nigger get out of here. -lOS Other potential customers have simply
refused to work with a business after discovering that its owner is a minority. In a recent
encounter, a black business owner arriving at a home-site was told to leave by a white
customer, who commented "you didn't tell me you were black and you don't sound
black. -106
un Brimmer & Marshall, Public Policy and Promotion of Minority Economic Development: City of Atlanta
and Fulton County., Georgia, Pt. I, 9-10 (1990). See also D.l. Miller & Associates, City of Dayton: Dimarity
Study 183 (1991) ("A small percentage of Black firms' revenues come from private sector projects .•).
1113 Brimmer & Marshall, Public Policy and Promotion of Minority Economic Development: City of Atlanta
and Fulton County. Georgia, Pt. III, IS, 34 (1990).
1001 New Haven Board of Aldermen, Minority and Women Participation in the New Haven Con'struction
Industry 10 (1990).
105 National Economic Research Associates, The Utilization of Minority and Women..Qwped Businesses by
'
the City of Hayward 6-23 (1993).
1116
See BBC Research and Consulting, City of Tuscon Dimarity Study IX-23, (1994).
-
37
,
'
�2. Discrimination by Business Networks
Contrary to the common perception, contracting is not a "meritocracy" where the low
bidder always wins. ·[B]eneath the complicated regulations and proliferation of collective
bargaining contracts lies a different reality, one dominated mainly by personal contacts and
informal networks .• 107 These networks can yield competitive advantages, because they
serve as conduits of information about upcoming job opportunities and facilitate access to the
decisionmakers
~,
contracting officers, prime contractors, lenders, bonding agents and
suppliers). Simply put, in contracting, access to information is a ticket to success; lack of
information can be a passport to failure. Networks and contacts can help a business find the
best price on supplies, facilitate a quick loan, foster a relationship with ,a prime contractor,
or yield information about an upcoming contract for which the firm can prepare -- all of
which serve to make the firm more competitive.
What transforms the mere existence of established networks into barriers for minority
,
'
owned businesses is the extent to which they operate to the exclusion of minority
membership. It has been recognized in Congress that private sector business networks
frequently are off-limits to minorities: "institutional wall[s], .. and ·old-boy network[s] ...
makeO it exceedingly difficult for minority firms to break into the private commercial
10'1 Bailey It. Waldinger, The Continuing Significance of Race: Racial Conflict and Racial Discrimination in
Construction, Politics and Society, Vol. 19, No.3, 298 (1991). See Brimmer &. Marshall, Public Policy and
Promotion of Minority Economic Development; City of Atlanta and Fulton County, Georgia. Pt. II, 3S (1990)
("[MJost job seekers find their jobs through informal channels. So too it is with construction markets,
especially in the private sector. -).
- 38
�sector. "I~ Parallel descriptions 'appear in numerous state and local sbJdies. 109
Ultimately, exclusion from business networks "isolate[s minorities] from the 'web of
information' which flows around opportunities" thereby putting them at a distinct
disadvantage relative to nonminority firms. IIOy In government contracting, this
disadvantage can· be fatal: "[government] vendors who do get contracts, experts agree, have
,
.
obtained vital bits of information their competitors either ignored or couJdn't fmd .
[O]nlythe well connected survive. "III
101 Minority Business Development Pmeram Reform Act of 1981: HeaMes On S.1993 and H.R. 1801
Before the Senate Cornrn. on Small Business, lOOth Coilg., 2d Sess. 121 (1988) (statement of Parre.n Mitchell).
See H.R. Rep. No. 810, lO3d Cong., 2d Sess. 15 n.36 ("The construction industry is close-knit; it is family
dominated (and refleets an] old buddy network. Minorities and women, unless they are part of construction
families, have been and will continue to be excluded whenever possible. "); Minorities and Franchising:
Hearings Before the House Comm. on Small Business, 102d Cong., 1st Sess. 54 (1991) (statement of Rep.
LaFalce) (discussing "problems relating to exclusion 'of minorities or groups of minorities from franchise
systems"); 131 Cong. Ree. 11,441 (1985) (statement of Rep. Schroeder) (an "old boy's club" excludes many
minorities from business opportunities).
109 See, ~, Associated Gen. Contractors v. Coalition for Economic Equity, 950 F.2d 1401, 1414 (1991)
(municipal study showed that there "continued to operate an 'old boy network' in aw8.rdingcontracts. thereby
disadvantaging (minority firms]"), cert. denied. 503 U.S. 985 (1992); BBC Research & Consulting, The City of
Tuscon Disparity Study 202 (1994) (citing "numerous detailed examples of the exclusionary operation of good
old boy networks"); National Economic Research Associates, The Utilization of Minority and Women Owned
Business Enterprises by the Southeastern Pennsylvania Transportation Authority 101 (1993) (exclusion from
'old-boy' networks "was the most frequently cited problem" of minority and women-o'WDed firms); National
Economic Research Associates. The Utilization of Minority and Women-Owned Business Enterprises by the
City of Hayward 6-14 (1993) ("15 percent of the witnesses cited problem,s breaking into established 'old-boy'
networks" .).
.
110 United States v. Gear,ia Power Co., 414 F.ld 906 (5th Cir. 1913) (finding that district court's "failure
to order [word-of-mouth recruitment practices] to be supplemented by affirmative action .•. was clearly an
abuse of power"). See National Economic Research Associates, Availability and Utilization of Minority and
Women Owned Business Entemrises at the Massachusetts Water Resources Authority 74 (1990) (finding that
minorities -Deed to spend much more time and money on marketing because they do Dot have established
networks and reputations-); Minority Business Enterprise Legal Defense and Education Fund. An Examination
of Marketplace Discrimination in Durham County 16 (1991) (citing "Dumerous allegations that black contractors
... learned of bid opportunities much later than their white competitors that are tied into the ',ood old boy'
network-).
III
Kevin Thompson, Taking the Headache Out of Government Contracts, Black Enterprise 219 (1993).
- 39
I,
I
�Restricted access to business networks can particularly disadvantage minorities in .the
planning stages of government procure~ent. In designing contracts for public bidding,
. agencies commonly consult businesses to make sure that s~ifications match available
..
services. Only bidders who meet the specifications may compete for the contract and the
exclusion of minority-owned businesses from planning and consultations can lead to
specifications that are written so narrowly as to exclude minority bidders.1t2 In addition,
the failure to consult minority-owned businesses during the planning stages of procurement
I
prevents them from mobilizing resources for the upcoming competition. As a committee of
Congress recently reported, "[m]inorities and women are. always left out in any kind of
design or planning phase for these projects, and that is why when [they] first know about
them ... it is traditionally too
l~te
to get [their] forces and resOurces together to react... m
3. Discrimination in Bonding and By SURRliers
The competitiveness of bids on public and private contracts is not determined solely
by the bidder's
resource~.
Rather, competitiveness often· hinges on the ability of the bidding
112 This is accomplished by, for example, specifying that'i)idders must use certain brand-name products
available QDly to several companies, speCifying. depth·of contract experience that minority-owned firms can
rarely provide. and bundling projects into large contracts that small minority-owned companies camiot perform.
H.R. Rep. No. 870, 103d Cong., 2d Sess. 14 (1994) (citbJg recommendation that agencies sepaBte
See,
"contractsmto smaller parts, so that M&WOSB's. would be able to Participate in those opportunities"); Mason
Tillman Associates, Sacramento Municipal Utility District: MfWBE Disparity Study 146 (1992) (noting that, in
many instances, contract specificatioos are wriUe.o so narrowly that there are only. few firms that can do the
job); Tuchfarber !l!L., City of Cincinnati: Croson Study 153 (1992) ("Products specified in the Request for
Proposals were· so narrow that only one company that bad exclusive distribution of the product specified could
. .
satisfy the contract. ").
u..
III
H.R. Rep. No. 870, 103d Cong., 2d Sess. 13 (1994).
- 40
�company to .obtain quality services from bonding companies and su.ppliers at a fair price.
,
"
Here too; di.scrimination places minority firms at a disadvantage.
All contractors on federal construction, maintenance, and repair contracts valued at
.
.
over 5100,000 are required to secure a surety bond guaranteeing the
~rformance
of the
contract. 114 To obtain bonding, most surety companies require that a fmn present a record .
of experience to substantiate its ability to perform the job. This mandate
o~n
lands
. minorities in the middle ofa vicious circle. Since a history of discrimination has prevented .
many minority companies .from gaining experience in contracting, they cannot get bonding.
And since they cannot get bonding, they cannot get experience. As Congress has' .'
recognized, this dilemma "serves' to preclude equitable minority business participation in
..
federal construction contracts. "lIS
Congress also has' realized that minorities are -disadvantaged by their ex~lusion from
business networks that facilitate bonding, bc!cause "firms tend to give performance and
,
"
,
payment bonds to people they already -know and not to the new business person, especially if
.~'
IU United States Congress, Federal Compliance to Minority Set-Asides: R;oort to the Speaker. U.S. House .
of Representatives. by the Congressional Task Force on Minority Set-Asides 29 (1988). See also H.R. Rep.
No. 870, 10)d Cong., 2d Sess. 14 (1994) (wInability to obtain bonding is ODe of the top three reasons that new
. minority small businesses have difficulty procuring U,S. Government contracts. -); Minority Business
Participation in D;partment of Tranmortation Projects: Hearing Before a Subcomm. oftbe House Comm. on
Government Operations, 99th Cong., 1st Sess. 159 (l9~5) (statement of Sherman Brown) (·Virtually everyone
connected with the minority contracting industry .•. apparently agrees that surety bonding is one of the biggest
.
obstacles in the development of minority firms .•).
- 41
I
i
�the small business owner is a woman or of a racial or ethnic minority. _116 Furthermore,
., Congress has considered evidence indicating that bondingi agents, like lenders, inj~i racial
•
biases into the bonding process. 1I7 Evidence of discrimiriation in bonding also has been
!
accumulated in a number of state and local studies. III These problems have made minority
.
,
businesses significantly less able to secure bonding on equal terms with white-owned firms
with the .same experience and credentials. For example:
•
A Louisiana study found that minority firms were nearly twice as likely to be
rejected for bonding, three times more likely to be rejected for bonding for
'116
H.R. Rep. No. 870, 103d Cong. 2d Sess. 15 (1994).
I
I
.
See Discrimination in Surety Bondina: Hearing Before the Subcomm. on Minority Enterprise. Finance
and Urban Development of the House Comm. on Small Business, lQ3d Cong., lst Sess. 2 (1993) (statement by
Rep. Kweisi Mfume) eSimilarities between a banker's ability to make arbitrary credit decisions and a surety
producer or an underwriter's capability of injecting personal prejudi~ into the bonding process are compelling
indeed. "); City of Richmond V. l.A. Croson: Impact and Response:' Hearing Before the Subcomm. on Urban
and Minority-Owned Business Development of the Senate Comm. oD Small Business, 101st Cong., 2d Sess. 40
• (1990) (statement of Andrew Brimmer); i!L. at 165-66 (statement of Edward Bowen); Disadvantaged Business
Set-Asides in Ttansportation Construction Projects: Hearings Before the Subcomrn. on Procurement, Innovation
and Minority Enterprise Development of the House Comm. on Small Business, looth Cong.; 2d Sess. 107
.
(1988) (statement of Marjorie Herter) ("Discrimination against wOmen and minorities in the bonding market is
quite prevalent").
.
111
;.
'
See Division of Minority and Women's Business Developmerit, Qp,portunity Denied! A Study of Raciaf
and Sexual Discrimination Related to Government Contracting in New York State, Exec.utive Summary 57
(1992) (noting that 47 witnesses reported "specific incidents of racial' discrimination ... in attempting to secure
performance' bonds·); National Economic Research Associates, The Utilization of Minority and Women-Owned
Business Enterprises by A1ameda County 202, 212 (June 1992) (neafly 50 percent of minority businesses
reported experiencing bonding discrimination); National Economic Research ASsociates, The Utilization of
Minority and Women-Owned Businesses Enterprises by Costa County 231,241 (May 1992) (noting evidence of
bonding discrimination); Board of Education of the City of Chic...go; Report Concerning Consideration of the
Revised Plan for Minority and Women Business Enterprise Economic Participation 316 (1991) eBonding is
selectively and capriciously provided or denied with the decision beipg 85 percent subjective .•); Mason TilIman
Associates, Sacramento Municipal Utility District. MIWBE Disparity Study 119,135-43(1990) (Doting evidence
.of bonding discrimination).
.
.
II.
. 42
�over $1 million, and on average were charged higher rates for. the same
. bonding policies than white firms with the same experience leve1. 119
•
An Atlanta study found that 66 percent of minoritY-Owned construction f'irnls .
.
)
,
had been rejected for a bOnd in the last three years, 73 percent of those finns
limited themselves exclusively to contracts that did not require
none of them had unlimited bonding capacity. By contrast,
~nding,
le~sthan
and
20
percent of nonminority firms had unlimited bonding capacity. no
Another factor restricting the ability of minority-owned businesses to compete· in both
.
.
private and public contracting is discrimination allowing "non-minority subcontractors and
contractors [to get] special prices and discounts from suppliers ·which [are] not available to
[minority] purchasers... 121 This drives up anticipated costs, and therefore the bid, for
. minority-owned busin"esses. A recent survey reported that 56 percent of black business
owners, 30 percent of Hispanic owners, and 11 percent of Asian business owners had
119
D.J. Miller &. Associates, State of Louisiana Dis.parity Study Vol. 2, pp.35~5" (June ·1991).
J . .
.
,
Brimmer &. Marshall, Public Policy and Promotion of Minority Economic Development: City of Atlanta
aDd Fulton County. Georl:ia, Pt. III, 131-38 (1990).
. .
IlID
.
121
. . '
.
Cone Com. v. Hillsborough County, 908 F.ld 908, 916 (lIth Cir.) cert. denied, 498 U.S. 983 (1990).
Evidence of pricing discrimination outside the contracting setting indicates that the problem cuts across the
economy. For example, a recent testing study of automobile purchases showed that, on average, black men
were charged nearly $1,000 more for cars than white men. Ian Ayres, Fair Driving: Gender and Race
Discrimination in Retail Car Negotiations, 104 Harv. L. Rev. 817 (1991).
- 43
�experienced mown instances of discrimination in the forin of higher quotes from
suppliers. l22 Numerous other state and local studies hav¢ reported similar findings. III
In one glaring case, a firm in Georgia began sending white employees to purchase
supplies posing as owners pf a white-owned company. The "white-front" routinely received
quotes on supplies that were two thirds lower than those :quoted to the minority-owned parent
,
. !.
.
company.l24 Another firm entered into a joint venture with a white firm and each obtained
quotes from the same supplier for the same project.
Wh~n
the two firms compared ,the
,
quotes" they discovered that those given to the minority-owned firm were so much higher
12:2 National Economic Research Associates, The Utilization of Minority and Woman-Owned Businesses by
the Regional Tran§POTtation District (Denver Colorado): Final RepOrt 16-23 (1992).
1%1 See National Economic Research 'Associates, The State of Teus Dimarity Study: A Report to the Texas
Legislature as Authorized by H.B. 2626. 73rd Legislature 148 (1994) (Hispanic business owner denied credit by
supplier who told him that "we ooly sellona cash basis to people
your kind"); D.I.'Miller &. Associates,
Dis.parity Study for Memphis/Shelby County Intergovernmental ConSortium 117 (1994) ("Other frequent
complaints pertaining to informal barriers included being completely, stopped by suppliers' discriminatory
practices. It); BBC Research Associates, ,Dis.parity Study for the City' of Fort Wortb IX-20 (1993) (citing
evidence that suppliers discriminate against minorities by "refus[ing] to sell or seJJ[ing] at higber prices than [to]
whites'); Division of Minority and Women's Business Development:, Opportunity Denied! A Study of Racial
and Sexual Discrimination Related to Government Contracting in New York State, Executive Summary, 53
(1992) (53 witnesses reported "specific incidents, of racial discrimination ... wbere materials or equipment
suppliers would Dc,M extend the same payment terms and discounts to them as they knew were being made
available to whiteiDale owned contractors with the same financial histories"); National Ecooomic Research
Associates, The Utilization of Minority and Women-Owned Business Entemrises by AJameda County 187
(1992) (41 ~ of minority-owned business respondentS reported experiencing discrimination in quotes from
suppliers): City of Dayton. Dis.parity Study 101 (1991) (citing evidence of discriminatory pricing); D.I. Miller
&. Associates, City of St; Petersburg I?is.parity Study 39-40 (1990) (i· Discrimination by suppliers bas also
prevented [minority-owned businesses] from entering successful bids .•); Mason Tillman Associates, Sacramento
Municipal. Utility District, MfWBE Disparity Study 135-43 (1990).
of
1)1 Brimmer &. Marshall, Public Policy and Promotion of Minority Economic Development: City of Atlanta
:
and Fultonj:ounty. Ge6rgia Pt. II, 76 (1990).
- 44
�than those given to his white joint venture partner that they would have added 40 percent to
the fmal contract price. 125
C. Evidence of the Impact of Discriminatory Barriers on Minority Opportunity in
Contractin2 Markets: State and Local 'Disparity Studies
In recent years, many state and local governments have undertaken fonnal studies to
, determine whether there is evidence of racial discrimination' in their relevant contracting
markets that would justify the use of race-conscious remedial measures in their procurement
activities. These studie,s -- many of which ha:ve been cited in the previous sections of this
. memorandum -- typically contain extensive statistical analyses that have revealed gross
disparities between the availability of minority-owned businesses and the utilization of such.
businesses in state and local government procurement. . Under .the rules established by the
Supreme Court in its 1989 Croson decision, which held that affirmative action at. the state
and local level is subject to strict scrutiny,such disparities can give rise to an inference of
discrimination that can serve as the foundation of race-conscious remedial measures in
procurement. 126 The studies also generally contain anecdotal evidence and expert opinion,
125
BBC Research and Consulting. Regional Dis;parity Study: City of Las Vegas IX-20 (1992).
In describing what it takes for the government to establish a remedial predicate in procurement. the
Court in ~ said that "(w]here there is a significaot statistical disparity be~een the number of qualified
J:16
minority contractors willing and able to perform a particuJar service lind the number of such contractors actually
eogaged by the [govel11.lDent] or the [government's] prime contractors, an inference of discriminatory exclusion
could arise." 488 U.S. at 509.
'
-
45
�"'developed in hearings, surveys, and reports, that bring the statistical evidence to life and
vividly illustrate the effectS of discrimination on procurement opportunities for minorities.
The federal government obviously purchases some goods and services that state and
local governments do not
~,
space shuttles, naval warships). For the most part, though,
,
,
the fedeqll government does business in the same contracting markets as state and local
governments. Therefore, the evidence in state and local studies of the impact of '
discriminatory barriers to minority opportunity in contracting markets throughout the country
is relevant to the question whether the federal government has a compelling interest to take
remedial action in 'its own procurement activities. J77 Accordingly, the Justice Department
asked the Urban Institute (UI) to analyze the statistical findings in the studies. On the
strength of the findings in 39 studies that it considered, U1 has reached the following
conclusions: 128
•
.
The studies ',show underutilization by state and local governments of African
American, Latino, Asian and Native American-owned businesses. The pattern
of disparity across industries varies with racial and ethnic groups. However,
127 The studies are also of particular relevance in assessing the compelling interest for Congressionally
authorized affirmative action measures in programs that provide federal funds to state and local governments for
use in their procurement.
1211 To date, UI bas evaluated 56 of the studies. Ultimately, UI excluded 17 of the 56 studies from its
analysis, OIl the grounds that those studies do not present disparity ratios; do not present tests of statistical
significance or Dumber of contracts; do Dot present separate results by industry; or do Dot present disparity
ratios based OD government contracting.
- 46 ;..
�,
,
the median disparity figures calculated by UI demonstrate disparities for all
ethnic groups in every industry. 129
•
Minority-owned businesses receive on average only S9 cents of state and local
expenditures that those firms would be expected to receive, based on their
availability. The median disparities vary from 39 cents on the dollar for frrms
owned by Native Americans to 60 cents' on the dollar for frrms owned by
Asian-Americans.
•
Minority firms are underutilized by state and local governments in all of the
industry groups examined: construction, construction subcontracting, goods,
professional services and other services. The largest disparity between
availability and utilization was seen in the category of "other services," where
minority firms receive S1 cents for every dollar they were expected to receive.
The smallest disparity was in the category of construction subcontracting,
wh~re minority
firms still receive only 87 cents, for every dollar they would be
exPected to receive.
129 UI's findings of underutilization are predicated on two different measures: the median disparity ratio
across all studies and the percent of studies reporting substantial underutilization (defined as a disparity ratio of
less than 0.8). A disparity ratio is the proportioo of government contracting received by minority-owned firms
to the proportion of available firms that,are minOrity-oWDed. Thus,a disparity ratio of 0.8 indicates that
businesses owned by members of a minority group received onJy 80 ceots of every dollar expected to be
allocated to them based on their availability. UI's findings of disparity do not change substantially when
analysis is limited to studies with either a large number of contracts or high availability. In fact. in most
instances, the disparity between availability and utilization was greater in studies that involve large numbers of
contracts.
- 47
�An important corollary to UI's fmdings is the experience following the Supreme
Court's 1989 ruling in Croson. In the immediate aftermath of that case, state and local
governments scaled back or eliminated altogether affirmative action programs that had been
adopted precisely to overcome discriminatory barriers to minority opportunity and to correct
for chronic underut.ilization of minority firms. As a result of this retreat from affirmative
action, minority participation in state and local procurement plummeted quickly. To cite just
a few examples:
•
After the court of appeals decision in Croson invaliQating the city of
Richmond's minority business program in 1987, minority participation in
municipal construction contracts dropped by 93 percent. 130
•
In Philadelphia, public works subcontracts awarded to minority and womenowned firms declined by 97 percent in the first full month after the city's
program was suspended in 1990. \31
•
Awards to minority-owned businesses in Hillsborough County, Florida, fell by
99 percent after its program waS struck down by a court. 132
1:10
United States Commission on Minority Business Developanent, Final Report 99 (1992).
III
hL.
-
I
I
I
48
�•
After Tampa suspended its program, participation in city contracting decreased
by 99 percent for African American-owned businesses and 50 percent for
Hispanic-owned firms. 133
•
. The suspension of San Jose's program in 1989 resulted in a drop
of over 80 percent in minority participation in the city's prime
contracts. 134
Together, the information in the state and local studies, and the impact of the cut-back
in affirmative action at the state and local level after Croson, provide strong evidence that
further demonstrates the compelling interest for affirmative action measures in federal
procurement. The information documents that the private discrimination discussed previously
in part II of this memorandum -- discrimination by trade unions, employers, lenders,
I
suppliers, prime contractors, and bonding providers -- substantially impedes the ability of
minorities to compete on an equal footing in public contracting markets. And it these Same
discriminatory barriers that impair minority opportunity in federal procurement. The
information also indicates that, without affirmative action, minorities would tend to remain
locked out of contracting markets.
•
1301
BPA Economics, et al. MBEIWBE Disparity Study for the City of San Jose. Vol. III. 118·19 (1990).
I
- 49
�The information also helps to illuminate what it is that Congress is seeking to redress
-- and hence what interests are served - through remedial action in federal procurement.
First Congress has a compelling interest in exercising 'its constitutional power to remedy the
J
impact of private discrimination on the ability of minority businesses to compete in
contracting markets that is reflected in the studies. Second, Congress has a compelling
interest in exercising its constitutional power to redress the statistical disparities reflected in
the studies that give rise to an inference of discrimination by state and local governments, or
at minimum suggest that those governments are compounding the impact of private
discrimination through ostensibly neutral procurement practices that perpetuate barriers to
minority contracting opportunity. 135 Finally Congress has a compelling interest in
J
ensuring that expenditures by the federal government do not inadvertently subsidize the
discrimination by private and public actors that is reflected in the studies. l36 Were that
to
occur the federal government would itself become a participant in that discrimination
J
through procurement practices that serve to sustain impediments to minority opportunity in
national contracting markets.
135 ,The role of state and local ,overnments in impeding contracting opportunities for minority firms is most
directly addressed through federal programs that authorize recipients of federal funds to take affirmative action
, in their procurement activities. Those programs plainly are examples of the exercise of Congress' power under
the Fourteenth Amendment to remedy discrimination by state and local governments. See Adaraod, 115 S, Ct.
at 2126 &. n.9 (Stevens, J., dissenting). Since that same state and local conduct constitutes an impediment to
minority opportunity in contracting markets in which the federal government does business, it also serves as a
basis for affirmative action measures in the federal government's own procurement. Therefore, those measures
too entail an exercise of Congress' authority under the Fourteenth Amendment. See i!L. at 2132 n.l (Souter,
J., dissenting) (for purposes of exercise of Congress' power under the Fourteenth Amendment, there is no
difference between programs in which -the Dational government makes a construction contract directly· and
programs in which -it funnels construction money through the states-).
I~
See
~,
488 U.S. at 492.
- 50
�m.
Conclusion
As a nation, we have made substantial progress in, fulfilling, the promise of racial
equality. In contracting markets throughout the country, minorities now have opportunities
from which they were wholly sealed off only a generation ago. Affirmative action measures
have played
an important part in this story.
Howe~er,
the'information compiled by the "
Justice Department to date demonstrates that racial discrimination and its effects continue to
, impair the ability of minority-owned businesses to compete in the nation's contractirig
markets.
The evidence shows that the federal government has a compelling interest in
eradicating the effects of two kinds of discriminatory barriers: first, discrimination by
employers, unions, and lenders that has hindered the ability of members of racial minority
groups to form and develop
b~sinesses
as an initial matter; second, discrimination by prirt:'e
contractors, private sector customers, business networks, suppliers, and bonding companies
that raises the costs of doing business for minority firms once they are formed, and prevents
them from competing on an equal playing field with nonminority businesses.
~is
discriminatio~ has been, in many instances, deliberate and overt. But it also can take
amore
subtle form that is inadvertent and unconscious. Either way, the discrimination reflects
practices that work to maintain barriers to equal opportunity.
- 51
�The tangible effects of the discriminatory barriers are documented in scores of studies
that reveal stark disparities between minority availability and minority utilization in state and
local procurement. In tum, the disparities sh~w that state and local governments themselves
are tangled in this web through ostensibly neutral procurement actions that perpetuate the
discriminatory barriers. The .very same discriminatory barriers that block contracting
opportunities for minority-owned businesses at the state and local levels also operate at the ..
fede~
level. Without affinnative action in its procurement, the federal government might
-.
w~l1
become a participant in a cycle of discrimination.
Affin'native action in federal procurement is not the cure-all that will eliminate all the
obstacles that racial discrimination presents for minority businesses. No one remedial tool
can completely address the full dimension of this problem. Laws proscribing discrimination
and general race-neutral assistance to Small businesses are critical to the achievement. of these
ends. But the evidence demonstrates that such measures cannot pierce the many layers of
discrimination and its effects that hinder the ability of minorities to compete in our nation's
contracting markets. Thus, there remains today a compelling interest for race-conscious
affirmative action in federal procurement.
- 52
�oeR/ES
. 11/12/96· IUE 13:09 FAX 9202 619 3818
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,.
U)(lTZD STATES. DBPAll'!'MEIn" OF EDUCATION
~ c.t ~ G'DD..AL.
eom...r.
JlIly 30. 1996
:D8iu:' col1eire ..'nd
tmi.vez:.i'ty Counsel: .
I aa lII"riti:n9 Co xeaffJ.z.. tbe Depa~ of' 1\d\t.Cl!lt.i.on'c
Po.iticn t::ftat.,0 "W14er UIa c:cmatit:ut10!1 aJ'Icl Title! VI of' t.be ely!1
1L1ght:. Act. of ~9'4, i.t is penl1&Gible in Appropriate.
.
c:1.rcuasn:a1lCBS .tox Call8CJ8S ana unlYe:1:'.itias to cQnaic:l.J:' Z'acc til
'imld.ng adais.i:Cn& f!oo1_,t;tins lind granting financial aid. The.y Ji;ay
do so to pr01llQta cl1vel!'.l~y of their stuaent J:aady, .ci::oneistBl;1t with
J\la1:.1ce PaVell:'. lalUi:aal'lt opinioll in bUMe pf lhLt7rli1rJlr!l;lh. O'.C
2iU.l(gnlia .v •
!lYgal\t= Vo
u.s.
~ftS, 31.1.-~1:i (1978).
See alao
l'4u~, 476 U.S • •" , 286. (198')
~r alsa way do &0 t.o Z"eIIlIdy. t.ha
disc:riJainat'.iaa 'lly 'thll j.llst1'tU~j,oll it,Alf
.B.itkk~f' 431
.taskqp H. d
(O'connor. J.,~ c:an.r:urrinc.J). .
c:oirt:lnuillr; aff!aacs at
within ~he BCa~e or local edueatlQna~
sy.~ea
as a
~Ol•• l
ar
.
.
,
The Depa.t-b:ie.a.1:' g
pcsl~lan
is ref] ~ct:ad . in i't& pullBbeG
r89Ulatian. ana 1~ guidances on the application of ~,racQ.
tarqated f1n~1al ass1#taftCe, aBd ~ese;t:aCJat1on of b&atitut.1oNl
of.' hip_r edu~t.1oft. 2 '121.1: pos1tion bAS n~ e'ba.ng'od. liS .. re.uJ.t
of tbf!! F.1f"'tl1 C!.irc1tJ:c;s dec;1-10ll earlle.r thl. yeaI:' in 'tl1a BoINQQd.
case" ar the S'Clprelle ccvrt'. recent. 4e.ter.il1.nat.1cn not to p-a"t:
certiora.ri t.o review. the Fifth Circuit's clfllJGi.ioft'. ,~~.." •
.tgXQ, '8.1'. 3d 19'32 (fi~ Cit:. 1 9 96" mEt. d!mled, xpra. v.
HOWos<l, No. 95-1713 (July 1, 1996).
"
in den,Yll'1~ .cextiarad. tn. SUF~ co"Jre. neither a.ff'~o .
nor Z'evei'sed ~e Fifth Ci~~oe panel's decisi.on in ~, VIlie.b
took
tbepol5it.~on
that. the University of Texas Law SchOOl cdulc:l
not tak@ race into account in Rdlli~J.o'fts eichei:" to· prCUllote
=£~~sltr or ~8 r~r the effects oftbe state's fo~lY
.. 1
-
~
ci:l;jr at(.! 11qo.mtmg ..,. J.A. 0:psqp
(1989); ~t.d.:.atat:,!!.o 9.
J'cmUee,
sse11
488 U.S. .'9, 491-'Z
saS 11.S. 717, 732 1'1.'7 (1992).
,i
~" CPR Part 2.01)1
"
.
ttaco-ta:r;eted J'l.nanclal Aiel No't.1ce, 59'
FederalR.eqister 815& (Feb. 23, 2.994); PClrcU.c:e lfGtice, 59 !'edcal
aeqistir4271 (Jan. 31, 1994); Bakke.otice, 44. Fedaral A8giG~ez
5850Sl (Oet:.. 10. :t01S), Sept .. 7, 199!i let"tar.h'ClIlJuditb Winston..
General eotmsel, 'United States llepa%'t=erw~ cf £duca:t.laft .. ta
COllefJl! and U'n.i.versity counsel reg'ard.1nq the sup:a:eme Ccnu:t"s
, 1
4e.nial or smrtttr.w.iJl ~w ~.1YD11h 38 F.3d 147 (4t.b.
.
t;iJ:. 1:994) .and~ t:s de.cild.Cn 1ft A~i,,:,n4 cqMt"Q1et.m:Ji V.I!&tI&. 115
s•.ct 2097 (1995) ida.vised cri:tG%ia speci£yi1UJtbe Inqz:e4ientA al!
Acc.ptabl~ Jllar,.s to Dc&segr"eqata $'t.ate! syst:ea& of 1'ub11c B.1CJbt!Z'
.
S4u~dtian,
.3 F:ederal
.
(Feb. 1.2, 1978) ..
.
'!
Re91st.rG6~8
�11/12/96
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TUE 13:09 FAX 9202 619 3818
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Oft11
segreqaead. .yst~, Of IUltl!CI educaticm, !:Nt.' c:oul4
seek to
J"uGciy t:1le Law Sc:.b.Dol's own 4i&crillli.natlon. 1'be Clell ..1 gf'
c;e¢J,QEVi ,4GSs ; nc:tC aean tbae the su~ c0141: depa'i't8tl frow.
, JUat.iee favell's opinion 1n • • • that .. callas- or 'Uld.wl'Sity
bas • capellln9 inter.1It. in, ~11'111 raca iftt:o o.c=cGWit. 1n Il
pi:'aperlr devised IldJd.SS.tObD pEQ9r_ to acbieve il 0.1Ve.'r8e stUdent
boC1y.,
does ~ it. maaA tbat U. ""nnae cav.rt accept. the Fif~
c:irc:U.J.t:'8 ~v vie. of t:be poraiaeU,le reaadi.al
pz:ed.icaote ",U$,t1fYing ~e cemsidentlo.n of r:ace ~ inatltut.ioM of'
A19b'e.2' ec:h&eatiOlfe
.c:rr:
•
cO.l':LS8fiUecl:l.y the Dcip;nl:'t:ment. r.;ont1Z'l"lles to "el1G9. tbat,
Qu't.a.t..cle. o~ thA 1'1Rh Ci%wit, :Lt: 1. PUllissJ.ble tor &l\
11,
.e4uaat1ohal institution to conalder raee in a narravly ~.ilor8d
"~.r in aitbct its .d.issia~8 pr~aa or ics fiDanOial aid
~0gZ''' 1n oro at to acld.eft a diverse at.udel\t ):,ody cr to remedy
~e atfllCt:s of "past discri1linat:lan in ocSucation sYCtas.
ifi!!h1r.t
to- law is uncle:ltr ~£t::o.l.' the paIlOJ.'S decisicm
in ~.I c;1van thla 'W'Icerta1nty, the Depa.!"br:enC vill avatt:
_ l.Irther. proCeeding.. in the case r which 1. naw on re.m.a:nd e~ tho "
!
parael dec.is1Oft," \01" goseqw.en~ rU11nqa in" othoJ: case. a:.e.cgre
Qeterminil'tfJ' Vhs1:her turtbc- qu1danee loll net:assazy.
tbe Jl'ifthCiI'W1t,
\
,
vi11 con~'ftQe to
1ft the,ir efforts to
that eoaply with Title VXof the ct91l .i~ht5
~. D~'s Ofrica of 'civil Rights
p~.id. teChn1c~l,a ••iGtaftea ~o lnst1~t10ns
4e9~lop program~
Act
or.
1964.
!
, since'J:"81y,
"'wi!tn "A. Winston
,
j
,t
~-
See 2'p.asr.v. 19~4, No. 95-1'73' (JU.ly 1, 1996) Copinien
of Ginsbw:9, J. ~j Dinsd :by Sauter. J'.);; 1!bi.I;SI8F'V. ttsDrem I." . "
rGv§ J;U;, 1996~ til. 163399, 2-~ (7th cir. 1996);
v .. Ci!:tQ
af....:t'!:XU, a4 '.34 720, 7l2-24 (5th elr 1996) (Pol tz, 'Klnq;
J
IItwm
W!ifIJ1OZ", Bena:\ri~s, stewa.rt, Parker and. Delst'li.a, J3.,Cl1SCft'nt:ingl,
'724-25 (Ge...,.,.rt,1 J., 4,il!lsent.itl4).
.
�"y~~ "
':,
,,;:
/.:~l ~
_
;:,::i: ':', ': '
',t,::::(:i·,·
AFFIRl'VIATIVE ACTION
(~~:~.: Quotas
~: '\Question:
Are you in favor of quotas?
','::)'-:: ..
·}~Answer:
The responsibility of the Civil Rights Division is to enforce federal civil rights
laws and certain constitutional provisions. The Supreme Court has in a series
of decisions carefully delineated when race conscious remedies may and may
not be used by the Department of Justice -to redress violations of those laws.
The decisions in Sheet Metal Workers and Paradise should and will dictate the
policy of the Justice Department. The practice of the Civil Rights Division
should be to adhere to, and be constrained by, those decisions. Obviously the
Division should not seek race conscious remedies where, under the· controlling
Supreme Court decisions, remedies of that sort would not be appropriate .
..·.,[IF PUSHED]
Senator, in 1991, as part of its work on the Civil Rights Act of that year,
-::;::Answer:
Congress attempted without success to agree on a definition of a "quota.
\.i-".....
Most members of Congress agreed they were against quotas, but could not
agree on what they meant by a "quota". I don't think we are going to solve
."n:,:" .
that problem here today.
.
i:,' .
y/,
II
In casual conversation, or in a political debate, it may be perfectly sufficient to
use the word "quota" to refer to the remedies you are against, but as a lawyer
responsible for enforcing federal civil rights statutes I have to be more precise.
In determining what race conscious remedies the Division should avoid, my
responsibility would be to took to the controlling Supreme Court decisions
rather than debating what is and is not a quota.
�AFFIRMATIVE ACTION
7. Conflict between affirmative action and merit
Question:
Answer:
Isn't arrmnative action inconsistent with inerit based decisions?
Often affirmative action is ~ effective strategy for advancing merit principles .
. Employers who follow affirmative action policies may well end up hiring or
promoting exceptionally well qualified women or minorities whom they might
otherwise have overlooked. President Clinton, in making cabinet and
subcabinet level appointments, deliberately set out to create an administration
that looks like America. In the course of achieving that goal he has assembled
a superbly talented administration. The President's policy and record is one
that recommends itself to any private employer.
)
�AFFlRMATIVE ACTION
8. Best qualified applicant
Question:
But shouldn't the best qualified applicant always get the job?
Answer:
Often there simply is no "best qualified applicant". In the Weber case, for
example, the job in question was an entry level apprenticeship. Essentially all .
the interested workers, white and black alike, were fully and equally qualified .
for the apprenticeship program; Mr. Weber, the white plaintiff in that case,
didn't claim he had superior qualifications.
�AFFIR1\1ATIVE ACTION
9. Proven discrimination
Question:
Shouldn't arrlrl11ative action be limited to cases of proven unlawful
d~rUn1oation?
.
Answer:
The Supreme Court has repeatedly rejected such a limitation on volunta.r:y
affirmative action. In Bakke the Court held that race or gender could be
considered in college admissions as one of several factors that might increase
the diversity of the student body. In Weber the Court held that voluntary
affirmative action is permissible under Title VII even absent proof of prior
unlawful discrimination. The Court reached the same conclusion regarding
constitutional challenges to affirmative action in Wygant; Justice O'Connor's
concurring opinion discussed this very issue in detail.
On the other hand, courts can only order affirmative action, or any other
remedy, after a showing of a violation of the law.
..
.A
�AEFIRJ.\1ATIVE ACTION
10.'Race-conscious remedies
Question:
Answer:
Shouldn't race conscious remedies, or at least court ordered race conscious
remedies, be limited to individuals who are the specific victims of proven
discrimination?
. The.Supreme Court decision in Sheet Metal Workers rejected that distinction.
Often discriminatory practices are directed against women or minorities as a
group, and it is not feasible to figure out which woman or minority would
have gotten a particular job in the absence of discrimination. Employers who
violate Title VII are not in the habit of k~ping lists of the "actual victims" of
their unlawful conduct.
�AFFIRMATIVE ACTION
11. Recruiting
Question:
Answer:
Shouldn't affirmative action be limited to recruiting?
The Supreme Court decisions regarding affirmative action do not make any .
such distinction. For example, in Sheet Metal Workers v. EEOC the
defendant union had for 20 years engaged in persistent intentional
discrimination in brazen violation of a series of state and federal court orders.
Ordering the union to recruit minorities would have been pointless; the union
. was still opposed to actually admitting minorities.
�AFFIRMATIVE ACTION
12. When justified?
. Question:
Answer:
What .circumstances do you think justify afrumative action?
Senator, the question is not what circumstances I think justify affirmative
action. As we sit here today there are 14 major Supreme Court decisions
regarding when affirmative action is permissible, and when it is legally
required.
.
In the case of court orders, affirmative action can only be required to redress a
proven violation of the law. In the case of voluntary affirmative action, the
Supreme Court has held that states subject to the constitution, and private
employers subject to Title VII, can engage in affirmative action in a somewhat
broader range of circumstances. _For example, under Bakke a state college can
consider race in admission decisions in order to obtain a diverse student body.
�AFFIRMATIVE ACTION·
13. Set asides
Question: Are you for set asides?
.
Answer:
.
.
The federal set aside programs tha~ exist today were either created by
Congress, as was the case in Fullilove, or at least expressly sanctioned by
.Congress, as was the case in Metro Broadcasting. If these programs, or other
set aside programs which Congress may in the future enact, are attacked in the
courts, the Department of Justice will defend the actions of Congress.
At this point in time, so far as I am aware, the legislative proposals that have .
been advanced by the Clinton administration do not address the issue of set.
aside programs. The first priority· of this administration was' and remains
... revitalizing the national economy ~ Substantial progress has been made in our
. first year, but more remains to be done, especially in the poor and
predominantly non-white neighborhoods of our country .. Economic proposals
for dealing with those continuing problems are going to be formulated by
agencies other than the Civil Rights Division. If our views are sought, we will
certainly remind the agencies considering those economic issues of the
constitutional constraints that must be considered in framing any legislation.
�AFFIRMATIVE ACTION
14. Minority Contracting Plans
Question:
Answer:
.--"
What is the Department's position on race-conscious remedies, such as set
.. asides and hiring and promotion goals?
Consistent with the Supreme Court cases, race-conscious remedies may be
appropriate where Congress has authorized or required such relief to remedy
racial discrimination. Also consistent with Supreme Court cases, courts may
order race-conscious measures in certain circumstances to remedy the effects
of past discrimination.
Background: The Supreme Court ruled in Fullilove v. Klutznik, 448 U.S. 448 (1980), that
Congress, pursuant to its powers under the 14th Amendment, may enact race
conscious measures to remedy historic discrimination in federal contracting.
without requiring agencies or states that receive federal funds to make .
independent findings of discrimination in the regions or in the sectors where
the federal funds for promulgating the federal contracting plan are utilized. In
.Fullilove , and more recently in Metro Broadcasting v. FCC, 110 S. Ct. 2997
(1990), the Supreme Court has stressed that greater deference is due
. Congress's determination of a remedial plan than that of a state-sponsored
program. The Division has relied heavily on the principles of Fullilove to
defend federal minority and female contracting plans in instances where the
respective plans are sufficiently tailored to the achievement of the goals
contemplated by Congress.
With regard to court-ordered remedies and public employers' voluntary
affirmative action plans, the Department has taken the position (most recently
in the Birmingham firefighters' case in an 11th Circuit brief on· remand from
Martin v. Wilks) that race-conscious relief may be justified where there is Ita
firm basis for believing remedial action is necessary. Johnson v.
Transportation Agency, 480 U.S. 616, 652 (1987) (O'Connor, J., concurring).·
The relief, however, should "exten[d] no further than necessary to accomplish
the objective of remedying" racial imbalances (citing United States v.
Paradise, 480 U.S. 149, 166 (1987». [Need fuller discussion, including
Croson. Check with J. Silverstein for Payton draft responses].
II
�. LEGISLATION
96. Legislation to overturn St. Mary's Honor Center v. Hicks
Question:
. Do you support legislation to overturn the Supreme Court's decision
in St. Mary's Honor Center v. Hicks, 113 S.· Ct. 2742 (1993)?
Answer:
It is .likely that Hicks will make it more difficult for victims of
. intentional discrimination to win relief. Although the Department has
not yet taken a formal position, I believe some legislation may be needed
to address this problem.
.
Background: Sen. Metzenbaum has introduced legislation, S. 1776, that would
overturn Hicks by using the language of prior Supreme Court cases.
Pursuant to the bill, a complainant ~ould prevail by showing either that
"a discriminatory reason more likely motivated the respondent," or "the
respondent's proffered explanation is unworthy of credence." Thus, the
complainant would not have.'to show, as Hicks holds, that the proffered
explanation was not only a pretext, but was a pretext for discrimination.
Courts have read Hicks to require that complainants produce direct
evidence of discrimination. That requirement undermines the rationale
behind the McDonnell Douglas prima facie case, which is that direct
knowledge of the defendant's true intent often lies uniquely with the
defendant and he must come forward and state his real reason or be held
liable.
�
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Stephen Warnath - Civil Rights Series
Creator
An entity primarily responsible for making the resource
Domestic Policy Council
Stephen Warnath
Civil Rights Series
Date
A point or period of time associated with an event in the lifecycle of the resource
1993-1997
Is Part Of
A related resource in which the described resource is physically or logically included.
<a href="http://clinton.presidentiallibraries.us/items/show/36406" target="_blank">Collection Finding Aid</a>
<a href="http://catalog.archives.gov/id/641686" target="_blank">National Archives Catalog Description</a>
Description
An account of the resource
Stephen Warnath served as Senior Policy Analyst in the Domestic Policy Council. The Civil Rights Series includes material pertaining to the Civil Rights Working Group and topics such as affirmative action, English only, age discrimination, religious freedom, and voting rights. The records also include confirmation briefing materials for Department of Justice (DOJ) and Equal Employment Opportunity Commission (EEOC) nominees. The records include briefing papers, correspondence, schedules, testimony, reports, clippings, articles, legislative referral memoranda, and memos. The majority of the memos are internal between the Domestic Policy Council staff and the staff of the Equal Employment Opportunity Commission, and between the Domestic Policy Council staff and Congress.
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Publisher
An entity responsible for making the resource available
Clinton Presidential Library & Museum
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Extent
The size or duration of the resource.
134 folders in 13 boxes
Text
A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text.
Original Format
The type of object, such as painting, sculpture, paper, photo, and additional data
Paper
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
[Affirmative Action] [1]
Creator
An entity primarily responsible for making the resource
Domestic Policy Council
Steven Warnath
Civil Rights Series
Is Part Of
A related resource in which the described resource is physically or logically included.
Box 1
<a href="http://www.clintonlibrary.gov/assets/Documents/Finding-Aids/Systematic/Warnath-DPC-Civil-Rights.pdf" target="_blank">Collection Finding Aid</a>
<a href="http://catalog.archives.gov/id/641686" target="_blank">National Archives Catalog Description</a>
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Publisher
An entity responsible for making the resource available
Clinton Presidential Library & Museum
Medium
The material or physical carrier of the resource.
Reproduction-Reference
Date Created
Date of creation of the resource.
2/8/2012
Source
A related resource from which the described resource is derived
641686-affirmative-action-1
641686