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Need for disparity studies clarified by ruling on set-asides.

In a decision that has attracted national attention, the U.S. Court of Appeals for the District of Columbia struck down Washington's fifteen-year-old Minority Contracting Act last month.

Because of this Court's location and its tradition of handling major issues, decisions by the D.C. Circuit are always carefully monitored by the legal community. This ruling has special significance. Not only was the three-judge panel unanimous; but two of the judges, Abner Mikva and Ruth Bader Ginsburg, are among the most distinguished liberal jurists in the country.

Washington, D.C's Minority Contracting Act required that each city agency pursue a goal of 35 percent minority contracts in all construction markets. To achieve that figure, sheltered markets (set-asides) were established in which only certified minority businesses could bid. In FY 90, minority firms won about 40 percent of the local public construction contracts and 97 percent of those in the road building category.

Challenging the program in court, the O'Donnell Construction Company, which had white owners and an 80 percent minority workforce, said it had been permitted to bid on only one D.C. contract in the last five years.

The Appellate Court opinion began by noting that the appropriate precedent was City of Richmond v. Croson, decided by the Supreme Court in 1989. Although Croson was based on the 14th Amendment's equal protection clause forbidding discrimination by local governments and states, the Appellate Court found that the Fifth Amendment made the equal protection standard fully japplicable to the District of Columbia.

Croson states that the only justification for the use of racial classifications in local contracts is to remedy the present effects of past discrimination in public construction. The Appellate Court noted, however, that the record was "devoid of any evidence that agencies of the District of Columbia had been favoring white contractors over non-white contractors or that the typical bidding process was somehow rigged to have this effect." Nor was there sufficient evidence to establish the 35 percent goal and the Washington, D.C. government conceded it had never made a finding of local discrimination to justify the inclusion of Hispanic Americans, Asian Amercians, Pacific Islander Americans, or Native Americans in its program.

In the aftermath of the court decision, the Washington Post stated that four minority companies received 80 percent of the $64 million in street repair contracts over a four-year period.

The pattern that a few businesses garner the lion's share of contracts is common in both set-aside and open-bidding arrangements, however.

The D.C. mayor and council are hastening to create a temporary substitute for the old program until the city can complete a disparity study. Some council members would like to see a race neutral program. Some think it should have a graduation provision or be limited to smaller businesses, while others would like to focus on firms from local economically depressed areas.

Many observers believe that the Washington, D.C. government would have benefitted from doing, much earlier, the kind of "disparity study" that the Supreme Court's Croson decision requires to identify discrimination in order to determine if any race-conscious program in public contracting is permissible. Disparity studies examine the historical and economic context of local public contracting and statistically analyze whether minority businesses are under-utilized. While the question of what kind of evidence is ultimately necessary is far from a settled issue, the O'Donnell case's clear message is that any use by a city of racial classifications without first doing a disparity study is risky and probably not defensible.

Dr. George R. La Noue is director, Policy Sciences Program, University of Maryland-Baltimore County, and is the author of NLC's recent publication, Minority Business Practices and Disparity Studies.
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Author:La Noue, George R.
Publication:Nation's Cities Weekly
Date:Jun 15, 1992
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