How to Weigh Race

Fellow Edward Blum
Will President-elect Barack Obama be a real agent of change, as he has promised, or will it be business as usual for racial and ethnic preferences in the Obama administration? A ruling by the U.S. Court of Appeals for the Federal Circuit in Washington may give us an opportunity to find out.

The November decision in the case of Rothe Development Corp. vs. Department of Defense struck down a race-based affirmative action contracting program mandated by Congress more than two decades ago. Within weeks of settling into the Oval Office, President Obama and his administration must decide whether to appeal. They should let the court opinion stand.

Any new spending legislation should disallow the kind of racial, ethnic and gender preferences Congress has mandated in the past.

Meanwhile, the administration should work with Congress to create new legislation that allows all small-business owners, regardless of their ethnic heritage or race, to compete for contracts at the Department of Defense. After all, because candidate Obama recognized during the campaign that it would be inappropriate for his two daughters to receive preference based on race when they apply to college, surely President Obama would agree that they--and other well-advantaged racial and ethnic minorities--should not get one when they compete for a government contract.

This is not a complex problem to resolve. At issue specifically in Rothe is the constitutionality of awarding 5 percent of all Defense Department contracts to small businesses owned by "socially and economically" disadvantaged individuals. One of the problems the appeals court found with this program is that it presumes that all Latinos, African Americans, Asian Americans and Native Americans are socially and economically disadvantaged, regardless of education, business success or personal net worth.

Suzanne Patenaude, the owner of San Antonio-based Rothe Development Corp., learned this the hard way. In 1998, her company submitted the lowest bid for an Air Force telecommunications contract. However, because Patenaude is white, her company's low bid of $5.57 million was "adjusted" upward by 10 percent to $6.1 million. As a result, a company owned by an Asian American became the "lowest" bidder at $5.75 million. Not only was this unfair to Patenaude, it also was shamefully wasteful to taxpayers.

This program, which was reauthorized by Congress in 2006, is like most government-based affirmative action policies. It is predicated on the assumption that general societal discrimination--past and present--against racial or ethnic minorities justifies lowering the bar for every one of them when they compete for college admissions, jobs or contracts. The courts, however, have generally noted that before establishing a race-based contracting preference, a governmental body must first identify with some specificity the discrimination to be remedied and have " 'a strong basis in evidence' upon which to conclude that remedial action is necessary."

The federal appeals court's three-judge panel found in the Rothe case that Congress failed to meet this requirement in reauthorizing this program. The ruling noted that the empirical and anecdotal evidence Congress examined to justify reauthorization of the program was filled with so many methodological defects that it was unclear if the Defense Department had been discriminating against minorities in the awarding of contracts in the past or the present. Thus, the program was struck down as a violation of "the equal protection component of the Fifth Amendment right to due process."

Empirical "disparity studies" such as the one the Defense Department relied on here have been in a roaring bull market since the Supreme Court enhanced their use in its 1989 landmark opinion in City of Richmond vs. Croson. In essence, these studies purport to measure the disparity between the number of minority-owned firms available to do certain types of work and the number of contracts awarded to them in the past. If the study shows that very few minority-owned firms are winning contracts, yet there are sufficient numbers of them available to do the work, then racial or ethnic discrimination is deemed the likely culprit.

Disparity studies have been controversial at best. As University of Maryland professor George LaNoue, one of the nation's foremost authorities on disparity studies, has noted, these frequently multimillion-dollar studies rarely identify the perpetrators of discrimination with any accuracy. Furthermore, the vast majority of these studies mismeasure the true availability and capacity of minority firms to perform the kinds of work required by the Defense Department.

Enough already. Not only is it time to dismantle the disparity-study industry, but we should end the use of race, ethnicity--and gender--in the awarding of federal contracts as well. If Washington wants to offer a helping hand to small, emerging businesses, that's fine, but limiting these opportunities to minorities and women is wrong.

Congress' record under both Republican and Democratic leadership for ending contracting preferences is abysmal. But that can change. With the new administration poised to allocate billions of dollars on the nation's infrastructure, any new spending legislation should disallow the kind of racial, ethnic and gender preferences Congress has mandated in the past. Dozens of jurisdictions from Florida to California have implemented race-neutral, small-business enterprise programs that have lowered barriers and helped all entrepreneurs compete. The race-neutral Local Small Business Enterprise Preference Program in Los Angeles County is a good model.

As Obama wrote in his book, "The Audacity of Hope," "An emphasis on universal, as opposed to race-specific, programs isn't just good policy; it's also good politics." This case may determine if he really meant it.

Edward Blum is a visiting fellow at AEI.

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