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    • Minority-Owned Firms Face ‘Crisis’ As Affirmative Action Programs Decline
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    Minority-Owned Firms Face ‘Crisis’ As Affirmative Action Programs Decline

    Online Niel Posted on

    Julian Mark
    | Washington Post

    Minority- and women-owned businesses are bracing for the end of affirmative action in federal contracts — and the potential loss of at least $70 billion a year in contracts — as government programs for “disadvantaged” firms have come under legal fire in the past year . .

    In a seismic shift, a series of court rulings have held that some of the federal government’s largest diversity programs violate the Constitution’s guarantee of equal protection, often citing the Supreme Court’s 2023 decision to strike down race-conscious college admissions.

    As a result, key agencies abandoned race and gender preferences born of the civil rights era and intended to level the playing field by allocating billions each year in contract dollars to minority- and women-owned firms.

    “It’s become a reality that it’s a different game,” said Tony Franco, managing partner at PilieroMazza, which represents many minority contractors. How the government tries to achieve equality “will require a lot more thinking about how to reach disadvantaged communities of all races”.

    Since the Supreme Court ruled last year against race-based admissions at Harvard University and the University of North Carolina at Chapel Hill, several contracting programs have suffered adverse rulings, including a small business administration program handing out billions in contracts federal to disadvantaged companies.

    Franco said the Biden administration’s decision not to appeal the SBA decision signaled a major turning point, indicating the administration agreed the process needed to be changed to comply with the Constitution. As a result, any programs that similarly assume minorities are disadvantaged may be subject to overhaul, he said.

    The election victory last week of Donald Trump — an ardent foe of affirmative action programs — is raising fears that race-based programs could be rolled back further. Meanwhile, another major program is poised for a similar outcome: In September, a federal judge in Kentucky partially blocked the Transportation Department’s Disadvantaged Business Enterprises program, which has operated for more than four decades on the presumption that minorities and women are socially disadvantaged. In his opinion, Judge Gregory F. Van Tatenhove, a George W. Bush appointee, indicated he would block the entire program from awarding contracts based on those presumptions.

    The program has 49,000 participants. Some say such a ruling would be catastrophic, affecting their access not only to federal contracts but also to the many state and local programs structured in the same way.

    “It would be a minority business crisis if this program were to go away,” said Shon Harris, owner of a Chicago electrical services firm.

    Harris, who founded the business in 2006, said it could be decimated. Although only about 10 percent of his company’s $19 million in revenue last year came from the federal program, much of the remaining revenue came from contracts won through the Illinois state-run “minority enterprise” program, which Harris predicted would it will be next to overturning.

    “From an African-American contract standpoint, it’s pretty scary to think that these programs aren’t going to exist,” Harris said. “And trying to prepare for them is not necessarily all in our hands. … It’s not like the problems with bias and racism are going to go away.”

    Created in the 1960s and 1970s, federal affirmative action programs were enacted to address widespread racial and gender discrimination in the private and contract sectors. Backlash soon followed from whites and male business owners who said the programs discriminated against them.

    A series of Supreme Court decisions in the 1980s narrowed the circumstances in which race and gender preferences were justified. And starting in the late 1990s, several states took ballot measures to ban affirmative action. It is now banned in nine states: Arizona, California, Florida, Idaho, Michigan, Nebraska, New Hampshire, Oklahoma and Washington.

    California, the first state to pass a ban, is often held up as an example of what’s to come if the federal government abandons basic race-conscious programs. The passage of Proposition 209 in 1996 ended the use of race and gender considerations in government, including the awarding of state and local contracts.

    As a result, minority- and women-owned firms won fewer government contracts, wiping $1 billion from their annual revenue, according to a 2015 report by the Equal Justice Society. More than 80 percent of that lost business — $823 million — was tied to state contracts, while municipalities like San Francisco accounted for most of the rest.

    “There were a lot of companies that had to close because entrenched business networks — the old-boy networks that exist throughout the economy — were allowed to flourish after Proposition 209 went into effect,” said Oren Sellstrom , director of litigation at Lawyers for Civil Rights. in Boston, who was practicing law in San Francisco when California’s affirmative action ban was passed. “This is a predictor in some ways of what might happen if a similar situation were to play out at the federal level.”

    According to a 2009 study published in the Review of Economics and Statistics, the price of state-funded contracts in California fell 5.6 percent after the affirmative action ban, compared to federally funded contracts that were not affected by the law. The state collectively saved $64 billion in 1998 and 1999, according to the study, which attributed the decrease to fewer restrictions on contractor selection.

    Kendra Perkins Norwood, partner and government contractor attorney at ReedSmith, tries to prepare her clients for what to expect. She predicts that contracting preferences in general will no longer be based solely on race or gender. Instead, she said, the qualification will come down to an individual’s ability to document their struggles with discrimination.

    Norwood said all minority and women entrepreneurs should prepare written narratives to prove their disadvantage. This became an essential part of the application process after a court blocked the use of racial preferences in the Small Business Administration’s 8(a) program. Participants in the Department of Transportation’s DBE program should prepare for a similar requirement, Norwood said, although the program has not yet adopted it.

    “You’re definitely going to have to be prepared to meet a higher standard to demonstrate why you deserve to have access to these programs, and it’s going to become more competitive,” said Norwood, who represents disadvantaged companies in both programs.

    Procurement at all levels of government contributes significantly to the US economy, typically comprising about 10% of the country’s gross domestic product.

    In fiscal year 2023, the federal government committed about $759 billion in contracts, according to the Government Accountability Office. About $76 billion went to minority-owned businesses through SBA programs such as the 8(a) program. In addition, companies in the Transportation Department’s program received nearly $34 billion in federal transportation contracts over the past five fiscal years, according to data provided by the Transportation Department.

    The federal government still requires most government contractors to take “affirmative action” to ensure equal opportunity for their employees, meaning they are legally required to ensure that their workforce is diverse. That requirement comes through a 1965 executive order issued under Lyndon B. Johnson that has remained in place ever since — despite Ronald Reagan’s effort to repeal it back in 1984.

    In a sweeping policy proposal for the incoming Trump administration, conservative policy advocates are recommending Trump rescind the Johnson order — a move that would eliminate affirmative action obligations for contractors and the office that enforces them. While Trump has not indicated he would do so, he issued an executive order in 2020 that effectively banned contractors from implementing diversity training — which President Joe Biden later rescinded.

    Federal programs aren’t the only ones facing legal challenges. In a highly publicized case involving a minority contract withdrawal program in Houston, two landscaping companies run by white plaintiffs sued the city, alleging discrimination under the equal protection clause. A federal judge is set to decide whether to block the program.

    Colette Holt, a San Antonio attorney who has developed and defended such programs for three decades, said judges have typically upheld minority contracting programs “based on accepted statistical analysis and qualitative evidence,” such as studies which measures the differences between the number of minorities. available firms compared to those awarded government contracts.

    However, since the Supreme Court’s college admissions decision, “federal courts are now rejecting these studies and appear to be changing the law to make it much more difficult to justify systemic, tailored remedies for race and sex discrimination in public contracts,” he said. Holt. in an email.

    Linda Moen, head of an engineering firm in the St. Louis, said the now-threatened Department of Transportation program helped her business after she signed up in 1998. Although she said her firm is now strong enough without the program’s contracts, they still employ 30 people. % of his company’s $12 million annual revenue.

    “I think we’re going to take a big hit,” Moen said. But “who it’s really going to hurt are the people who are just starting out in the industry.”

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