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 oday,
in Adarand v. Mineta, the Supreme Court will again
confront the contentious issue of racial preferences in public contracting.
The outcome of this case may not only determine the future of federal
affirmative-action programs, but influence state and local programs
as well. Not surprisingly, the case has attracted more than a dozen
amicus briefs, and both sides have lodged thousands of pages of
documents with the Court. The most influential document may be a
recent report issued by the General Accounting Office (GAO) which
substantially undermines the government's effort to defend racial
preferences.
GAO is frequently
called the congressional watchdog; its most frequent assignment
is investigating bureaucratic behavior at the behest of individual
congressmen or committees. Thanks to the GAO's 3,500 employees and
the scores of reports they write annually, the federal government
in its mundane daily operations is more responsive, equitable, and
efficient than it otherwise might be.
This June,
however, GAO issued a report of enormous constitutional significance
because of what it didn't find, and because it challenged
a number of Congressional assumptions when the transportation racial-preference
program was extended.
After a three-year
investigation, GAO's report — "Disadvantaged Business
Enterprises: Critical Information is Needed to Understand Program
Impact" — did not find evidence of any pattern of discrimination
against minority- and women-owned businesses (DBEs) in the highway
construction industry. The report, issued just a few days before
the plaintiff's brief was due in Adarand, was reproduced
in full in an appendix to that document now before the Court. Since
it is the government's burden to show that racial preferences are
a response to identified discrimination, the GAO report now constitutes
a major hurdle.
Further, the
significance of the report is enhanced by its unusual origin. During
the 1998 passage of a massive federal highway program, TEA-21, Republicans
made major efforts to amend the two-decade-old DBE program to make
it race-neutral, benefiting all small businesses. In the face of
nearly unanimous opposition from Democrats, a compromise was reached
to preserve the DBE program, while requiring GAO to study the characteristics
of DBE firms and whether there was any evidence of discrimination
against them. This was putting the evidentiary cart before the legislative
horse, because courts have clearly said the proof of discrimination
should exist before a narrowly tailored, race-conscious remedy is
used. It was, however, the best Sen. McConnell (R., Ky.) and his
colleagues could do. As Congressman Schuster (R., Pa.), chair of
the House Committee on Transportation and Infrastructure and the
floor manager for the transportation bill, said during the House
debate, the Act "...also requires a GAO study that would examine
whether there is continued evidence of discrimination against small
businesses owned and controlled by socially and economically disadvantaged
individuals. I believe such a study will lay the groundwork for
future reform."
The GAO study
has four major components: an attempt to describe the characteristics
of DBEs and their non-DBE competitors, an examination of discrimination
complaints filed by DBEs, a review of transportation-related "disparity
studies," and an answer to what happens when DBE programs are
discontinued.
1.
Missing information
If DBEs are
truly "disadvantaged," then it is essential to have information
to compare them with non-DBEs. That information rarely exists. GAO
had planned to survey all transit authorities receiving federal
funds, but the Federal Transit Administration does not even have
a complete list. When 83 state and transit recipients were surveyed,
only 40 percent or fewer of the respondents could report the gross
revenues of the DBEs that won contracts. Fewer than 25 percent of
the respondents could report the gross revenues of the DBEs that
did not win contracts. Only about a third of the agencies could
report data on the personal net worth of DBE owners, although TEA-21
regulations require that such owners' net worth not exceed $750,000.
Even fewer recipients could report data on the gross revenues or
owner net worth characteristics of non-DBE firms. While most respondents
could report data about subcontracts-awarded DBEs, fewer than a
third could report similar data for non-DBEs. That means that most
respondents did not regard comparing DBE and non-DBE subcontractor
utilization as relevant in setting goals, or in determining whether
discrimination exists.
Nor are respondents
acquiring relevant information: 98.8 percent have not conducted
any study determining if awarding prime or sub contracts to DBEs
affects contract costs; 67.5 percent report no study of discrimination
against DBE firms; 84.2 percent report no study of discrimination
against DBEs by financial credit, insurance, or bond markets; 79.5
percent report no study of factors making it difficult for DBEs
to compete; and 92.8 percent have made no study on the impact of
the DBE program on competition and the creation of jobs.
2.
Discrimination complaints
GAO conducted
a survey of discrimination complaints received by USDOT and recipients,
as that might prove to be a useful source of data about the nature
and frequency of discrimination against DBEs. Although USDOT sometimes
receives written complaints of discrimination, the agency could
not supply information on the number of complaints filed or investigations
launched, or their outcomes. GAO also asked state and local transit
recipients about complaints they received, and they had better data.
During 1999 and 2000, 81 percent of the recipients had no complaints,
while a total of 31 complaints were received by the other recipients.
Of these, 29 were investigated, and findings of discrimination were
made only four times across the nation. The report concluded:
Other factors
may also limit the ability of DBEs to compete for USDOT state-assisted
contracts. The majority of states and transit districts we surveyed
had not conducted any kind of analysis to identify these factors.
Using anecdotal information, we identified a number of factors,
or barriers, such as a lack of working capital and limited access
to bonding, that may limit DBEs' ability to compete for contracts.
However, there was little agreement among the officials we contacted
on whether these factors were attributable to discrimination.
In fact, GAO
reported there were few, if any, studies by government agencies
or industry groups regarding barriers to DBE contracting. "USDOT
officials, however, stated that they believe contract bundling is
one of the largest barriers for DBEs in competing for transportation
contracts." That, of course, is not a problem caused by discrimination.
3.
Disparity studies
GAO also reviewed
14 transportation-specific disparity studies completed between 1996
and 2000, because they might provide evidence about discrimination
and because USDOT permits recipients to use disparity studies to
set annual goals, and determine the level of discrimination these
goals purportedly are remedying. GAO found that about 30 percent
of the recipients surveyed used disparity studies to set their 2000
goals.
GAO, however,
found these studies were not reliable because the limited data used
to calculate disparities, compounded by the methodological weaknesses,
create uncertainties about the studies findings... While not all
studies suffered from every problem, each suffered enough problems
to make its findings questionable. We recognize there are difficulties
inherent in conducting disparity studies and that such limitations
are common to social science research; however, the studies we reviewed
did not sufficiently address such problems or disclose their limitations.
USDOT in fact
made this problem worse, because it advised recipients that disparity
studies should be "reliable" and then provided no guidance
on what would comprise a reliable study. GAO concluded that:
USDOT's guidance
does not, for example, caution against using studies that contain
the types of data and methodological problems that we identified
above. Without explicit guidance on what makes a disparity study
reliable, states and transit authorities risk using studies that
may not provide accurate information in setting DBE goals.
GAO's finding about the unreliability of disparity studies is consistent
with the findings of every court that has examined the merits of
such studies after discovery and trial.
4.
Discontinuing Programs
One of the
arguments used in the TEA-21 debates and defendants' trial briefs
is the assertion, often anecdotal, that without goals, DBE participation
would decline precipitously. The difficulty with that assertion,
even if true, is that the decline in DBE participation may be the
result of previous overutilization caused by goals set too high,
or may occur because when a program is struck down, DBEs may have
little incentive to seek or maintain certification.
But is the
basic assertion true? It turned out that ten of twelve recipients
with discontinued programs did not know what the DBE participation
result was. For instance, though Michigan was cited frequently by
DBE proponents in the TEA-21 debate as an example where minority
utilization declined after a program was struck down, GAO reports:
Michigan could
not provide us with minority- and women-owned business participation
data in state highway contracting for the years immediately before
and after it discontinued its program. Furthermore, Michigan officials
stated that the analysis showing the decline that is often cited
was a one-time-only analysis and that analysis is no longer available.
Consequently we cannot verify the number cited during the debate.
While GAO,
of course, does not conclude that Congress did not have a compelling
interest for the DBE program, the missing and/or unreliable data
GAO discovered surely undermines the rhetorical assertions of DBE
advocates. Nothing in the GAO report supports any finding of a national
pattern of discrimination against DBEs. No doubt every law clerk
on the Supreme Court will become familiar with this GAO report as
the Adarand decision is crafted.
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