Adarand Constructors, Inc. v. Pena Brief for the Respondents
Public Court Documents
December 1, 1994
Cite this item
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Brief Collection, LDF Court Filings. Adarand Constructors, Inc. v. Pena Brief for the Respondents, 1994. 11af56ea-ab9a-ee11-be37-00224827e97b. LDF Archives, Thurgood Marshall Institute. https://ldfrecollection.org/archives/archives-search/archives-item/b6bde202-cedf-4328-957c-2108f0789ec5/adarand-constructors-inc-v-pena-brief-for-the-respondents. Accessed October 08, 2025.
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No. 93-1841
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Adarand Constructors, Inc., petitioner
Secretary of Transportation, et al.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
BRIEF FOR THE RESPONDENTS
October Term, 1994
v.
F ederico Pena.
Drew S. Days, III
Solicitor General
Stephen H. Kaplan
General Counsel
Deval L. Patrick
Assistant Attorney General
Paul M. Geier
Assistant General Counsel
Paul Bender
Deputy Solicitor General
for Litigation Cornelia T.L. P illard
Assistant to the SolicitorEdward V.A. Kussy
Deputy Chief Counsel
Federal Highway David K. Flynn
General
A dministration
Department of
Lisa C. Wilson
Attorneys
Department of Justice
Washington, D.C. 20530
(202) 515-2217
Transportation
Washington, D.C. 20590
QUESTIONS PRESENTED
1. Whether the equal protection component of the
Fifth Amendment prohibits Congress from enacting
a rebuttable presumption that minority-owned and
-controlled businesses are disadvantaged business en
terprises under the Small Business Act.
2. Whether the equal protection component of the
Fifth Amendment prohibits the Department of
Transportation, pursuant to the Small Business Act,
from offering added compensation to federal govern
ment prime contractors who choose to subcontract
10% or more of their contract work to disadvan
taged business enterprises in order to cover the costs
of assisting the disadvantaged businesses.
(i)
TABLE OF CONTENTS
Page
Opinions below..................................... 1
Jurisdiction.......................................... 1
Constitutional and statutory provisions involved......... 2
Statement............................................................................ 2
1. Statutory background .......................... -............ - 4
2. Regulatory background ........................................ 12
3. The Subcontracting Compensation Clause......... 17
4. Proceedings below ................................................ 19
Summary of argument................................................... 22
Argument:
I. The Subcontracting Compensation Clause is
constitutional...... ................................................... 25
A. The Clause is based on social and economic
disadvantage; minority racial status plays
only a procedural role through a rebuttable
presumption of such disadvantage ......-....... 25
B. Petitioner lacks standing to challenge the use
of the race-based rebuttable presumption..... 27
C. The Clause does not constitute a preference
for disadvantaged subcontractors ................. 31
D. The rebuttable presumption of disadvantage
is based on congressional findings of racial
discrimination and serves the compelling
governmental objective of remedying past
discrimination.................................................. 33
1. Race-based remedial action by Congress
is subject to intermediate scrutiny......... 34
2. Intermediate scrutiny applies here ...... 38
3. Congress had a firm and compelling basis
to act ......................................................... 41
E. The Clause is narrowly tailored to achieve
Congress’s constitutional objectives ............. 43
(III)
IV
Argument—Continued: Page
1. The Clause is not underinclusive............. 43
2. The Clause is not overinclusive ____ 44
3. The Clause does not involve a fixed quota
or set-aside ........... ........ ............................ 47
4. The rebuttable presumption is of limited
duration.... ...... 48
II. Principles of stare decisis support the continuing
vitality of Fullilove v. Klutznick............... ......... 49
Conclusion ......................... 50
Appendix A ..... la
Appendix B ..... 18a
Appendix C ............. ............. .......... ............ ...... ....... . 37a
TABLE OF AUTHORITIES
Cases:
Allen V. Wright, 468 U.S. 737 (1984) ................... 30
Autek Systems Corp. V. United States, 835 F. Supp.
13 (D.D.C. 1993), aff’d, No. 93-5399 (D.C. Cir.
May 13, 1994) ................................ 14
City of Richmond V. J.A. Croson Co., 488 U.S. 469
(1989)....- .............. passim
Dandridge V. Williams, 397 U.S. 471 (1970) ......... 26
Doe V. Heatherly, 671 F. Supp. 1081 (D. Md.
1987), aff’d, 854 F.2d 1316 (4th Cir. 1988)....... 13
EEOC V. Wyoming, 460 U.S. 226 (1983) ............... 35
Ellis V. Skinner, 961 F.2d 912 (10th Cir.), cert.
denied, 113 S. Ct. 374 (1992) ................... ......... 50
Fullilove V. Klutznick, 448 U.S. 448 (1980).........passim
Harrison & Burrowes Bridge Constructors, Inc. V.
Cuomo, 981 F.2d 50 (2d Cir. 1992) _____ ____ 50
Heart of Atlanta Motel, Inc. V. United States, 379
U.S. 241 (1964) .................................................... 35
Hodel V. Indiana, 452 U.S. 314 (1981) ................ 35
Johnson V. Transportation Agency, Santa Clara
County, 480 U.S. 616 (1987) ............................ 48
Jones V. Alfred H. Mayer Co., 392 U.S. 409 (1968).. 38
Katzenbach V. McClung, 379 U.S. 294 (1964)..... . 35
Katzenbach V. Morgan, 384 U.S. 641 (1966) .......... 37
V
Cases—Continued: Page
Lujan V. Defenders of Wildlife, 112 S. Ct. 2130
(1992)...................................................................... 29
McDonald V. Sante Fe Trail Tramp. Co., 427 U.S.
273 (1976) ........................................................... 25
Metro Broadcasting, Inc. V. FCC, 497 U.S. 547
(1990) ................................................................... passim
Milwaukee County Pavers Ass’n V. Fielder, 922
F.2d 419 (7th Cir.), cert, denied, 500 U.S. 954
(1991) ..................................................................... 37, 50
Mobile, J. & K.C.R.R. V. Tumispeed, 219 U.S. 35
(1910) ..................................................................... 46
NLRB V. Baptist Hospital, Inc., 442 U.S. 773
(1979) .................................................................... 46
Northeastern Florida Chapter of Associated Gen
eral Contractors V. City of Jacksonville, 113
S. Ct. 2297 (1993) .............................................. 30
Norwood V. Harrison, 413 U.S. 455 (1973) ............. 35
O’Donnell Construction Co. V. District of Colum
bia, 963 F.2d 420 (D.C. Cir. 1992)....................... 50
Planned Parenthood V. Casey, 112 S. Ct. 2791
(1992) ..................................................................... 50
Regents of the University of California V. Bakke,
438 U.S. 265 (1978) .......... 42
Reno V. Flores, 113 S. Ct. 1439 (1993) __ ____ __ 33
Runyon V. McCrary, 427 U.S. 160 (1976) ---------- 38
Slaughter-House Cases, 83 U.S. (16 Wall.) 36
(1873)... ......................................................... -..... - 36
St. Mary’s Honor Center V. Hicks, 113 S. Ct. 2742
(1993) ................................................................... 45
Tennessee Asphalt Co. V. Farris, 942 F.2d 969 (6th
Cir. 1991) .............. 50
United States V. Gainey, 380 U.S. 63 (1965).......... 46
United States V. Salerno, 481 U.S. 739 (1987)---- 33
Useru v. Turner Elkhorn Mining Co., 428 U.S. 1
(1976) ............... 46
Wygant V. Jackson Board of Education, 476 U.S.
267 (1986) ........................... 42
Constitution, statutes and regulations:
U.S. Const.:
Art. I, § 8, Cl. 1 (Spending Clause) ............2—2, 35, la
Art. I, § 8, Cl. 3 (Commerce Clause) ...............2, 35, la
VI
Constitution, statutes and regulations—Continued: Page
Amend. I .............................................................. 41
Amend, V ................. ................ ........................... 20
Amend. X III....................................2, 35, 36, 37, 38, la
Amend. XIV ............................... 2, 20, 35, 36, 37, 38, la
Section 5 .................................................. 37, 38, 2a
Act of Oct. 24, 1978, Pub. L. No. 95-507, 92 Stat.
1757:
§ 201, 92 Stat. 1760............................................. 8
§ 211, 92 Stat. 1767............................................. 8
Act of July 2, 1980, Pub. L. No. 96-302, § 118, 94
Stat. 840 ......................................... ............ ........... io
Business Opportunity Development Reform Act of
1988, Pub. L. No. 100-656, 102 Stat. 3853:
§ 101,102 Stat. 3855.... ........ ............................. 10
§ 207,102 Stat. 3861-3862........ ...... ................... 10
Civil Rights Act of 1964, Tit. VI, 42 U.S.C. 2000d.. 20
Consolidated Omnibus Budget Reconciliation Act
of 1985, Pub. L. No. 99-272, § 18015, 100 Stat.
370 (1986) ................... ....................................... . io
Intermodal Surface Transportation Efficiency Act
of 1991, Pub. L. No. 102-240, § 1003 (b), 105
Stat. 1919-1921 ........ ................................ ............ 5
Public Works Employment Act of 1977, Pub. L.
No. 95-28, Tit. I, 91 Stat. 116 ......................... 41
Small Business Act, 15 U.S.C. 631 et seq. (1988 &
Supp. V 1993) ...................... .............................. 2,3,2a
15 U.S.C. 631 (f) (1) (B) ..................................7, 39, 2a
15 U.S.C. 631(f)(1)(C) ..................................7,39,2a
15 U.S.C. 631b (1988 & Supp. V 1993) ........ . 48, 4a
15 U.S.C. 632(a) (1)-(3) (Supp. V 1993)....... 6
15 U.S.C. 636(j) (10) (F) (1988 & Supp. V
1993) ............................................................... 15
15 U.S.C. 636(j) (10) (H) (1988 & Supp. V
1993)................................... 15
15 U.S.C. 637 (a) ................................................. 8,6a
15 U.S.C. 637(a) (5) ........................................ 6 ,13,7a
15 U.S.C. 637 (a) (6) (A) ................................. 6,14,7a
15 U.S.C. 637 (a ) (6 ) (B ) ................... 15,8a
vn-
Statutes and regulations—Continued: Page
15 U.S.C. 637 (a) (6) (C) (Supp. V 1993)......... 15, 8a
15 U.S.C. 637(a) (6) (C) (i) (Supp. V 1993).... 15, 8a
15 U.S.C. 637(d) (Supp. Y 1993) .............. ........ 7,9a
15 U.S.C. 637(d) (1) (Supp. V 1993)................ 4,9a
15 U.S.C. 637 (d) (3) (C) (Supp. Y 1993) ..6, 7, 39,11a
15 U.S.C. 644(g) (1) .................................... ..... 5,12a
15 U.S.C. 644(h) (1988 & Supp. V 1993)....... 48,14a
15 U.S.C. 644(h) (1) ........................................... 5,14a
15 U.S.C. 645(d) ................................................ 47
Surface Transportation and Uniform Relocation
Assistance Act of 1987, Pub. L. No. 100-17, 101
Stat. 132 ........ 3
§ 106,101 Stat. 144-146............................ .... 2 ,15a-16a
§ 106 (c) (1), 101 Stat. 145........................... ....5, 7 ,16a
§ 106(c) (2) (B ), 101 Stat. 146.................. ....... 7 ,17a
§ 106(c) (4), 101 Stat. 146.......................... ..... .34,17a
42 U.S.C. 1983........ 20
13 C.F.R.:
Pt. 121:
Section 121.601.......................................... 6
PI. 124................................................................ 12
Subpt. A:
Section 124.5................................................ 47
Section 124.6 ................................................ 47
Section 124.101 (c) (2 ) ....... 15
Section 124.103............................... 47
Section 124.104.... 47
Section 124.105 (b )...................................... 13
Section 124.105(b) (1) ....................... 16
Section 124.105 (c) (1) ( i ) ........................ 14
Section 124.105(c) (1) (v) ................... 14
Section 124.105(c) (1) (v) (A )-(C )............ 14
Sections 124.105-124.106...................... ..... 13, 39
Section 124.106(a) (1) (ii) ........................ 14
Section 124.106(a) (2 )............................. 14
Section 124.106 (b).................. 14
Section 124.108..... ......... ............... .— *...... 47
Section 124.109 ............................................ 47
VIII
Regulations—Continued: Page
Section 124.111(c)...................................... 15
Section 124.208......................................... 15
Subpt. B ...... ....... ........ ................................... 15, 29, 39
Section 124.603 (b ) ...................................... 15
Section 124.605(b) ( 2 ) ........................ 15
Section 124.607 (a ) ...................................... 15
Section 124.608......................................... 15
Sections 124.608-124.609............................ 29
Section 124.609..... 15
Section 124.609(d) (3 ) ............................... 15
48 C.F.R.:
Section 19.703 ................................ 44
Section 52.219-8.................................................. 7
Section 52.219-13................................................ 7,17
49 C.F.R. Pt. 23 ........................................................... 13
Subpt. C:
Sections 23.51-23.53............ 47
Subpt. D ................................................... 15
Section 23.62......................... ..................15,16,17
Section 23.62 (a )-(e )__ 16
Section 23.64(e)............... 5
Section 23.65.......................... 5
Section 23.69 ...................................... 29,39
Section 23.69 (b) (1 ) ............................... 16
App.A ................................................16,17, 26, 44
App. C .......................................... 16, 29, 39,44, 47
Subpt. E .............................................................. 16
Miscellaneous: Page
Barriers to Full Minority Participation in Fed
erally Funded Highway Construction Projects:
Hearing Before a Subcomm. of the House Comm,
on Government Operations, 100th Cong., 2d Sess.
(1988) ........................................... ......................... 10, 38
124 Cong. Ree. (1978):
p. 29,641....... 9
p. 29,644 ............................ ....... . 9
IX
Miscellaneous—Continued: Page
p. 34,097............................................................... 8
p. 35,408............................................................... 8
133 Cong. Rec. 33,314-33,315 (1987)...................... 10-11
Disadvantaged Business Set-Asides in Transporta
tion Construction Projects: Hearings Before the
Subcomm. on Procurement, Innovation, and
Minority Enterprise Development of the House
Comm, on Small Business, 100th, Cong., 2d Sess.
(1988)...................................................................... 10
Federal Contracting Opportunities for Minority
and Women-Owned Businesses—An Examina
tion of the 8(d) Subcontracting Program: Hear
ings Before the Senate Comm, on Small Busi
ness, 98th Cong., 1st Sess. (1983).......— ........... 9
Federal Highway Administration, U.S. Dep’t of
Transportation, Disadvantaged Business Enter
prise (DBE) Program Administration Partici
pant’s Manual (Apr. 1990) ............ 34
H.R. 1807,100th Cong., 1st Sess. (1987).................. 11
H.R. 5612, To Amend the Small Business Act to
Extend the Current SB A 8(a) Pilot Program:
Hearing on H.R. 5612 Before the Senate Select
Comm, on Small Business, 96th Cong., 2d Sess.
(1980)................... .................................................. 9
H.R. Rep. No. 468, 94th Cong., 1st Sess, (1975)..... 9
H.R. Rep. No. 1714, 95th Cong., 2d Sess. (1978).... 8, 26
H.R. Rep. No. 460, 100th Cong., 1st Sess. (1978).... 11
Minority Business and Its Contribution to the U.S.
Economy: Hearing Before the Senate Comm, on
Small Business, 97th Cong., 2d Sess. (1982)....... 9
Minority Business Participation in Department of
Transportation Project: Hearing Before a Sub
comm. of the House Comm, on Government Op
erations, 99th Cong., 1st Sess. (1985)................ 38
Minority Enterprise and General Small Business
Problems: Hearing Before the Subcomm. on
SBA and SBIC Authority, Minority Enterprise,
and General Small Business Problems of the
House Comm, on Small Business, 99th Cong., 1st
Sess. (1985) 10
X
Miscellaneous—Continued: Page
S, Rep. No. 1070, 95th Cong., 2d Sess. (1978)....... 8
S. Rep. No. 4, 100th Cong., 1st Sess. (1987) ......... 12
S. Rep. No. 394, 100th Cong., 2d Sess. (1988)....... 48
Small ancl Minority Business in the Decade of the
1980’s (Part 1): Hearings Before the House
Comm, on Small Business, 97th Cong., 1st Sess.
(1981)...................................................................... 9
Small Business Problems: Hearings Before the
House Comm, on Small Business, 100th Cong.,
1st Sess. (1987) .................................................... 10
State of Hispanic Small Business in America:
Hearing Before the Subcomm. on SB A and SBIC
Authority, Minority Enterprise, and General
Small Business Problems of the Home Comm, on
Small Business, 99th Cong., 1st Sess. (1985)..... 9-10
Surety Bonds and Minority Contractors: Hearing
Before the Subcomm. on Commerce, Consumer
Protection, and Competitiveness of the Home
Comm, on Energy and Commerce, 100th Cong.,
2d Sess. (1988) ..................................................... 10
The Disadvantaged Business Enterprise Program
of the Federal-Aid Highway Act: Hearing Be
fore the Subcomm. on Transportation of the
Senate Comm, on Environment and Public
Works, 99th Cong., 1st Sess, (1985)................. 19
Women Entrepreneurs— Their Success and Prob
lems: Hearing Before the Senate Comm, on
Small Business, 98th Cong., 2d Sess, (1984)....... 9
Htt tip? I&tprrnu? (Emtrt at tip? litttrh Staton
October Term , 1994
No. 93-1841
A darand Constructors, I n c ., petitioner
v.
F ederico P ena,
Secretary of T ransportation , et al.
ON WRIT OF CERTIORARI
TO THE UNITED STA TE S COURT OF APPEALS
FOR THE TENTH CIRCUIT
BRIEF FOR THE RESPONDENTS
OPINIONS BELOW
The opinion of the court of appeals (Pet. App.
1-24) is reported at 16 F.3d 1537. The opinion and
order of the district court (Pet. App. 27-37) are re
ported at 790 F. Supp. 240.
JURISDICTION
The judgment of the court of appeals was entered
on February 16, 1994. The petition for a writ of cer
tiorari was filed on May 17, 1994, and granted on
( 1 )
2
September 26, 1994. The jurisdiction of this Court
rests on 28 U.S.C. 1254(1).
CONSTITUTIONAL AND
STATUTORY PROVISIONS INVOLVED
The Spending Clause, the Commerce Clause, and
the Thirteenth and Fourteenth Amendments to the
Constitution are reprinted at App., infra, la-2 a. Per
tinent provisions of the Small Business Act, 15
U.S.C. 631 et seq. (1988 & Supp. V 1993), and of
Section 106 of the Surface Transportation and Uni
form Relocation Assistance Act of 1987, Pub. L. No.
100-17, 101 Stat. 144-146, are reprinted at App.,
infra, 2 a-17 a.
STATEMENT
This case concerns the constitutionality of a stand
ard contract clause, the Subcontracting Compensa
tion Clause (Clause or SCC), included in highway
construction contracts let by the Central Federal
Lands Highway Division (CFLHD) of the Federal
Highway Administration (FHWA) of the United
States Department of Transportation (DOT). The
Clause encourages, but does not require, prime con
tractors to hire small disadvantaged business enter
prises (DBEs) as subcontractors on federal highway
construction subcontracts by offering them financial
compensation for the added expenses of their employ
ing and assisting such subcontractors. Petitioner, a
losing bidder on a federal highway guardrail con
struction subcontract, challenges the constitutionality
of the Clause, asserting that it caused the prime con
tractor to reject its bid and to award the subcontract
to Gonzales Construction Company, a small disad
vantaged business.
3
The Federal Lands Highway Program (FLHP)1 in
cludes the Compensation Clause in its prime contracts
as one means to implement its statutory responsibilities
under the Small Business Act (SBA), 15 U.S.C. 631
et seq. (1988 & Supp. V 1993), which applies to all
federal agencies’ contracts for goods and services.
The Clause also helps the FLHP meet the require
ments of the Surface Transportation and Uniform
Relocation Assistance Act of 1987 (STURAA), Pub.
L. No. 100-17, 101 Stat. 132, which provided the
funding for the highway project in this case. The
SBA establishes a 5% government-wide minimum
goal for participation by small disadvantaged busi
nesses in government contracting and subcontract
ing, and requires each federal agency to implement
that government-wide goal through subsidiary
agency goals. STURAA, which applies only to DOT,
establishes a goal at not less than 10% for use of
small disadvantaged businesses in federally funded
transportation programs.
Under both statutes, “disadvantage” requires a
showing of both social and economic disadvantage. A
presumption of disadvantage operates where mem
bers of specified minority groups seek to have their
firms certified as disadvantaged. That presumption
is rebuttable if disadvantage does not in fact exist.
1 The CFLHD is one of three regional divisions of the
FLHP, a component of the FHWA. Each of the divisions is
responsible for the design and construction of roads on fed
eral lands, including national parks and forests. C.A. App.
320. The CFLHD includes within its jurisdiction roads on
federal lands within Arizona, California, Colorado, Hawaii,
Kansas, Nebraska, Nevada, New Mexico, North Dakota,
South Dakota, Texas, Utah, and Wyoming. Pet. App. 9 n.7.
4
Under STURAA, small businesses owned by women
are also presumed to be disadvantaged; expenditures
with businesses owned by women thus constitute
expenditures with disadvantaged subcontractors
under the Clause, and are counted toward both the
STURAA and SBA goals. In addition, businesses
owned by men who are not members of minority
groups are treated as disadvantaged under both stat
utes if the persons who own and control the firms
are socially and economically disadvantaged. Peti
tioner, which did not claim that it was itself disad
vantaged, did not challenge the fact that Gonzales
Construction Company was disadvantaged, nor did
it seek to rebut any presumption of disadvantage
that may have applied to Gonzales. Petitioner in
stead makes a facial challenge to the Clause.
1. Statutory background. A. Both the SBA and
STURAA establish a federal policy of doing business
with small disadvantaged business enterprises.2 The
statutes seek to foster nationwide economic develop
ment by permitting small disadvantaged businesses
to share in the economic benefit of the government’s
vast purchasing activity. The statutes also reflect
Congress’s belief that, by contracting with small dis
advantaged business enterprises, and by working with
them through a variety of business development pro-
2 Section 8(d) (1) of the SBA, 15 U.S.C. 637(d) (1) (Supp.
V 1993), provides:
It is the policy of the United States that small business
concerns, and small business concerns owned and con
trolled by socially and economically disadvantaged in
dividuals, shall have the maximum practicable oppor
tunity to participate in the performance of contracts let
by any Federal agency, including contracts and sub
contracts.
5
grams, the government can strengthen such businesses
and thereby enhance market competition for the goods
and services the government buys.
The SBA requires annual, government-wide goals
to be set for contracting for supplies and services
from small businesses, and also from small disadvan
taged businesses. The Act sets a 5% floor for the
latter goal. 15 U.S.C. 644(g)(1). The President is
required to adjust that government-wide goal an
nually, and each executive agency is required to de
velop a goal appropriate to its own contracting needs
and the markets from which it purchases goods and
services.3 The goals at every level may be waived
where not practicable,4 and no penalty attaches to
failure to meet them.
In STURAA, enacted in 1987, Congress comple
mented the SBA’s provisions by setting a disadvan
taged business enterprise goal specific to STURAA
transportation construction. Section 106(c)(1) of
STURAA contained a goal of not less than 10% for
disadvantaged business expenditure of federal funds
appropriated under STURAA for fiscal years 1987
through 1992. Pub. L. No. 100-17, 101 Stat. 145.5
Expenditures through disadvantaged businesses are
counted toward both STURAA and SBA goals.
3 The subsidiary disadvantaged business contracting goal
DOT assigned to the CFLHD for 1989 was approximately
12-15%. Pet. App. 9 n.7.
4 See 15 U.S.C. 644(h) (1) (requiring justification for fail
ure to meet goals) ; 49 C.F.R. 23.64(e), 23.65 (setting forth
waiver criteria for DOT).
5 The disadvantaged business enterprise goals are now
being implemented under the successor to STURAA, the
Intermodal Surface Transportation Efficiency Act of" 1991,
Pub. L. No. 102-240, § 1003 (b), 105 Stat. 1919-1921.
6
B. The definition of small disadvantaged business
that applies under both statutes is set out in the
SBA. A small business is one that is independently
owned and operated, is not dominant in its field of
operation, and has annual gross receipts not in ex
cess of the level set by regulation for the industry in
which the business operates. 15 U.S.C. 632(a)(1)-
(3) (Supp. V 1993)."8 A small business is disadvan
taged if it is at least 51% owned and controlled by
persons who are both socially and economically dis
advantaged. 15 U.S.C. 637(d)(3)(C) (Supp. V
1993). A “socially disadvantaged” person is one who
has been subjected to “racial or ethnic prejudice or
cultural bias because of [his or her] identity as a
member of a group without regard to [his or her]
individual qualities.” 15 U.S.C. 637(a)(5). An
“economically disadvantaged” person is a socially
disadvantaged person who also demonstrates that his
or her “ability to compete in the free enterprise sys
tem has been impaired due to diminished capital and
credit opportunities as compared to others in the
same business area who are not socially disadvan
taged.” 15 U.S.C. 637(a) (6) (A).
The goals of both the SBA and STURAA are thus
directed at the employment of disadvantaged business
enterprises. That category is not limited to members
of racial minority groups, nor are all members of
such groups included in the disadvantaged category.
Congress, however, expressly recognized in both stat
utes that racial discrimination in the United States
6 A small business, in the case of highway construction
specialty subcontractors such as Gonzales and petitioner, is one
whose average annual gross receipts do not exceed $7,000,000.
13 C.F.R. 121.601 (Major Group 17, SIC Code 1799).
7
has been a principal cause of current disadvantaged
status. Congress found in the SB A that “many
[socially and economically disadvantaged] persons
are socially disadvantaged because of their identifica
tion as members of certain groups that have suffered
the effects of discriminatory practices or similar in
vidious circumstances over which they have no con
trol,” and that “such groups include, but are not
limited to, Black Americans, Hispanic Americans,
Native Americans, Indian tribes, Asian Pacific Amer
icans, Native Hawaiian Organizations, and other mi
norities.” 15 U.S.C. 631(f)(1)(B ) and (C). The
SBA’s subcontracting provision, Section 8(d), thus
authorizes prime contractors to “presume that socially
and economically disadvantaged individuals include
Black Americans, Hispanic Americans, Native Ameri
cans, Asian Pacific Americans, and other minorities, or
any other individual found to be disadvantaged by
the [Small Business] Administration pursuant to
section 8(a) of the [SBA].” 15 U.S.C, 637(d) (3) (C)
(Supp. V 1993). STURAA utilizes the SBA’s defini
tion of disadvantaged business, see Pub. L. No. 100-
17, § 106(c) (1), 101 Stat. 145, except that STURAA
also provides that, in the context of highway
construction, “women shall be presumed to be
socially and economically disadvantaged individuals,”
§ 106(c)(2)(B), 101 Stat. 1467
C. Congress’s findings that disadvantage is highly
correlated with race were based on extensive evidence
of racial discrimination affecting government con-
7 The Federal Acquisition Regulations, 48 C.F.R. 52.219-8
and 52.219-13, referred to in the Subcontracting Compensa
tion Clause, J.A. 24, define disadvantaged business consist
ently with the SBA, and include women-owned businesses.
8
tracting. The SBA first made express reference to
race in the 1978 Amendments to the statute. Act of
Oct. 24, 1978, Pub. L. No. 95-507, §§ 201, 211, 92
Stat. 1760, 1767. Congress there recognized “ [t]he
fact that minority small businesses have had an espe
cially difficult time in fully participating in the
economic system,” and decided that the SBA’s small
business development program “should be used only
for developing minority and other socially and eco
nomically disadvantaged businesses.” S. Rep. No.
1070, 95th Cong., 2d Sess. 16 (1978); see also H.R.
Rep. No. 1714, 95th Cong., 2d Sess. 22 (1978):8
8 Representative Addabbo, the floor manager of the bill
in the House, stated that “ [o] ur findings clearly state that
groups such as black Americans, Hispanic Americans, and
Native Americans, have been and continue to be discrim
inated against and that this discrimination has led to the
social disadvantagement of persons identified by society as
members of those groups.” 124 Cong. Rec. 34,097 (1978).
Senator Nunn, who managed the bill in the Senate, also
emphasized that “ [bjecause of present and past discrimina
tion many minorities have suffered social disadvantagement.”
Id. at 35,408.
See S. Rep. No. 1070, supra, at 14 (analyzing the 1978
Amendments to SBA Section 8(a) that “establish [ed] the
policy goal of developing businesses owned by socially and
economically disadvantaged persons” as “also recogniz [ing]
the pattern of social and economic discrimination that con
tinues to deprive racial and ethnic minorities, and others,
of the opportunity to participate fully in the free enterprise
system”) ; id. at 20 (“many individuals are socially and
economically disadvantaged as a result of being identified
as members of certain groups, including but not limited
to, black Americans and Hispanic Americans”) ; id. at 22
(directing the Small Business Administration to “recognize
the historic past discrimination of minorities in their efforts
to participate in the free enterprise system”).
9
At the time of the 1978 Amendments, minority
businesses constituted only 4% of the total number
of firms in the United States and accounted for less
than 1% of total nationwide business receipts. 124
Cong. Rec. 29,641 (1978) (remarks of Sen. Glenn);
id. at 29,644 (statement by Sen. Heinz). A 1975
report of the Subcommittee on SBA Oversight and
Minority Enterprise of the House Committee on
Small Business set forth statistics showing that,
“ [w]hile minority persons comprise[d] about 16 per
cent of the Nation’s population,” only 3% of busi
nesses in the United States were minority-owned.
H.R. Rep. No. 468, 94th Cong., 1st Sess. 2. The re
port determined that those statistics were “not the
result of random chance,” but resulted from “past
discriminatory systems [that] have resulted in pres
ent economic inequities.” Ibid.
Since 1978, Congress has repeatedly revisited the
issue of disadvantage in federal contracting caused
by racial discrimination,® and has found that those
0 See, e.g., H.R. 5612, To Amend the Small Business Act
to Extend the Current SBA 8(a) Pilot Program: Hearing
on H.R. 5612 Before the Senate Select Comm, on Small Busi
ness, 96th Cong., 2d Sess. (1980) ; Small and Minority Busi
ness in the Decade of the 1980’s (Part 1).: Hearings Before
the House Comm, on Small Business, 97th Cong., 1st Sess.
(1981) ; Minority Business and Its Contribution to the U.S.
Economy: Hearing Before the Senate Comm, on Small Busi
ness, 97th Cong., 2d Sess. (1982) ; Federal Contracting Op
portunities for Minority and Women-Owned Businesses—
An Examination of the 8(d) Subcontracting Program: Hear
ings Before the Senate Comm, on Small Business, 98th Cong.,
1st Sess. (1983) ; Women Entrepreneurs— Their Success and
Problems: Hearing Before the Senate Comm, on Small Busi
ness, 98th Cong., 2d Sess.. (1984) ; State of Hispanic Small
Business in America: Hearing Before the Subcomm. on SBA
10
disadvantages continue. Consequently, each time the
SBA has been amended, Congress has retained or ex
panded upon the findings of social disadvantage based
on race.10 When Congress amended the SBA in 1988
to add the disadvantaged business enterprise goals,
it reaffirmed that the SBA’s disadvantaged business
contracting program is “the most significant effort
of the Federal Government to reduce the effects of
discrimination on entrepreneurial endeavors.” 133
and SBIC Authority, Minority Enterprise, and General Small
Business Problems of the House Comm, on Small Business,
99th Cong., 1st Sess. (1985) ; Minority Enterprise and Gen
eral Small Business Problems: Hearing Before the Subcomm.
on SBA and SBIC Authority, Minority Enterprise, and Gen
eral Small Business Problems of the House Comm, on Small
Business, 99th Cong., 1st Sess. (1985) ; Disadvantaged Busi
ness Set-Asides in Transportation Construction Projects:
Hearings Before the Subcomm. on Procurement, Innovation,
and Minority Enterprise Development of the House Comm,
on Small Business, 100th Cong., 2d Sess. (1988) ; Barriers
to Full Minority Participation in Federally Funded Highway
Construction Projects: Hearing Before a Subcomm. of the
House Comm, on Government Operations, 100th Cong., 2d
Sess. (1988) [hereinafter 1988 Barriers Hearing] ; Surety
Bonds and Minority Contractors: Hearing Before the Sub
comm. on Commerce, Consumer Protection, and Competitive
ness of the House Comm, on Energy and Commerce, 100th
Cong., 2d Sess. (1988); Small Business Problems: Hearings
Before the House Comm, on Small Business, 100th Cong., 1st
Sess, (1987).
10 See Act of July 2, 1980, Pub. L. No. 96-302, §118, 94
Stat. 840; Consolidated Omnibus Budget Reconciliation Act
of 1985, Pub. L. No, 99-272, § 18015, 100 Stat. 370 (1986);
Business Opportunity Development Reform Act of 1988, Pub.
L. No, 100-656, §§ 101, 207, 102 Stat. 3855, 3861-3862.
11
Cong. Ree. 33,314-33,315 (1987) (remarks of Rep.
LaFalce upon introduction of H.R. 1807). The House
Committee on Small Business specifically found that
“discrimination and the present effects of past dis
crimination” continue to hinder minority business
development, H.R. Rep. No. 460, 100th Cong., 1st
Sess. 18 (1987), and that an increase in the effective
ness of the SB A was necessary “to redress the effects
of discrimination on entrepreneurial endeavors,” id.
at 16.
Evidence before Congress in 1988 showed that the
disadvantaged business program had thus far made
unsatisfactory progress in removing discriminatory
barriers to minority business success: “ [0]nly six
percent of all firms are owned by minorities; less
than two percent of minorities own businesses while
the comparable percent for nonminorities is over six
percent; and the average receipts per minority firm
is less than 10 percent the average receipts of all
businesses.” H.R. Rep. No. 460, supra, at 18. Federal
procurement data revealed a similar pattern: In
1986, “total prime contracts approached $185 billion,
yet minority business received only $5 billion in prime
contracts, or about 2.7 percent of the prime contract
dollar.” Ibid. Repeating the observations that had
been made a decade earlier, the Committee Report
concluded that the disparity between minority and
nonminority businesses’ participation in the economy
and in federal procurement was “not the result of
random chance,” but that “discrimination and the
present effects of past discrimination have hurt
socially and economically disadvantaged individuals
in their entrepreneurial endeavors.” Ibid.
The enactment of STURAA in 1987 was also sup
ported by additional evidence and findings of racial
and gender discrimination specific to the highway
12
construction industry. The Senate Committee on En
vironment and Public Works reported on STURAA:
The Committee has considered extensive testi
mony and evidence on the bill’s DBE provision,
and has concluded that this provision is necessary
to remedy the discrimination faced by socially
and economically disadvantaged persons attempt
ing to compete in the highway and mass transit
construction industry. * * *
* * * [B]arriers still remain, preventing mi
norities and women from successfully competing
in the industry. Moreover, the Committee has
concluded that the findings adopted by Congress
in 1978 when enacting legislation covering proj
ects under the Small Business Act, 15 U.S.C.
§ 631(e), apply equally to the federally-funded
highway and mass transit construction projects
covered by this bill.
S. Rep. No. 4, 100th Cong., 1st Sess. 11 (1987). We
have collected in Appendix B, infra, 18a-36a, more
examples of hearings, floor debates and committee re
ports in which Congress’s choice of a limited, race-
based remedy was repeatedly debated and reaffirmed.
2. Regulatory background. Under the Subcon
tracting Compensation Clause that is challenged in
this case, a small business concern will be considered
disadvantaged if it has been certified as such by the
Small Business Administration (Administration) or
any state highway agency. J.A. 24.11 In certifying
11 The Administration certifies disadvantaged businesses
pursuant to the Small Business Act and its implementing
regulations, 13 C.F.R. Pt. 124. State highway and transporta
tion agencies certify disadvantaged businesses for partici-
13
businesses as disadvantaged, the Administration de
termines on a case-by-case basis (a) whether a firm
claiming disadvantage is actually owned and con
trolled by the person claiming disadvantage, (b)
whether that person is socially disadvantaged, and
(c) whether that person is economically disadvan
taged. In making those determinations, the Admin
istration employs a rebuttable presumption that,
“ [i]n the absence of evidence to the contrary,” Black
Americans, Hispanic Americans, Native Americans,
Asian Pacific Americans, and Subcontinent Asian
Americans are socially disadvantaged. 13 C.F.R.
124.105(b). Minority status is, however, neither a
sufficient nor a necessary basis for certification. Be
cause the presumption of social disadvantage is re
buttable, members of the specified groups may none
theless be considered not to be socially disadvantaged.
In addition, people who are not members of the speci
fied minority groups may also be treated as disad
vantaged under the Clause. 15 U.S.C. 637(a)(5);
13 C.F.R. 124.105-124.106. For example, persons
who have suffered ethnic or cultural bias on account
of their ancestry, physical handicap,112 or “long-term
residence in an environment isolated from the main-
pation in DOT programs pursuant to 49 C.F.R. Pt. 23. The
FLHP also accepts certification by other government agen
cies, provided the Contracting Officer has determined that
comparable procedures are followed. J.A. 24.
12 See, e.g., Doe v. Heatherly, 671 F. Supp. 1081 (D. Md.
1987) (applying nonracial inquiry into “cultural bias” to
evaluate disadvantage claim by person with calligraphic dys-
graphia and dyslexia), afFd, 854 F.2d 1316 (4th Cir. 1988)
(Table).
14
stream of American society” may be deemed socially
disadvantaged. 13 C.F.R. 124.105(c) (1) (i).1:3
Small business owners who establish their social
disadvantage must also demonstrate to the Adminis
tration that they are economically disadvantaged “as
compared to others in the same business area who are
not socially disadvantaged.” 15 U.S.C. 637(a)(6)
(A); 13 C.F.R. 124.106(b). The separate showing
of economic disadvantage ensures that certification
does not “assist concerns owned and controlled by
socially disadvantaged individuals who have accumu
lated substantial wealth, who have unlimited growth
potential or who have not experienced or have over
come impediments to obtaining access to financing,
markets and resources.” 13 C.F.R. 124.106(a)(1)
(ii). In evaluating whether a business owner is in
fact economically disadvantaged, the Administration
considers the personal financial condition, business
financial condition, and access to credit and capital
of the individual claiming disadvantaged status. 13
C.F.R. 124.106(a)(2).14
Where a competitor, such as petitioner, believes
that a certification of a subcontractor as disadvan
taged is unwarranted, it may submit information to
33 The Administration “will entertain any relevant evi
dence in assessing [the social disadvantage] element of an
applicant’s case,” 13 C.F.R. 124.105(c) (1) (v), and the reg
ulations set forth factors to be taken into account, 13 C.F.R.
124.105(c) (1) (v) (A)-(C) (education, employment, business
history).
34 See, e.g., Autek Systems Corp. v. United States, 835
F. Supp. 13 (D.D.C. 1993) (upholding Administration’s de
termination that minority business owner’s personal income
disqualified him from participation), aff’d, No. 93-5399 (D.C.
Cir. May 13, 1994).
15
the contracting officer and seek initiation of a protest.
13 C.F.R. 124.603(b); see generally 13 C.F.R. Pt.
124, Subpt. B. “No specific form is required” for a
protest to disadvantaged status, 13 C.F.R. 124.607
(а ) , and it may be filed at any time before the
work under the subcontract is completed, 13 C.F.R.
124.605(b) (2). When such a protest is filed, the Ad
ministration must investigate, 13 C.F.R. 124.608, and
make a prompt determination as to disadvantage, 13
C.F.R. 124.609. In making that determination, the
Administration is required to review “ownership and
control of each protested firm as well as social and
economic disadvantage regardless of the grounds
specified in the protest.” 13 C.F.R. 124.609(d) ( 8 ) “
States that certify disadvantaged businesses apply
standards that generally mirror those promulgated
under the SBA. 49 C.F.R. Pt. 23, Subpt. D ; see Pet.
App. 8. Under STURAA’s implementing regulations,
as under the SBA’s, members of certain minority
groups are rebuttably presumed to be disadvantaged.
49 C.F.R. 23.62.16 However, state certification of dis-
115 The Administration has independent review responsibil
ities even in the absence of a protest. The SBA provides that
businesses that are not in fact both socially and economically
disadvantaged must be decertified or “graduated.” 15 U.S.C.
636(j) (10) (F) and (H) (1988 & Supp. V 1993), 637(a)
(б) (C) (Supp. V 1993) ; 13 C.F.R. 124.208. The financial
information that disadvantaged businesses must file annually,
15 U.S.C. 637(a)(6)(B ), or credible evidence coming to
the attention of the Administration from any other source,
13 C.F.R. 124.101(c) (2), 124.111(c), may trigger a review,
and the Administration is required to investigate and to
satisfy itself that the criteria have been met, 15 U.S.C.
637(a) (6) (C) (i) (Supp. V 1993).
18 The groups as to which the rebuttable presumption ap
plies are virtually the same under both statutes. Both include
16
advantage under STURAA, like certification by the
Small Business Administration, is also available to
nonminorities.17 Thus, persons such as “disabled
Vietnam veterans, Appalachian white males, Hasidic
Jews, or any other individuals who are able to demon
strate to the [State] that they are socially and eco
nomically disadvantaged may be treated as eligible to
own and control a disadvantaged business, on the
same basis as a member of one of the presumptive
Black Americans, Hispanic Americans, Native Americans,
and Asian-Pacific Americans. The STURAA regulations,
however, specify “Asian-Indian Americans” in place of the
SBA regulations’ “Subcontinent Asian Americans.” Compare
49 C.F.R. 23.62 (a)-(e) (“socially and economically disadvan
taged individuals”) (defining precise contours of listed
groups) with 13 C.F.R. 124.105(b) (1) (same).
The rebuttable presumption under DOT’S STURAA regula
tions provides that “members of the named [minority] groups
* * * are presumed to be both socially and economically dis
advantaged,” 49 C.F.R. Pt. 23, Subpt. D, App. C If 2, while the
parallel presumption in the SBA regulations applies only to
social disadvantage. Under both sets of regulations, the cer
tifying agency is entitled to consider all relevant evidence in
order to ensure that the statutory disadvantage criteria are
met as to each subcontractor. With respect to the rebuttal
of the presumption, see 49 C.F.R. 23.62, the STURAA regula
tions provide that “ [a]ny third party” may bring a chal
lenge, 49 C.F.R. 23.69(b) (1); see 49 C.F.R. Pt. 23, Subpt. E,
and may “present evidence that the firm’s owners are not
truly socially and/or economically disadvantaged, even though
they are members of one of the presumptive groups,” 49
C.F.R. Pt. 23, Subpt. D, App. C If 2.
17 The state agencies “may determine, on a case-by-case
basis, that individuals who are not a member [sic] of one of
the [minority] groups are socially and economically disad
vantaged.” 49 C.F.R. 23.62 (defining “socially and economi
cally disadvantaged individuals”) ; see 49 C.F.R. Pt. 23,
Subpt. D, App. A T[ 10 (analysis of Section 23.62).
17
groups.” 49 C.F.R. Pt. 23, Subpt. D, App. A f 10
(analysis of Section 23.62). Women are also pre
sumed to be socially and economically disadvantaged.
49 C.F.R. 23.62; see also 48 C.F.R. 52.219-13 (cited
in Subcontracting Compensation Clause, J.A. 24).
3. The Subcontracting Compensation Clause. The
Subcontracting Compensation Clause is a standard
clause developed by FHWA’s Federal Lands Highway
Program and is used in most of the Program’s sealed-
bid contracts. The Clause is one of several means
employed to aid DOT in implementing its statutory
responsibilities to make efforts to expend contract
and subcontract funds through disadvantaged small
businesses. As its name suggests, the Clause is de
signed to offset the financial disincentives that would
otherwise exist to employing and assisting disadvan
taged businesses as subcontractors by covering the
additional expenses associated with such employment.
J.A. 24-26; Pet. App. 10; C.A. Supp. App. 33-34, 54,
108-109. In return for compensation under the
Clause, the prime contractor thus must agree to
locate, train, utilize, assist, and develop [disad
vantaged businesses] to become fully qualified
contractors in the transportation facilities con
struction field. The Contractor shall also provide
direct assistance to disadvantaged subcontractors
in acquiring the necessary bonding, obtaining
price quotations, analyzing plans and specifica
tions, and planning and management of the work.
J.A. 25.
Compensation Is available to a prime contractor
under the Clause when at least 10% of the prime
contract amount is expended with one or more dis-
18
advantaged subcontractors. J.A. 25.18 The Clause
limits compensation to 10% of the amount actually
subcontracted to disadvantaged subcontractors. In
this case, the subcontract amount was $104,800;
the prime contractor was thus entitled to compensa
tion of approximately $10,000. Pet. App. 11. In
addition, total compensation under the Clause may
not exceed 1.5% of the prime contract amount if the
prime contractor employs one disadvantaged subcon
tractor, or 2% of the prime contract amount if the
prime contractor employs more than one disadvan
taged subcontractor. J.A. 26. Thus, if Mountain
Gravel and Construction Company (Mountain Gravel),
the prime contractor on the project involved in this
case, had subcontracted 40% of the work on a
$1,000,000 project, its compensation would not be the
full $40,000 representing 10% of the subcontracted
amount; rather, if one disadvantaged subcontractor
performed the entire 40% portion, compensation
would be capped at $15,000 (i.e., 1.5% of the prime
contract amount), and if more than one disadvan
taged firm were involved, compensation could not ex
ceed $20,000 (i.e., 2% of the prime contract amount).
The compensation amount is deemed to be “full com
pensation for locating, selecting, training, and assist
ing DBE subcontractors; for maintaining supporting
records; and for supplying all facilities and services
to complete this DBE subcontracting provision.” Ibid.
The Clause does not impose any requirement that
prime contractors subcontract with any disadvantaged
subcontractors; a prime contractor remains fully eli
gible to be awarded a contract whether or not it does
18 This 10% threshold can be modified “based on the avail
ability of eligible subcontractors.” C.A. Supp. App. 39-40,
52-53, 103.
19
so. See Pet. App. 7; J.A. 25 (eligibility for compen
sation) ; C.A. Supp. App. 96.18
4. Proceedings below. A. In September 1989, the
CFLHD awarded Mountain Gravel a prime contract
for a federally funded highway construction project
in the San Juan National Forest known as the West
Dolores project. Pet. App. 9. The contract included
the Subcontracting Compensation Clause. Id. at 10.
Mountain Gravel solicited bids to subcontract the
guardrail installation portion of the contract. In
subcontracting, Mountain Gravel was not required
to accept the lowest bid. Although petitioner sub
mitted a slightly lower bid, Mountain Gravel awarded
the guardrail subcontract to Gonzales, a certified
small disadvantaged business, and thus received com
pensation under the Clause. Id. at 10-11. Petitioner
did not seek disadvantaged status for itself, did not
19 The mechanism of prime contractors assisting disadvan
taged businesses in a mentor-like relationship was proposed
to Congress by the American Association of State Highway
and Transportation Officials (AASHTO) in a hearing that
preceded the passage of STURAA. See The Disadvantaged
Business Enterprise Program of the Federal-Aid Highway
Act: Hearing Before the Subcomm. on Transportation of the
Senate Comm, on Environment and Public Works, 99th
Cong., 1st Sess. 101 (1985) (“The management of a high
way contracting organization requires many skills, including
knowledge of estimating and bidding, the employment and
administration of managers, technicians and laborers, and
the overall financial management of the business. These
skills are not easily learned [,] * * * In time, it can be ex
pected that as expertise is acquired, many of today’s subcon
tractors will become prime or general contractors if they so
desire. To help this process along, we believe in AASHTO
that wider usage of the mentor-protege concept, the forma
tion of partnerships between new DRE and WBE firms and
established contracting organizations, holds great promise.” ).
20
question Gonzales’s actual disadvantaged status, and
did not seek to rebut any presumption that might
have been applied to Gonzales in the certification
process.
On August 10, 1990, petitioner filed suit for declar
atory and injunctive relief against officials of DOT,
alleging that the use of the Clause violates 42 U.S.C.
1983, Title VI of the Civil Rights Act of 1964, 42
U.S.C. 2000d, and the Fifth and Fourteenth Amend
ments to the Constitution. On cross-motions for sum
mary judgment, the district court granted summary
judgment for respondents. Pet. App. 27-37. The
court rejected petitioner’s argument that the chal
lenged federal program must be subjected to strict
judicial scrutiny under City of Richmond v. J.A.
Croson Co., 488 U.S. 469 (1989), holding instead that
Fullilove v. Klutznick, 448 U.S. 448 (1980), and
Metro Broadcasting, Inc. v. FCC, 497 U.S. 547 (1990),
establish the relevant standard. The district court
was satisfied that here, as in Fullilove, Congress had
an “abundant historical basis” to support the chal
lenged program. Pet. App. 35 (quoting Fullilove, 448
U.S. at 478 (opinion of Burger, C.J.)). “ [T]he mere
fact that CFLHD implements a federal program
within Colorado does not convert it into a state pro
gram requiring Crosomtype analysis.” Pet. App. 34.
The district court held that the Clause is narrowly
tailored to serve Congress’s important objectives. Pet.
App. 35-36. The court found that the Clause is not
“overinclusive,” because the annual certification proc
ess ensures that only legitimately disadvantaged sub
contractors participate in the program. Ibid. It is
also not “underinclusive,” because disadvantaged
21
firms that are not presumptively disadvantaged may
apply for certification and become qualified to partici
pate. Id. at 36. The court further noted that the
waiver mechanism properly relieves federal agencies
of their disadvantaged business obligations when there
are not enough qualified disadvantaged businesses
available to achieve the agency’s goal. Ibid.
B. The court of appeals affirmed. Pet. App. 1-24.
In an undivided opinion, the court held, as had the
district court, that Fullilove, not Croson, controls. Id.
at 15. “Under Fullilove, if Congress has expressly
mandated a race-conscious program, a court must
apply a lenient standard, resembling intermediate
scrutiny, in assessing the program’s constitutional
ity.” Ibid. “Indeed,” the court observed, “the Metro
Broadcasting majority held that even non-remedial
race-conscious measures mandated by Congress are
constitutionally permissible if they satisfy intermedi
ate scrutiny.” Id. at 19.
The court rejected petitioner’s argument that, be
cause the challenged program was also “fashioned
and specified by an agency and not by Congress,” Pet.
App. 17, particularized findings of past discrimina
tion were required to justify the program under
Croson. The court stated that “ [petitioner] cites no
authority, nor do we know of any, to support the
proposition that a federal agency must make inde
pendent findings to justify the use of a benign race
conscious program implemented in accordance with
federal requirements.” Id. at 18. The court of ap
peals found that the particular aspects of the pro
gram petitioner challenges were specifically author
ized by Congress. In including the Subcontracting
Compensation Clause in prime contracts, the CFLHD
thus “did exactly what Congress explicitly directed
it to do” under the SBA. Id. at 20.
22
Finally, the court of appeals held that the Clause
is constitutional because it is narrowly tailored to
achieve the important governmental objective of pro
viding opportunities for minority subcontractors.
“The qualifying criteria of the SCC program [are]
not limited to members of racial minority groups,”
and “minority businesses that do not satisfy that
economic criteria cannot qualify for DBE status.”
Pet. App. 23. The court also pointed out that the
10% threshold for using disadvantaged subcontrac
tors in the Clause “is an optional goal, not a set-aside,”
because “it is entirely at the discretion of the prime
contractor whether to exercise its option under the
Subcontracting Compensation Clause.” Id. at 12 n.9.
The SCC program was “ ‘appropriately limited in
* * * duration’ because federal procurement and
construction contracting practices are subject to regu
lar ‘reassessment and reevaluation by Congress.’ ” Id.
at 23 (quoting Fullilove, 448 U.S. at 489 (opinion of
Burger, C.J.)).
SUMMARY OF ARGUMENT
I. A. Petitioner has brought a facial constitutional
challenge to the use of the Subcontracting Compensa
tion Clause on the ground that it incorporates race-
based classifications. The Clause, however, is sub
stantively based on disadvantaged status; race plays
a role in the operation of the Clause only through a
rebuttable presumption that small businesses owned
and controlled by members of racial minority groups
are disadvantaged. That presumption may be set
aside or rebutted if a minority subcontractor is not
actually disadvantaged. In addition, the compensa
tion program challenged by petitioner applies to en
courage the utilization of disadvantaged subcontrac
tors who are not members of minority groups.
23
Petitioner also mischaracterizes goals set under
the Small Business Act as “race-based set-asides.”
Those goals, however, are neither based on race nor
are they used to set aside funds exclusively for minori
ties. The goals do not apply to all minority businesses,
but only to those owned by disadvantaged minorities.
The goals also apply to government contracting with
women and members of other disadvantaged groups.
Because the percentage levels of the goals are not tied
to race, they are not subject to heightened constitu
tional scrutiny.
B. Petitioner lacks standing to challenge the use
of the rebuttable presumption associated with the Sub
contracting Compensation Clause. Petitioner failed
to show that the presumption was applied to the
successful bidder in this case, or that, if it was
applied, it led to an incorrect determination of dis
advantage. Nor did petitioner show that it was itself
disadvantaged. Petitioner, moreover, seeks only fu
ture relief, to which it is not entitled on a record
that demonstrates, at best, only remote and specula
tive future harm.
C. Nor is the challenged Clause correctly viewed
as conferring a racial preference. The Clause does
not create an artificial incentive to subcontract with
disadvantaged businesses. It seeks instead to remove
disincentives to using such businesses by compensat
ing prime contractors for the additional expenses and
time associated with that use. Specifically, the Clause
requests that prime contractors train and assist dis
advantaged subcontractors, and, where they agree to
do so, it offers them compensation to offset the cost
to them of such additional effort.
D. Because the challenged presumption was en
acted by Congress as a remedial measure based on
legislative findings of racial discrimination affecting
minority business opportunity, intermediate scrutiny
24
is the appropriate standard of constitutional review.
The presumption is, however, constitutional under
any degree of scrutiny. It serves a compelling re
medial objective, and, because rebuttable and non
exclusive, is closely tailored to serve that objective.
Congress determined that a remedy was necessary
based on its findings that racial discrimination con
tinues to impair minority access to subcontracting
opportunities in federal procurement generally, and in
road construction specifically.
E. The presumption challenged in this case is more
narrowly tailored than any race-based remedial meas
ure this Court has yet considered. It is not under-
inclusive, because it provides the same compensation
for contracting with nonminority-owned as with
minority-owned disadvantaged small businesses. It is
not overinclusive, because it is accompanied by proce
dures to exclude minorities who are not in fact dis
advantaged. The Clause imposes no fixed requirement
of subcontracting with disadvantaged businesses and
is neither a set-a,side nor a quota. The presumption
employed under the Clause is also appropriately lim
ited in duration, because it is subject to active and
ongoing congressional assessment of its continuing-
necessity.
II. Finally, this Court should reaffirm its decision
in Fullilove. As clarified by this Court’s subsequent
decisions in Croson and Metro Broadcasting, Fulli
love has provided a workable standard of constitu
tional review of race-conscious measures adopted by
Congress after extensive factfinding and delibera
tion. There is no conflict in the Circuits regarding
the proper application of Fullilove. The decision in
that case reflects appropriate judicial respect for
congressional determinations on matters of race that
touch federal spending programs.
25
ARGUMENT
I. THE s u b c o n t r a c t in g c o m p e n s a t io n
CLAUSE IS CONSTITUTIONAL
A. The Clause Is Based On Social And Economic Dis
advantage; Minority Racial Status Plays Only A
Procedural Role Through A Rebuttable Presump
tion Of Such Disadvantage
Petitioner challenges the Subcontracting Compen
sation Clause on its face. Although that Clause em
ploys a presumption of disadvantage that is based on
racial group membership, the presumption is rebutt
able and nonconclusive. The presumption therefore
plays a procedural rather than a substantive role in
the contracting program that employs the Clause.
The program is, at the same time, open to subcon
tractors who have been the targets of ethnic prejudice
or cultural bias, as well as to those subcontractors
who have been victims of racial prejudice.30 All sub
contractors covered by the Clause also must, in addi
tion to having suffered social disadvantage caused by
group prejudice or bias, have suffered economic dis
advantage.
A member of a racial minority group who has not
himself or herself been the victim of racial prejudice
is thus not to be treated as disadvantaged under the
challenged program. Nor is such a minority group
member to be treated as disadvantaged, even if he
or she has been the victim of racial prejudice, if that
prejudice has not resulted in economic disadvantage
to him or her. On the other hand, subcontractors
who are not racial minorities are to be included in
the program if they are both economically and so-
20 The program also broadly covers all disadvantage caused
by racial prejudice—not only racial prejudice directed against
racial minorities. Cf. McDonald V. Santa Fe Trail Tramp*
Co., 427 U.S, 273 (1976).
26
daily disadvantaged. Women subcontractors consti
tute the largest category of nonminorities who are
included. Members of ethnic minorities are also cov
ered. In addition, the Conference Report on the 1978
SBA Amendments refers to the potential disadvan
taged status of “a poor Appalachian white person,”
see H.R. Rep. No. 1714, supra, at 22, and the regu
lations under STURAA give disabled Vietnam vet
erans and members of Hasidic Jewish sects as other
illustrations of the program’s reach beyond racial
minorities, see 49 C.F.R. Ft. 23, Subpt. D, App. A
Hi o .
The Subcontracting Compensation Clause program
is thus a program based on disadvantage, not on
race. There is no constitutional impediment to legis
lative action based on such disadvantage beyond the
requirement that the means be nonarbitrary and ra
tionally related to the objective. Government regula
tion “in the social and economic field” requires only
the most relaxed judicial scrutiny. See Dandridge v.
Williams, 397 U.S. 471, 484 (1970). Congress’s
decision to foster the economic development of
small disadvantaged businesses clearly serves legiti
mate objectives—improving the disadvantaged busi
nesses’ stability and business competence, and en
hancing competition in the marketplace for govern
ment contracts—and the means chosen by Congress to
achieve those objectives are just as clearly rationally
related to the legislative ends.
Petitioner’s facial challenge to the CFLHD’s goals
depends entirely on its inaccurate assertion that they
are race-based. Petitioner erroneously equates dis
advantaged businesses with minority businesses, as
serting that, “ [wjhile Congress may have had a basis
for the adoption of a program authorizing the set-
aside of 5 percent of government contracts on the
basis of race, * * * the decision by the CFLHD to
27
adopt a program in which 12 to 15 percent of its
contracting funds are apportioned on the basis of
race is without the factual basis required by this
Court.” Pet. Br. 20 (emphasis added); see id. at
47-49. However, all percentages that petitioner re
fers to—including the 5% SB A goal, the 10%
STURAA goal, the 12-15% CFLHD goal, and the
10% subcontracting threshold in the SCC—reflect
expenditures with disadvantaged businesses of all
types, nonminority-owned as well as minority-owned.
Petitioner’s incorrect characterization of the goals as
race-based leads it to focus on the level of the goals,
and on how and by whom they are set. If petitioner
seeks to challenge the Clause as race-conscious, the
proper focus of that challenge is on the only aspect
of the program that is race-based: the race-based re
buttable presumption used in some certification de
terminations under the Subcontracting Compensation
Clause.
B. Petitioner Lacks Standing To Challenge The Use
Of The Race-Based Rebuttable Presumption
The Subcontracting Compensation Clause employs
a race-based criterion in the limited form of a re
buttable presumption of disadvantage flowing from
minority group membership. As we explain below,
that presumption, although calling for intermediate
scrutiny under the Court’s equal protection prece
dents, easily passes constitutional muster. As a pre
liminary matter, however, we believe that petitioner
has failed to demonstrate, as it must, that it has
standing to challenge the limited procedural use of
that racial criterion in the Compensation Clause pro
gram. Petitioner has completely failed to show that
the presumption affected the award of the subcon
tract in this case to another bidder, and petitioner
has also failed to allege or prove that the future
28
relief it seeks would affect its business opportunities.
Petitioner challenges its loss of a subcontract that
was awarded to a certified disadvantaged business
enterprise, arguing that the contract award was the
result of a racial preference, but has failed to estab
lish that race played any role whatever in the chal
lenged award. First, petitioner never alleged or
proved that the basis of Gonzales Construction Com
pany’s certification as a disadvantaged business was
its ownership and control by a member of a racial
minority group. Petitioner submitted no evidence
regarding the criteria actually used in that certifica
tion.21 So far as the record reveals, Gonzales may
have been certified as a disadvantaged business be
cause of ownership and control by a woman, by an
ethnic minority, or by a physically disabled person,
or on some other ground.22 There has thus been no
showing that the race-based rebuttable presumption,
which is the only racial component of the challenged
program, was actually applied so as to affect the
award of the subcontract in this case.
Second, petitioner failed to establish that, even
assuming that Gonzales’s ownership by a racial mi
nority group member was the basis of the certifica
tion, the owner was not socially and economically
disadvantaged. Although the SBA and STURAA
regulations provide a procedure through which any
interested person may challenge whether a certified
21 Petitioner did not depose or otherwise seek discovery
from the owner of the Gonzales firm, nor from any of the
state or SBA officials involved in disadvantaged business
certifications.
22 Petitioner simply refers repeatedly and consistently to
Gonzales as a disadvantaged business enterprise, or “DBE,”
without indicating the basis of the finding of disadvantage.
See, e.g., J.A. 18 (Complaint); Pis. Answers to Defs. Interrog.
16; Pet. 5; Pet. Br. 11; see J.A. 80.
29
disadvantaged subcontractor is actually disadvan
taged, 13 C.F.R. Pt. 124, Subpt. B; 49 C.F.R. 23.69,
petitioner chose chose not to take advantage of that
procedure. A challenge by petitioner to Gonzales’s
certification would have required the certifying
agency not simply to confirm the race of those who
own and control the company, but to review and
verify the company’s actual disadvantaged status.
See 13 C.F.R. 124.608-124.609; 49 C.F.R. Pt. 23,
Subpt. D, App. C. If Gonzales is actually disadvan
taged and if petitioner, as appears, see Pet. Br. 24
n.21, had a fair opportunity to challenge that status
but chose not to do so, petitioner can hardly claim
now that any rebuttable presumption used to deter
mine that Gonzales was disadvantaged was uncon
stitutional.
Nor has petitioner ever claimed or established that
it is itself disadvantaged. Thus, petitioner cannot
challenge the rebuttable presumption on the ground
that it unconstitutionally prefers minorities by mak
ing it easier for them than for nonminorities to be
certified as disadvantaged.
The abstract nature of petitioner’s claim is further
underscored by its failure to show that the relief it
seeks would actually affect its business. Petitioner
does not seek retrospective relief for Mountain Gra
vel’s failure to award it the subcontract. Rather, pe
titioner seeks only to enjoin and declare unlawful the
future use of the Clause by the FHLP. J.A. 22-23.
Petitioner thus has standing only if it faces “ ‘actual
or imminent’ injury.” Lujan v. Defenders of Wild
life, 112 S. Ct. 2130, 2138 (1992). The asserted
future harm upon which petitioner’s claim is based
is, however, both remote and highly contingent. In
the 18 years that petitioner has been in the guard
rail construction business, the subcontract on the
West Dolores project is the only subcontract that
3G
petitioner has allegedly lost due to the Subcontract
ing Compensation Clause. Pis. Answers to Defs.
Interrog., Attachs. 1, 3. In Colorado, where peti
tioner bids, the only agency using the Clause is the
CFLHD, which has on average less than one guard
rail subcontract per year in each State. Defs. An
swers to Pis. Interrog. 13. Petitioner has not always
bid on government subcontracts, and when it did it
most often failed to make the lowest bid. Pis. An
swers to Defs, Interrog. 9, Attach. 1. In addition,
most highway construction projects on which peti
tioner bids are not administered by the CFLHD, but
by the State, and therefore do not include the Sub
contracting Compensation Clause. Finally, if peti
tioner lost future contracts under the Clause to dis
advantaged businesses owned by nonminorities, an
injunction against use of the racial presumption in
the Clause would provide it no relief. All these fac
tors make the “links in the chain of causation be
tween the challenged Government conduct and the
asserted injury * * * far too weak for the chain as
a whole to sustain [petitioner’s] standing.” Allen v.
Wright, 468 U.S. 737, 759 (1984).23
Petitioner, in sum, has not established—nor does
it appear to have—any factual basis for challenging
23 Northeastern Florida Chapter of Associated General Con
tractors V. City of Jacksonville, 113 S. Ct. 2297 (1993), is
not to the contrary. That case was brought by an association
of 240 contractors and subcontractors that regularly bid on
contracts affected by the challenged set-aside, in contrast to
petitioner here, which faces only the most speculative chance
that it will be affected by the challenged program. The pro
gram in City of Jacksonville was also fundamentally different
from the one at issue here, because it was an exclusively
minority program, whereas the Clause here neither prevents
petitioner from obtaining certification as a disadvantaged
business nor, even if not so certified, from bidding on and ob
taining subcontracts on prime contracts including the Clause.
31
the constitutionality of the only factor of any kind
in the Compensation Clause program that is based
on minority racial status. As we show below, the
rebuttable presumption, in the context of a program
that seeks not to give a preference, but to alleviate
discriminatory barriers that would otherwise imperil
disadvantaged subcontractors, is unquestionably con
stitutional. On the present record, however, the only
aspect of the Compensation Clause open to challenge
is its implementation of Congress’s decision to in
crease the share of federal procurement business al
located to disadvantaged subcontractors, whether
minority or not. There can be no serious question
as to the legitimacy of that congressional objective.
C. The Clause Does Not Constitute A Preference For
Disadvantaged Subcontractors
Petitioner’s constitutional attack on the Subcon
tracting Compensation Clause depends not only on
petitioner’s incorrect assertion that the Clause focuses
on race rather than disadvantage, but also on its con
tention that the Clause constitutes a “bonus” or “re
ward” (Pet. Br. 9 & n.9, 10 & n.12, 11) to prime
contractors to induce them to prefer contracting with
disadvantaged subcontractors. That contention is
also factually erroneous.
Rather than constituting a preference for disad
vantaged subcontractors, the Compensation Clause
is designed to remove barriers that would otherwise
exist to the free participation by disadvantaged
businesses in bidding for subcontracts on federal
highway projects. As explained by the text of the
Clause itself and by the legislative record, disadvan
taged subcontractors, who by definition must have
diminished capital resources and credit opportunities,
will, without assistance, often be unable to compete
with more affluent subcontractors for work on gov-
32
ernment projects. The Clause is part of a FLHP
effort to encourage prime contractors on federal high
way projects to lend that needed assistance and to
be willing to utilize disadvantaged subcontractors de
spite the extra costs associated with that effort.
As the Clause notes, among the additional costs
of employing disadvantaged subcontractors are pay
ments to assist the subcontractors to get bonding, the
expense and time involved in providing assistance
in business, financial and labor management, and
technical planning and organization of the subcon
tracted work. J.A. 25-26. The prime contractor is
required to keep records “documenting these activi
ties and shall make them available for Government
review upon request.” J.A. 25. If those extra ex
penses were not negated by the Clause, disadvan
taged subcontractors would often either be denied
needed assistance, be forced to submit higher bids
than more affluent subcontractors who face fewer
disadvantages, or be excluded from government pro
curement business altogether. Any of those results
would conflict with Congress’s objectives of using its
procurement program to spur economic development
and of encouraging healthy price competition on gov
ernment projects.24
24 Petitioner has made no effort to show that the compensa
tion figure used under the Clause exceeds the costs of doing
business with disadvantaged subcontractors so as to consti
tute a preferential “bonus” or “reward.” In addition, com
pensation is initially calculated at 10% of the dollar amount
of the subcontracts placed with disadvantaged businesses, but
cannot exceed 2% of the amount of the prime contract. Thus,
any affirmative incentive it might provide in a particular
situation would, in all events, be a limited one.
33
D. The Rebuttable Presumption Of Disadvantage Is
Based On Congressional Findings Of Racial Dis
crimination And Serves The Compelling Govern
mental Objective Of Remedying Past Discrimination
In amending the SB A since the mid-1970’s, and in
enacting STTJRAA in 1987, Congress identified past
and continuing racial discrimination, specifically in
cluding discrimination in the highway construction
industry, as having impaired the ability of minorities
to participate in economic activity, and it sought to
ensure that federal procurement spending not com
pound the effects of that discrimination, but rather
help to remedy it. In this effort, Congress chose to
utilize, in addition to other means, a narrow and
flexible rebuttable presumption of disadvantage ap
plicable to racial minorities seeking to participate in
federal contracting activity. Insofar as petitioner has
standing to raise the issue, this case presents the
question whether, in assessing the disadvantaged sta
tus of a particular small business, the CFLHD may
properly rely on certifications of disadvantage in which
the presumption has been employed.®
The presumption itself is both nonconclusive and
rebuttable. Certifying agencies are to presume dis
advantage if a subcontractor is a member of any of
26 As noted, petitioner has not identified the certification
process actually used in this case. For that reason, it is
unclear which regulations are at issue—those under the SBA
or those under STURAA. Accordingly, in order to reverse
the decision below, this Court would have to find all poten
tially applicable regulations facially unconstitutional. See
Reno V. Flores, 113 S. Ct. 1439, 1446 (1993) (citing United
States V. Salerno, 481 U.S. 739, 745 (1987)). So long as the
“projected administration givefs] reasonable assurance that
the program will function within constitutional limitations,”
Fullilo've V. Klutznick, 448 U.S. 448, 490 (1980) (opinion of
Burger, C.J.), the program must be upheld.
34
a list of minority groups, or, in the case of the agen
cies implementing STURAA, is a women. The over
riding statutory obligation of the certifying agencies
remains that of determining whether each small busi
ness is, in fact, socially and economically disadvan
taged; the agency may rely on the presumption only
in the absence of contrary information. Where avail
able information shows, for example, a lack of eco
nomic disadvantage, the presumption must be dis
regarded. Moreover, unlike a court, the certifying
agency is entitled to implement independent investi
gative procedures to satisfy itself that the statutory
criteria are being met.®6 In addition, in any case in
which a non-disadvantaged business believes applica
tion of the presumption may result in discrimination
against it, it may trigger an investigation into
whether the minority business has truly suffered both
social and economic disadvantage.
1. Race-based remedial action by Congress is sub
ject to intermediate scrutiny. This Court has never
applied strict scrutiny to a remedial, race-conscious
measure adopted by Congress, and should not do so
here, where the program involves neither a quota, a
set-aside, nor any other kind of substantive racial
preference. Cf. City of Richmond v. J.A. Croson Co.,
488 U.S. 469, 499, (1989). The rebuttable presump
tion employed in programs under the SBA and
STURAA is instead subject to the intermediate
standard of review set forth in this Court’s decisions
26 See Federal Highway Administration, U.S. Dep’t of
Transportation, Disadvantaged Business Enterprise (DBE)
Program Administration Participant’s Manual 65 (Apr.
1990) (advising state agencies to require applicants for dis
advantaged business certification to submit gross receipts for
at least three previous years and income tax returns for
each owner); STURAA § 106(c) (4), 101 Stat. 146.
35
in Metro Broadcasting, Inc. v. FCC, 497 U.S. 547
(1990), and Fullilove v. Klutznick, 448 U.S, 448
(1980).
Intermediate scrutiny applies because of Congress’s
broad powers in matters of race. Those powers de
rive from an “amalgam” of sources, Metro Broad
casting, 497 U.S. at 564 n .ll (quoting Fullilove, 448
U.S. at 473 (opinion of Burger, C. J .)), including
Congress’s “institutional competence as the National
Legislature,” as well as its constitutional powers
under the Spending Clause,127 the Commerce Clause,128
and the enforcement clauses of the Civil War Amend
ments, Metro Broadcasting, 497 U.S. at 563. Unlike
the States and localities, Congress is a co-equal
branch, and the Court is bound to give its decisions
“great weight.” Fullilove, 448 U.S. at 472 (opinion
of Burger, C.J.). Congress’s role as the national leg
islature—a bicameral, representative body subject to
presidential veto—makes it less likely than state or
local governing bodies to be captured by parochial and
biased interests. It thus does not present the “height-
27 Article I, Section 8, Clause 1. See Fullilove, 448 U.S. at
474 (opinion of Burger, C .J.); Metro Broadcasting, 497 U.S.
at 563. “It is beyond dispute that any public entity, state or
federal, has a compelling interest in assuring that public
dollars, drawn from the tax contributions of all citizens, do
not serve to finance the evil of private prejudice.” Croson,
488 U.S. at 492 (citing Norwood V. Harrison, 413 U.S. 455,
465 (1973)).
28 Congress has vast powers under the Commerce Clause,
Article 1, Section 8, Clause 3, to regulate any activity that
“has a real and substantial relation to the national interest.”
Heart of Atlanta Motel, Inc. V. United States, 379 U.S. 241,
255 (1964); EEOC V. Wyoming, 460 U.S. 226 (1983); id. at
248 (Stevens, J., concurring); Hodel V. Indiana, 452 U.S.
314, 323-324 (1981); Katzenbach V. McClung, 379 U.S. 294,
304 (1964).
36
ened danger of oppression from political factions”
present in smaller political units. Croson, 488 U.S.
at 523 (Scalia, J., concurring in the judgment):20
Moreover, in the event that Congress should err in its
choice of a remedy, its broadly representative char
acter provides a check.
In matters of race, the Civil War Amendments ex
pressly granted “additional powers to the Federal
government,” and specifically to Congress, and laid
“additional restraints upon those of the States.”
Croson, 488 U.S. at 491 (opinion of O’Connor, J.)
(quoting the Slaughter-House Cases, 83 U.S. (16
Wall.) 36, 68 (1873)).80 “It is fundamental that in
no organ of 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 pro
tection guarantees.” Fullilove, 448 U.S. at 483 (opin
ion of Burger, C.J.); id. at 508-510 (Powell, J.,
concurring) ®;1
29 See also Fullilove, 448 U.S. at 473 (opinion of Burger,
C.J.) (federal legislation represents not a conclusion reached
“by a single judge or a school board, but a considered decision
of the Congress and the President”).
30 “ [I] t is one thing to permit racially based conduct by
the Federal Government—whose legislative powers concern
ing matters of race were explicitly enhanced by the Four
teenth Amendment, see U.S. Const., Arndt, 14, § 5—and quite
another to permit it by the precise entities against whose
conduct in matters of race that Amendment was specifically
directed.” Croson, 488 U.S. at 521-522 (Scalia, J., concurring
in the judgment).
31 As those Justices who addressed the issue in Croson took
care to point out, Congress has powers that States and locali
ties lack to act in an affirmative, race-conscious manner. 488
U.S. at 486-493 (opinion of O’Connor, J., joined by Rehnquist,
37
Congress’s powers under Section 5 of the Four
teenth Amendment supported the federal race
conscious measures in both Fullilove, 448 U.S. at 483-
484 (opinion of Burger, C.J.), and Metro Broadcast
ing, 497 U.S. at 564-565, and similarly authorize the
rebuttable presumption of disadvantage at issue in
this case. “Congress, unlike any state or political
subdivision, has a specific constitutional mandate to
enforce the dictates of the Fourteenth Amendment.
The power to ‘enforce’ may at times also include the
power to define situations which Congress determines
threaten principles of equality and to adopt pro
phylactic rules to deal with those situations.” Croson,
488 U.S. at 490 (opinion of O’Connor, J.) (citing
Katzenbach v. Morgan, 384 U.S. 641, 651 (1966))
(“Correctly viewed, § 5 is a positive grant of legisla
tive power authorizing Congress to exercise its discre
tion in determining whether and what legislation is
needed to secure the guarantees of the Fourteenth
Amendment.” ) ) ; see also Fullilove, 448 U.S. at 476
(opinion of Burger, C.J.). Because Congress in this
area has constitutionally coordinate power to define
racial inequality and to devise appropriate remedies,
the Court must accord special respect to congressional
judgment regarding both means and ends.
Congress’s remedial powers under the Thirteenth
Amendment similarly require deference to its identifi
cation of private discrimination and its choice of
remedy. The enforcement clause of the Thirteenth
Amendment is a source of uniquely federal power “to
enact laws ‘direct and primary, operating upon the
acts of individuals, whether sanctioned by State legis-
C.J., and White, J.). Judge Posner in Milwaukee County
Pavers Ass’n V. Fielder, 922 F.2d 419, 423-424 (7th Cir.),
cert, denied, 500 U.S. 954 (1991), articulated the same
principle.
38
lation or not.’ ” Runyon v. McCrary, 427 U.S. 160,
179 (1976) (quoting Jones v. Alfred H. Mayer Co.,
392 U.S. 409, 438 (1968)).
Petitioner errs in contending that Congress’s Sec
tion 5 powers are not relevant here because this case
“involves a federal program implemented by a fed
eral agency” and “no state or local government is
involved.” Pet. Br. 33 n.29. The legacy of discrimi
nation that Congress aimed to remedy in STURAA
and the SBA is a history not only of private,82 but
also of state-sponsored discrimination.38 Nothing in
the Fourteenth Amendment requires that a federal
remedy for such discrimination be implemented only
through the States.134 Congress’s powers under the
Thirteenth Amendment do not, in all events, turn on
state responsibility for past and present racial dis
crimination.
2. Intermediate scrutiny applies here. It is thus
“of overriding significance” to this case that the
rebuttable presumption of disadvantage “ha[s] been
32 Discriminatory practices by prime contractors, banks,
unions, vocational schools, and the like are among1 the prac
tices Congress sought to redress by expressly recognizing
racial minorities as disadvantaged in highway construction
and devising measures to remedy disadvantage in federal
contracting. Some illustrations of the bases for Congress’s
action are touched upon in Appendix B, and in the materials
referred to therein.
38 See, e.<]., Minority Business Participation in Department
of Transportation Project: Hearing Before a Subcomm. of
the House Comm, on Government Operations, 99th Cong., 1st
Sess. 185 (1985); 1988 Barriers Hearing 82, 117.
84 Under STURAA, however, Congress in fact chose in
large part to implement its remedial program through the
States: The vast majority of the funds allocated under
STURAA—-approximately 98%—is for aid to the States,
which is also spent subject to STURAA disadvantaged busi
ness enterprise contracting provisions.
39
specifically approved—indeed, mandated—by Con
gress.” Metro Broadcasting, 497 U.S. at 563. Al
though agency regulations define some aspects of the
rebuttable presumption, Congress made the “critical
determinations.” Fullilove, 448 U.S. at 468 (opinion
of Burger, C.J.). Congress thus determined that per
sons who are “socially disadvantaged because of their
identification as members of certain groups that have
suffered the effects of discriminatory practices” “in
clude, but are not limited to, Black Americans, His
panic Americans, Native Americans, Indian tribes,
Asian Pacific Americans, Native Hawaiian Organiza
tions, and other minorities.” 15 U.S.C. 631(f) (1) (B)
and (C). It also determined that, in subcontracting,
those minorities may be “presume [d]” to be disad
vantaged. 15 U.S.C. 637(d)(3)(C) (Supp. V 1993).
The Administration and DOT each elaborated on
those determinations in their regulations by outlining
evidence relevant to determinations of social and eco
nomic disadvantage, 13 C.F.R. 124.105-124.106; 49
C.F.R. Pt. 23, Subpt, D, App. C, and by spelling out
the procedures available for rebutting the presump
tion, 13 C.F.R. Pt. 124, Subpt. B; 49 C.F.R. 23.69;
49 C.F.R. Pt. 23, Subpt. D, App. C. The role of the
agencies in “flesh [ing] out this skeleton, pursuant to
delegated rulemaking authority,” does not make the
crucial race-based, remedial determination any less
the decision of Congress. Fullilove, 448 U.S. at 468
(opinion of Burger, C.J.).
The appropriate constitutional test for determining
the validity of the rebuttable presumption of disad
vantage is set forth in the plurality opinion of Chief
Justice Burger in Fullilove and in the majority opin
ion in Metro Broadcasting. Relying on Fullilove, this
Court in Metro Broadcasting held that “benign race-
40
conscious measures mandated by Congress * * * are
constitutionally permissible to the extent that they
serve important governmental objectives within the
power of Congress and are substantially related to
achievement of those objectives.” Metro Broadcast
ing, 497 U.S. at 564-565. In a facial challenge such
as is presented in this case, “given a reasonable con
struction and in light of its projected administration,
if [the Court] find[s] the [minority business enter
prise] program on its face to be free of constitutional
defects, it must be upheld as within congressional
power,” Fullilove, 448 U.S. at 480-481 (opinion of
Burger, C.J.). “ [D]oubts must be resolved in sup
port of the congressional judgment that this limited
program is a necessary step to effectuate the constitu
tional mandate for equality of economic opportunity.”
Id. at 489.
Petitioner does not ask this Court to overrule Fulli
love. Rather, it contends that Chief Justice Burger’s
opinion effectively applied strict scrutiny, and urges
this Court to so hold. Pet. Br. 26-27; Pet. 7-11. But
the Court observed in Metro Broadcasting that “ [a]
majority of the Court in Fullilove did not apply strict
scrutiny to the race-based classification at issue,” 497
U.S. at 564—an observation with which the dissent
ing Justices in that case agreed. See id. at 608
(O’Connor, J., dissenting) (“the Court correctly ob
serves that a majority [in Fullilove] did not apply
strict scrutiny”). In any event, whatever label is
given to the degree of scrutiny employed in Fullilove,
the result there requires validation of the presumption
challenged here, which is as strongly justified and
more narrowly tailored than the set-asides at issue in
FulliloveJ815
35 Petitioner also does not question the validity of the
Court’s decision in Metro Broadcasting, but seeks to distin-
41
3. Congress had a firm cmd compelling basis to
act. Although Congress “need not make specific find
ings of discrimination to engage in race-conscious re
lief,” Croson, 488 U.S. at 489 (opinion of O’Connor,
J . ) ; see also Fullilove, 448 U.S. at 478 (opinion of
Burger, C.J.), the presumption at issue here is in
fact supported by explicit congressional findings that
minorities are disadvantaged in participating in high
way construction projects because of racial discrim
ination and its continuing effects. See pp. 7-12,
supra; App., infra, 18a-84a. As it did in enacting
the Public Works Employment Act of 1977 (PWEA)
at issue in Fullilove, Congress in the SBA and
STURAA sought to ensure that state and private
entities receiving federal funds and contracts would
not employ procurement practices that Congress had
decided “might result in perpetuation of the effects
of prior discrimination which had impaired or fore
closed access by minority businesses to public con
tracting opportunities.” Fullilove, 448 U.S. at 473
(opinion of Burger, C.J.). Census data available to
Congress further demonstrate that minorities in the
construction industry, and in the economy generally,
guish it as applicable only to non-remedial affirmative action
in which First Amendment interests are at stake. Pet. Br.
28-31. Intermediate scrutiny applicable to a non-remedial
race-conscious program, however, should, a fortiori, apply to
a remedial program such as this one, given that the interest in
remedying racial discrimination is the most compelling reason
the Court has yet identified for race-based legislative distinc
tions. See Metro Broadcasting, 497 U.S. at 611 (O’Connor,
J., dissenting). The First Amendment interests at stake in
Metro Broadcasting did not contribute to the Court’s view
that a lesser level of scrutiny was required, but rather fac
tored into the determination whether, under the intermediate
test the Court employed, the government had established a
sufficiently “important governmental o b j e c t i v e Id. at 565.
42
have continued to lag far behind whites in securing
economic opportunities. Appendix C to this brief sets
forth census figures showing that, although there
have been modest improvements in some respects
since 1978, the participation of racial minority
groups in the construction industry, and the economic
benefit they derive from construction work they do,
continue to lag far behind that of whites. Such
data, as well as all legislative materials, are relevant
to the determination that Congress was acting to
remedy the effects of prior discrimination, since “Con
gress, of course, may legislate without compiling the
kind of ‘record5 appropriate with respect to judicial
or administrative proceedings.” Metro Broadcasting,
497 U.S. at 572 (quoting Fullilove, 448 U.S. at 478
(opinion of Burger, C .J.)); see also Metro Broad
casting, 497 U.S. at 572 (quoting Fullilove, 448 U.S.
at 502-503 (Powell, J., concurring)).
Congress may act broadly both in identifying dis
crimination and in fashioning a remedy for it.86 In
Croson, which concerned action taken by a city coun
cil, not Congress, the plurality rejected the appellee’s
view that “the city must limit any race-based re
medial efforts to eradicating the effects of its own
prior discrimination.” 488 U.S. at 486 (opinion of
O’Connor, J.). Congress may also act with the
forward-looking goal of increasing opportunities for
36 “Congress may identify and redress the effects of society
wide discrimination.” Croson, 488 U.S. at 490 (opinion of
O’Connor, J.) ; see also Wygant V. Jackson Board of Educa
tion, 476 U.S. 267, 287 (1986) (O’Connor, J., concurring in
part and concurring in the judgment) (“a plan need not be
limited to the remedying of specific instances of identified
discrimination for it to be deemed sufficiently ‘narrowly tail
ored,’ or ‘substantially related/ to the correction of prior
discrimination by the state actor”) .
43
those who have been disadvantaged by racial discrim
ination. “A central purpose of the Fourteenth Amend
ment is to further the national goal of equal oppor
tunity for all our citizens,” but remedying past harms
need not be done without “studying their probable
impact on the future.” Croson, 488 U.S. at 511
(Stevens, J., concurring in part and concurring in the
judgment); see Metro Broadcasting, 497 U.S. at
601 (Stevens, J., concurring).
E. The Clause Is Narrowly Tailored To Achieve Con
gress’s Constitutional Objectives
Although satisfaction of intermediate scrutiny is
all that is required, the Subcontracting Compensation
Clause is sufficiently narrowly tailored to satisfy
even the most stringent constitutional scrutiny. In
deed, the use of the rebuttable presumption of dis
advantage under the SBA, rather than a fixed set-
aside for minorities, is the very program that the
petitioners in Fullilove advocated as an acceptable,
because “less onerous,” alternative to the program
they challenged in that case. Brief for Petitioner,
General Building Contractors of New York State,
Inc., at 30 (No. 78-1007). The Fullilove petitioners
emphasized that SBA disadvantaged business certifi
cations are not limited to minorities, but are “struc
tured to assisting businesses of socially and econom
ically disadvantaged individuals.” Ibid. They favor
ably characterized the certification program in this
case as “similar to the race-conscious approach taken
by Harvard College in its admission program, which
Justice Powell has found constitutional.” Id. at 30
n.37 (citing Regents of the University of California
v. Bakke, 438 U.S. 265, 316 (1978)).
1. The Clause is not underinclusive. The race
conscious affirmative measures this Court has previ-
44
ously approved, unlike the Clause at issue here, have
not allowed minority business enterprises to partici
pate. See, e.g., Metro Broadcasting, 497 U.S. at 630
(O’Connor, j., dissenting) (opportunity to compete
for licenses in distress sales “depends entirely upon
race or ethnicity”). The criteria for qualification for
disadvantaged status under the SB A and STURAA,
in contrast, allow businesses owned by persons who
are not members of minority groups to participate
when they establish their social and economic dis
advantage. 48 C.F.R. 19.703; 49 C.F.R. Pt. 23, Subpt.
D., Apps. A and C.
2. The Clause is not overinclusive. At the same
time, the Clause is not overinclusive, because it does
not include all minority-owned businesses in its cov
erage, without regard to whether they have in fact
suffered from social or economic disadvantage. In
Fullilove, where all minority-owned contractors were
included, the Court was satisfied that the 10% set-
aside there was sufficiently tailored because the pro
gram included: (1) administrative scrutiny to weed
out “minority-front entities,” (i.e., businesses that
purported to be owned and controlled by members
of racial minority groups but that were in fact
nonminority-owned and -controlled businesses), 448
U.S. at 487-488 (opinion of Burger, C .J.); (2) pro
cedures for a prime contractor to obtain a waiver of
the set-aside requirement in order to avoid dealing
with a minority business that was “attempting to
exploit the remedial aspects of the program by charg
ing an unreasonable price, i.e., a price not attributable
to the present effects of past discrimination,” id. at
488; and (3) procedures permitting the set-aside
goals to be waived when the grantee could show that
its “best efforts will not succeed or have not succeeded
in achieving the statutory 10% target for minority
45
firm participation within the limitations of the pro
gram’s remedial objectives,” ibid. The Clause here is
significantly more closely tailored to ensure that only
disadvantaged minorities benefit from the subcon
tracting program.
The rebuttable presumption employed under the
Clause is a fitting response to Congress’s findings of
competitive business disadvantage due to racial dis
crimination. The presumption responds to those find
ings in a manner designed effectively to ameliorate
the insidious harms caused by racial discrimination,
while neither limiting the remedy to race nor benefit-
ting minorities who are not in fact disadvantaged.
Congress recognized that the racial minorities to
whom the presumption applies have been pervasively
subjected to social and economic disadvantages—es
pecially in the construction industry, where racial dis
crimination has been particularly virulent and tena
cious—because of discrimination against them. The
rebuttable presumption recognizes that it is factually
accurate in most cases to presume that such disad
vantage has affected a small minority subcontractor.
By enacting a presumption, rather than a conclusive
determination, Congress recognized the realities that
not all minority group members have equally borne
the brunt of racial discrimination and that other bias-
related disadvantages may equally affect the ability
of small businesses to compete for government
contracts.
The use of the presumption thus operates to focus
the inquiry on disadvantage by indicating a result in
the absence of additional evidence. See St. Mary's
Honor Center v. Hicks, 113 S. Ct. 2742 (1993). Such
a presumption is valid if it rests on “a sound factual
connection between the proved and inferred facts.”
46
NLRB v. Baptist Hospital, Inc., 442 U.S. 773, 787
(1979).87 Chief Justice Burger in Fullilove found the
minority business set-aside there adequately tailored
precisely because it effectively operated as a presump
tion subject to rebuttal: Congress assumed that minor
ity business enterprise prices would reflect the effects
of discrimination, and that, in the absence of discrimi
nation, minority participation in federal construction
projects would be approximately 10%. Crucial to the
finding of narrow tailoring, however, was that “each
of these assumptions may be rebutted in the admin
istrative process.” Fullilove, 448 U.S. at 487 (opin
ion of Burger, C.J.); see Croson, 488 U.S. at 489
(opinion of O’Connor, J.) (noting with approval that,
in Fullilove, both “ ‘assumptions’ could be ‘rebutted’
by a grantee seeking a waiver of the 10% require
ment”). Here, the very participation of a minority
business enterprise in the program is subject to proof
of actual disadvantage if the rebuttable presumption
of disadvantage is brought into question.38
37 It is “only essential that there shall be some rational
connection between the fact proved and the ultimate fact
presumed, and that the inference of one fact from proof of
another shall not be so unreasonable as to be a purely arbi
trary mandate.” JJsery V. Turner Elkhorn Mining Co., 428
U.S. 1, 28 (1976) (quoting Mobile, J. & K.C.R.R. V. Turn-
ispeed, 219 U.S. 35, 43 (1910)). Because the “process of
making the determination of rationality is, by its nature,
highly empirical, * * * significant weight should be accorded
the capacity of Congress to amass the stuff of actual experi
ence and cull conclusions from it.” Ibid, (quoting United
States v. Gainey, 380 U.S. 63, 67 (1965)).
88 The statutes and the regulations contain provisions more
forceful and extensive than those in the program reviewed
in Fullilove to prevent the minority presumption from being
abused by nonminority, non-disadvantaged business “fronts”
47
3. The Clause does not involve a fixed quota or
set-aside. A third way in which the Clause is nar
rowly tailored is that it does not establish a racial
set-aside or reflect any fixed or rigid racial quota.
Specifically, the SBA’s overall goals for the use of
disadvantaged small businesses do not, contrary to
petitioner’s repeated contention (Pet. Br. 20, 47, 48),
function as set-asides. They are benchmarks against
which the procuring agencies, the Small Business
Administration, Congress, and the President may
measure the agencies’ performances in contracting
with those businesses. As petitioner itself explained
in the court of appeals:
The mere setting of a “goal” does no harm.
This is because a goal, in and of itself, has no
substantive effect. Constitutional problems arise
only when a public entity grants a race-based
preference to one class of persons in order to
achieve a goal. Thus, the question of the means
used to achieve a racial goal is entirely separate
from the setting of the goal itself.
Adarand C.A. Br. 19.
Nor does the particular program challenged here
—the Subcontracting Compensation Clause—estab
lish any set-aside or percentage contracting require
ment. Agreeing to subcontract with disadvantaged
businesses is not a contractual condition of eligibility
for award of the prime contract. Contractors are
entirely free to contract with any subcontractor they
posing as disadvantaged businesses. See 15 U.S.C. 645(d)
(providing that misrepresentations of disadvantaged status
in order to obtain contracts are punishable by up to 10 years’
imprisonment and/or $500,000 fine) ; 13 C.F.R. 124.5, 124.6,:
124.103, 124.104, 124.108, 124.109; 49 C.F.R. Ft. 23, Subpt. D,
App. C (other eligibility considerations, addressing require
ment of ownership and control) ; 49 C.F.R. 23.51-23.53.
48
believe will best and most economically do the job.
They are affirmatively encouraged to utilize and sup
port disadvantaged businesses by the opportunity to
recover the additional costs attending that use and
support, but there are no sanctions or penalties if a
prime contractor elects not to take advantage of that
opportunity. Because prime contractors are not ob
ligated to accept the lowest bidder on subcontracts, no
“legitimate, firmly rooted expectation” is disturbed
by the Clause. Johnson v. Transportation Agency,
Santa Clara County, 480 U.S. 616, 638 (1987). Nor
does it appear that a disproportionate number of
subcontracts is directed toward disadvantaged sub
contractors through use of the Clause. In fact, non-
disadvantaged businesses obtain more than 95% of
the subcontracting dollars on federal contracts.89
4. The rebuttable presumption is of limited dura
tion. Finally, the rebuttable presumption applicable
under the Subcontracting Compensation Clause is
“appropriately limited in extent and duration,” be
cause the statutes that establish it are subject to
regular “reassessment and reevaluation by the Con
gress.” Fullilove, 448 U.S. at 489 (opinion of Bur
ger, C.J.). STURAA, like the PWEA, is an appro
priations measure of finite duration. The SBA,
though of more permanent nature, is also subject to
periodic and extensive congressional oversight. The
SBA requires annual reporting to Congress and the
President. 15 U.S.C. 631b, 644(h) (1988 & Supp. V
1993). Congress also frequently holds hearings on
the operation of the SBA’s disadvantaged business
39 In Fiscal Year 1987, “only 3.1 percent of the federal pro
curement prime subcontracting awards were performed by
minority businesses” and “only $1.5 billion in subcontracts
were directed to minority firms out of a total of $63 billion.”
S. Rep. No. 394, 100th Cong., 2d Sess. 81, 82 (1988).
49
enterprise programs. See Appendix B, infra, 18a-36a.
Congress closely follows the efforts of federal agen
cies to utilize disadvantaged businesses, and the SBA
allows the goals to be set by the agencies at lower
levels as circumstances warrant.
The high degree of congressional concern is a
forceful indication that wmfer-utilization of disad
vantaged businesses is the acute social and economic
problem facing the Nation; petitioner’s claim that
the program at issue here unfairly over-utilizes mi
nority businesses finds no support in either the rec
ord or facts of this case or in the unusually exten
sive legislative record developed by a Congress deeply
concerned with both economic development and racial
justice. Congress can, moreover, confidently be ex
pected to prevent any expansion of its programs that
would give undue competitive advantages to disad
vantaged businesses; such advantages would be en
tirely inconsistent with Congress’s purposes to stim
ulate national economic activity and to improve the
efficiency of federal procurement.
II. PRINCIPLES OF STARE DECISIS SUPPORT THE
CONTINUING VITALITY OF FULLILOVE x.
KLUTZNICK
This Court should not depart from the funda
mental constitutional principle of Fullilove that Con
gress has unique powers to enact race-based reme
dies. That principle was reaffirmed in Croson.40 No
conflict has developed in the lower courts as to the
proper interpretation or application of Fullilove. See,
40 488 U.S. at 490-491 (O’Connor, J., joined by Rehnquist,
C.J., and White J.) ; id. at 521-522 (Scalia, J., concurring in
the judgment) ; id. at 557-558 (Marshall, J., joined by Bren
nan and Blackmun, JJ., dissenting). See also Metro Broad
casting, 497 U.S. at 606-609 (O’Connor, J., dissenting) ; id.
at 634 (Kennedy, J. dissenting).
50
e.g., Harrison & Burrowes Bridge Constructors, Inc.
v. Cuomo, 981 F.2d 50, 57 (2d Cir. 1992); Ellis v.
Skinner, 961 F.2d 912, 915 (10th Cir.), cert, de
nied, 113 S. Ct. 374 (1992); Tennessee Asphalt Co.
v. Farris, 942 F.2d 969, 975 (6th Cir. 1991); Mil
waukee County Pavers Ass’n v. Fielder, 922 F.2d
419, 423-424 (7th Cir.), cert, denied, 500 U.S. 954
(1991); see also O’Donnell Construction Co. v. Dis
trict of Columbia, 963 F.2d 420, 423 (D.C. Cir.
1992); id. at 429 (Ginsburg, J., concurring). The
central rule of Fullilove has in no way “been found
unworkable,” Planned Parenthood v. Casey, 112 S.
Ct. 2791, 2809 (1992), and no new principle of law
has called its correctness into question. This Court
should continue to sustain Congress’s vital role in
remedying the effects of racial discrimination that
continue to burden the Nation’s economy and polit
ical life by reaffirming Fullilove.
CONCLUSION
The judgment of the court of appeals should be
affirmed.
Respectfully submitted.
Stephen H. Kaplan
General Counsel
Paul M. Geier
Assistant General Counsel
for Litigation
Edward V.A. Kussy
Deputy Chief Counsel
Federal Highway
Administration
Department of
Transportation
Drew S. Days, III
Solicitor General
Deval L. Patrick
Assistant Attorney General
Paul Bender
Deputy Solicitor General
Cornelia T.L. P illard
Assistant to the Solicitor
General
David K. Flynn
Lisa C. Wilson
Attorneys
December 1994
APPENDIX A
CONSTITUTIONAL PROVISIONS INVOLVED
1. The Spending Clause of the United States Con
stitution, Article I, Section 8, Clause 1, provides:
The Congress shall have Power To lay and collect
Taxes, Duties, Imposts and Excises, to pay the Debts
and provide for the common Defence and general
Welfare of the United States; but all Duties, Imposts
and Excises shall be uniform throughout the United
States.
2. The Commerce Clause of the United States Con
stitution, Article I, Section 8, Clause 3, provides:
The Congress shall have Power * * * To regulate
Commerce with foreign Nations, and among the sev
eral States, and with the Indian Tribes.
3. The Thirteenth Amendment to the United
States Constitution provides:
Section 1. Neither slavery nor involuntary servi
tude, except as a punishment for crime wThereof the
party shall have been duly convicted, shall exist within
the United States, or any place subject to their juris
diction.
Section 2. Congress shall have power to enforce
this article by appropriate legislation.
4. The Fourteenth Amendment to the United States
Constitution provides, in pertinent part:
Section 1. * * * No State shall make or enforce
any law which shall abridge the privileges or immuni
ties of citizens of the United States; nor shall any
State deprive any person of life, liberty, or property,
(la)
without due process of law; nor deny to any person
within its jurisdiction the equal protection of the
laws.
* * . * * *
Section 5. The Congress shall have power to en
force, by appropriate legislation, the provisions of
this article.
STATUTORY PROVISIONS INVOLVED
1. The Small Business Act, 15 U.S.C. 631 et seq.
(1988 & Supp. V 1993), provides, in pertinent part:
§ 631. Declaration of policy
* * * * *
(f) Findings; purpose
(1) With respect to the Administration’s business
development programs the Congress finds—
(A) that the opportunity for full participa
tion in our free enterprise system by socially and
economically disadvantaged persons is essential
if we are to obtain social and economic equality
for such persons and improve the functioning of
our national economy;
(B) that many such persons are socially dis
advantaged because of their identification as
members of certain groups that have suffered the
effects of discriminatory practices or similar
invidious circumstances over which they have no
control;
(C) that such groups include, but are not
limited to, Black Americans, Hispanic Ameri
cans, Native Americans, Indian tribes, Asian
3a
Pacific Americans, Native Hawaiian Organiza
tions, and other minorities;
(D) that it is in the national interest to ex
peditiously ameliorate the conditions of socially
and economically disadvantaged groups;
(E) that such conditions can be improved by
providing the maximum practicable opportunity
for the development of small business concerns
owned by members of socially and economically
disadvantaged groups;
(F) that such development can be materially
advanced through the procurement by the United
States of articles, equipment, supplies, services,
materials, and construction work from such con
cerns; and
(G) that such procurements also benefit the
United States by encouraging the expansion of
suppliers for such procurements, thereby encour
aging competition among such suppliers and pro
moting economy in such procurements.
(2) It is therefore the purpose of section 637(a)
of this title to—
(A) promote the business development of
small business concerns owned and controlled by
socially and economically disadvantaged individ
uals so that such concerns can compete on an
equal basis in the American economy;
(B) promote the competitive viability of such
concerns in the marketplace by providing such
available contract, financial, technical, and man
agement assistance as may be necessary; and
(C) clarify and expand the program for the
procurement by the United States of articles,
supplies, services, materials, and construction
4a
work from small business concerns owned by
socially and economically disadvantaged individ
uals.
* * * * *
§ 631b. Reports to Congress; state of small business
(a) Report on Small Business and Competition
The President shall transmit to the Congress not
later than January 20 of each year a Report on
Small Business and Competition which shall—
(1) examine the current role of small busi
ness in the economy on an industry-by-industry
basis;
(2) present current and historical data on
production, employment, investment, population,
job creation and retention, annual business fail
ures, annual business startups, and other eco
nomic variables for small business in the econ
omy as a whole and for small business in each
sector of the economy, with, to the extent prac
ticable, specific statistics divided as to urban,
suburban, and rural areas;
(3) identify economic trends which will or
may affect the small business sector and the state
of competition;
(4) examine the effects on small business and
competition of policies, programs, and activities,
including, but not limited to the Internal Revenue
Code [26 U.S.C. 1 et seq.], the Employee
Retirement Income Security Act [29 U.S.C.
1001 et seq.], the Securities Act of 1933 [15
U.S.C. 77a et seq.], and the Securities Ex
change Act of 1934 [15 U.S.C. 78a et seq.],
and regulations promulgated thereunder; iden
tify problems generated by such policies, pro-
5a
grams, and activities; and recommend legislative
and administrative solutions to such problems;
and
(5) recommend a program for carrying out
the policy declared in section 631a of this title,
together with such recommendations for legisla
tion as he may deem necessary or desirable.
(b) Appendix to report
The President also shall transmit simultaneously
as an appendix to such annual report, a report, by
agency and department, on the total dollar value of
all Federal contracts exceeding $10,000 in amount
and the dollar amount (including the subcontracts
thereunder in excess of $10,000) awarded to small,
minority-owned and female-owned business.
* * * * *
(e) Small business concerns owned by disadvan
taged individuals and by women
The information and data required to be reported
pursuant to subsection (a) of this section shall sepa
rately detail those portions of such information and
data that are relevant to—
(1) small business concerns owned and con
trolled by socially and economically disadvan
taged individuals, by gender, as defined pursuant
to section 637(d) of this title; and
(2) small business concerns owned and con
trolled by women.
* * * * *
§ 637. Additional powers
(a) Procurement contracts; subcontracts to disad
vantaged small business concerns; performance
bonds; contract negotiations; definitions; eligi
bility; determinations; publication; recruit
ment; construction subcontracts; annual esti
mates ; Indian tribes
* * * * *
(4) (A) For purposes of this section, the term
“socially and economically disadvantaged small
business concern” means any small business con
cern which meets the requirements of subpara
graph (B) and—
(i) which is at least 51 per centum un
conditionally owned by—
(I) one or more socially and eco
nomically disadvantaged individuals,
(II) an economically disadvantaged
Indian tribe (or a wholly owned busi
ness entity of such tribe), or
(III) an economically disadvantaged
Native Hawaiian organization, or
(ii) in the case of any publicly owned
business, at least 51 per centum of the stock
of which is unconditionally owned by—
(I) one or more socially and eco
nomically disadvantaged individuals,
(II) an economically disadvantaged
Indian tribe (or a wholly owned busi
ness entity of such tribe),
(III) an economically disadvantaged
Native Hawaiian organization.
7a
(B) A small business concern meets the re
quirements of this subparagraph if the manage
ment and daily business operations of such small
business concern are controlled by one or more—
(i) socially and economically disadvan
taged individuals described in subparagraph
(A) (i) (I) or subparagraph (A) (ii) (I),
(ii) members of an economically disad
vantaged Indian tribe described in subpara
graph (A) (i) (II) or subparagraph (A)
(ii) (II), or
(iii) Native Hawaiian organizations de
scribed in subparagraph (A) (i) (III) or
subparagraph (A) (ii) (III).
(C) Each Program Participant shall certify,
on an annual basis, that it meets the require
ments of this paragraph regarding ownership
and control.
(5) Socially disadvantaged individuals are
those who have been subjected to racial or ethnic
prejudice or cultural bias because of their iden
tity as a member of a group without regard to
their individual qualities.
(6) (A) Economically disadvantaged individ
uals are those socially disadvantaged individuals
whose ability to compete in the free enterprise
system has been impaired due to diminished cap
ital and credit opportunities as compared to
others in the same business area who are not
socially disadvantaged. In determining the de
gree of diminished credit and capital opportuni
ties the Administration shall consider, but not
be limited to, the assets and net worth of such
socially disadvantaged individual. In determin-
8a
mg the economic disadvantage of an Indian
tribe, the Administration shall consider, where
available, information such as the following: the
per capita income of members of the tribe ex
cluding judgment awards, the percentage of the
local Indian population below the poverty level,
and the tribe’s access to capital markets.
(B) Each Program Participant shall annually
submit to the Administration—
(i) a personal financial statement for
each disadvantaged owner;
(ii) a record of all payments made by the
Program Participant to each of its disad
vantaged owners or to any person or entity
affiliated with such owners; and
(iii) such other information as the Ad
ministration may deem necessary to make
the determination required by this para
graph.
(C) (i) Whenever, on the basis of informa
tion provided by a Program Participant pur
suant to subparagraph (B) or otherwise, the
Administration has reason to believe that the
standards to establish economic disadvantage
pursuant to subparagraph (A) have not been
met, the Administration shall conduct a review
to determine whether such Program Participant
and its disadvantaged owners continue to be im
paired in their ability to compete in the free
enterprise system due to diminished capital and
credit opportunities when compared to other con
cerns in the same business area, which are not
socially disadvantaged.
9a
(ii) If the Administration determines, pursu
ant to such review, that a Program Participant
and its disadvantaged owners are no longer
economically disadvantaged for the purpose of
receiving assistance under this subsection, the
Program Participant shall be graduated pursu
ant to section 636(j) (10) (G) of this title sub
ject to the right to a hearing as provided for
under paragraph (9).
* * * * *
(d) Performance of contracts by small business
concerns; inclusion, of required contract clause;
subcontracting plans; contract eligibility; in
centives; breach of contract; review; report
to Congress
(1) It is the policy of the United States that small
business concerns, and small business concerns owned
and controlled by socially and economically disadvan
taged individuals, shall have the maximum practica
ble opportunity to participate in the performance of
contracts let by any Federal agency, including con
tracts and subcontracts for subsystems, assemblies,
components, and related services for major systems.
It is further the policy of the United States that its
prime contractors establish procedures to ensure the
timely payment of amounts due pursuant to the
terms of their subcontracts with small business con
cerns and small business concerns owned and con
trolled by socially and economically disadvantaged
individuals.
(2) The clause stated in paragraph (3) shall be
included in all contracts let by any Federal agency
except any contract which—
10a
(A) does not exceed the small purchase
threshold;
(B) including all subcontracts under such con
tracts will be performed entirely outside of any
State, territory, or possession of the United
States, the District of Columbia, or the Common
wealth of Puerto Rico; or
(C) is for services which are personal in
nature.
(3) The clause required by paragraph (2) shall
be as follows:
“ (A) It is the policy of the United States that
small business concerns and small business con
cerns owned and controlled by socially and eco
nomically disadvantaged individuals shall have
the maximum practicable opportunity to partici
pate in the performance of contracts let by any
Federal agency, including contracts and subcon
tracts for subsystems, assemblies, components,
and related services for major systems. It is fur
ther the policy of the United States that its
prime contractors establish procedures to ensure
the timely payment of amounts due pursuant to
the terms of their subcontracts with small busi
ness concerns and small business concerns owned
and controlled by socially and economically dis
advantaged individuals.
“ (B) The contractor hereby agrees to carry out
this policy in the awarding of subcontracts to
the fullest extent consistent with the efficient
performance of this contract. The contractor
further agrees to cooperate in any studies or sur
veys as may be conducted by the United States
Small Business Administration or the awarding
11 a
agency of the United States as may be necessary
to determine the extent of the contractor’s com
pliance with this clause.
“ (C) As used in this contract, the term ‘small
business concern’ shall mean a small business
as defined pursuant to section 3 of the Small
Business Act [15 U.S.C. 632] and relevant
regulations promulgated pursuant thereto. The
term ‘small business concern owned and con
trolled by socially and economically disadvan
taged individuals’ shall mean a small business
concern—
“ (i) which is at least 51 per centum owned
by one or more socially and economically
disadvantaged individuals; or, in the case of
any publicly owned business, at least 51 per
centum of the stock of which is owned by
one or more socially and economically dis
advantaged individuals; and
“ (ii) whose management and daily busi
ness operations are controlled by one or
more of such individuals.
“The contractor shall presume that socially and
economically disadvantaged individuals include
Black Americans, Hispanic Americans, Native
Americans, Asian Pacific Americans, and other
minorities, or any other individual found to be
disadvantaged by the Administration pursuant
to section 8(a) of the Small Business Act [15
U.S.C. 637(a)].
“ (D) Contractors acting in good faith may
rely on written representations by their subcon
tractors regarding their status as either a small
business concern or a small business concern
owned and controlled by socially and economically
disadvantaged individuals.”
* * * * *
§ 644. Awards or contracts
* * * * *
(g) Goals for participation of small business con
cerns in procurement contracts
(1) The President shall annually establish Govern
ment-wide goals for procurement contracts awarded
to small business concerns and small business con
cerns owned and controlled by socially and econom
ically disadvantaged individuals. The Government
wide goal for participation by small business con
cerns shall be established at not less than 20 percent
of the total value of all prime contract awards for
each fiscal year. The Government-wide goal for par
ticipation by small business concerns owned and con
trolled by socially and economically disadvantaged
individuals shall be established at not less than 5
percent of the total value of all prime contract and
subcontract awards for each fiscal year. Notwith
standing the Government-wide goal, each agency
shall have an annual goal that presents, for that
agency, the maximum practicable opportunity for
small business concerns and small business concerns
owned and controlled by socially and economically
disadvantaged individuals to participate in the per
formance of contracts let by such agency. The Ad
ministration and the Administrator of the Office of
Federal Procurement Policy shall, when exercising
their authority pursuant to paragraph (2), insure
that the cumulative annual prime contract goals for
all agencies meet or exceed the annual Government-
13a
wide prime contract goal established by the President
pursuant to this paragraph.
(2) The head of each Federal agency shall, after
consultation with the Administration, establish goals
for the participation by small business concerns, and
by small business concerns owned and controlled by
socially and economically disadvantaged individuals,
in procurement contracts of such agency. Goals es
tablished under this subsection shall be jointly estab
lished by the Administration and the head of each
Federal agency and shall realistically reflect the po
tential of small business concerns and small business
concerns owned and controlled by socially and eco
nomically disadvantaged individuals to perform such
contracts and to perform subcontracts under such con
tracts. Whenever the Administration and the head
of any Federal agency fail to agree on established
goals, the disagreement shall be submitted to the
Administrator of the Office of Federal Procurement
Policy for final determination. For the purpose of
establishing goals under this subsection, the head of
each Federal agency shall make consistent efforts to
annually expand participation by small business con
cerns from each industry category in procurement
contracts of the agency, including participation by
small business concerns owned and controlled by
socially and economically disadvantaged individuals.
The head of each Federal agency, in attempting to
attain such participation, shall consider—
(A) contracts awarded as the result of unre
stricted competition; and
(B) contracts awarded after competition re
stricted to eligible small business concerns under
this section and under the program established
under section 637 (a) of this title.
(h) Reports to Administration; submittal of infor
mation to Congress
(1) At the conclusion of each fiscal year, the head
of each Federal agency shall report to the Adminis
tration on the extent of participation by small busi
ness concerns and small business concerns owned
and controlled by socially and economically disadvan
taged individuals in procurement contracts of such
agency. Such reports shall contain appropriate justi
fications for failure to meet the goals established
under subsection (g) of this section.
(2) The Administration shall annually compile
and analyze the reports submitted by the individual
agencies pursuant to paragraph (1) and shall sub
mit them to the President. The Administration’s
submission to the President shall include the fol
lowing :
(A) The Government-wide goals for partici
pation by small business concerns and small
business concerns owned and controlled by so
cially and economically disadvantaged individ
uals and the performance in attaining such
goals.
(B) The goals in effect for each agency and
the agency’s performance in attaining such
goals.
(C) An analysis of any failure to achieve the
Government-wide goals or any individual agency
goals and the actions planned by such agency
(and approved by the Administration) to achieve
the goals in the succeeding fiscal year.
15a
(D) The number and dollar value of con
tracts awarded to small business concerns and
small business concerns owned and controlled by
socially and economically disadvantaged indi
viduals through-—
(i) noncompetitive negotiation,
(ii) competition restricted to small busi
ness concerns owned and controlled by so
cially and economically disadvantaged in
dividuals,
(iii) competition restricted to small busi
ness concerns, and
(iv) unrestricted competitions,
for each agency and on a Government-wide
basis.
(E) The number and dollar value of subcon
tracts awarded to small business concerns and
small business concerns owned and controlled by
socially and economically disadvantaged indi
viduals.
(F) The number and dollar value of prime
contracts and subcontracts awarded to women-
owned small business enterprises.
(3) The President shall include the information
required by paragraph (2) in each annual report to
the Congress on the state of small business prepared
pursuant to section 631b(a) of this title.
* * * * *
2. Section 106 of the Surface Transportation and
Uniform Relocation Assistance Act of 1987, Pub. L.
16a
No. 100-17, 101 Stat. 144-146, provides, in pertinent
part:
SEC. 106. AUTHORIZATION OF APPROPRIA
TIONS.
(a) From the Highway Trust Fund.—For the pur
pose of carrying out the provisions of title 23, United
States Code, the following sums are hereby author
ized to be appropriated out of the Highway Trust
Fund (other than the Mass Transit Account):
* * * * »
(8) Forest highways.—For forest highways
$55,000,000 per fiscal year for each fiscal years
1987, 1988, 1989, 1990, and 1991.
* * * *
(c) Disadvantaged Business Enterprises.—
(1) General rule.—Except to the extent that
the Secretary determines otherwise, not less than
10 percent of the amounts authorized to be ap
propriated under titles I and III of this Act or
obligated under titles I, II, and III (other than
section 203) of the Surface Transportation As
sistance Act of 1982 after the date of the enact
ment of this Act shall be expended with small
business concerns owned and controlled by so
cially and economically disadvantaged indi
viduals.
(2) Definitions.—For purposes of this subsec
tion—
(A) Small business concern.—-The term
“small business concern” has the meaning
such term has under section 3 of the Small
Business Act (15 U.S.C. 632); except that
such term shall not include any concern or
group of concerns controlled by the same
17a
socially and economically disadvantaged in
dividual or individuals which has average
annual gross receipts over the preceding 3
fiscal years in excess of $14,000,000, as ad
justed by the Secretary for inflation.
(B) Socially and economically disadvan
taged individuals.—The term “socially and
economically disadvantaged individuals” has
the meaning such term has under section
8(d) of the Small Business Act (15 U.S.C.
637(d)) and relevant subcontracting regu
lations promulgated pursuant thereto; ex
cept that women shall be presumed to be
socially and economically disadvantaged in
dividuals for purposes of this subsection.
(3) Animal listing of disadvantaged business
enterprises.—Each State shall annually survey
and compile a list of the small business concerns
referred to in paragraph (1) and the location of
such concerns in the State.
(4) Uniform certification.—The Secretary shall
establish minimum uniform criteria for State
governments to use in certifying whether a
concern qualifies for purposes of this subsec
tion. Such minimum uniform criteria shall in
clude but not be limited to on-site visits, personal
interviews, licenses, analysis of stock ownership,
listing of equipment, analysis of bonding capac
ity, listing of work completed, resume of prin
cipal owners, financial capacity, and type of
work performed.
(5) Applicability.—Section 105(f) of the Sur
face Transportation Assistance Act of 1982 shall
not apply to amounts authorized under such Act
and obligated after the date of the enactment of
this Act.
18a
APPENDIX B
Statements in Congress Regarding Racial Discrimination
and its Effects on Minority Business Enterprises
The following remarks by Members of Congress
and industry experts in testimony received in hear
ings before congressional committees are relevant to
our submission that, in enacting the disadvantaged
business enterprise (DBE) provisions in the Small
Business Act (SBA) and the Surface Transportation
and Uniform Relocation Assistance Act of 1987
(STURAA), Congress was seeking, among other
things, to remedy the effects of discrimination against
minorities. Before Congress enacted the laws at issue
here, and throughout the period they have been in
place, Congress has repeatedly considered testimony
on both sides of the debate about whether race
conscious remedial measures are needed.
The following are illustrative statements in sup
port of the measures:
1. When Congress in 1978 debated amending the
SBA to add findings of the disadvantage suffered by
racial minorities, it considered the effects of racial
discrimination on minority participation in public
contracting.
Following the introduction of the Conference Re
port to the Senate, Senator Weicker stated:
The pattern of social and economic discrimina
tion that continues to deprive racial and ethnic
minorities of the opportunity to participate fully
in the free enterprise system is recognized.
124 Cong. Rec. 35,204 (1978). See also id. at 29,637
(remarks of Sen. Weicker) (“This legislation recog
nizes the pattern of social and economic discrimina-
19a
tion that continues to deprive racial and ethnic minor
ities of the opportunity to participate fully in the
free enterprise system.”) ; see id. at 24,021 (remarks
of Rep. Mitchell) (“The promises of equality for
minorities are inanitions.” ).1
Senator Dole argued for the passage of the Minor
ity Business Development and Assistance Act of 1977
(amending the SB A), stating that the “underlying
rationale” of the bill “is that minority businessmen
can compete equally when given an equal opportunity.
One of the most important steps this country can take
to insure equal opportunity for its hispanic, black
and other minority citizens is to involve them in the
mainstream of our free enterprise system.” 124
Cong. Rec. 7681 (1978).
This Court, in upholding the minority set-asides in
the Public Works Employment Act of 1977 in Fulli-
love v. Klutznick, 448 U.S. 448 (1980), relied sub
stantially on the findings of discrimination supporting
the 1978 SB A Amendments at issue here. See 448
U.S. at 460, 463-468 (opinion of Burger, C.J.). Chief
Justice Burger relied on a report of the Committee
on Small Business that summarized the Committee’s
ongoing activities in the period leading up to the 1978
SB A Amendments, see H.R. Rep. No. 1791, 94th
Cong., 2d Sess. (1977). He also quoted from a re
port of the Subcommittee on SBA Oversight and
Minority Enterprise of the House Committee on Small
Business referred to therein, see H.R. Rep. No. 468,
94th Cong., 1st Sess. (1975), which concluded:
The effects of past inequities stemming from
racial prejudice have not remained in the past.
1 See generally 124 Cong. Rec. 821-323 (1978) (statements
of Sen. Brooke on the state of minority businesses).
20a
The Congress has recognized the reality that past
discriminatory practices have, to some degree,
adversely affected our economic system.
Id. at 1-2. See also Fulliiove, 448 U.S. at 466-468
(opinion of Burger, C.J.) (referring to other reports
making findings of discrimination that were con
sidered by Congress shortly before the SBA Amend
ments).
2. In 1980, the Senate Select Committee on Small
Business held a hearing on legislation to amend pro
visions of the SBA that pertain to the Section 8(a)
program. H.R. 5612, To Amend the Small Business
Act to Extend the Current SBA 8(a) Pilot Program:
Hearing on H.R. 5612 Before the Senate Select Comm,
on Small Business, 96th Cong., 2d Sess. (1980) [here
inafter 1980 SBA 8(a) Pilot Program Hearing~\.
Witnesses presented evidence that the effects of dis
crimination continued to depress the percentage of
construction dollars going to minority-owned firms.
Id. at 16-17. The Committee received testimony that
minority-owned construction firms generated approxi
mately $3 billion in gross receipts, in comparison
with the total $200 billion generated by all construc
tion firms. According to the testimony, if minority-
owned firms had performed as actively as nonminority-
owned firms, the gross receipts for the minority-
owned firms would have been closer to $30 billion
Ibid. Witnesses also described the ongoing effects of
discrimination faced by minority-owned firms in get
ting subcontracts, even on Section 8(a) projects. See
id. at 19-23.
In 1981, the House Committee on Small Business
held hearings, see Small and Minority Business in the
Decade of the 1980’s (Part 1): Hearings Before the
21a
House Comm, on Small Business, 97th Cong., 1st Sess.
(1981) , in which the Committee heard evidence con
cerning problems experienced by small and minority-
owned firms that prevented them from becoming
viable, competitive businesses. Those problems in
cluded: (1) difficulties getting bonding for construc
tion projects, id. at 10, securing adequate financing
and credit terms, id. at 33-34, 220, and getting
prompt payment from prime contractors for work
completed, id. at 65; (2) the impact of the negative
perception by the public and private sectors as to
the skills and competence of minority and disadvan
taged businesses, id. at 106, 221; and (3) criticism
that federal agencies were not fully promoting the
utilization of minority and disadvantaged subcontrac
tors by prime contractors, id. at 114, 118, 120, 241.
The problems were attributed in part to racial dis
crimination. Id. at 4 (“racism and other barriers to
the free enterprise system have placed a heavier bur
den on the development and maturity of minority
businesses”).
3. Section 106(c) of STURAA, enacted in 1987,
was preceded by a similar provision, Section 105(f)
of the Surface Transportation Assistance Act
(STAA). Section 105(f) was originally introduced
as an amendment to STAA by Representative
Mitchell, who intended the amendment to ensure “the
participation of [disadvantaged] businesses in these
massive public spendings.” 128 Cong. Rec. 28,927
(1982) . Representative Mitchell expressed concern
about the “disproportionate unemployment enjoyed
by minorities,” and his fear that, without Section
105(f), “the twin forces of racism and economic dis
crimination will once again raise their ugly heads”
and exclude blacks and other minorities from the
“employment rejuvenation program” contemplated by
STAA. Ibid.
4. Both the Section 8(a) program and Section
105(f) received close congressional scrutiny through
out the 1980’s. Numerous congressional hearings
were conducted where the success and continued via
bility of both the Section 8(a) program and Section
105(f) were debated. In those hearings, testimony
was presented documenting the current discrimina
tion that frustrated minority small businesses gen
erally, and highway contractors specifically, seeking
to compete equally. For instance, at a hearing in
1985 to determine whether the DBE provision of
STAA should be included in STURAA, Representa
tive Mitchell stated that “ [w]hen this Nation ad
vances to what I think it ought to be, then there
will be no need for this kind of effort. But until we
get there, there is a demonstrable need for [Section]
105(f) or something similar to it in terms of prefer
ential treatment.” The Disadvantaged Business En
terprise Program of the Federal-Aid Highway Act:
Hearing Before the Subcomm. on Transportation of
the Senate Comm, on Environment and Public Works,
99th Cong., 1st Sess. 10 (1985) [hereinafter 1985
DBE Hearing].
In prepared testimony at that hearing, Roberto
Rohas, National Executive Director of the National
Hispanic Association of Construction Enterprises,
stated that if prime contractors “used ‘good, faith’
efforts in utilizing [the services of Hispanic contrac
tors], hearings such as these would become a thing
of the past.” 1985 DBE Hearing 221.
James K. Laducer, Director of the North Dakota
Minority Business Enterprise Programs, United
Tribes Educational Technical Center, noted in written
23a
testimony that local banks “refuse to lend monies to
minority businesses from nearby Indian communities”
because “Bankers tend to view lending capital to
such businesses as potentially harmful to ‘their own’
small businesses and local economic base.” 1985
DBE Hearing 363.
Also in 1985, a Subcommittee of the House Com
mittee on Government Operations conducted a hear
ing in which testimony was received documenting
racial discrimination in the transportation con
struction industry, which hindered the effectiveness
of STAA and prevented minority firms from entering
the economic mainstream. For instance, James
Haughton, President of Fight Back, commented on
the highway construction industry in New York,
stating that there was “unbridled racism in the con
struction industry. As you well know, it is not some
thing recent, it’s the history of this industry and
sorry to say over the years conditions have not im
proved for black people, Hispanic people, and women.
Indeed, the conditions have gotten much worse.”
Minority Business Participation in Department of
Transportation Project: Hearing Before a Subcomm.
of the House Comm, on Government Operations, 99th
Cong., 1st Sess. 179 (1985) [hereinafter 1985 Trans
portation Hearing']. He later remarked that to ob
tain a construction contract in New York, a contrac
tor must contract with a union, and “I have known
contractors who have suffered very heavily because
they have been victims to that discrimination as prac
ticed by the unions.” Id. at 201.
At that same hearing, R.E. Castro, a small business
man, testified about problems faced by minority firms
in the transportation construction industry as a result
of racial discrimination. 1985 Transportation Hearing
24a
197. He then remarked that “it is impossible to legis
late people’s attitudes of responsibilities,” but “ [i]t
seems to me that unless we take effective action to
ensure that equal access to economic opportunity be
comes a reality in this country, we might as well
take the Constitution and put it aside because the
equal protection provision of the Constitution will
never be lived up to,” Id. at 198.
In hearings concerning preservation of the Sec
tion 8(a) program, testimony was presented that
discrimination had hindered the ability of minority
members to compete in business, and that the Section
8(a) program helps remedy that discrimination.
Representative Conyers remarked: “The fact in
American life is that blacks have been cut out of
business. We are not doing them a favor by creating
these programs. They are created out of an experi
enced need. So, I am more concerned about getting a
level playing field and that is what we have been
trying to redress for so long.” A Bill to Reform the
Capital Ownership Development Program: Heamngs
on H.R. 1807 Before the Subcomm. on Procurement,
Innovation, and Minority Enterprise Development of
the House Comm, on Small Business, 100th Cong.,
1st Sess. 14 (1987) [hereinafter 1987 Capital Own
ership Hearings].
At those hearings, Representative Mfume stated:
[X]n the area of civil rights—and particularly
in the area of discrimination—the existence of
the protections does not insure that the protec
tions are, in fact, enforced. * * * And that has
been strikingly absent from much of the civil
rights legislation and protection programs that
have been instituted by this Nation,
25a
* * * I am concerned about the enforcement,
and I think this program goes a long way in
making sure that some of the things that are
supposed to happen do, in fact, take place.
1987 Capital Ownership Hearings 22.
Former Representative Parren Mitchell, Chairman
of the Minority Business Enterprise Legal Defense
and Education Fund, Inc., also testified:
A part of my concern is that I think that there
is an antiblack, antipoor, anti-Hispanic, anti
minority attitude developing in this country. I
see it as I travel around the country. I see its
manifestations. Therefore, I assume that a part
of the attacks on the Federal effort on behalf
of minority businesses, a part of those attacks
are reflective of the resurgence of racism in this
Nation, which is a very troublesome thing to me.
1987 Capital Ownership Hea;rings 32-33. Mitchell
described the problems faced by minority-owned bus
inesses as a result of discrimination:
The hard fact of the matter is that the major
ity firms that are trying to do something to in
corporate minority businesses admit openly and
publicly that their own membership is reluctant
to do business. * * * There are a dozen of them
in various States who will work on behalf of
minorities. But they will be the first to say, “I
cannot get the other guys whose names are on the
letterhead to do business with minority firms.”
Why is that? * * * First, the “old boy” net
work. * * *
* * * * *
26a
The other real significant thing in that private
sector, and people do not like to hear talk like
this, but that private sector is not immune to
the resurgence of racism that is taking place in
this country. * * * You get it in the private
sector and you get it in Government where the
festering of racism immediately establishes at
titudes which are against those of us who are
black, or brown, or the minorities.
Id. at 34.
Finally, at those same hearings, Edward Irons,
Acting Superintendent of the Office of Banking and
Financial Institutions for the District of Columbia,
testified that “the evidence of racism is irrefutable
in the business arena” and hinders opportunities for
minorities. 1987 Capital Ownership Hearings 593.
In hearings preceding the 1988 amendment to
Section 8(a), Parren Mitchell testified that “ [t]he
harsh reality is that in the private sector, there is
a wall that is set up, there is an institutional net
work, there is an old-boy network, that makes it
exceedingly difficult for minority firms to break into
the private commercial sector.” Minority Business
Development Program Reform Act of 1987: Hear
ings on S. 1998 and H.R. 1807 Before the Senate
Comm, on Small Business, 100th Cong., 2d Sess. 127
(1988). In those hearings, Senator Levin urged re
authorization of the Section 8(a) program, stating
that the program “gives important business oppor
tunities to members of our society who have been
denied such opportunities for too long.” Id. at 189.
Hamilton Bowser, of Evanbow Construction Co.,
testified during a hearing on the problems of minority
contractors in obtaining surety bonds that “ [w]e
know that our minority contractors have been cut
27a
out of entering the bond market with this, the biases
that are developed. * * * It is our guess that less than
one-tenth of 1 percent of bonding issued by the surety
companies in America go[es] to minority firms.”
Surety Bonds and Minority Contractors: Hearing
Before the Subcomm. on Commerce, Consumer Pro
tection, and Competitiveness of the House Comm, on
Energy and Commerce, 100th Cong., 2d Sess. 6
(1988).
Representative Hastert testified during a hear
ing that “ [t]he DBE program is * * * an admission
of sorts that minority and women-owned businesses
have been treated unfairly In the past.” Barriers to
Full Minority Participation in Federally Funded
Highway Construction Projects: Hearing Before a
Subcomm. of the House Comm, on Government Oper
ations, 100th Cong., 2d Sess. 3 (1988). Representative
Hastert noted that “ [t]he DBE program * * * pro
vides businesses which previously found it difficult to
effectively compete for federally aided highway con
tracts with the opportunity to at least get their foot
in the door.” Ibid.
During hearings on DBE participation in trans
portation construction projects, Joann Payne, Presi
dent of PSM Consultants, noted that, “ [historically,
minorities and women-owned businesses have had a
difficult time competing fairly in the highway con
struction industry. * * * [BJecause of the ethnic
and sex discrimination practiced by lending institu
tions, it was very difficult for minorities and women
to secure bank loans, and bonding insurance.” Dis
advantaged Business Set-Asides in Transportation
Construction Projects: Hearings Before the Subcomm.
on Procurement, Innovation, and Minority Enterprise
Development of the House Comm, on Small Business,
28a
100th Cong., 2d Sess. 25-26 (1988) [hereinafter
1988 DBE Transportation Construction Hearings].
At the same hearing, Carolyn Jordan, Board Mem
ber of the Illinois Association of Black Women Busi
ness Owners, testified that, “ [b] asically, the system
discriminates, and the people that implement the sys
tem condone a system that allows only white males
and white females the opportunity to work and earn
a living while the black and minority women sit back
and get more and more frustrated * * *. The intent
of the law * * * is to maximize participation of
minorities and women in an industry that has been
dominated by men and to prevent discrimination.”
1988 DBE Transportation Construction Hearings
96-98.12
Representative Savage, then-Chairman of the Sub
committee on Economic Development of the House
Committee on Public Works and Transportation, tes
tified about racial discrimination in the industry:
Now, let me * * * explain the specific problem,
which concerns this subcommittee. * * * It is
simply this: Because of historically and often
2 See also 1988 DBE Transportation Construction Hearings
61-62 (testimony of Patricia Low, President of PAL Indus
tries, Inc.) (“I believe that there has been discrimination
against minorities and women in the industry”) ; id. at 69-70
(testimony of Low); id. at 87 (testimony of Cleve Chapman,
President of Midwest Contractors for Progress); id. at 107
(testimony of Marjorie Herter, National President of the
Women Construction Owners and Executives, USA) (“Dis
crimination against women and minorities in the bonding
market is quite prevalent.”); id. at 107-109 (testimony of
Glendis Hambrick, of the Chicago Chapter of the Coalition of
Black Trade Unionists).
29a
legally imposed disadvantages, it has been
deemed by the U.S. Congress and the U.S.
Supreme Court that certain minorities * * * have
been denied equal opportunity for employment,
promotions, and contracts by Government and
private business.
Present evidence of these disadvantages are
found in the following sampling of statistics. For
1987, * * * the unemployment rate for white
males and females was only about 5.3 percent,
but for Hispanics, it was 8.8 percent and for
blacks, it was 13 percent * * *.
In 1986, 27.3 percent of Hispanics and 31.1
percent of blacks suffered incomes below the pov
erty level, nearly 3 times the rate for whites.
1988 DBE Transportation Construction Hearings 112.
Representative Savage added that both the Section
8(a) program and the DBE provision of STURAA
attempt to remedy the specific disadvantages caused
by discrimination in small businesses and in the high
way construction industry. Id. at 112-113. Repre
sentative Savage later stated that discrimination in
the highway construction industry is evidenced by
the fact that the federal government has never “con
tracted anywhere close to fairly with minorities and
the figures show it.” Id. at 120.3
8 Numerous other hearings conducted between 1980 and 1988
further demonstrate the close congressional scrutiny of both
Section 105(f) and the Section 8(a) program. See, e.g., 1980
SB A 8(a) Pilot Program Hearing, supra; Minority Business
and Its Contributions to the U.S. Economy: Hearing Before
the Senate Comm, on Small Business, 97th Cong., 2d Sess.
(1982); Federal Contracting Opportunities for Minority and
Women-Owned Businesses—An Examination of the 8(d)
Subcontracting Program: Hearings Before the Senate Comm.
30a
5. In response to the continued existence of dis
crimination and its harmful effects on minority busi
nesses generally, and minority businesses in the con
struction industry specifically, Congress has repeat
edly chosen to retain the Section 8(a) program in
the SBA and the DBE set-aside provision of
STURAA.
a. In the 100th Congress, H.R. 1807 was introduced
to amend Section 8(a). Following the introduction of
H.R. 1807 in the House of Representatives, Repre
sentative Conte quoted from the 1987 report of the
President on the state of small business, which stated
that minorities represented 20% of the population,
but only 1.8% of the minority-owned businesses, com
pared to 6.4% of nonminorities. 133 Cong. Rec.
33,318 (1987). Among minority-owned businesses,
94% were sole proprietorships, compared to 69%
on Small Business, 98th Cong., 1st Sess. (1983); Women
Entrepreneurs—Their Success and Problems: Hearing Be
fore the Senate Comm, on Small Business, 98th Cong., 2d
Sess. (1984); State of Hispanic Small Business in America:
Hearing Before the Subcomm. on SBA and SBIC Authority,
Minority Enterprise, and General Small Business Problems
of the House Comm, on Small Business, 99th Cong., 1st Sess.
(1985); Minority Enterprise and General Small Business
Problems: Hearing Before the Subcomm. on SBA and SBIC
Authority, Minority Enterprise and General Small Business
Problems of the House Comm, on Small Business, 99th Cong.,
2d Sess. (1986); To Present ancl Examine the Result of a
Survey of the Graduates of the Small Business Administra
tion Section 8(a) Minority Business Development Program:
Hearing Before the Senate Comm, on Small Business, 100th
Cong., 1st Sess. (1987); The Small Business Competitiveness
Demonstration Program Act of 1988: Hearing on S. 1559
Before the Senate Comm, on Small Business, 100th. Cong., 2d
Sess. (1988).
31a
of all businesses. Ibid. Representative Conte indi
cated that discrimination was the cause of these
deficiencies, ibid., and urged passage of the bill:
Mr. Speaker, we have a chance to make history
today. In doing so we can address program
matic failures and shortcomings of the 8(a) pro
gram and create a workable mechanism to finally
redress past discriminatory practices.
Id. at 33,320.
Representative Conyers also spoke in support of
the bill. He, too, cited statistics indicating that the
“struggle” for “economic empowerment” for minor
ity businesses was not yet complete. 133 Cong. Rec.
33,321 (1987). Representative Conyers stated:
Two-thirds of all black firms earn less than
$10,000 annually, and one-third of Hispanic firms
gross less than $5,000 annually. In addition re
ceipts from black firms are only 0.16 percent of
all business receipts in this country. The 8(a)
program, which enabled minority businesses to
perform more than $1 billion in Federal con
tracts last year, is an essential step in overcom
ing the appalling circumstances which continue
to plague minority Americans and in achieving
parity and growth in the minority business
community.
Ibid.
Additionally, during the introduction of H.R. 1769,
the Minority Business Development Act of 1988
(amending Section 8 (a)), Representative Mfume
stated that “ [w]e know that over the years blacks
and other racial and ethnic minorities have suffered
32a
the effects of racial discrimination, discrimination
which has impaired the ability of many within the
minority business community to be able to access
resources and markets that have been essential to
economic viability.” 134 Cong. Rec. 30,078-30,079
(1988). In speaking about the Act, Representative
Mf ume stated:
[Discrimination * * * has moved to impair the
ability of the minority business community to
access resources and markets essential to eco
nomic viability. * * *
Today as we ask the question whether or not
there remains a compelling need for special
Federal programs to provide socially and eco
nomically disadvantaged persons with the oppor
tunity * * * for full participation in our free
enterprise system, the answer unfortunately re
mains a resounding yes. The need to devote
Federal resources to assist minority businesses
in overcoming economic disadvantages is no less
apparent today.
Id. at 16,584.
b. In the Senate, S. 1993 was introduced as the
companion bill to H.R. 1807. During the introduc
tion of the bill, Senator Bumpers noted that “ [o]nly
1.8 percent of all minorities have been financially
able to start firms, and well over 94 percent of such
businesses are sole proprietorships. They continue
to face discrimination in access to credit and markets.
Therefore, the restricted resources with which these
firms must deal have stagnated economic expansion
in many areas.” 133 Cong. Rec. 37,814 (1987).
Senator Weicker recited the benefits of the bill and
stated that, “ [although remnants of discrimination
33a
remain in this society as well as other economic or
financial barriers which minority entrepreneurs must
face, many are making it, who might not have, with
out the 8(a) program.” 133 Cong. Rec. 37,821
(1987).
Senator Kerry also spoke in support of the pro
gram, stating:
It is my belief that one of the most important
missions of the Small Business Administration
is to help members of disadvantaged and mi
nority groups and others who suffer from social
and economic discrimination in our society to
participate in the great American tradition of
starting and owning a business.
133 Cong. Rec. 37,824 (1987). Senator Kerry ex
pressed Ms view that Section 8(a), as amended by
S. 1993, would provide such support,4
Senator Weicker stated, regarding the Section
8(a) program, that “ [discrimination * * * and
other social or economic disadvantages that minority
citizens still face on the road to business opportunity
are being challenged through this small but very vital
program.” 134 Cong. Rec. 17,136 (1988).
Similarly, Senator Sasser stated that “the 8(a)
program provides important business opportunities
4 Senator Kerry had then recently introduced S. 1848, the
Minority Business Development Act. 133 Cong. Rec. 30,771
(1987). Upon introduction of that bill, Senatory Kerry stated:
Let us make no mistake; there is still a tremendous
amount of work to be done before we can say that racism
and other forms of discrimination have been abolished
in the economic marketplace. Minority business owner
ship is still dramatically below that of nonminority busi
ness ownership in most areas of the country.
34a
to members of our society who have long been denied
such opportunity.” 134 Cong. Rec. 17,149 (1988).
After presenting the Conference Report on the
Section 8(a) program to the Senate, Senator Bum
pers stated that the program “is intended to provide
access to the Federal procurement system to those
who have been denied access for a long time, and it
is intended to build business skills and to develop
capital through the performance of essential Govern
ment contracts.” 134 Cong. Rec. 31,492 (1988).
Senator Levin stated that “ [t]he 8(a) Program
is intended to give disadvantaged individuals a chance
to own their own businesses and to bring them needed
jobs and training by giving them an opportunity to
participate in the Federal acquisition process. * * *
[T]he 8(a) Program provides important business
opportunity to members of our society who have long
been denied such opportunity.” 134 Cong. Rec.
31,493 (1988).
6. Considering the extensive floor debates and
numerous hearings regarding the necessity, success
and viability of the DBE set-aside provision of
STAA and the Section 8(a) program, “it is incon
ceivable that Members of both Houses were not fully
aware of the objectives of the * * * provision [s]
and of the reasons prompting [their] enactment.”
Fullilove, 448 U.S. at 467 (opinion of Burger, C.J.).
7. Since the passage of STURAA and the SBA,
Congress as well as the Executive Branch have con
tinued to monitor closely the success and progress
of the Section 8(a) program and the Section 106(c)
DBE provision of STURAA. See, e.g., Federal Ac
quisition Streamlining Act of 1994, Pub. L. No. 103-
355, 108 Stat. 3243; Intermodal Surface Transporta
tion Efficiency Act of 1991, Pub. L. No. 102-240,
§ 1003(b), 105 Stat. 1919-1921; Minority Franchis-
35a
ing—Is Discrimination a Factor?: Hearing Before the
House Comm, on Small Business, 103d Cong., 1st Sess.
(1993); SBA’s Minority Business Development Pro
gram: Hearing Before the House Comm, on Small
Business, 103d Cong., 1st Sess. (1993) (hearing to
discuss reforms to SBA’s Section 8(a) program);
Problems Facing Minority and Women-Owned Small
Businesses in Procuring U.S. Government Contracts:
Hearing Before the Subcomm. on Commerce, Con
sumer, and Monetary Affairs of the House Comm,
on Government Operations, 103d Cong., 1st Sess.
(1993); Discrimination in Surety Bonding: Hearing
Before the Subcomm. on Minority Enterprise, Fi
nance, and Urban Development of the House Comm,
on Small Business, 103d Cong., 1st Sess. (1993);
Small Business Development: Hearing Before the
Subcomm. on Procurement, Tourism, and Rural De
velopment of the House Comm, on Small Business,
102d Cong., 2d Sess. (1992); Problems with Equal
Employment Opportunity and Minority and Women
Contracting at the Federal Banking Agencies: Hear
ing Before the House Comm, on Banking, Finance
and Urban Affairs, 102d Cong., 2d Sess. (1992) (dis
cussion of RTC’s progress in satisfying goals for
utilizing DBEs); Small Disadvantaged Business Is
sues: Hearings Before the Investigations Subcomm.
of the House Comm, on Armed Services, 102d Cong.,
1st Sess. 11 (1991) (remarks by Rep. Collins that
the Department of Defense (DOD) “simply has not
made adequate good faith outreach efforts” ; DOD’s
subcontracting with DBEs “has resulted in a paltry
performance of 2.5 to 3 percent each year, and many
of those contracts were for janitorial and kitchen serv
ices”) ; Minorities and Franchising: Hearing Before
the House Comm, on Small Business, 102d Cong., 1st
Sess. 54 (1991) (statement by Chairman LaFalce
36a
that problem areas that are more pronounced and
specific to minority franchising include “problems
relating to the exclusion of minorities, or groups of
minorities, from franchise systems”) ; Acquisition
Issues: Hearings Before the Investigations Subcomm.
of the House Comm. on Armed Services, 101st Cong.,
2d Sess. 12 (1990) (chart showing percentage of
DOD subcontracts awarded to DBEs as 1.9% in
1988, and 2.8% in 1989); Minority Construction
Contracting: Hearing Before the Subcomm. on SB A,
the General Economy, and Minority Enterprise De
velopment of the House Comm, on Small Business,
101st Cong., 1st Sess. (1989) (examination of minor
ity and women’s subcontracting opportunities in fed
eral construction projects); Implementation of Small
Business Subcontracting Program: Hearing Before
the House Comm, on Small Business, 100th Cong., 2d
Sess. (1988); Subcontracting with Small and Disad
vantaged Businesses— GSA Oversight: Hearing Be
fore a Subcomm. of the House Comm, on Government
Operations, 100th Cong., 2d Sess. (1988); General
Accounting Office, Minority Contracting: DOD’s Re
porting Does Not Address Legislative Goal (July
1993) (discusses failure of DOD to meet procure
ment obligations); General Accounting Office, Prob
lems Continue With SBA’s Minority Business Devel
opment Program (Sept. 1993); General Accounting
Office, Resolution Trust Corporation: Status of Mi
nority and Women Outreach and Contracting Pro
gram (May 1993) (concluding that RTC is short of
goal for contracting with minority- and women-owned
law firms); H.R. Rep. No. 1044, 100th Cong., 2d
Sess. (1988) (documenting failure of GSA to meet
its statutory mandate to provide subcontracting op
portunities for small businesses and minority-owned
businesses on major GSA contracts).
37a
APPENDIX C
Census Data Available to Congress Regarding
Minority-Owned Businesses in Construction
and Related Census Data
Minorities are underrepresented in business gener
ally, and in the construction industry particularly.
In 1987, there were over 1.2 million minority-owned
firms with gross receipts of just under $78 billion.
Bureau of the Census, U.S. Dep’t of Commerce,
1987 Economic Censuses—Survey of Minority-Owned
Business Enterprises: Summary 3 (Aug. 1991)
[hereinafter Summary']. Minority-owned firms ac
counted for 8.9% of the total number of individual
proprietorships, partnerships, and subchapter S cor
porations in the United States and 3.9% of their
gross receipts. Ibid.
In 1987, the gross receipts for minority-owned
construction firms constituted approximately 3% of
the total receipts for all construction firms. Bureau
of the Census, U.S. Dep’t of Commerce, 1987 Eco
nomic Censuses— Characteristics of Business Owners
8-9 (Table 1) (Apr. 1992) [hereinafter Character
istics].1 The total number of minority-owned firms
in the construction industry was approximately 6.6%
of the total number of firms in that industry. Ibid.
Minorities were even less well represented in the
heavy construction industry, in which minority-
owned firms were approximately 5.3% of the total
number firms in that industry, and accounted for
1 There are three main types of construction activities
reported in census data: general building contractors, heavy
construction contractors, and special trade contractors. The
building of roads, bridges, sewers, tunnels, etc., is reported in
the heavy construction category.
only 1.9% of the total receipts for all heavy con
struction firms. Ibid.
Moreover, minority-owned businesses occupy a pro
portionally smaller market share and are on the
whole less prosperous than their nonminority coun
terparts. In 1987, the average gross sales and re
ceipts in the construction industry was $146,103 for
nonminority-owned firms. That figure was 2.7 times
the average for American Indian-owned firms, 2.5
times the average for black-owned firms, 2.4 times
the average for Hispanic-owned firms, and 1.6 times
the average for Asian-owned firms. Characteristics
8 (Table 1); Summary 10 (Table 1). Hispanic con
struction-firm owners were 50% more likely to have
household incomes of less than $10,000 compared to
nonminority male construction-firm owners. Char
acteristics 74 (Table 12a). Further, only 27.6% of
minority-owned construction firms had paid employ
ees, compared to 34.7% of nonminority-owned con
struction firms. Summary 10 (Table 1), 84 (Table
10) .
Minority-owned firms tend to employ minorities
at a greater rate than nonminority male-owned
firms. 57.3% of minority-owned construction firms
with employees had minority employees on the pay
roll, compared to 34.3% of nonminority male-owned
firms. Characteristics 178-179 (Table 24a).
In those industries that sell and produce supplies
and equipment for construction, minority-owned
firms were equally underrepresented as in the con
struction industry taken as a whole. Minority-owned
firms in the wholesale trade industry accounted for
only 6.1% of the total number of firms in that in
dustry and only approximately 2.7% of the gross
receipts. Characteristics 8-9 (Table 1). In the manu-
39 a
factoring industry, only 7% of the total number of
firms were minority-owned, and those firms accounted
for only 1.8% of the gross receipts. Ibid.
Most of this country’s racial and ethnic minorities
remain poorer and less educated and suffer greater
unemployment than the white majority. For exam
ple, in 1992 the percentage of families with incomes
below the poverty level was 3.5 times higher among
black families than among white families. 1990
census data show that 8.8% of white families had
incomes below the poverty level, compared to 30.4%
of black families, 26.5% of families of Hispanic
origin, 12.9% of Asian and Pacific Islander families,
and 30.9% of American Indians, Eskimos and Aleuts.
Bureau of the Census, U.S. Dep’t of Commerce,
Statistical Abstract of the United States: 1993, at 47
(Table 50), 471 (Table 741), 473 (Table 743)
(1993) [hereinafter 1993 Statistical Abstract].*
Overall, the median income for minority families was
approximately three-fifths of the median for white
families. Id. at 462 (Table 721). If wealth instead
of income is compared, the picture is even bleaker.
When average net worth is considered, minorities
owned fewer than $23 in assets for every $100 in
assets owned by whites; when median net worth is
considered, minorities owned fewer than $7 in assets
for every $100 in assets owned by whites. Id. at 477
(Table 753).
Minorities also have received less education than
white persons. Among persons 25 years old and
2 We note the similarity between those rates and the pov
erty rates for minority families we described 15 years ago in
our brief to the Court in Fullilove V. Klutznick, 448 U.S. 448
(1980). U.S. Br. at 3a (No. 78-1007) (29.8% of black fami
lies, 20.4% of families of Spanish heritage, and 33.3% of
American Indian families).
40a
older, 79.1% of white persons had completed four
years of high school or more by the time of the 1990
census. 1993 Statistical Abstract 154 (Table 233).
Only 66.2% of black persons, 50.8% of persons of
Hispanic origin, and 65.6% of American Indians
had completed high school. Ibid.; 1 Bureau of the
Census, U.S. Dep’t of Commerce, 1990 Census of
Population: Characteristics of American Indians by
Tribe and Language 95 (Table 4) (July 1994)
[hereinafter Characteristics of American Indians'].
In the same age group, 22.0% of all white persons
had completed four years of college or more, while
only 11.8% of black persons, 9.2% of persons of His
panic origin, and 9.4% of American Indians had
finished college. 1993 Statistical Abstract 154 (Table
233); Characteristics of American Indians 95
(Table 4).
Unemployment affects minorities at a greater rate
than whites. While whites in 1990 had an unemploy
ment rate of 4.7% and Asians a rate of 4.2%, blacks
suffered at 11.3%, persons of Hispanic origin at
8.0%, and Native Americans at 14.4% 1993 Statis
tical Abstract 47 (Table 50), 395 (Table 625); Bu
reau of the Census, U.S. Dep’t of Commerce, 1990
Census of Population—Social and Economic Charac
teristics: United States 111 (Table 108) (Nov.
1993).
Those statistics demonstrate a worsening of the eco
nomic position of minority families. By 1990, the
median income for white families had increased in
constant dollars by $3,890 since 1975, while the
median income for black families had increased by
only $1,049, and the median income for Hispanic
families had increased by only $1,270. 1993 Statisti
cal Abstract 462 (Table 721) . The greater increase
in white income reduced the ratio of minority-to-white
median family income from approximately two-thirds
in 1975 to three-fifths in 1990. Ibid.
Racial/ethnic composition as of April 1,1990
White Black Hispanic Indian/ A sian/
Eskimo/ Pacific
Aleut Islander
Other
United States 80.3 12.1 9.0 0.8 2.9 3.9
Colorado 88.2 4.0 12.9 0.9 1.8
1993 Statistical Abstract 18 (Table 18), 30-31 (Table 32).
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