Affirmative Action's Latest, Greatest Challenge

A landmark case before the U.S. Supreme Court could scuttle federal programs that earmark contracts for minority-owned businesses

Many women and minority small-business owners fear affirmative action's days are numbered now that the U.S. Supreme Court has agreed to hear a case that challenges the constitutionality of special treatment for minority businesses seeking federal contracts.

"With this court, it's difficult to be optimistic," says Anthony Robinson, head of the Minority Business Enterprise Legal Defense & Education Fund, which will file a brief in the case. He's also not optimistic that the Bush Administration will vigorously defend the laws that reserve a certain percentage of federal contracts for disadvantaged and minority businesses.

"John Ashcroft said he was going to uphold the law. The issue is whether he is going to be consistent. I don't think he will be," adds Robinson, referring to the Attorney General's promise in March to uphold the the policies being challenged by Adarand Constructors.


  Adarand, a white-owned construction company in Colorado Springs, failed to win a contract for erecting roadside guard-rails in Colorado's San Juan National Forest after submitting the lowest bid. It argues that special treatment for minority firms by the U.S. Transportation Dept. amounts to reverse discrimination.

So far, there has been no word on the issue from the White House. "The silence from the Bush Administration is deafening," says Steven Sims, a vice-president at the National Minority Supplier Development Council (NMSDC), a non-profit, corporate-financed organization that recruits and certifies minority-owned companies.

The Small Business Administration, which runs programs to help minority-owned companies compete for federal contracts, isn't talking. "The issue is too politically charged for us to speak at this point," says SBA spokeswoman Tiffani Clements.

At the Justice Dept., spokeswoman Cristine Romano was no more forthcoming, saying: "We're not ready to talk to the public." The department will be filing a brief in the case later this spring, but what it will say remains a mystery for now. "The department has filed documents in the past, and now we have a new Administration that's reviewing those and hasn't come to any conclusions," says Romano, referring to briefs that were filed in the Adarand case during the Clinton Administration.


  Frances Nevarez, founder of the PowerUp! Internet training and software company in San Jose, Calif., hopes the court will look long and hard at the affirmative-action issue, which she says is economically and socially important. "We're not asking for a handout. All I'm asking for is an opportunity to bid," says Nevarez, who doesn't expect the cause of affirmative action to receive any help from the White House. Says Nevarez: "Bush is not a friend of the minority-owned, woman-owned, small business."

The small-business community is referring to this case as Adarand II, to distinguish it from the 1995 Supreme Court case, Adarand Constructors v. Pena. In a 5-4 decision written by Justice Sandra Day O'Connor, the court concluded that federal and state programs to benefit so-called "disadvantaged businesses" were not unconstitutional, per se. All the same, it tightened the parameters for such programs, which now must pass what is called the "strict scrutiny" test: Past and present discrimination in the market against the minority group in question must be proven, rather than assumed, and the government must show that its program benefits only victims of such discrimination.

The previous Administration revamped the disadvantaged-business program in a bid to meet the new standard and thus, in the words of Bill Clinton, "mend, not end" affirmative action. The current case, Adarand Constructors v. Mineta, argues that the program, under which the Department of Transporation aims to give 10% of all contracts to disadvantaged businesses, is still unconstitutional. The makeup of the Supreme Court is unchanged from 1995, when the original Adarand decision was written.

Although the case cites only the Transportation Dept.'s program for disadvantaged businesses, its outcome is widely regarded as crucial to affirmative-action programs in general.


  Without public policy to help them, minorities' and women's business opportunities dry up, Robinson insists. "The most persuasive evidence we were able to present to Congress three years ago, when they reauthorized these programs, is that in every state where these programs were dismantled, minority participation fell through the floor," he says.

If policies aimed at giving federal contracting dollars to disadvantaged small businesses are ended, Horizon Consulting of Falls Church, Va., will survive, says CEO Wanda Alexander, who adds: "The Horizon of five years ago may not have been able to." Horizon, which reviews FHA loans and does appraisals for the Housing & Urban Development Dept., is designated as a disadvantaged small business and has won several contracts reserved for such companies. She expects Horizon will soon outgrow the program's income limits -- $5 million in revenue over the previous three years.

Such programs are not a handout, Alexander says, citing the stiff competition for federal contracts. "You still have to do your job," she notes. "You still have to show prior experience, past performance, letters of reference...they don't remove competition, they just make sure small competes against small."

William Soza, founder of Soza & Company, a management and Internet technology consulting firm in Fairfax, Va., built his business through the SBA program known as 8A, which helps minority firms get federal contracts. He learned the ins and outs of government contracting and built up his staff and finances to compete. Soza, who took in $80 million last year, has outgrown the SBA program, going from 14 employees in the mid-'80s to 750 today, when he competes with the likes of EDS and Andersen Consulting.


  "The program has brought underutilized firms into government contracting," Soza says. "For the most part, minority entrepreneurs really do not have introductions into what the mainstream is doing." Although the playing field looks very uneven to him, Soza doubts the Supreme Court will see things his way. "In view of the decisions the court has made before, it's an uphill fight for the current legislation to continue," he says.

If ending such laws hurts a large segment of the small-business community, some are determined to make President Bush will share their pain. "The minority business community would galvanize," predicts the NMSDC's Sims, whose organization has 3,500 corporate members and 15,000 minority-owned small-business clients. "The Administration has to accept the reaction by the minority business community if it determines this is a suit not worth defending." Robinson goes a step further: Scrapping set-asides, he says, would "radicalize minority communities."

Clearly, with Adarand scheduled to be argued in the fall, small-business advocates will be keeping it under their own kind of strict scrutiny.

By Theresa Forsman in New York

Edited by Robin J. Phillips