William M. Leiter
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Abstract
The federal Disadvantaged Business Enterprise (DBE) program requires that business
owners be certified as disadvantaged discriminates as a basic requisite for the
receipt of DBE affirmative-action benefits in federal contracting. A
multiplicity of minorities are presumed
by federal law to be disadvantaged discriminates, and this deviates from the
U.S. Supreme Court’s equal protection of the laws ruling that affirmative
action be based on a strong basis in the evidence that unlawful discrimination
has occurred. Consequently, the federal DBE-contracting program--the federal
expenditure goal for which has been greatly exceeded during the Obama
Presidency-- is constitutionally suspect.
Introduction
During the Obama Administration –between FY 2009 and FY2012—federal contract
spending for certified small disadvantaged enterprises contractual services totaled
some $133 billion or about 8% of total expenditures for federal procurement of
goods and services for those years.[1] The
8% exceeds the 5% goal assigned by statute for all federal agencies. Federal
procurement expenditures for certified, small disadvantaged business
enterprises (DBEs) represent a significant national affirmative-action effort
to assist minority and female-owned business through a variety of preferential
treatments. There are some thirty-five thousand of these DBEs[2] recognized
by the federal government; states and localities have created many others, but
there is no accurate count of their numbers.[3]
The emergence of DBEs was much associated with the effort to appease African
Americans in the wake of the 300 or so ghetto upheavals in the 1960s (resulting
in 200 deaths and the destruction of thousands of businesses[4])
as skin color and ethnicity have been critical to governmental certification of
disadvantaged status. The creation of African-American DBEs fomented a stampede
by other groups insisting on their disadvantaged status, and this fanning of the
flames of racial/ethnic/gender grievance successfully garnered further
governmental DBE-appeasement. It was
extended not only to cultivate minorities and females, but also to calm the
guilt and fear of Americans who have widely harbored the notion that their
society had been racially/ethnically oppressive and sexist. Currently,
businesses owned and operated by U.S. citizens whose net worth is below $750,000[5]
(not counting the value of one’s home and business) can remain certified DBEs
(for federal and state/local programs) if the owner/operator is a female or is
a member of one of the following presumptively[6]
(by federal DBE law) disadvantaged/discriminated against groups:
Black Americans; Hispanic Americans; Native Americans (Alaska Natives,
Native Hawaiians, or enrolled members of a Federally or State recognized Indian
Tribe); Asian Pacific Americans (persons with origins from Burma, Thailand,
Malaysia, Indonesia, Singapore, Brunei, Japan, China (including Hong Kong),
Taiwan, Laos, Cambodia (Kampuchea), Vietnam, Korea, The Philippines, U.S. Trust
Territory of the Pacific Islands (Republic of Palau), Republic of the Marshall
Islands, Federated States of Micronesia, the Commonwealth of the Northern
Mariana Islands, Guam, Samoa, Macao, Fiji, Tonga, Kiribati, Tuvalu, or Nauru);
Subcontinent Asian Americans (persons with origins from India, Pakistan,
Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal). [7]
Surely, the creation of this
extraordinary assemblage of presumptive discriminatees was motivated by more
than mere appeasement. The effort here, as in other affirmative-action
undertakings was to correct our societal deficiencies and to appropriately
apportion the benefits of American life, while facilitating the integration of
our society. Nevertheless, the clear language of the antidiscrimination laws of
the 1960s—and the clear moral imperative of that era—was “color- blindness.”
And the DBE programs with their affirmative-action preferences frustrate
color-blindness. The ghetto upheavals of the 1960s helped change ideological commitments,
as crises often do.[8] Ironically,
African-American businesses--for whom DBE affirmative action was originally created[9]--may
receive less from DBE programs than others. For example, a study of 2004 DBE
contracts issued by the Federal Aviation Administration noted that
African-American firms received 23.5% of the DBE contracts (31% of the
dollars), while white females obtained 48.3% of those contracts (36.5% of the
dollars).[10]
Benefits
available to DBEs include:[11]
-- Establishment
of governmental goals (including goals in prime contracts) for the hiring of
minority and female DBE businesses.
--Monetary
incentives for prime contractors to subcontract to DBEs as in Adarand v. Pena (1995)[12]
discussed below.
--Sheltered
markets offering set-asides (which restrict bidding to DBEs) and sole-source
contracting where contract negotiation is restricted to particular firms.
--Governmental
loans and training.
--Requirements
that good faith efforts be undertaken by prime contractors to seek out
potential DBE subcontractors.
The startling list of presumptive DBE-discriminatees
above prompts the question of who--in accordance with the Constitution’s equal
protection of the laws requirement-- can be granted DBE-affirmative action
benefits. In this connection, it would be
appropriate to better delineate affirmative-action’s dimensions.
Affirmative Action
and its Rebadging
Affirmative action
differs from other antidiscrimination initiatives in that (1) it targets and
seeks to remedy systemic-societal bias
(as manifested in public and private illegal action), not malefactors engaged in intentional
discrimination prohibited by law ; (2) in separate programs, or as major
portions of universal programs, it mandates race, ethnic, gender, sexual
orientation, and disability-conscious remedies for the statistical
disproportionately-adverse effects -- the so-called disparate impact -- of societal discrimination on protected
groups, whether or not specific discriminatory intent on the part of defendants can be isolated; and (3) it seeks
to integrate institutions by race, ethnicity, disabled condition, and sex.
Affirmative
action connotes remedial consideration of race, ethnicity, disability, gender,
or sexual orientation as a factor, among others, in decision-making about
outreach, jobs, government contracting, K-12 student assignment, university
admission, voting rights and housing. The goal of this process is to redress
the disadvantage under which members of disparately-impacted groups are said to
labor. The relative weight accorded to race, national origin/ethnicity, gender,
sexual orientation or disability varies from program to program. Thus, affirmative action remedies range from
disseminating job information to preferential employment and admissions
practices, classroom integration, the creation of majority-minority legislative
districts, set-asides for minority and women-owned businesses, and court-ordered employment quotas in
egregious discrimination cases.
Affirmative action has been
“rebadged.” The need for “diversity” in
school, government agencies, and workplace populations—and the supposed
difference in ideas and practices various groups bring-- has become a dominant
rationale used to support the race/ethnic/sex/disability-conscious remedies
typical of traditional affirmative action. As Congresswoman Maxine Waters said
at a Congressional hearing [13] where
she successfully argued that there needed to be a law supporting
minority/female-inclusion in the federal financial agencies and in federal
financial contracting:
We have known for many years that most of the
minorities in these [federal financial agencies and private financial] firms
are at the entry level and the lower levels. …We came up with offices of
minority inclusion to be created for each of these financial services agencies,
so there is someone who is sitting at the table who can say, ah friends, do you
not remember that we had a subprime meltdown where minority communities were
targeted, where they were talked into no doc loans, and ARMs, that the greatest
mortgage foreclosure problems are in those communities.
We think that whether it is the
private sector or in the public sector unless you create something inside these
businesses or government whose attention will be directed toward solving this
problem, it is not going to happen. …
The goodwill statements, we believe in diversity, but the proof of
the pudding is … in the eating. We have to take affirmative steps to do
something. That is why we did the office of minority inclusion that is being
resisted by the same people who resist
diversity.
Why
this shift to ideational differences to promote affirmative action? For one,
diversity theory does not require the demonstration of past or present
forbidden discrimination required by the U.S. Supreme Court since 1989[14] as
necessary constitutional support for disparate-impact affirmative action.
Consequently, a barrier to promoting affirmative action is removed. Ideational
diversity, as diversity theory has it, is required to spur productivity and
intellectuality, irrespective of past or present discrimination. Additionally,
Harvard sociologist Frank Dobbin argues that diversity rebadging was a
self-preservation “cover” created by affirmative-action devotees in personnel
departments casting about for a theory which could thwart the perceived Reagan
Administration’s efforts to reduce the undesired affirmative-action treatment
afforded protected groups. Professor Dobbin found a bridge between diversity
and disparate-impact thinking in American political thought. To him, mainstream
American thinking and disparate-impact theory have both subscribed to fair and
equal treatment. Fair and equal treatment and its rejection of racism and
comparable invidious animosities, to the advocates of affirmative action, would
lead naturally to diverse populations at work and in education.[15] Besides,
employing diversity themes lubricates the advance of affirmative action by
making its controversial dimensions more politically palatable. Thus, in his
Executive Order 13583,[16]
President Obama established a “Coordinated Government-Wide Initiative to
Promote Diversity and Inclusion in the Federal Workforce.” This Order did not
focus on remedying racial/ethnic/gender discrimination through preferential
devices. Rather, we are told that “Our Nation derives strength from the
diversity of its population and from its commitment to equal opportunity for
all. We are at our best when we draw on the talents of all parts of our
society; and our greatest accomplishments are achieved when diverse
perspectives are brought to the bear to overcome our greatest challenges.” The
Director of the federal government’s central hiring agency--The Office of
Personnel Management-- said in connection with the above order: "We're
going to be very aggressive. We're going to dog this from every angle I
can." [17]He drew
particular attention to the government's need to hire more Hispanics and disabled
people.[18]
Which Business
Owners Should Be Eligible For DBE-Affirmative Action Benefits? The Supreme
Court and the Equal Protection Standards for Affirmative Action
At the constitutional level, the critical constitutional
disputes regarding affirmative action have concerned the Equal Protection
Clause of the 14th Amendment (applicable to state government) and
its “component” embedded[19]
by Supreme Court decree in the 5th Amendment’s Due Process Clause which
governs the national government. The Equal Protection Clause prohibits any
state government from depriving “any person within its jurisdiction the equal
protection of the laws.” An important affirmative-action Equal Protection
Clause question concerns the level of judicial scrutiny of government action
that Clause requires. Should it be "mid-tier" or "strict"? To survive mid-tier review, an affirmative action program must serve an
important government interest, and
employ means that are substantially related
to that governmental end. On the other hand, strict scrutiny requires a compelling governmental interest, and
means which are narrowly tailored to
achieve that compelling interest. After years of inconclusive Supreme Court
debate as to the merits of mid-tier versus strict judicial review, strict
scrutiny was adopted by the High Court for racial/ethnic governmental
classifications, first for state government in Richmond v. Croson (1989),[20] and later for the federal government in Adarand v. Pena (1995).[21]
Nominally, intermediate scrutiny was applied by the Court for gender
classifications,[22]
but that distinction may have been annulled in 1996 when intermediate scrutiny
was defined by the U.S. Supreme Court as requiring an “exceedingly persuasive”
interest to support governmental gender discrimination.[23]
Surely, “exceedingly persuasive” can be incorporated in the nature of
“compelling” as it was defined in Croson’s
approach to strict scrutiny. There, the
Court majority determined that the City of Richmond Richmond had failed to produce:[25]
There is no doubt that "[w]here gross statistical
disparities can be shown, they alone in a proper case may constitute prima
facie proof of a pattern or practice of discrimination" under Title VII
[of the 1964 Civil Rights Act[26]] But
it is equally clear that "[w]hen special qualifications are required to
fill particular jobs, comparisons to the general population (rather than to the
smaller group of individuals who possess the necessary qualifications) may have
little probative value." See … Mayor of Philadelphia v. Educational Equality League, 415 U.S. 605, 620 (1974) ("[T]his is not
a case in which it can be assumed that all citizens are fungible for purposes
of determining whether members of a particular class have been unlawfully
excluded").
In the employment
context, we have recognized that for certain entry level positions or positions
requiring minimal training, statistical comparisons of the racial composition
of an employer's work force to the racial composition of the relevant
population may be probative of a pattern of discrimination. But where special
qualifications are necessary, the relevant statistical pool for purposes of
demonstrating discriminatory exclusion must be the number of minorities
qualified to undertake the particular task.
Later the Croson approach to strict scrutiny was
applied to national affirmative action efforts in Adarand v. Pena (1995).[27]
Note that the Croson Court (in the
above-cited quote) accepted disparate-impact theory by saying that gross
statistical underrepresentation of protected groups could demonstrate a
violation of the 1964 Civil Rights Act ban against discrimination, but only if
there was an underrepresentation of workers in these protected groups who were
capable of the doing the work involved.
The Supreme
Court’s Croson and Adarand
embrace of strict scrutiny in connection with DBE- affirmative action
provoked the publication of an avalanche of
“disparity studies” meant to support the view that minority and
women-owned businesses were “underrepresented” in government contracting, and
thus warranted DBE-affirmative action benefits. According to the U.S. Civil
Rights Commission, these “disparity studies” failed to provide the information
required by Croson and Adarand. The U.S. Civil Rights Commission--which
proclaims its independence and bipartisanship-- has had the function since 1957
of studying and reporting on the implementation of civil rights laws including
those of the Constitution. Its reports are impressive. As to disparity studies,
the Commission said[28]
in 2006 that
In 1996, the U.S. Department of
Justice cited results from disparity studies and other sources to justify the
government’s continued use of racial classifications after the Supreme Court’s
decision in Adarand v. Pena. …
Most
current [state and local] disparity studies are not only outdated, but have
common flaws. They fail to measure availability according to requirements to
compare qualified, willing, and able businesses that perform similar services.
They use simple counts of businesses without taking capacity into account. The
researchers (1) use obsolete or incomplete data; (2) report results in ways
that exaggerate disparities; (3) fail to test for nondiscriminatory
explanations for the differences; (4) find purported discrimination without
identifying instances of bias or general sources; (5) rely on anecdotal
information that they have not collected scientifically or verified; (6) do not
examine disparities by industry; and (7) neglect to identify which racial or
ethnic groups suffer from disparities. …
The
three national studies of disparities—the Department of Justice’s 1996 appendix
to its guidance, the Urban Institute’s meta-analysis, and the Department of
Commerce benchmark studies—are outdated and inappropriate now to serve as a
basis for federal policy or agency action. …
The
[federal] government should conduct new research on disparities nationwide to
support both its policy on discrimination in contracting and federal, state,
and local jurisdiction’s efforts to narrowly tailor race-conscious programs.
Federal officials must discard disparity studies using data that is more than
five years old to justify the award of contracts. The government must use
current data, not outdated results. . . .When conducting national research on
disparities, study directors should. . .develop a rationale for including
businesses ready, willing, and able to carry out contract work…and test for
nondiscriminatory explanations for group differences.
The Obama
Administration, DBEs, and the Demands of the Social Sciences
As
noted, the federal government has granted some 8% of its contract dollars to
certified DBEs during the Obama Administration. DBE certification centrally
depends on the nationwide presumption established by federal
law that minorities and women are disadvantaged and discriminated against in
the award of federally subsidized contracts.
This presumption of racial/ethnic discrimination is based on no reasonably
recent (last five years or so) study publicly providing nationwide data as to the
availability of capable minority/women businesses and their underrepresentation
in the award of federal contracts. Nothing in the way of a study that would
satisfy the above-described Supreme Court strict-scrutiny dictates in Adarand/Croson. During the Obama years,
the Government Accountability Office published an analysis of DBE
certification, but did not question the merit of presuming that racial/ethnic
minorities are disadvantaged and discriminated against. Rather, it concluded
that insufficient attention was given by the Small Business Administration (the
primary DBE certifier) to the long-standing problems of fraudulent representation
of minority status, and economic eligibility.[29]
The presumption of minority and
female exclusion and discrimination was furthered in the Wall Street
Accountability and Consumer Protection Act of 2010.[30]
The President extolled the virtues of the Act, but he did not mention that the
Act required the establishment of offices of minority and female inclusion in
all the U.S. financial agencies (some 30) which were charged with the
responsibility of promoting to the “maximum extent possible” minorities and
female participation in federal financial contracting, and in the federal
agency workforce. Minorities are defined as Black, Hispanic, Native, and Asian
Americans.[31] At the
House hearings on this matter, the primary reference was to a Government
Accountability Office study on the number of minorities and females in banks
and other financial units relative to the number of White males. No data on
minority and female capacity or availability was provided.[32]
The U.S. Department of Transportation has, of late, emphasized
its adherence to Croson/ Adarand, and
required its state recipients of federal transportation-construction monies to establish
DBE-contract award goals in conformity with Supreme Court standards. Some
of the disparity studies conducted under
this new emphasis have resulted in the attenuation of presumptive
discrimination. For example, three
states have denied presumptive eligibility for some: Hispanics in California and Oregon ; Native Americans in Oregon ; and women in Arizona .[33]
Overall, though, according to the Transportation Department’s Inspector General,
Transportation’s DBE effort suffers from numerous weaknesses: state
administrators complain of insufficient guidance as to DBE eligibility; most
DBE-eligible firms do not get transportation contracts; ineligibles get DBE
contracts; and there is inadequate graduation of DBE firms to non-sheltered
status.[34]
Strict scrutiny demanded by Adarand/Croson assumes--along with
social science theory--that the capability, availability of minority/female
businesses and their discriminatory treatment are determinable with substantial
statistical precision. It may be that social science theory demands too much by
insisting that government answer questions “scientifically.” The questions of comparable capacity,
underrepresentation/discrimination admit of numerous reasonable answers.
Perhaps government should be left in the DBE area--as it is in so many other areas--
to policy choices rooted in hunches, guesses, political pressures, and other
non- scientifically precise prodding. The difficulties in obtaining Adarand/Croson data are illustrated by a
federal statute of 2000 authorizing women-owned businesses to obtain federal
contract set-asides for business undertakings where women were underrepresented
or substantially so. At that point, the Small Business Administration (SBA)
determined that there were four areas of underrepresentation: (1) providing
intelligence data; (2) engraving and metal working; (3) furniture and cabinet
manufacturing; and (4) motor vehicle dealerships. After widespread criticism,
the SBA changed its count from four to 31, and during the Obama Administration it
was raised to 83.[35]
Science or politics?
Copyright 2014 ©
by William M. Leiter. All rights reserved.
[1] U.S.
[2]George R. La Noue,
Defining Social And Economic Disadvantage: Are Government Preferential Business
Certification Programs Narrowly Tailored? 12 U Maryland
[3] Id.
[4] Jonathan J. Bean, Big
Government and Affirmative Action: The Scandalous History of the Small Business
Administration 37 (University Press of Kentucky
[5] La Noue, 12 U Maryland LJ of Race, Religion and
Gender at 295 (Cited in note 2). Initial certification permits a net worth of
less than $250,000. U.S. October 12,
2012 , Summary. Accessible at http://digital.library.unt.edu/ark:/67531/metadc227649/m1/1/high_res_d/R40744_2012Oct12.pdf
Women-owned DBEs need no such economic “disadvantage” if their businesses are
substantially underutilized in the marketplace. U.S. Congressional Research
Service, Small Business Set Aside
Programs….June 15, 2012, 10. See http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/R41945_06152012.pdf
[6] The law
permits the rebutting of presumptive disadvantaged status, but this involves
written complaints and hearings and is seldom accomplished. For example, no
challenges were made to DBE certification at the Small Business Administration
and the Department of Transportation between 2003 and 2011. La Noue, 12 U Maryland
[7] List of groups quoted from La Noue, 12 U Maryland LJ
of Race, Religion and Gender at 282. (Cited in note 2). Bolding added.
[8] See Robert Higgs, Crisis
and Leviathan: Critical Episodes in the Growth of American Government (The
Independent Institute, 2013), 258-262.
[9] Bean, Big
Government and Affirmative Action, 46-93 (Cited in note 4).
[10] George R. La Noue, Follow the Money: Who Benefits from the Federal Aviation
Administration’s DBE Program, 38 The American Review of Public Administration,
480, 494 (February 8, 2008 ).
[11] U.S.
[12] 515 U.S.
[13] U.S. Opportunity , Minorities
and Women in Financial Regulatory Reform, pp. 8-9, May 11, 2010 . Italics added.
Available at http://financialservices.house.gov/media/file/hearings/111/printed%20hearings/111-135.pdf
[14] Richmond U.S.
[15] Frank Dobbin,
Inventing Equal Opportunity (Princeton & Oxford, 2009), 101-160. The
concepts “rebadging” and “retheorization” are from this volume.
[16] August 18, 2011 . Accessible
at http://www.whitehouse.gov/the-press-office/2011/08/18/executive-order-establishing-coordinated-government-wide-initiative-prom
[17] Cited by Joe Davidson, Diversity is Among OPM Chief’s Top Goals, The Washington Post, January 11, 2012 , Metro
Sect. B04.
[18] Id.
[19] See Bolling v. Sharpe, 347 U.S.
[20] 488 U.S.
[21] 515 U.S.
[22] Craig v.Boren,
429 U.S. 190 (1976).
[23] U.S. Virginia U.S.
[24] Richmond U.S.
[25] Id at 501-502. Internal citations largely omitted.
[26] Pub L 88-352, 78 Stat 241, Codified as amended,
generally at 42 USC 1471 et seq
(2009)
[27] 515 U.S.
[28] U.S.
[29] U.S., Government Accountability Office, Steps Have Been Taken to Improve
Administration of the 8(a) Program, but key Controls for Continued Eligibility
Need Strengthening, March, 2010,
initial abstract. See http://www.gao.gov/assets/310/302582.pdf
[30] Pub. L. 111-203.
[31] Id, Section 342.
[32] U.S. Opportunity , Minorities
and Women in Financial Regulatory Reform, May 11, 2010 . Available at http://financialservices.house.gov/media/file/hearings/111/printed%20hearings/111-135.pdf See also U.S. Accountability Office, Diversity Management: Trends and Practices
in the Financial Services Industry and Agencies after the Recent Financial
Crisis, April, 2013. Available at http://www.gao.gov/assets/660/653814.pdf
[33] George R. La Noue, Western States’ Light: Restructuring the Federal Transportation
Disadvantaged Business Enterprise
[34] U. S. Department of Transportation, Office of
Inspector General, Audit Report:
Weaknesses in the Department’s
Disadvantaged Business Enterprise Program Limit Achievement of its
Objectives, April 23, 2013, 1-24. See http://www.oig.dot.gov/sites/dot/files/DOT%20DBE%20Program%20Report%5E4-23-13_0.pdf
[35] U.S. June 15, 2012 , p. 9, n 55.
Accessible at http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/R41945_06152012.pdf
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