The State of Minority- and Women- Owned ... - Cleveland.com

Legal Standards for Government Affirmative Action Contracting Programs
that the proper inquiry is not only whether disparities remain despite the operation of its
affirmative action program (a statistical question to which many disparity studies, then and now,
continue to limit themselves) but also whether disparities remain when remedial intervention is
not present in the marketplace, as reflected by M/WBE participation on contracts without
affirmative action goals, in the public sector, the private sector, or both.
The law and economics model applies accepted social science principles of data collection,
statistical analyses and anecdotal inquiries within rigorous frameworks to the questions relevant
to whether the agency has a strong basis in evidence of the continuing effects of discrimination,
and if so, what responses are supportable, even where remedial efforts have been undertaken:
Are there disparities in the overall market outside the agency’s projects that support the inference
of the market failure of discrimination, such that the agency needs to continue to take action to
ensure that it does not passively participate in such discrimination? What additional market
factors outside the agency’s direct control affect the entrepreneurial opportunities of M/WBEs
that perpetuate discrimination and disparate impacts?
The law and economics model’s analysis of disparities in the rates at which M/WBEs in the
government’s markets form businesses compared to similar non-M/WBEs, their earnings from
such businesses, and their access to capital markets has been held to be highly relevant to the
determination whether the market functions properly for all firms regardless of the race or gender
of their ownership. These analyses contributed to the successful defense of local race- and
gender-conscious construction programs, 76 as well as the DBE program for federally-assisted
transportation contracts. 77 As explained by the Tenth Circuit, the evidence
demonstrates the existence of two kinds of discriminatory barriers to minority
subcontracting enterprises, both of which show a strong link between racial disparities in
the federal government's disbursements of public funds for construction contracts and the
channeling of those funds due to private discrimination. The first discriminatory barriers
are to the formation of qualified minority subcontracting enterprises due to private
discrimination, precluding from the outset competition for public construction contracts
by minority enterprises. The second discriminatory barriers are to fair competition
between minority and non-minority subcontracting enterprises, again due to private
discrimination, precluding existing minority firms from effectively competing for public
construction contracts. The government also presents further evidence in the form of
local disparity studies of minority subcontracting and studies of local subcontracting
markets after the removal of affirmative action programs.… The government's evidence
76 Builders Association of Greater Chicago v. City of Chicago, 298 F.Supp.2d 725 (N.D. Ill. 2003) (holding that
City of Chicago’s M/WBE program for local construction contracts met compelling interest using this
framework).
77 Western States Paving, 407 F.3d at 992-93; Sherbrooke Turf, 345 F.3d. at 970 (in the face of evidence of
“barriers to the formation of minority-owned construction businesses, and of barriers to entry… [plaintiffs] failed
to present affirmative evidence that no remedial action was necessary because minority-owned small businesses
enjoy non-discriminatory access to and participation in highway contracts”); Northern Contracting I, LEXIS
3226 at *113, 122.
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