Blind Justice For Minority Firms?

Entrepreneurs await Justice Department findings on affirmative action

Next month, the Department of Justice is expected to issue final rules to “mend” affirmative action efforts in federal procurement. But while members of the minority business community and the Congressional Black Caucus applaud the Clinton administration’s efforts, they fear the results may actually end hard-won contracting opportunities for a host of minority entrepreneurs.

The new rules are expected to comply with the Supreme Court’s 1995 decision on the Adarand Construction v. Pena case, which sharply curtailed federal affirmative action efforts for minority contractors. First the Department of Commerce will do an industry-by-industry probe to compare the availability of minority firms with their actual use in contracting. Benchmarks for each industry, which will be reviewed on an annual basis, will be created to determine whether affirmative action efforts should be continued, scaled back or eliminated.

The danger to minority businesses would occur if, after periodic checks, It appears minorities are winning contracts equal to or in excess of their availability and capacity to do the work in a particular industry. In this case, preferences would be eliminated altogether, explains a Justice Department official.

“We also have to figure out whether affirmative action is responsible for what appears to be their ability to compete, so it’s not just a mechanical look at the numbers,” the Justice official adds.

But CBC member Albert Wynn (D-Maryland) says that retrenchment of affirmative action would only further damage black-owned businesses’ ability to compete in the marketplace. “The benchmark is only achieved as a result of affirmative action programs, so if they are terminated within a short period of time, there will be a major drop-off of minorities in that industry,” he warns.

On the other hand, if in a given industry minorities are underutilized, incentives such as price and evaluation credits would be used to increase opportunities.

Melvin Clark Jr., president and CEO of the Washington, D.C.-based railroad construction company Metroplex, is concerned about the procedure the Commerce Department will use to scrutinize the level of minority participation. Commerce will be using 80 two-digit Standard Industrial Classification (SIC) codes to do an industry-by-industry sweep. The two-digit code refers only to the particular industry that a company works in, such as construction in Clark’s case. An expanded four- digit code would also indicate specialization within particular fields, such as railroad construction. Clark believes the difference is crucial when determining exactly how many minority businesses are working in a particular area and thinks the two-digit code will indicate stronger minority utilization than actually exists.

“There are very few minority-owned firms in railroad construction, and we may not get the opportunities we did in the past because of the skewed results that will come out of this incomplete benchmarking system,” says Clark.

Minority entrepreneurs and legislators are also concerned because the SBA’s 8(a) business development program will be adversely affected by the new rules. When the small disadvantaged business participation exceeds an industry benchmark, the SBA will consider steps to limit the use of the 8(a) program in that industry by restricting the entry of

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