A quota by any other name.

JUST recently, pundits were ringing the death knell for affirmative action. With the California Civil Rights Initiative getting under way and a new Republican majority in Congress, it seemed as if the era of quotas and preferences was at an end. But the assault on affirmative action has yet to materialize. In fact, the only blow to the quota regime so far has come not from Congress but from the Supreme Court, in its decision in Adarand Constructors v. Pena last June.

Adarand extended the so-called strict-scrutiny standard required of state and local preference programs to the federal level. But this apparent setback to affirmative action may well prove inconsequential. Previous court rulings reining in affirmative action have been ignored or evaded by state and local governments looking to please special interests and preserve a reputation for "diversity."

Take the 1989 case J. A. Croson v. Richmond, in which the Supreme Court struck down a Richmond minority set-aside program and established the strict-scrutiny standard for race-based contracting by state and local governments. For race-based programs to be acceptable under Croson, there must be compelling evidence of disparate treatment of minorities, programs must be of a temporary and last resort, and they must be narrowly tailored to an identifiable population and must address a specific industry or area.

Richmond has nonetheless managed to build a new racial-entitlement system on the ashes of the old one. The evolution and implementation of this new program provide a glimpse of what the future holds for federal programs in light of the Adarand decision.

Under the program declared unconstitutional in Croson, Richmond had set aside for minority-owned businesses 30 per cent of contracting for construction projects and various forms of services. After the decision, Richmond commissioned a study by National Economic Research Associates. In 1991, Richmond announced that the study had "proved" that Minority Business Enterprises were being significantly under-utilized in the Richmond area. As a remedy it instituted a 16 per cent MBE participation goal.

In fact, the NERA study was blatantly rigged to come up with the right answer. First, it defined discrimination as disparate impact (a much lower standard than disparate treatment). Then, it assumed that "in the absence of discrimination the percentage of dollars received by MBEs would equal the percentage of construction establishments owned and operated by minorities," thus failing to take into account the comparative size of minority and non-minority businesses. The report readily admits to this error, "Of course, minorities operate smaller businesses than non-minorities. . . . It is impossible to ascribe all the problems that limit the development of MBEs to current discrimination. Nonetheless, comparing the percentage of businesses operated by minorities to the percentage of contract dollars received by minorities is useful and possibly consistent with Croson."

NERA's study also found "no decided cases" of employment-discrimination litigation against construction companies in the Richmond area and no evidence of discrimination in employment (according to the report, "we do not have sufficient information to conclude that the under-representation [of minorities] results from discrimination").

Furthermore, the disparity study found that "over 75 per cent of minority dollars went to just four firms . . . One of these, Quail Oak, accounts for 46 per cent of all dollars awarded to MBEs; it also ranks fourth among all contractors in dollars awarded." The study admits that because the overwhelming majority of the money is going to only four MBEs, "Richmond's construction spending is probably not assisting in the further development of MBEs in the Richmond area."

Perhaps most surprisingly, NERA actually found that MBEs were being over-represented in Richmond-area contracting: "Since the [original] set-aside program ended, MBEs have received a larger share of prime and subcontract awards and a larger share of prime contract award dollars than we would expect based on their availability." Nevertheless, on the basis of some disparity and anecdotal evidence of discrimination, both NERA and the city claimed that a new minority program was justified.

DISPARITY studies in general have a shoddy history. According to George La Noue, a professor of political science at the University of Maryland, "There is a tendency for cities to commission these studies when they want, or already have, a minority program." One case in point is that of KPMG Peat Marwick's disparity study for Miami. When this study failed to find evidence of discrimination against blacks or Hispanics, the city commission rejected the study and ordered a new one with more acceptable results.

Richmond's public-procurement law requires that city contractors first pre-qualify. All contractors are given a score from 0 to 100, and only the top few are invited to bid. This score is based on a variety of factors, two of which are minority participation, which refers to both employment practices and subcontracting. (By the way, "minority" here is restricted to "a minority that has been subjected to legally mandated racial segregation in Richmond" -- in other words, blacks only.) A contractor's past and proposed minority participation is worth 30 points (more than any other criterion). The city code claims that the disparity between MBEs and non-MBEs is due primarily to discrimination, but that "regardless of cause, it is imperative to the public good that the disparities be redressed and corrected." It goes on to cite various consequences arising from this disparity, among them: lack of competition resulting in higher costs, unemployment, crime, and instability of minority families. It apparently has not occurred to city officials that crime, unemployment, and unstable families may be the cause of disparity rather than the other way around.

Contractors who fail to meet the goal must convince the city that they were unable to. Failure to satisfy city bureaucrats can result in being barred from city contracting for two years. Contractors are required to fill out a "Proposed Good Faith Efforts" form with a Yes and a No box. When I asked Debbie Barnes, the city's MBE Administrator, if anyone had ever checked the No box, she said that one contractor had but changed the response after she questioned the company's senior partner.

The lowest score Debbie Barnes has ever seen for someone who pre-qualified to bid was 75. The maximum score anyone can get without minority participation is 70. Essentially, if a contractor wants to do business with the city, it must agree to a "voluntary" minority-participation program. "Our goals can not be considered quotas because they are flexible," she said. Not surprisingly, Richmond consistently meets its 16 per cent MBE-participation goal.

Contractors are not happy with this new program. Mark Singer, Executive Director of the Richmond Area Municipal Contractors Association, complained that "there are successful minority contractors that continue to benefit from the program."

According to Steve Vermillion, Executive Director of the Richmond chapter of the Associated General Contractors, "Contractors have a clear incentive to simply treat the city's goal like a quota." Nationally, the Associated General Contractors of America has been leading the fight against race-based programs in public contracting. "Any program that applies pressure to government contractors to base decisions on race is discriminatory," says Mike Kennedy, General Counsel for the AGC. "People use the word 'goal' to try and suggest that their program is inspirational," he said, "but if you meet the 'goal' you don't have to demonstrate good-faith efforts. You are pressured to just meet the goal."

The case of Richmond demonstrates that racial preferences are far from dead. The short-term legacy of the Adarand decision will be more litigation. The Clinton Administration has made it very clear that it intends to do all it can to preserve the current system of preferences. In the end, the Federal Government will be forced to conduct intense regional disparity studies to justify its programs. If they are successful, "goals" will replace quotas across the country -- and nothing will have changed.