M/WBE Programs Are at Risk

In June 2023, the U.S. Supreme Court ruled in SFFA v. Harvard/UNC that race-conscious college admissions policies violate the Equal Protection Clause of the Fourteenth Amendment. We knew that the ruling could negatively impact our contracting goal programs nationwide. After the decision, we have been watching several lawsuits against the contracting programs. In July of 2023, a judge upended the SBA 8A program noting that race alone did not equate to disadvantage. The SBA changed the parameters of the program to require an evidenced narrative of disadvantage from all applicants. In September 2023, a lawsuit was filed against the City of Houston for discrimination due to their minority business set aside program. A landscaping company states that they lost a contract having been the low bidder because the set aside was granted. That lawsuit is scheduled for trial in 2025. Many more suits have been filed across the country. There appears to be an endless stream of financial backing for additional lawsuits teed up.

A ruling occurred at the federal level against the DOT’s DBE program in September of this year “Mid-America Milling v. USDOT”. The lawsuit was brought by two subcontractors doing business in Kentucky and Indiana alleging that they had suffered “reverse discrimination” because their firms lost multiple contracts that were awarded to DBEs. The white owned firms didn’t fall into the race or gender categories identified in the DBE program as being presumed disadvantaged. The federal Judge Van Tatenhove agreed citing “Because these race and gender classifications violate the Constitution’s guarantee of equal protection, the pending request for a preliminary injunction will be granted”. The injunction now includes 23 states – Minnesota being one of them.

What does this mean?

While the federal suit is still ongoing, the immediate impact is that if the plaintiffs were to state that they are going to bid on a DOT project then there would be no DBE goals set on that project. Currently this is only affecting the DOT under this injunction ruling and not MetCouncil or MAC. A DOT spokesperson said the agency plans to keep the program intact, at least for now. “As the case moves forward, we will continue to defend the program,” the spokesperson said. “In the meantime, we will comply with the court’s ruling, and the program otherwise remains in effect.” (according to ConstructionDive.com). Local programs at cities, counties and states as well as other public contracting entities could be an even larger target than the federal programs right now.

I believe curative measures that could be examined include:

    • The DBE program adjusts by removing any presumed disadvantage based on race or gender like what the SBA 8A program has done. (I don’t like adding subjectivity however to the certification process which is tough enough to qualify for)
    • We move to race/gender neutral programs for small businesses.
    • We eliminate price preferences and set asides based on race and gender. This is a target area for lawsuits as evidenced in the Houston case.

To answer another question – yes there are lawsuits challenging the constitutionality of workforce goals in federal construction contracts following the Supreme Court’s decision to strike down affirmative action. I have been very vocal about Minnesota’s workforce goals of 32% minority and 20% women being mathematically unattainable. The industry’s concerns over these numbers have fallen on deaf ears for 10 years now. While the Department of Human Rights states that these are just “aspirational goals” contractors are being held to different levels of scrutiny or penalty for not committing to or meeting the goals depending on the agency involved. I imagine Minnesota’s workforce goals are a target for a suit.

We know from historical data that without goals M/W/SBEs are less likely to be utilized. The past year I have been working hard to strengthen our programs and fighting to ensure that we aren’t overreaching on implementation of the regulations. I have been working to remove fronts, passthroughs and those illegitimate businesses from the programs. I have had multiple discussions with the vendor working on the disparity study to look at program improvement. I regularly meet with agencies about program concerns including certification issues for members. I also do training on how best to utilize small businesses. These programs are a core value at AWC.

At this moment agencies need to do whatever they can to preserve any mechanism of addressing past discrimination and current underutilization for women and minorities. The recent rulings put contracting goals at risk overall. We can’t rest hope that there is a government or legal savior to return to the precedent decisions of past decades. We won’t win in the courts through aggressive measures like price preferences, set asides, assumptions of disadvantage, or unattainable goals. Stay tuned as we continue to monitor and bring your voice to the decision makers.

— B