Politics & Policy

Setting Aside Set Asides

The Bush administration on sex discrimination.

The Bush administration is under fire from various women’s groups because of a new rule its Small Business Administration has proposed regarding set-asides for female-owned companies. No surprise here: Naturally, the women’s groups want more set-asides than the rule would allow.

The truth is that the administration actually did a good job here, since the Constitution itself allows such discrimination only if, at a minimum, the government can show that women are being denied contracting opportunities on account of their sex. As it turns out, there are relatively few sectors in which this can be shown, and so the rule quite rightly limits set-asides to those sectors.

In fact, the only persuasive criticism of the Bush administration is that it went too far. As a matter of economics and law, it should not be allowing any set-asides here.

Let me make the economic point first, since it’s easy and obvious: Whenever government contracts are awarded to someone other than the lowest bidder, the taxpayer loses money.

The legal point is only a little more complicated. The statute under which the rule is proposed does not require the use of gender set-asides; it only “authorizes” them. And, while the administration is correct that before such set-asides can be constitutionally permissible, there must be evidence of “substantial under-representation” of female-owned companies and evidence that the under-representation has been caused by “discrimination in that industry,” it overlooks the fact that it must also be the case that the set-aside approach is the appropriate means to stop the discrimination. I stress here that, as a constitutional matter, the aim must be to end the discrimination, not just to get the numbers right.

The use of gender classifications and preferences by the federal government is subject to heightened constitutional scrutiny, and requires an “exceedingly persuasive justification.” There is no credible, let alone any exceedingly persuasive, justification for such classifications and preferences in 2008. To the extent that the government is concerned that women face discrimination in its contracting programs, there are effective responses that do not require gender classifications or preferences.

At every step of the contracting process, it is clear that there are better tailored remedies to discrimination than using gender preferences. If companies are being excluded from bidding because of unrealistic or irrational bonding or bundling requirements, then those requirements should be changed for all companies, regardless of the sex of the owner. If companies who could submit bids are not doing so, then the publication and other procedures used in soliciting bids should be opened up — but, again, to all potential bidders, not just some. And, finally, if it can be shown that bids are being denied to the lowest bidder because of that bidder’s sex, then there should be put in place safeguards to detect discrimination and sanctions to punish it — but, again, those safeguards and sanctions should protect all companies from sex discrimination, not just some.

The aim of all these alternatives is to correct and end discrimination — not to achieve a particular percentage of contracting by this or that racial, ethnic, or (in this case) gender group. This is obvious from the case law in this area: The judicial decisions make very clear that the desire to achieve a particular politically correct mix for its own sake is not itself a compelling or important interest; the use of preferences can be justified only if there is an interest beyond that, such as, in this case, ending sex discrimination.

Contracts are not like hiring, promoting, or even university admissions, where there is an irreducible and significant amount of subjectivity in the decision-making. Contracting is an area that can be made very transparent and where this transparency can make it relatively easy to detect and correct discrimination.

Finally, even if there could still, in theory, be a few cases of discrimination that go without remedy in the absence of gender classifications, there will be many more cases of discrimination that will result from the institutionalization of gender preferences.

In sum, it is very unlikely that, in 2008, the best way to end sex discrimination in contracting is through sex discrimination in contracting. As Chief Justice Roberts wrote last year, “The way to stop discrimination … is to stop discriminating ….”

Roger Clegg is president and general counsel of the Center for Equal Opportunity.


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