Associated General Contractors of California, Inc. v. City and County of San Francisco Summary and Opinion

    UNITED STATES COURT OF APPEALS 
FOR THE NINTH CIRCUIT

Associated G eneral Contractors 
of California, Inc., et al.,

Plaintiffs-Appellants,
v.

C ity and County of San 
Francisco,

Defendant-Appellee, 
and

San Francisco Black Chamber of 
Commerce, et al.,

Intervenors-Defendants/
Appellees.

No. 85-2420
D.C. No.

CV 84-6899 TEH
OPINION

Argued and Submitted 
June 13, 1986—San Francisco. California

Filed March 23, 1987

Before: Procter Hug, Jr., Robert R. Beezer and 
Alex Kozinski, Circuit Judges.

Opinion by Judge Kozinski

Appeal from the United States District Court 
for the Northern District of California 

Thelton E. Henderson, District Judge, Presiding

SUMMARY

Constitutional Law/Statutes

Appeal from grant of summary judgment. Affirmed in part, 
reversed and remanded in part.



2 Associated G eneral Contractors v. San Francisco

This action arises from appellee the City and County of San 
Francisco’s (the city) ordinance giving various preferences to 
minority-owned, women-owned, and locally-owned business 
enterprises (MBEs, WBEs, and LBEs) in municipal contract­
ing. The ordinance employs four principal methods. First, it 
requires each city department to set aside 10 percent of its 
purchase dollars for MBEs and 2 percent for WBEs. Second, 
it gives MBEs, WBEs, and LBEs a 5 percent bidding prefer­
ence for those contracts put out to bid. Third, it requires each 
city department to establish a yearly goal for the percentage 
of contracting dollars to go to MBEs, WBEs, and LBEs. 
Finally, it establishes an overall goal that 30 percent of the 
city’s contracting dollars shall go to MBEs and 10 percent to 
WBEs. The ordinance is to stay into effect until that goal is 
reached.

Appellants sued seeking declaratory and injunctive relief. 
The district court granted summary judgment in favor of the 
city. Appellants argue that, as to contracts valued over 
$50,000, the preferences violate a San Francisco City Charter 
provision requiring that contracts be awarded to the lowest 
reliable and responsible bidder. Next, they contend that the 
preferences for MBEs violate three separate federal civil 
rights statutes, and finally, they argue that all violate the equal 
protection clause.

[1] The district court was required to follow Ninth Circuit 
precedent in applying California law as California courts con­
strue it. California courts have uniformly construed the term 
“lowest responsible bidder” to mean the bidder who can be 
expected to successfully complete the contract for the lowest 
price. [2] The charter includes a general prohibition against 
accepting other than the lowest bid, subject only to specific 
exceptions. [3] Since the charter’s framers found it necessary 
to add express exceptions to the requirement that all con­
tracts go to the lowest reliable and responsible bidder, the 
charter can only be read as a general limitation on the city’s 
power. [4] In sum, this court concludes that the ordinance



violates the city charter insofar as it aumorizes the awiuu of 
contracts that are worth more than $50,000 and are not cov­
ered by the charter's exception to other than lowest responsi­
ble bidders.

[5] The examination of the equal protection aspect of the 
MBE preference calls for an examination of three factors. 
First, whether the city had the authority to act; second, 
whether its findings are adequate; and finally, whether the 
means it selected are appropriate. [6] A state or its political 
subdivision has the authority—indeed the constitutional 
duty—to ascertain whether it is denying its citizens equal 
protection of the laws and, if so, to take corrective steps. [7] 
State or local governments must be acting to remedy 
government-imposed discrimination, perpetuated by it or by 
one of its departments or divisions. State or local govern­
ments do not have the power to discriminate on the basis of 
race simply to dispel the lingering effects of societal discrimi­
nation. [8] This court considers this requirement a persuasive 
and principled way to reconcile past Supreme Court deci­
sions.

|9j At the city’s hearings, many witnesses advocated race­
conscious affirmative action measures for MBEs; no one 
spoke out against them. [10] Flowever, this court is bound to 
scrutinize the ordinance closely and skeptically, as is appro­
priate whenever governmental action is challenged on the 
ground that it impairs personal liberties guaranteed by the 
constitution. [11] The city’s thorough fact-finding process 
makes painfully clear that the city did not conclude in its 
findings a prior discrimination by the governmental unit 
involved. [12] The statistics do not bear out the assertion that 
minority-owned and women-owned businesses have been vir­
tually excluded from city contracts. [13] The curious exclu­
sion of subcontracts in the city’s findings leaves this court 
without an accurate picture as to extent of minority and 
women participation in the city’s procurement process.

Associated G eneral Contractors v, San F rancisco 3



4 Associated G eneral Contractors v. San F rancisco

114] These figures encompass a variety of businesses that do 
not provide goods or services subject to significant contract­
ing by the city. [15] When adopting race-conscious remedies 
that extend benefits and burdens beyond its territorial bound­
aries, the city is exercising authority with respect to individu­
als outside the scope of its legislative purview. [16] Finally, 
the ordinance contains no evidence whatsoever supporting 
the proposition that each of the listed ethnic groups included 
in the ordinance’s categorization has been the subject of dis­
crimination.

[17] Race-conscious classifications must fit with greater 
precision than any alternative means, [18] In addition, the 
remedial program must not impose a disproportionate bur­
den upon few individuals. [19] Because the ordinance casts 
such a wide net, it is difficult to tell whether the burden it 
imposes is broadly shared or concentrated. [20] Concrete 
assurances that harsh and disproportionate effects upon par­
ticular contractors will be considered and corrected by indi­
vidualized administrative procedures appears to be entirely 
lacking in the ordinance before this court. [21] Also, on the 
basis of the record it had compiled, the city was not justified 
in turning to such drastic remedies as bid preferences and set- 
asides, at least not in the first instance.

[22] Each of the problems recognized by the city was capa­
ble of a direct, specific response, having far less dramatic 
effects on individual rights than the remedies actually 
adopted. [23] This court does not hold that the city is forever 
limited to moderate remedial measures, but requires exhaus­
tion of more neutral measures before resorting to race- 
conscious ones.

[24] As to the equal protection aspect of the WBE prefer­
ence, a thin line divides governmental actions that help cor­
rect the effects of invidious discrimination from those that 
reinforce the harmful notion that women need help because 
they can’t make it on their own. [25] While remedying hard­



Associated G eneral Contractors v. San Francisco 5

ships by giving women an advantage in seeming contracts 
with the city is an important and legitimate objective, this 
court thinks it a much closer question whether the means 
employed are substantially related to its achievement. [26] 
Although this court finds the city’s WBE preference troubling, 
the preference is upheld against the challenge presented in 
this case. [27] While governmental action need not operate 
with surgical precision, there must be strong assurances that 
it is not merely the result of patronizing assumptions about 
the status and abilities of women, but an attempt to provide 
assistance where it is needed and warranted.

[28] As to the LBE preference, the city’s power to spend its 
funds as it pleases is not limitless. However, the city may 
rationally allocate its own funds to ameliorate disadvantages 
suffered by local business, particularly where the city itself 
creates some of the disadvantages.

COUNSEL

John H. Findley, Sacramento, California, for the plaintiffs- 
appellants.

Mara E. Rosales, San Francisco, California, for the 
defendant-appellee.

Robert L. Harris, San Francisco, California; William C. 
McNeill, III, Oakland, California, for the appellees- 
intervenors.

OPINION

KOZINSKI, Circuit Judge:

We consider a challenge to an ordinance of the City and 
County of San Francisco (the city) giving various preferences



6 Associated G eneral Contractors v. San Francisco

to minority-owned, women-owned and locally-owned busi­
ness enterprises (MBEs, WBEs and LBEs). The district court 
upheld the ordinance, rejecting claims that it violates the 
city’s charter, federal civil rights laws and the equal protec­
tion clause of the fourteenth amendment.

Facts

On April 2, 1984, after numerous hearings and consider­
able debate, the San Francisco Board of Supervisors enacted 
Chapter 12D of the City’s Administrative Code (the ordi­
nance). The ordinance was designed to increase the participa­
tion of MBEs, WBEs and LBEs in municipal contracting, and 
thereby to alleviate the “historic discrimination against 
minorities and women, often officially sanctioned and 
enforced by government from the inception of our Republic 
to the present.” Ordinance § 12D.2(1).

The ordinance employs four principal methods. First, it 
requires each city department to set aside 10 percent of its 
purchasing dollars for MBEs and 2 percent for WBEs. Id. 
§ .8(B)(2). Second, it gives MBEs, WBEs and LBEs a 5 percent 
bidding preference for those contracts put out to bid.1 Id. 
§ .8(B)(3). Third, it requires each city department to establish 
a yearly goal for the percentage of contracting dollars to go to 
MBEs, WBEs and LBEs. For certain public works contracts, 
a prospective prime contractor must submit a bid that meets 
or exceeds the department’s goal by distributing among 
appropriate subcontractors the requisite percentage of the 
contract’s value. Id. § .9(B)(1). Finally, the ordinance estab­
lishes as an overall goal that 30 percent of the city’s contract­
ing dollars shall go to MBEs and 10 percent to WBEs. Id. § .3. 
The ordinance is to remain in effect until that goal is reached. 
See id. §. 15(A).

Tocally-owned MBEs r.nd WBEs get a 10% preference.



Associated G eneral Contractors v. San Francisco 7

Appellants sued seeking declaratory and injunctive relief. 
Their motion for a preliminary injunction was denied on 
November 5, 1984. They appealed that decision but, before 
this court could rule, the district court heard the parties’ 
cross-motions for summary judgment and granted that of the 
appellees. Associated Gen. Contractors v. City & County o f  
San Francisco, 619 F. Supp. 334, 335 (N.D. Cal. 1985). The 
preliminary injunction appeal was then dismissed, appellants 
pursuing instead their appeal from the district court’s deci­
sion on the merits.2

Contentions of the Parties

Appellants mount their attack on three fronts. First, they 
argue that, as to contracts valued over $50,000, the prefer­
ences violate a San Francisco City Charter provision requir­
ing that contracts be awarded to “the lowest reliable and 
responsible bidder.” S.F. Charter § 7.200 (1986).3 Next, they 
contend that the preferences for MBEs violate three separate 
federal civil rights statutes: 42 U.S.C. §§ 1981, 1983, 2000d 
(1982). Finally, they argue that all the preferences violate the 
equal protection clause of the fourteenth amendment of the 
United States Constitution. Appellees forcefully dispute each 
of these contentions.

Jurisdiction

The district court had jurisdiction over the federal claims 
pursuant to 28 U.S.C. §§ 1331, 1343(a)(3), and pendent juris­
diction over the state law claim. See UM W v. Gibbs, 383 U.S. 
715 (1966). We have jurisdiction under 28 U.S.C. § 1291.

2Even though only the grant of defendant’s summary judgment motion 
is before us, we may afford complete relief, if appropriate, to either party. 
See Morgan Guar. Trust Co. v. Martin, 466 F.2d 593, 600 (7th Cir. 1972) 
(interpreting 28 U.S.C. § 2106).

3When appellants brought this suit, section 7.200 covered contracts 
worth more than $15,000. The amount was increased to $50,000 on June 
3, 1986, ten days before this case was submitted.



8 Associated G eneral Contractors v. San F rancisco

Discussion

I. THE CHARTER4

A. Appellants claim that, by compelling city departments 
to accept bids that are not the lowest, the ordinance violates 
S.F. Charter § 7.200 which provides:

When the expenditure for any public work or 
improvement shall exceed the sum of fifty thousand 
dollars ($50,000), the same shall be done by con­
tract, except as otherwise provided in this charter.
The head of the department in charge of or responsi­
ble for the work for which a contract is to be let, or 
the purchaser of supplies in the case of purchases of 
materials, supplies and equipment, shall let such 
contract to the lowest reliable and responsible bidder 

. . [Emphasis added.]

In Inglewood-Los Angeles County Civic Center Authority v. 
Superior Court, !  Cal. 3d 861, 500 P.2d 601, 103 Cal. Rptr. 
689 (1972), the California Supreme Court interpreted Cali­
fornia Government Code section 25454, a provision very 
similar to charter section 7.200. It held that the term 
“responsible”

has reference to the quality, fitness and capacity of 
the low bidder to satisfactorily perform the pro­
posed work. Thus, a contract must be awarded to the 
lowest bidder unless it is found that he is not respon­
sible, i.e., not qualified to do the particular work 
under consideration.

4We consider the pendent state claim first because its resolution might 
obviate the need to reach the merits of a difficult federal constitutional 
question. See Schmidt v. Oakland Unified School Dist., 457 U.S. 594, 595 
(1982).



Associated G eneral Contractors v. San Francisco 9

Id. at 867, 500 P.2d at 604, 103 Cal. Rptr. at 692 (citations 
omitted). In reaching this result, the court relied on cases 
interpreting similar language in other statutes and, in one 
case, West v. City o f Oakland, 30 Cal. App. 556, 159 P. 202 
(1916), a city charter. We followed Inglewood in overturning 
a school district’s plan for accepting higher bids from minor­
ity contractors, stating that “[w]e do not think that the Cali­
fornia Supreme Court would construe the term . . . differently 
from the construction it gave the same language in Inglewood; 
the statutes are virtually identical.” Associated Gen. Contrac­
tors v. San Francisco Unified School Dist., 616 F.2d 1381, 
1385 (9th Cir. 1980) {Unified School District). We have found 
no California case interpreting the term “responsible” any 
other way.

Despite these seemingly compelling authorities, the district 
court adopted a much more expansive construction of charter 
section 7.200, concluding that “the concept of responsibility 
is sufficiently flexible to embody other legitimate municipal 
concerns such as the remedying of past discrimination.” 619 
F. Supp. at 336.5 The district court purported to follow the 
reasoning of Southwest Washington National Electrical Con­
tractors Association v. Pierce County, 100 Wash. 2d 109, 667 
P.2d 1092 (1983), which interpreted the term responsible to 
mean “socially responsible.”6 In the Washington Supreme

5We understand the district court’s ruling to cover the LBE preference as 
well, thus including the city’s desire to ease the burden on local businesses 
as one of the “legitimate municipal concerns” encompassed in the “concept 
of responsibility.”

6The court below also cited Weiner v. Cuyahoga County Comm. Coll. 
Dist., 19 Ohio St. 2d 35, 249 N.E.2d 907 (1969), cert, denied, 396 U.S. 1004 
(1970), where the Ohio Supreme Court stated that “the capacity to assure 
a performance which complies with antidiscrimination laws is reasonably 
a part of the standard of a best or responsible bidder on a contract involving 
the expenditure of public funds.” Id. at 39, 249 N.E.2d at 910. We fail to 
see how this unremarkable proposition supports the district court’s conclu­
sion. A contractor’s ability to comply with all relevant laws—be they those 
pertaining to safety, taxation or discrimination—is certainly relevant to 
whether it is responsible. Here, the city does not claim that non-MBE con­
tractors are less capable of complying with antidiscrimination laws than 
MBE contractors.



10 Associated G eneral Contractors v. San Francisco

Court’s view, a business that failed to meet affirmative action 
goals was socially irresponsible. Id. at 115, 667 P.2d at 1095- 
96. The district court also reasoned that its interpretation of 
the term responsible “is clearly consistent with the two pur­
poses generally underlying competitive bidding statutes: 1) to 
protect the general public from cronyism or collusion in the 
awarding of contracts and, 2) to provide a fair forum for 
potential bidders.” 619 F. Supp. at 337 (citing Southwest 
Washington, 100 Wash. 2d. at 116, 667 P.2d at 1096).

[1] We are unable to approve the district court’s interpreta­
tion of the term “responsible” in San Francisco charter sec­
tion 7.200. First, and most fundamentally, the district court 
was led astray by following inapposite authorities and ignor­
ing pertinent ones. Southwest Washington expressly rejected 
Ninth Circuit precedent, 100 Wash. 2d at 115, 667 P.2d at 
1096; the district court was not free to follow suit. Unified 
School District and the California cases on which it relies con­
strued language very similar to that in charter section 7.200. 
The district court was required to follow Ninth Circuit prece­
dent in applying California law as California courts construe 
it. And California courts have uniformly construed the term 
“lowest responsible bidder” to mean the bidder who can be 
expected to successfully complete the contract for the lowest 
price.7

Moreover, we find the district court’s reasons for following

7Whatever may have been the record presented in Southwest Washing­
ton, nothing before us suggests that the term “responsible” in the San Fran­
cisco City Charter, adopted in 1932, was meant to do more than exclude 
those contractors “not qualified to do the particular work under consi­
deration.” Inglewood, 7 Cal. 3d at 867, 500 P.2d at 604, 103 Cal. Rptr. at 
692. That is a concept capable of relatively precise definition and objective 
application. Notions of social responsibility, commendable as they may be, 
are of a wholly different character. One person’s social responsibility is 
another’s officious intermeddling. The district court’s approach removes an 
objective standard from the charter and substitutes for it a concept so nebu­
lous that it removes any meaningful constraint on the Board’s actions.



Associated G eneral Contractors v. San F rancisco 11

Southwest Washington unpersuasive. Its assertion that a 
broad reading of the term “responsible” is consistent with the 
purposes underlying competitive bid statutes misconstrues 
those purposes. The first purpose enumerated by the district 
court—protecting the public from cronyism and collusion— 
is much too narrow. Competitive bid statutes are designed to 
protect against a variety of ills that might befall the govern­
ment procurement process: sloth, lack of imagination or care­
lessness on the part of those who award public contracts; 
inadequate notice to potential bidders, causing contracting 
officers to act on the basis of ignorance or misinformation; 
and, perhaps most important of all, insufficient competition 
to assure that the government gets the most work for the least 
money. See generally J. Whelan & R. Pasley, Cases & Materi­
als on Federal Government Contracts 175-81 (1975).

The second purpose cited by the district court—“to pro­
vide a fair forum to potential bidders”—is far too broad. 
Nothing in charter section 7.200, or in any other competitive 
bid statute of which we are aware, assures that contractois 
will be treated fairly in any and all respects. The provision 
assures only that responsible contractors who submit the low­
est bid will be awarded the contract. Under the district court’s 
interpretation, there is no limit to the type of fairness a city 
could seek to achieve, defeating the charter’s mandate that 
contracts be awarded to the lowest bidder.8

Finally, the district court’s ruling goes far beyond even the 
logic of Southwest Washington. The Washington Supreme 
Court there held that a bidder is responsible if he awards a 
portion of his subcontracts to MBEs and WBEs. Under that 
approach, a contractor has a fair measure of control over

8The city could, for example, steer contracts to particular neighborhoods, 
if it thought it fairer to enrich Nob Hill at the expense of Russian Hill. Or 
it might choose to favor businesses with poor owners or those that are fail­
ing. Fairness means different things to different people, many of them 
inconsistent with the requirement that contracts be awarded to the “lowest 
reliable and responsible bidder.”



12 Associated G eneral Contractors v. San F rancisco

whether or not he is deemed responsible; an irresponsible 
contractor can become responsible by awarding a larger share 
of subcontracts to MBEs and WBEs. Southwest Washington,
100 Wash. 2d at 112, 667 P.2d at 1094. Thus, while the Wash­
ington Supreme Court gave the term “responsible” an expan­
sive interpretation, it retained the concept’s essential charac­
teristic as a description of a bidder’s willingness and ability to 
comply with applicable standards. By contrast, the district 
court here removed all connection between “responsibility” 
and volitional action. A contractor is deemed responsible not 
because of how it conducts its business but because of what it 
is: A firm that qualifies as an MBE, WBE or LBE is conclu­
sively deemed responsible; a firm that does not is conclusively 
deemed irresponsible. By holding that “the concept of 
responsibility is sufficiently flexible to embody other legiti­
mate municipal concerns such as the remedying of past 
discrimination,” 619 F. Supp. at 336, the district court trans­
formed a limitation on the city’s power into a broad authori­
zation for preferring some contractors over others on the 
basis of innate characteristics such as race and gender, or 
whatever other “legitimate municipal concerns” the city 
might wish to pursue. We doubt that even the Southwest 
Washington court would have gone that far.

B. Appellees argue in the alternative that the ordinance 
does not violate the city charter because it does not contra­
vene an express prohibition. They note that there is no 
express prohibition against affirmative action, and so urge us 
to conclude, as did the district court, that the ordinance must 
be valid.

[2] We reject this argument for two reasons. First, whether 
or not the charter contains a prohibition against affirmative 
action is irrelevant. It does include a general prohibition 
against accepting other than the lowest bid, subject only to 
specific exceptions. See pp. 13-14 infra. Second, appellees 
misunderstand the longstanding rule that there are no limits 
to a chartered city’s regulation of municipal affairs “except as



Associated G eneral Contractors v. San F rancisco 13

expressly limited by the charter provisions.” City o f Grass 
Valley v. Walkinshaw, 34 Cal. 2d 595, 599, 212 P.2d 894, 896 
(1949). While, as appellees argue, “jajll rules of statutory con­
struction as applied to charter provisions . . .  are subordinate 
to this controlling principle,” id., this simply means that an 
older principle—that cities receive only those powers dele­
gated by the state—does not apply to chartered cities. See id:, 
see, e.g., Longv. City o f Fresno, 225 Cal. App. 2d 59, 64-65, 
36 Cal. Rptr. 886, 890-91 (1964). This rule only prohibits 
inferring limitations from the absence of an express grant of 
power; it provides no help in interpreting an express limita­
tion like section 7.200.

C. Finally, amicus supporting the city notes that the char­
ter expressly allows the Board of Supervisors to accept bids 
other than the lowest in some circumstances. For example, 
charter section 7.204 provides that

[in] any contract for any public work or improve­
ment, or for the purchase of materials .. . [the Board 
may provide] a preference in price not to exceed 10 
percent . . .  in favor of such materials as are to be 
manufactured, fabricated or assembled within the 
City and County of San Francisco as against similar 
materials which may be manufactured, fabricated or 
assembled outside thereof.

In addition, of course, section 7.200 itself exempts contracts 
worth $50,000 or less from the low bid restriction.

[3] Insofar as the city charter itself provides exceptions to 
the rule that contracts be awarded to the lowest responsible 
bidder, preferences falling within the contours of those excep­
tions are valid. But it is difficult to understand how this helps 
the city with respect to those preferences that do violate char­
ter section 7.200. The normal inference is to the contrary. 
Since the charter’s framers found it necessary to add express 
exceptions to the requirement that all contracts go to the



14 Associated G eneral Contractors v. San F rancisco

“lowest reliable and responsible bidder,” charter section 
7.200 can only be read as a general limitation on the city’s 
power.9

[4] In sum, we conclude that the ordinance violates the city 
charter insofar as it authorizes the award of contracts that are 
worth more than $50,000 and are not covered by charter sec­
tion 7.204 to other than lowest responsible bidders. Insofar as 
the ordinance’s bid preferences, subcontracting goals and set 
asides would result in awards that violate the charter, they are 
void. Because the ordinance contains a severability provi­
sion, it continues to apply to contracts for $50,000 or less.10 
We must therefore consider appellant’s remaining challenges 
to the ordinance insofar as it applies to such contracts for 
$50,000 or less.

II. THE EQUAL PROTECTION CLAUSE11

Because not all classifications drawn in the ordinance are 
equally suspect, we discuss the ordinance’s treatment of 
MBEs, WBEs and LBEs separately.

9Appellants also argue that in enacting the ordinance the Board usurped 
functions that the charter reserved to heads of departments or the purchas­
ers of supplies. This is meritless. Although department heads, knowing the 
peculiar requirements of their agencies, presumably have some authority to 
determine whether a low bidder is “responsible” (i.e. able to do the work), 
the Board is authorized to establish general bidding procedures and con­
tracting requirements. See S.F. Charter §§ 7.200, 7.205.

10The ordinance’s severability clause, Ordinance § 12D.16, is persuasive 
evidence that the Board would want the preferences to apply to contracts 
for $50,000 or less. Because contracts over $50,000 “can be mechanically 
severed” from the coverage of the ordinance, this presumption of severabil­
ity is not rebutted. Schenley Affiliated Brands Corp. v. Kirby, 21 Cal. App. 
3d 177, 199, 98 Cal. Rptr. 609, 626 (1971); see also Tip Top Foods, Inc. v. 
Lyng, 28 Cal. App. 3d 533, 552, 104 Cal. Rptr. 718, 731 (1972).

“ Appellants allege that the ordinance deprives them of their right to 
equal protection under the Fourteenth Amendment. Section 1983 provides



Associated G eneral Contractors v. San Francisco 15

A. The MBE Preferences

The parties disagree on the proper level of review. Appel­
lants argue that the ordinance’s racial and ethnic preferences 
should be subjected to strict scrutiny; the city claims that a 
three part test, examining the Board of Supervisors’ author­
ity, findings and methods, is appropriate. Both parties are 
right. The level of review is indeed strict scrutiny, but not the 
old strict scrutiny that was “ ‘strict’ in theory but fatal in 
fact.” Regents o f  Univ. o f Cal. v. Bakke, 438 U.S. 265, 361-62 
(opinion of Brennan, White, Marshall & Blackmun, JJ.); see 
also United States v. Paradise, 47 CCH S. Ct. Bull. B1194 
(Feb. 25, 1987) (plurality opinion); Wygant v. Jackson Bd. o f 
Edac., 106 S. Ct. 1842, 1852 (1986) (O’Connor, J., concur­
ring). The form that scrutiny has taken in affirmative action 
cases does call for an examination of the three factors appel­
lees suggest and all sides discuss. First, we must consider 
whether the city had the authority to act; second, we must 
examine whether its findings are adequate; finally, we must 
determine whether the means it selected are appropriate.12

a cause of action for deprivations of federal rights under color of state law. 
Section 2000d provides a cause of action for discrimination on the basis of 
race. The Supreme Court has held that the rights protected by sections 1983 
and 2000d extend as far as the equal protection clause’s guarantees against 
racial discrimination. Sec Regents o f Univ. o f Cal. v. Bakke, 438 U.S. 265, 
287, 333 (1978) (opinion of Powell, J.; opinion of Brennan, White, Mar­
shall and Blackmun, JJ.) (§ 2000d). It is not entirely clear whether the 
remaining statute, section 1981, gives protections beyond those provided 
by the fourteenth amendment, see, e.g., Setser v. Novacklnv. Co., 657 F.2d 
962, 966 (8th Cir.) (en banc), cert, denied, 454 U.S. 1064 (1981); Local 
Union No. 35, Int’l Bhd. ofElec. Workers v. City o f Hartford, 625 F.2d 416, 
425 (2d Cir. 1980). cert, denied, 453 U.S. 913 (1981); Detroit Police Offi­
cers’ Ass’nv. Young, 608 F.2d 671, 691-92 (6th Cir. 1979), cert, denied, 452 
U.S. 938 (1981). What is clear is that section 1981 applies only to discrimi­
nation based on race or color, see Runyon v. McCrary, 427 U.S. 160, 167- 
68 (1976), so we would still have to examine appellant’s remaining consti­
tutional claims. We therefore assume, without deciding, that section 1981 
extends no farther than the fourteenth amendment.

12Unfortunately, as Justice Brennan noted recently, “although [the] 
Court has consistently held that some elevated level of scrutiny is required 
when a racial or ethnic distinction is made for remedial purposes, it has yet 
to reach consensus on the appropriate constitutional analysis.” Paradise, 47 
CCH S. Ct. Bull, at B1193-94 (plurality opinion).



16 Associated G eneral Contractors v. San F rancisco

1. Authority

Relying on Fullilove v. Klutznick, 448 U.S. 448, 499 (1980), 
appellants contend that only Congress may enact affirmative 
action programs because only Congress has the authority to 
act under section 5 of the fourteenth amendment. However, 
appellants overlook that the Fullilove plurality relied on sec­
tion 5 as authority only for the federal government’s imposi­
tion of affirmative action on state and local governments. 
Fullilove, 448 U.S. at 476-78 (opinion of Burger, C.J.). It 
relied on the commerce clause to justify the imposi tion of the 
program on private contractors. Id. at 475-76.

|6] Like the federal government, a state or its political sub­
division has the authority — indeed the “constitutional 
duty,” Wygant, 106 S. Ct. at 1856 (O’Connor, J. concurring) 
(emphasis original) — to ascertain whether it is denying its 
citizens equal protection of the laws and, if so, to take correc­
tive steps. See Ohio ConuuUOis, Ass’n Kelp, 713 F.2d 167, 
172-73 (6th Cir. 1983); South Fla. Chapter v. Metropolitan 
Dade County, 723 F.2d 846, 852 (1 1th Cir.), cert, denied, 469 
U.S. 871 (1984); see also Paradise, 47 CCH S. Ct. Bull, at 
p. B1194 (“[t]he government unquestionably has a compel­
ling interest in remedying past and present discrimination by 
a state actor”) (plurality opinion), id. at B1214 (Powell, J., 
concurring). More than that we cannot say here. The extent to 
which the city may act depends on the factual record prompt­
ing the action and its range of available options, subjects we 
discuss below.

2. The Findings

i. The city is not just like the federal government with 
regard to the findings it must make to justify race-conscious 
remedial action. As Justice Powell noted in his Fullilove 
concurrence, “[t]he degree of specificity required in the find­
ings of discrimination and the breadth of discretion in the 
choice of remedies may vary with the nature and authority of



Associated G eneral Contractors v. San F rancisco 17

a governmental body.” 448 U.S. at 51 * 16 n.14. This notion 
is also reflected in the plurality opinion:

Here we deal . . . not with the limited remedial 
powers of a federal court, for example, but with the 
broad remedial powers of Congress. It is fundamen­
tal that in no organ o f government, state or federal, 
does there repose a more comprehensive remedial 
power than in the Congress, expressly charged by the 
Constitution with competence and authority to 
enforce equal protection guarantees.

Id. at 483 (emphasis added).

The Court’s concern with the level of government adopting 
race-conscious legislation is based on important theoretical 
and practical considerations. See generally Note, A Madi­
sonian Interpretation o f the Equal Protection Doctrine, 91 
Yale L.J. 1403 (1982) (Madisonian Interpretation). As Justice 
Stevens noted in his Fullilove dissent, ’’because classifications 
based on race are potentially so harmful to the entire body 
politic, it is especially important that the reasons for any such 
classification be clearly identified and unquestionably legit­
imate.” 448 U.S. at 534-35 (footnote omitted); see also Para­
dise, A1 CCH S. Ct. Bull, at B1215 n.2 (“racial distinctions are 
inherently suspect”) (Powell, J., concurring). Where Congress 
itself acts, the broad spectrum of interests represented within 
our federal structure plays an important role in guaranteeing 
that individual rights will not be sacrificed to political expedi­
ency. However, as the Founding Fathers recognized, the nar­
rower a government’s domain, the greater the likelihood of 
oppression:

The smaller the society, the fewer probably will be 
the distinct parties and interests composing it; the 
fewer the distinct parties and interests, the more fre­
quently will a majority be found of the same party; 
and the smaller the number of individuals compos­



18 Associated G eneral Contractors v. San F rancisco

ing a majority, and the smaller the compass within 
which they are placed, the more easily will they con­
cert and execute their plans of oppression. Extend 
the sphere, and you take in a greater variety of par­
ties and interests; you make it less probable that a 
majority of the whole will have a common motive to 
invade the rights of other citizens; or if such a com­
mon motive exists, it will be more difficult for all 
who feel it to discover their own strength and to act 
in unison with each other.

The Federalist No. 10, at 22 (J. Madison) (2d ed. Johns Hop­
kins Univ. Press 1966). See also Madisonian Interpretation, 
91 Yale L.J. at 1410 (“state procedure and structure reinforce 
the tendency of majorities to tyrannize minorities, federal 
procedure and structure weaken any such tendency”).

[7] While we have no occasion to define the precise con­
tours of state or local governments’ power to pass laws that 
favor one race or ethnic group over another, we note that the 
Supreme Court “never has held that societal discrimination 
alone is sufficient to justify a racial classification” by such 
entities. Wygant, 106 S. Ct. at 1847 (plurality opinion); see 
also id. at 1854 (O’Connor, J., concurring). At a minimum, 
the state or local government must be acting to remedy 
government-imposed discrimination, perpetrated by it or by 
one of its departments or divisions.13 Unlike Congress, state 
or local governments do not have the power to discriminate 
on the basis of race simply to dispel the lingering effects of 
societal discrimination, “an amorphous concept of injury 
that may be ageless in its reach into the past.” Bakke, 438 U.S.

13If a particular department is found to have acted in a racially discrimi­
natory fashion, the city is not limited in its remedies to activities within 
that department alone. Once it discovers official discrimination that vio­
lates equal protection, the city may use all available resources to right the 
wrong. But righting the wrong is as far as it may go. It may not use the occa­
sion to commit further discrimination.



Associated G eneral Contractors v. San Francisco 19

at 307 (opinion of Powell, J.); see also Wygant, 106 S. Ct. at 
1854 (O’Connor, J., concurring).

The requirement that the governmental entity itself have 
discriminated finds support a recent Supreme Court case on 
the subject: “[S]ome showing of prior discrimination by the 
governmental unit involved [must be made] before allowing 
limited use of racial classifications in order to remedy such 
discrimination.” Wygant, 106 S. Ct. at 1847 (plurality opin­
ion) (emphasis added); id. at 1853 (O’Connor, J., con­
curring).14 The governmental body in Wvgant, a school 
board, had determined that the percentage ot minority teach­
ers was lower than the percentage of minorities in the student 
population and concluded that this was the result of societal 
discrimination. Such ambient discrimination was held to be 
an insufficient basis for upholding the school board’s affirma­
tive action program.

[8] We recognize that the plurality opinion in Wygant 
commanded only four votes. Absent more definitive guid­
ance, however, we consider the requirement that state and 
local governments act only to correct their own past wrongdo­
ing a persuasive and principled way to reconcile Wygant and 
Fullilove. Moreover, we find the distinction a compelling one. 
Experience reinforces Madison’s observation that at the 
lower levels of government it becomes much more likely “that 
measures [will be] too often decided, not according to the 
rules of justice and the rights of the minor party, but by the 
superior force of an interested and overbearing majority.” 
The Federalist No. 10, at 16; see also id. No. 51, at 163 (J.

14In a case decided earlier this Term, the Justices seemed to agree that a 
finding of official discrimination was the necessary predicate for a district 
court decree imposing racially conscious remedies on employers. Paradise, 
47 CCH S. Ct. Bull, at B1193-98 (plurality opinion), id. at B1216 (Powell, 
J., concurring), id. at B1219 (Stevens, J., concurring), id. at B1225 
(O’Connor, J., dissenting). In the words of Justice Stevens, “the govern­
mental decisionmaker who would make race-conscious decisions must 
overcome a strong presumption against them.” Id. at B1222.



20 Associated G eneral Contractors v. San F rancisco

Madison) (“a coalition of a majority of the whole society 
could seldom take place on any other principles than those of 
justice and the general good”). As Justice Powell stated in 
Bakke, “[t]o hold otherwise would be to convert a remedy 
heretofore reserved for violations of legal rights into a privi­
lege that all institutions throughout the Nation could grant at 
their pleasure to whatever groups are perceived as victims of 
societal discrimination.” 438 U.S. at 310; see note 17 & p.29 
infra. “That is a step [the Court has] never approved.” Id.:, see 
also Wygant, 106 S. Ct. at 1854 (O’Connor, J., concurring) 
(“a governmental agency’s interest in remedying ‘societal’ 
discrimination, that is, discrimination not traceable to its 
own actions, cannot be deemed sufficiently compelling to 
pass constitutional muster under strict scrutiny”).

With these observations in mind, we examine the city’s 
extensive findings in support of the ordinance.

ii. To its credit, the city did not act precipitously in adopt­
ing the ordinance. The record discloses a careful and deliber­
ate effort to ascertain whether MBEs (as well as WBEs) had 
been the subject of invidious discrimination and, if so, what 
to do about it. The process started on December 13, 1982, 
when the Board of Supervisors adopted Resolution No. 952- 
82 “calling upon the Mayor to request [the Human Rights 
Commission] to hold public hearings to investigate the extent 
of minority and women business participation in City and 
County contracts.” Human Rights Commission of San Fran­
cisco, Investigation Into Minority and Women Business Par­
ticipation in City Contracting (October 1983) (HRC Rep.). 
Pursuant to this resolution, the HRC staff solicited informa­
tion from the city’s 56 departments, divisions and bureaus in 
an effort to develop a picture of their procurement practices. 
The Commission checked the responses for accuracy and 
completeness; it then issued press releases and bought several 
newspaper advertisements inviting input from anyone with 
additional views or information. Letters were sent to 
“[fjourteen minority and women business associations . . .



Associated G eneral Contractors v. San Francisco 21

[and] more than 750 companies and individuals, with names 
drawn from almost every available source.” Id. at 6.

19] Over 40 witnesses testified during four days of hearings. 
Twenty witnesses submitted written statements. Id. at 6-7. 
No one who wanted to testify was turned away. Officials of 
some of the city’s departments also testified and answered 
questions. Many witnesses advocated race-conscious affirma­
tive action measures for MBEs; no one spoke out against 
them. Id. at 92-93. The Commission then analyzed and sum­
marized this mass of information in a 172-page report to the 
Board of Supervisors. The Board conducted its own hearings 
and received further written reports. Only then did it pass the 
ordinance.

[10] The city’s procedures in considering and enacting the 
ordinance bespeak a careful and deliberate effort, one deserv­
ing the greatest deference consistent with our constitutional 
responsibility. At the same time, we are bound to scrutinize 
the ordinance closely and skeptically, as is appropriate when­
ever governmental action is challenged on the ground that it 
impairs personal liberties guaranteed by the constitution. 
“Racial and ethnic distinctions of any sort are inherently sus­
pect and thus call for the most exacting judicial exami­
nation.” Bakke, 438 U.S. at 291 (opinion of Powell, J.).

[11] The city’s thorough fact-finding process makes pain­
fully clear what the city did not conclude in its findings. Most 
significantly, there is no finding of “prior discrimination by 
the governmental unit involved.” Wygant, 106 S. Ct. at 1847 
(plurality opinion).15 The findings discuss at some length such 
matters as the “historic discrimination against minorities and

15The commission did report allegations “that some staff have actually 
discriminated on the basis of race in awarding contracts.” HRC Rep. 106. 
However, the commission made no finding of actual discrimination. The 
Board made no mention of these allegations, nor did it make findings of dis­
crimination. We can only conclude that the allegations were not substanti­
ated.



22 Associated G eneral Contractors v. San F rancisco

women, often officially sanctioned and enforced by govern­
ment from the inception of our Republic to the present” and 
the “centuries of limited access to the marketplace” that these 
groups have suffered. Ordinance §§ 12D.2(1), (2).

The findings also fault “the departments and awarding 
authorities of the city and county of San Francisco” for 
“functioning without specific uniform standards and criteria 
in the award of contracts and leases,” noting that “minority- 
owned and women-owned businesses and other small local 
businesses are particularly disadvantaged” by this lack of uni­
form standards.16 Id. § 2(7)(a)(c). But nowhere does the city 
intimate that there has been any discrimination against 
minorities by city officials or under color of the city’s 
authority.17 Indeed, the only finding directly on point is that

16The inclusion of “other small local businesses” among those particu­
larly disadvantaged by the city’s haphazard contracting policies undercuts 
the city’s approach somewhat. In the first place, it suggests that disadvan­
tages suffered by MBEs and WBEs may be more a function of their size than 
the race or gender of their owners. Also, it leads to the inference that small 
businesses that are neither MBEs nor WBEs will now suffer a double 
whammy: the inequities of the prior system plus the further competitive 
disadvantage visited upon them by the ordinance. Normally, burdens of 
remedial measures should be imposed on the “group which was in position 
to benefit from those [discriminatory] practices.” Ohio Contractors Ass’n v. 
Keip. 713 F.2d 167, 173 (6th Cir. 1983). “[T]here is a measure of inequity 
in forcing innocent persons . . .  to bear the burden of redressing grievances 
not of their making.” Bakke, 438 U.S. at 298 (opinion of Powell, J.).

17What the findings do contain is the following, which we find troubling:
[I]n a city which has a minority population of nearly 50%, a female 
population of nearly 60%, and a civilian work force which is 45% 
female, the public interest will best be served by our enactment of 
an Ordinance mandating policies and programs which will 
enhance the opportunities for women-owned and minority-owned 
businesses to become prime contractors in the provision of goods 
and services to the City and County of San Francisco . . . .

Ordinance § 12D.2(3). This finding suggests that those who benefit from the 
ordinance may well outnumber those who suffer from it, coming uncom­
fortably close to demonstrating the wisdom of Madison’s warning about



Associated G eneral Contractors v. San Francisco 23

“[m]ost departments . . . stated that the ethnicity of the con­
tractor was unknown to them.” HRC Rep. 106. Absent a find­
ing of discrimination by city officials, “it cannot be said that 
the government has any greater interest in helping one indi­
vidual than in refraining from harming another. Thus, the 
government has no compelling justification for inflicting such 
harm.” Bakke, 438 U.S. at 308-09 (opinion of Powell, J.).18

the ease with which majorities in small communities can define the com­
mon good in a way that “will invade the rights of other citizens.” The Feder­
alist No. 10, at 22. See also Madisonian Interpretation, 91 Yale L.J. at 1407 
(“[a]t the state level. . .  the smaller number of factions facilitates the form­
ing of entrenched majority coalitions’̂

18Both circuit decisions the city cites as approving race conscious reme­
dies dealt with situations where there had been a finding of official discrimi­
nation. In Ohio Contractors Ass’n, ’’the United States District Court for the 
Southern District of Ohio [had] found that the state had become ‘a joint 
participant’ with private industry and certain craft unions in a pattern of 
racially discriminatory conduct which excluded black laborers from work 
on public construction projects.” 71 3 F.2d a t ' 70-7'. The Ohio state courts 
made similar findings as to discrimination in the awarding of state con­
tracts. Id. at 171. The Ohio General Assembly “accepted the findings of 
Ohio courts, executive department investigations and earlier studies by 
committees of the legislature itself’ in passing the statute in question. Id.

Our reading of Ohio Contractors is supported by the Sixth Circuit’s more 
recent opinion in J. Edinger & Son v. City o f Louisville, 802 F.2d 213 (6th 
Cir. 1986). The Sixth Circuit there held unconstitutional a bid preference 
for minorities, women and the handicapped on Louisville’s supply and ser­
vice contracts. Like San Francisco, Louisville aimed its ordinance at “ ‘the 
correction of unequal opportunities historically generated and made 
available’ ” to those groups. Id. at 214. Distinguishing Ohio Contractors, 
the court held that a discrepancy between the composition of the popula­
tion and the amount of business the city gave each group was insufficient 
to prove the intentional discrimination necessary to uphold the classifica­
tion. Id. at 216.

The Eleventh Circuit’s opinion in South Florida Chapter v. Metropolitan 
Dade County, 723 F.2d 846 (11th Cir.), cert, denied, 469 U.S. 871 (1984), 
is somewhat less clear on this point, noting only that “although the present 
county government had not engaged in discriminatory practices, there had 
been ‘identified discrimination against Dade County black contractors at



24 Associated G eneral Contractors v. San Francisco

[12] While the absence of a finding of official discrimination 
is the ordinance’s most significant shortcoming, there are 
other serious problems as well. Before the city “embarks on 
an affirmative action program, it [must have] convincing evi­
dence that remedial action is warranted.” Wygant, 106 S. Ct. 
at 1848 (plurality opinion). The Board relied heavily on sta­
tistics purportedly demonstrating the “virtual exclusion of 
minority-owned and women-owned businesses from City 
contracts.” Ordinance § 12D.2(7)(e). The statistics do not, 
however, bear out this assertion.19 For example, the findings 
note that “[MBEs] and [WBEs] combined received less than 
three percent (2.8 percent) of all prime contracts (exclusive of 
subcontracts) awarded during a base period of 1981 and 
1982,” id. § .2(7)(d), “notwithstanding the fact that MBEs

some point prior to the county’s present affirmative action program.’ ” Id. 
at 853 (emphasis original). It does not matter of course whether discrimina­
tion is committed by current officials or their predecessors; government has 
the responsibility to correct its own past misconduct, whether or not the 
offending employees are still in place.

19The court’s responsibility to assure itself that statistics employed to jus­
tify discriminatory practices are relevant and meaningful was emphasized 
by Justices Powell and O’Connor in Wygant. 106 S. Ct. at 1847-48 (plural­
ity opinion); id. at 1856-57 (O’Connor, J., concurring). There seems to be 
considerable agreement on this point. As Justice Marshall noted in dissent, 
“[w]hat is most important, under any approach to the constitutional analy­
sis, is that a reviewing court genuinely consider the circumstances of the 
provision at issue.” Id. at 1862. See also Hazelwood School Dist. v. United 
States, 433 U.S. 299, 308 (1977) (relevant comparison is “between the 
racial composition of [the school’s] teaching staff and the racial composi­
tion . . .  in the relevant labor market”); International Bhd. o f Teamsters v. 
United States, 431 U.S. 324, 340 (1977) (“usefulness [of statistics to estab­
lish racial discrimination] depends on all the surrounding facts and 
circumstances”); Craig v. Boren, 429 U.S. 190, 202 (1976) (“the statistics 
exhibit a variety of other shortcomings that seriously impugn their value to 
equal protection analysis”); Edinger, 802 F.2d at 216 (relevant statistical 
showing is “disparity between the percentage of qualified minority business 
contractors doing business in [the county] and the percentage of bid funds 
awarded to those businesses. Defendant’s reliance upon general population 
statistics is especially troubling.”).



Associated G eneral Contractors v. San Francisco 25

represent in excess of thirty-three percent (33%), and WBEs 
twenty-five percent (25%) of all San Francisco based firms.” 
Id. § ,2(7)(e). While these numbers appear compelling, closer 
examination reveals flaws.

[13] In the first place, the statistics seriously undercount 
minority (and women) participation in city contracting. As 
the ordinance recognizes elsewhere,20 subcontracts account 
for a large portion of the city’s contracting dollars. There is no 
finding—and we decline to assume—that male Caucasian 
contractors will award contracts only to other male Cauca­
sians. If women- and minority-owned businesses are as preva­
lent as the city’s findings suggest, such businesses may be 
earning a substantial portion of the city’s contracting dollars 
by way of subcontracts. The curious exclusion of subcontracts 
in the city’s findings21 leaves us, as it did the Board, without 
an accurate picture as to the extent of minority and women 
participation in the city’s procurement process.22

20For example, the ordinance imposes stringent requirements for the 
award of subcontracts. Section 12D. 9(b)(1) compels a bidder for a prime 
construction contract with a city agency to submit a bid that includes MBE 
and WBE subcontractor participation in percentages equal to or greater 
than the percentage that the agency has as its goal, usually 30 percent MBE 
and 10 percent WBE.

21The Report contains virtually no information as to subcontracts 
because “[n]o department was requested to submit subcontracting data as 
part of this report.” HRC Rep. 97.

2ZAlthough the Human Rights Commission did not ask the various city 
departments for subcontracting data, it did choose some construction and 
architect-engineer (A/E) contracts to monitor. The results seem to confirm 
that an exclusive focus on prime contracts significantly understates the 
degree of participation by minority- and women-owned businesses.

Percentage of Contracting Dollars Awarded to M/WBE’s
1981 1982

Construction A/E Construction A/E

prime 3.8 15.8 1.7 19.0
sub 14.3 24.0 19.3 22.7

HRC Rep. 96.1-97.



26 Associated G eneral Contractors v. San F rancisco

[14] In addition, the reference to 33 percent minority and 
25 percent women enterprises in San Francisco is over- 
inclusive. These figures encompass a variety of businesses 
that do not provide goods or services subject to significant 
contracting by the city: ethnic restaurants, beauty parlors, 
newsstands and grocery stores, for example. The HRC Report 
in fact noted that “[a]vailability [of MBEs and WBEs] was 
difficult to assess accurately, as it is influenced by the number 
of firms which actually want to work for the City and also by 
the number of firms offering the kinds of services the City 
needs in any given year.” HRC Rep. 98-99. Findings that 
would justify classifications based on race, potentially impair­
ing the constitutional rights of those who are disadvantaged 
by them, must be drawn much more precisely and based upon 
more carefully selected and finely tuned data than those upon 
which the city relies here. See Wygant, 106 S. Ct. at 1848 (plu­
rality opinion) (comparison between the racial composition 
of the staff and the racial composition of the student body is 
irrelevant); id. at 1857 (O’Connor, J., concurring); Edinger, 
802 F.2d at 214-16 (statistical comparison must be with rele­
vant groups, “not merely rely upon general population 
statistics”).

[15] Moreover, we note an inherent difference between 
Congress and the city, a difference that bears upon the find­
ings on which they each may base remedial action. When 
Congress adopts a program such as that considered in 
Fullilove, it acts entirely with respect to persons within its 
jurisdiction because its power extends throughout the United 
States. The city has authority only over those within its bor­
ders; its actions, nevertheless, can have significant spillover 
effects. Here, for example, the city contracts with individuals 
and firms based outside San Francisco as imposition of the 
LBE preference acknowledges. When adopting race­
conscious remedies that extend benefits and burdens beyond 
its territorial boundaries, the city is exercising authority with 
respect to individuals outside the scope of its legislative pur­
view. If such authority can be sustained, it must be based on



Associated G eneral Contractors v. San Francisco 27

very specific findings that actions the city has taken in the past 
have visited racial discrimination on such individuals.

The findings upon which the ordinance is based do not 
address this issue; all of the data the city considered pertains 
to firms within San Francisco. See, e.g., Ordinance § 12D.2(7) 
(e); HRC Rep. 101. That the city contracts with firms outside 
its borders seriously undercuts the basis for its conclusions. 
Contract awards should reflect the pool of available contrac­
tors, not the city’s ethnic makeup. See note 17 supra; Edinger, 
802 F.2d at 215.

[16] Finally, the findings do not support the ordinance’s 
sweeping definition of MBEs as those businesses owned or 
controlled by “ethnic persons of color including American 
Indians, Asians (including, but not limited to, Chinese, Japa­
nese, Koreans, Pacific Islanders, Samoans, and Southeast 
Asians), Blacks, Filipinos and Hispanics.” Ordinance 
§ 12D.5. The ordinance and the Human Rights Commission 
report contains no evidence whatsoever—much less particu­
larized findings—supporting the proposition that each of the 
listed ethnic groups included in this categorization has been 
the subject of discrimination.23 Like the Wygant plurality, 
106 S. Ct. at 1852 n. 13, we are unable to uphold such a broad 
classification of who qualifies as a minority for purposes of 
the city’s remedial affirmative action program. See also 
Bakke, 438 U.S. at 309 n.45 (opinion of Powell, J.) (inclusion 
of Asians in special admissions group is “especially curious” 
in light of substantia! number of A sians admitt ed through reg­
ular admissions process). “Preferring members of any one 
group for no reason other than race or ethnic origin is dis­

23T o the extent that the HRC Report addresses the issue, it seems to sup­
port the contrary conclusion. The Report notes that “Asian, Black, and His­
panic contractors represented 96% of the MBE/WBE participation in 
construction contracts. The underrepresentation of American Indians, Fili­
pinos, and women was apparently due to their extremely limited availabil­
ity as construction firms.” HRC Rep. 99.



crimination for its own sake. This the Constitution forbids ” 
Id. at 307.

3. The Means

[17] Even if the findings were adequate to support some 
race-conscious remedies, we would have to consider whether 
the means adopted by the ordinance are appropriate to that 
end. Race-conscious distinctions must be narrowly tailored 
to eliminate the consequences of past discrimination. See 
Bakke, 438 U.S. at 299 (opinion of Powell, J.); Paradise, 47 
CCH S. Ct. Bull, at B1199-1213 (plurality opinion), B1226 
(O’Connor J., dissenting); Wygant, 106 S. Ct. at 1850 (plural­
ity opinion); Fullilove, 448 U.S. at 484 (opinion of Burger, 
C.J.); In re Griffiths, 413 U.S. 717, 721-22 (1973). “Racial 
classifications are simply too pernicious to permit any but the 
most exact connection between justification and classi­
fication. Fullilove, 448 U.S. at 537 (Stevens, J., dissenting). 
This means that the classification adopted must “ ‘fit’ with 
greater precision than any alternative means.” Wygant, 106 
S. Ct. at 1850 n.6 (plurality opinion) (citing Ely, The Constitu­
tionality o f Reverse Racial Discrimination, 41 U Chi L Rev 
723, 727 n.26 (1974)).

[18] In addition, the remedial program must not impose a 
disproportionate burden upon few individuals. See Ohio 
Contractors Ass’n, 713 F.2d at 173 (burden must be “rea­
sonable”). In upholding the program in Fullilove, the plurality 
opinion noted as follows:

The actual burden shouldered by non-minority 
firms is relatively light in this connection when we 
consider the scope of the public works program com­
pared with overall construction contracting oppor­
tunities.72

72The Court of Appeals relied upon Department of 
Commerce statistics to calculate that the $4.2 billion

28____Associated General Contractors v. San Francisco



Associated G eneral Contractors v. San F rancisco 29

in federal grants conditioned upon compliance with 
the MBE provision amounted to about 2.5% of the 
total of nearly $ 170 billion spent on construction in 
the United States during 1977. Thus, the 10% mini­
mum minority business participation contemplated 
by this program would account for only 0.25% of the 
annual expenditure for construction work in the 
United States. Fullilove v. Kreps, 584 F.2d at 607.

448 U.S. at 484-85 and n.72; see also id. at 514-15 (Powell, J., 
concurring). In striking down the remedial measures in 
Wygant, the plurality noted this aspect of Fullilove, 106 S. Ct. 
at 1850-51, finding that the burden imposed by the Jackson 
school board’s program fell squarely upon “Wendy Wygant 
and other individuals who claim that they were fired from 
their jobs because of their race.” Id. at 1850 n.8. In upholding 
the district court’s remedial order in Paradise, a plurality of 
the Justices felt that the decree “did not impose an unaccept­
able burden on innocent third parties.” Paradise, 47 CCH S. 
Ct. Bull, at B1209 (plurality opinion); id. at B1227 (“[t]he 
effect of the order on innocent white troopers is likely to be 
relatively diffuse”) (Powell, J., concurring).24

24While we consider our holding as entirely consistent with Paradise, we 
note that the Court there may have applied a somewhat more deferential 
standard of review than we must apply here. Some of the Justices appear to 
be of the view that when the remedial measures are imposed by a district 
court in a case where official discrimination is established, “we must 
acknowledge the respect owed a District Judge’s judgment that specified 
relief is essential to cure a violation of the Fourteenth Amendment.” 
Paradise, 47 CCH S. Ct. Bull, at B1211 (plurality opinion); id. at B1219 n. 1 
(noting “the novelty of the suggestion that a test that may be appropriate for 
determining the constitutionality of state executive or legislative action 
should also be used in reviewing federal judicial decrees”), and id. at B1224 
n.4 (“remedial issue. . .  is dramatically different from the question whether 
a statutory racial classification can be justified as a response to past societal 
wrong”) (Stevens, J., concurring); but see id. at B1215 n.2 (“[bjecause racial 
distinctions are inherently suspect whether they are imposed by a legisla­
ture or a court, we have never measured court-ordered affirmative action 
remedies against a less demanding standard”) (Powell, J., concurring).



30 Associated G eneral Contractors v. San F rancisco

The requirement that the remedial program be drawn so as 
to avoid a disproportionately large burden on an individual 
or group of individuals is inherent in the equal protection 
clause. As the Court has noted, “rights created by the first sec­
tion of the Fourteenth Amendment are, by its terms, guaran­
teed to the individual. The rights established are personal 
rights.” Shelley v. Kraemer. 334 U.S. 1, 22 (1948). The more 
severely the burden of governmental action falls upon an 
individual or an identified group singled out on account of 
race, the more appropriate it becomes for a court to intercede 
to assure “that the burden . . .  is precisely tailored to serve a 
compelling governmental interest. The Constitution guaran­
tees that right to every person regardless of his background.” 
Bakke, 438 U.S. at 299 (opinion of Powell, J.).

[19] Because the ordinance casts such a wide net,25 it is dif­
ficult to tell whether the burden it imposes is broadly shared 
as in Full Hove and Paradise, or concentrated as in Wygant.

Giving a district court’s decree greater deference makes considerable 
sense. A district judge, dealing with a specific case, is likely to address prob­
lems narrower in scope than a legislature. Moreover, his findings, based on 
the adversary process, are apt to be much more finely tuned. And, “[t]he 
district court has first-hand experience with the parties and is best able to 
deal with the ‘flinty, intractable realities of day-to-day implementation of 
constitutional commands.’ ” Paradise, 47 CCH S. Ct. Bull, at B1211-12 
(plurality opinion) (quoting Swann v. Charlotte-Mecklenburg Board o f Edu­
cation, 402 U.S. 1, 6 (1971). See also Fullilove, 448 U.S. at 527 (Stewart, J., 
dissenting) (suggesting that a court of equity, unlike a legislature, has the 
“dispassionate objectivity” and the “flexibility” necessary “to mold a race­
conscious remedy around the single objective of eliminating the effects of 
past or present discrimination”) (cited with approval in Paradise, 47 CCH 
S. Ct. Bull, at B 1212 n.34) (plurality opinion).

25Cases that have approved race-conscious remedies have generally 
involved a much more limited subject matter. See, e.g„ Fullilove, 448 U.S. 
at 484 (construction contracts); South Florida, 723 F.2d at 848 (construc­
tion contracts); Ohio Contractors Ass’n, 713 F.2d at 168-69 (construction 
contracts; “contracts for the purchase of equipment, materials, supplies or 
contracts for the purchase of insurance”).



Associated G eneral Contractors v. San Francisco 31

Fullilove, Wygant and Paradise dealt with discrete activities; 
the Court there could determine who would be likely to bear 
the burdens and how such burdens would be distributed. The 
ordinance here covers a much broader range of activities: 
whatever the city acquires by purchase or contract. This 
includes everything from construction and consulting to 
interpreting and book binding. HRC Rep. 49, 56, 60-61.26 
Depending on the industry in question, the degree of minor­
ity participation, and the extent to which the city’s patronage 
amounts to a significant share of the market for the particular 
good or service, the burden imposed by the ordinance will 
vary.27 In an industry where city procurement is negligible or

26One need only leaf through the HRC Report for a sampling of the goods 
and services covered by the city’s procurement process: engineering, envi­
ronmental, graphic arts and insurance services, HRC Rep. 34; legal, 
accounting and appraisal services, id. at 37-38; examinations, id. at 40; ser­
vices of physicians and other health care providers, id. at 47-48; bookbind­
ing and book supplies id. at 49; counseling, tutoring, crisis intervention and 
recreational services, id. at 49.1; funeral services, id. at 53-54; communica­
tions and business systems, id. at 56; security services, id.; microfilm, mag­
netic tape, hardware, Christmas trees, bus parts, Freon gas, autos and 
trucks, dryers, pottery, and eggs; police, electric, plumbing, laundry, cam­
era and graphic arts supplies; and garden, office and x-ray equipment, id. at 
63-66; mailing, typesetting, steam cleaning and respiratory therapy, id.; 
and computer systems, id. at 71.

In addition, monetary awards were made to a variety of non-profit orga­
nizations such as the Boys Club of America, id. at 47, and the San Francisco 
Performing Arts Foundation. Id. at 72. The city also awarded franchises. 
Id. at 33, 61. Finally, the city deposited its funds at various banks and sav­
ings and loan associations. Id. at 71.

27Neither the HRC nor the Board addressed whether MBEs or WBEs in 
particular industries already received substantial business from the city. 
The findings do illustrate, however, that the degree of MBE and WBE par­
ticipation varied considerably from industry to industry. For example, 
minority firms seem to have done well in the banking industry', with 38.95% 
of the city’s 1981-82 deposits invested in minority-owned banks and sav­
ings and loan associations. The following year, a full 80.26% of the city’s 
funds were deposited with MBEs. HRC Rep. 71. In the construction of the 
George R. Moscone convention center, MBEs received 21% of the prime 
contracting dollars and 22.22% of the subcontracting amounts. Id. at 36.



MBEs make up a relatively small portion of the market, the 
burden occasioned by giving MBEs a preference will be 
spread broadly and lightly. By contrast, a non-MBE business 
in an industry heavily dependent upon city procurement 
where MBEs have a significant share of the market may well 
be destroyed.28 Nothing in the ordinance prevents this from 
happening. Yet, given the ordinance’s breadth, there is a sig­
nificant risk that it may.

This concern is properly considered in the context of a 
facial challenge because the ordinance lacks adequate admin­
istrative mechanisms to prevent or ameliorate such poten­
tially harsh results. The existence of appropriate admini­
strative remedies played a pivotal role in the plurality’s opin­
ion in Fullilove. See 448 U.S. at 486-89. The plurality there 
noted:

Even in the context of a facial challenge such as is 
presented in this case, the MBE provision cannot 
pass muster unless, with due account for its adminis­
trative program, it provides a reasonable assurance 
that application of racial or ethnic criteria will be 
limited to accomplishing the remedial objectives of 
Congress and that misapplications of the program 
will be promptly and adequately remedied admin­
istratively.

Id. at 487. In determining the adequacy of the available 
administrative remedies the plurality noted that the proce­
dures could be used to rebut

32 Associated G eneral Contractors v. San F rancisco

28A recent national study noted the differences in minority participation 
between various industries: “Relative to the distribution of all businesses, 
black-owned businesses are more than proportionately represented in the 
transportation industry, but considerably less than proportionately repre­
sented in the wholesale trade, manufacturing, and finance industries.” 
United States Small Business Administration, The State o f Small Business: 
A Report o f the President Transmitted to the Congress 201 (1986) (The State 
of Small Business).



Associated G eneral Contractors v. San Francisco 33

[t]wo fundamental congressional assumptions [that] 
underlie the MBE program: (1) that the present 
effects of past discrimination have impaired the 
competitive position of businesses owned and con­
trolled by members of minority groups; and (2) that 
affirmative efforts to eliminate barriers to minority- 
firm access, and to evaluate bids with adjustment for 
the present effects of past discrimination, would 
assure that at least 10% of the federal funds granted 
under the Public Works Employment Act of 1977 
would be accounted for by contracts with available, 
qualified, bona fide minority business enterprises.

Id.

The Fullilove plurality also thought it significant that 
administrative procedures were available “to avoid dealing 
with an MBE who is attempting to exploit the remedial 
aspects of the program by charging an unreasonable price, 
i.e., a price not attributable to the present effects of past 
discrimination,” id. at 488; that these procedures give grant­
ees “the opportunity to demonstrate that their best efforts will 
not succeed or have not succeeded in achieving the statutory 
10% target for minority firm participation within the limita­
tions of the program’s remedial objectives,” id.', that “[t]he 
administrative complaint mechanism allows for grievances of 
prime contractors who assert that a grantee has failed to seek 
a waiver in an appropriate case,” id. at 489; and that “the use 
of racial and ethnic criteria is premised on assumptions 
rebuttable in the administrative process givfing] reasonable 
assurance that application of the MBE program will be lim­
ited to accomplishing the remedial objectives contemplated 
by Congress and that misapplications of the racial and ethnic 
criteria can be remedied.” Id.

[20] While the San Francisco ordinance provides some 
administrative procedures,29 they do not have the scope or

29For example, as to certain contracts section 12D.9(B)(2) allows a city 
agency to apply to the Director for a waiver based on a claim that not



34 Associated G eneral Contractors v. San Francisco

breadth of those discussed in such detail in Fullilove. 
Aggrieved contractors have no mechanism for asserting that 
the ordinance’s fundamental premises are inapplicable to 
their industry; that the ordinance will have a harsh and dis­
proportionate impact upon them far exceeding the sharing of 
the burden approved in Fullilove; or that the ordinance is, in 
particular instances, operating not to eradicate the effects of 
past discrimination, but to give a windfall to an MBE “who 
is attempting to exploit the remedial aspects of the program.” 
448 U.S. at 488. We read Fullilove, particularly in light of 
Wygant, as requiring concrete assurances that harsh and dis­
proportionate effects upon particular contractors will be con­
sidered and corrected by individualized administrative 
procedures.30 This appears to be entirely lacking in the ordi­
nance before us.31

enough qualified MBEs or WBEs can be found to provide a particular good 
or service, and appeal a denial of xhat waiver to the Human Rights Com­
mission; and section 12D. 6(B)(2) contemplates procedures for qualifying 
businesses as bona fide MBEs, WBEs or LBEs.

30Administrative procedures will be adequate if the decision-making 
body has the opportunity to consider the appropriateness of awarding each 
contract on the basis of race-conscious preferences. The “extensive review 
provisions,” 723 F.2d. at 854, approved by the Eleventh Circuit in South 
Florida appear to be sufficient. There, the Board of County Commissioners 
—the very body that passed the challenged ordinance—made a separate 
determination with respect to every contract before any race-conscious 
measures were adopted. Id. at 853. Moreover, the Board acted only after a 
county department had recommended that “race-conscious measures are 
appropriate for the project being reviewed,” which recommendation had to 
be approved by the County Manager and a three-member Contract Review 
Committee. Id. These procedures are particularly impressive because the 
ordinance in South Florida addressed only one class of contract, those for 
construction services. Id. at 858. The uncertainty, and the consequential 
need for case-by-case decision-making, is much greater here, where the 
ordinance covers a vast array of goods and services. See p. 32-33 & note 26 
supra.

31The administrative procedures the city does provide are both inade­
quate and misdirected. They are inadequate because requests for waiver



Associated G eneral Contractors v. San F rancisco 35

[21] We also conclude that, on the basis of the record it had 
compiled, the city was not justified in turning to such drastic 
remedies as bid preferences and set-asides, at least not in the 
first instance.32 We must give “particularly intense scrutiny to 
whether a nonracial approach or a more narrowly tailored 
racial classification” could remedy the limited participation 
of minorities in the contracting process. Wygant, 106 S. Ct. at 
1850 n.6 (plurality opinion) (quoting Greenawalt, Judicial 
Scrutiny o f “Benign" Racial Preference in Law School Admis­
sions, 75 Colum. L. Rev. 559, 578-79 (1975)). The findings on 
which the ordinance is based disclose a variety of causes for 
the limited minority participation in the city’s procurement 
process: the lack of uniform criteria for contracting with the 
city’s departments, Ordinance § 12D.2(7)(a); excessive bond­
ing and insurance requirements “often unrelated to actual 
performance,” id. § ,2(7)(1); and lack of notice of potential

can be made only by a city department; there is no mechanism whereby an 
aggrieved contractor can invoke the administrative relief provided by the 
ordinance. They are misdirected because they address those situations 
where the rights of non-MBE contractors are least likely to be impaired: 
where sufficient MBEs cannot be found to comply with goals and set asides. 
While San Francisco’s administrative procedures serve a useful purpose in 
safeguarding the city from the ordinance’s harsh effects, it does not do the 
same for those whose rights to equal protection the ordinance might 
impair.

32In approving the race-conscious remedial decree in Paradise, the plu­
rality reasoned that earlier, race-neutral attempts at correcting the problem 
of official discrimination had proven ineffective. Paradise, 47 CCH S. Ct. 
Bull, at B1184-93; see also id. at B1214 (defendant had “repeatedly failed 
to carry out court orders”) (Powell, J., concurring). On the basis of this his­
tory, the plurality concluded that “it is doubtful. . .  that the District Court 
had available to it any other effective remedy.” Id. at B1204 (quoting Sheet
Metal Workers v. EEOC, 478 U.S__ , _(1986)). The plurality also noted
that “[sjome promptness in the administration of the relief was plainly jus­
tified . . .  and use of deadlines or end-dates had proven ineffective.” 
Paradise 47 CCH S. Ct. Bull, at B1207.



36 Associated G eneral Contractors v. San F rancisco

contract awards due to limited advertising and outreach, id. 
§ -2(7)(k).33

[22] Each of these problems was capable of a direct, specific 
response, having far less dramatic effects on individual rights 
than the remedies actually adopted.34 Thus, the city could 
have attempted to correct the lack of uniform policies by 
adopting procurement guidelines and limiting the scope of 
departmental discretion. The arbitrary impositi on of bonding 
and insurance requirements could have been eliminated by 
revising insurance and bonding policies to bring them into 
conformity with the city’s needs. The lack of notice and out­
reach could have been remedied by increasing the resources 
devoted to advertising procurement opportunities to groups 
the city believes are underrepresented in the procurement 
process. Moreover, it would have been entirely permissible 
for the city to provide educational programs to acquaint 
minority and other businesses with city contracting opportu­
nities and the procedures required for preparing and submit­
ting bids.35

33The HRC Report listed similar problems: “lack of prompt payment; 
the need for technical assistance to MBE/WBEs; lack of availability of 
information on procedures used to choose consultants.” HRC Rep. 91-92.

34We have no quarrel with the Sixth Circuit’s observation that “there is 
no requirement that the least restrictive means be chosen.” Ohio Contrac­
tors Ass’n, 713 F.2dat 174. See also Paradise, 47 CCH S. Ct. Bull, at B1211 
(least restrictive means not required); but see Wygant, 106 S. Ct. at 1850 
n.6 (plurality opinion). The city has a broad range of options available to 
it from which it may choose freely. However, if it wishes to resort to race­
conscious remedies, it must show a necessity for doing so; this normally 
means that other remedies have been given a fair try and have proved inef­
fective. That was the situation in Ohio Contractors Association. Id. at 174, 
176.

35The HRC Report suggested several such options, including “[estab­
lishment of a City Liaison Office staffed by minorities and women; . . .  
training seminars for City staff awarding prime contracts; . . .  breaking 
down large prime contracts into smaller components;. . .  an over-all central
office listing all bids and Requests for Proposals pending and current___”
HRC Rep. 92 (emphasis original). Many of these measures were enacted 
along with the quotas and preferences. See, e.g., Ordinance §§ 12D.8 (A), 
(B)(7).



Associated G eneral Contractors v. San F rancisco 37

[23] We do not hold that the city is forever limited to such 
moderate remedial measures. We do read the admonition 
that only a “limited and properly tailored remedy” may be 
adopted, Fullilove, 448 U.S. at 484 (opinion of Burger, C.J.), 
as requiring exhaustion of more neutral measures before 
resorting to race-conscious ones.36 That is what happened in 
Fullilove. Before passing the statute there in issue the federal 
government had tried less sweeping remedies only to see 
them fail. Id. at 466-67,37 In attempting to protect and recon­
cile the sometimes conflicting rights and interests of all its cit­
izens, the city must do no less.

B. The WBE Preferences

Laws that afford special privileges to women raise some of 
the most difficult and sensitive questions about the permissi­
ble bounds of governmental action within the confines of the

36The HRC Report suggests that race-neutral measures can be effective. 
It notes that “[gjenerally, the departments with which the HRC has work 
order funding to monitor and implement affirmative action progress . . .  
have significantly higher MBE and WBE participation than those with 
which the HRC does not have such a relationship.” HRC Rep. 96. Such 
measures also appear to be working well in Santa Clara, a community near 
San Francisco. Bunzel, Helping Minority Firms, Hurting No One, Wall St. 
J., September 12, 1986, at 24, col. 4. Santa Clara County’s MBE program 
includes a countywide listing of all MBE firms and a requirement that a cer­
tain percentage of a project’s total value be procured from them. However, 
the requirement need not be met if a contractor shows it (a) contacted seven 
MBE or WBE firms (if that many are on the county’s list); and (b) none of 
those contacted submitted the lowest bid. “The county has not assumed. . .  
that it has a responsibility to assist MBEs and other small business to 
develop their capabilities by subsidizing them through limiting the award 
of contracts only to such firms. [The] real goal is to go out to those groups 
and get an honest bid back.” Id. at cols. 5-6. Over the past ten years of the 
program’s existence, the result has been a significant increase in the dollar 
value of contracts awarded to MBEs and substantial savings to the county, 
since its “undeviating policy” is that contracts go to the lowest responsive 
bidder. Id. at col. 6.

37As noted above, this was also the situation confronted by the Court in 
Paradise. See note 32 supra.



38 Associated G eneral Contractors v. San F rancisco

equal protection clause. The mid-level review that the Court 
has applied to such classifications provides “relatively little 
guidance in individual cases.” Madisonian Interpretation, 91 
Yale L.J. at 1412.38 The relevant considerations are numer­
ous and complex.

As the San Francisco City Council found, women have suf­
fered disparate treatment in the area of business and employ­
ment. Some of this may be due to the fact that women, as 
child-bearers, suffer career disruptions to which men are 
much less subject. However, many of the disadvantages 
women have suffered result from stereotypes concerning their 
proper roles and abilities.39 Only recently have women begun 
to assume their rightful place in business and the 
professions.40

38Borrowing a phrase from another area of constitutional law, the Court’s 
opinions in the area of gender discrimination have involved “essentially ad 
hoc, factual inquiries” into the particular circumstances of each program. 
See MacDonald, Sommer & Frates v. Yolo County, 106 S. Ct. 2561, 2566 
(1986).

39An 1875 decision of the Wisconsin Supreme Court, denying a woman 
admission to its bar, captures the essence of this thinking. The court there 
stated:

The law of nature destines and qualifies the female sex for the 
bearing and nurture of the children of our race and for the custody 
of the homes of the world and their maintenance in love and 
honor. . . .  There are many employments in life not unfit for 
female character. The profession of law is surely not one of these.
The peculiar qualities of womanhood, its gentle graces, its quick 
sensibility, its tender susceptibility, its purity, its delicacy, its 
emotional impulses, its subordination of hard reason to sympa­
thetic feeling, are surely not qualifications for forensic strife.

In re Lavinia Goodell, 39 Wise. 232, 245 (1875). See also Bradwell v. State, 
83 U.S. 130, 141 (1872) (“[t]he natural and proper timidity and delicacy 
which belongs to the female sex evidently unfits it for many of the occupa­
tions of civil life”).

40The last 10-15 years have marked a dramatic increase in women’s par­
ticipation in business and the professions. From 1977-1983 the number of 
women-owned businesses increased at an average annual rate more than



Associated G eneral Contractors v. San Francisco 39

As the Court has recognized, government may lawfully pro­
mote this progress. See, e.g., Schlesinger v. Ballard, 419 U.S. 
498, 508 (1975) (women officers given additional time to 
achieve promotion because they are barred from combat duty 
and therefore do not have the same promotional opportuni­
ties as do men); Califano v. Webster, 430 U.S. 313, 318 
(1977) (because the market is inhospitable to women seeking 
higher paying jobs, their retirement benefits may be com­
puted by a more generous formula than that applicable to 
men). Government has the broad power to assure that physi­
cal differences between men and women are not translated 
into permanent handicaps, and that they do not serve as a 
subterfuge for those who would exclude women from partici­
pating fully in our economic system.

twice that of men-owned businesses. The State of Small Business, supra 
note 28, at 151 & Table A. 1. In terms of receipts, women-owned businesses 
grew at almost three times the annual rate of men-owned businesses. Id. at 
151. These increases occurred in all major industries. Id. at 161 & Tables 
A. 8, A.20. The statistics on the number of women affected by this trend are 
also impressive: “[Bjetween 1979 and 1983, the number of unincorporated 
self-employed women increased five times faster than the number of self- 
employed men, and more than three times as fast as women wage-and- 
salary workers.” Id. at 122.

These trends seem destined to continue. In the last 15 years, the percent­
age of bachelor degrees in business management granted to women has 
increased more than 300 percent. The increase in the percentage of 
advanced business degrees awarded to women is even more dramatic: a 641 
percent increase in masters degrees and a 500 percent increase in doctor­
ates. Commission on Professionals in Science and Technology, Profes­
sional Women & Minorities 65, Table 3-16 (6th ed. 1986).

There has been similar progress in the professions. In 1982-83, women 
received 36.2 percent of first law degrees, almost ten times the percentage 
in 1947; and 34.8 percent of architecture degrees, as compared to 12.2 per­
cent in 1947. In 1984-85, women received 19.9 percent of first dental 
degrees, almost a ten-fold increase over the percentage 40 years earlier; and 
30.1 percent of medical degrees, three times the percentage in 1947. Id. at 
57, Table 3-3. Over the last decade alone, the percentage of women receiv­
ing doctorates in the professional fields has more than doubled. Id. at 56, 
Table 3-2.



40 Associated G eneral Contractors v. San Francisco

[24] But there are dangers. A thin line divides governmental 
actions that help correct the effects of invidious discrimina­
tion from those that reinforce the harmful notion that women 
need help because they can’t make it on their own. It is in part 
for this reason that the Court has required an “exceedingly 
persuasive justification” for classifications based on gender. 
Mississippi Univ. for Women v. Hogan, 458 U.S. 718, 724 
(1982); Kirchberg v. Feenstra, 450 U.S. 455, 461 (1981); 
Personnel Admin, o f Mass. v. Feeney, 442 U.S. 256, 273 
(1979).While helping women overcome the adverse effects of 
discrimination is a sufficiently important objective to justify 
the limited use of gender-based classifications, “the mere reci­
tation of a benign, compensatory purpose is not an automatic 
shield which protects against any inquiry into the actual pur­
poses underlying a statutory scheme.” Weinberger v. 
Wiesenfeld, 420 U.S. 636, 648 (1975). The city may invoke a 
compensatory purpose to justify a discriminatory classifica­
tion “only if members of the gender benefited by the classifi­
cation actually suffer a disadvantage related to the classi­
fication.” Id. Moreover, the classification must not reflect or 
reinforce archaic and stereotyped notions of the roles and 
abilities of women. Id. at 724-25.

The San Francisco ordinance seeks to compensate women 
for the disparate treatment they have suffered in the business 
community and for the bureaucratic inertia in the city’s con­
tracting procedures that has perpetuated the disadvantages 
flowing from that treatment. The ordinance states that 
women have been subjected to “historical discrimination” 
that has had “a serious, negative impact on their ability to 
participate fully and equitably in our society,” Ordinance 
§ 12D.2(1), and that they have suffered “centuries of limited 
access to the marketplace . . .  because of the failure of local 
government[]. . .  to remedy overt and subtle discrimination.” 
Id. § .2(2). The ordinance recognizes the disadvantages 
women suffer because of the city’s lack of uniform standards 
and excessive departmental discretion in awarding contracts; 
the disproportionate burden they must bear because of exces­



Associated G eneral Contractors v. San F rancisco 41

sive bonding and insurance requirements; and the reduced 
access to city contracts they have because of limited advertis­
ing. See id. § .2(7).

[25] The ordinance seeks to remedy these hardships by giv­
ing women an advantage in securing contracts with the city. 
While this objective is plainly an important and legitimate 
one, we think it a much closer question whether the means 
employed are “substantially related to [its] achievement.” 
Wenglerv. DruggistsMut. Ins. Co., 446 U.S. 142, 150 (1980). 
The ordinance is unusual in the breadth of the subsidy it gives 
women. Earlier cases, for the most part, considered relatively 
narrow remedies directed at relatively specific areas of disad­
vantage, see, e.g., Schlesinger v. Ballard, 419 U.S. 498 (1975) 
(opportunities for promotion in armed forces); Michael M. v. 
Superior Court, 450 U.S. 464 (1981)(statutory rape statute 
that applied only to males in order to protect women); Clark 
v. Arizona Interscholastic Ass’n, 695 F.2d 1126 (9th Cir. 
1982) (policy of sponsoring interscholastic volleyball teams 
exclusively for girls), cert, denied 464 U.S. 818 (1983). By 
contrast, the San Francisco ordinance gives women an advan­
tage in a large number of businesses and professions. We have 
no reason to believe that women are disadvantaged in each of 
the many different industries covered by the ordinance. Expe­
rience teaches the contrary. See Hogan, 458 U.S. at 729 
(“Mississippi has made no showing that women lacked 
opportunities to obtain training in the field of nursing or to 
attain positions of leadership in that field”).41

41The available data indicate that women’s participation varies greatly 
from industry to industry. For example, as of 1980, women comprised only 
6.4 percent of the nation’s mechanical engineers and only 8.5 percent of 
surveyors. Professional Women & Minorities, supra note 40, at 193, Table 
7-33. In other industries the degree of participation was much higher. For 
example, in 1980 women constituted 96 percent of registered nurses, id. at 
225, Table 8-51; 63 percent of social workers, id. at 234, Table 9-4; and 42 
percent of biological technicians, id. at 193, Table 7-33. Recent growth 
rates in women-owned businesses, see note 40 supra, have been highest in 
those industries where women have not traditionally participated — manu­



42 Associated G eneral Contractors v. San F rancisco

Moreover, preferences as broad as these can reinforce 
harmful stereotypes. See Bakke, 438 U.S. at 298 (“prefer­
ential programs may only reinforce common stereotypes 
holding that certain groups are unable to achieve success 
without special protection”)(opinion of Powell, J.). This risk 
is magnified where the preferences are not accompanied by 
particularized findings of harm, and where they extend to 
areas where women have not been found to be disadvantaged. 
The notion that women need help in every business and pro­
fession is as pernicious and offensive as its converse, that 
women ought to be excluded from all enterprises because 
their place is in the home. See note 39 supra.

[26] Although we find the city’s WBE preference troubling, 
we uphold it against the challenge presented in this case. 
While the city’s program may well be overinclusive, we 
believe it hews closely enough to the city’s goal of compensat­
ing women for disadvantages they have suffered so as to sur­
vive a facial challenge. Unlike racial classifications, which 
must be “narrowly” tailored to the government’s objective, 
e.g., Wygant, 106 S. Ct. at 1850 (plurality opinion); Fullilove, 
448 U.S. at 480 (opinion of Burger, C.J.), there is no require­
ment that gender-based statutes be “drawn as precisely as 
[they] might have been.” Michael M., 450 U.S. at 473 (1980) 
(plurality opinion). Although the city’s program may extend 
preferences to some fields where women are not disadvan­
taged, experience suggests that these are still the exceptions. 
See generally Professional Women & Minorities, supra note 
36, at 54-265. In most fields, the requirement that the gender 
benefited “actually suffer a disadvantage related to the 
classification” will be satisfied. Hogan, 458 U.S. at 728. The 
WBE program is therefore substantially related to the city’s

facturing, construction and agricultural services. Between 1977 and 1983, 
receipts for women-owned businesses posted their single largest increase in 
the construction industry. The State o f Small Business, supra note 28, at 
161-62.



Associated G eneral Contractors v. San Francisco 43

important goal of compensating women for the disparate 
treatment they have suffered in the marketplace. Id. at 724.

[27] We may reach a different conclusion if and when the 
WBE preferences are challenged as applied to an industry 
where women are not disadvantaged. While governmental 
action, particularly where it is plainly remedial in character, 
need not operate with surgical precision, there must be strong 
assurances that it is not merely the result of patronizing 
assumptions about the status and abilities of women, but an 
attempt to provide assistance where it is needed and war­
ranted. The city may not close its eyes to the rich texture of 
our economic landscape and ignore the very real differences 
in the status of women in various businesses and professions, 
see note 41 supra; nor may it ignore the substantial progress 
women have made and continue to make in business and the 
professions. See note 40 supra.

As the ordinance found, fully 25 percent of businesses 
within the City of San Francisco are owned by women and 45 
percent of the civilian work force is female. Ordinance 
§§ 12D,2(7)(e), 12D.2(3). These numbers may not be distrib­
uted homogeneously and, in some industries, women may 
have reached or exceeded parity with men. It is unlikely that 
the city could demonstrate an “exceedingly persuasive 
justification” for giving women a preference in such indus­
tries. Equally important, in some industries the participation 
of women may be so high that encouraging further participa­
tion may well reinforce harmful stereotypes, defeating, rather 
than promoting, the cause of gender equality. See Hogan, 458 
U.S. at 729 (“[rjather than compensate for discriminatory 
barriers faced by women, [Mississippi’s] policy of excluding 
males from admission to the School of Nursing tends to per­
petuate the stereotyped view of nursing as an exclusively 
woman’s job”). We leave these matters to another day. We 
note only that such challenges, if raised, are not precluded by 
our decision today.



C. The LBE Preference

Appellants’ final contention is that the ordinance’s LBE 
preferences are unconstitutional because they seek to pro­
mote domestic businesses at the expense of nonresident com­
petitors. The only precedent they cite is Metropolitan Life 
Insurance Co. v. Ward, 470 U.S. 869 (1985). Metropolitan 
considered an Alabama statute that placed a heavier tax bur­
den on premiums collected by out-of-state insurance compa­
nies than those collected by insurance companies incor­
porated within the state. The state argued that this statute 
served legitimate purposes: (1) encouraging the formation of 
new insurance companies within the State; and (2) promoting 
capital investment in certain state assets and securities. Id. at 
873. The Court struck down the provision, holding that these 
purposes could not be advanced by burdening foreign busi­
nesses competing with domestic ones.42 What seemed to trou­
ble the Court was that the Alabama tax had no other function 
than to give domestic businesses an advantage over their for­
eign competitors. The Court noted:

A State’s natural inclination frequently would be to 
prefer domestic businesses over foreign. If we accept 
the State’s view here, then any discriminatory tax 
would be valid if the State could show it reasonably 
was intended to benefit domestic business.

Id. at 882 (footnote omitted).

[28] The LBE preference in the San Francisco ordinance is 
readily distinguishable from Alabama’s premium tax struck 
down in Metropolitan. Unlike the statute in Metropolitan, the 
ordinance in this case affects only the expenditure of public 
funds. The city’s power to spend its funds as it pleases is not

44 Associated G eneral Contractors v. San Francisco

42While Metropolitan seemed to say that the purposes themselves were 
not legitimate, see 470 U.S. at 882, it is quite clear that the Court was con­
cerned with means at least as much as with ends, perhaps more.



Associated G eneral Contractors v. San F rancisco 45

limitless, as the previous portions of this opinion demon­
strate. However, the city may rationally allocate its own funds 
to ameliorate disadvantages suffered by local business, partic­
ularly where the city itself creates some of the disad­
vantages.43

In addition, the LBE preference is not a burden imposed 
“discriminatorily . . .  on nonresident corporations solely 
because they are nonresidents,” id. at 882 n.10; it is an 
attempt to remove or to lighten a burden San Francisco busi­
nesses must bear that is not shared by others. While the dis­
tinction is a fine one, and our ruling should not be read as 
granting constitutional immunity to all local preferences so 
long as they can be characterized in this fashion, we believe 
that the combination of ends and means employed by the city 
here falls well within the discretion permitted to it under the 
equal protection clause.

Two of the ordinance’s findings are relevant to this issue. 
The first notes that “local businesses which seek to enter into 
contracts with the City and County of San Francisco are at a 
competitive disadvantage with businesses from other areas 
because of the higher administrative costs of doing business 
in the City (e.g. higher taxes, higher rents, higher wages and 
benefits for labor, higher insurance rates, etc.).” Ordinance 
§ 12D.2(4). The second is that “the public interest would best 
be served by encouraging businesses to locate and remain in 
San Francisco through the provision of a minimal ‘good faith’ 
preference to local businesses in the awarding of City 
contracts.” Id. § .2(5). Both of these are legitimate consider­
ations. And, as the Supreme Court has recognized, it is gener­
ally legitimate for a governmental entity to encourage

43C/. United Building & Construction Trades v. Mayor o f Camden, 465 
U.S. 208 (1984) (holding that the city has a vital interest in “analyzing local 
evils and in prescribing appropriate cures,” but distinguishing public 
employment from employment with contractors engaged in public contract 
work, for purposes of the privileges and immunities clause of Article IV.)



46 Associated G eneral Contractors v. San F rancisco

businesses to move into the jurisdiction. Metropolitan, 470 
U.S. at 879; Allied Stores o f Ohio, Inc. v. Bowers, 358 U.S. 
522, 532-33 (1959) (Brennan, J., concurring).

As Metropolitan demonstrates, however, seemingly legiti­
mate ends are tainted if they are pursued by illegitimate or 
excessive means. Here the means adopted are both measured 
and appropriate. The preferences given local businesses are 
relatively slight. LBEs get only a 5 percent bidding preference; 
there are no goals, quotas or set-asides. Moreover, the prefer­
ence does not apply to all business transactions conducted 
within the jurisdiction, only those where the city itself is a 
party. Finally, the definition of LBE is rather broad;44 foreign 
businesses can become LBEs by acquiring “fixed offices or 
distribution points” within the city and paying their permit 
and license fees from a San Francisco business address. Thus, 
any business willing to share some of the burdens of a San 
Francisco location — higher rents, wages, insurance premi­
ums, etc. — can enjoy the benefits of the LBE preference. We 
see no constitutional infirmity in the city’s modest attempt to 
support local businesses and to induce other businesses to 
move there.

Conclusion

We hold as follows:

(1) With respect to contracts over $50,000, all of the ordi­
nance’s preferences are invalid insofar as they would result in

44An LBE is defined as follows:
[A] business firm with fixed offices or distribution points located 
within the boundaries of the City and County of San Francisco 
and listed in the Permits and License Tax Paid File with a San 
Francisco business street address. Post Office box numbers or resi­
dential addresses may not be used solely to establish status as a 
“Local Business”.

Ordinance § 12D.5.



Associated G eneral Contractors v. San Francisco 47

the award of contracts to other than the “lowest reliable and 
responsible bidder.” However, the LBE preference is valid as 
to any contracts covered by San Francisco Charter section 
7.204.

(2) With respect to contracts of $50,000 or less: (a) those 
provisions of the ordinance giving preferences to MBEs are 
void as violating the equal protection clause; (b) those provi­
sions giving preferences to WBEs are facially valid but subject 
to further challenge as applied to particular contracts and 
industries; and (c) all other portions of the ordinance, in par­
ticular the 5 percent bid preference given to LBEs, are valid.

We remand to the district court for entry of a decree in 
accordance with this opinion.



PR IN TED  FOR
ADM INISTRATIVE OFFICE— U.S. COURTS 

BY BARCLAYS / ELECTROGRA PHIC— SAN FRANCISCO— (415) 588-1 I 55

The summary, which does not constitute a part of the opinion of the court, is 
copyrighted © 1987 by Barclays Law Publishers.