The Corner

The Set-Aside Boondoggle


Here’s a fat target for any member of the new Congress who wants to make his mark rooting out government waste, fraud, and abuse: minority set-asides. Two major construction companies are under federal investigation for using minority front companies in New York subway and water treatment-projects. Skanska USA and Schiavone Construction Company hired government-designated “struggling” minority sub-contractors that merely wrote checks to other subcontractors hired on their professional credentials; those qualified subcontractors actually did the work. Big surprise. Minority quota programs virtually force companies into deception, since there are not enough competent minority-owned companies to fill the quotas. And when “disadvantaged” companies do actually participate on a project, rather than just acting as fronts, their suboptimal skills can require the hiring of additional workers to oversee or redo the quota employees’ contribution. New York City has long been afflicted with extortion outfits that show up at construction sites demanding payoff money to not sue for an affirmative-action violation.

Government set-aside programs actually require ineffiency in infrastructure projects by demanding that the least competitive contractors be hired to work on them. Success in a contracting business disqualifies a contractor from being designated as a “minority business enterprise.” Only contractors with a net worth below $750,000 and a relatively low annual income may participate.

But the bureaucracy required to oversee these programs is reason enough to cut them out, even if they did not guarantee waste in the actual operation of a project. Federal, state, and local governments all have employees on their payroll whose only job is to certify “disadvantaged” companies for quota reception and to oversee the quota programs. And the costs to contractors of complying with the set-aside paperwork and mandates inflate the price tag of government projects.

Bias is not preventing minorities and women from entering the contracting field and prospering within it. Banks are under mandate to loan to minorities and women. To be sure, family connections undoubtedly create a barrier to outsiders in some sub-specialties. But the real problem underlying minority underrepresentation in the construction business is inadequate skills. Running a contracting business requires reading, math, and management capacity. Black males lag far behind whites on at least the first two requirements. In eighth grade, only 8 percent of black males living in large cities performed at or above the proficient level in reading, compared with 33 percent of white males nationwide, according to a report published in October by the Council of Great City Schools. Eighth-grade math scores are similarly skewed. Black males’ SAT reading scores are over 100 points lower than white males’. With such disparities, every profession with any cognitive content is going to have fewer black participants than whites.

As for women, their continuing appetite for quotas is nauseating. Females outnumber males in the nation’s colleges; every graduate program in the country recruits them as assiduously as they do blacks. They can write their ticket anywhere. If they are not proportionally represented in the building trades, it’s because they are going to law and medical school instead.

Construction quotas are just one layer in the mother lode of affirmative-action waste that deficit hawks should be attacking. Municipal-bond issuers have to pay a toll to firms that exist solely because of minority-underwriting requirements. And then there’s the humongous “Equal Employment Opportunity” infrastructure within each government agency, made up of hacks whose only job is to count the number of minority and female employees in that agency — something a computer could do — and pretend eternal vigilance against the alleged menace of bias that threatens at every moment to break out among white-collar government employees, many of whom are minorities themselves. Perhaps as a temporary emergency-deficit-reduction measure, governments could dismantle their EEO empires on a five-year experimental basis, and see if a vast eruption of discrimination occurs. My guess is that the only change would be a significant decrease in paperwork and an increase in efficiency. 


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