Right-leaning legal and policy foundations are backing new lawsuits that challenge racial preferences in public works contracting—hoping one will end up before the U.S. Supreme Court's conservative majority and that the justices will sharply limit or even terminate the programs.

The June high court ruling against racial preferences in college admissions has given new life to such efforts, which could undermine the legal basis for programs that sustain many minority-owned construction companies.

"With the court we have now, the time is right to bring this up again," says Joshua Thompson, director of equality and opportunity litigation for the Pacific Legal Foundation, which backs cases involving conservative issues. Thompson promises that the group will support new cases in addition to one it filed earlier this year in federal court in Virginia on behalf of a service provider to the U.S. Dept. of Veteran's Affairs.

Recent challenges to contracting programs have been made against federal programs, including ones run by the U.S. Small Business Administration and U.S. Dept. of Agriculture, and against state and local programs.

Another foundation, the Wisconsin Institute for Law & Liberty, in March filed suit—and won an injunction in favor of its three clients, one of whom is an architect—in federal court in Texas. The plaintiffs say the aid to small business services provided by the federal Minority Business Development Agency, a unit of the U.S. Commerce Dept., are unconstitutionally denied to them because none of the three is a minority group member. 

In another case supported by the Pacific Legal Foundation, a group called the Californians for Equal Rights Foundation says it is appealing a losing decision in a state court case it has against Alameda County, Calif. The county had continued a minority business enterprise (MBE) program even after a state proposition passed in 1997 that banned racial preferences.

Apart from conservative foundations, several contractor associations also have challenged state or local racial preference programs. The Mechanical Contractors Association of Memphis in 2021 settled a federal lawsuit it filed over the constitutionality of a Shelby County, Tenn., program. The county paid the contractor group's legal costs and, since then, has drawn up a new program that has not yet been made public, according to David Sink, association executive director.

The U.S. Supreme Court's college admissions decision set off alarms that previous rulings—even those directly related to public works—did not. Ying McGuire, CEO of the National Minority Supplier Development Council, a group of firms that hire others owned by Blacks, Hispanics and other designated minority groups, said in a statement that "the decision poses a direct threat to minority-owned businesses and their economic prosperity."

Soon after the court decision, 13 Republican state attorneys general sent a letter warning Fortune 100 companies against using race-based remedies to counter past discrimination—specifically referring to contracting

That letter added to the worry triggered by the high court ruling that, if given the chance, the new conservative majority would use a case involving government contracts to demolish or pare back programs that provide livelihoods for thousands of minority-owned contractors.

"We're not going to win if it reaches the Supreme Court," warns Wendell Stemley, president of the National Association of Minority Contractors and of Black IPO, a San Diego-based program management and construction services company. Every effort must be made to defeat the challenges in the lower courts and to raise funds for the legal defense costs needed to battle the well-financed foundation-backed cases, he says.

All existing MBE programs that have not yet fully done what's needed to meet the legal standard previously set by the Supreme Court, adds Stemley, must now "dot the i's and cross the t's." Prior to the challenge to its program, Shelby County was not ready to do that, he says.

Disparity and Discrimination

The Pacific Legal Foundation and others use sympathetic plaintiffs to help make their case. In the federal court case in Virginia, a service-disabled U.S. Navy veteran whose company provides supplies and equipment to military bases and veterans' hospitals claims he was shut out of work by a Small Business Administration preference program.

In other cases, however, the foundation plans to focus its legal firepower on disparity studies. 

These have been used as proof of discrimination since the Supreme Court Adarand case dating to 1995 and the Croson case in 1989, involving local and federal public works contractors. Those decisions required such programs to be narrowly tailored remedies and subject to "strict scrutiny" based on actual discrimination. Those decisions also made it clear that statistical data could be used to demonstrate a compelling government interest in correcting discrimination, and that disparities could be an inference that discrimination exists.

Some believed that those high court decisions had left the meaning of strict scrutiny muddled and that discrimination would be hard to prove unless, in the words of one writer, it "walked like a duck" and was plainly evident.

As such, they say existing MBE programs are vulnerable if the current Supreme Court issues a new and more detailed definition of strict scrutiny. 

Disparity studies became the pillars on which most programs rested—whether new or restarts of existing ones that were paused after the Croson ruling. A handful of consulting companies generated dozens of such studies. Oakland, Calif.-based Mason Tillman Associates produced about one-third of themOn its website, the firm claims that none of its studies for various government entities has been "successfully legally challenged."

Shelby County, however, had a Mason Tillman disparity study as the basis of its MWBE program that started in 2017. The county had set a 28% overall goal for construction work, most of which was met by hiring Black-owned contractors, and did not penalize prime contractors for good faith efforts that fell short of the goal. The county disbanded the program in 2021 after the settlement reached with the Mechanical Contractors Association of Memphis.

Disparity studies typically compare the number of minority- and women-owned companies available in the area to the total number of firms and volume of work used in government contracts. They include distribution of all prime contract dollars for each ethnicity and for non-minorities, including the percent of government dollars available, expected dollar amounts, amounts actually awarded and "dollars lost" in the difference and percentage awarded.

Anecdotal information about discrimination also is included.

Thompson of the Pacific Legal Foundation does not believe the studies are proof of discrimination that will pass muster with the current Supreme Court.

Using the example of nursing, a profession dominated by women, Thompson says that "disparities are inherent in society and the idea that any particular industry will have balance based on demographics of region is a mathematical impossibility." 

He adds: "The court didn't anticipate, and it's important to get that before the Supreme Court now to rule definitively, whether disparity studies are actually showing discrimination and whether they are sufficient evidence to justify racial preferences."

In Shelby County, the contractors claimed the MWBE program relied on unconstitutional race-based preferences and established an unlevel playing field for non-MWBE contractors.

The Minority Business Economy

Contracts for minority businesses in fiscal 2021.pngAll private and public contracts awarded in the U.S. by industry sector to minorities in fiscal year 2021. Source: Minority Business Development Agency (U.S. Dept. of Commerce). Minorities are defined as African Americans, Asian Americans, Hasidic Jews, Hispanic Americans, Native Americans and Pacific Islanders.

The contractors' complaint took aim squarely at Shelby County's original Mason Tillman disparity study, completed in 2016. The firms claimed that the study's sampling was unreliable, based on lists of companies deemed "ready, willing and able" to work on county jobs with no distinction about whether the companies were qualified to perform county work or interested in it.

The study also did not take into account different types of construction work, the contractors claimed, "treating the construction industry as a single, undifferentiated trade."

During a contentious part of pre-trial maneuvering, Mason Tillman turned over thousands of pages of documents demanded by the contractors. But they still pressed for more information about the consultant's methods before the matter settled.

After hitting the reset button, the county hired consultant Griffin & Strong and it conducted a fresh and extensive disparity study. The firm stated that the statistical data should compare qualified MBE contractors with the total percentage of contract dollars paid to minority firms and that "the relevant question among lower federal courts has been which tools or methods are best for such analysis."

The Griffin & Strong study, like the one by Mason Tillman, also found that minority and women-owned contractors were underutilized. But it distinguished between companies of different sizes in its extensive statistical analysis. Also, in its qualitative discussion of stories told by minority contractors in hearings held, Griffin & Strong noted that the minorities believed they were shut out by an informal network of county contractors and service providers.

Any major differences in methods between the two Shelby County disparity studies, however, were not immediately apparent.

A Congressional Research Service report, updated in June after the high court's college admissions affirmative action ruling, noted that courts may consider all kinds of evidence as the basis for a race and gender preference program, including statistical research and anecdotes.

 "Detailed findings of discrimination and strong supporting evidence," are best, its report says. "Once a record is built, a more limited remedy more easily passes strict scrutiny."  Sunset provisions, reauthorization requirements, race-neutral criteria and waiver provisions "can help," the researchers added. "If legislation includes a numerical goal, it can be tailored to reflect available data."

The report also said that "measures to minimize harm to third parties can reduce a statute’s vulnerability to equal protection challenges under strict scrutiny."

Can Courts End MBE Programs?

Thomas F. Powers, professor of political science at Carthage College, does not believe that even an adverse Supreme Court decision can wipe out the affirmative action and antidiscrimination apparatus that is deeply entrenched in statutes, regulations and presidential orders. "Disparity studies are enshrined in laws to the point where conservatives won't get rid of them although they may nibble away," he says. Powers' new book, American Multiculturalism and the Anti-Discrimination Regime, deals with the subject of "disparity as discrimination." 

"Arguing over how you calculate disparity, conservatives may be successful, but that will leave in place a whole infrastructure" of antidiscrimination law and regulation, he says.

NAMC's Stemley says current challenges to the programs undermine government and public enthusiasm for MBE programs. "To get emotionally invested in these negative rulings, that's when we back away" from the programs, he says. 

New arguments are needed to win support in the court of public opinion, Stemley insists.

"Seldom will you see a legal brief challenging the programs that says, 'I don’t want to see any minorities or women or Latinos receiving any scholarship,'" he contends. "Even the Pacific Legal Foundation doesn’t have the audacity to present that. What it tries to do is come up with fancy words and narratives to say, 'eliminate that.'"

Arguments against the programs should look at the economic aspects, says Stemley.

"Everybody who pays in to the system has to believe they have a right to participate in the system," he says. The conservative foundations "lead people to believe we want something for nothing, or welfare. But if every person of color and every woman has to pay gas taxes and airport taxes, they should have the expectation of a right to participate in public works contracts. We are paying for the sidewalks."

Stemley asserts: "If we start crafting [our arguments] around the economics, we’ll get conservatives to understand that inclusion makes sense."

This article was updated Aug. 16 to show that the Supreme Court's Adarand decision was in 1995.