Conflicts with Organized Labor

In Hartford, Connecticut, city ordinances give preference to local hiring and minority contracting. Project labor agreements (PLAs) between the city and unions, however, require the use of union firms, and 90 percent of minority contractors run non-union businesses.  The PLAs have taken priority, resulting in widespread, sanctioned non-compliance with the local hiring and minority contracting goals.  The $107 million Hartford Trinity Learning Corridor is an example: only three of Hartford's 68 registered minority contractors worked on the job and half of the contractors were hired from out of state.

There are, however, promising advances being made in writing pro-community project labor agreements, which include requirements about percentages of minority and/or local laborers and subcontractors.  In Seattle, a number of PLA agreements have maintained 25 percent minority and women participation rates.  In Buffalo, intense monitoring of participation on a PLA agreement governing the Roswell Park Cancer Institute Project achieved 28 percent participation rates for minorities and women.  And New York City's Tappan Zee Bridge project  designed a PLA that stipulated 60 percent of apprenticeship positions would be filled by minorities and/or women.

False Certification

Ideally, affirmative action programs enhance the competitiveness of women or minority owned firms by increasing their access to projects.  Unfortunately, these programs can suffer significant abuses, which undermine their effectiveness.  There are a number of techniques that white- and male-owned businesses have used to manipulate the incentives intended for disadvantaged business enterprises (DBEs).

The Washington State administrative code has defined the following schemes as business shams that majority firms have used to manufacture the appearance of a DBE:

• Conduit : a DBE agrees to be named as a subcontractor when the work is actually performed by some other contractor. 
• Front : a majority business that creates the appearance of being owned by a woman or a member of a protected class.
• Switch Business : a business that was previously white- or male-owned and controlled that made technical changes to its business structure so it now is reported as woman- or minority-owned and controlled, though the true power structure remains unchanged.

In 2001, a number of prime contractors in New York City were found to have performed over $40 million worth of fraudulent MBE contracts in the last decade.  These prime contractors created the appearance that MBEs were performing the subcontracting positions that they were in fact performing themselves.  Lack of enforcement of New York City's MBE program (see item below), before it disappeared altogether, made it vulnerable to such abuses.

DBE certification must be a dependable, monitored process to ensure that the program is assisting those it was designed to help.  The city must also have viable, enforceable punishments to render when firms are found to have operated sham businesses.  In Chicago, for example, contractors who fraudulently misrepresent minority participation are banned from doing business with the city for up to three years.

Reluctant City Leadership

Generally, the successful implementation and accountability of ordinances lies in the hands of the mayor and city council.  Unfortunately, this means that unwilling city leadership can stymie local efforts. 

In 1992, New York City passed a charter that set a 15 percent goal for minority- and women-owned construction business participation, and an 8 percent goal for goods and services contracts.  But in 1994, the new administration of Rudolph Giuliani took office, and began supporting actions that led to the program being declared unconstitutional by the New York Supreme Court later that year.  In order to revive the program, a disparity study was required.  The Giuliani administration, however, never authorized funding for this study and the charter was allowed to sunset.  This has resulted in no legislation requiring the city to monitor how much business is done with MBEs or requiring that MBEs receive an equitable percentage of contracts. It is estimated that between 1994 and 2000, New York minority- and women-owned businesses have lost $2 billion worth of contracts due to the absence of such a provision.

Programs that habitually fail to meet prescribed goals must be held accountable.  If city leadership lacks the political will to do so, community groups, residents, and business associations must organize to put pressure on their political representatives to monitor and enforce the program.

Constitutionality of Ordinances

Over the past fifteen years, the U.S. Courts have significantly shaped local, state, and federal racial preference policies.  Three particular cases have had a significant impact:

City of Richmond v. J.A. Croson Co.

In 1989, the Supreme Court found Richmond's minority set-aside program to be in violation of the Equal Protection Clause of the Constitution.  This was the first time the court had agreed that a standard of "strict scrutiny" was appropriate for race-conscious programs. 

In Richmond, prior to the adoption of an affirmative action program, minority business enterprises (MBEs) executed less than one percent of the city's construction work, even though minorities made up more than 50 percent of Richmond's population.  After the adoption of the set-aside program, MBE participation increased to approximately 40 percent.  After the court case and subsequent dismantling of the program, minority construction business participation fell to 10 percent.  The restructured program, which passed the strict scrutiny test, set levels at 16 percent.

Metro Broadcasting v. FCC

In 1990, the Supreme Court upheld a federal program that gave preference to minority and female applicants for broadcast station licenses.  The court found in a 5-4 decision that the goal of fostering broadcast diversity was a sufficiently important goal to warrant the program, and that a less rigorous standard of "intermediate scrutiny" was satisfactory review for affirmative action programs.

Adarand Construction, Inc v. Pena

The Supreme Court decision in Adarand is considered a critical turning point in the federal government's position on affirmative action programs.  In 1995, the Court reversed its previous opinion in Metro , finding that "all racial classifications, imposed by whatever federal, state, or local government act, must be analyzed by a reviewing court under strict scrutiny."  Strict scrutiny, the court argued, was necessary to differentiate benign and malign racial classifications and to ensure that there is sufficient demonstrated need to warrant use of this "highly suspect tool."  The strict scrutiny test must ascertain whether the program supports a compelling government interest, and is narrowly tailored to meet demonstrated need. 

Background: In 1989, the United States Department of Transportation awarded the prime contract for a highway construction project in Colorado to Mountain Gravel and Construction Co.  Mountain Gravel awarded Gonzales Construction (a certified DBE) the bid for a subcontracting job, even though another firm (Adarand Construction) offered the lowest bid.  Under DOT's "Subcontracting Compensation Clause," Mountain Gravel was eligible for an incentive of 10 percent of the subcontractor contract if they hired a certified DBE - an incentive which more than made up the difference between the two bids.  Adarand Construction, Inc. brought a case against federal officials after losing this bid, claiming that the race-based presumptions of minority subcontractor programs violated the equal protection clause of the Fifth Amendment. 

After many appeals and reversals, the program has been restructured and passed the constitutionality test in 2000. (For detailed on the new DOT program, see their website.)

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