REPLACING RACE-BASED SET-ASIDES WITH RACE-NEUTRAL PROGRAMS:

AFFIRMATIVE ACTION IN THE CITY OF ATLANTA*

Under the current affirmative action program within the City of Atlanta, contracts are awarded not on the merit of the individual companies, but rather on the basis of racial preferences. It is important to distinguish between a racial preference and true affirmative action. Affirmative action means "aggressive anti-discrimination." If somebody’s race, ethnicity, or sex weighs in a person’s favor when some judgement or decision is being made, that person has received a preference. A preference, in other words, is a form of discrimination. The goal of affirmative action should be to bring expanded opportunities to our community. Unfortunately, what affirmative action has become is a race-based quota system that promotes economic inefficiency, excessive taxation and a certain ride back to the old days of political corruption.

Furthermore, the current system of racial preferences does not really address the underlying economic problems that plague this city and is more akin to putting a band-aid on an wound that needs stitches. We need to address the issues that make the truly disadvantaged unable to compete effectively in the market-place. More precisely there are more pressing issues such as an inadequate educational system, lack of marketable skills, and inability to gain access to credit lines that need addressing. Any program that does not attempt to address these problems will inevitably become just another attempt to redistribute wealth thus effectively perpetuating the endless cycle of dependence on government.

The City of Atlanta has a golden opportunity to once again claim its rightful place as the national center for civil rights advancement. Under the City’s current Minority and Female Business Enterprise (MFBE) program, specific "participation goals" direct certain percentages of public contracts to minority and female businesses based on race, ethnicity and gender. In the absence of evidence proving ongoing discrimination against minorities and females in the City of Atlanta contracting process, Atlanta’s MFBE program violates the very laws for which civil rights activists have fought and died, laws guaranteeing equal protection under the law and banning government-sponsored discrimination against any individual based on the color of skin, ethnicity, or gender. Despite U.S. Supreme Court rulings that appear to doom Atlanta’s race-based program, and despite repeated rebuffs from the City of Atlanta government to SLF’s offer to discuss race-neutral alternative programs to reach the truly disadvantaged and small businesses in Atlanta, SLF proffers several practical suggestions.

The landmark U.S. Supreme Court decision, City of Richmond v. Croson (U.S. 1989), set forth the primary directive for state and local governments which implement race-based programs. According to Justice O’Connor, who wrote the opinion, there are a number of constitutional race-neutral measures that governments may use, including "[s]implification of the bidding procedures, relaxation of bonding requirements, and training and financial aid for disadvantaged entrepreneurs of all races . . .." In that spirit, consider the following examples of successful race-neutral programs employed by cities across the nation.

Title VII of the 1964 Civil Rights Act plainly bans government discrimination based on race, ethnicity, religion and gender. Since passage of the venerable Act, Congress, state legislatures and local governments (including the City of Atlanta) have enacted thousands of anti-discrimination laws designed to redress specific instances of discrimination. The City of Atlanta Charter’s Bill of Rights states that "The City of Atlanta shall not, directly or indirectly, discriminate among persons because of race, religion, sex, marital status, sexual orientation, or national origin." The first and most important step toward race-blind government programs is the rigorous enforcement of anti-discrimination laws.

At its inception in 1975, Atlanta’s MFBE program was designed to redress years of demonstrable discrimination by city government against minority- and female-owned businesses. According to court-sanctioned studies regarding the City of Atlanta, there is no demonstrable discrimination by city government against minorities and females today. Under current law, in order for a city to maintain a race-based public contracting program, the city must demonstrate specific, ongoing patterns of discrimination (see herein). The disparity studies which support the City of Atlanta’s MFBE program have been thoroughly excoriated by at least two federal judges in the 11th Circuit. According to the City of Atlanta Chief Operating Officer, Larry Wallace, city government has not discriminated against minorities in the past ten years and will not begin discriminating if the current MFBE program is dismantled. Clearly, the City of Atlanta can demonstrate no legal need for its race-based program, and should contemplate development of programs to assist disadvantaged, local and small businesses without regard to race or gender. The City of Atlanta does not need a race-based set-aside program for public contracting.

Under the guidelines established by the U.S. Supreme Court and numerous federal court decisions, passive discrimination may exist in the form of state and local governments which contract with non-minority bidders, who in turn discriminate against minority subcontractors. Representatives of the City of Atlanta have alleged in recent weeks that such discrimination may in fact exist in city contracting. Under current City of Atlanta ordinances, the city maintains the power to revoke any contract in which it can be proved that a non-minority contractor is discriminating against minority contractors on the basis of race, among other remedies. Since 1990, the City of Atlanta apparently has not enforced its anti-discrimination ordinances for public contracting.

Under the guidelines established by the U.S. Supreme Court and applied in numerous federal court decisions, "general amorphous claims of societal discrimination . . . are not sufficient to establish a ‘strong basis in evidence.’" Recent claims by representatives of the City of Atlanta that general "marketplace" discrimination currently exists in metro Atlanta do not legally justify the existence of a race-based public contracting program.

The answer to the problem of disadvantaged businesses gaining access to the necessary tools of the marketplace is not to spend taxpayer dollars defending an illegal program. The answer is to devise a legal and equitable program that will reach its intended recipients and not just benefit the politically connected friends and allies of the current city government.

In contrast to the following race-neutral programs, the City of Atlanta maintains broad, generalized terms for defining "disadvantaged business," "economically disadvantaged persons," "small business," and "socially disadvantaged persons."

Community Small Business Enterprise Program (Miami-Dade County)

In May 1997, Dade County, Florida adopted a race-neutral program for community small businesses. The ultimate goal of the program is to steer about 10 percent of the county’s $300 million in annual construction contracts to local small businesses. To certify as a CSBE, a company must not exceed a certain threshold for annual gross receipts (which vary by type of company). The county also requires that the combined net worth of the firm’s owners not exceed $750,000. Once the firms are certified, the county allows CSBE’s to bid competitively on set-aside contracts for small businesses, provides management and technical assistance from consultants and construction professionals, offers working capital and financial assistance for surety bonding, and brokers a mentor relationship with a more established local firm that can help identify weaknesses in the CSBE’s bids or business plans. In the first year of the program, about 195 firms were certified as CSBE’s, and about 18 set-aside contracts totaling $65 million were awarded.

Locally Based Enterprise (LBE) Program (New York City )

In 1980, New York City established a race-neutral program for locally based enterprises with the goal of setting aside at least 10 percent of the city’s construction contracts for small, local firms. This goal is served by requiring government contractors who use subcontractors to use LBE’s for at least 10 percent of the entire contract. LBE’s are also exempt from the need to secure the payment and performance surety bonds usually required of contractors and receive help in locating working capital. To qualify, a firm must be located within the city and owned and operated independently, gross less than $2 million a year, and perform at least 25 percent of its business in the city’s designated "economic development" areas.

The MTA of L.A. County adopted a plan in September 1997 to create a Small Business Enterprise (SBE) program for all MTA contracts not funded with any federal dollars. The MTA maintains a database of more than 200 qualified SBE’s. Before putting each contract out for bid by prime contractors, the MTA consults its database, examines the contract for suitable opportunities for SBE participation, determines a goal for the percentage of the job that ought to be subcontracted to SBE’s, and asks all prime bidders to submit a plan for achieving that goal. Prime contractors may consult the MTA database of SBE subcontractors.

The Associated General Contractors (AGC), a national trade association for construction-related firms that has long opposed race-based set-asides, has an excellent mentoring program to aid and develop small contractors of all races. Called the Stempel Plan, the program aims to match small, new contractors (called "protégées") with older, larger firms (called "mentors"). The concept is to match two mentors with each protégée to offer technical assistance and advice on bidding for contracts, keeping the books, meeting government accounting standards, securing surety bonding and capital, and other vital management issues. Derivative programs exist in Portland, Oregon; Milwaukee, Wisconsin; Kansas City, Missouri, and other urban centers.

Plenty of jurisdictions still resort to unconstitutional preference programs to encourage the participation of small, usually local businesses in bidding for government contracts. Nevertheless, even these programs can offer ideas for race-neutral methods for opening up opportunity to small businesses. To create such opportunities, cities can:

1. Maintain a databank of qualified small businesses and keep them informed of upcoming contracting opportunities.
2. Solicit bids aggressively for each government contract from all qualified local small businesses.
3. Divide larger contracts into smaller pieces to permit maximum small business participation (when economically feasible).
4. Advise small businesses on the practices and bids of past successful bidders.
5. Waive bonding requirements on certain projects of $250,000 or less.
6. Advertise bids in a variety of publications including minority owned publications.

Combined with rigorous enforcement of anti-discrimination laws, which permit cities to revoke contracts if prime contractors are discriminating against minority or female subcontractors, aggressive implementation of race-neutral public contracting programs will move the City of Atlanta one step further toward the noble dream of a free and open marketplace with true equal opportunity. The government may not draw racial distinctions among its citizens and treat them differently on that basis. Preferences are unconstitutional, except in a very narrow set of circumstances. The 14th Amendment guarantees to all Americans "equal protection under the law," and the U.S. Supreme Court has made clear that this prohibits all government classifications based on race, except when "narrowly tailored" to achieve a "compelling interest." If a race-neutral remedy is sufficient to cure a race-based problem, then a race-conscious remedy can never be narrowly tailored to that problem. In the City of Atlanta, a race-neutral remedial program has never been seriously attempted. The City, therefore, has a tremendous opportunity to move forward into the next millennium carrying the banner of true equal opportunity for all its citizens.

*Excerpts taken by permission from Policy Review, May-June 1998, The Heritage Foundation, "A Color-Blind Vision for Affirmative Action," Roger Clegg. Mr. Clegg serves as General Counsel for the Center for Equal Opportunity. Mr. Clegg is a graduate of Yale Law School, and served as a deputy in the U.S. Justice Department’s civil rights division.