High Court case may affect MTA minority pacts.

A decision on a case set to be heard by the U.S. Supreme Court next year could, in the worst case scenario, dismantle all government programs nationwide that aim to award a certain percentage of federal contracts to minority and women-owned businesses, sources said.

If so, minority and women-owned contractors working on the Metro Rail construction project could be among the hardest hit in the Southland because the project is federally funded, sources added.

In Adarand Constructors Inc. vs. Federico Pena, non-minority subcontractor Adarand lost out on work on a federal highway construction contract in Colorado to Colorado-based Gonzalez Construction Co., a minority-owned business. Colorado-based Adarand was the lowest bidder on the contract. Pena is the U.S. Secretary of Transportation.

Adarand challenged the award in U.S. District Court in Colorado and lost. Adarand subsequently appealed to the U.S. Court of Appeals for the Tenth Circuit and lost again.

The company then appealed to the U.S. Supreme Court, and its appeal was accepted in November. Oral arguments before the court are expected to begin in January, and a decision is expected next spring, said Jeanie Barnett, editor of Women's Business Exclusive, a Torrance-based newsletter for women business owners.

Currently, Congress mandates that all federal agencies and local governments spending federal dollars establish "good faith effort" programs, under which their prime contractors award a percentage of their subcontracting dollars to "disadvantaged" minority- and women-owned businesses -- or prove they made a "good faith effort" to do so. Each federal agency sets its own percentage.

'Good faith effort' required

A disadvantaged business is one whose revenues fall short of a certain amount, which varies from industry to industry. A good faith effort means the prime contractors have to outreach to such businesses to try to inform them about subcontracting possibilities.

Federal agencies, such as the Department of Transportation, set their own standards, which are then followed and sometimes modified by local government agencies, such as the Metropolitan Transportation Authority. Then the MTA and other local government agencies require that its prime contractors meet the modified goals or prove they made a good faith effort to do so.

There are several possible decisions the Supreme Court could make regarding the Adarand case, said Michael Gagan, a lobbyist with Rose & Kindel, a downtown L.A.-based lobbying firm that represents minority and women-owned businesses.

The court could rule against Adarand, and uphold all federal affirmative action contracting programs as they are, Gagan said.

Or, the court could narrowly rule that the prime contractor, Mountain Gravel & Construction Co., should have awarded Adarand the subcontract, but that all federal affirmative action contracting programs should still remain as they are, he said.

Court requires studies

However, it is possible the court could rule that all federal agencies, in awarding contracts, cannot use minority ownership of a company as a criterion unless there is proof of previous discrimination against a particular race.

The U.S. Supreme Court already ruled in 1989, in J.A. Croson Co. vs. the City of Richmond, that state and local government entities must prove a history of such discrimination before implementing affirmative action programs.

In another scenario, the Supreme Court's decision could call for the dismantling of any affirmative action contracting program set up by any federal agencies, Gagan said. This would include both the sweeping good faith effort rule and percentage goal-setting programs instituted by separate federal agencies.

The case may have implications for "any race and gender conscious program mandated by Congress," Barnett said.

Paul Suzuki, legal counsel for the Asian Business Association, added, "This decision is one more thing ... that would make it more difficult for minority business owners to get contracts from the government."

City violates charter

Suzuki said recent court decisions that have made it more difficult for minority and women business owners to secure government contracts include the Croson decision and the case of Domar Electric Inc. vs. the City of L.A.

In the Domar case, the California 2nd District Court of Appeals ruled in 1993 that the City of L.A.'s good faith effort program is invalid because it was enacted by a mayoral directive that conflicts with the city charter. Amending the city charter requires voter approval, and such a vote has not yet taken place.

The Domar case has been appealed and is pending before the state Supreme Court.

Because several conservative justices currently sit on the U.S. Supreme Court, it is conceivable that in the Adarand case, the court would decide either to abolish federal affirmative action contracting programs altogether or to require that each federal agency prove discrimination exists before its programs are deemed valid, according to a letter concerning the case written by attorneys at Riley & Artabane, a law firm based in Washington, D.C. Riley & Artabane filed an amicus (friend of the court) brief in the case, arguing in favor of upholding federal affirmative action contracting programs. The brief was accepted.

Riley & Artabane represents the Washington D.C.-based Equal & Enterprise Opportunity Association, an association that advocates minority business issues. Its members are minority businesses and associations.

The justices who voted in past U.S. Supreme Court cases to uphold Congress' mandated good faith effort programs are gone and, for the most part, have been replaced by more conservative ones, the letter states.

If the court strikes down the federal good faith effort program, prime contractors won't make an effort to subcontract with disadvantaged minority- and women-owned businesses, said Lorraine Smoot-Stone, president of the United Minority Contractors Association, a non-profit association in South Central L.A. that assists minority businesses in getting contracts.

"If they don't have to consider minority subcontractors, they won't," Stone said. "It allows them to really ignore the situation."

More specifically, disadvantaged minority and women-owned businesses contracting to build the Metropolitan Transportation Authority's Metro Rail project could suffer if the court strikes down programs to give such businesses contracting dollars, sources said.

MTA contractors could lose out

The U.S. Department of Transportation provides the project with funds, and the MTA's own program requires that prime contractors provide 29 percent of their contracting dollars to disadvantaged minority and women-owned businesses or prove they made a good faith effort to meet that percentage.

If the federal affirmative action contracting program is struck down altogether, the participation of such contractors on the project would decline, Gagan said. Such a decision could leave the MTA's affirmative action contracting program open to legal challenge, added Gwendolyn Williams, director of equal opportunity for the MTA.

And if the court rules that federal agencies need to prove discrimination before such programs could be valid, "absent a thorough predicate study, I don't think (the MTA) would have a leg to stand on," Gagan added. A predicate study is conducted to determine if discrimination exists to justify an affirmative action policy.