Defining Social and Economic Disadvantage: Are Government Preferential Business Certification Programs Narrowly Tailored?
No Thumbnail Available
Links to Files
Permanent Link
Author/Creator
Author/Creator ORCID
Date
Type of Work
Department
Program
Citation of Original Publication
George R. La Noue, Defining Social and Economic Disadvantage: Are Government Preferential Business Certification Programs Narrowly Tailored?, 12 U. Md. L.J. Race Relig. Gender & Class 274 (2012). Available at: https://digitalcommons.law.umaryland.edu/rrgc/vol12/iss2/2
Rights
This item is likely protected under Title 17 of the U.S. Copyright Law. Unless on a Creative Commons license, for uses protected by Copyright Law, contact the copyright holder or the author.
Abstract
The passage of the Public Works Employment Act (“PWEA”) of 1976 which set aside ten percent of all procurement dollars awarded under it for “minority owned businesses” began a precedent of the use of contracting preferences for these firms in various federal programs. Later, many of these procurement programs were expanded to include women-owned businesses as beneficiaries. Soon such programs were initiated by state and local governments across the country.
Race and gender preferential contracting programs have always had an uneasy relationship with equal protection principles. Although the PWEA survived a United States Supreme Court decision in Fullilove v. Klutznick, in two later landmark decisions, City of Richmond v. Croson and Adarand v. Pena, the Court determined that strict scrutiny would be the standard of review for race-based programs. Specifically, such programs would need to have a compelling interest and be narrowly tailored to survive. Since then, lower courts have made several dozen decisions applying these standards. Courts have heavily criticized some of these programs for not having a compelling interest, but more often where preferential programs have been terminated or altered, it has been because they have not been narrowly tailored. The most common programmatic defect has been including groups without evidence of discrimination against them. There is another narrow tailoring problem courts have not addressed. Almost all preferential contracting programs require as a condition of participation that individual firm owners seek certification as a Disadvantaged Business Enterprise (“DBE”) for federal procurement or Minority and Women-Owned Business Enterprise (“MWBE”) for state and local procurement. Without such certification, a businesscannot receive a preferential contract or be counted in meeting a goal. The certification process to determine social and economic disadvantage are remarkably uniform across agencies and levels of government.
Three characteristics of the certification process raise narrow tailoring problems. First, the social disadvantage affidavit requires only that the owner affirm that he or she has been “subjected to racial or ethnic prejudice or cultural bias.” These phrases do not properly distinguish between remediable discrimination and societal discrimination, which the Supreme Court has found is not a basis for a narrow tailored remedy. Second, there is evidence that while the process for challenging the rebuttable presumption of social disadvantage exists, the criteria for establishing that an owner, identified as a member of a designated group, now has sufficient achievement and social standing to be no longer socially disadvantaged does not exist. Thus, social disadvantage is as a practical matter established at birth and cannot be challenged by evidence of a successful life.
Third, the economic disadvantage affidavit requires that an owner attest that “my ability to compete in the free enterprise system
has been impaired due to diminished capital or credit opportunities compared to other businesses in the same or similar lines of business who are not socially or economically disadvantaged.” This attestation requires the owner to have accurate information about the capital and credit opportunities of the other businesses. The diminished status has no time or place limitations. The certification process requires no actual information about the applicant’s credit or borrowing history.
This Article examines the legal framework for the certification process as well as two different sources of empirical evidence. A number of disparity studies around the nation have asked minority and women business owners whether they have suffered from businessrelated discrimination. Most owners, in fact, do not claim they have suffered from discrimination. The second source of empirical evidence is from a telephone survey where certified Maryland MWBEs were asked what they thought the concept of social disadvantage meant and to describe the incidents of discrimination that had affected them. Overwhelmingly, these results show that owner understandings of disadvantage and discrimination are inconsistent with the requirement to identify relevant discrimination outlined in Croson. The Article then concludes by suggesting some modifications in the certification process to make it narrowly tailored.