At a moment when judicial tolerance of race-conscious government action seems to be waning, this Article develops a new set of constitutionally viable justifications for affirmative action. Rather than enter the familiar debate over the legitimacy of the Court's application of strict scrutiny to remedial affirmative action, Ayres & Vars excavate widely overlooked language in the Supreme Court decision in City of Richmond v. J.A. Croson Co., which notes the ability of government to eradicate the effects of private, not just governmental or "public," discrimination. The authors develop three justifications for remedying private discrimination through public affirmative action, each of which produces non-arbitrary goals that do not unduly burden "innocent" third parties--making them narrowly tailored to a compelling governmental interest. Thus, the authors re-cast Croson, an opinion routinely understood as the death knell for affirmative action, into a model for its redirection and possible expansion.

Beginning with the story of Marian Anderson's 1939 concert at the Lincoln Memorial, the authors demonstrate how public affirmative action used to remedy private discrimination is neither counter-intuitive nor unprecedented in our historical memory. They then focus on affirmative action in government procurement, and demonstrate how the larger size of private markets and the stronger evidence of private discrimination suggest that the future of affirmative action in procurement may turn largely on private discrimination justifications. Three private discrimination rationales follow: (1) to ensure that government spending does not directly or indirectly facilitate private discrimination (the "causal" justification); (2) to correct for the depressive effect of private discrimination on the capacity of minority-owned firms (the "but-for" justification); and, most radically, (3) to compensate for shortfalls in private sales caused by purely private discrimination, so long as the scope of the government remedy is restricted to that particular market (the "single- market" justification). The Article applies the justifications it offers to the related context of employment and argues that public remedies for private discrimination in employment can be narrowly tailored. Thus, a position which at first appears to be incompatible with the Supreme Court's present unwillingness to uphold affirmative action programs emerges as a remarkably compelling and constitutionally grounded argument in support of the government's ability to remedy private discrimination in a wide array of settings.

Table of Contents

Introduction ....................................................... 1578

I. The Empirical Importance of Private Discrimination ................. 1589
A. The Relative Size of Private and Public Markets ............... 1590
B. Minority Underutilization by Government and Private Purchasers 1592

II. The Causal Justification ........................................... 1596
A. Direct Causation--Public Money Pays for Discrimination ........ 1598
B. Indirect Causation--Public Money Encourages Discrimination on
Private Jobs ..................................................... 1601

III. The But-For Justification .......................................... 1603

IV. The Single-Market Justification .................................... 1610
A. Purely Private Discrimination as a Compelling Governmental
Interest ......................................................... 1611
B. Narrowly Tailoring the Single-Market Justification ............ 1614
    1. The Existing Business Principle ............................. 1615
    2. The Unjust Enrichment Principle ............................. 1616
C. Market Definition ............................................. 1619
D. The 100 Percent Problem ....................................... 1622

V. Public Remedies For Private Discrimination in Employment ........... 1633

Conclusion ......................................................... 1638

Injustice anywhere is a threat to justice everywhere. [FN1]

Marian Anderson was a contralto with a voice of rare power, a voice that Toscanini said "came once in a hundred years." [FN2] But in the late 1930s, the Daughters of the American Revolution (DAR) refused to rent Constitution Hall--the only large concert hall in Washington, D.C. at the time--to Anderson because she was black. Eleanor Roosevelt was outraged by the DAR's action and not only resigned from the organization, but prompted the National Park Service to invite Anderson to sing at the Lincoln Memorial on Easter Sunday, 1939. [FN3] The concert was a monumental success. More than 75,000 people came to hear Anderson sing before the statue of the Great Emancipator and millions more listened by radio. [FN4] Beyond the concert's emotional impact, the event soon came to be seen "as the first strategic victory of the modern civil rights movement." [FN5] Decades later, when Martin Luther King, Jr. chose to speak at the Lincoln Memorial, the memory of the masses assembling for Anderson's concert must have served as a guide. [FN6]

Amazingly, many federal courts today would probably find Anderson's invitation unconstitutional, because they believe that the government can take race-conscious action only to remedy its own discrimination. [FN7] Even the Clinton Justice Department--which as a general matter has worked so assiduously at trying to "mend, not end" [FN8] affirmative action--has explicitly rejected private discrimination as a rationale for public affirmative action:

[A]ffirmative action in federal procurement is not a means to make up for opportunities minority-owned firms may have lost in the private sector . . . . [FN9] But the whole purpose of Anderson's invitation was to make up for the opportunities she lost in the private sector. The federal government at that time did not normally open the Lincoln Memorial for public concerts. The invitation to Anderson was a race-conscious preference, a form of affirmative action, to remedy the DAR's private discrimination. Anderson's invitation was one of the federal government's first attempts in this century to rectify the continuing harms of racial discrimination. Yet, somehow, we have gone from thinking that making up for private discrimination is an appropriate first step to thinking such remediation is illegal.

Rejecting private discrimination as a rationale for public affirmative action has ramifications far beyond the provision of concert space. Limiting public affirmative action to remedying discrimination by the government itself may eviscerate affirmative action in federal contracting. Jeffrey Rosen has offered the following syllogism, which succinctly summarizes the argument: "[T] he Supreme Court will only uphold federal racial set-asides in light of convincing evidence of past discrimination by the federal government itself; but, for almost twenty years, the federal government has been discriminating in favor of minority contractors rather than against them." [FN10] From these two premises Rosen concluded that federal set-asides were doomed.

Rosen's first premise, that the federal government can act only to remedy its own discrimination, is not true. In City of Richmond v. J.A. Croson Co., Justice O'Connor, joined by Chief Justice Rehnquist and Justice White, concluded that the City of Richmond "can use its spending powers to remedy private discrimination, if it identifies that discrimination with the particularity required by the Fourteenth Amendment." [FN11] And, while Croson concerned state and local procurement, the Court in Adarand Constructors, Inc. v. Pena has more recently held that the Croson analysis applies to federal programs. [FN12] Thus, even though Croson and Adarand are usually viewed as restricting the government's ability to implement affirmative action (by subjecting such legislation to strict scrutiny), [FN13] these decisions in at least one dimension expand that ability--by making clear that remedying private discrimination is a compelling interest of state and federal governments. [FN14]

The idea that government affirmative action can only be used to remedy government discrimination comes from Justice Powell's plurality opinion in Wygant v. Jackson Board of Education, which noted that the Supreme Court "has insisted upon some showing of prior discrimination by the governmental unit involved before allowing limited use of racial classifications in order to remedy such discrimination." [FN15] But Croson overturned this Wygant limitation by squarely holding that remedying private discrimination is a compelling governmental interest. [FN16] Notwithstanding Croson, many federal circuits (and commentators such as Rosen) continue to insist that governmental units can only use affirmative action to remedy their own discrimination. [FN17] This Article seeks to end this misplaced reliance on Wygant and instead identifies when affirmative action in government procurement to remedy private discrimination can be "narrowly tailored" to pass strict scrutiny.

Rosen's syllogism, while flawed, usefully underscores the importance of private discrimination. His second premise--that the federal government has not been discriminating for twenty years--may be much closer to the truth. As an empirical matter, government discrimination, standing alone, may not suffice to justify the current patterns of affirmative action in state and federal procurement. While government discrimination in some procurement markets may be a thing of the past, [FN18] the same cannot be said of private discrimination. [FN19] Underutilization [FN20] of minority businesses is a much bigger problem in private markets than in public markets. Indeed, there may be some public markets where minority firms are not underutilized at all. [FN21] If affirmative action procurement programs in these areas are going to pass constitutional muster, it will be because of underutilization in private markets. Thus, our focus on private discrimination is not just a nice question of law--it is likely to become the critical question in deciding the future of the federal government's 10 billion dollar race-conscious procurement programs. [FN22]

Croson, however, did not fully explain what types of private discrimination are remediable. It is clear that certain forms of "societal discrimination" do not create a sufficient factual predicate. [FN23] For instance, the Court rejected evidence of discriminatory exclusion of blacks from skilled construction trade unions and training programs as too amorphous to support race-conscious preferences for minority businesses. [FN24] At the same time, however, the Court suggested that discriminatory exclusion of eligible minority-owned businesses from professional trade associations could suffice: "In such a case, the city would have a compelling interest in preventing its tax dollars from assisting these organizations in maintaining a racially segregated construction market." [FN25] Consequently, it is unclear how evidence of private discrimination might be used to validate an affirmative action program.

This Article attempts to answer this question. We offer three broad justifications for using evidence of private discrimination to narrowly tailor affirmative action in government procurement, which for convenience we label as the causal, but-for, and single-market justifications. [FN26]

The Causal Justification. The causal justification is based on the government's compelling interest in ensuring that its spending does not cause private discrimination. The causal justification was implicitly embraced by Croson's "passive participant" discussion:

[I]f the city could show that it had essentially become a "passive participant" in a system of racial exclusion practiced by elements of the local construction industry, we think it clear that the city could take affirmative steps to dismantle such a system. It 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 not serve to finance the evil of private prejudice. [FN27] The causal justification allows the government to more narrowly tailor the affirmative action to remedy discrimination that the government itself has caused. [FN28] Thus, if prime contractors working on government contracts are shown to discriminate against minority subcontractors, then the government should be able to implement affirmative action on behalf of the affected subcontractors. In this sense, the government is a passive participant in private discrimination when its procurement facilitates private discrimination.

The But-For Justification. There is, however, a second way that the government can be a "passive participant." The government is a passive participant in private discrimination when it does not adjust its affirmative action goal to account for how private discrimination has reduced minority availability--i.e., reduced the number of minority firms that are ready, willing, and able to perform. This second meaning is most clearly captured by Croson's analysis of discrimination by local contractors' associations. When a private association refuses to accredit minority businesses, the government would be a passive participant in the association's private discrimination if the government relied on membership status as a criterion for bidder eligibility: "In such a case, the city would have a compelling interest in preventing its tax dollars from assisting these organizations in maintaining a racially segregated construction market." [FN29] Even though the government did not cause the private discrimination, the government can constitutionally take action to ensure that its procurement process is not distorted by the private discrimination.

This second "passive participant" theory suggests that the government would be justified in changing its procurement criteria so that it would purchase as much from minority firms as it would but for private discrimination. In standard terms, this would mean making a "but-for" adjustment to increase the estimate of available minority firms to what it would be absent private discrimination.

But Croson makes clear that not all types of discrimination would be remediable under a but-for theory. We argue that the government should be able to make but-for availability adjustments to counteract the effects of private discrimination against the minority businesses qua minority businesses. Private (or government) discrimination against the much larger class of potential minority entrepreneurs would not be remediable by affirmative action in procurement. This distinction suggests that but-for adjustments should not be used to estimate how many more minority firms would exist but for private discrimination, but should be limited to estimating how much more available existing firms would be--in terms of capacity or ability to charge a lower price--in the absence of private discrimination.

Restricting the types of remediable private discrimination is necessary to satisfy the narrow-tailoring requirements that remedies be neither arbitrary nor unduly burdensome. Estimating how many more firms would exist absent discrimination against potential entrepreneurs is necessarily more attenuated than estimating how much more capacity existing minority firms would have in the absence of discrimination; thus, estimates based on existing firms offer a less arbitrary basis for tailoring an affirmative action goal. Furthermore, restricting the remedy to counteract private discrimination against minority firms is less burdensome to disfavored nonminority firms. Nonminority businesses that are disadvantaged by the but-for adjustment in competing for a small proportion of government purchases are not "unduly burdened" if the government can show that they are the beneficiaries of private discrimination with regard to selling the same product. But-for adjustments to remedy societal discrimination against potential minority entrepreneurs, in contrast, are more burdensome to nonminority businesses because they may not have benefited as directly from the private discrimination. This criterion nicely explains the examples discussed in Croson itself. While the Court suggested that but-for adjustments to counteract private discrimination which excluded minority-owned businesses from professional trade associations would be constitutional, it maintained that but-for adjustments to counteract private discrimination in education or employment markets against potential minority entrepreneurs would be unconstitutional.

The Single-Market Justification. The but-for justification suggests that the government can constitutionally act to remedy the effects of private discrimination which it has not caused. The crucial requirement is a non-arbitrary estimate of how much private discrimination against minority firms has reduced minority sales to the government (i.e., how much more the government would have purchased but for private discrimination). But a parallel argument suggests a final "single-market" justification: The government should be able to use affirmative action in procurement not just to correct shortfalls in government purchasing caused by private discrimination, but also to correct shortfalls in private purchasing caused by private discrimination.

Our core thesis is that the government can remedy shortfalls in private purchasing only when the firms disadvantaged by the government's affirmative action were likely beneficiaries of the private discrimination. This principle implies that the government cannot use affirmative action in one market to remedy discrimination in another. But when purchasing a particular product, the government should be able to remedy private discrimination against sellers of the same product. The but-for adjustment does just this to remedy shortfalls in government purchasing; the single-market justification expands the procurement remedy to correct for shortfalls in private purchasing.

While the Supreme Court has rejected generalized claims of past discrimination that "provide[ ] no guidance for a legislative body to determine the precise scope of the injury it seeks to remedy," [FN30] estimating the impact of private discrimination on the minority market share in a particular industry provides a non-arbitrary basis [FN31] for selecting a utilization target. Indeed, the same utilization analysis suggested by Justice O'Connor in Croson regarding government procurement can be applied to private purchases of the same products to determine whether a shortfall in minority participation exists. [FN32] If a utilization analysis of private purchases in a particular market suggests that minority businesses are selling less than one would expect absent discrimination, then the government may constitutionally increase its purchases of that product from minority businesses to offset the private discrimination. [FN33]

Nonminority businesses disadvantaged by affirmative action in competing for a proportion of government purchases are not "unduly burdened" if the government can show that they are the beneficiaries of private discrimination with regard to the same product. The crucial test is whether the nonminority firms disadvantaged by a remedial program in a particular market have benefitted from private discrimination in the form of increased private sales. If the answer to this question is yes, then the government should be able to use affirmative action in procurement to narrowly tailor a remedy that does not unduly burden the nonminority competitors.

This single-market justification might dramatically increase government utilization targets. Because the private consumption of most products is often much larger than government consumption, and because private discrimination is more pronounced, [FN34] a goal of remedying private discrimination might conceivably justify the government purchasing 100 percent of certain products from minority firms. Take, for example, the $2.9 billion spent by the Department of Defense (DoD) in prime contract awards for construction in 1992. This figure represented roughly one percent of the $307 billion (combined public and private) construction market in that year. Minority Business Enterprises (MBEs) were 9.1 percent of all construction firms, but earned only 5.1 percent of public and private sales. [FN35] No doubt, much of this four percentage point disparity was due to the fact that minority-owned firms are, on average, smaller and younger. But suppose that one-quarter of this difference, or one percentage point, could be attributed to discrimination. In order to increase the overall MBE market share to the level one would expect absent private discrimination (6.1 percent), the DoD would have to direct 100 percent of its prime construction contracts to MBEs.

We ultimately argue that 100 percent targets violate the Equal Protection Clause. But at a minimum, the government should still be able to engage in what we term "proportional overutilization." If there is a gross underutilization of minority contractors of 3 percent in the private market, the government should be able to engage in a gross overutilization of 3 percent with respect to its purchases. The government's ability to remedy private discrimination would be limited to the government's overall size in the market. If, for instance, government purchases represented 10 percent of the overall (private and public) market, the government's overutilization would make up for 10 percent of the private underutilization. The "proportional overutilization" approach would usually cap the government's minority utilization target well below 30 percent and would tie the scope of the remedy to the government's relative position in the overall market. We also offer a more aggressive "shifting availability" approach for calculating the government's utilization target, which would assume that the underutilized capacity in the private sector was shifted to the public sector. Both approaches avoid the expressive harm of a 100 percent minority procurement goal.

This Article is divided into four parts. Part I provides the empirical impetus for our analysis by summarizing evidence that underutilization of minority businesses is a much larger problem in private markets than in government purchasing. Parts II through IV examine our causal, but-for, and single-market theories for using private discrimination to justify public affirmative action. Part V analyzes how private discrimination could be used to justify government affirmative action in employment.

FNa1. William K. Townsend Professor, Yale Law School; Ph.D. (Economics) M.I.T., 1988; J.D. Yale Law School, 1986; B.A. Yale College, 1981.

FNaa1. J.D. Yale Law School, expected 1999; A.B. Princeton University, 1995. Timothy Bates, Bill Bowen, Bill Carney, David Goldberg, John Jeffries, Jr., Jonathan Macey, Dan Ortiz, Victor Rosenblum, Peter Siegelman, Paul Sonn, Bill Spriggs and seminar participants at Cornell, Florida State, Kansas, Valparaiso, and Yale law schools provided helpful comments. (Professor Ayres has advised the Justice Department in its post-Adarand review of affirmative action. The authors have also submitted comments to the Small Business Administration and the Department of Transportation. The opinions expressed in this Article are not necessarily the views of the Justice Department, or any other federal agency.)

FN1. Martin Luther King, Jr., Letter From Birmingham Jail (Apr. 16, 1963), in Why We Can't Wait 76, 77 (1964).

FN2. Liane Hansen, Marian Anderson Sings, Weekend Edition, Transcript #97022315-215 (National Public Radio broadcast, Feb. 23, 1997) [hereinafter Hansen].

The authors thank David Goldberg for suggesting this historical parallel. A more accessible version of the Marian Anderson discussion appeared in the Los Angeles Times shortly after the 59th anniversary of Anderson's Easter performance. See Ian Ayres, Remedying Past Discrimination: Following the 'Anderson' Model, L.A. Times, Apr. 26, 1998, at M2.

FN3. Roosevelt influenced Harold L. Ickes, Secretary of the Interior, to have the National Park Service issue this extraordinary invitation. Before the recital began, Ickes addressed the audience: "Genius, genius draws no color line. She has endowed Marian Anderson with such a voice as lifts any individual above his fellows, as is a matter of exultant pride to any race." Hansen, supra note 2; cf. Charles L. Black, My World with Louis Armstrong, 95 Yale L.J. 1595 (1986) (describing the genius of Louis Armstrong).

FN4. See Marian Anderson: A Life in Song--Singing to the Nation, Penn Library Exhibitions [hereinafter Singing to the Nation] (visited Feb. 8, 1998) <http:// www.lib.upenn.edu/special/gallery/anderson/lincoln.html> (on file with the Columbia Law Review); see also Marian Anderson, My Lord, What a Morning: An Autobiography (1992).

FN5. Marian Anderson 1897-1993 (visited Feb. 8, 1998) <http:// www.ctforum.org/cwhf/anderson.html> (on file with the Columbia Law Review). In July, 1939, Eleanor Roosevelt presented Anderson the NAACP's Spingarn Medal. See Singing to the Nation, supra note 4. Four years later, the DAR reversed its policy and invited Anderson to sing at Constitution Hall. See id.

EP{77} FN6. The 75,000 person audience was the largest to date ever assembled at the Memorial. See Singing to the Nation, supra note 4. A dramatic picture of Anderson singing before the mass assemblage can be viewed at Marian Anderson: A Life in Song--Photographs from: Lincoln Memorial Concert, Washington, D.C., 9 April 1939 (visited Feb. 8, 1998) <www.lib.upenn.edu./ special/gallery/anderson/linimage2.html> (on file with the Columbia Law Review), and a moving quicktime clip of her singing "My Country 'Tis of Thee" at the Memorial can be found at Videotape of Marian Anderson Performing at the Lincoln Memorial, Washington, D.C., Easter Sunday 1939 (visited Feb. 8, 1998) < www.lib.upenn.edu/special/gallery/anderson/av/lincoln.html> (on file with the Columbia Law Review).

FN7. See infra note 17 (cases cited).

FN8. John F. Harris, Clinton Avows Support For Affirmative Action: "Mend It, but Don't End It," President Says in Speech, Wash. Post, July 20, 1995, at A1 (quoting July 19, 1995 speech at the National Archives).

FN9. Response to Comments to Department of Justice Proposed Reforms to Affirmative Action in Federal Procurement, 62 Fed. Reg. 25,648, 25,650 (1997).

FN10. Jeffrey Rosen, The Day the Quotas Died, New Republic, Apr. 22, 1996, at 26. Like Rosen, we confine our attention primarily to affirmative action based on race.

FN11. 488 U.S. 469, 492 (1989) (plurality opinion). Although this statement appeared in a plurality opinion, a majority of the Justices in Croson accepted private discrimination as a constitutionally sufficient rationale for a racial set-aside. See id. at 538 (Marshall, J., joined by Brennan and Blackmun, JJ., dissenting) ("the interest in ensuring that the government does not reflect and reinforce prior private discrimination in dispensing public contracts is ... compelling").

FN12. And, while the Adarand Court emphasized "congruence" in applying strict scrutiny to both state and federal affirmative action programs, see Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 224 (1995), it did not repudiate the principle that Congress deserves greater deference than states because Congress is a co-equal branch of government and explicitly charged with enforcement power by Section 5 of the Fourteenth Amendment. See id. at 231 ("We need not, and do not, address these differences [in deference] today."); see also Croson, 488 U.S. at 490 (plurality opinion) ("Congress, unlike any State or political subdivision, has a specific constitutional mandate to enforce the dictates of the Fourteenth Amendment"); Proposed Reforms to Affirmative Action in Federal Procurement, 61 Fed. Reg. 26,042, 26,051 (1996) (noting that Congress's mandate of enforcement under the Thirteenth and Fourteenth Amendments means it "need not make findings of discrimination with the same degree of precision as do state or local governments"). Some commentators have missed this point. See, e.g., Proposed Reform of the 8(A) Program Through H.R. 3994, The Entrepreneur Development Program Act of 1996: Hearing Before the House Comm. on Small Bus., 104th Cong. 92, 2d Sess. (1996) (statement of Jeffrey Rosen, Legal Affairs Editor, The New Republic) [hereinafter Rosen Testimony]; The Constitutionality of Race-based Preferences: Oversight Hearing on the Impact of Adarand v. Pena Before the Subcomm. on the Constitution, Federalism, and Property Rights and the House Judiciary Comm. Subcomm. on the Constitution, 104th Cong. 651 (1995) (statement of George R. La Noue, Director of the Project on Civil Rights and Public Contracts) [hereinafter La Noue Statement]. The first federal court to rule on this question concluded that: "Reading Adarand and Croson together, it is clear that race-conscious actions by Congress must meet a strict scrutiny standard, but in determining whether they do so, Courts should give Congress somewhat greater deference." Cortez III Serv. Corp. v. NASA, 950 F. Supp. 357, 361 (D.D.C. 1996).

As noted above, Section 5 of the Fourteenth Amendment provides Congress with constitutional power to enforce the Equal Protection Clause. This clearly supports the proposition that Congress is entitled to greater deference than states on matters touched by that Amendment. But because the Equal Protection Clause is directed specifically towards states, it is more difficult to read Section 5 as creating power for Congress to remedy private discrimination. However, the Thirteenth Amendment may provide Congress with power to counter private discrimination in contracting.

Section 1 of the Thirteenth Amendment prohibits "slavery or involuntary servitude," and Section 2 is an enforcement provision exactly parallel to Section 5 of the Fourteenth. Pursuant to Section 2, Congress enacted §42 U.S.C. 1981 (1994), which protects the right of all citizens to enter into and enforce contracts. The Supreme Court has held that "[s]urely Congress has the power under the Thirteenth Amendment rationally to determine what are the badges and the incidents of slavery, and the authority to translate that determination into effective legislation." Jones v. Alfred H. Mayer Co., 392 U.S. 409, 440 (1968). One might plausibly infer that congressional action to eradicate the effects of private discrimination in contracting (as a "badge of slavery") is subject to rational relation review, rather than strict scrutiny. Of course, such action is still subject to the judicially- incorporated Equal Protection component of the Fifth Amendment, see Adarand, 515 U.S. at 213-18, but there remains a relatively strong textual argument for greater deference to Congress.

In this Article, we follow Adarand's mandate of "congruence" without considering residual deference to Congress. However, if the private discrimination rationales offered satisfy the Croson standard for justifying state and local affirmative action, then they apply a fortiori to congressional programs.

FN13. This doctrinal development has drawn harsh criticism. See, e.g., Kathleen M. Sullivan, City of Richmond v. J.A. Croson Co.: The Backlash Against Affirmative Action, 64 Tul. L. Rev. 1609 (1990). This Article does not enter the familiar debate over the appropriateness of strict scrutiny; rather, we take strict scrutiny as a given and outline when affirmative action based on private discrimination can satisfy the Croson standard.

FN14. Scholars from opposing perspectives have noted this change. Compare Judith C. Areen et al., Constitutional Scholars' Statement on Affirmative Action After City of Richmond v. J.A. Croson Co., 98 Yale L.J. 1711, 1713 (1989) ("The Supreme Court has rejected the notion[ ] that race-conscious affirmative action measures adopted by a local government or other body must as a constitutional matter be limited to redressing the effects of that government's or body's own past discrimination ...."), with Charles Fried, Affirmative Action After City of Richmond v. J.A. Croson Co.: A Response to the Scholars' Statement, 99 Yale L.J. 155, 160 (1989) ("The Court makes clear that a governmental unit may act to remedy not only its own past discrimination but that of identified others within its jurisdiction.").

Even though he recognized the important point, Fried subtly misconstrued Croson. What is essential for a constitutionally sufficient predicate for affirmative action after Croson is not that the "others" be identified, but that the discrimination be identified. If individual private discriminators could be identified, race-neutral enforcement of anti-discrimination laws would suffice.

FN15. 476 U.S. 267, 274 (1986) (plurality opinion of Powell, J.).

FN16. See Croson, 488 U.S. 469, rev'g 822 F.2d 1355 (4th Cir. 1987). The Croson decision overruled the Fourth Circuit's holding that "[f]indings of societal discrimination will not suffice; the findings must concern 'prior discrimination by the government [sic] unit involved."' 822 F.2d at 1358 (quoting Wygant, 476 U.S. at 274). See infra text accompanying notes 122-125 for a more extensive discussion of the relationship between Wygant and Croson.

FN17. In as many as ten federal circuit and district courts, majority opinions have favorably quoted the Wygant language limiting race-conscious remedies to the "governmental unit involved" notwithstanding the interceding Croson decision. See Messer v. Meno, 130 F.3d 130, 136 (5th Cir. 1997); Aiken v. City of Memphis, 37 F.3d 1155, 1162 (6th Cir. 1994); In re Birmingham Reverse Discrimination Employment Litig., 20 F.3d 1525, 1540 (11th Cir. 1994); Billish v. City of Chicago, 962 F.2d 1269, 1280 (7th Cir. 1992); Hiller v. County of Suffolk, 977 F. Supp. 202, 206 (E.D.N.Y. 1997); McLaughlin v. Boston Sch. Comm., 938 F. Supp. 1001, 1008 (D. Mass. 1996); Koski v. Gainer, No. 92 C 3293, 1995 U.S. Dist. LEXIS 14604, *40 (N.D. Ill. 1995); Mallory v. Harkness, 895 F. Supp. 1556, 1559 (S.D. Fla. 1995); Shuford v. Alabama State Bd. of Educ., 846 F. Supp. 1511, 1521 (M.D. Ala. 1994); Concrete Gen., Inc. v. Washington Suburban Sanitary Comm'n, 779 F. Supp. 370, 378 (D. Md. 1991). For additional examples of continued misplaced reliance on the Wygant limitation, see our discussions of Taxman v. Board of Education of Piscataway, 91 F.3d 1547 (3d Cir. 1996) (en banc), cert. granted, 117 S. Ct. 2506 (June 27, 1997), cert. dismissed, 118 S. Ct. 595 (Dec. 2, 1997), and Hopwood v. Texas, 78 F.3d 932 (5th Cir. 1996), cert. denied 518 U.S. 1033 (1996), infra notes 200, 205-208 and accompanying text.

At the same time, several circuits have correctly recognized that Croson modified the Wygant limitation. See Concrete Works of Colo., Inc. v. City and County of Denver, 36 F.3d 1513, 1529 (10th Cir. 1994); Contractors Ass'n v. City of Philadelphia, 6 F.3d 990, 1002 n.10 (3d Cir. 1993); O'Donnell Constr. Co. v. District of Columbia, 963 F.2d 420, 429 (D.C. Cir. 1992) (Ginsburg, J., concurring); Tennessee Asphalt Co. v. Farris, 942 F.2d 969, 974 (6th Cir. 1991); Coral Constr. Co. v. King County, 941 F.2d 910, 916 n.6 (9th Cir. 1991). For example, the Ninth Circuit wrote:

The declaration of the Croson plurality that a city "can use its spending powers to remedy private discrimination," in conjunction with the opinion of the three dissenting justices, appears implicitly to overrule our requirement in AGCC I that to justify a race-based preference, "the state or local government must be acting to remedy government-imposed discrimination." Associated Gen. Contractors Inc. v. Coalition for Econ. Equity, 950 F.2d 1401, 1413 n.10 (9th Cir. 1991) (citations omitted); see also Am. Subcontractors Ass'n v. City of Atlanta, 376 S.E.2d 662, 664 n.5 (Ga. 1989) (citing to Croson in support of state's right to remedy private discrimination).

FN18. Racial discrimination persists in other areas of government action. African Americans and Hispanics are routinely discriminated against in the criminal justice system. See, e.g., Ian Ayres & Joel Waldfogel, A Market Test for Race Discrimination in Bail Setting, 46 Stan. L. Rev. 987, 990-91 & nn.11-14 (1994) (citing, among several others, a report that found bail amounts in Hartford, Connecticut, for black defendants to be 70 percent higher than for white defendants); David C. Baldus et al., Comparative Review of Death Sentences: An Empirical Study of the Georgia Experience, 74 J. Crim. L. & Criminology 661, 707-10 (1983) (reporting a substantial race-of-victim disparity in the imposition of the death penalty in Georgia); Paul W. Valentine, ACLU Files Suit Against Md. Police; Group Says Blacks Targeted Along I-95, Wash. Post, June 5, 1998, at B1 (noting, in addition to the Maryland suit, legal action against law enforcement agencies in New Jersey, Pennsylvania, Florida, and Indiana). In recent years, several hundred (mostly state and local) law enforcement officials attended the infamous "Good Ol' Boys Roundup" gathering in Tennessee. See Pierre Thomas, Treasury Finds Limited Involvement in "Roundup," Wash. Post, Jan. 6, 1996, at A14. Federal loan programs and employment are plagued by racial discrimination. See, e.g., Michael A. Fletcher, Weighing in "Hard" Against USDA Discrimination, Wash. Post, Feb. 9, 1998, at A17 (reporting a backlog of around 1000 complaints from minority farmers of discrimination in lending); Michael A. Fletcher, Bias Settlement Approved in Corps of Engineers Case; Pittsburgh District to Pay Blacks $800,000, Wash. Post, Jan. 25, 1997, at A9 (settlement addressed subjection of black employees to physical abuse, verbal abuse, and job discrimination).

FN19. See, e.g., Ian Ayres, Fair Driving: Gender and Race Discrimination in Retail Car Negotiations, 104 Harv. L. Rev. 817 (1991) (finding systematic discrimination against women and African Americans in auto sales) [hereinafter Ayres, Fair Driving]; J. Linn Allen, Civil Wrongs, Chi. Trib., Nov. 14, 1993, at C1 (citing HUD findings that blacks experience discrimination over half of the times they try to buy or rent a home, and that levels of housing discrimination in 1993 were "basically unchanged" from the 1970s); PrimeTime Live: True Colors, (ABC television broadcast, Sept. 26, 1991) (transcript on file with the Columbia Law Review) (using undercover cameras and matched testers to document blatant discrimination in employment, car sales, and housing) [hereinafter PrimeTime Live].

FN20. In Croson, Justice O'Connor suggested that public entities could prove the requisite discrimination in a market by comparing the minority market share of contracts (utilization) to the minority market share of qualified firms (availability). O'Connor suggested that "some form of narrowly tailored racial preference might be necessary to break down patterns of deliberate exclusion" on the basis of "a significant statistical disparity between the number of qualified minority contractors willing and able to perform a particular service and the number of such contractors actually engaged by the locality or the locality's prime contractors." Croson, 488 U.S. at 509. While O'Connor measured utilization in terms of the minority share of the number of contracts, some lower courts applying Croson have implied that the percentage of contract dollars going to minority-owned firms would be a better measure. See, e.g., Associated Gen. Contractors v. City of Columbus, 936 F. Supp. 1363, 1389 (S.D. Ohio 1996) (concluding that availability statistics that did not account for the smaller average size of MBEs were "invalid"). We consider the significance of this difference below, see infra notes 58, 114.

FN21. See infra Part I.B.

FN22. See George Stephanopoulos & Christopher Edley, Jr., Affirmative Action Review: Report to the President, July 19, 1995, at 62-63.

FN23. Croson, 488 U.S. at 497. Justice O'Connor noted that Justice Powell in both Bakke and Wygant distinguished "between 'societal discrimination' which is an inadequate basis for race-conscious classifications, and the type of identified discrimination that can support and define the scope of race-based relief." Id.

FN24. See id. at 498-99.

EP{88} FN25. Id. at 503.

FN26. While the bulk of this Article is concerned solely with affirmative action in procurement, we briefly apply our thesis to the employment context. See infra Part V.

FN27. Croson, 488 U.S. at 492.

FN28. We examine two versions of this causal argument: (1) direct causation, i.e., when prime contractors on government jobs discriminate with public money in the awarding of subcontracts; and (2) indirect causation, i.e., when government money facilitates private discrimination, by giving government contractors more financial freedom to discriminate on nongovernment jobs. The Croson Court approved affirmative action as a response to the direct causal case with language that also supports the broader second justification.

FN29. Croson, 488 U.S. at 503.

FN30. Id. at 498.

FN31. Although this exact phrase did not appear in Croson (or in other Supreme Court cases on affirmative action), we believe it accurately captures one of the criteria Justice O'Connor applied in Croson. See infra note 68.

FN32. While several commentators have criticized the Croson underutilization approach, see, e.g., Ian Ayres, Narrow Tailoring, 43 UCLA L. Rev. 1781, 1819-20 (1996) [hereinafter Ayres, Narrow Tailoring]; George R. La Noue, Social Science and Minority "Set-Asides," 110 Public Interest 49, 57-62 (Winter 1993), our point is that whatever method one uses to determine a non-arbitrary amount to remedy the government shortfall in minority purchases could be applied as well to determine an amount to remedy the private shortfall.

FN33. If guardrail producers do not compete with businesses that engage in other types of construction, then the government could not use minority underutilization in these other types of construction to justify race-conscious purchasing of guardrails. See infra text accompanying notes 146-148.

FN34. See Timothy Bates, Viewing Minority Business Assistance as a Job-Creation Strategy 30 (Mar. 1997) (unpublished manuscript, on file with the Columbia Law Review); infra text accompanying notes 41-61.

FN35. See infra notes 38, 51, and 53.

 

 

WHO COUNTS?: DETERMINING THE AVAILABILITY OF MINORITY BUSINESSES FOR PUBLIC CONTRACTING AFTER CROSON

I. Introduction .................................... 793

II. Disparity Studies ............................... 797

III. Judicial Principles in Calculating Disparities .. 805

IV. Judicial Considerations of Availability ......... 810
A. San Francisco .............................. 811
B. Philadelphia ............................... 813
C. Columbus ................................... 816
D. Dade County ................................ 820

V. Examining Bidding .......................... 825

VI. Conclusions ..................................... 831

Among the many challenges the Supreme Court decision in City of Richmond v. J. A. Croson Co. [FN1] created for state and local jurisdictions is the need to gather empirical evidence documenting discrimination. [FN2] After Croson, such jurisdictions must identify the existence and source of discrimination in order to establish minority business enterprise (MBE) programs that provide preferences on the basis of race, ethnicity, or gender.

As the Croson Court instructed, before a jurisdiction may use suspect classifications, it must make [p]roper findings . . . to define the scope of the injury and the extent of the remedy necessary to cure its effects. Such findings also serve to assure all citizens that the deviation from the norm of equal treatment of all racial and ethnic groups is a temporary matter, a measure taken in the service of the goal of equality itself. [FN3]

Justice O'Connor's opinion emphasized that the courts must review those findings because, "[a]bsent searching judicial inquiry into the justification for such race-based measures, there is simply no way of determining what classifications are 'benign' or 'remedial' and what classifications are in fact motivated by illegitimate notions of racial inferiority or simple racial politics." [FN4] Regarding the evidence that Richmond provided to support its goals program, the Court concluded: "There was no direct evidence of race discrimination on the part of the city in letting contracts or any evidence that the city's prime contractors had discriminated against minority-owned subcontractors." [FN5]

No longer are rhetorical statements or sweeping generalizations sufficient to establish racial classifications. Croson affirmed that, "In the absence of particularized findings, a court could uphold remedies that are ageless in their reach into the past, and timeless in their ability to effect the future." [FN6] Thus, the Croson Court admonished against the use of "a generalized assertion that there has been past discrimination in an entire industry" because such an assertion "provides no guidance for a legislative body to determine the precise scope of the injury it seeks to remedy. . . ." [FN7] Referring to Wygant v. Jackson Board of Education, [FN8] the Croson Court emphasized the distinction between "'societal discrimination' which is an inadequate basis for race-conscious classifications, and the type of identified discrimination that can support and define the scope of race-based relief." [FN9]

The Court, however, was prepared to consider properly developed statistical evidence showing disparities in public contracting, as it has considered statistical disparities in other areas where allegations of discrimination are involved. [FN10] This type of analysis, however, always requires careful measurement of appropriate variables. Perhaps the most complex empirical issue posed by Croson is how to determine the availability for public contracting of firms owned by members of various groups. This problem is critical because, if availability is measured incorrectly, not only will any resulting statistical inferences about the existence of discrimination be wrong, but so will any goals based on expected availability. Thus, accurate calculations of availability are essential to both the compelling-basis and narrow-tailoring tests that Croson established to determine the constitutionality of an MBE program.

Fortunately, Croson provided guidelines for conducting an analysis of statistical disparities. These guidelines focus on what the Court considered the key concepts for measuring availability. Justice O'Connor wrote: "Where there is a significant statistical disparity between the number of qualified minority contractors willing and able to perform a particular service and the number of such contractors actually engaged by the locality or the locality's prime contractors, an inference of discriminatory exclusion could arise." [FN11] In other words, rather than comparing the utilization of the general population of minority contractors to the general population of non-minority contractors, Croson restricted the disparity analysis to those firms that are "qualified," "willing and able to perform a particular service." As Judge Bechtle wrote in Contractors Association of Eastern Pennsylvania, Inc. v. City of Philadelphia [FN12]: "'Qualified,' 'willing and able' are the pillars of the Croson test; a fortiori, a municipality may not enact race-based remedial measures unless it determines that qualified, willing and able minority contractors have been excluded from participating in public contracting." [FN13]

The relevant question, then, is how to determine which firms are qualified, willing, and able to perform a particular service. According to the Supreme Court's decision in Adarand Constructors, Inc. v. Pena, [FN14] the federal government, as well as States and municipalities, must also demonstrate that their racial preferences in contracting are narrowly tailored remedies for past discrimination. [FN15] Since Adarand, the Department of Justice has struggled to develop what it calls "benchmark limits" or defensible goals. [FN16] Establishing benchmark limits on empirical grounds will require the federal government credibly to determine the availability and capacity of firms seeking federal contracts.

Although this problem has consumed an enormous volume of resources, no consensus has evolved among scholars or practitioners. This Article examines current methods for measuring availability, the development of law concerning availability, and the empirical evidence regarding availability. It concludes with some practical suggestions for making availability assessments.

Although much has been written about what "could," "should," or "would" change in response to Adarand, this article focuses on the practical implications of what will soon change. [FN4] Contracting officers and base legal counsel may have to contend with district court actions blocking award of particular contracts which employ race-based presumptions. Furthermore, because the Supreme Court failed to communicate clear precedent in this regard, and because of the deep philosophical differences regarding affirmative action underlying the Court's 5-4 vote, district courts are unlikely to be uniform in their analysis of which government contracting practices violate strict scrutiny. For this reason, contracting officers in Colorado, for instance, may be enjoined from awarding prime contracts with a preference for minority subcontractors, but there might be no problem making similar awards in other jurisdictions. Familiarity with the small business preferences that are being challenged and how the Government is seeking to overcome the challenges will be essential to the practitioner operating in this environment.
 

Because there are separate and distinct goals for small disadvantaged businesses, these goals and the regulations designed to achieve them sometimes serve to siphon government business away from small businesses that are not also "disadvantaged." In other words, preferences designed to increase the share of procurement dollars devoted to SDBs removes this subset of awards from non-SDB small businesses. Adarand Constructors Inc., (Adarand) qualifies as a small business because of its size; but does not qualify as a "disadvantaged" business, because the company (although 60 percent woman-owned) is operated by a white male. [FN11] Mr. Randy M. Pech, president and general manager of Adarand, contends that the aforementioned "goals" are nothing more than a pseudonym for "quotas," considering the way the government has achieved these goals in practice. [FN12]

In 1989, Adarand was bidding as a subcontractor to provide the guardrails for a federal highway program. [FN13] Based upon a federal financial incentive to prime contractors to utilize SDBs as subcontractors, Adarand (the low priced bidder) lost the job to Gonzales Construction, a company presumed to be disadvantaged based upon a race-based presumption mandated by the Federal Acquisition Regulation (FAR). [FN14] Based upon his personal conviction that "discrimination based upon race or gender is immoral, unethical, against the law, and should not be allowed, much less performed by the government," [FN15] Mr. Pech brought his constitutional challenge to the federal regulatory scheme to court in the Federal District Court for the State of Colorado. Eight years later, despite victories at the Supreme Court, [FN16] and later on remand at the district court, [FN17] the case is still being litigated. For Adarand, as a practical matter, nothing has changed. [FN18]

The 1995 Adarand decision sent shock waves through the federal government and the minority business community. [FN19] President Clinton demanded a top-down review of government affirmative action programs, causing a temporary freeze on SDB programs while the administration determined how to redraft existing regulations to comply with the strict scrutiny standard. [FN20] DOD suspended those sections of the Defense Federal Acquisition Regulation Supplement (DFARS) which prescribed the set-aside of acquisitions for SDB concerns while the interagency government-wide review of affirmative action programs was conducted. [FN21] Despite the turmoil and uncertainty of the day, COs were nevertheless required to continue to monitor and report the amount of small business and small disadvantaged business participation in government contracts. [FN22] COs also were confronted with the dilemma of keeping the numbers up without some of the tools they had previously enjoyed. [FN23] Finally, the local "mom and pop" contractors that had secured fairly steady and dependable government contracts based upon the SB and SDB preferences stood to lose the competitive advantage garnered under the former rules. Furthermore, installation commanders interested in maintaining solid relations with the local community risked losing some of the goodwill that the government enjoyed by virtue of the government contract link.

To further complicate matters, The Federal Acquisition Streamlining Act (FASA) [FN24] was passed by Congress in 1994 to allow the federal government to act more like a commercial enterprise in conducting its procurement efforts. Significantly, for purchases under $100,000, the government was encouraged to use "simplified" techniques and was directed to revise the FAR to accommodate these streamlined procedures. [FN25] The set- aside programs designed to foster small business growth had always depended on low dollar value contracts as the cornerstone of the SB and SDB programs. Would "streamlining" erode, or reinforce, the strength of the set-aside programs? [FN26]

The Federal Acquisition Reform Act of 1996 (FARA) [FN27] took "commercialization" of government acquisition one step further. Section 4101 required that the Federal Acquisition Regulations be amended to qualify that "full and open competition" be tempered by efficiency. [FN28] Section 4203 of FARA establishes "commercial off-the shelf" (COTS) items as a subset of commercial items which could be offered to the government without modification, just as they are offered in the commercial marketplace. [FN29] Section 4203 is even more generous in exempting COTS items from federal procurement laws than FASA was in exempting "commercial" acquisitions from the ordinary bureaucracy of the government purchasing system. [FN30] FARA requires the Office of Federal Procurement Policy (OFPP) to publish a list of federal laws, which are inapplicable to COTS items, including any law "imposing Government-unique policies, procedures, requirements, or restrictions...." [FN31] Small business programs are obviously "Government-unique." FARA required that implementing regulations be generated which are effective no later than January 1, 1997. [FN32] How will small business initiatives be impacted by these new regulations?

This article is designed to inform COs, their legal counsel, and their commanders, about DOD and SBA initiatives to promote and preserve SB and SDB programs. It also examines areas of continuing uncertainty as to the constitutionality of the current and proposed regulatory schemes, and discusses the potential for increased courtroom and bid protest activity in this regard. [FN33] The article begins with a short history of federal contracting with small businesses prior to FARA, FASA, and Adarand. Next, the Adarand case is discussed in depth, particularly the June 1997 district court decision on remand that the SDB incentives in question violated Adarand's fifth amendment right to equal protection, since the regulations in question were not sufficiently narrowly tailored to accomplish the government's remedial purpose. [FN34] The business consequences to Adarand itself are examined to put the court's ruling in perspective. Then, the current and proposed regulatory schemes are analyzed with an eye toward whether changes incorporated in the last two years can overcome strict scrutiny as it is being applied in the lower courts. Finally, because "non-disadvantaged" small businesses are in direct competition with small and disadvantaged businesses, potential pitfalls in the form of non-minority contractor court challenges and protests to the latest SDB initiatives will be explored.

San Jose city attorneys are scheduled to appear before California's 6th District Court of Appeal this morning to try to revive the city's minority contracting rules despite Mayor Ron Gonzales' opposition to those rules.

The case is a major test of Proposition 209, the 1996 ballot initiative that banned "preferential treatment" in government hiring and contracts and university admissions. Attorneys and other legal observers say the San Jose case should help define "preferential treatment," and a long list of Proposition 209 opponents has joined the city in its appeal.

Gonzales said during last year's campaign that he opposed the city program because "race or gender should not be a factor" in contracting decisions. He also said the city was wasting money appealing because higher courts would not overturn Santa Clara County Superior Court Judge Richard C. Turrone's ruling last year that the program violated Proposition 209.

But Gonzales, who took office in January, has not asked the city council to drop the appeal because the majority's "position on this is very, very strong, very strong," he said this week. "Reasonable people can disagree with each other."

At issue in the case are revisions San Jose made to its affirmative action program in the weeks following passage of Proposition 209.

The revised program required companies seeking city public works contracts either to include a specified percentage of minority- or women-owned subcontractors or to document their attempt to do so by writing letters to such firms and making follow-up telephone calls.

City Attorney Joan Gallo argues that, given a history of excluding women and minorities from city contracts, such requirements are necessary to ensure that general contractors are not discriminating against women and minorities, as prohibited both by Proposition 209 and federal law.

The city has argued in court papers that its "very minimal outreach" requirement "does not provide any incentive for, let alone require, a contractor to actually hire any (minority- or women-owned businesses) in order to obtain a city contract," and therefore the program does not grant a preference to those groups.

But Turrone agreed last year with attorneys from the Pacific Legal Foundation in finding that minority firms have "a distinct advantage" compared to non-minority businesses under the city program because they are guaranteed either a share of the contracts or direct solicitations from contractors. He ordered the city to abandon its requirements, which San Jose has, pending the appeal.

"A really critical issue is whether Proposition 209 invalidates outreach and recruitment programs to expand opportunities for women and minorities to participate in public works contracts," said Beth Parker, an attorney for Equal Rights Advocates in San Francisco, which filed a brief supporting the city's position.

Parker's group has been joined by three other civil rights organizations: the Lawyers Committee for Civil Rights of the Bay Area, the American Civil Liberties Union and the Employment Law Center. Also filing a brief backing San Jose are the city and county of San Francisco on behalf of Alameda and Marin Counties and the cities of Albany, Berkeley, Los Angeles, Oakland, Redlands, Sacramento and San Pablo.

The Pacific Legal Foundation brought the case on behalf of a Rancho Cordova-based company whose low bid to provide an electrical device for the city's sewage-treatment plant was rejected by the city in 1997. The company, Power Providers, does not use any subcontractors, and its chief executive objected to the city's requirement that he waste time and money soliciting bids from firms he knew he would not hire.

But in their first meeting with the Republican governor, the lawmakers were left without a firm commitment on two other requests: an executive order for affirmative action and a state office to assure agency compliance with minority contracting law.

The 13 legislators also pressed their agenda of improving the health and education of blacks, especially children. They said they found Taft sharing their concerns and are optimistic about the prospect for improvements.

"We established a working relationship with the governor," Sen. C.J. Prentiss, D-Cleveland, president of the Ohio Legislative Black Caucus, said after the 75-minute meeting in Taft's office.

"The governor wants it to be known that he speaks for all people," said House Minority Leader Jack Ford, D- Toledo. "I think he's going to be one we can work with and approach."

Scott Milburn, the governor's press secretary, said that Taft regarded the meeting as "a good beginning of dialogue."

"He thought the meeting was successful, and he wants to have another one in a couple or three months," Milburn said.

The 15 percent set-asides for minority state contracts for goods and services were upheld April 7 by the Ohio Supreme Court. But U.S. District Judge James Graham in October ruled unconstitutional the 5 percent minority set-asides on construction contracts. That case is under appeal in the 6th U.S. Circuit Court of Appeals in Cincinnati.

Milburn said that Taft will reinstate the construction set-asides for minority contractors if Graham lifts his ban. Milburn said the minority set-aside program for goods and services will continue.

"It was never dismantled," he said, although the administration of former Gov. George V. Voinovich halted set-asides after the initial court ruling.

Milburn said that Taft is open to a study of the rate of participation in the Minority Business Enterprise Program to judge its effectiveness.

Rep. Otto Beatty Jr., D-Columbus, who remained skeptical of Taft's willingness to meet the requests of the legislators, said his group wants an independent Office of State Contract Compliance.

The office would track compliance with minority contract requirements in all areas of state government.

But Milburn said that Taft wants more information about the overall success of the minority business program before committing to a compliance office.

Beatty said the governor promised that his legal counsel, William Klatt, will work with the black legislators to see if an acceptable executive order on affirmative action can be written.

Milburn said that Taft does not favor race-based quotas on contracts "except in areas where historically discrimination exists." Milburn said the governor asked for more information.

"We need to continue to educate them and give them documentation," Beatty said. "We do not want the state of Ohio to be a passive participant in exclusionary policies when it comes to minority participation in state contracts."

Both Milburn and the legislators said Taft took to heart the criticism that his staff and cabinet are short on blacks.

Rep. Ray Miller, D-Columbus, quoted Taft as saying: "I am not pleased with where we are. You will see changes in the next three weeks."

Prentiss said that Taft will work with the legislators on providing money for teacher training, smaller classes in urban areas and school building construction assistance -- but that Taft made no promises.

The legislators were less optimistic about their request for an extra $3 million for Central State University, a historically black institution in southwestern Ohio. Milburn said that Taft pointed out his budget already contains an additional $2 million bonus for Central State.

Small-business owner Ron Montoya views the government's latest effort to create jobs in poorer neighborhoods as more than just a chance for him to make money and find new business.

"It's an opportunity for our community," said Montoya, president of PlastiCom, which has three computer hardware manufacturing and assembly locations in north Denver. "I will apply."

The U.S. Small Business Administration began accepting applications to its new HUBZone Empowerment Contracting program late last month. It gives businesses in "historically underutilized business zones," HUB zones, an advantage in bidding for government contracts.

The government intends to direct $2 billion worth of contracts toward the program in its first year -- 1 percent of the $200 billion the federal government spends annually on goods and services. It plans to direct $6 billion in contracts to the program in its second year.

Only six companies had been approved as HUB zone contractors nationally by Wednesday of last week, according to an SBA spokesman in Washington.

None of those firms is from Colorado, but word of the new set-aside process is just beginning to spread in the small-business community here.

Montoya is a two-time chairman of the U.S. Hispanic Chamber of Commerce, and he is known for running his business with an eye on what he can do for Hispanic communities.

Forty of his 51 employees have been hired through programs that help low-income workers get and retain jobs that can sustain a family.

Essentially, his 10-year-old company makes, assembles and distributes hardware that allows computers to receive digital data over copper wires at Internet speeds.

He is an "8a" contractor, certified by the federal government as a small, disadvantaged business, but he hasn't done much work for government agencies. Instead, PlastiCom has largely been involved in work for such commercial clients as US West and Nextel Communications Inc.

The zone program could add new business for the company, but it also would benefit the communities around his plants.

"Absolutely," he said. "For us to get additional business gives us the opportunity to give something back to the community."

To qualify as a HUB zone contractor, a company must be a small business in one of the zones -- 7,000 city census tracts and 900 mostly rural counties across the country, as well as all Indian reservation land throughout the nation -- it must be owned by one or more U.S. citizens, and at least 35 percent of its employees must work in a HUB zone.

The last requirement is geared to providing jobs in poorer communities where the companies operate, and it steers the program away from traditional affirmative-action labels since it is not limited to minority-owned companies but merely to small businesses.

Because it's geographic, the HUB zone sounds similar to Colorado's enterprise zone program, a controversial $45 million set of tax breaks for companies that locate businesses in certain areas designated by the state.

Enterprise-zone critics complain that often, neither the businesses that reap the Colorado tax breaks nor the areas designated by the state are poor enough to warrant the giveaways.

But the legislation creating the federal HUB zones, the Small Business Reauthorization Act of 1997, intentionally avoided offering tax breaks and was structured to give qualified businesses just a slight bidding advantage once they qualified for the program.

A designated HUB zone contractor can be awarded a sole-source set-aside contract up to $5 million for manufacturing and up to $3 million for other services if a federal contracting officer expects no other HUB zone contractor will seek the set-aside business.

The company would compete for HUB zone set-asides with other qualified HUB zone contractors if more than one were bidding for the same work.

It also would receive a 10 percent price advantage if it were competing with a large firm in a full and open bidding competition for work.

That means the large company -- defined as having more than 500 employees or more than $5 million in revenues -- would have 10 percent added to its bid if a HUB zone contract or had submitted a bid no more than 10 percent higher than the large company's. Then the contract would be won by the lower bidder.
 

As a small-business owner seeking federal government contracts, Gail Conner was bothered that some businesses were allowed to simply sign a form saying they were "disadvantaged" businesses. She had chosen instead to receive an 8(a) designation through a Small Business Administration (SBA) program, which meant paperwork, verification and working through the agency for bids - not just her word.

But starting July 1, self-certification will no longer be an option. And companies that had been self-certified as disadvantaged will have to apply for the designation when bidding on federal contracts.

In August, the SBA launched its certification program for small disadvantaged businesses to verify claims of ownership by someone who is considered by the government to be socially or economically disadvantaged. Companies will have to apply through the SBA and await approval to qualify for the status, which gives them price credits geared to their industry and access to prime contractors seeking credit for subcontractors.

"We want to create opportunities for more small disadvantaged businesses to participate in federal procurements, a $200 billion marketplace," said Terri Dickerson, acting associate administrator for the Office of Small Disadvantaged Business Certification and Eligibility. "It really is a program designed to create opportunities for those who have been historically excluded."

In 1996, 5.5 percent of the $197 billion federal procurement budget went to socially and economically disadvantaged businesses. In May, the SBA reported that the 8(a) program accounted for $6.4 billion in federal contracting for fiscal 1997, or almost 3.5 percent of overall federal procurement.

Ms. Conner, president and chief executive at G&C Environmental Services in Newtown Square, Pa., is excited about the addition of the certification program. Her 8-year-old business tests sites for OSHA compliance and for asbestos and other concerns of the Environmental Protection Agency. Federal contracts with agencies such as the Department of Defense account for less than 10 percent of her business.

Disadvantaged companies without 8(a) designations "didn't have to go through the tax returns and review audits. They just checked a box on a form," Ms. Conner said. The small disadvantaged business certification "will be the best thing in the world if it works."

Fraud and abuse partly prompted the development of the certification requirement, Ms. Dickerson said. Many of those cases were reported by small companies competing against someone they thought did not qualify as disadvantaged.

The major thrust behind it, however, was a 1995 Supreme Court ruling that said affirmative action programs must be narrowly targeted to remedy only the lingering effects of discrimination.

The certification is given only to businesses in industries that have small percentages of disadvantaged contractors. Those were chosen based on studies done by the U.S. Department of Commerce, Ms. Dickerson said.

"Some in the procurement community are unhappy. It's a change that stems from the federal government having to now comply with a Supreme Court decision," Ms. Dickerson said. "The studies that have been done really show where the need is."

To qualify, businesses must have a net worth of $750,000 or less - revenues minus liabilities - and be owned by African-Americans, Asian-Americans, American Indians or people who prove they are "socially disadvantaged" when dealing with the government. The certification expires after three years or once the company's net worth exceeds $750,000.

The benefit for companies is a 10 percent adjustment in bids for some contracts. So if a company competes with nondisadvantaged businesses, it won't have to be the lowest bidder to win a contract award. The rules also provide a system of preferences for large businesses that use small disadvantaged businesses as subcontractors.

The primary responsibilities of the Office of Small Disadvantaged Business Certification and Eligibility are to certify the ownership and control of small companies that apply; establish and oversee a nationwide network of private certifiers who will help SBA process applications; and maintain Pro-Net, a public online registry of certified small disadvantaged businesses.

To apply

Application for the small disadvantaged business certification are available by calling the Office of Small Disadvantaged Business Certification and Eligibility at (800) 558-0884. They are also available on the SBA's Web site at http - - www.sba.gov.

Since 1994, a company co-owned by a friend of Atlanta's mayor has reaped more than $15 million in city business as a minority contractor even though white firms did most of the work.

The minority firm, DSI Contracting Co., was approved to do the work by the city's Office of Contract Compliance, currently the focus of an inquiry by a blue-ribbon commission appointed by Mayor Bill Campbell. The mayor asked the panel to examine the OCC's procedures to prevent fraud, waste and abuse and to recommend better methods to police the city's program for disadvantaged businesses.

The mayor's action came on the heels of an Atlanta Journal-Constitution investigation into the city's oversight of its minority business program. The newspaper reported that millions of dollars of city contracts intended for minority businesses may have been passed to white-owned firms. The newspaper also reported the city knew about such transactions but did not properly investigate them. The mayor has steadfastly refused to discuss any of these issues with the Journal-Constitution.

Much of the work awarded to DSI Contracting was under the program that requires at least 36 percent of the revenue from most city contracts be earmarked for businesses owned by minorities or women. Companies that are awarded work under the program are supposed to do most if not all of the work themselves, city officials say. City code requires that minority contractors perform a "commercially useful function" and not just pass the work on to others.

DSI's business with the city includes:

$7 million for inspecting, cleaning and repairing city sewer lines. DSI co-owner Burgess Baird Jr. acknowledged that a white-owned firm performed virtually all the work under the contract for the first two years, and about two-thirds of the work in the three years since then. The contract was awarded for one year in 1994 and has been renewed four times since then without competitive bidding, according to city records.

$6 million for microtunneling work on a project at Utoy Creek to construct separate sewers to carry stormwater and sewage. Rick Richards, an executive with Utah-based Westcon/Dillingham, says his firm did all the microtunneling there and that DSI does not even have the equipment needed to do that work. Mikah Williams, DSI's former project manager at Utoy Creek, said he was the only DSI employee on the site. And Mark Accetturo of Reynolds Inc., the general contractor on one phase of the project, also said DSI did no tunnels. DSI declined to comment on Utoy Creek.

$2 million for labor on the Orme Street Sewer repair project. Curt White Jr., president of Coastal Gunite Construction Co., said his firm supplies many of the workers that are listed on DSI's payroll when the two firms work together on projects in Atlanta. White said many of those workers were recruited by Coastal Gunite in east Tennessee, and the only available payroll records in city files show 79 percent of the project's payroll went to workers from Tennessee. "As a non-minority partner, I've always had some heartburn on this," White said. DSI officials declined to comment on the Coastal Gunite project.

Neither the Utoy nor Orme Street Sewer projects would have met city goals for minority participation if DSI had not been credited with doing the work performed by white contractors, under OCC rules.

DSI's performance under city contracts illustrates several areas the mayor's commission may examine. The firm was certified as a minority contractor over the objections of the OCC, but there is no written record of how the decision was overturned. The firm passed millions of dollars on to white-owned contractors that did not qualify for the minority program, and several major city contracts were awarded on the basis of credits for minority-participation goals that were never achieved.

The Office of Contract Compliance reviews financial records and visits construction sites to make sure that minority businesses actually perform the work they agree to do, but the agency's files contain no hint that its employees ever questioned whether DSI was doing the work. Penalties for violating the guidelines include cancellation of contracts and disqualification from future bidding.

In response to the newspaper's findings, OCC Director Susan Bronston said OCC records will be corrected to reflect a reduced level of minority participation on the Utoy Creek projects, but she did not specify the amount that would be disallowed. However, the agency does not plan to take any punitive action against the companies, she said.

The OCC will also have to recalculate another DSI contract on which work has not yet begun. In December, DSI got an $18.5 million contract with Western Summit/Pizzagalli to work at the city's R.M. Clayton Sewer Treatment plant. DSI will actually perform only about $2 million of that work, yet OCC officials approved the entire $18.5 million as if it were being done by minority companies. Bronston now says DSI's supervisory work should not have been considered in calculating minority participation on the project.

Oliver Lee, an African-American attorney who owns 51 percent of DSI, is a political supporter of Campbell's and co-sponsored a fund-raiser for the mayor in April 1998. DSI and other firms in

which Lee and Baird are officers gave the Campbell campaign $9,250 in 1997, and Baird and Lee donated $750 to Campbell's 1993 race, according to campaign finance disclosures.

A Wall Street Journal profile on Lee in 1995 describes him as a life-long supporter of affirmative action. The son of an illiterate Savannah garbage collector, Lee was chosen to attend a Connecticut prep school by "A Better Chance," a program to help promising low-income black youths. He went on to attend Dartmouth College, then Vanderbilt Law School at the same time that the mayor was an undergraduate at Vanderbilt.

The mayor refused to discuss DSI or Oliver Lee, but his spokesman, Nick Gold, said Campbell and Lee established a relationship after they arrived in Atlanta.

Lee rebuffed Journal-Constitution reporters' efforts to contact him at his office and by telephone over several months. Baird spoke with reporters at his office one time but didn't return numerous follow-up telephone calls.

DSI's success came after the city had refused in 1994 to allow the firm to take part in the program for disadvantaged businesses because of doubts that a minority actually owned and controlled it.

DSI appealed the decision to a hearing officer and won, entitling it to bid for city work as a minority contractor, according to city officials. But how it gained its certification may never be known. There is no written record of the ruling or of any of the testimony or evidence that was presented to the hearing officer.

Senior Assistant City Attorney Robin Shahar, who represents the OCC, said lack of a written record is of little consequence. Both the city and DSI were present and agree that the ruling was made.

Until 1990, DSI was a white-owned business, based in Lilburn and specializing in laying out streets and utilities for new housing developments. That year, Baird sold 51 percent of the company to Lee. Baird and his wife kept the other 49 percent of the business and remained officers in the company.

Baird said he sold a majority share to Lee because he wanted to get into municipal contracting to smooth out the cycles in the housing development business. And to get government contracts in metro Atlanta, he said, it helps to be a minority-owned company.

"I was looking for a way to expand my business, looking to open doors," Baird explained.

DSI's status as a minority-owned firm apparently was a factor in getting its first city contract. In April 1994, DSI won a $1.8 million contract to inspect, clean and reline deteriorating Atlanta sewer lines for one year, even though the firm had no prior experience with the highly specialized work and no license for the process it proposed to use for the repairs.

At the time, OCC Director Susan Ross sent a letter to city purchasing officials stating that DSI's bid was in "substantial compliance" with city regulations for minority business participation. "DSI is an 100% AABE (African-American business enterprise)," Ross' letter said.

It is unclear how Ross made that determination. The city code defines an AABE as a company that has been certified by the OCC as being owned and controlled by African-Americans. But the only request for certification by DSI in the city records came 10 months after Ross wrote that letter.

Ross, now working as a systems programmer for the city, declined to discuss the letter.

DSI's bid gave no indication that it planned to hire a subcontractor for the job, but city officials insist they knew all along that DSI planned to hire a white-owned firm from Missouri to do the work. That company, Insituform Technologies Inc., had been doing the sewer-repair work for the city for several years with a patented process that uses chemicals and resins to repair and reline cracked sewer and water pipes without digging them up.

In fact, Insituform and DSI had agreed beforehand that DSI would bid on the contract and Insituform would perform much of the work as a subcontractor, according to executives with both firms. The arrangement was a response to Insituform's decision not to license other businesses to use its process, which made it difficult to comply with the city's minority-participation goals, said Bob Affholder, Insituform's senior executive vice president.

"Insituform came to Atlanta looking for a minority partner," DSI's Baird said. "You had an inside track if you were a minority."

Baird said he had hoped that a DSI crew would work alongside Insituform workers to learn the process. But crew members didn't get along and DSI's workers were sent home after one day, Baird said.

For two years after that, DSI did the paperwork necessary under the contract and Insituform did everything else, according to Baird and executives with Insituform. In 1996, DSI purchased inspection and television-monitoring equipment to do some of the preparatory work that was worth about one-third of the value of the contract, according to city and DSI officials.

Under city purchasing rules, even a minority-owned company must submit a plan for other minority businesses to share a city contract, and DSI should not have passed the work on to Insituform without obtaining a waiver from that requirement, officials say. But DSI's bid specified that no waiver was being requested, and city files contain no record of the paperwork that would be associated with a waiver.

Despite the lack of documentation, city officials insist today that the OCC must have granted DSI a waiver or it would not have won the contract. DSI officials would not comment.

DSI's initial contract for sewer repairs expired in 1995, but it has been extended year after year since then in apparent violation of the city code. Under the city's purchasing ordinance, a contract may be extended if the city's original solicitation informed all potential bidders of that possibility, which was not done in DSI's case.

"The letter of the law wasn't followed," said Jerolyn Ferrari, senior assistant city attorney. But she said the intent of the law was followed because the extensions were approved by the City Council at a public meeting.

Council President Robb Pitts nevertheless contends the practice is unwise.

"I'm always concerned any time we add to the scope or extend an annual contract without rebidding. It's not fair to the firms that originally bid," Pitts said.
 

WASHINGTON -- The third time holds no charm for Bill Lann Lee.

Senate Republicans are blocking his nomination to head the Justice Department's civil-rights division, just as they have twice before, claiming the former NAACP Legal Defense Fund lawyer's views on affirmative action are too radical. But that hasn't stopped the softspoken Mr. Lee. He has been making policy and litigating cases for the past 15 months-as acting civil-rights chief.

Mr. Lee's work at the Justice Department while his nomination sputters is a metaphor for the way the Clinton administration is striving in Congress and the courts to quietly salvage what it can of many government affirmative-action programs that once appeared doomed. This "mend it, don't end it" approach is galling to many conservatives, who thought they would have the upper hand after the Supreme Court's landmark Adarand decision in 1995. It limited government affirmative-action programs to those that "serve a compelling interest" and are "narrowly tailored" to address proven past discrimination.

But the vagueness of those guidelines leaves plenty of room for debate about whether particular programs are constitutional. Meanwhile, conservative Republicans, who have been vowing since 1994 to purge the federal books of race-based set-asides and preferences, have made little headway. Several major affirmative action programs were renewed in the last year, usually with only modest tinkering by Congress. On its own, the administration has revised dozens of federal programs and issued new procurement guidelines governing when agencies can take race or gender into account in contracting decisions.

After fending off a congressional effort to kill a longtime Transportation Department set-aside, for example, the administration refashioned it into an "aspirational goal" of giving minority companies 10% of government construction contracts. Likewise, a Pentagon program that gives minorities preferences on defense contracts where there is a pattern of past discrimination was reauthorized after adjustments to take account of Adarand.

Overall, federal contracts going to minority and women-owned companies have declined in the past year, which the White House says is probably due to declining procurement budgets as well as agencies' uncertainty about the legality of affirmative action. And it is by no means clear that some of the more creative efforts by Clinton officials to mend affirmative action will survive in the courts. Still, a report released this month by the liberal Citizen's Commission on Civil Rights concludes that while "affirmative action remains under attack at every level," the "tide has begun to turn" in its favor.

Mr. Lee's civil-rights division is helping, partly by staking out aggressive positions in court. One case involves an Arlington County, Va., program that takes into account income, race and native language in aiming for "diversity" reflective of the community in a magnet elementary school. A federal district judge ruled that "diversity" for its own sake isn't a compelling justification for a race-based program. The Justice Department and the county have appealed.

The law in this area is unclear. In 1996, a federal appeals court struck down University of Texas Law School admission procedures that gave preferences to blacks and Hispanics, but other federal judges have endorsed the concept of diversity. The Supreme Court hasn't clarified the issue lately and appears wary of treading into this politically sensitive area.

"We're in a situation where we have to figure what the law is in a time of some flux," Mr. Lee says. "We've made a good-faith effort, and if there are developments, we'll adjust."

Critics say Mr. Lee's division is staking out positions not justified by Adarand. In a report released this month, two conservative think tanks, the Institute for Justice and the Center for Equal Opportunity, concluded that the "civil rights division under Bill Lann Lee isn't primarily a force for racial healing, but instead persistently deploys its resources to classify and discriminate against Americans on the basis of race and ethnicity."

Mr. Lee responds that "the report doesn't appear to recognize that the Adarand decision says race-based actions are permissible on a limited basis."

The Clinton administration has taken advantage of Congress's own ambivalence about doing away with federal affirmative-action programs. Consider the case of Rothe Development Corp., a Texas company that bid last year on a federal contract to provide computer and telephone service at a Mississippi Air Force base.

Rothe was the low bidder at $5.5 million, according to court documents, but the contract went to a Maryland company, International Computers & Telecommunications Inc., which had bid $5.7 million. That's allowable under a Pentagon affirmative-action program because International Computers qualifies as a "small disadvantaged business," even though it has 120 employees and already services dozens of federal contracts. The owner, a Korean-American named David Sohn, comes from one of several minority groups, including blacks, Hispanics, American Indians and Asian Americans, who are "presumed" to be disadvantaged.

Rothe sued last fall, claiming that the program is unconstitutional. In a pending motion to dismiss the suit submitted under Mr. Lee's name, the Justice Department argues that Congress has repeatedly renewed the program since it was created in 1986. Congress believed "the challenged program was needed to remedy the effects of discrimination in federal contracting," Mr. Lee said.

Further, he said, the program is closely monitored: It was suspended in January when the Pentagon acknowledged achieving the program's 5% goal of total contracts every year since 1992. That shows the Pentagon is adhering to Supreme Court guidelines requiring affirmative-action programs to be "narrowly tailored," Mr. Lee says.

Rothe's lawyers aren't buying it. "It's kind of like slip and fall cases in the supermarket: You go clean up the spot after the person has fallen," says attorney David Barton.

Mr. Lee's defenders don't mind if the affirmative-action controversy focuses on him, not on the nitty-gritty of the issue itself. A graduate of Columbia University law school and a son of Chinese immigrants, he is a self-proclaimed beneficiary of affirmative action and the administration's senior Asian- American appointee.

That's important symbolically as the White House looks to galvanize its liberal base heading into the 2000 elections. It also helps explains Mr. Clinton's refusal to take the Senate's no on Mr. Lee.

Mr. Lee's nomination hasn't made it out of the Senate Judiciary Committee the last two times. Chairman Orrin Hatch (R., Utah) says he won't even schedule a hearing this time. In a statement after Mr. Lee was renominated earlier this month, Mr. Hatch said he would support Mr. Lee for "almost any other position in the government, but not one that allows him to implement unconstitutional policies such as quotas."

Even if the latest push fails, the administration isn't unhappy: Unless the Senate actually rejects Mr. Lee's nomination, he can continue in office indefinitely.
 

The Supreme Court won't let the Dallas Fire Department revive an affirmative action program to promote more blacks, Hispanics and women.

But the justices are letting the federal government give companies with disadvantaged owners extra help in winning highway contracts.

The apparently contradictory actions Monday, however, seemed based on how the second case, from Utah, reached the nation's highest court not on the justices' views of affirmative action. In both cases, the court simply refused to review lower court rulings, action that sets no national precedent.

But its handling of the Dallas case betrayed little patience for employers' efforts to give special help to those historically underrepresented in their work force. Over two dissenting votes, the court left intact a ruling that struck down the Dallas program as discriminatory against white men.

Justices Stephen G. Breyer and Ruth Bader Ginsburg voted to consider reviving the fire department's program. But the votes of four of the court's nine members are needed to grant such review.

The court generally has been hostile in recent years to programs aimed at giving special help to racial minorities.

In Dallas, the City Council adopted a five-year plan in 1988 for promoting qualified blacks, Hispanics and women ahead of white men who had scored higher on fire department promotion tests.

At the time, white men filled 85% of all driver-engineer jobs within the department and 97% of the 103 lieutenant posts. Five years later, those percentages had dropped to 77% and 82%, respectively.

In 1992, the City Council voted to extend the affirmative action plan for another five years, but between 1991 and 1995 the Dallas Fire Fighters Association and individual firefighters filed four lawsuits challenging the promotion program.

A federal judge ruled against the city. The 5th U.S. Circuit Court of Appeals upheld that ruling, and the Supreme Court let the decision stand.

In the Utah case, the court let the federal government continue giving companies owned by disadvantaged people extra help in winning highway project contracts.

The action, however, cannot be read as an endorsement of the federal Disadvantaged Business Enterprise program, which requires that no less than 10% of all federally funded highway construction contracts be awarded to "small business concerns . . . owned and controlled by socially and economically disadvantaged individuals."

Cache Valley Electrical Co., which is owned by Jack Laub, who is white, filed a lawsuit challenging the program after it lost out on two 1995 contracts for work on federally funded highway projects.

A federal judge threw out the lawsuit, saying the company lacked the legal standing to sue, and a federal appeals court and the Supreme Court upheld the dismissal.

 
I had a chat with Ward Connerly the other day.

You know Connerly. He's the California regent who has gotten so heady with his success in ending affirmative action in his home state that he has gone national with it.

In Florida, he's fallen into the wanton embrace of the Associated General Contractors. This is a group that, for years, has fumed at most efforts intended for minorities or women to have a shot at even the measliest share of municipal work. The sort of work that many of their members inherit by dint of longevity and ol' boy networking. A group that, after Jacksonville's minority set-aside program was suspended in 1989, didn't wince when only one black business won a city contract that year -- to mow the lawn at City Hall.

But Connerly says that's not his vision of how things would work in a world without government-backed assurances that minorities will be represented in government contracts and college admissions.

So I decided to give him the floor. With me having the last word, of course.

First of all, Connerly says that he's misunderstood. He says he has never opposed affirmative action; he opposes race-based preferences.

Affirmative action, he says, should work "as an aggressive reminder as to whether the process is fair." For example, he says there's nothing wrong with maintaining data to examine whether hiring or admissions practices are fair to minorities.

Nor is there anything wrong with outreach programs, or plans like the one he recently voted for in California that will allow students who graduate in the top 4 percent of their high school class to attend a state university.

"Now that will invariably expand the pool of black kids," Connerly told me. "I think that if you go back to the notion that affirmative action is anti-discrimination, then there's nothing wrong with that."

But how does someone like myself, I asked, who didn't score the minimum on the Scholastic Aptitude Test but had a strong high school record and had won some prestigious writing contests, get the same break as a white student who might be the offspring of an alumnus?

Especially if no one cares about enrolling minorities and clings to standards that play to the strengths of certain people and the weaknesses of others? What if, without any concrete commitment, someone decides that test scores are the only way to tell if someone can succeed in college?

"Well, I've always believed that we should look at merit, and the total picture," Connerly replies. "I've never believed that you use the standardized test as the only standard. That's another misconception."

I'll take Connerly at his word. But if he is truly propelled by this notion of a colorblind society, I can think of a better place for him to start. At home.

See, before Connerly became known as the black regent who set out to undo affirmative action, he was also known as one of the housing industry's top experts. In the 1970s, he had worked for California's housing and community development department. He gushed when I asked him whether he was ever involved in major efforts to make housing affordable for poor people -- people who tend to be disproportionately minority.

"Oh, I helped a lot of communities set up programs to get rid of blight," Connerly said. "Having decent, affordable housing goes a long way to building community pride. It helps build pride in children, and in their education."

I then gave him my two cents worth. I told him that if he really wants to see a day when race or disadvantage isn't an issue in college admissions, then it would make better sense for him to focus on problems such as affordable housing. Especially in his state, where a recent report by the Center on Budget and Policy Priorities showed that seven major California cities -- including his own Sacramento -- consistently rank at the bottom when it comes to affordable housing.

If poor parents don't have to worry about where they're going to live, they can better concentrate on improving the schools and the education for their children, I told him. Then their children would be more likely to pursue college preparatory classes and make the high test scores and grade-point averages

needed to get into the University of California system. Without any policy finagling.

He agreed that I had a point.

The world Connerly envisions certainly isn't one that I'm opposed to. But to get there means doing the grueling, piecemeal work of eliminating inequities at their source. Not by embarking on a national campaign at the behest of groups who have never had any real interest in seeing minorities prosper in this society.

Connerly may think he's doing minorities a favor by sparing them the affirmative action conundrum; the feeling that no matter how good they may be, they'll always wear an asterisk. But opportunity can help them erase that asterisk a lot quicker than exclusion will. Some of the people who are backing Connerly, the ones who have benefited for years by not having to worry about competing with minorities, know this well. Except this time, they have Connerly, swaddled in his dreams of a colorblind reality, to help them shut the door. Again.

Even he can't be that naive.

 
The sparring intensified between affirmative action foe Ward Connerly and the leaders of Florida's black legislative caucus on Tuesday.

The two sides traded charges over whether Connerly was being paid to help building contractors regain the two percent of government contracts that now go to minority-owned firms.

Connerly, a wealthy black conservative who led the campaigns that abolished affirmative action in California and Washington, announced last week he'll try to repeat his success in Florida. He is calling for an end to the use of race as a factor in state hiring, university admissions and the awarding of government contracts. Working with the Florida Association of General Contractors, Connerly will try to collect the 453,073 signatures needed to place his proposal on the November 2000 ballot.

But not if black lawmakers have their way.

"We strongly oppose the efforts . . . to reverse the gains made by minorities and women in Florida," said Sen. Daryl Jones, D-Miami and chairman of the Florida Conference of Black State Legislators. "(Connerly's campaign) would be extremely divisive and would only serve to make Florida less competitive in most areas of commerce."

The caucus members were announcing their strategy to oppose Connerly's ballot initiative, which they say will weaken Florida's economy. According to Workforce 2000 statistics, by next year 75 percent of Americans entering the workforce will be minorities and women.

"Any effort to reduce the educational, employment and contractual opportunities for 75 percent of our entering workforce cannot be of benefit to Florida," Jones said.

Jones also said black lawmakers were angered by the contractors' involvement in Connerly's campaign. He said 96 percent of state contracts go to non-minority businesses and 2 percent to women-owned firms -- leaving just 2 percent that by law must go to firms owned by minorities.

"We are outraged that the (Associated Builders and Contractors) would make such a concerted effort to eliminate this meager minority participation and attempt to force governmental entities to give them the remaining 2 percent," he said.

Jones later acknowledged he'd meant to say AGC (Association of General Contractors), not ABC -- "but I'm not sure how much difference that makes because of dual membership. If (the ABC) wants to draw a big distinction, they should come out and oppose Connerly."

ABC lobbyist Richard Watson said his group would not be involved with Connerly's ballot initiative. "It's been discussed but rejected," he said.

Jones also said the caucus had received information that Connerly was "retained" by the contractors, a charge Connerly vehemently denied.

"That is totally outrageous, totally untrue," said Connerly, "but not unexpected from the likes of that group, because the truth has no currency with them . . . . If I were not a public official, I'd sue their butts."

Connerly is a member of the California Board of Regents.

"Mr. Connerly hasn't been retained," said Allen Douglas, director of the Florida AGC. "He has offered his expertise and assistance."

The thing that makes you sit up and take notice, of course, is that Connerly is black. Who isn't fascinated at the sight of a hen campaigning for the foxes?

This particular hen is pretty good at what he does. The Sacramento businessman has championed ballot measures that overturned affirmative action in Washington state and his native California. Last week, Connerly announced a petition drive aimed at doing the same thing in Florida. God must hate the Sunshine State.

Don't get me wrong. I think there's good reason to question affirmative action, if not to oppose it outright. It seems fair to ask if, by setting aside contracts and classroom seats for minorities and women, government does not inadvertently reinforce in them a victim's mentality--an insidious sense that they lack the stuff to earn those things on their own.

That observation, however, must be balanced by the observation that white men have long enjoyed a kind of de facto affirmative action. After all, for generations, the nation used every legal and extralegal means to deny women and racial minorities--blacks in particular--access to education and entrepreneurship. It retarded the progress of those groups while offering white men set-asides and preferences that allowed them to move ahead by prodigious leaps.

It's not too much to ask the country to make right what it made wrong. Especially considering that the hostility toward blacks and women has hardly ended, but only become more subtle. If we don't redress the inequity through affirmative action, fine. But how do we do it? Because it's crucial that we do.

It would be good if Connerly showed any grasp of this. Instead, his stated reason for opposing affirmative action is that it's racially divisive--which is such an asinine assessment that you hardly know where to begin responding to it.

Perhaps it's enough to simply ask which campaign to open closed doors was ever anything but divisive. The civil rights movement? That was divisive. Feminism? Yep, divisive, too. The United Farm Workers boycott? Pretty darn divisive. The Civil War? Golly gosh, that was about as divisive as it gets.

Hell, division is predictable. Those who enjoy privileges seldom surrender them easily or willingly.

But it's not simply the abject stupidity of Connerly's reasoning that offends. Rather, it's the way that reasoning offers aid and comfort to the new breed of white bigotry. The one which tells us that white people are the true victims of racism.

You know the rhetoric . . . victimized by preferences, victimized by employers, victimized by political correctness that accepts a Miss Black America pageant or an Ebony magazine but, darn it, would have hissy fits over Miss White America or a magazine called "Ivory." The most virulent of modern white bigots will tell you with a straight face and evident sincerity that he is only fighting for equality. And never mind that by virtually every relevant measure, white men--still!--enjoy advantages that go well beyond simple parity.

Most people--black, white and otherwise--understand this and recognize cries of white victimization for what they are: only the latest effort to turn the language of the civil rights movement to the cause of intolerance. Only the most creative attempt to dress racism up as reason.

There are valid reasons for disliking affirmative action. That it's divisive is not one of them. And while it's troubling that some white guys won't understand this, disconcerting that they would embrace an image of themselves as powerless and put-upon, it's galling to see that ignorance validated by a black man.

Some would call Ward Connerly an Uncle Tom. It is, to my mind, an unfortunate term that's been too often used to discourage black intellectual independence. I won't call Connerly that. I will, however, suggest that he is a confused Negro who should know better than to allow his skin color to be used as moral cover by those whose truest goals have little to do with liberty and justice for all.

If this hen has any sense, he might wonder at the motive of the foxes at his back.

Paulo Da Cruz is confused. Sometimes he is a minority. Sometimes he is not.

Da Cruz owns a construction-related business, and the federal government, Washington state and most public agencies consider him a minority who can take advantage of affirmative action in public contracting.

But King County does not deem him a minority-business owner.

And he would not fit the definition of minority if he were a job-seeker or college applicant looking for help from affirmative action at any public agency anywhere.

Da Cruz is a Portuguese American, an ethnic group that, along with a handful of others, straddles the line between minority and nonminority in the complicated world of government affirmative action in the 1990s.

In that world, the definition of minority is much more than an exercise in semantics. It goes to the heart of what affirmative action is and what it is meant to do.

The landmark federal Civil Rights Act of 1964 dismantled segregation by outlawing discrimination based on certain characteristics: race, color, national origin, religion, gender.

But affirmative action, begun in 1965, moved beyond the ban of bias to provide active assistance to specific groups that had faced government-sanctioned discrimination. The history of how the government identified those minority groups helps explain the intensity of advocates for affirmative-action policies.

And the story of how Portuguese Americans were included in some definitions of minority, while remaining excluded from others, illustrates how public policies can be shaped by politics, pressure from interest groups and the quirks of bureaucratic regulations.

These are among the issues Washington state voters may ponder when they vote Nov. 3 on Initiative 200, which would ban preferences based on race, ethnicity and gender in state and local government employment, public contracting and public education, ending affirmative action as now practiced.

From fishing to new career

About two years ago, Da Cruz left his career as a commercial fisherman and began Northwest Erosion Control, a small firm contractors hire to contain runoff from construction sites.

He applied and obtained status as a minority-owned and disadvantaged business from the state and the federal government, because he fit their definitions of minority.

Da Cruz employs anywhere from two to 10 people on a job.

"Usually I use a lot of minorities," he said. "I go through El Centro de la Raza. And a lot of it comes word-of-mouth from the Hispanics working for me."

Da Cruz's shift of occupation has served him well.

This year, the 37-year-old projects his Issaquah-based business will have revenues of $500,000 - 90 percent of it from public contracts he won through affirmative action as a minority-owned business.

But he bemoans the projects for which he did not qualify as a minority business - particularly those contracts with King County.

"I lost a $300,000 job because of that," Da Cruz complained. "It's a really, really bad law. I don't know what they are doing. I have called everybody I can think of and I told them I am being discriminated against because I am Portuguese."

Who's a minority

Portuguese Americans were not among the minority groups initially targeted by affirmative action.

In 1965, when President Johnson ordered federal contractors to take affirmative action in hiring, he did not define the term "minority." But few questioned which groups fit the description: They had been identified at the birth of the civil-rights movement during World War II.

Shortly after Japanese Americans on the West Coast were rounded up and put into camps in the interior, author Carey McWilliams in 1942 voiced the view that the war had two fronts - one abroad with fascism and one at home with racism.

He wrote about the groups denied even the most basic civil rights. Using his terms:

-- American Indians, whose treaties the government had trampled.

-- Mexicans, deemed an inferior race in the West and Southwest.

-- Chinese, Japanese and Filipinos, all excluded by law from immigration and citizenship.

-- Negroes, legally segregated as a separate, second-class and stigmatized race.

Even U.S. immigration policy reflected white privilege: It used a quota system so focused on white Europeans that seven of 10 allowed in were to be from England, Ireland and Germany. The quotas lasted until 1965.

Although the civil-rights movement that began during the war was led by African Americans, it included organizations representing all other minority groups as well.

And after the Civil Rights Act of 1964 became law, the Equal Employment Opportunity Commission (EEOC) drew up a familiar list of minorities most likely to face workplace discrimination: "Negroes, Orientals, American Indians, and Spanish Surnamed Americans."

William Taylor, a civil-rights attorney and former staff member of the U.S. Commission on Civil Rights in the 1960s, explained the reasoning: "These were people who suffered discrimination by law and official policy of the government, as opposed to the private discrimination that affected so many other ethnic groups."

Who counts, who doesn't

That may have been the working definition of minority, but it wasn't necessarily the only official one.

The distinction became important as civil rights shifted from being a people's movement to a bureaucratic endeavor.

In the early 1970s, federal administrators found a lack of consistency in the data collected on minorities, and felt hindered in their efforts to track discrimination in government programs. So, at the behest of the Nixon administration, several agencies began meeting as a task force to create common racial and ethnic categories for statistical purposes.

The result would be used for population counts by the U.S. Census Bureau and for employment reports filed by businesses with the EEOC. In turn, those numbers would create the foundation for civil-rights enforcement and for affirmative-action plans by federal contractors and nearly every public agency in the country.

Finally, in May 1977, the federal Office of Management and Budget (OMB) issued the familiar categories: American Indian or Alaskan Native, Asian or Pacific Islander, Black, and Hispanic.

White ethnics fight exclusion

The significance was not lost on the growing "white ethnic" movement, made up of Americans with origins in Poland, Italy, Greece and other southern and eastern European countries. In 1979, they challenged their exclusion from the definition and from affirmative action, charging they, too, had faced discrimination.

The U.S. Civil Rights Commission heard them out but rejected their claim - ironically, because they had too little data to prove discrimination against them.

Meanwhile, the category that raised the most questions was Hispanic, a new term adopted by the federal government. OMB defined a Hispanic as "a person of Mexican, Puerto Rican, Cuban, Central or South American or other Spanish culture or origin, regardless of race."

This term was confusing enough that the OMB immediately added a special clarification: "Hispanic" excluded those of Portuguese origin, specifically people from Brazil, Guyana, Suriname, Trinidad, Belize and Portugal.

But the OMB also added another important proviso: The categories were for statistical purposes, not to determine who could participate in a federal program.

Rules for a new program

Deciding eligibility was exactly the task that the U.S. Department of Transportation faced when it established its first formal program for minority- and women-owned businesses in 1980.

The easiest path would have been to adopt the OMB definitions, already in use by public affirmative-action programs in employment. But key DOT policymakers had a problem: That definition excluded people from Brazil, the largest country in South America, and they felt everyone from Latin America should qualify.

"So what we did was to use the definition of Hispanic that included people of Spanish or Portuguese culture with origins in Mexico, South or Central America or the Caribbean Islands. But we specifically excluded European Portuguese and Spanish," said DOT attorney Robert Ashby, who has written regulations for the minority and women's contracting program since it began.

That rule lasted about a year - until a new president came to town.

In January 1981, the same month affirmative-action foe Ronald Reagan became president, a group calling itself the Hispanic American Contractors sent DOT a petition.

"The petition requested that the definition of Hispanic be expanded to include Hispanic people of European origin," Ashby said, because discrimination "could as easily apply to someone from Barcelona as from Mexico City."

When DOT floated the idea, it received 101 comments, 97 of them favorable. "The opposition wasn't particularly strong or strident," Ashby said, "so we then decided to go along with that change."

But, he said, "that created the problem of leaving out the Brazilians." To continue including them, DOT added the term "of Portuguese origin," which also brought in people from Portugal.

Public response to that change was minimal, Ashby said. So the Portuguese were in.

"It was one of the many minor technical changes in a large public program that did not receive wide public notice," he said.

Congress creates a quirk

Then Congress entered the picture.

DOT had set up its program on its own authority, but in 1983 Congress enacted legislation for all federal minority-business programs.

So DOT had to switch to the language and definitions of the new law. And it defined eligible firms based on Section 8d of the Small Business Act (SBA), a separate disadvantaged-business program set up in 1978.

"As it happened, Portuguese were not included in 8d," Ashby said. "So for reasons having nothing to do with policy, but purely as a definitional quirk in statutes and regulations, the Portuguese are out again."

And this change made waves.

"We got quite a few letters from Portuguese-American contractors and even some letters from congressmen, particularly from Barney Frank, who represents among other areas the Fall River

(Mass.) area that has a particularly strong Portuguese population," said Ashby.

Despite the protests, the new definition remained in place until the Department of Transportation learned the SBA had quietly changed its definition in 1986, Ashby said.

The change apparently happened without going through normal rule-making procedures. How it came about mystifies Henry Wilfong, a black Reagan appointee who served from 1982 to 1985 as associate administrator for minority small business under the SBA, and it draws a blank from his successor, Wilfredo Gonzalez.

SBA lawyers now say it was just a legal interpretation - in use by other agencies - that defined Hispanics as coming from the Iberian peninsula, thus including Portuguese.

Through this circular route, DOT in October 1997 put the Portuguese back in, Ashby said, not only because of the complaints but also "to retain some consistency among federal programs."

And to this day, DOT and the SBA includes Portuguese Americans in the definition of minorities.

Most Portuguese Americans want little to do with being defined as minorities.

That point was made loud and clear by Frank, the Democrat from Massachusetts. Frank insists he has never lobbied to get Portuguese Americans defined as Hispanics or minorities for any affirmative-action programs, though he allowed he might have sent a letter to DOT 15 years ago.

Affirmative action, no thank you

"The undeviated view of the overwhelming majority of Portuguese Americans is that they don't want to be involved in affirmative action," said Frank.

That refrain was repeated by the staff of other representatives of the congressional districts with large numbers of Portuguese Americans, from California to Rhode Island.

And it is largely the view of Ronald Cruz, president of the Portuguese American Leadership Council of the United States, which represents some 2 million Portuguese Americans.

"We no more want to be categorized as Hispanics than Italians would want to be Hispanics, or Polish would want to be Hispanics," he said.

Cruz said Portuguese Americans want to be Americans first, not "minorities." He argued that no ethnic or racial group should get a break that others do not, and that affirmative action needs to be phased out.

But Cruz concedes, "I will not shy away from the fact that when our community has had a chance to take advantage of the minority category, we have."

Specifically, they have cashed in on minority-contracting policies.

"Where it has been to our advantage as a group to be able to participate with other minority groups in obtaining business contracts," he said, "then we have done so."

In Washington state, Portuguese Americans are included in minority-business programs run by every public agency - except King County.

Ironically, the county's minority-business program relies on the state's list of certified minority businesses, and even posts that list on its Web site. But when the county awards contracts to minority businesses, it excludes those owned by Portuguese Americans or European Spaniards.

Phyllis Aylene, who heads the program, explained why: "In a disparity study, we found no evidence that European Hispanics had been discriminated against."

A disparity study examines whether minority businesses face discrimination and whether they get their fair share of government contracts.

Meanwhile, Washington state government and its university system do not include Portuguese Americans in their definitions for minorities in employment and college admissions.

"Twenty to 25 years ago, we didn't fight so much about who were minorities, because we knew," said Jim Medina, who directs the state government's Office of Minority and Women's Business Enterprises. Now, he added, "We spend a lot of time on it."

And it is only going to get more difficult.

New categories in next census

Earlier this year, the OMB revised its racial and ethnic categories for the first time since 1977. Beginning with the census in the year 2000, people will be able to check more than one box to describe their race or ethnicity.

No one - from the chief federal enforcer of affirmative action for federal contractors to the lowest-level administrator of such programs - knows yet how this will ultimately affect affirmative action. But all agree that once the Census Bureau begins releasing its new population figures in 2001 or 2002, racial categorization will be much more difficult.

That complication is something Medina understands: His father was Mexican American; his mother, raised in Hawaii, was Chinese and Filipino. He said the whole question of racial categorization highlights the difficulty government programs face in dealing with discrimination.

"We're talking about a couple of things. One thing is the legal classification," he said. "The other is the real world."

On paper, he must describe his race or ethnicity. But in the real world, when he faces discrimination, Medina said, "Nobody asks me, 'What are you?' "

So, he said, "We try to work in that gap between the real world and the world of regulations."

Not a complaining person

Da Cruz rails against King County's regulations, but like many Portuguese Americans, he said he could not recall being discriminated against and wouldn't complain if he did. "I'm not that kind of a person," he said.

"The only bad thing I feel is when my wife gets discriminated against," he added.

When he and his wife decided to sell their house, she called and left their name with a couple of real-estate firms. Not one of the firms called back, he said.

So she called again later, but this time left her maiden name, Diana Merritt. And some of the same firms called right back.

"She was very astounded by it, and very upset by it," Da Cruz said. "She didn't think there were people like that."