The Court
addressed the merits of the federal government's challenge to the
district court's 1977 judgment for Adarand.
In beginning its decision, the Court first determined that
its review would include the prior and current versions of
legislation and regulation. Second,
the Court eliminated certain pieces of legislation from the case
because of decisions by the Supreme Court and its decisions on
Adarand's standing on the issues.
These included
- section 8(a) of the Small Business
Act,
- provisions of the SCC program that pertained to women-owned
business enterprises,
- contracting opportunities for small disadvantaged
businesses set forth in 15 U.S.C. 637 and 644(g),
- the various goals for fostering the participation of small
minority-owned businesses promulgated pursuant to 15 U.S.C.
644(g), and
- paragraphs (4) to (6) of 15
U.S.C. 637(d).
The Court then
addressed
"the
constitutionality of the relevant statutory provisions as
applied in the SCC program, as well as their facial
constitutionality. To
the extent the district court's judgment can be construed as
having reached statutes, programs, and issues beyond the scope of
Adarand's standing and the Supreme Court's remand in Adarand III,
we reverse that judgment."
In following the
Supreme Court's guidance in Adarand III, the Court proceeded to
the "task of assessing the application of racial presumptions
in the SCC program under a strict scrutiny standard."
The Court dealt with:
the compelling interest part of the strict scrutiny review
and the narrow tailoring part of a strict scrutiny review.
Compelling
Interest
In assessing
whether the federal government has a compelling interest, the
Court 's inquiry consisted of four parts.
These included
- whether the government's articulated goal in enacting the
race-based measures at issue were appropriately a "compelling
interest" under governing case law,
- if a compelling interest exists, standards must be set
under which to evaluate the government's evidence of compelling
interest,
- whether the evidence submitted by the government is
sufficiently strong to meet its initial burden of demonstrating
the compelling interest it articulated, and
- whether Adarand met its ultimate burden of rebutting the
government's evidence.
Compelling Interest Under
Case Law
The Court
concluded that the U. S. Congress had "a compelling interest
in not perpetuating the effects of racial discrimination in its
own distribution of federal funds and in remediating the effects
of past discrimination in the government contracting markets
created by its disbursements."
Additionally, the Court concluded that the "geographic
scope of Congress's reach in this regard is 'society-wide' and
therefore nationwide."
Standards For Evaluating
The Government's Evidence
The Court said
that its benchmark for judging the adequacy of the government's
evidence for affirmative action legislation is whether there
exists "a strong basis in evidence" for the government's
conclusion that remedial action is necessary.
The Court added that both "statistical and anecdotal
evidence are appropriate"
under the strict scrutiny standard but anecdotal evidence by
itself is not. The
Court also explained that it considers both "direct and
circumstantial evidence, including post-enactment evidence . . .
as well as the evidence in the legislative history itself."
Furthermore, the Court stated that it "may consider public and private
discrimination not only in the specific area of government
procurement contracts but also in the construction industry
generally; thus, any findings Congress has made to the entire
construction industry are relevant."
The Court
explained that the "nature and extent" of the evidence
is considered. Statements
made by congressional reports and members of Congress are not
sufficient in themselves to support a finding of a compelling
interest under the strict scrutiny standard.
Government's Evidence To
Support a Compelling Interest.
To a large
extent, the Court was impressed by the evidence in the document
entitled The
Compelling Interest for Affirmative Action in Federal Procurement
. The
Court noted that the government provided evidence of two kinds of
discriminatory barriers to minority subcontracting enterprises,
both of which showed 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. These
barriers included
- those involving the formation of qualified minority
subcontracting enterprises due to private discrimination and
- those to fair competition between minority and non-minority
subcontracting enterprises, again due to private discrimination.
Barriers To
Minority Business Formation In Construction Subcontracting
Under this
category, the Court highlighted government evidence that showed
- prime contractors in the construction industry often refuse
to employ minority subcontractors due to "old boy"
networks--based on a familial history of participation in the
subcontracting markets--from which minority firms were excluded
- subcontractors' unions place barriers to membership before
minority firms that effectively blocked them from participating in
the subcontracting market in which union membership is an
important condition for success, and
- race-based denial of access to capital.
The Court
concluded that the government's evidence "strongly support an
initial showing of discrimination in lending."
The Court added that it noted an "obvious causal
connection between access to capital and ability to implement
public works construction projects."
Barriers To Competition
By Existing Minority Enterprises
Under this
category, the Court highlighted government evidence that showed contracting was
a closed network with prime contractors
maintaining long-standing relationships with whom they preferred
to work. Because
minority firms are new entrants to most markets, the existence and
proliferation of these relationships locked them out of
subcontracting opportunities.
Minority firms were seldom or never invited to bid for
subcontracts that did not contain affirmative action requirements
- when minority firms are permitted to bid on subcontracts,
prime contractors often resisted working with them.
The minority firms low bids were either not accepted or
their bids were shared with other subcontractors in a practice
called "bid shopping."
- minority subcontracting enterprises found themselves unable
to compete with non-minority firms due to racial discrimination by
bonding companies.
- discrimination by suppliers resulted in non-minority
subcontractors receiving special prices and discounts from the
suppliers while minority subcontractors did not receive the
special prices and discounts.
The Court noted
that the government presented evidence that "strongly
supports the thesis that informal, racially, exclusionary business
networks dominate the subcontracting construction industry,
shutting out competition from minority firms."
Finally, the Court concluded that "the government's
evidence as to the kinds of obstacles minority subcontracting
businesses face constitutes a strong basis for the conclusion that
those obstacles are not 'the same problems faced by any new
business, regardless of the race of the owners."
Additional Evidence
The Court also
noted other evidence such as the disparity between the
availability of minority-owned businesses and the utilization of
these businesses in government contracting.
The Court concluded that "the disparity indicates that
there has been under-utilization of the existing pool of minority
subcontractors; and there is no evidence either in the record on
appeal or in the legislative history before us that those minority
subcontractors who have been utilized have performed
inadequately or otherwise demonstrated a lack of necessary
qualifications."
The Court also
looked at the link between compelling interest and remedy and said
there was ample evidence that when
race-conscious public contracting programs are struck down or
discontinued, minority business participation drops sharply or
disappears.
Conclusion On The Quality
Of Evidence
The Court looked
at Adarand's rebuttal and did not find it persuasive.
The Court concluded that the evidence provided by the
government "met its initial burden of presenting a 'strong
basis in evidence' sufficient to support its articulated,
constitutionally valid, compelling interest.
The Court then affirmed the district court's finding of a
compelling interest.
Narrow
Tailoring
Noting the
existence of only a handful of Supreme Court decisions that
applied the strict scrutiny standard to affirmative action
programs, the Court first defined the strict scrutiny process it
would follow. These
included (1) the availability of race-neutral alternative
remedies, (2) limits on the duration of the SCC and DBE
certification programs, (3) flexibility, (4) numerical
proportionality, (5) the burden on third parties, and (6)
under-and over-inclusiveness..
Additionally,
the Court provided its opinions on the programs in existence when
the District Court issued its decision and the revised programs
that were changed by the federal government in response to the
Supreme Court's decision in Adarand III.
A side-by-side comparison of the old versus the revised is
added under each section of the Court's narrow tailoring analysis.
|
Availability
of Race-Neutral Alternative Remedies |
|
Earlier
Program |
Revised
Program |
|
The
Court questioned whether FLHP considered other more
narrowly tailored alternative remedies before
implementing 15 U.S.C 644(g) with the SCC.
The court concluded that the government did not
show that the FLHP adequately considered such
alternative measures in the program.
This absence weighed strongly against any finding
of narrow tailoring and the Court affirmed the
District's Court decision that the program was not
narrowly tailored. |
The
Court found that the situation changed dramatically
since 1996. The
revised regulations instruct recipients that they
"must meet the maximum feasible portion of your
overall goal by using race-neutral means of facilitating
DBE participation."
49 C,F,R, 26.51(a) (2000). |
|
Limits
on the Duration of the SCC and DBE Certification
Programs |
|
Earlier
Program |
Revised
Program |
|
The
Court looked at the 1996 version of the programs and
decided that the SBA's 8(a) certification program
allowed companies to remain in the program for about ten
and one-half years and that each year participants were
required to submit financial statements and other
information so that SBA could reevaluate the company's
status and determine if they should graduate from the
program. The
Court concluded that the 8(a) program provided for
participation that was limited to the company's needs.
Once the company lost its economic disadvantage,
it lost its certification. However, it pointed out
that SBA's 8(d) program did not.
As
a result, the Court concluded that insofar as the 1996
SCC program relied on the 8(a) criteria, those criteria
increased the narrow tailoring of the program.
However, if the SCC program relied on the 8(d)
criteria, through state certification, it did not find limits on time in the program.
The Court concluded that reliance on the 8(d)
program's criteria made the SCC unconstitutional. |
The
Court noted that the revisions to the 8(d) program
incorporated certification requirements from the 8(a)
program.
As
a result, the Court concluded that the revised DBE
programs were sufficiently narrowly tailored.
|
|
Flexibility |
|
Earlier
Program |
Revised
Program |
|
The
Court said that the 1996 SCC program goal was not
mandatory and included a waiver provision.
As a result, the Court concluded that the 1996
program passed the test of constitutionality under the
narrow-tailoring test. |
The
revised version increased the flexibility of the DBE
programs by providing express waiver provisions.
As a result, the Court concluded that the DBE
programs met the flexibility review. |
|
Numerical
proportionality |
|
Earlier
Program |
Revised
Program |
|
The
Court said that the government did not provide evidence
in the district court to support a 12 - 15 percent goal
for DBE program participation in 1996. |
The
revisions in the form of TEA-21 regulations instruct
recipients of federal funds that its "'overall goal
must be based on demonstrable evidence of the
availability of ready, willing and able DBEs relative to
all businesses ready, willing and able to participate on
[the recipient's] DOT-assisted contracts' and must
make 'reference to the relative availability of DBE's in
[the recipient's] market.'"
"The
current 10 percent figure in the current programs is
described as "an aspirational goal at the national
level." It
"does not authorize or require recipients to set
overall or contract goals at the 10 percent level, or
any other particular level."
|
|
Burden
on third parties |
|
Earlier
Program |
Revised
Program |
|
The
Court said that insofar as the 1996 and revised SCC
programs are limited in scope and duration, they only
postponed the hiring of non-DBEs.
This imposed a diffuse burden foreclosing only
one of several opportunities. |
The
revisions imposed less of a burden on non-DBEs since the
new regulations required recipients to ensure that DBEs
were not "so overconcentrated in a certain type of
work as to unduly burden the opportunity of non-DBE
firms to participate."
Additionally, the monetary compensation for prime
contractors to hire DBEs was capped which would tend to
limit the further hiring of DBEs. |
|
Under-and
over-inclusiveness |
|
Earlier
Program |
Revised
Program |
|
The
SCC program did not consider the effectiveness of at
least one other less sweeping approach to implementing a
race-conscious SCC program.
That is to disaggregate the presumptions of
social and economic disadvantage, as it is done in the
8(a) program, to require a separate determination of
social and economic disadvantage.
This separate showing would show that the
government undertook the necessary effort to tailor the
relief to those who had suffered from the effects of
discrimination. The
8(d) method of certification reviewed by the district
court was not narrowly tailored. |
In
its revised regulations, the government eliminated its
offending 1996 practices.
This included eliminating the discrepancy between
the 8(a) program's individualized determination of
economic disadvantage and the 8(d) program's
non-individualized determination of economic
disadvantage. As
a result, the main obstacle to a finding of
narrow-tailoring has been removed. |
In summing up its analysis of
the programs tailoring, the Court concluded that
"the 1996 SCC was
insufficiently narrowly tailored as applied in this case and
is thus unconstitutional under Adarand III's strict standard
of scrutiny. Nonetheless,
after examining the current SCC and DBE certification
programs, we conclude that the 1996 defects have been
remedied, and the relevant programs now meet the requirements
of narrow tailoring."
