Rules set limits on race-based methods

Newly proposed rules for contracting with minority-owned businesses would sharply limit set-asides and other "race conscious" procurement methods agencies could use to hire such firms.

Under the Justice Department plan released last week, statutory contracting goals would still apply, but agencies would not be able to use race-based programs to achieve them unless the government determines that minority-owned firms in a specific industry are being discriminated against.

The proposed policy is the Clinton administration's response to last year's Adarand v. Pena Supreme Court decision, which held that federal affirmative-action programs must be narrowly targeted to address specific evidence of discrimination. President Clinton's expected opponent in the presidential race, Sen. Bob Dole (R-Kan.), would end these programs entirely, so the plan has significant political ramifications.

Rep. Charles Canady (R-Fla.), the sponsor with Dole of a bill to end federal affirmative-action programs, said the administration's plan is "woefully inadequate as an effort to comply with the Adarand decision.

"I think it's very disappointing that this administration intends to continue down this perilous road," Canady said.

According to the plan, agencies would be guided in their use of race-based contract awards by a set of "benchmarks" to be developed by the Commerce Department, the General Services Administration and the Small Business Administration. Benchmarks for each industry would be based on "the level of minority contracting that one would reasonably expect to find" if there were no discrimination in the marketplace, the proposal says.

If an agency lets fewer contracts for a particular type of work than the benchmark indicates are possible, it would be allowed to use race-based methods to increase its awards to minority firms in that industry. But if the agency meets or exceeds the benchmark, it would have to restrict its use of such techniques.

Program Expansion

In all cases, agencies would be required to expand their use of outreach and technical-assistance programs designed to help all small businesses and to target their efforts toward industries in which minority-owned firms are under-represented.

Devon Hewitt, a lawyer with Shaw, Pittman, Potts and Trowbridge, McLean, Va., said the proposal might not give agencies clear enough guidance that they will feel comfortable using race-based contracting programs at all.

"What the minority community wanted was something clear, unequivocal," she said.

Nevertheless, she said, information technology firms would probably fare well under the proposed policy because "minority representation in the IT community has always been small."

Permissible ways to encourage awards to minority-run firms would include a race-neutral version of existing mentor programs that match small companies with established prime contractors.

Meanwhile, the SBA would provide on-line systems to inform agencies of qualified minority-owned firms, notify small businesses of upcoming procurement opportunities and help fledgling firms use electronic commerce.

The SBA's 8(a) program, under which firms designated as socially and economically disadvantaged are eligible for contract set-asides, would have to conform to these rules, in part by restricting the number of participating firms and set-asides in industries in which minorities are fairly represented among contractors.

In addition to the 8(a) program, agencies would be allowed to give minority-owned firms extra points or some other "credit" when evaluating competitive bids, and to give prime contractors points for using small, disadvantaged businesses as subcontractors.

The Defense Department has used a version of this method for several years, and both methods were authorized for use by the entire government by the Federal Acquisition Streamlining Act of 1994.

DOJ will accept comments on the proposal for 60 days and expects to issue the final rules later this year.